Developing HR strategy
8 steps towards delivering a successful HR strategy
A well-defined strategy clarifies the role of the HR team. It determines the size, structure, and cost of the resource required to deliver it and ensures that all HR activity is aligned to business needs – the most crucial requirement of all – joined-up HR!
What follows are eight key steps in the quest towards delivering a successful HR strategy.
1. Aligning business and HR needs
The business’ goals – that is its strategic imperatives – sit at the heart of any HR strategy and in order to align business and HR needs one key question must be answered, “Can your organization’s internal capability deliver its business goals?”
This is where HR receives the most criticism. The function is frequently accused of failing to fully understand its business, goals, and strategy for achieving these goals, and its business model, and how it delivers to its customers. For those who already understand the demands of their business, it is easy to identify where the business has strong core competencies and where the business is weakest.
Sometimes these weaknesses are related to essential systems or processes, but more often – and significantly for HR – these weaknesses relate to the quality of the workforce, its motivation, and ability to deliver organizational performance. Taking steps to understand your business and where it has a competitive advantage is an essential first step towards determining the key HR interventions that form the basis of an HR strategy.
2. Developing your HR strategy
Deeper knowledge and understanding of your business goals and business model can identify potential threats and opportunities in the quantity and quality of human resources required by your organization. This in turn identifies the key components of your HR strategy and the virtuous circle of providing whatever your organization needs for success.
It is also critical that the HR team has a high level of expertise in aligning major HR interventions and their relevance to business performance. This calls for expert HR thinking and identifies the requisite interventions and, equally important, how they fit together to leverage organization performance.
If there is a strong need for the organization to develop its management capability, for instance, should you align your compensation strategy to reinforce this objective? If the organizational structure defines the accountabilities clearly at every level of the organization, is your HR team selecting and developing against them?
Another concern for HR is when it should make strategic interventions. Easy, it either follows your business cycle or is triggered by other key events such as a merger, an acquisition, or a change in business direction.
3. Organizational performance
Organizational performance is the process by which business goals and objectives are cascaded and managed across and down an organization. It provides a link and rationale for all other HR activities and, in addition, the greatest opportunity to directly impact business success, enhancing HR’s reputation and contribution.
HR needs to create and install a robust performance management process that sets out performance objectives for all levels of staff within a business. This is an opportunity to develop line managers’ skills in being able to disseminate and set stretch targets for their business.
A critical part of this process is a robust performance review process, which gives people feedback about what has been achieved – what people have done well and not so well.
The third element is a personal development review process where individual strengths and weaknesses are identified for the purposes of assessing and meeting organizational development needs.
4. Organizational design and structure
Organizational design is the shape, size, and structure of the organization required to meet customers’ needs. It reflects the management processes that drive the business model and determines organizational agility and flexibility. These processes can be a source of competitive advantage or sources of frustration, unnecessarily absorbing time, cost, and resources.
Decisions affecting the shape, size, and cost of the organization will be aligned with the business strategy. It should be relatively easy to see whether an organization invests in marketing, sales, or manufacturing, for instance, and whether the organization is maximizing its workflow capability.
As people experts, the role of HR is to add value to the structure and operation of the business. Structural weaknesses offer an opportunity to revamp any part of the organization by identifying and making appropriate changes, reductions in size or cost; or improvements to the quality of the operation. Conversely, structural strengths are a signal to the HR team to reinforce organizational competence.
5. Strategic resourcing
Achieving clarity throughout the organization’s structure is critical in order for resourcing strategies to work well. If the organization is transparent about its key roles and accountabilities, this will define the skills and knowledge required to undertake the work and determine strategic resourcing requirements.
Deciding on your resourcing strategy means identifying a number of critical components. These range from the processes needed to determine resourcing needs, the processes to attract the right people, and the processes for assessing and selecting the right people. HR has a strong traditional involvement in all of the above. In addition, it is essential to ensure each stage of the resourcing activity is aligned and in direct response to the strategic imperatives.
Another important component determining the effectiveness of any resourcing strategy is the need to create a ‘recruitment brand’ – how the image (or brand) of the organization appears to the recruitment market can either support or undermine the success of a resourcing strategy.
6. Organisation development
If strategic resourcing is about providing a pipeline for importing external talent, then an organization’s development strategy is the way in which the HR team decides what changes and improvements need to be made to the current workforce.
Usually, these responses work at three levels – the individual, team, and organization – and all are geared to achieve high levels of organizational performance. It requires a close examination of the strategic imperatives and clarity about the capabilities to execute them.
Development responses will aim to increase business skills, the application of business skills (sometimes called competencies), and the behavioral elements – all of which contribute to an organization’s effective performance. It is important at an individual level, particularly for senior people, that they feel their development needs are agreed upon and that they are provided with the skills to do their jobs.
At a team level, it defines individuals’ ability to work with others flexibly and align individual and team skills and activity to business goals – all of which ensure that the organization is equipped to deliver its goals.
7. Compensation and benefits
Often called reward strategy, the purpose of compensation and benefits systems is to align the performance of the organization with the way it rewards its people, providing the necessary incentives and motivation required for an organization to deliver its goals.
Its components are a combination of base pay, bonuses, profit sharing, share options, and a range of appropriate benefits, usually based on market or competitor norms and the organization’s ability to pay. Typically, the components of an organization’s reward strategy will reflect the particular performance culture of a business.
There is evidence that organizations see compensation as a strategic management lever and are increasingly experimenting with new practices – team bonuses, for example, aimed at improving team performance or skills/behavior payments to upskill the workforce or reinforce culture or behavior change. A company’s reward policy in particular benefits from clarity about which other elements of the HR strategy it aims to support.
8. Organization culture
Culture is usually described as the “way we do things around here” – the way the organization acts, reacts, and interacts. The trend in the last 10 to 15 years has been to align organizational behavior more strongly with customers’ needs, creating customer-facing units and customer-sensitive behaviors. This has been a direct result of the increased competition around the product, quality, prices, and packaging. In re-aligning an organization’s culture there can be a real benefit and competitive advantage through improved service.
HR teams that are closely involved with the organization’s cultural ambitions can lead these initiatives through their knowledge of organizational psychology such as describing new behaviors and work styles, and through their skills in organizational development and being able to provide development solutions to deliver the improvements.
Production of the HR strategy
The eight components described here form a generic model of the most commonly used elements of HR strategies. It is important to select those that are most relevant to any particular organization.
When the key elements are decided, there are a number of simple questions that the HR team should be asking itself as each element of the strategy is considered in turn:
- START – What are we not doing yet, that the business needs from us?
- STOP – What should we stop doing because it does add not value?
- CONTINUE – What are we already doing that supports the business plan?