Practicing Strategic Human Resources

October 12, 2015
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Scope—This article provides an overview of strategic human resource management—the development and implementation of employee-related programs that solve business problems and directly contribute to major long-term business objectives. 

Overview

This article provides a definition, background, information, resources and suggested reading on how to begin the process of strategic human resources. Topics include the following:

  • Benefits to HR to engage in strategic planning.
  • Developing a strategic HR plan.
  • Assessing the organization's current environment.
  • Creating statements of vision, mission and values.
  • Implementing, monitoring and evaluating the HR strategic plan.

Background

Strategic human resource management involves a future-oriented process of developing and implementing HR programs that address and solve business problems and directly contribute to major long-term business objectives.

HR management has changed dramatically in recent decades. It was once largely an administrative function focused on day-to-day responsibilities such as employee recruiting and selection and managing employee benefits. Changing labor market conditions and new business thinking call for HR business strategies that include recruiting and retaining the right people, as well as providing ethical and cultural leadership.

Strategic planning presents great challenges and opportunities for HR professionals. Nearly all HR leaders in the largest global companies are involved in strategic decision-making and participate on the organization's strategy team, and a majority of HR professionals report that strategic planning is part of their function. In contrast, HR professionals in many medium and small organizations are not often involved in organizational or functional strategic planning. Consequently, to achieve long-term strategic HR objectives and to be a key player in the organization's strategic planning process, some HR departments may need to overcome stereotypical negative views of the HR function.

See:

Effective HR Practices Drive Profit

Creating an Effective Human Capital Strategy

Conaty: Strategic HR Is Being a Talent Master

Change Within

Ask 'What,' Not 'How'

Take a Good Look at Strategic HR

Benefits of HR Strategic Planning

The closer the alignment between HR and an organization's overall business strategy, the better the company's ability to anticipate and respond to customer needs and to maintain competitive advantage. Rigorous research, planning and development involving workforce culture, behaviors and competencies promote the successful execution of business strategy.

Particular benefits of HR strategic planning include the following:

  • Avoiding costly and disruptive surprises that interfere with achieving goals.
  • Addressing key issues in a timely manner to avoid crises.
  • Promoting employee productivity and overall organizational success.
  • Providing a sense of direction to positively affect how work gets done.
  • Keeping employees focused on organizational goals.
  • Providing a strategic focus to guide training and development initiatives.
  • Giving leaders tools to help focus and implement their strategic initiatives.

Developing a Strategic HR Plan

HR's role includes developing a plan of HR initiatives to achieve and promote the behaviors, culture and competencies needed to achieve organizational goals. See Strategic Planning Not So Hard if Done Right and Engaging in Strategic Planning.

Results-oriented goals broadly include the following:

  • Correctly assessing staffing and skills needs and keeping training up-to-date.
  • Developing and maintaining competitive pay and benefits.
  • Managing performance and designing a rewards system that keeps employees motivated. 
  • Knowing what competitors are doing to recruit and retain talent.
  • Providing training, including ethics, which reinforces corporate values.

The strategic planning process begins with four critical questions:

  • Where are we now? (Assess the current situation.)
  • Where do we want to be? (Envision and articulate a desired future.)
  • How do we get there? (Formulate and implement a strategy and strategic objectives.)
  • How will we know if we are on track toward our intended destination? (Establish a mechanism to evaluate progress.)

The following sections examine each step in greater detail.

Step 1: Assess the Current Situation

Being a strategic business partner means carrying out HR activities with the long-range goals of the organization in mind. To do this, HR professionals must do the following:

  • Understand how the various organizational components interact and recognize the long-term implications of HR decisions. The impact of HR decisions must be thoroughly researched and analyzed before changes are implemented.
  • Have a firm grounding in business basics, including finance, marketing, sales, operations and IT. These skills help with budgeting and with maintaining a workforce with the correct mix of skills.
  • Develop and exercise analytic skills directed at "the why" as well as "the what." This may mean spending more time on so-called translational work (such as coaching business leaders, planning and implementing HR practices that effectively execute strategy, and helping teams manage change) than on transactional work (such as recruitment, training, human resource information systems and other traditional HR functions).
  • Conduct a strengths, weaknesses, opportunities and threats (SWOT) analysis of their organizations. The SWOT approach offers a clearer picture of customers, markets and competitors.

See:

Understanding the Business of HR

Knowing the Numbers a Critical HR Skill

Role of HR Becoming More Strategic, New Report Shows

Aligning the HR function to the organization's business strategy

For HR departments in particular, intradepartmental strategic planning can be a good way to start the functional alignment process. However, regardless of whether strategic planning begins in the HR department or in another department, or is managed on an organization wide scale, the actions of the HR department will be integral to the success of the strategic plan. Thus, HR professionals must take care to align the HR function with every aspect of the strategic plan, even if the strategic plan does not explicitly address HR issues. See Alignment is Essential to effective Performance, Profitability and Aligning Workforce Strategies with Business Objectives.

Recent SHRM research reveals that HR professionals foresee significant workplace challenges, including rising health care costs, the retirement of large numbers of Baby Boomers and the increased demand for work/life balance. Retention programs, work/life programs, succession planning, and health, safety and security programs are among the HR efforts that are viewed as key workplace challenges through which HR can strategically contribute to organizations. See Five Key Trends from SHRM's Special Expertise Panels

The HR alignment process is often driven by workforce composition issues. Although every organization's particular strategic plan is unique, the demographics and other characteristics of the available workforce have a major effect on the way businesses are staffed. In turn, the way organizations are staffed has a significant impact on the execution of the organization's strategy.

See:

To Know the Business, Start in the Trenches

Businesses Turn to HR to Spur Change

Conaty: Strategic HR Is Being a Talent Master

In Strategic Workforce Planning, Questions More Important than Answers

HR Can Play Influential Role in Helping Boards Manage Risk

Survey: HR Seen as Important but Fails to Deliver Value

Effective HR Practices Drive Profit

Take a Good Look at Strategic HR

How HR Professionals Can Help Companies Grow and Create Jobs

Be a Ringmaster of Risk

HR professionals should monitor and respond accordingly to factors that may affect workforce composition, including the following:

  • Age. The age of the existing employees, the age of the available workforce, and the patterns of retirement for older workers and for the entrance of younger workers can significantly affect workforce availability.  
  • Current economic conditions. Unemployment rates, natural disasters and political changes can also have an impact the availability of workers.  
  • Globalization. One aspect of globalization that will affect almost all organizations is the increasing diversity of the workforce. Another aspect of globalization is the economic incentive to outsource labor and production activities to wherever such costs are lower. A third, and related, aspect is immigration, both legal and illegal, in the United States and abroad.

See:

Human Resource Strategy: Adapting to the Age of Globalization

Thought Leaders Focus on Managing a Global Workforce

CEOs Say HR Plays Critical Role in Growing Businesses Globally

Conducting a SWOT analysis

Understanding of the current situation can be enhanced by conducting a SWOT analysis. This analysis includes an internal assessment of the organization's capabilities and limitations as well as an external environmental scan to review its customers, markets and competitors, and to forecast to external opportunities and threats.

See:

Strategic Planning: What is SWOT Analysis, and How Does It Apply to an HR Department?

Ask 'What,' Not 'How'

Major areas to consider during an external scan include economic, demographic, political, social and technological trends. An analysis of customers, markets and competitors is used to determine how the market is changing, to predict who the future customers will be and to analyze competitors in the marketplace. See Strategic Planning: What are the basics of environmental scanning?

When conducting a customer/market/competitor analysis, HR professionals should answer the following questions:

  • What business are we in?
  • What is going on in the world in which we do business?
  • What business should we be in?
  • What are our resources?
  • What are our core competencies?
  • Who are our competitors?
  • How will we compete?

Step 2: Envision the Future

When the HR strategic planning team has fully evaluated the current situation, it should consider what the ideal future would look like from an organizational perspective.

See:

What Comes Next?

Thought Leaders Forecast 2020 Workplace

The question "Where do we want to be?" can be answered and clearly articulated by creating statements of vision, mission and values. A vision statement provides a description of what an organization wants to become or hopes to accomplish in the future. An effective vision statement paints a mental picture of the organization's preferred future that is inspirational, aspirational, compelling and concise. See Human Resources Mission Statement Examples.

A values statement describes what the organization believes in and how it will behave. This statement can serve as the organization's moral compass and should be used to guide decision-making and assess actions taken. See Mission: What Is the Difference Between a Company's Mission, Vision and Values Statements?

Step 3: Develop Strategic HR Objectives

Setting strategic objectives is an important part of the strategic planning process. Therefore, these objectives must be aligned with the organization's mission, vision and overall strategy. Strategic objectives will vary from organization to organization.

See:

Alignment is Essential to Effective Performance, Profitability

Aligning Workforce Strategies with Business Objectives

Integrate HR with Operating Strategy

To identify whether strategic objectives have a solid foundation for success, HR should consider the following questions:

  • Have the benefits of obtaining the defined objectives been outlined and communicated?
  • Are the strategic objectives relevant to the organization's position in the external market? For example, do they consider competitor positions, organizational size and financial strength?
  • Do the strategic objectives recognize the organization's strengths and weaknesses?
  • Do employees throughout the company understand how these objectives affect them and how they contribute independently and collectively to the defined objectives?
  • Are the strategic objectives realistic and feasible? Unrealistic objectives typically result in disappointment for all involved.
  • Have timelines for benchmarking progress and targets for completed objectives been set?
  • Will the organization realistically be able to identify the success or lack of success in the accomplishment of strategic objectives in some quantitative fashion?
  • Can the strategic objectives be linked back to the organization's overall strategy?

As an example, ABC Company may identify in its strategic planning analysis a need to improve the talent acquisition process. The strategic objective to address this issue is to design selection criteria to ensure best-fit hiring while reducing the time-to-fill positions. See Creating an Effective Human Capital Strategy and Customize, Align Talent Strategies with Business Objectives.

Once a key initiative is identified, the organization should do the following:

  • Continuously ensure that the objective and action plan are aligned with the organizational and HR strategy.
  • Identify the primary actions required to achieve the objective.
  • Set milestones for each action, and plan for contingencies.
  • Identify the required resources, including budget and staff.
  • Establish success measures.
  • Communicate key messages.

Ultimately, a strategic objective is only as good as the overall strategic plan.

At this step of the strategic planning process, the focus is on specifying short-term answers to the question "How do we get there?" Specific, concrete short-term objectives that can be completed within six months to a year should be established to answer this question.

Although many organizations engage in strategic planning, very few of them believe they are highly successful at strategy execution. According to a survey by the American Management Association and the Human Resources Institute, only 3 percent of executives polled said their organizations were very successful at executing corporate strategy, whereas 62 percent stated their organizations were moderately successful. However, the companies that reported relatively high success in strategy execution were more likely to realize favorable revenue growth, market share, profitability and customer satisfaction.

Though every organization has its own strategy execution challenges, this study found that mastering the following areas is essential to successfully implementing strategic plans:

  • Clarity of communication.
  • Alignment of practices.
  • Leadership.
  • An adaptive organizational infrastructure.
  • Resource management.

The single greatest barrier to executing strategy is the lack of adequate resources, the study found.

Step 4: Monitor and Evaluate

The final step should be establishing a mechanism to monitor and evaluate progress toward the achievement of strategic objectives. Most organizations conduct annual or quarterly strategic reviews for this purpose. These reviews do the following:

  • Determine whether the organization is on track to achieve key objectives.
  • Provide the opportunity to identify and adapt to significant internal or external changes that affect the strategic plan.
  • Update annual action priorities.

Some organizations may find that systems or tools such as balanced scorecards, benchmarking and dashboards are helpful for keeping focus and monitoring results.

See:

How can the balanced scorecard be applied to human resources?

How do I determine which HR metrics to measure and report?

Knowing the Numbers a Critical HR Skill

 

Templates and Tools

Articles

Competency Modeling Meets Talent Management

Books

Stroble, K. R., Kurtessis, J. N., Cohen, D. J., & Alexander, A. (2015). Defining HR Success: 9 critical competencies for HR professionals. Alexandria, VA: Society for Human Resource Management.

Holbeche, L. (2009). Aligning human resources and business strategy. Oxford, England: Butterworth-Heinemann.

Bliss, W. (2006). Business literacy for HR professionals: Essentials of strategy. Boston. Massachusetts.: SHRM/Harvard Business School Press.




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