Taking HR to the next level - Deloitte

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1. Understand business strategyUnderstand customer needs, market forces, and trends. Model their impacton resource planning and workforce performance.Understand business strategy and strategic priorities. Plan and model theimpact on resource planning and workforce growth.Understand the implications of the overall business strategy and marketenvironment on governance, compliance, and risk.Different business strategies require different workforce strategies.How a company chooses to compete — and the current and projectedstrengths and weaknesses of its talent pool — will largely dictate thekinds of human capital investments and actions necessary to achievedesired results in the marketplace. For example, a strategy based oninnovation has different workforce requirements than a strategy basedon outstanding customer service levels or low prices. Similarly, anorganic growth strategy requires very different people practices thanan aggressive growth strategy based on mergers and acquisitions.A company’s HR strategy, just like its overall business strategy, mustbe grounded in a solid understanding of market forces and trends.In developed countries, demographic trends, such as Baby Boomerretirements, aging workforces, and a declining interest in science andtechnology education, are creating a chronic shortage of critical talent.At the same time, the labor pool is becoming increasingly global,driven by new workplace practices and technologies that make itpossible to tap talent pools that were previously inaccessible.In addition, actions taken by customers, competitors, and supplierscan have a big impact on a company’s workforce requirements. Forexample, as competition in the telecommunications industry continuesto squeeze profits, companies are steadily shifting their operations tolower-cost offshore locations. Similarly, in the technology sector, theemergence of high-profile companies is forcing incumbents to findnew ways to attract and retain top talent.When developing an HR strategy, all of these forces and trends mustbe factored into the equation. Figure 2 shows a simple, but effectiveframework to help HR align its strategies and capabilities with thestrategies and priorities of the company.Figure 2: Aligning HR with the Company (case study):CEO PerspectiveBusiness StrategyBusiness Plan• Scale and scope for a consolidatingtelecommunications industry• Innovation leader delivering comprehensiveportfolio of products, services and solutions• Unique position to compete effectivelyagainst competition• Achieve €1.5Bn cost synergies by 2010• Double digit operating margin in the first year• Drive savings and targets• Regulatory and reporting compliance• Talent retentionHR Strategy• Aid transition and enable business to achievestrategic goals and targets• Uncertainty from rapid changes• Reducing costs and increasing revenue whileretaining talent• Reducing IT and business complexity andredundancyHR Business Plan• An efficient, effective, flexible and compliantHR that provides integrated service delivery• An HR cost structure that supports expansioninto low cost countries• An HR Service Delivery Model to handle M&A,downsizing or the acquisition of groups ofemployeesCHRO PerspectiveSource: Deloitte Consulting strategic analysis for a telecommunications client.4
2. Define HR strategyDetermine the most effective ways to attract, motivate, develop, and retain newand existing talent given the business environment.Define a set of key people initiatives to support the overall business strategy.Develop guidelines and approaches for governance, compliance, and risk mitigation.An effective HR strategy provides a roadmap for creating valuethrough the company’s workforce. It also includes guidelines thatthe company will follow when competing for new talent or tryingto retain existing talent. These guidelines can cover a broad rangeof issues, such as which skills and competencies are most critical forachieving future goals and objectives, how to source talent (grow orbuy), and how to create and maintain a high-performance culture.The latter might include insights about the types of behaviors tobe rewarded, the appropriate mix of monetary and non-monetaryincentives, and how to handle underperforming employees.Of course, it is very difficult for a company to be good at everything.The key to developing an effective strategy is deciding what to focuson — and what to ignore. An effective HR strategy defines a smallset of initiatives that are critical to the overall business strategy. It alsodescribes the types of products and services associated with thesecritical initiatives — for example, compensation and training — andprovides a broad outline for how these products and services will bedelivered.Deloitte Enterprise Value Map for Human Capital (figure 3) showsthe link we see between specific human capital dimensions (such asworkforce planning, rewards, compliance, change management, andleadership development) and key business drivers (revenue growth,operating margin, asset efficiency, and expectations). This typeof analysis can help company leaders understand the relationshipbetween business strategy and HR and make it easier to develop anHR strategy that aligns with the needs of the company (figure 3).A comprehensive HR strategy also incorporates a view of thecompany’s people-related risks in operations, reporting, andcompliance. These include everything from succession planning andemployee retention to bonus accruals, retirement planning, and rulechanges in tax and accounting. An awareness of these issues can givea company an edge in the marketplace by allowing it to manage riskmore effectively.Figure 3: Deloitte Enterprise Value Map TMfor Human CapitalSHAREHOLDER VALUERevenueGrowthOperatingMarginAssetEfficiencyExpectationsPriceVolumeDirectCosts(COGS)IndirectCosts(SG&A)IncomeTaxProperty,Plant, &Equip.InventoryReceivables&PayablesCompanyStrengthExternalFactorHuman Capital ActionsSource: Enterprise Value Map for Human Capital. Copyright © 2004 Deloitte Development LLC.5
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Taking HR to the next level - Deloitte

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