This article seeks to unpack what is the People Strategy by articulating a few definitions of what the People Strategy entails. After that, it will navigate you through the process you can follow in developing the People Strategy and describes what can be done to create a truly differentiated HR function that drives strategic value.
According to David Ulrich (1997), 'HR strategy' is the outcome: 'the mission, vision, and priorities of the HR function'. According to Meshoulam (2000), the HR Strategy should be viewed as the outcome of the HR function's mission, vision, and priorities. The Human Resources Strategy is designed to develop staff skills, attitudes, and behaviors that will help the organization meet its goals (Odina, 2009). Armstrong (2021, p80), states that the people strategy shows the organization's intent towards its employees through the policies and practices and how those are bound with the business strategy and how they work together.
Step-By-Step Process for Developing the HR Strategy.
Step 1. Develop a Solid Understanding of the Business Model.
The first step before the development of the HR Strategy is to have an appreciation of the business value proposition of your organization.
This understanding can be developed by undertaking the activities outlined and briefly explained below.
1.1. Review and analyze the organizational strategic plan.
The business model can be understood by reviewing the organizational strategic plan document to get an insight into the vision, mission, objectives, values, priorities, core mandate, strategic drivers, and strategic bottlenecks. Below are the questions that need to be explored to understand the strategic context and direction of the organization.
1. What are the current business challenges?
2. What are the current strategic bottlenecks?
3. What are the strategic objectives?
4. What are the strategic focus areas?
5. What is the core mandate of your organization?
6. What are the vision, mission, and values of your organization?
1.2. Understanding the business environment.
You also need to understand the political, economic, social, technological, and legislative trends and their implications on the HR Function. Wright et al. (2004, p40) emphasize the importance of knowing the external environment and the business strategy because understanding the context and how the organization positions itself is vital for achieving a vertical fit between the business strategy and people strategy.
Below is a series of questions that need to be explored:
1. What is the impact of social trends on HR Function?
2. What is the impact of technological trends on the HR Function?
3. What is the impact of economic trends on the HR Function?
4. What is the impact of political trends on the HR Function?
5. What is the impact of environmental trends on the HR Function?
6. What is the impact of demographic trends on the HR Function?
The analysis of the above questions gives the HR team a deep contextual understanding of the external forces that affect the HR organization.
According to Armstrong (2021, p105- 106.), from an internal perspective, the implications of business objectives, the organization's success factors, values and their everyday implications, employee characteristics, employee value proposition and its effectiveness, employee development actions, and employee engagement should be considered. The internal analysis gives the HR team an E'xra view of the HR function.
1.3. Review the corporate performance scorecard.
Reviewing the organization's corporate scorecard gives you a holistic overview of how the organization is performing.
1.4 Stakeholder analysis.
Stakeholder analysis starts with finding out who the stakeholders are by examining who has a legitimate interest in the organization and what they are interested in. Next, conflicts between the stakeholders and planned actions are investigated. Lastly, a decision is made on how the stakeholders' interests are considered. (Armstrong 2021, 106-107.)
Step 2. Define the HR Strategy.
Provide a roadmap for creating a unique competitive advantage by outlining how the organization will leverage the organization's human capital to address business challenges and achieve business objectives. The HR strategy must be aligned with the organization's vision, mission, values, and strategic focus areas to ensure the viability and sustainability of the organization.
The diagram below gives an illustration of an HR strategic plan roadmap.
1. Assess the Current Capacity and Capabilities of the HR Function.
This phase is intended to identify the features of the current HR state that impede the effective and efficient achievement of the function's outcomes. The questions that need to be explored under this phase include, among others:
1. How effective and efficient are the current HR policies and procedures?
2. How effective and efficient is the current HR Operating Model/ Structure?
3. How effective and efficient are the current processes in the HR Function?
4. How effective and efficient are the current HR policies and procedures?
5. Do the people in the HR Function possess the competencies required to drive the strategy?
6. How effective and efficient is the Human Resources Infrastructure?
7. How does the current culture impact the HR Function?
8. Is the HR Strategy aligned with the business strategy?
9. What risks impede the execution of the HR Strategy?
2. Assess Future Workforce Needs and Project Future Workforce Supply.
A strong understanding of the current workforce's characteristics, capabilities, and distribution is necessary to project how the workforce will change during the planning horizon and provide the fundamental understanding of the workforce needed to develop effective gap-closing strategies.
Conduct Workforce Demand Forecasting.
Workforce demand forecasting entails estimating the number and mix of employees an organization will need. Particular attention should be paid to identifying and projecting mission-critical occupations. The forecast has two components:
· estimating the workload and related staffing requirements;
· estimating the likely competencies and skill sets needed.
Conduct Workforce Supply Forecasting
Workforce Supply Forecasting is the projection of the composition and characteristics of the organization's workforce if trends remain unchanged.
Identify Gaps and Develop Gap-Closing Strategies.
Gap analysis identifies the deficit or surplus between the projected workforce supply and demand. Gap analysis can be as simple as assessing the number of key leadership and technical positions that must be filled in the next five years. More commonly, gap analysis focuses on identifying critical professions where the organization expects to have a shortfall and new skills that will be needed that are not easily available in the organization or the local labor market. According to David Ulrich (2009), the gap-closing strategies fall into six groups:
3. Identify and Prioritize HR Strategic Pillars.
Define and determine which workforce segments are most critical to achieving results. The HR function should focus on value-adding activities to support the execution of the business strategy and objectives. This step entails addressing the questions outlined below for each identified HR Strategic Pillar:
1. What are the objectives?
2. What are the key initiatives/action plans required to execute that particular strategy?
3. What are the key performance indicators/measurable indicators of success?
4. Who would be responsible?
5. What is the timeframe for executing certain initiatives?
6. What are the resources required?
7. What are the desired outcomes/key outputs?
4. Design the Target HR Operating Model.
An HR operating model illustrates how the HR function creates value that impacts the business's bottom line. The HR Operating Model, among other things:
· connects HR strategy, HR goals and objectives
· connects HR processes and jobs into an operating model
· defines key roles and responsibilities of human resources
· defines how key HR tasks will be delivered and which process and unit in HR will deliver them
· defines the key HR Infrastructure and governance structure
· Identify the competencies required by people in the HR Department.
Different prominent business consultants have put forward several HR Operating Models, which are illustrated below.
1. The HR Operating Model of David Ulrich.
2. The Mackinsey HR Operating Model.
2. The Gartner HR Operating Model.
3. The PWC HR Operating Model
EY’s HR Design Model.
KPMG’s HR Operating Model.
5. Develop the HR Monitoring and Evaluation Framework.
After developing the HR Operating Model, you must develop a monitoring and evaluation framework. This framework should be in the form of an HR Scorecard. The scorecard should outline the following key elements:
· HR Strategic priority area.
· Objectives for each priority area
· Define the key performance indicators
· Responsibility for action planning
· Resources required
· Expected outcomes
6. Develop the HR Strategy Implementation and Institutionalization Framework.
The implementation plan should articulate, among other things:
· Key stakeholders
· Communication plan
· Resources Required
· Cost Benefit analysis
· Risk mitigation plan
· Change plan
Newturn Wikirefu is the Head of Talent Acquisition and Assessments at Industrial Psychology Consultants (Pvt) Ltd, a management and human resources consulting firm.
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