How to develop a Human Resource Strategic Plan

Table of Contents

List of abbreviations

List of Figures

List of Tables

1 Introduction
1.1 Problem and Objectives
1.2 Procedure of Seminar Paper

2 Defining the Terms
2.1 Human Resource Management (HRM)
2.2 Strategic Human Resource Management (SHRM)
2.3 Human Resource Strategic Planning
2.4 Strategic Management Process (SMP)
2.5 Hierarchy of Strategy
2.6 Short Introduction of Audi AG

3 How to develop a Human Resource Strategic Plan
3.1 Determination of the Organization’s Business Strategy
3.2 Assessment of the Organization and its Environment
3.3 Setting of specific Objectives and formulating the Strategy
3.4 Implementation of Strategies to accomplish the Objectives
3.5 Evaluation & Control of the Strategies
3.6 The human resource strategic plan (example of Audi)

4 Conclusion and Outlook

Appendices

Bibliography

List of abbreviations

illustration not visible in this excerpt

List of Figures

Figure 1: The Audi brands strategy 2020 (Audi 2014e)

Figure 2: Corporate responsibility department – organization (Audi 2014d)

Figure 3: Timeframe of strategy implementation

Figure 4: Example of HR strategy of Audi

Figure 5: The strategic management model (Bratton and Gold 2012, p. 40)

Figure 6: Hierarchy of strategic decision-making (Bratton and Gold 2012, p. 42.)

Figure 7: Corporate Responsibility diagram from Audi workshop (Audi 2014d)

Figure 8: Magic Moments at Audi (Audi 2014g)

List of Tables

Table 1: SWOT of Audi AG (example) (Audi 2014a, p.199-203)

Table 2: Result of step one and step two of SMP regarding to HR-factors

Table 3: CR program of Audi: goals and measures (selection) (Audi 2014d)

1 Introduction

1.1 Problem and Objectives

The recession in 2008/09 illustrated for some companies the weakness in the marketplace that led to lower company valuations, increased business failures, outsourced businesses of companies, and sell offs of noncore business units. But if the organizations think forward they find opportunities that were not available when business was booming, such as expanding their company through acquisition. Eventually companies always need to look forward to stay competitive, capture market share, and be the first to innovate a new product or service (Mondy 2014, p.115).

Organizations use strategic planning as a constantly changing and ongoing process in order to find a competitive advantage. They see the need to diversify and increase variety of goods that are made or sold. At other times companies have the requirement to downsize in response of the external environment or the strategic plan sees integration as their driving force, what means the unified control of a number of successive or similar operations. Therefor strategic planning endeavours to position the organization regarding external environment. Thus strategic planning at all levels of organization is important (Mondy 2014, p.115). To anticipate future business and environmental demands on the company, strategic planning in human resource (HR) is necessary to meet the personnel requirements dictated by those conditions (Lengnick-Hall 1988, p. 457). Hereby the strategic management process is used to answer a central question in HR strategy planning: ‘How to develop a human resource strategic plan?’

The following assignment answers the question by using the strategic management process in order to develop the human resource strategic plan (HRSP). With practical parts of Audi´s strategy the process of developing the human resource strategic plan is explained.

1.2 Procedure of Seminar Paper

Chapter two is about defining the terms. In the subsequent chapter three it is described in theory how to develop a human resource strategic plan. To illustrate the implementation of a HRSP in a company, Audi acts as an example. In chapter four the conclusion and an outlook complete the assignment.

2 Defining the Terms

2.1 Human Resource Management (HRM)

There are a lot of definitions of human resource management in literature. The following one describes HRM in Mondy´s view very suitable. „Human Resource Management is the utilization of individuals to achieve organizational objectives.“ (Mondy 2014, p. 28)

2.2 Strategic Human Resource Management (SHRM)

In literature it is unclear which of the terms of strategic human resource management and human resource strategy relate to a process or an outcome. This working paper only illustrates one definition of SHRM: „Strategic human resource management is the process of linking the human resource function with the strategic objectives of the organization in order to improve performance.“ (Bratton and Gold 2012, p. 37)

The HR strategy could be defined as a strategy, which supports the chosen competitive strategy for the business. In this way, the HR strategy attends with the five P´s – philosophy, policies, programmes, practices and processes – to sting and empower the employees (Bratton and Gold 2012, p. 46).

2.3 Human Resource Strategic Planning

“Human resources planning is broadly defined as anticipating future business and environmental demands on organizations and meeting the personnel requirements dictated by those conditions (Cascio, 1987a).” (Lengnick-Hall 1988, p. 457)

The strategic alignment of personal management is substantial to ensure that the actions of the managers and of the human resources department are oriented on the long-term objectives and not only on short-dated successes (Rosenberger 2014, p. 29). Strategic planning is an ongoing process that is constantly changing in order to find competitive advantage (Mondy 2014, p. 115).

2.4 Strategic Management Process (SMP)

Nowadays the word ‘strategy’ means ‘long-term planning’, where the focus is on deciding and taking actions to accomplish performance goals of the organization. The SMP appears in several management texts as a cycle in which different activities depend on each other. Typically the process is allocated in five steps:

1. Mission and Goals

Step one describes the values and aspirations of the organization. Indicates the direction the senior management is going. Goals describe the short-term measurable outcomes.

2. Environmental Analysis

Step two involves the analysis of internal organizational strengths and weaknesses and external opportunities and threats (SWOT).

3. Strategic Formulation

In step three senior managers evaluate the interaction between strategic factors and make the strategic choices with focus on the organizational goals. The strategies can be formulated on different levels (2.5 Hierarchy of Strategy).

4. Strategy Implementation

Activities implement the strategy in step four. They include leadership style, organizational structure, information and control systems and the human resources management.

5. Strategy Evaluation & Control

Step five matches the operating and financial performance with the desired performance. Mechanisms of control can be initiated.

The strategic management model (appendix, Figure 5) makes the interaction between the five steps more clear (Bratton and Gold 2012, p. 39-41).

2.5 Hierarchy of Strategy

Because of multidivisional business organizations three different levels of strategy are identified (appendix, Figure 6) that allocate strategic issues to the level of hierarchy.

1. Corporate-level strategy

Main question: What business are we in?

The corporate-level strategy describes an overall direction of a corporation. This strategy depends on the general philosophy towards growth and management of the business units and defines the type of business the organization wants to be involved in.

2. Business-level strategy

Main question: How do we compete?

The business-level strategy includes the decisions and actions to make the business unit more competitive in its marketplace. Important is, that the strategy must fit to the operating situation of the business unit. Porter defined in the 1980s a framework to formulate the business strategy. It characterizes three competitive strategies: cost leadership, differentiation and focus. At this point the competitive strategies of Porter are not further examined. Also Miles and Snow, who have identified four modes of strategic orientation (defenders, prospectors, analysers and reactors), which are only mentioned here.

3. Functional-level strategy

Main question: How do we support the business-level competitive strategy?

The divisions research and development, marketing, manufacturing, finance and HR belong to the functional operations within the business units. The main strategic issues in functional-level are the maximization of resource productivity and how to support the business-level strategy.

The three levels of strategy form the hierarchy of strategy in large multidivisional organizations. The specific operation of strategic planning differs in diverse corporations between ‘top-down’ and ‘bottom-up’ (Bratton and Gold 2012, p. 42-44).

2.6 Short Introduction of Audi AG

The brand with the four rings is especially noted for its unmistakable design, innovative technologies and high quality standards. This is expressed by the brand essence “Vorsprung durch Technik,” which comprises the brand values sportiness, progressiveness and sophistication (Audi 2014a, p. 144). The Audi Group delivered a total of 1,751,007 cars to customers in 2013. The core brand Audi increased its total number of units delivered by 8.3 percent to 1,575,480 vehicles – a new all-time record for the Company. Audi has a wide range of luxurious and comfortable cars delivering excellent performance in the segment of affluent customers seeking luxury, comfort and excellent driving experience. The target customers of Audi are professionals and executives as well as rich families, what eases the transfer to the vision of Audi – being the premium brand. Examples of the product portfolio are the Audi-models A1, A2, A3, R8, Q7, and the Audi TT. Competitors of Audi are BMW, Mercedes, Porsche, and the mother company of Audi, the Volkswagen AG (Audi 2014b).

3 How to develop a Human Resource Strategic Plan

This chapter is a guideline, which can be used to develop a human resource strategic plan. It is not necessary to use a different strategic planning framework or hierarchy as the strategic management process contains (Kearns 2010, p. 23). The five steps of the strategic management process are convenient to develop the human resource strategy. The strategy of Audi AG as an example of an implemented strategic process clarifies the procedure.

3.1 Determination of the Organization’s Business Strategy

At the beginning of the process ‘how to develop a human resource strategic plan’ the most important is to understand the corporate strategy of the organization. The strategy of the company gives an overall direction and consists of the

1. vision,
2. mission, and
3. the goals regarding to the executive management´s philosophy.

The vision sets up the course or direction of the future of the organization. It only gives a general course and does not attempt to delve into specifics (Kearns 2010, p. 24-25). The mission of the company can be determined as the most important aspect of the first step in the process of developing a human resource strategic plan, because the mission is a company´s continuing purpose or reason for being (Mondy 2014, p. 115.).

Audi´s vision is defined as ‘Audi – the premium brand’ and is oriented to 2020, where the Audi Group sets itself the goal of being the leading brand worldwide. The following Figure 1 illustrates the brands strategy of Audi 2020 (Audi 2014e).

At the heart of the strategy 2020 (in the middle of Figure 1) the mission of Audi is declared as ‘We delight customers worldwide’. The contents of the mission are ‘We define innovation’, ‘We create experiences’, ‘We live responsibility’, and ‘We shape Audi’. With these statements Audi describes the management philosophy with its values and aspirations of the organization. In the static purpose ‘We live responsibility’ all activities concerned with sustainability are grouped together. The five core themes are ‘product’, ‘environment’, ‘employees’, ‘society’ and ‘operations’ (Audi 2014e).

illustration not visible in this excerpt

Figure 1: The Audi brands strategy 2020 (Audi 2014e)

The main purpose for HR is responsibility to employees. A diagram of Audi´s responsibility (appendix, Figure 7) shows how important this topic is for the company (Audi 2014d). Further ‘We shape Audi’¹ is connected to HR. It shows the responsibility of the employees to manage the challenges of business with their expertise, passion and innovativeness to create maximum customer benefit (Audi 2014e).

Overall Goals also belong to the corporate-level strategy of an organization. Audi´s goals are ‘superior financial strength’, ‘continuous growth’, ‘top image position and customer mix’, ‘leaders in innovations’, ‘attractive employer worldwide’, and ‘sustainability of products and processes’ (Audi 2014e). According to the topic of HR, the most important goal of Audi is being an ‘attractive employer worldwide’. As Audi´s vision is to become the leading premium brand worldwide, it is fundamentally important to be perceived as an attractive employer to get the best and most highly qualified employees (Audi 2014e).

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¹ ’We shape Audi’ is not further regarded in this assignment