PHR / SPHR Exam For Dummies
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Subjective tools often determine the value of business activities. Make sure that you're familiar with these as you prepare to take the PHR and SPHR exams.

Cost-benefit analysis (CBA)

A cost-benefit analysis (CBA) measures the effectiveness of a community of intervention activities focused on company operations. Basically, a cost-benefit analysis takes a more global, whole-system view. Although a bottom-line dollar figure is used to communicate the results, a CBA seeks to measure both tangible and intangible outcomes in terms of money. Factors to evaluate include

  • Alignment with company's mission, vision, and values: Does the suggested intervention strategy serve the MVV?

  • Management engagement in the trenches (operational): Is there sufficient buy-in of the managers for successful implementation of the activity, and if not, what does HR need to do to develop the management team?

  • The direct costs of the program specifics: Does the company's cash flow support the outcome, whether negative or positive?

  • The indirect costs of implementation: Have you considered the indirect costs of implementation, including wages, benefits, and lost productivity of the personnel involved?

  • Risk factors of failing to implement: What will happen if you don't implement this particular strategy?

  • Revenue and profit: What revenue will be generated as the result of these efforts, and what will be the profit margin?

  1. CoolerCorks is a large scale American manufacturer of wine storage cooling units. As part of this year's strategic plan, the company decided it would undertake a Lean Manufacturing transformation, where the focus is on streamlined operations and elimination of waste. Michaela, the quality manager, has questioned whether or not the inconvenience and cost of this transformation is really necessary. Which of the following statements is TRUE?

    (A) Michaela should be given the option to step down, and a more committed replacement found.

    (B) Michaela should be allowed to continue on as a manager; she'll come around eventually.

    (C) Michaela should be coached through the process, seeking buy-in and commitment.

    (D) Michaela should be fired.

The correct answer is (C). HR provides support to the management team during the change that often is the result of the strategic planning process. (B) isn't a viable solution, because it doesn't clearly communicate the performance expectations and solutions. (A) and (D) may become necessary, but not until she has been given adequate time and support to perform successfully.


A crystal ball in human resources would come in handy at times, but the information may be less magic and more available than you may think. Data is collected both internally and externally for use in planning. If done properly, you now have at your disposal much of the information you need to properly forecast human resource needs at your place of employment. Consider the following examples:

  • Political: Who holds office at a national and local level can strongly influence organizational objectives. For example, in 2000 then President Bill Clinton passed a national ergonomics safety standard. In 2001, when George W. Bush took office, he signed an order from Congress to repeal. Based on the current political climate, immigration reform will continue to be an emerging compliance issue for employers.

  • Economic: Swinging gas prices affect commerce on multiple levels, not the least of which is the cost of getting product from A to B. The economy is further deteriorated when companies must pass this cost along to consumers, increasing the cost of living. If wages don't keep up, American workers can't afford to buy. If workers can't afford to buy, company profits suffer, leading to negative outcomes such as furloughs or layoffs. Based on the current economic climate, employers should seek out tax and training credits for workforce expansion and other government efforts to get individuals back to work.

  • Social: Cultural trends and patterns are often useful gauges toward the practice of human resources. One of the best examples is the 1960s civil rights era. The mood of the country was that of diversity, and Congress responded by passing the Civil Rights Act of 1964, which led to changes in workplace hiring practices and legal compliance, just to name a few. Based on the current social climate, anti-discrimination regulations will continue to emerge for groups not currently protected and depth in coverage for others.

  • Technological: Employers can count on technological advances to emerge at a fairly fast pace. From enterprise resource planning (ERP) systems to radio frequency (RF) inventory scanners, multiple tools are available to increase quality and productivity. Based on the current technology climate, anticipate the need for virtual work space and clearer telecommuting policies and procedures.

  1. Which of the following statements is TRUE?

    (A) Strategic planning is an executive level activity.

    (B) Analyzing the political climate is part of an environmental scan.

    (C) Calls per hour is a type of quality measurement.

    (D) The mission statement identifies where a company wants to be.

The correct answer is (B). PEST and PESTLE audits scan the environment for the political, economic, social, technological, legal, and environmental factors that must be addressed as part of an organization's strategic plan. (A) isn't the best answer, because midlevel managers are often part of the planning process and certainly become involved at the implementation stage. (C) is incorrect, because calls per hour are a measure of productivity. Mission statements (D) identify why a company exists.


The use of scorecards in one form or another is a useful way to see a snapshot of how the company is doing as a whole when compared to the desired outcomes identified during the strategic planning process. One widely accepted approach is the use of a balanced scorecard.

A balanced scorecard defines the accountability factors for each of these areas and collects data to measure how well or how poorly an organization is doing in addressing the deficiencies defined during the strategic planning process. The results allow for on-the-spot decision making and adaptability, rather than waiting to see if the intervention measures worked at the end of some arbitrary period of time.

  1. Which of the following measurement tools would best capture an overview of how well a company is doing when measured against the strategic plan?

    (A) An ROI calculation

    (B) A break-even analysis

    (C) A balanced scorecard

    (D) A financial dashboard

The correct answer is (C), a balanced scorecard, which pulls together data regarding the organization as a whole and compares it to the goals identified as part of the strategic planning process. (A) and (B) are incorrect because these types of calculations are best used on a micro level for smaller interventions. (D) is incorrect because it's specific to a function, not a company overview.

About This Article

This article is from the book:

About the book author:

Sandra M. Reed, SPHR, is the owner of EpocHResources, a consulting firm specializing in the unique HR needs of small businesses. She has authored learning modules and case studies for the Society for Human Resource Management. She is the co-author of PHR/SPHR: Professional in Human Resources Certification Study Guide, 4E, by John Wiley & Sons, Inc.

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