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Complete Guide to HR Strategy Formulation

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Human resource planning is a process that identifies current and future human resources needs for an organization to achieve its goals. Human resource planning should serve as a link between human resource management and the overall strategic plan of an organization.

Human resource planning is an integrated process of analysis and forecasting that must take into account the requirements of the organization, the needs of its customers, the environment in which it operates and the labor markets in which it recruits and selects personnel. HR strategy formulation addresses these four critical areas.

An organization’s mission, vision and values are behind the plan, as well as the organization’s goals and objectives.

There are four critical areas (identifies for human resource planner) that must be considered in developing a human resource strategy plan.

  1. Identifies Requirements for the Organization
  • What kind of skills, education, knowledge, experience and abilities does the organization need to achieve its goals?
  • What kinds of people do we need to have on board to make our plan work?
  • Who do we need for the organization to compete successfully in the world marketplace?
  1. Identifies Requirements for Customer Needs
  • How do we plan to deliver quality products and services to customers?
  • How will we deliver those products and services?
  • How will we meet our customers’ expectations for quality, service and value?
  • How do we respond to cost vs. quality trade-offs?
  1. Identifies the Environment in Which The Organization Operates
  • What forces are pulling or pushing the organization to change?
  • What external opportunities do the existing or planned forces present to the organization?
  • How do we respond to changing customer needs, evolving technology, new competitors, new alliances, evolving government regulations, changing societal laws and changing demographics?
  1. Identifies Labor Markets
  • What are the implications to the organization of labor supply and demand over the next 1, 2, 5 and 10 years?
  • What kinds of people do we expect to need in the future? Why?
  • What types of educational skills and abilities do we need?
  • How do we recruit, select, orient and develop the kinds of people needed through the strategic plan?

The next step is to develop the strategy to achieve the needed people. The process of developing a strategic plan and supporting systems to implement and deliver on that plan is known as strategic human resource planning.

Let’s return to the 3 areas that must be taken into account in developing a human resources strategy.

  1. External Forces – The organization must identify the outside forces that will affect its ability to achieve its goals.

Forces of supply and demand: economic changes; growth and contraction of related industries; geographic location.

political forces: tax regulations governing deductibility of employee benefits; government-funded programs; discrimination and affirmative action laws.

social forces: concerns of the public; societal goals; legislation and regulation on social issues (for example, drug testing, AIDS awareness, firing range safety).

technological forces: cost of production; factory safety concerns.

environmental forces: concern for safety of products and services; concern with environmental issues; consumer awareness and behavior.

  1. External Opportunities – Organizations can capitalize on forces that present opportunities to either grow the business or decrease the business costs.
  • Expanding market opportunities
  • New markets, new products, new technologies.
  • Reduced-cost opportunities
  • Utilize different workers and employees; cost reduction.
  1. Internal Forces – The human resources department also needs to identify the internal forces that are pulling the organization to change (so they can better respond to the external forces).
  • Worker shortages and excesses in the labor market
  • Worker attitudes
  • The organization’s structure and culture
  • Technology
  • Customer demands.

Directions Downward – In order to be successful, HR strategy must be set with input from all lines of management, not just the human resources department.

Directions Across the Organization – HR strategy must be a coordinated effort and must be concerned with the future.

Directions to Human Resources – HR strategy is, in large measure, a way to get those people needed by the organization.

Directions to External Environment – HR strategy must be created with the awareness of the continually changing external environment.

Directions to Future – At this point, the organization needs to work out what they will do about the needs identified by the HR strategy.

Four Components of Stakeholder

Stakeholders are people or groups whose interests, plans or expectations are involved in the strategy and/or the implementation of the strategy. Those interested in the strategy’s success include:

those who must deliver products and services and who must play a part in strategy implementation and monitoring those who depend on the strategy and must support or comply with it associated groups, suppliers and vendors.

Identifying Stakeholders – Stakeholders are people who will be affected by the strategy, or in some way have a vested interest in its success – employee and employee groups, management, stockholders, government, the community, and customers.

Categorizing Stakeholders – The importance of the stakeholder’s interests determines the location within the model. Knowledge of key players – and their seniority and relationship to the process – helps in developing the sales and marketing strategy.

Stakeholder Information – includes the following information about each stakeholder:

  • Name
  • Size and location of entity (employers, distributors, associates, etc.)
  • Brief company background
  • Summary of financial results
  • Products or services (the type of customer)
  • Profitability results
  • Objectives, performance history, and sales results
  • Major competitors
  • Key strategies for the past three years
  • Critical success factors
  • Research department
  • R&D facilities
  • Production facilities
  • Administrative and manufacturing support locations
  • Business expansion plans
  • How the company plans to meet its goals (as reported in the annual report)
  • Sustainable competitive advantage
  • Non-competitive threats that could erode competitive strengths
  • Government requirements and regulatory changes
  • Government subsidy plans
  • International locations and foreign competitors

HR strategy must integrate with all corporate strategies at the highest levels.

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