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.  

Steps to Help Your Employees Understand the Details of Their Benefits

Tell them real-life stories

This week I’m going to cover a small but very important tactical element of HR. Although it’s a small thing, it leads to a much larger strategic element of building a high-performing workplace culture

I’m a strong believer in delivering an amazing onboarding experience for employees. I built one at one employer from the ground up and I had the pleasure of  inheriting an outstanding one at another employer.

Today’s post is going to deal with one portion of the onboarding process – the Benefits discussion.  This is often the most confusing and boring part because HR typically comes in and goes through the insurance benefits using HR and insurance industry jargon. As a result, most employees don’t understand most of what is being said and just tune out and start looking at their phones. This is unfortunate because an organization’s benefits are an important and  critical piece of the total rewards program and employees need to fully be comfortable with understanding them.

I think employees really need to understand all of their benefits and there should be the appropriate amount of time put into the onboarding schedule to make sure employees really do fully understand them. We owe our employees the extra effort to help them understand their benefits rather than just handing them a packet of papers or just helping them logon to the onboarding site and leaving them with an hour to review and enroll.  

So here’s how I do it.

In my schedule, the benefits discussion occurs immediately after all the required hiring paperwork is completed. This way, they are still pretty fresh and enthusiastic.  I always go into the HR portion which includes the insurance and benefit portion of onboarding telling the new hires that this portion is going to be the most exciting and interesting part of the entire  process. I’m obviously being silly and I purposely exaggerate this because they and everybody else has experienced the opposite so it grabs their attention.

I then like to tell real-life stories about how the different benefits work. These are my stories based on my experiences and I’m certain you have your own story bank you can go to when communicating benefit details to your employee team.

For instance as I’m talking about the medical benefits, most people understand what the deductible means and how the co-pay plays into that but many don’t really understand what the Annual Max Out of Pocket means.

So I tell a real-life story about an employee (this was at a previous employer and whose identity I keep confidential) who had a heart attack while out camping with his family. He was life flighted to the hospital and had open heart surgery.  Well, when everything was said and done and the employee added up all the bills that came, the total was over $1,000,000. Fortunately for him and his family, the company health insurance plan had a maximum out of pocket of $3500.  What does this mean? Simple. The employee only had to pay $3500 total for the episode.. And this all happened in the summer so he had to continue treatment, cardiac rehab, and many other doctor appointments and because he reached his MOP, he paid nothing for the rest of the year. Every time I tell this story, I see clear understanding in the new hires’ eyes because this story always makes it obvious what the max out of pocket is.

Another story I like to tell is when describing the Employee Assistance Program (EAP). This benefit is very often forgotten and rarely used. I believe strongly in it as I’ve used it myself and tell the story of a couple employees I helped through substance abuse problems (again at a previous employer keeping names confidential).  

I had employees come to me asking for help with their substance abuse. They feared they would lose their job but my company believes in helping employees who ask for help. So I gave them all the EAP info and explained to them how the EAP works and strongly encouraged them to call and get the counseling help they need. I also explained that in addition to the free counseling sessions, our medical insurance has programs to help them clean up. They took advantage of these programs, cleaned themselves up, and remained good productive employees.

I love telling this story.

The last story I’m going to share this week is about the Flexible Savings Account (FSA). I tell them I love this benefit because it’s like an interest free, tax free loan to pay for medical related expenses like co-pays and deductibles. I tell them I usually max out the benefit and contribute the full $2600 and at the end of the year, if I have some left over, I treat myself to some very nice eye glasses and/or prescription sunglasses.  I also go back to the story above about the maximum out of pocket and tell them the heart attack employee had about $1600 left in his FSA and applied that to the MOP amount of $3500 he owed. So he only had to come up with $1900 for the entire cost of the episode.

There are, of course, other stories I tell to help our new employees understand the more complicated details of their benefits but I may share those at another time.. I always get positive comments from the new hires who appreciate me taking the time to sit down with them and going through the benefits we offer and explaining, through real-life stories, how they work.

Not only does this help them personally in understanding their benefits package, it sends the strong message that the organization sincerely cares about them and their well-being.  It’s an important element in the strategy of building that all important high-performing culture that we all strive for.  

The Mommy Track Bias

In a recent article over at SHRM, they discussed the bias against women and men (but mostly women) trying to re-enter the workforce after taking time off from their careers to stay home and raise their kids.  Most hiring managers and HR tend to think these women have lost their edge in their industry and are, therefore, not strong candidates. They are passed over during the hiring process for candidates who have not taken the time off to raise their kids.  I think this bias is wrong and have first hand experience that supports my belief.

I’m pleased that the article is supportive of these women and discuses the positive attributes and skills that stay-at-home parents acquire during their time raising their kids.

…some HR experts argue that stay-at-home parenting actually imparts skills that prove valuable in the workplace, such as patience, persistence, creativity and reliability.

“Careers for men and women, parents or not, are no longer linear, and an accomplished woman who took a career detour to devote herself to motherhood can still be an incredibly valuable hire,” said Marisa Thalberg, founder of executivemoms.com, a networking site for working mothers.

Matt Brosseau, chief technology officer and head recruiter at Instant Alliance, an HR staffing and consulting firm, noted that “there’s a level of patience and creative problem-solving you can gain only from dealing with a toddler.”

“When parenting, you are often forced to negotiate with someone who may not be reasonable, and that’s a good skill when dealing with unreasonable clients and others,” he said.

In my time as a store manager at Macys, I hired many women who had taken several years off to raise their kids.  The article does claim the retail industry is easier to assimilate than industries such as law, medicine, and IT.  I can easily say almost all of the return-to-work moms turned out to be fantastic hires and very valuable employees.  Many of them ended up being managers for me who have since gone on to very successful careers.  One in particular, is a regional director for a large specialty retail chain store who has thanked me many times for giving her a chance when she was re-entering the workforce.  Several others are now business owners or are in mid to high level management positions within their organizations.

I completely agree with the experts quoted above who emphasize the positive attributes gained by those who raise their kids. In addition to what they say,  stay-at-home parents learn how to juggle multiple priorities while being constantly distracted.  They have strong interpersonal skills in being able to negotiate and deal with difficult people.  They have learned how to manage difficult situations while instilling a sense of fair play.  They have learned how to motivate people to be their best.  And having and raising kids matures and humbles people.

These are all attributes and skills that are valuable in any workplace!

I want to include my wife who recently re-entered the workforce, in retail, after many years of staying home and raising our kids.  Its interesting to note that there were significant changes in technology that she had to deal with and learn but the core basics of retail are still the same.  It took her a little time to catch on the the technology changes but she did.  Along with her outstanding leadership ability, her selling skills, great customer service, and credit production, she is now a very valuable and highly desirable employee.  Her boss has tried to promote her several times but she isn’t quite ready to take that step yet but I know she eventually will and will be very successful.

Bottom line, hiring people who took time off to raise their kids is not as risky as most people think.  Any parent who has raised or is raising their kids should know how difficult the job is and the skills that are developed while doing so.  Sure, there will be a learning curve at first but there is with all new hires.

The bias against people who are trying to re-enter the workforce after raising their kids should end.  Employers are missing out on very skilled, motivated, and dedicated employees by passing them over.

Adding Value: Design and deliver intangibles audits

Continuing the series of how HR can add value to investors, I will discuss the importance of conducting an “intangibles audit”.  According to Dave Ulrich, the audit assesses what is necessary to deliver investor value given an organization’s history and strategy, measures how well intangibles are being delivered, and leads to an action plan for improvement.

There is no info on the internet about the audit so I recommend you get a hold of the book where you can get more detail.  For the purpose of this post, I am just summarizing.

The audit measures four core dimensions of the organization:

1.  Keeping Promises
2. Growth Strategy
3. Core Competence
4. Organization Capabilities (this dimension has 11 possible strengths listed below)

  • Talent
  • Speed
  • Shared Mindset
  • Accountability
  • Collaboration
  • Learning
  • Leadership
  • Customer connection
  • Innovation
  • Strategic unity
  • Efficiency
Each dimension is rated from 1-5.  Scores of 4-5 mean you are doing a good job; scores of 3 mean that you may need to do some work to improve; and scores of 1-2 mean that your intangibles are probably hurting your value to investors.
Again, get the book for more detail on how to conduct the audit and interpret the results.

Adding Value: Highlight the importance of intangible value to total shareholder return

In my continuing series on how HR adds value to investors, I will now look at how to present the value of HR related intangibles to an organization’s leaders in the financial terms they understand.

Ulrich presents “three visual exercises that highlight the importance of intangibles and spotlight HR’s impact on shareholder value”.

1.  Earnings and Shareholder Value:  Ulrich suggests going through the last ten to fifteen years of a company’s financial results and plot earnings and stock prices (or market cap) by quarter.  This will show if the company’s market value is above or below the earnings line – a way to determine if the company has a net positive or negative intangible reputation.

2.  Price/Earnings Ratio Race:  This exercise compares a company’s intangibles to their competitor’s. Compare ten or fifteen years of the company’s quarterly P/E ratio against their leading competitor’s.  This chart will show how investors perceive the company and its competitors.  The real life example Ulrich uses is when they discovered a company had a P/E ratio consistently 20% below that of their largest competitor which suggests that investors were less confident in their management vs their competitors.  With the company’s market value at $20 billion, it further suggested that their reputation cost them about $4 billion.

3.  Management View of Impact f Organization and People:   This exercise recommends that each member of the management team to plot, on a piece of blank graph paper, their assumptions showing shareholder value on one axis and the quality of the organization’s people (HR) on the other.  This will help start a discussion about how HR issues matter in their perceptions of shareholder value.  Most leaders believe that increasing the quality of people will lead to increased shareholder value.   This exercise helps them visualize it better and opens up the discussion for better understanding.