This post was co-authored by Pamela Hooper and Christine Roach.
This post was co-authored by Pamela Hooper and Christine Roach.
Is HR a Weak Link in Your Strategic Planning?
Effective strategic planning is a non-negotiable prerequisite for realizing your company's vision and growth aspirations. Financial forecasting, market analysis, and operational efficiency tend to dominate the conversation, while human resources (HR) is often only a casual consideration or factor in the overall approach. Integrating HR into your strategic planning is a must that instills agility, mitigates risks, and enables financial optimization. Here’s how to make it happen effectively.
Assess (and Firm Up) Your HR Foundation
Many business owners or executives who want or try to meaningfully integrate HR into their strategic planning aren’t sure where to begin and lack full knowledge of all that needs to be considered. When we help organizations with strategic planning, one of our first steps is to carefully assess the company’s HR or People Ops present state and its alignment with the broader business vision. This entails a thorough examination of areas such as workforce alignment, talent acquisition, total rewards, compliance, and more. To frame it another way, you have to know where you are starting to map to where you want to go.
While keeping the broader business vision in view, the HR assessment identifies and classifies people risks to realizing the vision and the expected impacts of addressing (or not addressing) those risks. Understand, too, that certain baseline or tactical HR pieces need to be in place to support effective strategic planning and goal setting. Some of the questions our HR assessments evaluate, answer, and inform include:
- Does the business have an HR structure in place that will support its vision?
- How does the organization’s people operations compare to industry and market peers?
- How is your currently adopted HR and related technology supporting or limiting advancement?
- Will the training & development approach applied today produce needed employee growth moving forward both for the company and their own desired career advancement?
- Are all direct and indirect HR initiatives fully represented in the company’s budget?
Regarding the latter question on full HR representation in your budget, failing to include all direct and indirect HR costs sets your business up for unwanted surprises and P&L misses. Recruiting costs serve as a good example for companies in growth mode. Outsourced recruiting fees that five years ago were 10-20% of a hire’s first-year salary are now closer to 30% and sometimes more for executive-level positions. Every budget exclusion or underrepresentation of that nature adds up.
A clear and objective view of your People Ops picture that shows where high/medium/low risks and impacts lie puts you in a position to make informed decisions and prioritize actions smartly. Once your HR foundation is sufficiently solidified, efforts can shift more heavily to process optimization. This can span a wide array of areas and initiatives, from operationalizing key HR metrics to succession planning to culture-building efforts.
Reject Reactive. Personify Proactive.
Small to medium-sized businesses tend to approach HR more reactively than they should. While it’s impossible to anticipate a random unforeseeable event like a significant workplace policy violation or a proposed law that would affect your employment policies and bottom line, it is possible to be fully prepared for many of your HR initiatives and ensure the road to realizing your vision isn’t impeded. Addressing HR issues and structural gaps proactively will ensure ample mechanisms are ready to resolve and minimize the impact of potential yet unforeseeable HR-centered events if/when they arise. That proactivity also frees more bandwidth for strategic decision-making and scenario planning. Here are a few of the steps we recommend for instilling proactivity in your strategic planning:
- Involve HR Leadership Early: Bring HR leaders into the strategic planning process from the beginning. Partnering with a fractional HR / People Ops leader that has extensive relevant industry experience can be highly beneficial when you do not have this resource on your internal team or need to augment it.
- Leverage Data Continually: Be disciplined about regularly reviewing key HR metrics to inform planning and as-needed course corrections (e.g., time-to-hire, employee turnover rate, training ROI, etc.).
- Accelerate Key Event Prep: Assess whether communication and planning for recurring HR events such as benefits renewals, open enrollment, and related compliance processes are happening early and often enough to support forecasting and on-time/on-budget completion.
Here’s an example of why proactivity is so important. Let’s say that proposed changes to your benefits and rewards offerings will trigger a 20% increase in the number of employees who elect to sign up for those offerings and a significant increase in your bottom line expenses. If the planning and preparation period failed to forecast the increased employee appetite for these benefits early enough so that adjustments could be made or the higher costs could be accounted for in the budget, your P&L and ability to continue delivering the same level of benefits will be diminished.
The Bottom Line
Incorporating HR across all threads of your company’s strategic planning work is not optional; it’s essential. Start with a comprehensive assessment of your HR foundation and where its strengths, weaknesses, and any outright holes lie. Prioritize critical elements and then overlay the findings and insights from the assessment atop your vision for the business to see how well they are aligned. From there, develop a plan that optimizes alignment between your HR and broader business strategy. Lastly, work to remove rationalizations and biases that lead to reactive approaches to HR and overall strategic planning.
If you aren’t sure where you are starting, consider taking our HR Pulse survey. You will receive immediate confidential feedback and some actionable insights.
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How much could your company benefit by strengthening its strategic planning approaches and HR foundation? Request a Free Consultation with a vcfo expert who can help. We’ve partnered with leaders from more than 6,000 businesses in our 29-year history and are ready to put our experience to work for you.