HR strategies make a greater contribution to firm performance:
– they help the company exploit its specific advantages or strengths while avoiding weaknesses and
– they assist the firm in better utilizing its own unique blend of human resource skills and assets.
In developing an effective HR strategy, the organization faces several important challenges. The challenge from an HR perspective is to develop strategies that offer the firm a sustained competitive advantage. For instance, a company may develop programs that maximize present employees’ potential through carefully developed career ladders, while at the same time rewarding them generously with company stock with strings attached (for example, a provision that they will forfeit the stock if they quit before a certain date).
Developing HR strategies that support the firm’s overall business strategy is a challenge for several reasons.
First, top management may not always be able to enunciate clearly the firm’s overall business strategy.
Note: Some managers are so busy putting out fires that they have no time to focus on the long term. Nonetheless, a successful HR strategy demands a vision tied to the long-term direction of the business. Thus, a major challenge of strategic HR planning is prodding people into stepping back and considering the big picture.
In many small companies, staffs are so absorbed in growing the business today that they seldom pause to look at the big picture for tomorrow. Also, strategic HR planning in small companies is often synonymous with the whims of the company owner or founder, who may not take the time to formalize his or her plans.
Second, there may be much uncertainty or disagreement concerning which HR strategies should be used to support the overall business strategy. In other words, it is seldom obvious how particular HR strategies will contribute to the achievement of organizational strategies.
Third, large corporations may have different business units, each with its own business strategies. Ideally, each unit should be able to formulate the HR strategy that fits its business strategy best. For instance, a division that produces high-tech equipment may decide to pay its engineering staff well above average to attract and retain the best people, whereas the consumer products division may decide to pay its engineers an average wage. Such differentials may cause problems if the engineers from the two divisions have contact with each other.
Thus, diverse HR strategies may spur feelings of inequity and resentment.
In a recent CEO survey by HBR, Robert Kaplan, the Conference Board, and the Journal of Change Management identify strategy execution as one of their respondents’ top challenges. In fact, many agree that executing a strategy is more important than formulating that strategy initially.
Interesting findings include:
- 66% of HR organisations develop strategic plans that are not linked to the enterprise strategy
- 95% of employees in most organisations do not understand their organisation’s strategy
Even the best-laid strategic HR plans may fail when specific HR programs are poorly chosen or implemented.
- Define the competencies that employees should have in order to be effective, recognizing that your organization will need to revisit and modify this list as your business and industry change.
- Decide to whom the competencies should apply. Perhaps it is to all employees, or perhaps it is to some core subset of personnel who wield the greatest influence over your corporate culture.
- Communicate the competencies well throughout the organization, integrating them into your array of talent management components, including recruitment, succession planning, learning and development, performance management, and the like.
Design your talent management competencies system so that there is some decision-making individual or group. Decide whether it’s wise, given the context of your organization, to allow individual functions or business units to adjust these competencies to meet their own needs.