Creating a strategy oriented HR system starts by defining what the companyâ€™s strategic plans are such as, for Einstein Medical, expanding services and becoming a comprehensive health care network This is considered as defining the Business Strategy. Ideally senior HR leadersâ€™ insights regarding the human resources in their own company and in those of the competition provide valuable planning input. Similarly, their insights regarding how HR practices and deliverables can improve the firmâ€™s performance can help top management develop a superior strategic plan. Toward the end of this stage, management translates its broad strategic plans into specific, actionable strategic goals.
Outline the Companyâ€™s Value Chain: To achieve its strategic goals, any business must engage in certain strategically required activities. For example an ITeS must devise and introduce new IT or ITeS services. Microsoft must write new computer programs. Each such activity requires certain employee behaviors: Microsoft needs employees who have the expertise to help it devise new computer programs. The point is that any manager who wants to understand want employee behaviors are essential for his or her firmâ€™s success must first understand what the firmâ€™s required activities are.
For this, value chain analysis can be useful. The companyâ€™s value chain â€œidentifies the primary activities that create value for customers and the related support activitiesâ€. Each activity is part of the process of designing, producing, marketing, and delivering the companyâ€™s product or service. These activities might include bringing supplies and materials into the companyâ€™s warehouse; bringing these materials to the shop floor and designing the product to customersâ€™ specifications; and the various marketing, sales, and distribution activities that attract customers and get the companyâ€™s product to them.
The Seven Steps in the HR Scorecard approach to formulating HR policies activities and strategies are,
Formulate Business Strategies:
Define the business strategy
Outline the companyâ€™s value chain activities
Identify the strategically required organizational outcomes.
Identify Workforce Requirements:
Identify the required workforce behaviors
Formulate HR Policies and Practices:
Identify the strategically relevant HR system policies and activities, such as new training and grievance systems.
Develop Detailed â€œScorecardâ€ Measures
Design the HR Scorecard measurement system
Periodically reevaluate the measurement system.
Value chain analysis is more than just a tool for identifying the ways things are done now. It prompts questions such as: How do our costs for this activity compare with our competitors? Is there some way we can gain a competitive advantage with this activity? Is there a more efficient way for us to deliver these services? And do we have to perform these services in-house? Outlining and analyzing the companyâ€™s value chain can also help the HR manager create an HR system that makes sense in terms of the firmsâ€™ strategy? For example, it can help him or her identify the organizational outcomes the company absolutely must achieve if it is to achieve its strategic goals. For example, at a Medical services company delivering new services was so critical to what they had to accomplish, it was obvious it had to be a core value chain activity. This in turn can help the HR manager better understand what employee behaviors and competencies are required and what HR policies and activities (HR system) would produce these behaviors and competencies.
Consider another example. At Dell Computer, phone technicians competently and courteously assisting Dell customers with problem is a crucial (or â€œcoreâ€) value chain activity; indeed, it is a big part of what Dell has built its reputation on. The critical nature of this activity would be apparent from any outlining of Dellâ€™s value chain. Given this, Dell HR might well decide that, one way HR could add value is by improving phone technicians performance through the use of special computerized job aids that show technicians what series of questions to ask when customers call in with problems.
Outlining the companyâ€™s value chain shows the chain of essential activities. This can help managers better understand the activities that drive performances in their company. In other words, it is a tool for identifying, isolating, visualizing, and analyzing the firmâ€™s most important activities and strategic costs.