For the past two decades, a unique paradox has existed regarding the role of Human Resources (HR). Leaders and staff in HR have grown more interested in gaining a “seat at the table” of an organization’s strategic planning and execution process, but, in most cases, HR still isn’t seen as a true strategic partner.
Simultaneously, boards and executives continue to become more vocal and transparent about the importance of Talent Management and Human Capital, as well as the perceived lack of capabilities in these areas of their organizations. So what has been the roadblock to improved results in HR? Many companies’ HR functions have attempted to quickly move from transactional to strategic, but success depends on gaining credibility and relevance to the business. This requires a well-planned approach to setting, executing, communicating, and monitoring achievement of this transformation, comprised of the following:
- Human Resource Strategy to focus on the operations and efficiency of delivering core HR services
- Talent Strategy to address the unique needs of the organization in achieving business objectives
Human Resource Strategy
Before any business executive is willing to have a discussion regarding strategic talent management, the “basics” of HR service delivery need to be reliably and consistently addressed. IMG often sees the credibility of well-intended strategic talent initiatives undermined by inconsistent performance in core HR functional services. Examples include: HR systems delivering inaccurate employee / headcount data and reports; recruiters supplying unqualified candidates and / or lengthy “time to fill” jobs; delays in onboarding new employees; and compensation recommendations that don’t adequately reward, attract and retain.
The starting point is a business-aligned Human Resource Strategy to drive the design of the HR structure / roles, core HR processes and Human Resources Information Systems technology. The strategy also guides key decisions, such as size of HR staff / types of roles, customization vs. standardization, direct vs. shared support, cost allocation and target cycle time.
Despite strong demand we have noted a distinct escalation in general cost pressure beginning in Q1 2015, causing a renewed scrutiny on the performance of support functions such as HR. Best practice companies are proactively addressing this issue by performing a self-assessment and realignment of HR strategy and structure, ensuring that relevant metrics are in place to measure the efficiency, accuracy and cost of performing basic HR services. This provides the basis to potentially reduce service delivery costs and identify services that are not adding value, and review HR roles – the degree to which the company has the right people performing the right activities in the HR function.
An operations executive at a large global company recently said he asks one core-question: “Is the HR function supporting the achievement of my business goals or does this function stand in my way?” A business-relevant Talent Strategy can answer that question, proactively informing the executive of what strategic human capital support can offer. Within even very different industries we find that many senior managers are often not exposed to world-class HR / talent support, and are therefore not in a position to identify the solutions they seek from HR. However, they do recognize the symptoms that are beginning to arise from the lack of effective talent management, and in many cases, their competitors are beginning to solve these problems.
The development of an effective Talent Strategy begins with a discussion of the unit’s business objectives, and then considers the talent implications of the business’s growth, profitability and operational goals – any strategy in the talent space should tie directly to these. In developing an effective strategy, the following solutions should be considered:
- Organization Design – Is the business unit’s organizational structure centered around its business strategy and key performance measures?
- Key Talent Pipeline – Beyond just top-level managers, are core plans in place to identify and develop candidates for lynchpin roles in the organization?
- Organizational Capabilities / Workforce Planning – Are the required organizational capabilities needed to achieve objectives identified and forecasted?
- Employee Engagement – Engaged employees consistently out produce those who are not engaged. Have relevant drivers of engagement been selected, measured and acted upon?
- Performance / Incentive Alignment – Is employee performance measurement aligned with the unit’s objectives, and is performance rewarded?
- Change Management – Have stakeholders with influence in the unit’s organization been addressed, particularly with shifts in strategy?
- Leadership Development – Have high potential employees with leadership abilities been identified and developed?
Notably, these are the areas that HR leaders most want to support, but have the least amount of resources to execute. Potential pitfalls include:
Pitfall #1 - No Talent Strategy:
Surprisingly few organizations have any form of documented Human Capital or Talent Management strategies. More importantly, the HR function hasn’t gone through the process of developing such a strategy. The dialogue and coaching that occurs during this process of setting Talent Strategy is a golden opportunity to establish a “trusted adviser” relationship, ensuring HR proactively supports the business’s objectives. Additionally, HR leaders can use this with their staff to clearly articulate expectations.
Pitfall #2 - Talent Strategy at the Wrong Organizational Level:
The relevant talent-related implications vary based on the needs of the unique business unit. HR functions often attempt to develop one strategy to apply across the organization, resulting in a lack of relevance to many units. For example, in a single company, one business unit may be rapidly growing and require unique skill sets, while another is focused on cost control and employs standard undifferentiated jobs. In order to provide business-relevant talent support, each unit would need substantially different talent strategies.
Pitfall #3 - Human Resource Strategy is Used for a Talent Strategy:
While the efficiency and cost of HR basic services certainly interest executives (especially when deficient), success in those areas is no substitute for strategic advice and solutions. HR leaders often enthusiastically (and mistakenly) present a “strategic plan” which simply addresses improvement plans regarding internal operations. This type of inwardly-focused plan, which is to get HR’s “house in order,” is rarely seen as strategic support to the business.
Pitfall #4 – Lack of Metrics and Accountability:
For companies that do present a Talent Strategy, many fail to engage in essential follow up activities, which are critical to the relationship between HR and the business. The development of a scorecard of Talent Strategy metrics provides an opportunity for dialogue and a forum for the business and HR to hold one another accountable for talent-related results.
So what can companies do to address strategic HR and talent issues? The best starting point is to perform an objective assessment of the organization’s current capability in both HR basics and talent management. Key components of such an assessment include the degree of alignment regarding the needs of the business and the best practices at most world-class companies.
Next steps typically include a revision of the HR Strategy and Talent Strategy with associated plans, metrics and points of accountability. Even the simplest approach can set the stage for success in solving an energy company’s talent challenges in the hyper-competitive labor markets in which it competes.