Seven Steps Before Strategy
How many times have we heard these tired phrases?
In recent years, human resources professionals have been told that theirrightful place is as a senior company officer at the top of an organization.Tasks associated with what once was known as "personnel administration" havebecome the objects of scorn, while activities thought to position HR managers as"strategic partners" have been encouraged and applauded.
Many in HR have taken this message to heart. They are striving to focus onstrategy, to participate in decision-making at the highest levels of theirorganizations, and to elicit respect from other members of the senior managementteam.
Unfortunately, they are failing. Despite their best efforts, many are stillblocked from the head table or only grudgingly given a seat. They findthemselves too weak politically to be champions of organization transformation.And they find themselves in a constant battle to prove their worth and to haveany influence in key decisions. While this is due, in part, to slow-to-changeattitudes toward HR from other areas of the organization, HR also must acceptresponsibility.
The recent emphasis on strategy at the expense of operations has hurt HR. Intheir rush to become strategists, HR executives and managers have dropped theball on some fundamental aspects of HR. This has allowed those predisposed todiminishing the role of HR to point to shoddy basics as evidence of limitedabilities.
Does this mean that HR professionals should abandon strategic activities andreturn to the days of "administrivia"? No. It simply means that HRexecutives and managers must try harder to find the delicate balance betweenday-to-day operations and big-picture initiatives. While HR professionalsultimately should be focused on strategy, they must make sure that the basics ofthe job are taken care of first.
Ultimately, there is a hierarchy of roles and priorities that must befollowed--moving from the smooth execution of the basics of HR to theassumption of a seat at the table to, finally, becoming a champion of change.Following this path lets HR professionals avoid the fate of one executive whotried to advise an internal client about manpower issues. The line managerreacted with scorn, asking, "How about getting my open-position requisitionsfilled before giving me advice on strategic staffing issues?"
The seven steps
Taking care of the basics means taking steps to increase efficiency,streamline operations, link individuals and activities to organizationalobjectives, and establish sound relationships with multiple stakeholders. Thefollowing seven steps will help assure that both the basic and strategic HRneeds of organizations can be met:
- Get rid of what’s unnecessary
- Assess stakeholder satisfaction
- Communicate regularly with stakeholders
- Redefine "strategic"
- Practice what you preach
- Spread the word
Step 1: Get rid of what’s unnecessary
A common complaint from HR managers juggling basic HR operations andstrategic thinking is that there isn’t enough time to do both. With staff andbudget cuts forcing organizations to do more with less, this balancing act isbecoming even more difficult.
The solution is simple. Get rid of HR programs and practices that aren’tadding value to the organization’s bottom line.
We recognize that this is easier said than done. Jettisoning HR programs andpractices requires HR managers to know which activities are contributing toshareholder value and which are not. It means they must have the courage toadmit that certain practices do not work. And it means recognizing that justbecause a program is touted by conventional wisdom as a "must-have," thatdoesn’t mean it’s right for their organization.
The availability of new research is making this process less complicated. TheWatson Wyatt 2001 Human Capital Index establishes exactly which human-capitalpractices have the greatest impact on shareholder value. For example,effectively implementing a specific set of recruiting practices is associatedwith a significant increase in shareholder value. Among the practices includedin this category are those associated with hiring people who can hit the groundrunning, involving employees in the hiring process, treating peopleevenhandedly, and approaching recruiting and retention as mission-critical.
On the other hand, the HCI study also throws a cautionary flag in front ofsome popular HR practices. Three practices in particular--360-degree reviews,developmental training, and the use of HR technologies with "softer" goalsin mind such as culture change and enhanced communication--were associated inthe study with a decrease in financial performance. While there may be nothinginherently wrong with these practices, many organizations implement them in waysthat decrease, rather than increase, shareholder value.
HR executives and managers must take a hard look at their programs andpractices to evaluate which ones are adding value and which ones are not. Byfocusing only on core practices proven to add value, HR professionals free uptime and resources previously invested in delivering programs that bringmarginal returns.
Step 2: Automate
Forty years ago, HR staffers kept employee records on index cards.Fortunately, those days are gone. Today, HR should be using technology toautomate administrative transactions and to provide efficient, user-friendlyself-service systems to employees and managers alike.
Achievement of these goals is dependent on good execution of carefullycrafted HR technology plans. When HR technologies first became widely availableseveral years ago, many companies implemented as many eHR applications as theycould and made them available to as many employees as possible through e-mail,voice mail, Interactive Voice Response systems, the company intranet, the publicInternet, and HR service centers. The assumption was that the faster anorganization moved its traditional HR services into an eHR environment, the moreefficient HR would become and the more satisfied employees would be with HRservices.
However, our research shows that getting results has more to do with aproperly focused eHR strategy than with the speed or extent of an organization’seHR progression. Technology must be implemented with a clear objective in mind,and that objective must be tied to hard business outcomes. Using HR technologiesto reduce costs is associated with an increase in shareholder value, forexample. Similarly, using HR technologies to upgrade service or improvetransaction integrity or accuracy also can boost the bottom line.
Unfortunately, implementing HR technology for "softer" reasons has theopposite effect. Using HR technologies toenhance communication, for example, is associated with a decrease inshareholder value, as is using technology to promote culture change.
The task for HR is to figure out what can and should be automated, establishquantifiable objectives, draw up a plan to meet them, and carefully execute theplan. Specific steps in this process should include:
Understanding and leveraging the link between eHR and business strategy.HR services and systems must be viewed in the context of helping to achievecompany objectives.
Quantifying the current cost of delivering HR services. HR groups mustknow where they are today before they can identify opportunities for costcontrol and project expected cost-savings.
Defining how eHR will change the delivery of HR services. This meansestablishing a vision and articulating what that vision will mean in terms ofpeople, process, and technology.
Working closely with the finance side of the organization to develop therequired analysis. Typically, this includes a business case containing acombination of measures, such as net present value, rate of return, and paybackperiod.
Establishing measures/targets to maintain focus and assess progress. Asthe saying goes, "What gets measured gets done."
Step 3: Assess stakeholder satisfaction
Just because an HR group believes its activities are going well, that doesnot mean others share the same view. Consider data from the Watson Wyatt WorkUSA2002 study of employee attitudes and opinions. Only half--48 percent--ofparticipants rated the effectiveness of their organizations’ HR functionsfavorably.
HR executives and managers at every organization should know where they standin the eyes of their stakeholders, including senior executives, line managers,and employees. What are they doing well? Which areas need work? How are theyviewed by the majority? As administrative implementers? Strategic planners?Facilitators? Obstacles to progress?
Armed with this information, HR professionals can evaluate their roles in thecontext of what their organizations want and need from their HR departments.
Step 4: Communicate regularly with stakeholders
The truth is that most stakeholders in an organization don’t really carewhether HR has a seat at the table or not. They just want their HR needs met.
Consider line managers. They want to see their staffing requirementsfulfilled. They want the HRMS to be accurate and up-to-date. They want acompensation system that is easy to understand and lets them reward (and keep)their key talent. In short, they want to see the trains running on time.
When you make changes to the HR process that appear to eliminate HR duties ,you might at the same time create confusion and concern among line managers andothers in the company. Who will take care of the duties? How will the work getdone? In addition, line managers often are unaware of the importance of specificHR processes. A program or practice they dismiss as a waste of time may actuallybring significant value to the organization.
The solution is frequent and effective communication. By communicatingregularly with stakeholders, HR executives can show them why certain practicesand programs are essential. They can explain to stakeholders why changes such asautomation of the performance-management system or introduction of self-servicebenefits administration are being made. And they can make the business case forthem--pointing out advantages related to cost, efficiency, accuracy, and easeof use.
By making communication with stakeholders about proposed changes de rigueur,HR managers and executives can alleviate any concerns the stakeholders mighthave and develop a contract with HR’s customers that covers the organization’shuman-capital priorities.
Ultimately, the key to establishing trust in the HR function is helpingstakeholders understand the competitive and strategic human-capital issuesfacing their organizations and explaining the rationale behind change-relateddecisions.
Step 5: Redefine "strategic"
Let’s face it. It’s just not realistic for every person working in HR tobe focused solely on strategy. If every HR executive, manager, associate, andassistant eschewed administration for strategy, the result would be certaindisaster.
Still, everyone wants to be seen as a strategist. With the mantra "thinkstrategic" echoing in their ears, few HR managers are willing to definethemselves as anything but strategic partners.
The solution to this problem lies in broadening the definition of "strategic"to encompass both the formulation of strategy and the execution of strategy toaccomplish organizational goals. During the past few years, many of the peoplewho focused on strategy at the expense of operational success did so becausethey saw no connection between their operational duties and the success of theirorganizations. They wanted to "make a difference" and believed the only wayto do so was to become part of the decision-making process.
To solve this problem, organizations must clearly define roles andexpectations for people in HR-related positions. The percentage of each person’stime likely to be spent formulating strategy versus executing it should becalculated, and it should be made clear that meeting operational objectives isconsidered a top priority.
At the same time, steps should be taken to clarify for HR professionals inall positions how their work affects the bottom line. We call this "line ofsight"--showing employees that their individual contributions do have ameasurable effect on their companies’ ability to meet business goals.
The best way to accomplish line of sight is through a strategy-mappingprocess. In the first stage, assess the primary business strategies. What arethe business objectives of the organization? The division? The department?
Next, identify the operational plans necessary to execute these objectives.How will the business strategies be carried out? By whom? With what resources?In what time frame?
After the objectives and processes have been established, you can determinethe human-capital requirements for executing the plans. Questions to askinclude: What type of culture will we need? What type of work experiences willwe have to offer in order to acquire top talent? How will our compensation andbenefits practices change? Once you know the HR requirements, technologicalresources can then be evaluated and allocated to support the needed HR programsby reducing administration and maximizing existing resources.
With this knowledge, HR executives can show members of the HR staff wherethey fit in and how they can contribute to the achievement of businessobjectives.
Step 6: Practice what you preach
Getting the HR house in order is important from an efficiency standpoint, butit also is crucial for establishing credibility within the company. Few linemanagers are going to be willing to test out new practices such as flexible workarrangements or automated performance-management systems if the HR group exemptsitself from practices it asks others to accept.
By modeling behaviors and processes that can be implemented throughout thecompany, HR can be a testing ground to work out the kinks in new activities andas a showcase for good employment practices.
Step 7: Spread the word
While the HR literature may be filled with articles and editorialscelebrating the importance of human capital and its management, few peopleoutside the field of HR are widely exposed to that message.
There are some signs that this is changing. Key newspapers and nationalbusiness magazines regularly feature pieces on the handling of human-capitalissues. And companies are finding that it pays off to position themselvespublicly as good places to work.
HR executives and managers should emphasize this growing respect for humancapital by showing line managers, senior management, and investors the stronglink between superior human-capital practices and increased shareholder value.Three key findings from the HCI study can be used to make this case:
Superior human-capital practices are leading--not lagging--indicatorsof financial performance. This means that effective human-capital practicesdrive positive business outcomes more than positive business outcomes lead togood HR practices. Changes made now will help companies recover more quickly andemerge stronger when the economy rebounds.
Shareholder returns are three times higher at companies with superiorhuman-capital practices than at companies with weak practices. During the boomyears of the late 1990s, that difference was significant, but not nearly aslarge. It’s even more important to focus on human-capital superiority in toughtimes.
Not all human-capital practices are created equal. Some create a lot ofvalue. Others actually diminish it. Companies must examine programs andpractices to ensure they are adding to shareholder value.
Just because HR experts say HR executives and managers deserve a seat at thetable, that doesn’t make it so. HR professionals must evaluate for themselvestheir track record in meeting stakeholders’ operational expectations. Nomatter how brilliant their strategic thinking, unless the basic HR needs oftheir organizations are satisfied, HR professionals will not be viewed as fullmembers of the organizational team.
Workforce, November 2002, pp. 40-44 -- Subscribe Now!