Many of the human resource managers report working closely with senior management in both formulating and implementing their firms’ strategic plans. As you can see, 56% of the HR managers say to a large extent they work closely with senior management in creating strategic plans; 68% say they do so with respect to actually implementing the plans.
Metrics: Statistics used to measure activities and results.
On the other hand, creating human resource management policies and practices that support the employer’s strategic goals presumes that the human resource manager can measure how he or she is doing. On the whole, about 66% of large firms’ have methods in place to measure the HR department’s overall effectiveness; only about 31% small firm managers report doing so. Similarly the use of metrics to measure the performance of various human resources related activities varies widely by activity. For example, about 59% of employers use metrics to assess the firm’ recruitment and selection processes; that drops off to only about 28% who use metrics for evaluating leadership development
In practice, human resource managers can play two basic strategic planning roles, in strategy execution and in strategy formulation.
Strategy execution is traditionally the heart of the human resource manager’s strategic job. Top management formulates the company’s corporate and competitive strategies. Then the human resource manager designs strategies, policies and practices that make sense in terms of the company’s corporate and competitive strategies. Dell’s human resource strategies – the Web Based help desk, its centralized intranet service bureau help the firm better execute Dell’s low cost strategy. FedEx’s human resources strategies supporting communication and employee development, for instance – help FedEx differentiate itself from its competitors by offering superior customer service.
HRM supports strategy execution in other ways. For example, it administers most firms’ downsizing and restructuring efforts, out placing employee, instituting pay for performance plans, reducing health care costs, and retaining employees. When Wells Fargo acquired First Interstate Bancorp, human resources played a strategic role in implementing the merger in merging two wildly divergent cultures and in dealing with the uncertainty and initial shock that rippled through the work force when the merger was announced.
The Strategy Formulation Role:
We’ve seen that in recent years, human resource management’s traditional role in executing strategy has expanded to include working with top management to formulate the company’s strategic plans. Again, this expanded strategy formulation role reflects the reality employers face today. Globalization means more competition, more competition means more performance and most employers (such as Dell, FedEx, and Toyota) are pursuing improved performance (in whole or part) by boosting the competence and commitment levels of their employees. That makes human resource management’s knowledge and expertise (with respect to issue like: How can we boost employee productivity?) crucial to the strategy formulation process.
HR supports strategy formulation strategy in many ways. For example, formulating a strategic plan requires identifying, analyzing, and balancing the company’s external opportunities and threats, on the one hand, and its internal strengths and weaknesses, on the other. Hopefully, the resulting strategic plans capitalize on the firm’s strengths and opportunities and minimize or neutralize its threats and weaknesses.
Opportunities and Threats:
Externally, the human resource manager is in a unique position to supply competitive intelligence that may be useful in the strategic planning process. Details regarding competitors’ incentive plans opinion survey data from employees that elicit information about customer complaints and information about pending legislation such as labor laws and mandatory health insurance are some examples.
From public information and legitimate recruiting and interview activities, you ought to be able to construct organization charts, staffing levels, and group missions for the various organizational components of each of your major competitors. Your knowledge of how brands are sorted among sales divisions, who reports to whom can give important clues to a competitor’s strategic priorities. You may even know the track record and characteristics behavior of the executives.