Developing a Human Resource Management Strategy
In today’ fast paced global economy, rapid change has become the norm; therefore, it’s critical that organizations develop a more coherent customer-centric approach to managing people. In just the same way a business requires a marketing or information technology strategy it also requires a human resource or people (customer) strategy.
To begin with, what is unique about a company’s Human Resource Strategy as opposed to the marketing or IT strategies?
- HR is multidisciplinary: It applies the disciplines of Economics (wages, markets, resources), Psychology (motivation, satisfaction), Sociology (organization structure, culture) and Law (min. wage, labor contracts, EEOC etc.,)
- HR is embedded within the work of all managers, and most individual contributors due to the need of managing people (subordinates, peers and superiors) as well as teams to get things done.
Additionally, any discussion related to strategy requires at least some reference in terms of what is meant by the term “strategy.” All too often, those involved in formulating a company’s HR strategy have a slightly different paradigm or reference point; therefore, before any work is undertaken, it’s important that each participant go through a “vetting” process to ensure that each of them is on the same page.
Thus, what is the meaning of strategy? In its simplest form, strategy is a critical long-term factor that affects a company’s performance. Moreover, it’s a factor that contributes to a company’s Competitive Advantage in markets and involves the top executives and/or board of directors of the firm.
In developing an Human Resource Management Strategy two critical questions must be addressed.
- What kinds of people do you need to manage and run your business to meet your strategic business objectives? (For HR professionals, rather than think of “people” as employee’s, the 21st Century approach where talent is of limited supply and retention is essential to a company’s long-term stability, “people” is replaced by the word “customer” or rather “internal customer”)
- What people programs and initiatives must be designed and implemented to attract, develop and retain staff to compete effectively?
In order to answer these questions four key dimensions of an organization must be addressed. These are:
- Culture: the beliefs, values, norms and management style of the organization
- Organization: the structure, job roles and reporting lines of the organization
- People: the skill levels, staff potential and management capability
- Human resources systems: the people focused mechanisms which deliver the strategy – employee selection, communications, training, rewards, career development, etc.
Why is an HR strategy important to a company’s performance?
- 85% of all firms in the US are service firms, thus, a customer-centric approach to running their business is required for their success.
- Service is delivered by people.
- Low quality HR leads to low quality customer service.
- In the 21st century effective knowledge management translates into competitive advantage and profits.
- Knowledge comes from an organizations people.
Frequently in managing the people element of their business senior managers will only focus on one or two dimensions and neglect to deal with the others. Typically, companies reorganize their structures to free managers from bureaucracy and drive for more entrepreneurial flair but then fail to adjust their training or reward systems.
When the desired entrepreneurial behavior does not emerge managers frequently look confused at the apparent failure of the changes to deliver results. The fact is that seldom can you focus on only one area. What is required is a strategic perspective aimed at identifying the relationship between all four dimensions.
Furthermore, the entrepreneurial approach will also tend to create some disparities and/or inequalities because many of the HR processes (i.e. performance development and recognition/rewards) will lack consistency and integrity leading to perceptions of favoritism and unfair management practices.
Consistency is an important quality related to the implementation of HR policies. Employees should receive a clear, undiluted message of what behaviors are important and desirable. When there is a fit between HR systems, employees are likely to receive consistent feedback. The 3 types of consistency are…
- Single-employee consistency
- Among-employee consistency
- Temporal consistency
If you require an organization which really values quality and service you not only have to retrain staff, you must also review the organization, reward, appraisal and communications systems.
The pay and reward system is a traditionally another problematic area. Frequently organizations have payment systems which are designed around the volume of output produced rather then a well defined pay for performance program (or compensation philosophy) that includes base pay, variable compensation/bonus awards, benefits, equity and other awards.
If the decision makers seek to develop a company which emphasizes the product’s quality they must first change the pay systems with a meaningful compensation philosophy. Otherwise you have a contradiction between what the chief executive is saying about quality and what your payment system is encouraging staff to do.
So, how does an organization go about developing a human resources strategy that includes active involvement of the management team and where should they begin?
7 steps to developing Human Resource Management Strategy:
According to Tony Grundy and Laura Brown, authors of book entitled “Values-Based HR Strategy”, there are seven unique steps that are undertaken in the development on a company’s HR Strategy. They include the following:
Step 1: Understanding the “big picture” or a shared perspective
- Reinforce what the key driving forces of your business are. What are they? e.g. technology, distribution, competition, the markets.
- What are the implications of the driving forces for the people (or internal customer) side of your business?
- What is the fundamental people contribution to bottom line business performance?
Step 2: Develop a Mission Statement, or Statement of Intent, that relates to the people side of the business
Do not be put off by negative reactions to the words or references to idealistic statements – it is the actual process of thinking through the issues in a formal and explicit manner that is important.
- What do your people contribute?
Step 3: Conduct an analysis of your organization that focuses on the internal strengths and weaknesses of the people side of the business.
Thoroughly research the external business and market environment. Highlight the opportunities and threats relating to the people side of the business.
- What impact will (or might) they have on business performance?
- Consider skill shortages?
- The impact of new technology on staffing levels?
- What are the benchmarks used for determining whether the base pay and total compensation practices are competitive?
From this analysis you then need to review the capability of your HR function or department. Complete an analysis of the HR function considering – in detail – the department’s current areas of operation, the service levels and competences of your personnel staff.
Step 4: Conduct a detailed human resources analysis and concentrate on the HR fundamentals that include the organization’s culture, organization, people and HR systems
- Consider: Where you are now? Where do you want to be? Is that in line with the three to five year business plan for the organization?
- What gaps exists between the reality of where you are now and where you want to be?
- Begin the process of prioritizing the tasks/assignments to be undertaken; where can you get the greatest bang for the buck?
- Exhaust your analysis of the four dimensions: culture, organization, people and systems.
Step 5: Determine critical people issues by going back to the business strategy and examine it against steps 3 and 4 above.
- Identify the critical people issues namely those people issues that you must address. Those which have a key impact on the delivery of your business strategy.
- Prioritize the critical people issues. What will happen if you fail to address them? Greater turnover, lower moral, drop in productivity etc.,?
- How is pay tied to performance? Is there are formal “pay for performance” strategy within the compensation philosophy?
- The goal here is to identify where you should be focusing your efforts and resources.
Step 6: Implement accountabilities and innovative solutions, or linking HR and corporate strategy
For each critical issue identify the options for managerial action. This is a necessary step as frequently people jump for the known rather than challenge existing assumptions about the way things have been done in the past. Think about the consequences of taking various courses of action.
Consider the mix of HR systems needed to address the issues. Do you need to improve communications, training or pay?
What are the implications for the business and the HR function?
Once you have worked through the process it should then be possible to translate the action plan into broad objectives. These will need to be broken down into the specialist HR Systems areas of:
- employee training and development
- management development
- organization development
- performance appraisal
- employee reward
- employee selection and recruitment
- manpower planning
- Develop your action plan around these critical issues. Set targets and dates for the accomplishment of the key objectives.
Step 7: Implementation and evaluation of the action plans
The ultimate purpose of developing a human resource strategy is to ensure that the objectives set are mutually supportive so that the reward and payment systems are integrated with employee training and career development plans.
There is very little value or benefit in training people only to then frustrate them through a failure to provide ample career and development opportunities
Human Resource Management Strategy systems diagnostic checklists
The following check-lists present some questions which may prove helpful for you to think about when planning your development programs for human resources (your people/internal customers) in your organization.
Your organization is more than likely in trouble if any of following issues are present:
- chronic employee relations problems
- no means of resolving employee grievances
- increasing/erratic employee turnover
- increasing number of customer complaints
- no pride in the organization
- inter-group conflicts
- no career paths for ambitious talented employees
- dissatisfaction with pay and conditions
- unclear job roles
- no clear performance measures
- quality is unimportant
- bad product service/delivery records
- poor recruitment standards/practices
- no management development programs
- no induction training for new employees/lack of an On-Boarding strategy
- critical skill shortages
- inter-departmental conflict
- you do not know if any of the above are applicable
- you ignore any of the above
Unfortunately, too many times an organization will address the symptom(s) that are holding the business back without thoroughly vetting the underlying root causes for the problems. For that reason, it’s important that your firm engage a highly experienced HR professional to serve as the Architect in formulating your HRM strategy.
In fact, you might even consider bringing in someone from outside of your organization that can bring more objectivity to the situation and offer an un-biased perspective rather than someone that’s part of the “establishment” and/or possibly part of the problem.
Moreover, every organization has internal politics and relationships that influence every initiative undertaken for the company; therefore, by selecting an individual that does not have a preconceived “agenda” or desired outcome the end product will be
free of internal influences/politics. Consequently, the end product will be perceived to have more integrity and therefore greater buy-in by the management team.
For additional information on developing an Human Resource Strategy, check out the following resources:
Value-based Human Resource Strategy, By Tony Grundy, and Laura Brown
Rutgers School of Management and Industrial Relations, Center for HRM Strategy
Human Resource Strategy: Formulation, Implementation, and Impact, by Peter Alan Bamberger and, Ilan Meshoulam
Mike Russell is a seasoned professional with three decades of experience in the fields of HR and OD. In addition to having a career trajectory of HR Generalist to a VP within ten years, Mike also has a long and successful background as a Consultant/Business Partner to CEO’s, Presidents and Executive Directors in both the private and non-profit communities across a wide spectrum of industries.
As the sole-proprietor and owner of Organizational Development Solutions (ODS), Mike partners with business leaders committed to insulating their organization(s) from potential liability, increasing organizational effectiveness and adding shareholder value.