Sep 27 STOP THE INSANITY! HUMAN CAPITAL STRATEGY MEANS BUSINESS
As a consultant, I frequently speak with business owners and other executives about what I do, which is help businesses achieve better business results through their human capital and HR strategies and programs. Sometimes, I catch a brief flash of puzzlement on their faces at the mention of “human capital strategy.” Some let it pass, nodding their head slowly as they try to digest the term. Others don’t let it go and prod me to explain what I mean by it. Eventually the light bulb goes on and heads nod more rapidly in agreement of the value of using the same forethought and rigor with human capital planning and HR programs as one would any other component of a business. So, while I can get them to the right place, it’s clear I’m speaking a language many business leaders are not fluent in. I sense a fairly widespread lack of clarity on what human capital strategy is and why having people programs thoughtfully and intentionally designed to meet business objectives is critical for a business to grow and thrive.
Many business leaders confess that they have HR programs because they’re “required.” And, intuitively it makes sense to have new hire onboarding programs, performance management processes, and training and development opportunities for employees. Promoting the workplace culture and sharing personal stories from long term employees on the company website can help to attract talent. In theory, this all sounds like good stuff, but most leaders will admit they couldn’t tell you if those programs are helping, hurting, or neutral in aiding the organization to achieving business goals. They can’t connect the dots because there was no direct link to begin with. And that’s because many companies actually work backward, putting HR and talent management programs in place simply because it’s what you’re “supposed” to do. As a result, since the business rationale for implementing those programs wasn’t initially thought through, HR gets deemed a “cost center” because no one can measure its impact or results.
While this is not a new problem in small and growing businesses, it’s time to stop the insanity and start using the same methods for people planning that are used for the rest of the business, such as operations, IT, sales, and finance.
This starts by answering 3 key questions:
1. What does human capital strategy actually mean?
2. What does it look like on the strategic plan and in day-to-day operations?
3. And, most importantly, how does it translate into better business results?
What Does Human Capital Strategy Mean?
Googling the term brings a slew of descriptions and definitions. I like one from an overview written by practice leaders of Accenture’s Talent & Organization Performance Practice, “A human capital strategy is much more than a new way to engage in traditional talent management and workforce planning activities. It’s actually a new lens on business strategy— helping companies put in place the right leaders to source, develop and direct the right workforce talent, supported by the right culture, organization and operating model—to drive growth, agility and ongoing market competitiveness.” The key phrase here is the last part, “to drive growth, agility and ongoing market competitiveness.” That’s the goal after all, right?
When you lay out your business strategy, you apply a deliberate rigor and methodology to key areas such as the financials, sales and revenue growth, expense management, operational efficiency and streamlining, all with the goal to drive growth and outperform your competitors. What often happens next is shocking when you think about it. Management takes off its glasses at that point and doesn’t apply the same lens and process to the most critical factor for business success – its people. Human capital strategy starts with a forward looking view – where do you want your business to be in a year, 3 years, 5 years, then works to identify the make-up, structure, and expertise necessary in the workforce to help get you there. It’s looking at the people planning and programs with the same lens you would any other component of your business.
What Does Human Capital Strategy Look Like?
A strategic plan is a written document articulating an organization’s strategy for achieving its mission and vision. Goals or objectives are developed to lay out the necessary steps to reach the strategy. Here’s an example of a business strategy and objectives:
Expand market share by 20% to become the leading provider of BEST technology solutions to the medical services industry in the US and Canada by 2019.
- Increase revenues by 30% through expanding the sales force west of Chicago.
- Increase technician (customer) satisfaction by 15 points through extending product support hours to 9:00 PM EST.
- Reduce overall operating costs by 15% through automating product testing.
Lofty goals, but the steps to achieve them are clear. Or are they? The objectives have a common theme: They all need people to make it happen. How is the firm going to sell west of Chicago? Will it hire reps locally or re-structure current sales territories? Is the approach to selling in Los Angeles and Phoenix different than in Boston and Baltimore? Does the expertise exist in-house to automate product testing or does it need to be brought in or developed? You get the idea.
The missing link with the objectives is the human capital strategy of buying or building the talent to accomplish these business goals. The human capital objectives could be:
- In Q4 2016, hire a highly talented regional sales manager from industry to plan the strategy for expansion west of Chicago and build the sales team.
- In Q1 2017, re-structure the product support teams and implement flex-time and work from home programs to expand support hours to 9:00 PM EST.
- In Q1 2017, send top three testing engineers for ASTE training and certification to build automated testing processes in-house by Q1 2018.
Human capital strategy and planning lays out the people plan that will contribute to achieving the business goals.
How Does Human Capital Strategy Translate into Better Business Results?
In the example above, acquiring the right sales talent, re-working product support teams and schedules to expand service hours (while offering more flexibility to employees), and providing professional development and training to engineers to gain needed skills to automate testing are all critical to achieving the business goals. With this lens, there is a clear, direct link from the human capital strategy and resulting HR programs to company growth:
1. Talent acquisition plan → 30% increase in revenue
2. Employee flex-time and telecommuting → 15-point increase in customer satisfaction
3. Training and development program → 15% decrease in operating costs
People are the key component to executing any business strategy. Just as you wouldn’t set financial goals without laying out specifics to get to the numbers, don’t expect to hit the mark on your business goals without working through the people plans necessary to execute on the objectives. Stop the insanity and work forward, not backward. Don’t do HR just because of legal requirements, it feels good, or it’s what you’re supposed to do. Make talent management and HR programs work for you and contribute to the top and bottom lines through your human capital strategic plan.