Organizations should have a rigorous Strategic HR Planning Process in order to avoid redundancy, restructuring, and also to reduce HR costs.
Strategic HR Management
Like any other management practice, HR management also requires planning, organizing, leading, and controlling. The journey starts with a strategy. HR strategy depends on the business strategy. For example, if a company wants to run Research & Development, it needs to invest in people who are researchers.
Strategic HR management links an individual’s career with the organization’s culture, and goals. Thus, it creates a win-win situation for all the parties.
Strategic HR Planning Definition
Human resources management is not just managing the people in an organization; it involves many other strategic aspects to align all the units of an organization.
Human Resource Management starts with Strategic HR planning. In this planning phase, you need to analyze information and draw the right objectives, strategies, and action plans.
Such planning is very important to achieve the optimum usage of human resources. Human resource is the most critical resource for the success of any organization. If the management of these resources is not well aligned with the business strategy then many problems might occur. Such problems include redundancy, restructuring, high HR expense, etc.
Strategic HR Planning Process
The strategy depends on internal and external factors. To develop an HR strategy, an organization needs to understand its internal strengths and weaknesses as well as external opportunities and threats.
Here is a simple process of strategic HR planning:
- SWOT analysis
- Making HR plan to capitalize on strengths and opportunities
- Adjusting the plan considering the weaknesses and threats
- Implementing the plan
- Evaluating and adjusting to get maximum output
A plan becomes a strategic plan when it capitalizes on the strengths and opportunities as well as minimizes the weaknesses and threats.
Such analysis of Strengths, Weaknesses, Opportunities, and Threats (SWOT) will be successful based on various factors, such as:
- The identified SWOT factors are accurate
- The SWOT analysis is not incomplete to show only specific areas or hide specific areas of reality
- The reasoning used in SWOT analysis is accurate
Strategic HR Planning Example
For example, an organization wants to be the market leader in innovation. Then the organization should have the strength in R&D, and there must be opportunities to recruit and manage researchers that also depend on the availability of such resources in the market.
The strategic HR plan should not only consider those, but also the threats of Intellectual Property rights, the weakness of a culture that cannot drive innovation, etc.
After that SWOT analysis, an organization can decide on the strategic factors of HR management. Those factors should dictate the whole HR planning.
Still, it depends on proper reasoning. If the people cannot comprehend the actual relations among the factors, the strategic directions will not be accurate.
Strategic HR Planning Benefits
Strategic HR Management (SHRM) helps in the following areas:
- SHRM develops the human resources who are capable to drive the desired business
- Business strategy is nothing if the people of the business are not driving those strategies. SHRM aligns the business strategy with an individual’s objectives
- It connects every resource of an organization to drive unified objectives.
- It decreases expenses by minimizing wastage
The Outcome of Poor HR Planning
Poor HR planning results in various problems. Here are some of those:
If the HR plan is not consistent with the business plan, then that will be reflected in redundant human resources.
For example, an organization is unable to cover its R&D expenses. Therefore, the business plan is to expand selling to a new market with existing products and services and gain additional revenue with the least additional expenses. If the HR plan is not aligned, it will open a new R&D team for the new market. That will create redundancy.
Redundancy may also occur due to a lack of identification of internal strengths. For example, if a new product team asks for a new “creative designer” in their team when the company already has a few under-utilized creative designers. Proper and strategic HR planning ensures the right resources are available to the right team.
If an HR plan is not based on rigorous initial analysis, then restructuring is an obvious future. Restructuring refers to changing how people work together in an organization.
Team formation, organizational hierarchy, leadership, process, policies, etc. define an organization’s structure. It may break down due to a lack of proper analysis and planning before setting the structure.
For example, an organization starts with a vision to develop software-based products and services. Without proper planning, the newly recruited CEO recruits the head of Marketing and the head of Technology.
The head of technology recruits his/her own team members based on his/her own comfort zone of running a digital marketing agency business. On the other hand, the head of technology recruits his/her own team keeping his comfort zone of cybersecurity.
The result will be a non-functioning organization due to a lack of proper analysis and HR planning. In this example, the presence of strategic HRM would define the competencies, design the jobs, and develop the organizational structure.
3. Increased HR Costs
A study suggests that companies lose $550 billion annually for disengaged workers. In another study indicates that engaged workers achieve 21% better profitability. Lack of proper HR planning results in increased HR costs. This is very simple and natural logic, which indicates the need for planning.
For example, a South African company wishes to sell its software solution in 10 countries of Asia. For that objective, the company recruits a high-profile Head of International Business (IB) who is highly experienced in software sales in Europe but has no experience in the Asian market. The newly recruit head of IB will need senior sales and marketing professionals to support strategic areas of the Asian market.
In this case, a low profile and less expensive personnel from the Asian market could save lots in HR expenses.
How to Overcome Poor Strategic HR Planning?
In the above scenarios, the main problem lies in the lack of detailed analysis at the initial level.
If an organization does not follow rigorous initial analysis, it will never understand the strategic factors of HR management. That is why it is said that good planning is 50% of the success.
By detail-oriented initial analysis, any organization can find the actual strengths, weaknesses, opportunities, and threats. When those factors are identified, the HR strategy should be developed with complete alignment with the business strategy.
Strategic HR planning will be futile unless top management accepts it and drives it as a commitment. Not only the top management but also the people of the organization need to accept that. To facilitate that, the leadership needs to implement the strategies in the organization’s philosophy, policies, programs, practices, and overall culture. If such acceptance criteria are not considered in developing a strategic HR plan then the plan will fail.
Planning or developing a strategy will be successful if it is organized, executed, and monitored. It is not just set and forget. Regular review will help in adjusting the HR plan as per changes in internal as well as external factors.
Strategic HR planning cannot be based on emotions or the personal judgment of top management. Like any other strategy development, it should also start with information collection and analysis.
Based on the above theories, logic, and examples it is clear that strategic HR planning should be based on detailed analysis to make it successful. It decreases HR expenses, removes the need for restructuring, and avoids redundancy.
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