Why You Need to Create a Strategic Plan for Your HR Function

So why have an HR Strategic Plan?

In today’s highly competitive business environment, success is often determined by how well an organization and Human Resources can manage change.  Organizations have to constantly monitor their place in the external business environment as well as evaluate and improve their organizational capabilities, or intangible assets, in order to effectively compete in the marketplace.

The strategic planning process is the most effective way for organizations to identify and address all of the various external and internal forces that have an impact their business. This process moves the organization from their current place to their desired future.  And more importantly, brings value to all of the stakeholders of the organization.  

But what value is the strategic plan without the people within the organization being ready, willing, and able to execute the plan? None. The organization’s employees must understand and be fully engaged in and willing to follow the strategic plan in order for it to be of any value to the organization.

This is where HR comes in.  

HR’s value lies in being able to build and maintain the organizational foundation and infrastructure to help drive the necessary changes that will accomplish the organization’s strategic goals.  

Regrettably, HR is still thought by many business leaders as pretty much an administrative function that operates separately from the rest of the other functions in the organization.  Sadly, this reinforces the opinion that HR isn’t that important to the success of the organization. HR is also not typically held accountable for business results, as the other functions are, and because of this, HR considerations are typically ignored and viewed as a cost center rather than a profit line contributor.

There are some leaders, however, who recognize that an organization’s human capital is a key strategic resource for increasing organizational capability and achieving a competitive advantage over competitors.  Being able to attract, retain, motivate, and develop the best employees in the organization’s industry are critical to its success in the marketplace.

The ability of an organization to execute it’s strategic plan rests solely on its effective utilization of its human capital.  

Smart business leaders are recognizing this and have turned to HR to help them positively impact their business results.

In order for HR to have a positive impact on an organization’s business results, we must focus on and engage in both the long-term strategic and the short-term administrative and operational planning.

There are three roles that HR has in an organization that need defining before we go any further:

First is the administrative role. This is the traditional role most people think about HR. It’s things like regulatory compliance, policy & procedure interpretation, record keeping, HRIS management, benefits administration, onboarding & offboarding activities, etc.

Second is the operational role. These are the HR activities that relate to the day to day operations of the organization.  These are the tactical activities such as recruiting, filling job reqs, handling employee relations issues, employee communication, compensation program management, etc.

These two HR roles aren’t the high-level exciting things many of us in the upper levels of HR like doing any more but they are absolutely essential to the organization and the reputation of the HR function. HR must be 100% technically competent in the administrative and operational roles and execute their HR services flawlessly.  

HR’s reputation is built on the employee’s perceptions of competence and has to be flawless in these two roles in order for to build a solid foundation of building on the higher level strategic role.

Third is the strategic role. This is the role where HR can really make a difference.  It requires HR participating in the strategic planning process, improving the organization’s performance, ensuring effective leadership, redesigning organizational processes, and ensuring financial accountability for HR results.  

Business literacy is required in order for HR to be effective in the strategic role. HR must know and fully understand who the organization’s stakeholders are as well as the organization’s markets, products, customers, and competitors.  Fully understanding financial terminology, speaking the language of business, and knowing how to read and interpret the organization’s financial statements – income statement, balance sheet, cash flow statement, etc.- are absolutely necessary.

I believe that the most effective strategic HR professionals are those who have real-life business experience outside of HR. (Self-promotion alert) I’m, of course, biased having successfully led and operated, with full P&L accountability, an award winning full line Macys department store for 13 years.

By having a solid business background and experience, HR can develop effective value-added strategies of staffing, performance management, total rewards, employee relations, and employee development. This puts the organization’s employees in the best possible position to execute it’s strategic plan and contribute to its financial success in the marketplace.

Strategic HR is my favorite topic and the role I enjoy most as an HR professional. I’ve touched on it a bit in my Metrics and Analytics series but I’ve been focusing on writing/podcasting mostly on the operational side of HR.  I had to build a foundation first, you know!

Now I can start exploring more strategic HR topics here at HHHR!  

Next week, I’m going to continue with strategic HR and explain exactly what a strategic plan is.  

The FLSA Administrative Exemption

Image courtesy of stockimages at FreeDigitalPhotos.net

Image courtesy of stockimages at FreeDigitalPhotos.net

In this third post in the FLSA Overtime Exemption series, I’m going to discuss the administrative exemption.

Again, as with all the exemptions, in order to be considered exempt the employee must meet the salary basis test which requires a minimum of $455 per week or $26,600 per year. One thing I have not yet mentioned previously in the other posts on the FLSA Overtime Exemptions is as part of the salary basis test the employee must receive a regular fixed and predetermined amount of compensation, minus permissible deductions, each workweek regardless of the quality or quantity of work done by the employee.

There are two duties tests for the administrative exemption:

  • The employee’s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and
  • The employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

In 2004 the Department of Labor (DOL) issued revised regulations in order to clarify some of the key concepts in these duties tests which I summarize below.

In the first duties test, the primary duty “directly related to the management of general business operations of the employer” means employees must perform work that is directly related to assisting with the operating or managing of the business and not working on the front line doing manual work.

Employees acting as consultants or advisor’s to an employer’s customers or clients may qualify for the exemption if their primary duty is the performance of work directly related to the management or general business operations of the employer’s customers. A couple examples include financial consultants or tax experts.

The regulations also give some specific examples of administrative work related to the functional ares of a company’s business operations. These functions include tax, finance, accounting, auditing, purchasing, procurement, advertising, marketing, safety and health, human resources, public relations, legal, regulatory compliance, and Internet and database administration.

In the second duties test, things get a little more complicated regarding the statement “discretion and independent judgment with respect to matters of significance.” This statement means the employee has the authority to make an independent choice that is free from direction or supervision. An employee’s decisions can occasionally be reviewed and reversed and still be considered exercising discretion and independent judgment, and therefore, still be considered exempt.

Some factors to consider when looking at “discretion and independent judgment” are:

  • whether the employee has authority to formulate, affect, interpret, or implement management policies or operating practices;
  • whether the employee carries out major assignments in conducting the operations of the business;
  • whether the employee performs work that affects business operations to a substantial degree;
  • whether the employee has authority to commit the employer in matters that have significant financial impact;
  • whether the employee has authority to waive or deviate from established policies and procedures without prior approval, and other factors set forth in the regulation

Now, the term “matters of significance” means the level of importance or consequence of the work performed. The example from the DOL is an employee does not exercise discretion and independent judgment with respect to matters of significance merely because the employer will experience financial losses if the employee fails to perform the job properly.

It’s important to be very careful when classifying an employee under the administrative exemption. To me, it can be the most difficult one to get right.

Well, that concludes the administrative exemption post of my FLSA Overtime Series. The next post in the series will be the professional exemption.