Strategic Human Resources Challenges

Today’s human resources managers face three basic strategic challenges. One is the need to support corporate productivity and performance improvement efforts. With the globalization of the world economy, competition has soared, and with it the need to continually improve organizational performance. Second, employees play an expanded role in employers’ performance improvement efforts. Indeed, all the elements we associate with high performance organizations like Toyota’s – such as high technology team based production are largely useless without extraordinarily high levels of employee competence and commitment.

The third challenge ( stemming from the first two) is that employers see that their human resource units must be more involved in designing not just executing the company’s strategic plan. It used to be just the company’s operating (line) managers who had heavy input into the company’s strategic plan. The president and his or her staff might decide to enter new markets, drop product lines, or embark on a five year cost cutting plan. Then the president would more or less entrust the personnel implications of that plan (hiring or firing new workers, hiring outplacement firms for those fired, and so on) to the human resource manager.

Today’s stress on gaining competitive advantage through people renders such arrangements inadequate. Instead, top management needs the input of the human resource team in designing the strategy since it is team charged with hiring, training and compensating the firm’s employees. Human resource managers will therefore need an in-depth understanding of the value creating proposition of the firm [in other words, a basic functional understanding of how the firm makes money] what activities and processes are most critical for value creation as defined by customers and capital markets? Who in the firm executes these activities successfully? Human resource professionals need to understand the basics of strategic planning and of the basic business functions such as accounting, finance, production, and sales, so they can take (as human resource advocates out it) their seat at the table when top management is crafting the firm’s strategic plan.

Human Resource management’s strategic roles:

Yet, when it comes to just involved human resource managers should be in strategic planning, there is often disconnect between what CEOs say and do. Some do work on the assumption that human resource managers’ input is crucial.

A CEO organized a senior executive committee (the Automotive Strategies Board). It includes GM’s chief financial officer, chief information officer, and vice president of global human resources. As Wagner says, ‘I seek [the HR vice president’s] counsel and perspective constantly’. She has demonstrated a tremendous capacity to think and act strategically which is essential to our HR function and what we want to achieve in making GM a globally competitive business.

Some studies support the wisdom of such an approach. They show the crucial role that human resource managers can play in strategic planning. A study from the University of Michigan concluded that high performing companies’ human resource professionals should be part of the firm’s strategic planning tam. They help the team identify the human issues that are vital to business strategy. They help conceptualize and execute the sorts of organizational changes that companies increasingly need to execute their strategic plans. Another study, by Mercer Consulting, concluded that 39% of CEOs surveyed see human resources as more of a partner than a cost center. One study, of 447 senior human resource executives, helps illustrate their strategic contribution in concrete terms. Mergers in which top management asked human resource management to apply its expertise consistently outperformed those in which human resources was less involved.

On the other hand, one survey of 1,310 human resource professionals found that only about half said senior human resource managers involved in developing their companies’ business plans. A similar, recent survey by the Society for Human Resource Management demonstrates the current situation regarding employers’ use of strategic human resource management. Overall about 75% of the human resource managers surveyed said their companies have strategic plans in place. However only about 56% of those in firms with strategic plans in place said their human resources departments had their own (departmental) strategic plans.