How can I tell if I am being strategic: the definition of strategic HR
By Dr. John Sullivan who can be contacted at www.drjohnsulivan.com
It seems these days that almost everyone in Human Resources (HR) is striving to become more strategic. It's a legitimate goal, but quite possibly one many HR practitioners are not professionally prepared for. Ill prepared HR professionals get into trouble because they don't know exactly what the word means. It's not enough just to say that you're strategic, because nearly everyone says that these days.
It is essential to your credibility that if you are going to assert that you are strategic, that you first understand exactly what is and is not strategic. Before you try to define the word and what it means in HR it's important to realise that top management, not HR, makes the ultimate decision as to what is or is not strategic. "What is or is not strategic is determined by senior managers outside of HR. They judge strategic actions or programmes not by the words that describe them but instead by their actual impact on business results, which incidentally, are always measured in money terms!
2. What is the definition of strategic?
There are several different definitions of the word strategic. They run the gamut from the basic dictionary definition to a more focused HR definition.
A DICTIONARY DEFINITION: Strategic is a term that is borrowed from the military term where it means having an impact outside your own military unit, region or battle. The technical definition includes, "designed to strike the enemy at the sources of its military, economic or political power!"
It varies from the term that is on the other end of the "impact" spectrum, which is "tactical". Tactical means designed to impact the enemy at the "local level".
THE ACADEMIC DEFINITION: The "textbook" definition of strategic is "the plans made or the actions taken in an effort to help the organisation fulfill its intended purpose". Purpose in this case, is outlined by the organisations mission statement and related objectives.
A BUSINESS DEFINITION: Nearly every business function uses the term strategic to describe its plans, programmes and initiatives. Strategic initiatives vary dramatically from tactical initiatives. Tactical initiatives are those programmes, products or functions that have a major impact on reaching departmental or functional goals. In contrast, strategic initiatives make a major contribution toward helping the entire organisation meet its long-term goals and objectives. Examples of strategic business objectives include improving customer service, reducing costs, increasing market share or employee productivity.
AN HR DEFINITION: A strategic approach means taking a "longer" term, "big picture" approach to HR. Being strategic means operating HR programmes or initiatives with the goal of making a direct contribution toward meeting major corporate long-term objectives. Rather than focusing on internal HR "issues", a strategic focus means addressing and solving "business" problems through the effective use of people management programmes.
The primary goal of strategic HR is to increase employee productivity and corporate revenue. "Being strategic means focusing on business problems that occur outside of HR.
3. Identifying which corporate strategic goals and objectives to impact
As you can see from each of the above definitions, strategic actions are designed to impact corporate goals and objectives. Before HR can increase its strategic impact it must first determine what goals the organisation considers strategic.
At some companies identifying the top corporate objectives is relatively easy while at others, it's substantially more difficult. Quite often, the CEO outlines the major corporate objectives. If you have access to the company's strategic plan the goals are almost always documented there. In addition, CEO bonus compensation factors (generally set by the Board of Directors and administered through the executive compensation group) usually provide an accurate representation of what the organisation considers strategic. Being strategic in HR means impacting one or more corporate goals and objectives.
Every firm has it's own set of corporate objectives, but typical corporate long-term goals and objectives include:
>> Building a competitive advantage into a product or service Increasing revenues or profit
>> Cutting costs Increased market share Improving customer service or product quality
>> Reducing product development time-to-market Increasing employee productivity Increasing shareholder value (stock price)
4. The essential elements of strategic HR
Now that you have a definition of what is strategic, the next step is to operationalise that definition so that you can understand what actions must be taken in order to move from tactical to strategic. When you are trying to assess or develop a HR programme or department there are common elements, features or characteristics that strategic HR programmes share. These common essential elements are that:
HR INCREASES EMPLOYEE PRODUCTIVITY AND PROFITS: HR Provides programmes and services that result in a measurable increase in employee productivity, revenue and ROI. It builds a strong business case outlining its financial impact.
HR MUST PRIORITISE CUSTOMERS AND IT'S EFFORTS BASED ON CORPORATE OBJECTIVES: It is continually adding, cutting back or eliminating HR programmes based on their return on investment (ROI) and business impact. HR must also continually tracks shifts in the external environment, learn quickly and then adapt its strategy to the changing business world.
HR HELPS TO BUILD A PERFORMANCE CULTURE: HR plays an important role in ensuring that an organisation has productive employees and effective people management programmes. However, a strategic approach requires that HR marshal all of the resources of the corporation in order to build a "performance culture" that permeates the entire organisation. Only by ensuring that all managers, management systems, measures and rewards work together "in unison" can an organisation ensure that it optimises it's performance. HR must take the lead in building and maintaining this performance culture and in ensuring it permeates the organisation.
HR PROVIDES A COMPETITIVE ADVANTAGE: HR continually compares what "we do" in HR to what "they do" in HR at our product and talent competitors. HR provides people programmes whose output or results are superior to the company's direct competitors.
>> HR MAKES FACT-BASED DECISIONS USING METRICS: HR continually measures the business impact of HR programmes. It also uses metrics to proactively identify potential problems and opportunities and to continually improve. Most people management decisions are made based on facts and data, rather than opinions.
HR HAS AN "EXTERNAL" FOCUS: HR must ensure that it's programmes and staff focuses their efforts on the problems and opportunities of the business rather than on internal HR issues. HR must measure its success by it's impact on business results.
HR IS PROACTIVE AND FUTURE FOCUSED: HR must forecast and anticipate changes in the business environment so that HR programmes can adapt in time. Strategic functions must anticipate and prepare for an entire range of possible occurrences. They must proactively seek out business problems and opportunities and aggressively provide solutions. HR makes rather than facilitates change. There is a coordinated effort - HR must ensure that it's programmes and staff coordinate their efforts within HR to ensure results, speed, consistency and the highest "user" satisfaction.
HR TAKES A GLOBAL APPROACH: Ensuring that HR programmes have a business impact both locally and around the world. HR builds a brand - Strategic HR is not satisfied with just "running good programmes". In addition, HR must build a "great place to work" brand both internally and externally. Building an strong image or brand gives HR stable funding but it also raises its business contribution by increasing retention and providing a steady flow of recruits.
TECHNOLOGY PERMEATES EVERYTHING: Technology is the cornerstone of everything we do because without it, the extensive use of metrics, paperless HR, 24/7 employee and manager self-service and globaliSation would not be possible.
5. Thinking strategically may be an important goal
The first thing that HR professionals should realize is that there is nothing wrong with having a tactical impact. Contributing to departmental or functional goals is an important activity that any HR professional should take pride in. In fact there are some jobs and initiatives within HR that can only have a tactical impact. For example, it is difficult to have a strategic impact in payroll or benefits administration. The key thing to remember is that, even if your job isn't strategic, by thinking more strategically you can improve the focus of your programmes so that the financial return is greater and the positive impacts are broader.
Strategic thinking and HR means that everyone continually compares what they do to the major business objectives of the organisation. By constantly thinking like a "CEO" they can sharpen their focus (time and resources) on the things they do that can impact what the organisation has determined to be it's strategic objectives."HR is a tool, not the objective.
6. What is tactical HR?
Before you can be sure that what you do in HR is strategic you need to know the difference between strategic and tactical HR actions because being tactical is a step down of being strategic. Tactical actions have impact in the short to medium term and are generally focused internally. There are a variety of things that make an HR action tactical. They include:
INTERNALLY FOCUSED: You are internally focused on the day-to-day activities within the HR department. You "run" a programme without concern for it's strategic impact
FOCUS ON COST: You measure costs programme efficiency) but not your impact on revenue and profits
INCREMENTAL CHANGE: You maintain the status quo within HR by making only subtle refinements in existing programmes
FAILING TO PRIORITISE: You fail to prioritise programmes, individuals or business units so that high priority business units and programmes receive no special treatment
A FAILURE TO COORDINATE: You fail to coordinate your functional activities with other interdependent HR functions to ensure an increase in the overall business impact that HR has
BEING REACTIVE: Individuals and programmes react to events rather than anticipating them in order to prevent them or minimise the negative impact
7. A comparison between strategic and non-strategic HR actions
Most people and programmes are not strategic because few employees are given a chance to see or do strategic things early in their career. However, once people see a side-by-side comparison, the difference becomes more apparent. Perhaps a few examples will illustrate the difference between strategic HR actions and non-strategic ones.
RECRUITINGA STRATEGIC ACTION: Using metrics (measures) to identify the best sources in order to improve the on-the-job performance of hires; A non-strategic action -- Reducing the cost of hiring by using cheaper but lower quality sources with the net result being new hires that perform below average on-the-job
TRAINING A STRATEGIC ACTION: Adding new training programmes where there is significant measurable difference in on-the-job performance after an employee takes a class; A non-strategic action -- Offering the same training classes each year (regardless of their impact) because they are popular and well attended
RETENTION A STRATEGIC ACTION: Warning or alerting managers in advance about who is likely to quit and what tools are most effective in retaining them; A non-strategic action -- Tracking and reporting a manager's turnover rates after the fact
COMPENSATION A STRATEGIC ACTION: Educating managers and providing them with compensation tools that have a direct impact on employee productivity; A non-strategic action -- Suggesting that a manager give across-the-board raises even though there is no evidence that they impact productivity or retention
INTERVIEWS A STRATEGIC ACTION: Comparing candidate "scores" or ratings during an interview to their on the job performance and retention rate after they are hired. The goal is to see if the interviews predict on the job performance and over time, improving the performance of our new hires; A non-strategic action - Attending interviews and asking good questions
As you can see by these examples, strategic actions share certain common characteristics like the use of metrics, providing tools that impact employee productivity and warning managers in advance. I hope that the contrast between the two actions is obvious and that the strategic ones clearly provide more impact by increasing productivity, revenue or some other corporate objective.
Additional examples of strategic HR actions are as follows:
MOVING BEYOND THE MUNDANE and implementing bold programmes that directly improve employee productivity. Here are some additional examples that highlight activities that are clearly strategic in nature and "outside the box":
COMPETITIVE ANALYSIS: Complete a function-by-function competitive analysis between your firm's HR program offerings and those of our closest competitors. Assess which functions currently give us a competitive advantage and which ones need improvement in order to reach that goal
MEASURE AND REWARD MANAGERS FOR GOOD PEOPLE MANAGEMENT: Managers that practice good people management have the most productive employees. Unfortunately most firms have no measurement system for assessing individual mangers on how they manage their people. HR should develop a system for rewarding managers for great people management
PAY FOR PERFORMANCE: Increase the percentage of every workers pay that is "at risk" based on their output because you have evidence to prove that as you increase the percentage of an employees pay at risk, their performance increases
SWAT TEAM: Develop a rapid reaction team that can rapidly respond when a business unit has a major people problem. Demonstrate that acting quickly reduces the "damage" well before it can get out of hand
POST MORTEMS: Develop processes for analysing "failures" in people management in order to identify the root causes and which tools and strategies are most effective in preventing future failures
CORPORATE HEADCOUNT "FAT" ASSESSMENT PLAN: Rather than learning at the last minute that a firm needs to do a layoff establish a set of assessment tools that will let you know in advance where headcount may be excessive
"SMOKE" DETECTORS (PREDICTORS): HR needs to be proactive and to be able to anticipate problems. HR needs to develop systems and metrics known as "smoke detectors" that indicate potential problems while there is still sufficient time to develop plans and strategies to either avoid the problem or minimise its impact
BENCH STRENGTH (BACK FILL) PLAN: It's increasingly essential to have a strategy of identifying and developing individuals that can take over if an employee leaves. To ensure you aren't caught in a bind, develop a bench strength plan for replacing key jobs within a single department. Ensure that managers are held responsible for developing at least one individual to fill every key job
BAD MANAGEMENT IDENTIFICATION PROGRAMME: - One of the primary reasons that employees quit their jobs are the bad management practices of their direct supervisor. Develop a programme that can identify "bad managers" and then develop strategies for fixing these managers, transferring them back to more technical jobs or for releasing them
Becoming more strategic is a legitimate goal for everyone, including those individuals who jobs do not directly impact a corporate or division level strategy. However, becoming more strategic is also a goal that requires a great deal of advance preparation and coordination. Most practitioners go astray by not investing the time to identify what others, namely executive leadership and key customer groups consider strategic. To guarantee success, learn to identify what key corporate goals you can realistically impact, include as many of the essential elements of world-class strategy as possible, and always communicate to others in the other universal business language, dollars.
* Reprinted by permission of Dr. John Sullivan
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