Speaker 1

Welcome to Module Two: Environmental Factors and Business and Corporate

Strategies. In this module, we will examine the meaning of corporate strategy and
further examine different types of corporate strategies, including restructuring,
growth, and stability We are going to spend some time looking at the strategic
notions of turnaround, divestiture, liquidation, and bankruptcy. Although
organizational strategy primarily drives HR strategy, the external factors that also
shape HR strategy can't be ignored As a result, HR managers and planners must
continually monitor the environment to keep abreast of HR trends What
environmental factors impact HR strategy? As we've seen, economics, the labor
market, politics, laws and regulations, demographics and social norms affect HR
strategy. Additionally, the varied stakeholders who contribute strongly to HR
strategic planning include shareholders, union reps, customers, employees, and
executives. Let's first consider economic climate. The economy definitely affects HR
management Most organizations track indices and analyze interest traits,
unemployment rates, the value of the Canadian dollar, and possibly even the cost of
fuel. They also consider economic factors that influence their ability to compete,
such as inflation rates, tax rates, and trade barriers. An example is the concept of
GLOCA. International organizations often adopt a philosophy to think global but act
local. In 1950, 75% of the jobs in North America were in production or
manufacturing. Today, it is closer to 10%. as organizations have expanded their
global presence and have relocated their manufacturing facilities abroad to lower
cost markets, such as Asia or India. Essentially, globalization is the growth of trade
and financial capital across borders. It's the spread of economic ventures from one
country to another It affects sovereignty, prosperity, jobs, wages, and social
legislation. The global economy as a whole refers to an economy where goods
Services, people, skills, and ideas move freely across geographical borders. In a
global economy Capital might be obtained in one market and used to buy
equipment in another market, which, in turn, produces products sold in a third
market. How is globalization affected by political and legislative factors? And how do
provincial and federal governments affect organizations through changes to laws
and regulations? This brings us to the next environmental factor that HR strategists
need to consider. Political and legislative factors. Political and legislative factors
refer to the arena in which organizations and interest groups compete for attention
and resources, and includes the laws and regulations guiding these interactions.
Basically, it's the tug of war between organizations and special interest groups and
the body of laws and regulations enacted by governments. How do organizations try
to influence the government when it comes to laws concerning employment
standards, health and safety, taxation, and so on? For example, can organizations
exert influence on the government to do something about Canada's brain drain, or
the qualifications of immigrants? Technology not only impacts what work is done,
but also how it is done. Advanced technology has also resulted in a shift from touch
labor to knowledge workers. Technological factors are the processes by which inputs
from an organization's environment are transformed into outputs. In other words,
how can a company take new ideas, breakthroughs, and knowledge and translate
them into new products, processes, and materials? This concept encompasses the
increasing rate of change we see in our environment, including dramatic changes in
information technology with products like personal computers and cell phones.
Trends in this segment include digital convergence. Some trends that impact HR are
the increasing use of HRM systems. e-learning systems, software to manage
absenteeism, and systems to help managers administer performance issues Next,
let's examine demographic factors. This has been identified as one of the biggest
challenges facing HR managers today. Demographics is the study of population
statistics and includes subsets such as age, gender, family status. race, cultural
background, religion, education, economic status, and the labor market. The labor
market is the most important demographic factor monitored by HR professionals.
The labor market is where an organization recruits its employees. Labor market
statistics include such things as unemployment rates, geographic migration, and
graduation rates. We've all heard of baby boomers, Generation X and Generation Y,
but what do we actually know about them in terms of their attitude to employment
in the labor market? How do they affect the market as generations? Generational
differences represent important considerations not only for labor supply, but also for
the practices that attract and retain individuals from all ages. Rounding out our list
of important environmental factors are social and cultural factors. As an example.
What is the social attitude towards the desire for work-life balance or flexible work
arrangements? And how does this attitude influence a recruitment manager's view
of a candidate? What about visible body piercings or tattoos? Some of the current
social and political factors that are on the horizon include increasing environmental
awareness, low fertility rates, the increasing number of households without children,
telecommuting, and expanding seniors market for goods and services, especially
health care related. The key for organizations when determining their strategy is to
assess the impact that these factors will have on its operations and employment
practices. Internally, it is important for an HR professional to align their strategies
with the corporate or business strategy. In Module 2, we are going to focus on
corporate strategy. We'll discuss business strategy in module 4. Nevertheless, as an
HR manager, it is important to understand where you need to focus your energy. To
the overall corporation. the corporate strategy or to a specific business or selection
of companies operating within that corporation, the business strategy While in
smaller companies, the corporation and the business strategy may be one and the
same. In larger companies, the corporate and business goals might be quite
divergent. As a result, in these larger environments, it is often common for HR
professionals to be dispersed throughout the corporation as business partners to
the specific business units they are meant to serve and support. Corporate strategy
is an organization's overall strategy. From an overhead view, a corporation could
operate multiple business units in multiple markets in multiple contexts. I once
worked for a couple of large international companies, and each had different
business units, producing different product lines and operating in different markets
around the world. From an HR perspective, corporate strategy is the macro strategy
and is typically considered first. It identifies what we needed to organize from an
overall company-wide point of view in order to help the smaller individual business
units develop and achieve their objectives. Corporate strategy determines how the
corporation as a whole supports and enhances the value of the different business
units and supports and enhances their product lines. It answers the question, what
business should we be in? When considering a corporate strategy, it is important to
ask, How will we structure the overall business so that the parts create more value
together than they would individually? And that's really the crux when looking at
corporate strategies. Some smaller business units tend to operate as and gravitate
towards silos. You tend to find that at this lower level, their compensation,
succession planning, training, and learning programs align in a similar silo mentality.
based on their narrow and specific business or product line objectives.
Communication and cross pollination of skill sets from business unit to business unit
is almost non existent. If you are working towards fulfilling the corporate strategies,
then you, as an HR professional, need to understand how you create value together
across all business units rather than individually. Let's take a few moments to
discuss the different types of corporate strategy. Corporate strategy typically
focuses on the organization's long-term survival This begs the question, what is
long-term survival? Is it five years? Is it ten years? Is it two years There is current
research indicating that some companies are focusing their long-term planning 10
to 15 years into the future, some even longer. That being said, corporate strategy
does have its time limits, dependent largely on the industry and what you are
actually doing within it. One type of corporate strategy we will discuss is
restructuring. We're going to look at this in more detail in a few moments. However,
we'll get a bit of a jump on this discussion by noting that restructuring includes
notions of turnaround, divestiture, liquidation, and bankruptcy Here again, we'll
touch on these in a few moments. Next, growth strategies include incremental
growth, international growth, mergers, and acquisitions Stability strategy means
maintaining the corporation status quo. Taking each of these strategies together, an
HR manager needs to ask. What programs do we need to initiate or cease when a
company is restructuring, growing, or in a stability phase? How will our policies and
programs differ based on what the corporation wants to do? As we just discussed,
we're now going to spend some time examining restructuring strategies
Restructuring is the corporate management term for the act of reorganizing the
legal, ownership, operational or other structures of a company for the purpose of
making it more profitable or better organized for its present needs Restructuring
strategies fall into four areas. Turnaround, divestiture, liquidation, and bankruptcy.
Turnaround strategies attempt to increase the viability of the corporation or
business unit. Turnaround strategies examine individual business processes and
what the corporation is looking to undertake overall. From those examinations We
then try to determine the best HR solutions to increase the viability or sustainability
of the business and or corporation. For example, we may undertake a SWOT
analysis that examines the corporation's strengths, weaknesses, opportunities, and
threats. Turnaround strategies ask us to look at the larger perspective. Divestiture is
where a part of the business or corporation is sold For example, if the corporation
sells or investigates selling the sales department in one or all of its businesses, then
HR will need to seek the means of outsourcing its sales reps Similarly, instead of
divesting the sales department, HR may investigate changing the pay levels or
structure of the department, or recruit different talent as an alternative solution.
Divestiture are typically enacted in order to maximize profits, either by eliminating
underperforming aspects of the company. or by maximizing savings that can be
offered by outsourcing the divested aspect of the company. Sometimes corporations
will change direction making a service or department either redundant or
unnecessary. Divesting itself of that service or department will allow the company to
streamline its operations and focus resources on the core business, where it will
better impact overall corporate performance Liquidation refers to terminating a
business and selling its assets. Liquidation does not mean the organization has
altogether gone bankrupt. Just that the decision has been made to sell parts of the
business that the corporation does not need or want anymore, possibly in a
piecemeal fashion. Liquidating parts of a company, for example, may allow the
corporation to obtain the resources necessary to fund another part of the
corporation, or to fund the activities of another part of the business that is showing
growth. It usually results in whole parts of the organization being shut down,
employees being let go, and assets being sold. The final restructuring strategy is
bankruptcy. Bankruptcy is a legal status of a person or other entity that cannot
repay the debts it owes to creditors. In most jurisdictions, bankruptcy is imposed by
a court order, often initiated by the debtor. It is the formal procedure in which an
appointed trustee in bankruptcy takes possession of the business assets and
disposes of them in an orderly fashion. At this point the Board of Directors may or
may not resign and the trustee could assume control of the organization. From an
HR management perspective, your responsibilities during a bankruptcy would likely
be to oversee downsizing and to manage the termination andor severance notices.
Obviously, you won't be hiring anyone during a bankruptcy. Your HR function
definitely shifts once the corporation files for bankruptcy. We are now going to
switch our attention from restructuring to overall corporate growth strategies. There
are four common corporate growth strategies. They are incremental growth,
international growth, acquisition, and merger. Incremental growth may be a linear or
gradual expansion of the business. It can be attained by expanding the client base.
increasing the products or services, changing your distribution networks, and using
different or new technology. International growth entails seeking new customers or
new markets abroad, resulting in the organization expanding its reach
internationally beyond its traditional borders. Acquisition is the purchase of another
company in order to gain access to that second business's customer base or means
of production, or to consolidate a competitor's processes into your own. Acquiring
another company is often a faster or easier way of growing than compared to
starting from scratch. A merger is where two organizations combine their resources
to become one larger organization The questions facing HR during a merger are,
how do we manage the functional overlaps or redundancies? And what culture
should we adopt? The culture of company number one? The culture of company
number two? Or, perhaps, should a new culture be formed altogether? Regardless of
the growth strategy being implemented, it involves change. And from an HR
perspective You not only need to align and possibly update your HR strategies to
reflect the resulting realities of that change But you also need to be an effective
change agent that helps the organization and its employees prepare for and buy
into those changes. Is your corporation buying another company? Are resources
being combined? How are you supporting the new corporate realities posed by
these strategies? How will your activities lead the change resulting from this growth
strategy? Will the resulting growth mean the creation of new distribution networks?
If so, you will probably need to hire new employees. You may need to lay off
employees if their position has been made redundant. Perhaps you will have to start
performing due diligence on the start of negotiations for a new collective
agreement, or maybe all of the above. Let's consider an example of a merger and
the impact it could have on HR and on you as an HR manager. Two separate
computer organizations discovered that they work really well together. During the
course of their working relationship with one another, each company noted
synergies between their employees and their respective clients. Then, after five
years in business, they decided to merge. They are not only trying to achieve
economies of scale, but also offer their clients seamless integration of products and
services In this example, as the HR manager for one of the merging companies, an
important question you need to ask is What are your responsibilities to the
corporation as it decides whether to purchase or merge with another organization
by combining resources? In contrast to restructuring our growth strategies, a
stability strategy is adopted when the corporation seeks to keep everything the
same. When adopting a stability strategy, you are, in essence, trying to keep things
constant. Situations that may necessitate a stability strategy include those where
the Corporation is concerned or unsure about whether its business lines will exist in
the future, and therefore want to take a wait-and-see approach. Similarly,
depending on the route the business eventually decides to go, expending capital
and resources towards the growth of a product, service, or internal department that
may not fit into the corporation's future. may not make sense. A stability strategy
may also be temporary, perhaps serving as a pause after a change or an expansion.
Depending on the situation, it can also be known as a neutral or do nothing
strategy, or eventually as a retrenchment strategy if no additional investments are
being made into the corporation. Your HR responsibilities during a period marked by
a stability strategy could include helping management better understand that
expenses for training and development or succession planning may have to be
lowered. You may be responsible for sending out a communication to the employees
asking for their input on where money could be saved in their respective areas. Or
you may be engaged in helping to determine the projects or policies that could be
implemented to positively impact productivity.