HR strategy forum (1): What exactly is HR strategy?

HR strategy is notoriously difficult to define and pin down. Paul Kearns helps to identify the fundamental elements. Paul Kearns is a member of the HR Strategy Forum and author of HR Strategy: Business Focused, Individually Centred.

What exactly is HR strategy?

What's the difference between strategy, policy and practice? Some decisions are truly strategic, while others are merely tactical or reactive.

Being able to distinguish between them is crucial if you want to develop into an HR strategist. Why? Because those who formulate genuine HR strategies will transform their organisations, add an immense amount of value and make their greatest personal contribution. So can you learn how to tell the difference?

Here are five pointers to help you sort out the genuine HR strategists from the policy-makers.

- Have clear, strategic business objectives been identified? Is it market share, costs, sales, productivity, customer service, product development, research or innovation capability? Strategic HR has to be linked to such key, strategic business objectives.

- Are the strategic objectives specific, unequivocal and measurable? What is their potential value? What is a 1 per cent increase in market share worth in pounds? What does a two-point improvement in customer satisfaction mean in terms of sales volumes?

- Strategic timeframes, almost by definition, tend to be long. So, is there a stated time horizon and is it more like six weeks, six months or six years?

- One of the easiest ways to identify HR strategy is when it sets out to reconfigure the organisation. So, is this HR strategy setting out to change the organisational structure, the business processes or both?

- Does HR have a strategic role to play? Is it working at board level? Does it have the credibility to lead on change management? HR is only truly strategic when it is leading on some of the issues. If it is taking the lead from another department (production have decided to set up a new production facility, for example), then it is just HR planning, not strategy.

This is going to be a steep but rewarding learning curve for those who want to take up the strategic HR challenge. Use this column to your best advantage.

The dilemma

I am the HR director of a UK financial services firm. The business is 10 years old, and has grown rapidly, with annual sales of £850m.

But we are facing increased competition from new entrants and global players looking to grow their UK market share. Furthermore, growth predictions are pessimistic for our sector.

The board wants to put plans in place that will enable us to meet the challenges, with a reduction in cost, increase in efficiency, and the attraction and retention of high-value customers.

We employ more than 8,000 people across the UK and, as well as head office functions, we have retail and contact centres, and home-based sales people.

Rapid growth has meant we have been able to give employees excellent promotion opportunities and many of our managers are in their first people management roles.

In the past, we focused on customer acquisition, with little emphasis on systems, financial control or process improvement. Our planning has tended to be tactical.

I have a number of senior HR managers supporting different areas of the business, who are located with their teams in the areas they support. In addition, there are a number of specialist central groups, who provide training, organisational design and support on compensation and benefits. All other HR activity is done locally.

HR has provided a traditional response service for the business and most of what we do is operational. There has not been a compelling need to deliver a strategic agenda.

There are 200 people in the HR team. I am concerned that our current structure and capability will not enable the delivery of the future strategic agenda.

The chief executive has asked function heads to present how they will contribute to meeting the challenges. We have also been asked to assess and review the structure and capability of our teams.

What changes should I be considering?

Solution 1
By Margaret Savage the Director of Corporate HR Strategy and Systems, BT

Step 1
Work closely with the board, key business and influential line managers to truly understand vision, current/planned business drivers and the impact on their people. Establish what worries them and what they need from HR to deliver revenue targets or efficiency results. Explore workforce perceptions and attitudes. Spot potential barriers to success, including 'unwritten rules' and leadership weaknesses.

Step 2
This results-orientated analysis shapes the people strategy that dictates the organisational and functional agenda for an integrated HR strategy - defining the need for transformational change; scoping demand for value-add HR solutions; prioritising plan deliverables/objectives; scaling total labour cost, resourcing and skill demands, etc. Scan the external environment for other influences; impending legislative changes, and shared learning opportunities from others, including competitors and different industries, facing similar challenges. Reflect on the relevance of existing HR policies to the emerging landscape and employment branding going forward.

Step 3
Having aligned business, people and HR strategies, test systems and ideas with key business leaders for impact, fit and support. Engage the wider HR team to begin on HR skills gap analysis and discussions on consequences for future roles and responsibilities. Again, selectively test potential scenarios for employee reactions. Co-opt selected influential senior HR leaders to cement collective commitment to the change agenda and demonstrably refine or adjust plan ideas in line with feedback.

Simultaneously, examine the competitiveness of the present HR function. Identify systems infrastructure weaknesses; start to map current processes; use RACI techniques (the matrix tool for assigning job responsibilities) to establish critical touch points; probe the true cost of operation; examine HR performance or service reports; study current activities and transactional volumes; analyse employee measures and people capital metrics; assess managerial bench strength and responsiveness of the current structure.

Step 4
With research and diagnostics complete, engage senior HR managers in determining the transformational change agenda for HR itself. It might not be easy, but persist.

In the short term, enlist support to deliver the CEO's challenge by ensuring HR plans are focused on delivering the company's new goals. Reach shared agreement on the prioritised HR workstack with clear deliverables and output measures; agree prime target activities for elimination from products and services portfolio; improve operational effectiveness through the eradication of duplication or exploitation of synergies and collaborative working.

Check the scope for rapid policy and process simplification and likely e-enablement opportunities. Benchmark best practice, drilling down on quick wins for cost reduction. Build functional capability or skills development plans and secure funding. Finally, adjust HR resources in line with changes to deliver planned HR efficiency improvements and cost savings.

Solution 2
By Ralph Tribe the vice-president of HR at Getty Images

Step 1
With 200 people in HR, it should be possible to specifically select a small nucleus of your best people to assess the situation, develop a strategy, craft a plan, present and then implement it. Select this small team on the basis of business knowledge, analytical ability, project management and relationship management skills. HR knowledge is clearly important, but these will be the defining skills in any environment characterised by significant change.

Step 2
If the business strategy revolves around customer retention and loyalty, then the HR strategy must reflect this. It is critical that the strategy is not so much based on general best practice, but rather on HR activity that can be leveraged to differentiate your specific business in the market. As such, you need to consider what your competitors are doing from an HR perspective, and prioritise what you can do better or differently.

Step 3
Get out into the business and talk to line managers about their strategies for driving efficiencies and delivering increased customer loyalty. Sound them out on your ideas, and get their input on what HR activity would most positively impact their plans. Their contribution not only helps your HR team develop a clear strategy, but will broaden ownership prior to any final decision-making. The most obvious way of winning board-level support is to have discussed it with board members prior to presentation. Never present a surprise.

Step 4
In response to the CEO's call for reduced costs, prioritise current and planned HR activity in terms of its contribution to the organisation's new corporate goals, and then cut from the bottom of the list until you hit your cost reduction target (if you don't have this target yet, expect it soon).

Step 5
The structure of the future HR organisation should fall out of the HR strategy and activity plan developed to this point. Avoid falling into the trap of defining your organisation structure before you have agreed what it is going to deliver.

You should obviously engage other business managers in a similar dialogue to help them design their own organisations using the same approach.

How the forum works

This week Personnel Today, supported by some of the industry's most experienced people (see below), launches a major new initiative to help readers become more strategic in their day-to-day operations.

Over the coming months, Personnel Today will give a unique, developmental opportunity to hone your strategic skills using a wide range of HR scenarios submitted by senior HR professionals.

Each week, our panel of experienced practitioners and consultants will provide solutions to a typical strategic HR dilemma. You can get involved by sending in your own problems, marked 'strategic dilemmas' to martin.couzins@rbi.co.uk

The consultants

Duncan Brown, Assistant director general, CIPD

Paul Kearns, Director, PWL

Jim Mattewman, Mercer, Human Resource Consulting

Andrew Mayo, Director, MLI

Louise Allen, Director, LA Partners

Penny Davis. Head of HR, UK operations, T-Mobile

Marie Gill, HR director, Asda

Neil Roden, HR director, Royal Bank of Scotland

Ralph Tribe, Vice-president of HR, Getty Images

Dilys Winn, HR director Gloucestershire County Council

Margaret Savage, Head of HR strategy, BT