I am aware that it is too late to wish you a happy new year, nevertheless, I will proceed to ask you “how is the year 2020 going for you?”
We owe you a debt of gratitude for your support for the first two editions of the WorkBooth Magazine. Your support fulfills our aspiration.
This edition is focused on the HR Organisation which is my first professional constituency and I have chosen to delve into a topic of importance to the community of practitioners- “HR strategy”.
The first time I became conscious of the fancy business word “strategy” was in 2006, 2 years after graduation; I had just tendered my resignation after three months of working with my first boss.
My decision was premised on an intuition that my time was done at the company that gave me an opportunity as a fresh graduate. I enjoyed my time, though brief and my boss didn’t quite like that idea of early separation.
As an ambitious young man, I asked my boss for feedback about my rather brief stint and in his element, he took a pen and scribble some notes on a paper. That day, he explained how there are different levels of impact – strategic, tactic and operational. He then went ahead to announce his assessment of the kind of impact I had made in 3 months using his impact framework above. I guess you don’t want to know his verdict. I was proud of myself.
That was the beginning of my obsession with the word “strategy”. Eventually, I realized that strategy is a buzz word in the world of work and that your relevance can also be tied to your understanding of it and how it works.
Just like most buzz words, people use them a lot to sound important and knowledgeable without actually understanding the fundamental import of what they are saying.
As I climbed the management ladder particularly in HR, I began to notice the gap in the understanding of what strategy is. A few years ago, the relevance or otherwise of the HR profession was underpinned by how “strategic” it is and the practitioners were awarded the metaphoric “seats at the table” as an acknowledgment of strategy understanding.
The objective of my article is to highlight a few areas for “stepping up” our game of strategy.
1. Strategy is about Long Term
One fundamental thrust of strategy is that it is a long term game, contrasted with tactics that are mid/short term. How do you plan for 3-5 years if you are not a religious seer?
Most organizations invest in the yearly ritual of strategy sessions and I do support businesses to facilitate such sessions; however, what we call strategy sessions is nothing more than a tactical or operational review session because the conversations are typically focused on a one-year horizon. The proposed optics for teams that hold annual strategy session is that they are responsive and not reactive to business dynamics by having a one year plan ahead. In reality, if that is all your team does, you are tactically responsive but strategically reactive.
The difference between those who are planning to win and those who are planning not to lose is distinguished by the time orientation of their focus- long term or short term.
A strategic plan is a 3-5 year plan and not a one-year recurring plan. Due to the dynamic nature of strategy especially in a world leapfrog by technological advancement, a yearly or more frequent modification can be made to a long term plan, which is different from an annual strategy retreat focused only on the incoming year without the strategic plan as a filter and frame of reference.
2. Strategy aligns environmental scanning with company’s SWOT
If you remove the “future” from strategy, then what you have left is an operational engine. The question then is “how do you construct the future” and this is where scanning the environment becomes imperative for the design of your strategy. Tools like SWOT, PESTEL etc. are very useful in scanning the horizon for factors that can shape and derail the objective and aspiration of an organization. To develop an HR strategy, we must, therefore, scan the environment for factors that affect our people such as Demographics, Unemployment rate, Literacy rate, University ranking, etc., these must be the basis for your planning and design of your People Strategy.
Every business operates within the context of the country of operations; the human capital indicators are critical decision makers and must reflect in your people strategy. You cannot have a human capital strategy without feeding off the human capital index of your country of operations. These must be complemented with environmental scanning, a time horizon of your aspiration and of course the business strategy.
3. Strategy focuses on your Uniqueness
For most Organizations, drafting an HR strategy is a game of mimicry. If you check 10 organizations in your country, and you get the chance to review what each presents as an “HR strategy”, the chances are that you would not find any special differences. We all just copy one another, after all, why do the hard work, when you can copy right?
One of my model organizations for demonstrating a truly unique HR Strategy is Netflix https://hbr.org/2014/01/how-netflix-reinvented-hr
Netflix HR did not copy what others are doing in the name of benchmarking and best practices, it created its strategy which turned out to be unique without intending to be. It simply did the impossible by following the process. This alludes to my thinking that if you follow the strategy development process effectively, the outcome will not look like the HR strategic plan of the company next door.
First Netflix scrapped formal performance reviews, ditched formal travel and expense policy; only requires its employees to act like adults, hire only A candidates so that it won’t spend resources driving compliance, allows employees to take as much time off work as they like, doesn’t pay performance bonuses etc. What is the overall impact of these on the business? In its 2019 fourth quarter, Netflix reported revenue of $5.47 billion — up 31% year over year.
If you read up on Netflix people strategy and you attempt to copy what they have done practice for practice, then you haven’t understood the study and practice of strategy.
4. Strategy is Optimizing your resources to get a greater return
HR Strategy is not about knowing all the best practices and adopting them and embracing the business case for the creation of those practices. HR strategy is not about recruiting great employees or A players from popular recruitment sites or agencies; it is deciding which kind of employees are best suited to help the actualization of your current and future business aspiration; and where can you uniquely find them. HR strategy is not giving your employees all the attractive benefits in the market, it is deciding which of the benefits uniquely suits the kind of employees that you are hiring. HR Strategy is not being able to afford or fund an initiative, it is investing in an initiative that aligns with the long term aspiration of the business.
In my view, most organizations are wasting resources, throwing money at employees’ needs without a proper assessment of the long term fit for purpose, just because it is available. The question that strategy tends to answer is “what is the best use of our resources”; this is because the scarcity requires strategy; when you don’t have unlimited resources, strategy compels you to judiciously optimize what you have.
How do you develop an HR strategy?
There are 5 elements of strategy development process according to the Strategy Diamond, published in the 2001 edition of The Academy of Management Executive by Professors Donald Hambrick and James Fredrickson.
These are elements with a question to unlock the meaning of the dimension:
Arenas: where will we be active?
Vehicles: how will we get there?
Differentiators: how will we win in the marketplace?
Staging: What will be our speed and sequence of moves?
Economic logic: how will we obtain our returns?
If you use the framework above for iterating your strategic steps and actions, balanced with environmental scanning resources and bird view of the time horizon befitting a strategy, then your HR organization will truly be strategically responsive and not just tactically responsive.