Strategic Planning for Human Capital
February 2008
Co-Authored by:
Jim Schultz
President
Pretty Good Consulting, Inc.8101 E. Dartmouth Ave. #20
Denver CO 80231-4258
Phone: 303 671 6658Fax: 303 671 6659
Email: [email protected]
www.prettygoodconsulting.biz
Bill Welter
President
Adaptive Strategies, Inc.235 Lamont Parkway
Bartlett IL 60103-4528
Phone: 312-802-6476Fax: 630-289-7340
Email: [email protected]
www.adaptstrat.com
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Strategic Planning for Human Capital
The challenge for leaders, no matter what their industry or where they are located in the hierarchy is to manage three “musts.” Leaders must:
Get positive results with today’s business model and assets Set the direction for the business Build the capabilities that will be needed in the future.
We have seen superior execution of the first “must” over the past fifteen years. Organizations have downsized, rightsized, outsourced, off-shored, and become “lean and mean” to protect the profit line of the latest quarterly income statement. However, unless tomorrow is going to be a linear extrapolation of today, we think most executives have been pressured into paying today’s “Peter” by robbing the “Paul” of tomorrow.
Over the past few years organizations have awakened and collectively come to the realization that, in the long run, the top line has to grow and it has to grow significantly. Strategic thinking for top line growth has started to come to the fore and organizations are struggling with the paradigm shift from efficiency to effectiveness. Furthermore, few industries will win because of technology alone – it’s really all about the people who use the technology and other “hard assets” to bring about success. Technology and assets can be copied and, therefore, are essentially “table stakes” in the game of business. Winning requires talent. And talent is found in the capabilities and capacity of our managers and workers.
Human Capital and Strategic Planning and Execution
As little as 25 years ago a company’s strategy was built around automation, hard assets and financial projections. Strategies were built around sophisticated spreadsheets and we fell in love with “the numbers” and technology. For example, in the early 1980s Roger Smith committed GM to a “factory of the future” program that was focused on eliminating factory people and driving automobile success with robotics. GM spent enough money on that program that they could have bought Toyota – and they failed! Following that, we saw companies embrace “knowledge” as an asset, but they saw
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technology, not people, as the preferred route. More money down the drain.
Let’s cut to the chase – strategy has to include people. People make judgments, computers crunch numbers. People execute strategy and tactics, equipment just runs. People understand context. People anticipate the future. And so on and so on. So why do we relegate people (and HR) to secondary status when it comes to strategy? It’s a mystery to us, but we’d like to see it changed.
Strategic Results: Intention and Execution
Our position is that getting desired results from any business requires the ongoing interplay of intention and execution, as depicted in the following graphic. Developing goals and the associated strategy without considering the capabilities and capacity on-hand and needed is a fool’s errand that sets an organization up for early failure. However, we see this all too often. Goals are defined and a strategy is built with the assumption that execution will happen because the executives say so.
There is an old axiom that we need to consider on an ongoing basis: a marginal strategy that is well executed will always beat a brilliant strategy that is poorly executed. Our advice is simple: consider execution capabilities and capacity while you develop strategy. And since execution depends on people, HR better be involved from the beginning!
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Strategic Planning Process
We’re not sure what your strategic planning and execution process looks like, but more likely than not, you’ll find your process looks something like this.
****************************************************************A Sidebar For the H.R. Practitioner - The “Strategy Table” QuestionThere has been no shortage of articles devoted to the issues surrounding H.R.’s place at “the table.” Our focus here is not to discuss whether you should or shouldn’t be at the table but merely to ask “Are you there?” as the answer depends on where we start the process of integrating and aligning your H.R. strategic plans with the corporate strategic plan.
Assuming that you have a place at the table the process begins with input to the strategic discussions. Failing to have a place at the table will cause us to begin at the point where someone hands you the Strategic Plan and you’ll need to deconstruct its H.R. impacts.
Either way, you’ll need to have fairly rapid access to your data as we have found that Business Plans gain momentum with time. If you need to suggest a change in direction, the time to do it is now!
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PrepareTo
Plan
(Re)define Vision &
Mission & Goals
Evaluate performanc
e to plan
Conduct Environmental
Scan
Develop Portfolio
of Projects
Perform S.W.O.T.Analysis
Define Grand
Strategies
Implement the projects
Ongoing feedback
****************************************************************
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Preparing to PlanOur favorite way to prepare for a strategy session is to get a cross-functional and cross-hierarchical group of managers and executives together and explore the ten questions, below. If there is not an open and candid conversation around these questions then you can prepare to fail. If executives feel that lower level managers are not interested or are not capable of conversation at this level then either they are too arrogant for their own good or the managers need to be educated or replaced. If the management team is not capable of this discussion, the company is not capable of intercepting the future.
Ten Strategic QuestionsWhen we work with clients about business and H.R. strategy we often focus them on ten questions. Here is the list.
Executive questions1. Where are we? 2. How is our reality changing? 3. Where are we going? 4. Why are we going there? 5. How will we transition from today to our
desired tomorrow? Middle management questions
1. Do the managers know and understand the answers to the five executive questions?
2. What has to change here?3. What barriers exist to making the needed
changes?4. How will we deal with the barriers? 5. What don’t the executives know that they
should?
Vision & MissionThe work around an organization’s vision and mission was very much in vogue in the early 1990s and then seemed to drop from favor. What a pity! How can you expect the workers to be engaged in their work and their organization if they don’t know what it stands for and where it’s going? Pride is a huge motivator.Do you want a motivated workforce? Of course.
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However, a word of warning, this is not an exercise to give to the consultants. This takes time on your part to sit with workers and managers and have a conversation about the company’s mission (Why do we exist?) and vision (What do we want to look like in X-years?)
Don’t try to do this with a broadcast speech or a series of e-mails unless you really want to build cynicism in the organization.
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The Environmental ScanEnvironmental scanning is a tool used by futurists, business trend analysts and corporate issue managers to identify emerging issues and trends. It involves collecting data from as wide an array of sources as possible in order to obtain the broadest scope of information from which to base decisions as well as to avoid being blind-sided by a development you could have foreseen. The scan allows you to really step back, or as some like to say, “Take the helicopter view” in order to answer the question of “What is going on here?”
One common acronym used to help categorize your environmental scan is PESTLE, for Political, Economic, Social, Technological, Legal and Environmental. The World Future Society categorizes trends by Demography, Economics, Environment, Government, Society & Technology. Neither is sacrosanct but both are useful to help you think about the external issues that could weigh heavily on your planning. Pick the set that works best for your situation.
Scanning is best done continuously. Trying to do it once a year requires too much episodic activity and you are unlikely to do it well. Set up file folders, either electronic or manila, or both. Clip & copy your way through the year and as planning time comes around sort through the files.
Though the collection of data can be systematic and the structures put in place for data gathering can be quite detailed, environmental scanning is always considered a subjective exercise since it involves making decisions aboutwhich kinds of information are most relevant. For this reason, many organizations that use environmental scanning rely on teams of individuals to collect data, so that information is viewed from a number of different perspectives. An environmental scanning team will be a boon to your results.
You may be able to find external sources of data for your environmental scan. For example, The Society of Human Resource Management (SHRM) puts together a bi-annual environmental scan that can save you a good deal of work.
For example, the 2006 Workplace Trends Forecast found 10 issues at the top of the HR list.
1. Rising health care costs.
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2. Increased use of outsourcing (off-shoring) of jobs to other countries.3. Threat of increased health care/medical costs on the economic competitiveness of the U.S.4. Increased demand for work/life balance.5. Retirement of large numbers of baby boomers around the same time.6. New attitudes toward aging and retirement as baby boomers reach retirement age.7. Rise in the number of individuals and families without health insurance.8. Increase in identity theft.9. Work intensification as employers try to increase productivity with fewer employees.10. Vulnerability of technology to attack or disaster.
We’re reminded of an old professor who stated, “You can save yourself a lot of work by seeing who else has researched your topic before you start doing your own.”
Once you have collected your data, what are you seeing? Your answers should help you with the answer to Executive Question # 2 and maybe Middle Management Question # 5. How is our reality changing? What do we think we know given our environmental scan?
What will your future customers want and need? Consider the foundation questions that come from Blue Ocean Strategy1, the best selling book from Kim and Maughborn. They raise the basic issue of knowing “Why do people buy your products or services.” Then ask yourself four questions and, most importantly, consider the impact of and on the people who provide your products or services.
o What should we stop providing because the customer does not value it?
o What should we give the customer more of? o What should we give the customer less of? o What should we give the customer that they have never
had before?
What impact would those trends have on our Human Capital?
1 Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant, Chan Kim and Renee Mauborgne, 2005
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o Think about the quantity of people you’ll need. More? Fewer?
o What about their skill sets? Same? New? Less? o Will higher skills or more in demand skills require you to
have more stability in your workforce ?
What about the supply of the types of people you’ll need?
o Will they be easier to find or more difficult? o How will you differentiate yourself from your competitors?
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SWOT Analysis
SWOT derives from Strengths, Weaknesses, Opportunities and Threats. All of which should be playing into your thinking about your people. Strengths need to be maintained, weaknesses overcome, opportunities developed and threats avoided.
The data from your environmental scan should easily transfer into the External Threats and Opportunities of your SWOT analysis. The answers from the prior 10 Questions should have helped you to fill in the Internal sides of the Strengths and Weaknesses.
Where are we?
o Quantity? Are retirements threatening our supply of talent? o Quality? Are our people a strength or a weakness?o Stability? Are we running up our learning costs and lowering
our productivity by high turnover rates?o Supply? Are the schools providing enough “raw material?”
Where are we going? Why are we going there?
o What will the talent profile of our people need to look like when we get there?
o Do our people view this journey as a “Forced March” or an “Exciting Journey?”
What are our competitors going to do? Can we do something that would be hard or impossible for them to do?
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Defining Grand Strategies
The consulting world’s plethora of two by two matrices has one that fits our need as we explain the challenge of growing a business.
Basically, the business plan is going to get generated from this concept:
o Your plan is going to call for increasing sales, reducing costs or, more likely, both.
o On the sales side, it’s going to be selling to new customers or selling more to existing customers or both.
o On the products & services side, you’ll either be selling existing lines or new lines.
No doubt the verbiage will sound much more complicated when it hits the plan but in truth it’s not much more complicated than this.
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Products & Services
ExtendDefend
the CowOr
Exit
ExpandBuild
OrAttack
NewExisting
New
ExISTIng
Customers
Human Capital embedded in strategy
All strategies inevitably come down to make a portfolio of decisions that, in hindsight, are almost “common sense.” For example, a company like Walgreens bases its growth strategy on understanding the aging Boomer population and providing products and services that will appeal to them. Additionally, they try to “lock-in” as many pharmacists as possible inasmuch as they are the limiting factor to growth. They also move stores to high-traffic locations and position them for drive-through convenience. Many of the policies and procedures are “HQ centric” and the company is as command and control oriented as the military. Suppliers are controlled and monitored through strict procedures.
When you look at the decisions that underlie any company’s strategy you see a portfolio of decisions about:
Customers Products and services People and organization Resources Locations Technology Policies and procedures Metrics Suppliers
The challenge is to build a strategy that recognizes the interdependencies of these nine decision areas and, by doing so, avoids “holes in the strategy.” As you consider the nine categories and their interdependencies you have to look at thirty-six pairs of relationships. Consider the following graphic.
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Human capital strategy must consider, at a minimum, the obvious relationships between people / organization and the other eight categories. The end game for Human Capital is to have the right people, in the right place, with the right skills, at the right time and at the right price. And this is never accomplished in a vacuum. Decisions in the other eight areas will impact your people decisions and vice versa.
Think back to our 2x2 matrix: Are we planning to sell more to existing customers? Sell new things to existing customers? Sell new things to new customers. Sell new things to existing customers? Are we abandoning a business line or a category of customer?
Now, consider the following interrelationships between people and organization decision and the other eight decision categories. We have provided three items for each interrelationship as “starters”; add your specific considerations to our list:
AC – People/Organization meets Customers Do we know what customers want and need? Do we have the right people and are they in the right places? Are our people more effective than our competitors’ people?
BC – People/Organization meets Products/Services
Do we have the requisite skills to provide the products and services?
Have we become so “lean and mean” that we have a fragile organization that cannot respond to increases in demand?
Do we have the right mix of people if we have been a “product company” and now we want to provide “services” as well?
D – People/Organization Do we have enough people and are they organized optimally? Is the talent pipeline adequate? Too many layers or not enough? Silo’s or Teams?
CD – People/Organization meets Resources Do they have the tools and systems they need to be productive? Is information available to them? Do our people have decision authority over the resources they
need to do their job?
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CE – People/Organization meets Locations Do we have enough people in the right places? If not, do we
move people? Do we build new human resources? Is there sufficient time? If
not, can we hire skilled people? Are our managers skilled in dealing with a virtual workforce?
CF – People/Organization meets Technology Can our people utilize the technology we have for them to use? Is it “friendly” or do our people resort to a work-arounds? Is it productive? Does it provide competitive advantage?
CG – People/Organization meets Business Policy & Practice Is there any freedom within the framework of our policies and
procedures? Are all of our managers skilled project managers? Are we flexible enough to keep up with the market? Are we
retaining the “best & brightest?”
CH – People/Organization meets Evaluation/Metrics Is our Gross Revenue per FTE the highest in the industry? Is our turnover rate healthy or deadly? Is our compensation system rewarding the right people for the
right performance?
CJ – People/Organization meets Suppliers What kind of relationships do our employees have with our
suppliers? Adversarial, Win-Lose, looking over the shoulder? Productive, Trusting & Cooperative?
Are our employees in danger of getting “snowed” on technical issues by suppliers with newer technologies?
Have our employees been given guidance in various negotiation techniques or do we let them “learn on the job?”
Your answers to the questions above should provide the basic elements for your H.R. Plan. The gaps between “What Is” and “What Should Be”, ranked by value, are the points of attack. The next phase is the search for cost-effective solutions.
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Develop a portfolio of projectsStrategy inevitably produces a portfolio of projects that have to be implemented in a timely and coordinated fashion. We have facilitated workshops in project leadership for a number of years. Every workshop starts with a simple flipchart exercise called “Best of Times / Worst of Times” in which we ask participants to consider the best project they ever worked on and what made it so good. We then ask the same question for the worst project they ever worked on.
Every time we do this – no matter what industry or what level of project expertise – we get the same answers that point out the difference between great projects and failures. The answers always revolve around behavioral and organizational issues – around people issues! Motivation, communication, fairness, listening, information sharing... and on and on.
Think about this and think about this hard: espoused strategy is made operational through projects – and people skills make all the difference between success and failure. Have you developed GREAT project management skills and knowledge throughout the organization? Remember, strategy is implemented through a series of projects and most organizations have a terrible track record when it comes to implementing projects (“strategic” or otherwise) on-time, on-budget, and with scope intact.
ImplementationGiven the right amount of time and effort, any organization can come up with a good (or good enough) strategy. Now comes the tough part – turning espoused strategy into actual reality.
As you roll-out your newly developed strategy we would have you consider the following four factors:
1. Is there enough visibility of the “promise” that you have made to the organization? Strategy that has not been shared is likely to slip because the team will not feel the embarrassment of missing a promise. Make your strategy public to the organization and you suddenly have some skin in the game. The boss may understand, but your peers will be merciless.
2. Have you built a coalition of the willing? Or have you lobbed your strategy in the direction of other departments and expect
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them to step up to the plate? Many companies worry about “silos” and the impact they have on cooperation. Consider this – HR is the only horizontal silo in the organization. It touches every department that is staffed with living bodies and, therefore, should have (good) relationships with every department manager.
3. Is your strategy backed-up with a plan that is explicit and time based? Strategies that present issues of “coordinate” and “work with” are like the US Congress when it passes a “resolution” instead of making a law. We can pat ourselves on the back and feel good about doing the “right thing” but, in the end, nothing changes. We want to know what will actually change and when will it change!!!
4. Spend as much as you can on getting every manager and professional as competent as possible in project management skills – especially the skills that relate to organizational behavior and “people” skills. Think of the payback you could achieve if everyone was capable of bringing projects in on time and on budget!
Evaluate Performance to Plan If the only time your plan sees daylight is during the annual review you are doomed. Remember things are changing, faster than before. Your plan needs to adapt just as you organization does. You need a feedback loop to insure you were right about your assumptions.
Although metrics seem to be the bane of H.R., measurement is necessary. More than necessary, it’s crucial. How can you expect to become more effective if you have no idea how effective you are?
Although each of the projects will no doubt have its own metrics we favor a system that runs both top-down and bottom-up. The best tool we have found to help inculcate the values of strategy and measurement within an organization is Norton & Kaplan’s Balanced Scorecard. Catching both past performance and future performance drivers the four key categories of Learning and Growth, Business Process, Customer Perspective, and Financials, they manage to grasp the essential of any business plan.
The balanced scorecard goes beyond being a measurement system and becomes a management system that allows organizations to spell out their vision and strategy and convert them into action. Both
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internal business processes and external outcomes are monitored to constantly improve strategic performance and results.
Conclusion:An unknown writer left us with this quote, “Write it down. Written goals have a way of transforming wishes into wants; cant's into cans; dreams into plans; and plans into reality. Don't just think it -- ink it!
We wish you well on your path to integrating People and Strategy!
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About the Authors
Why We Exist
We’re willing to bet that sometime over the last couple of years you found yourself saying, “When things get back to normal around here, I’m going to ….”
We’re also willing to bet that things haven’t gotten back to normal and we’re pretty confident that they won’t. Welcome to the 21st Century!!! More is happening… and it’s happening faster. E-mail, crack-berries, cell-phones. No more vacations from work. No more time to relax and reflect. Things are different now.
A survey of CEO’s by the World Economic Forum found broad agreement on three general pressure points for today’s organizations.
“• First, corporate competitiveness: Pressure continues unabated to deliver profits and shareholder value in a period of economic downturn, high levels of competition, and greater international risk and uncertainty. This calls for business leaders and their companies to focus relentlessly on operational efficiency, cost effectiveness, productivity, customer service and innovation. It also points to working with others, including government bodies and academic institutions, to enhance national competitiveness.
• Second, corporate governance: In the wake of corporate governance scandals and public concern over accounting failures, conflicts of interest and inadequate market oversight, there is massive pressure on business leaders to rebuild public trust and to restore investor confidence in their own roles, in their companies, and in the capital markets. This calls for a relentless focus on corporate integrity, accountability and transparency. It also calls for proactive engagement between private sector leaders and public authorities to ensure that new rules and norms are suitable for protecting investors without destroying the spirit of entrepreneurship, innovation and risk-taking that drives markets and economic progress.
• Third, corporate citizenship: In the face of the high levels of international insecurity and poverty, the backlash against globalization and mistrust of big business, there is growing pressure on business leaders and their companies to deliver wider societal value. This calls for effective management of the company's wider impacts on and contributions to society, making appropriate use of stakeholder engagement. Once again it requires new types of public-private partnership to address challenges that are beyond the capacity or responsibility of an individual company or the private sector. These include issues such as access to training and education, healthcare, water, energy, credit and markets, as well as tackling problems such as corruption, money laundering, crime and terrorism.
These three pressures of corporate competitiveness, corporate governance and corporate citizenship, and the linkages between them, will play a crucial role in shaping the agenda for business leaders in the coming decade.”2
2 http://www.weforum.org/pdf/GCCI/Findings_of_CEO_survey_on_GCCI.pdf
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Are these issues on your mind? Our’s too. So what’s the answer? “People Are Our Most Important Asset.” Have you heard that? Have you said that? And you’re right. Not much happens without people… the right people… in the right place, at the right time, with the right skills and, of course, at the right price.
A recent survey by the Society for Human Resource Management determined that for HR professionals, the most critical demographic issues appeared to be the large numbers of baby boomers slated to retire around the same time and the implications this had for leadership, knowledge retention and generational issues in the workplace.3
Adaptive Strategies and Pretty Good Consulting can be the linchpins between your business plan and your H.R. plan. We take a strategic operations view of people management.
We have 6 specialty areas:
1. Business Plan to H.R. Plan Analysis & Alignment2. Leadership & Talent Supply & Demand Forecasting3. Leadership Candidate Identification & Selection Tools4. Succession Plan Development5. Leadership Development Gap Analysis 6. Leadership Development Services: Seminar Development & Delivery
Emerging Leader Coaching & Counseling, Individual Training Sourcing, Mentoring Program Design & Development
Who We Are:
Bill WelterBill is the President of Adaptive Strategies Inc. working out of Bartlett, IL. Bill specializes in business education and consulting, and is the author of “The Prepared Mind of a Leader”, published by Jossey-Bass in 2005. Mr. Welter has over 40 years of varied military, business, consulting and teaching experience.
Jim Schultz, CPTJim is President of Pretty Good Consulting, Inc. Jim had over three decades of experience building a “Good to Great” company as Div. V.P., Performance Development at Walgreens, the largest drug-store chain in the nation. His responsibilities covered a wide range of H.R. areas: training, management & executive development, productivity improvement, knowledge management, human factors engineering, human resource planning and information systems. A member of ISPI, ASTD, SHRM and the World Future Society, Jim received his Certified Performance Technologist designation in 2003.
Associates: We pride ourselves in having a wide range of business associates who are
3 http://www.shrm.org/trends/061606WorkplaceForecast.pdf
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even better than we are. (At least in their specialty areas.) We don’t hesitate to involve them in projects in order to better solve the problems or leverage the opportunities.
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