Chapter 3: Developing and Implementing Strategic HRM Plans

3.1 Strategic Planning

Learning Objectives

By the end of this section, you will be able to

  1. Explain the differences been HRM and personnel management.
  2. Define the steps in HRM strategic planning.

In the past, human resource management (HRM) was called personnel management. Personnel management departments hired people and dealt with the hiring paperwork and processes. It is believed the first human resource (HR) department was created in 1901 by the National Cash Register Company (NCR). The company faced a major strike but eventually defeated the union after a lockout. (We address unions in  Chapter 12, “Working with Labour Unions.”) After this difficult battle, the company president decided to improve worker relations by organizing a personnel department to handle grievances, discharges, safety concerns, and other employee issues. The department also kept track of new legislation surrounding laws affecting the organization. Many other companies were coming to the same realization that a department was necessary to create employee satisfaction, which resulted in more productivity. In 1913, Henry Ford saw employee turnover at 380% and tried to ease the turnover by increasing wages from $2.50 to $5.00, even though $2.50 was a fair wage during this time period.[1] Of course this approach didn’t work for long, and these large companies began to understand they had to do more than hire and fire if they were going to meet customer demand.

More recently, however, the personnel department has divided into human resource management and human resource development, as these functions have evolved over the century. HRM is not only crucial to an organization’s success, but it should be part of the overall company’s strategic plan, because so many businesses today depend on people to earn profits. Strategic planning plays an important role in how productive the organization is.

Table 3.1 Examples of differences between personnel management and HRM.
Personnel Management Focus HRM Focus
Administering policies Helping achieve strategic goals through people
Stand-alone programs, such as training HRM training programs that are integrated with company’s mission and values
Personnel department responsible for managing people Line managers share joint responsibility in all areas of hiring and management
Creates a cost within an organization Contributes to the profit objectives of the organization

Most people agree that the following duties normally fall under HRM. Each of these aspects has its own part to play within the overall strategic plan of an organization:

  1. Staffing. Staffing includes the development of a strategic plan to determine how many people an organization might need to hire. Based on the strategic plan, the HRM department then performs the hiring process to recruit and select the right people for the right jobs. We discuss staffing in greater detail in the Chapter 5, “Recruitment,” Chapter 6, “Selection,” and Chapter 7, “Compensation and Benefits.”
  2. Basic workplace policies. The development of policies to help reach the strategic plan’s goals is the job of the HRM department. These policies address things like safety, security, scheduling, vacation times, and flextime schedules. After the policies have been developed, they need to be communicated to the rest of the organization by the HRM department. Of course, HR managers work closely with supervisors in organizations to develop these policies. Workplace policies will be addressed throughout the book.
  3. Compensation and benefits. In addition to paycheques, perks such as RRSPs and pension plans, health benefits, and other perks are usually the responsibility of the HR manager. Compensation and benefits are discussed in Chapter 7, “Compensation and Benefits,” and Chapter 8, “Retention and Motivation.”
  4. Retention. The assessment of employees and strategizing how to retain the best employees is a task that HR managers oversee, but other managers in the organization will also provide input.  Chapter 10, “Successful Employee Communication,” Chapter 11, “Managing Employee Performance,” and Chapter 12, “Employee Assessment,” cover different types of retention strategies, from training to assessment.
  5. Training and development. Helping new employees develop the skills needed for their jobs and helping current employees grow their skills are also tasks for which the HRM department is responsible. Determining training needs and the development and implementation of training programs are important tasks in any organization. Training is discussed in great detail in  Chapter 10, “Successful Employee Communication,” including succession planning. Succession planning includes handling the departure of managers and making current employees ready to take on managerial roles when a manager does leave.
  6. Regulatory issues and worker safety. Keeping up to date on new regulations relating to employment, health care, and other issues is generally a responsibility that falls on the HRM department. While various laws are discussed throughout the book, unions and safety and health laws in the workplace are covered in Chapter 13, “Working with Labour Unions,” and Chapter 14, “Safety and Health at Work.”

In smaller organizations, the manager or owner is likely performing HRM functions.[2] They hire people, train them, and determine how much they should be paid. Larger companies ultimately perform the same tasks, but because they have more employees, they can afford to employ specialists, or human resource (HR) managers, to handle these areas of the business. As a result, it is highly likely that you, as a manager or entrepreneur, will be performing HRM tasks, hence the value in understanding the strategic components of HRM.

HRM vs. Personnel Management

HRM strategy is an elaborate and systematic plan of action developed by a human resource (HR) department. This definition tells us that an HR strategy includes detailed pathways to implement HRM strategic plans and HR plans. Think of the HRM strategic plan as the major objectives the organization wants to achieve, and the HR plan as the specific activities carried out to achieve the strategic plan. In other words, the strategic plan may include long-term goals, while the HR plan may include short-term objectives that are tied to the overall strategic plan. As mentioned at the beginning of this chapter, HR departments in the past were called personnel departments. This term implies that the department provided “support” for the rest of the organization. Companies now understand that the human side of the business is the most important aspect of any business (especially in this global economy). Therefore, HR has much more importance than it did 20 years ago. While personnel management mostly involved activities surrounding the hiring process and legal compliance, HR involves much more, including strategic planning, which is the focus of this chapter. The Ulrich HR model, developed by David Ulrich, is a common way of looking at HRM strategic planning and provides an overall view of the role of HRM in the organization. Ulrich’s model is said to have started the movement that changed the view of HR; no longer merely a functional area, HR became more of a partnership within the organization. While his model has changed over the years, the current model looks at alignment of HR activities with the overall global business strategy to form a strategic partnership.[3] His newly revised model looks at five main areas of HR:

  1. Strategic partner. HR Partners with the entire organization to ensure the alignment of the HR function with the needs of the organization.
  2. Change agent. HR has the ability to anticipate and respond to change not only within the HR function, but in the company as a whole.
  3. Administrative expert and functional expert. HR has the ability to understand and implement policies, procedures, and processes that relate to the HRM strategic plan.
  4. Human capital developer. HR develops talent that is projected to be needed in the future.
  5. Employee advocate. HR works for employees currently within the organization.

According to Ulrich, the implementation of this model must happen with an understanding of the overall company objectives, problems, challenges, and opportunities.[4] For example, the HR professional must understand the dynamic nature of the HRM environment, such as changes in labour markets, company culture and values, customers, shareholders, and the economy. Once this occurs, HR departments can determine how best to meet the needs of the organization within these five main areas.

Figure 3.1 To be successful in writing an HRM strategic plan, one must understand the dynamic external environment. This includes things like customers, shareholders, technology, the economy, society, and changes to the labour market.

HRM as a Strategic Component of the Business

Keeping the Ulrich model in mind, consider these four points when creating a good HRM strategic plan:

  1. Make it applicable. Often, people spend an inordinate amount of time developing plans only to let the plans sit in a file somewhere without implementing them. A good strategic plan should be the guiding principles for HRM. It should be reviewed and changed as aspects of the business change. Involvement of all members in the HR department (if it’s a larger department) and communication between everyone within the department will make the plan better.
  2. Be a strategic partner. The alignment of the HRM strategic plan with corporate values should be a major objective of the plan. In addition, the HRM strategic plan should be aligned with the mission and objectives of the organization as a whole. For example, if the mission of the organization is to promote social responsibility, then the HRM strategic plan should address this in the hiring criteria.
  3. Involve people. An HRM strategic plan cannot be written alone. The plan should involve everyone in the organization. For example, as the plan develops, the HR manager should meet with various people in different departments and find out what skills the best employees have. Then the HR manager can make sure the people recruited and interviewed have similar qualities as the best people already doing the job. In addition, the HR manager will likely want to meet with the financial department and executives who do the budgeting, so they can determine human resource needs and recruit the right number of people at the right times. In addition, once the HR department determines what is needed, communicating a plan can encourage feedback, which will help ensure that the plan is aligned with the business objectives.
  4. Understand how technology can be used. Organizations often do not have the money or the inclination to research software and find budget-friendly options for implementation. People are sometimes nervous about new technology. However, the best organizations are those that embrace technology and find the right technology for their businesses. There are thousands of HRM software options that can make the HRM processes faster, easier, and more effective. Good strategic plans address this aspect.

HR managers know the business and therefore know the needs of the business and can develop a plan to meet those needs. They also stay on top of current events so they know what is happening globally that could affect their strategic plan. If they find out, for example, that an economic downturn is looming, they will adjust their strategic plan. In other words, the strategic plan needs to be a living document, one that changes as the business and the world changes.

Human Resource Recall

Have you ever looked at your organization’s strategic plan? What areas does the plan address?

The Steps to Strategic Plan Creation

As mentioned previously, HRM strategic plans must have several elements to be successful. Remember, the HRM strategic plan is different from the HR plan. Think of the HRM strategic plan as the major objectives the organization wants to achieve, while the HR plan consists of the detailed plans to ensure the strategic plan is achieved. Often, the strategic plan is viewed as just another report that must be written. Rather than jumping in and writing it without much thought, it is best to give the plan careful consideration.

The goal of the next section is to provide you with some basic elements to consider and research before writing any HRM strategic plans.

Conduct a Strategic Analysis

A strategic analysis looks at four aspects of the individual HRM department:

  1. The company’s mission and values. It is impossible to plan for HRM if one does not know the values and missions of the organization. As we have already addressed in this chapter, it is imperative for the HR manager to align department objectives with organizational objectives. It is worthwhile to sit down with company executives, management, and supervisors to make sure you have a good understanding of the company mission and values.
  2. Organizational life cycle. You may have learned about the life cycle in marketing or other business classes, and this applies to HRM too. An organizational life cycle refers to the introduction, growth, maturity, and decline of the organization, which can vary over time. For example, when the organization first begins, it is in the introduction phase, and a different staffing, compensation, training, and labour or employee-relations strategy may be necessary to align HRM with the organization’s goals. This might be different from the strategy for an organization that is struggling to stay in business and is in the decline phase. That same organization, however, can create a new product, for example, which might put the organization in the growth phase. Table 3.2, “Lifecycle Stages and HRM Strategy,” explains some of the strategies that may be different depending on the place of an organization in the organizational life cycle.
  3. The HRM department mission and values. HRM departments must develop their own departmental mission and values. These guiding principles for the department will change as the company’s overall mission and values change. Often, the mission statement is a list of what the department does, which is less of a strategic approach. Brainstorming about HR goals, values, and priorities is a good way to start. The mission statement should express how an organization’s human resources help that organization meet its business goals. A poor mission statement might read as follows: “The human resource department at Techno, Inc. provides resources to hiring managers and develops compensation plans and other services to assist the employees of our company.”A strategic statement that expresses how human resources help the organization might read as follows: “HR’s responsibility is to ensure that our human resources are more talented and motivated than our competitors’, giving us a competitive advantage. This will be achieved by monitoring our turnover rates, compensation, and company sales data and comparing that data to our competitors’.”[5] When the mission statement is written in this way, it is easier to take a strategic approach with the HR planning process.
  4. Challenges facing the department. HR managers cannot deal with change quickly if they are not able to predict changes. As a result, the HR manager should know what upcoming challenges may be faced to make plans to deal with those challenges better when they come along. This makes the HRM strategic plan and HR plan much more usable.
Life Cycle Stage Staffing Compensation Training and Development Labour/Employee Relations
Table 3.2 Life Cycle Stages and HRM Strategy[6]
Introduction Attract best technical and professional talent. Meet or exceed labour market rates to attract needed talent. Define future skill requirements and begin establishing career ladders. Set the basic employee-relations philosophy of the organization.
Growth
  • Recruit adequate numbers and a mix of qualifying workers.
  • Plan management succession.
  • Manage rapid internal labour market movements.
  • Meet external market but consider internal equity effects.
  • Establish formal compensation structures.
 Mold effective management teams through management development and organizational development. Maintain labour peace, employee motivation, and morale.
Maturity
  • Encourage sufficient turnover to minimize layoffs and provide new openings.
  • Encourage mobility as reorganizations shift jobs around.
 Control compensation costs. Maintain flexibility and skills of an aging workforce.
  • Control labour costs and maintain labour peace.
  • Improve productivity.
Decline Plan and implement workforce reductions and re-allocations; downsizing and outplacement may occur during this stage. Implement tighter cost control. Implement retraining and career consulting services.
  • Improve productivity and achieve flexibility in work rules.
  • Negotiate job security and employment-adjustment policies.

Identify Strategic HR Issues

In this step, the HRM professionals will analyze the challenges addressed in the first step. For example, the department may see that it is not strategically aligned with the company’s mission and values and opt to make changes to its departmental mission and values as a result of this information.

Many organizations and departments will use a strategic planning tool called a SWOT analysis, which identifies strengths, weaknesses, opportunities, and threats to determine some of the issues they are facing. Once this analysis is performed for the business, HR can align itself with the needs of the business by understanding the business strategy. See Table 3.3, “Sample HR Department SWOT Analysis for Techno, Inc.,” for an example of how a company’s SWOT analysis can be used to develop a SWOT analysis for the HR department.

Once the alignment of the company SWOT is completed, HR can develop its own SWOT analysis to determine the gaps between HR’s strategic plan and the company’s strategic plan. For example, if the HR manager finds that a department’s strength is its numerous training programs, this is something the organization should continue doing. If a weakness is the organization’s lack of consistent compensation throughout all job titles, then the opportunity to review and revise the compensation policies presents itself. In other words, the company’s SWOT analysis provides a basis to address some of the issues in the organization, but it can be whittled down to also address issues within the department.

Prioritize Issues and Actions

Based on the data gathered in the last step, the HR manager should prioritize the goals and then put action plans together to deal with these challenges. For example, if an organization identifies that they lack a comprehensive training program, plans should be developed that address this need. (Training needs are discussed in  Chapter 9 “Training and Development.”) Involving management and executives in the organization is an important aspect of this step. Once you have a list of issues you will address, discuss them with the management and executives, as they may see issues or priorities differently than you. Remember, to be effective, HRM must work with the organization and assist the organization in meeting goals. This should be considered in every aspect of HRM planning.

Table 3.3 Sample HR Department SWOT Analysis for Techno, Inc.
Strengths
  • Hiring talented people
  • Company growth
  • Technology implementation for business processes
  • Excellent relationship between HRM and management/executives
Weaknesses
  • No strategic plan for HRM
  • No planning for up/down cycles
  • No formal training processes
  • Lacking software needed to manage business processes, including go-to-market staffing strategies
Opportunities
  • Develop an HRM staffing plan to meet industry growth
  • Purchase HRM software to manage training, staffing, and assessment needs for an unpredictable business cycle
  • Continue the development of HRM and a relationship with executives by attending and participating in key meetings and the decision-making processes
  • Use training programs and outside development opportunities to continue developing in-house marketing expertise
Threats
  • Economy
  • Changing technology

Draw Up an HRM Plan

Once the HR manager has met with executives and management and priorities have been agreed upon, the plans are ready to be developed. Detailed development of these plans will be discussed in Section 3.2, “Writing the HRM Plan.” Sometimes companies have great strategic plans, but when the development of the details occurs, it can be difficult to align the strategic plan with the more detailed plans. An HR manager should always refer to the overall strategic plan before developing the HRM strategic plan and HR plans.

Even if a company does not have an HR department, HRM strategic plans and HR plans should still be developed by management. By developing and monitoring these plans, the organization can ensure the right processes are implemented to meet the ever-changing needs of the organization. The strategic plan looks at the organization as a whole, the HRM strategic plan looks at the department as a whole, and the HR plan addresses specific issues in the HR department.

Key Takeaways

  • Personnel management and HRM are different ways of looking at the job duties of human resources. Twenty years ago, personnel management focused on administrative aspects. Today, HRM involves a strategic process, which requires working with other departments, managers, and executives to be effective and meet the needs of the organization.
  • In general, HRM focuses on several main areas, which include staffing, policy development, compensation and benefits, retention issues, training and development, and regulatory issues and worker protection.
  • To be effective, an HR manager needs to utilize technology and involve others.
  • As part of strategic planning, HRM should conduct a strategic analysis, identify HR issues, determine and prioritize actions, and then draw up the HRM plan.

Key Terms

HR plan: The specific activities carried out to achieve the HRM strategic plan.

HRM strategic plan: An elaborate and systematic plan of action developed by an HR department to carry out the HRM strategy.

HRM strategy: The major objectives the organization wants to achieve.

 

 

organizational life cycle: The introduction, growth, maturity, and decline of the organization, which can determine staffing, compensation, training, and labour or employee-relations strategies.

personnel management: Preceeded HRM. Personnel management departments dealt mostly with administrative tasks, such as hiring paperwork and processes.

SWOT analysis: A strategic planning tool that has an organization or department identify its strengths, weaknesses, opportunities, and threats.

Ulrich HR model: A HR model developed by David Ulrich that looks at aligning HR activities with the overall global business strategy to form a strategic partnership.

Exercises

  1. What is the difference between HR plans and HRM strategic plans? How are they the same?
  2. Of the areas of focus in HRM, which one do you think is the most important? Rank them and discuss the reasons for your rankings.
  1. Michael Losey, “HR Comes of Age,” HR Magazine, March 15, 1998, accessed July 11, 2011, http://findarticles.com/p/articles/mi_m3495/is_n3_v43/ai_20514399. ↵
  2. Jan de Kok and Lorraine M. Uhlaner, “Organization Context and Human Resource Management in the Small Firm,” Tinbergen Institute Discussion Papers, 01-038/3, Tinbergen Institute, 2001, accessed August 13, 2011, http://ideas.repec.org/s/dgr/uvatin.html. ↵
  3. David Ulrich and Wayne Brockbank, The HR Value Proposition (Boston: Harvard Business Press, 2005), 9–14. ↵
  4. David Ulrich, “Evaluating the Ulrich Model,” Acerta, 2011, accessed July 11, 2011, http://www.goingforhr.be/extras/web-specials/hr-according-to-dave-ulrich#ppt_2135261. ↵
  5. Gary Kaufman, “How to Fix HR,” Harvard Business Review, September 2006, accessed July 11, 2011, http://hbr.org/2006/09/how-to-fix-hr/ar/1. ↵
  6. Seattle University Presentation, accessed July 11, 2011, http://fac-staff.seattleu.edu/gprussia/web/mgt383/HR%20Planning1.ppt. ↵

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