Develop an HR Strategic Plan

1. Develop an HR Strategic Plan Strategize to maximize HR’s impact on business success.

2. Introduction With the bulk of most organizations’ operating expenses going towards labor costs, ignoring how this money is invested or can be better leveraged is folly. Increase your HR department’s cost-effectiveness, efficiency, preparedness, and overall success by developing an HR strategic plan. HR leaders wanting to take on a more strategic role within their organization. HR leaders who have been asked to take on more strategic responsibilities by their organization. HR leaders who have an operational plan, but wish to develop a more formal strategic plan. HR leaders who have never crafted a strategic plan before and want step-by-step guidance on how to do it. Move through the steps necessary to develop a formal HR strategic plan. Analyze the current and desired target states of the HR department and HR practice in the organization in terms of the overall business strategy. Organize the results of your strategic analysis into a suitable format for consistent review and updates. Document a formal HR strategic plan and present it to the executive. This Research Is Designed For: This Research Will Help You:

3. Executive Summary • Just as an IT or Sales department requires a formal strategic plan, so too does the HR department if it hopes to support business goals and objectives, and ensure that the right people with the right skills are available at the right time in a cost-controlled way. • HR strategic planning is a top priority for HR and business leaders alike: both groups rate it in the top three of areas for HR effort investment according to McLean & Company’s 2012 HR Trends Survey. • HR’ssuccess in meeting key alignment, budget control, employee retention, and business relations goals increases in lock-step with the extent to which an HR strategic plan is in place. • HR strategic planning explores four facets of the organizational environment in which it operates: • Culture • Operations • People • Systems A thorough COPS Analysis, accompanied by standard strategic planning efforts such as SWOT analysis, will provide HR with the most complete picture of the current state. With this in hand, HR can envision a realistic future target state and a series of achievable strategic initiatives that will bridge the gap between today and tomorrow. • An ideal HR strategic planning process will move through four stages: Assess (current state), Envision (future state), Develop (initiatives and the strategic plan), and Evaluate (strategic plan success). • Through this HR strategic planning process, McLean & Company offers a series of tools and templates to help spur brainstorming, document decisions, and develop a final HR strategic plan.

4. Make the Case Make the Case Collect Strategic Plan Inputs Assess the Current State of HR Envision the Future State of HR Develop and Prioritize Key Initiatives Set Measures and Evaluate Progress Learn why HR strategic planning is a top priority for both HR and the business. Know the key benefits of HR strategic planning. Be aware of common strategic planning pitfalls. Gain an introduction to the COPS framework. Get a step-by-step process model for undertaking HR strategic planning

5. HR strategic planning is a top priority for HR leaders according to McLean & Company’s 2012 HR Trends Survey Key survey findings: • HR leaders are increasingly aware that developing an HR strategic plan is a top priority. The time to take action is now! • Top 3 Priorities Identified by Business Executives • HR leaders and business executives alike have identified developing a robust HR strategy as a top priority in comparison with all other areas of HR activity. • Despite recognizing it as a top priority, another McLean & Company survey showed that only 10% of HR leaders actually have a formal HR strategic plan in place. • However, an additional 60% of HR departments are currently planning to develop a strategic plan on some level. • Top 3 Priorities Identified by HR Leaders 60% Leadership 50% Develop HR Strategy 45% Performance Mgmt Percentage Who Selected Each Area 84% Workforce Planning Both HR leaders and business executives list HR strategy as a top priority! 82% Leadership 75% Develop HR Strategy With 75% of executives selecting HR strategy as a priority, HR leaders no longer have the excuse that the business doesn’t want them to play a role in the organizational strategic planning. Percentage Who Selected Each Area Source: McLean & Company, N = 133

6. HR leaders are increasing their strategic planning efforts, but if the effort isn’t guided properly, it will all be for naught Be aware that… • Failing to connect each strategic HR initiative to a specific business goal. • Spending too much effort trying to convince the executive with words that you are strategic rather than showing them that you are. • Failing to take inventory of all current HR projects. Not knowing the available resources and constraints on those resources will result in the strategic plan not getting off the ground. • HR leaders are prioritizing HR strategy, and their efforts are following suit. • HR leaders are not only recognizing that developing an HR strategic plan is a priority, but they have also significantly increased their efforts in the area. • Developing an HR strategic plan will take time, and some of the returns on the effort invested may not be seen for a year or two. • Given the long time frames, doing it right is as important as doing it in the first place in order to avoid waste. Leadership Strategy Performance Management Risks and potential pitfalls… Workforce Planning Recruiting Employee Development HR Operations % Respondents Who Said They Increased Their Effort in These Areas Compared to Last Year Source: McLean & Co., N=124 The core of any HR strategy or framework has to be the absolute acknowledgement that it’s business that drives – we’re all working together because of a business concept. - John Winsor, Owner, Winsor Consulting

7. Faced with rapid change, organizations need to develop a more focused and coherent approach to managing HR In the same way a business requires a sales or technology strategic plan, it also requires a human resources strategic plan. The goal of any HR strategic plan is to answer two critical questions: What people do we need to manage and run our business in order to meet our strategic business objectives? What programs and initiatives must be designed to attract, develop, and retain the right people in order to compete effectively? HR Strategic Plan • An HR strategic plan: • Is a formal, written document that serves as a governance tool. • Applies to a specific organization over a specific time frame. • Clearly outlines the high-level goals and objectives for all key areas of HR management. • Describes the initiatives that will be undertaken in order to meet those HR goals and objectives. Business Strategy Sales & Marketing Strategic Plan Technology Strategic Plan

8. Having a strategic plan in place improves business relations, prepares HR for change, and increases overall efficiency Increased responsiveness and predictability allows HR to take off the firefighter’s helmet. Without a strategic plan, the HR director often has to default to firefighter mode. Too much time putting out fires can eliminate the ability to plan ahead and make the HR department more efficientand more effective for meeting the business needs of the organization. HR departments with a strategic plan feel they are more than TWICE as prepared than those who have no strategic plan. No Strategic Plan Being proactive means having a formal plan in place, allowing HR to prevent fires from happening and deal with urgent matters more effectively. A strategic plan will prepare HR for upcoming changes and help it better manage impending projects. This will also allow the HR department to better serve the business and help achieve overall organizational goals. Strategic Plan 61% 29% With a strategic plan, I’m able to react very quickly to changes. I get a lot less stressed when changes come down that can cause major blips because I’ve already done the planning in advance. - Anita Orozco, HR Director Level of HR Preparedness Source: McLean & Company, N = 82

9. Your HR strategic plan is connected to many smaller operational plans that address all areas of HR practice Organizational Design: An organization’s composition, which is made up of its basic structure and its operating mechanisms. Training & Development Plan: The projected organizational and individual learning, training, and development requirements. Workforce Plan: Defines the level and type of recruitment or redeployment of staff needed by business units to gain the skills required to meet business objectives. Talent Management Plan: Tactics to deal with the key employee lifecycle issues identified within the business strategy. In union environments, this will also include labor relations. Compensation Plan: The balance between corporate objectives and the need to remunerate and incent the people who support reaching those objectives. • Organizational Design • Workforce Plan • Compensation Plan • HR Strategic Plan • Training and Development Plan • Talent Management Plan

10. Developing a formal HR strategic plan reaps benefits across all key areas of HR practice Organizations that have an HR strategic plan in place also see improvements in HR’s ability to do all of the following: • Respond to the business needs. • Retain staff. • Deal with the executive team. • Manage its budget. • Meet its objectives. • Align the cost of HR initiatives with business needs. • Increase the maturity of your strategic planning and increase the likelihood of reaching your objectives. • As the maturity level of your HR strategic plan increases, so too does your chance for success. Overall Success HR departments that don’t have a plan become filers, paper pushers, and clerks. The ones that do have it really can work with the business and affect change, manage change, and really become part of the organization. - Julie Webb, HR Director, Monarch Maturity of HR Strategic Plan Source: McLean & Company, N = 82 Maturity is measured by the degree to which an HR strategy is in place: We don’t have one, and have no current plans to develop one. We don’t have one, but are currently planning to develop one. We are currently developing an HR strategic plan. We have an ad hoc, informal HR strategic plan. We have a formal HR strategic plan.

11. Set aside “getting a seat at the table” – instead, focus on showing how HR helps meet key business objectives For most HR leaders, the question is not “How do I get to the table?” Rather, it’s “How do I best contribute to the success of our organization?” For years HR leaders have talked about getting a seat at the table. However, HR’s real goal should be clearly demonstrating how much HR contributes to the greater organizational goals. If you do this well, and the business believes HR has a strategic role to play in the organization, then that seat at the table will come. CEOs are demanding that HR show the strategic connection to the organizational goals that prove they are contributing to the growth and performance of the company through effective people management. Chances are the executive has already put pressure on you to become more strategic, but if not it’ll be coming soon. Developing your HR strategic plan will allow you to address any demands requiring you to be more strategic and to demonstrate more value to the business goals. People capital is paramount to any business strategy; without people, nothing happens. - John Winsor, Owner, Winsor Consulting If your goal is to transition your HR department into a more strategic role, don’t wait for the executive to recognize that potential. Instead, demonstrate your strategic potential by developing a plan that directly rolls up to specific business goals. Don’t tell them, show them!

12. The costs and returns of HR strategic planning will vary wildly from organization to organization The ROI of HR strategic planning is less about the planning process itself and more about the success of the initiatives you decide to tackle. Bottom Line Avoid investing effort in a strategic planning process if you don’t have enough control over the initiatives selected to drive a successful outcome. Don’t risk failure! A failed HR strategic plan will hurt your team’s reputation as credible business players, and it could take a very long time to recover from that. HR strategic planning costs and returns • The costs of strategic planning are largely focused on the time spent by HR staff and executives to complete the appropriate planning exercises and build the plan itself. • The returns of strategic planning are less tangible. For HR, a heightened profile and increased credibility in the eyes of the business can’t be measured in financial terms, but the opportunities created and increased ease of gaining buy-in down the road are decidedly valuable. HR strategic initiatives costs and returns • The financial returns of HR initiatives are often indirect (e.g. improved engagement increases retention, thereby reduces turnover costs), and may not be fully realized for years. The case can be made, but expect to do some research to connect the dots. • Each HR strategic initiative will have its own unique costs, and each demands its own business case showing the tradeoffs between these costs and hoped-for returns. • The margin between costs and returns for an initiative can be narrow or wide. HR’s ability to maintain or increase that margin is the measure of that strategic initiative’s – and HR’s – success or failure. An HR department has to have a strategic plan…Otherwise it gets all the dumb stuff. - Julie Webb, HR Director, Monarch

13. Good HR strategic plans take into account four organizational areas: Culture, Operations, People and Systems (COPS) Culture Culture changes slowly, whereas strategies – more concrete – are constantly refined. Nevertheless, strategy and culture go hand in hand. - Peter Empringham, VP, Concert • Culture refers to the beliefs, values, norms, and management style of the organization. (For more on understanding culture, see McLean & Company’s Rid the Organization of an Inconsistent Culture to Improve Employee Engagement.) Operations HR leaders must include operational structure in their HR strategy to keep aligned with the overall business structure. - Paul Turner, HR Forecasting & Planning Operations includes the structure, job roles, and reporting lines of the organization. People The catalyst to drive business results is skilled and engaged people. - John Winsor, Owner, Winsor Consulting People consists of the skills, knowledge, and potential of employees and the management team. Systems If an organization really values quality and service, you not only have to retain staff, you must also review the organization, reward, appraisal and communications systems. - Paul Turner, HR Forecasting & Planning Systems refers tothe HR programs, processes, and mechanisms like employee selection, communications, training, rewards, and career development.

14. Use McLean & Company’s HR strategic planning process, and be sure to consider COPS at every step Inputs These four areas are involved at each step of the planning process Business Plan HR Trends + KeyEvents + 1 Assess the Current State 2 Envision the Future State A formal HR strategic plan is created during the Develop phase • Culture • Operations • People • Systems 3 Develop Initiatives and Tactics 4 Evaluate the Progress

15. Case study: An HR department reaps the benefits of a formal HR strategic plan An HR leader took over a department with no strategic plan and transitioned it into a strategic partner. Healthcare Medium enterprise HR director Industry: Segment: Source: Situation Actions Results A new HR director discovered that the HR department not only wasn’t consulted in any strategic planning processes, but they themselves didn’t have a plan in place. This countered what the HR director believed was most beneficial for the HR department and the business as a whole. The HR director identified the transition to a more strategic role in the organization as the key goal for her department. The new HR director met with every leader in the organization and said, “Here is my buffet of experience; I think I can help you here and help you there.” Rather than knocking on all those doors and saying, “I think you should do these things,” the HR director arrived with a plan and said, “This is going to help you.” She backed this up by speaking up and participating in meetings, and demonstrating her capacity to think and act strategically. Organizational leaders started wanting HR’s presence when they were discussing changes. In particular, they wanted help with change management and developing succession plans. The HR director had to hire more staff to accommodate all the requests to participate in various steering committees. Now the HR director, and the HR department as a whole, are seen as strategic partners in the organization.

16. Collect Strategic Plan Inputs Make the Case Collect Strategic Plan Inputs Assess the Current State of HR Envision the Future State of HR Develop and Prioritize Key Initiatives Set Measures and Evaluate Progress Understand the role of the business strategic plan in HR strategic planning. Know the impact of key internal and external events on organizational strategic priorities. Analyze the influence of emerging HR trends – like demographic changes, the war for talent, work-life balance, and technology – on strategic planning decision making.

17. The business strategic plan, key events, and HR trends are all inputs that influence your final HR strategic plan The Business Strategic Plan The business strategic plan consists of the organization’s values, vision and mission, high-level organizational goals and objectives, key business initiatives required to meet these goals, objectives for the next one to three years, and measures for success. Key Events Significant events that will alter the organization and the HR department in a way that impacts HR operations. While some events are foreseeable, others are not due to confidentiality constraints. HR Trends • HR trends are external or environmental activities or developments that influence or have a direct impact on HR priorities and the initiatives implemented by the HR department.

18. Leverage the business strategic plan to guide the direction and scope of the HR strategic plan • What is it? • The organization’s goals and objectives over the next one to three years. Often includes values, vision and mission statements, financial information, operational initiatives, time frames, and details on how success is measured. • Why is it important to HR strategy? • It is the guiding force behind your HR strategy’s focus and scope. Every initiative taken by your HR strategic plan should be directly linked to the goals, objectives, and initiatives articulated in the business strategic plan, and not go beyond the boundaries set by the business strategic plan. • What should you do? • Understand your business strategy. • Highlight the key driving forces of your business e.g. technology, competition, the markets. • Analyze the implications of these driving forces for the people-side of your business. • Connect the contribution of people to bottom-line business performance within the context of these driving forces. Business Strategic Plan At the core of everything isthe business strategy. We’re tasked as HR leaders to get an organization coalesced around driving results that align to the business strategy,and that’s ultimatelygoing to be accomplishedthrough people. - John Winsor, Owner, Winsor Consulting • TIP – If the business strategy is not documented, discover if one is pending. • If one is pending, your best bet is to wait until it’s available before doing your HR strategic plan to avoid guessing. • If one is not pending, do one of two things: conduct discovery interviews with members of the executive in order to find out what they think it is, or don’t do an HR strategic plan at all since it may be a directionless exercise in futility.

19. Identify foreseeable key events that will impact the HR strategic plan and make sure they are accounted for • What are they ? • Foreseeable significant events that will alter the organization in a way that impacts the business and HR strategies, and potentially day-to-day operations. Events could include: • Departure or arrival of a key executive. • Merger or acquisition. • Opening or closing of branches or work locations. • Major product or service launch. • Why are they important to HR strategy? • Sometimes organizational events occur that have a direct impact on HR, but this impact isn’t recognized until after the fact. This causes major disruptions to HR plans and operations, causing the HR leader to revert to a firefighter role. • What should you do? • Meet regularly with members of the executive team to identify any key organizational changes or initiatives that are planned or may be occurring. • Keep your eyes and ears open. While you don’t want to spread gossip, do be receptive to off-the-record information. Key Events Some events can’t be predicted, so a certain level of flexibility needs to exist. But foreseeable events have to be taken into account and planned for. - Julie Webb, HR Director, • TIP – Be prepared. • While some initiatives may not seem to concern HR, there will likely be some ramifications. Imagine the possibilities and develop a plan or response strategy that you can pull out of your back pocket just in case. It’s much more efficient to be prepared for something that never comes to pass than to be surprised and caught off guard.

20. Take into account these four HR trends that will impact the development of HR strategies What are they? External or environmental activities or developments that influence or have a direct impact on HR priorities and, ultimately, the initiatives implemented by the HR department. Major HR trends today are: • Demographic changes • The fight for talent • A healthy workplace • The impact of technology Why are they important to HR strategy? HR trends have a direct impact on your industry and the talent market in which all HR departments are operating. These trends should be on the HR’s radar since they affect challenges and opportunities, how HR is managed, and what needs to be done to keep pace with the competition. What should you do? • Keep your finger on the pulse of current and emerging trends, and understand or assess the potential business implications of each on your organization. HR Trends HR must help the organization understand the impact external and internal influences have on how work is accomplished. HR has to lead the workforce to build a culture of continual self-assessment and adaptability, without such a culture organizations will stale and suffer. You can’t keep denying change. - John Winsor, Owner, Winsor Consulting. • TIP – Tap multiple sources to find out what’s hot. • Read HR publications, attend conferences, and talk to your colleagues and watch for recurring themes. • Read the McLean & Company report HR Trends & Priorities for 2012 to discover what your peers are seeing on the horizon and putting at the top of their to-do lists.

21. Trend 1: Demographic Changes – Changing characteristics of the available talent pool will directly impact HR strategy A major shift in workforce demographics is taking place and HR directors need to be prepared for the many ramifications. • A “silver tsunami” will take place in the U.S. over the next 20 years as 79 million baby boomers exit the workforce. • This mass exodus will cause a skills void, thereby increasing competition for talent. • HR leaders need to ramp up succession planning to try to handle this shift in workforce demographics. • Generation Y, or the Millennials(born between 1981 and 2000), are here, and there are more on the way. • This group has characteristics and expectations unlike any other workforce group. • Generation Y tends to be picky about the employers they choose, expect flexible work options, and only stay in a given organization for just over two years. • Gen Y members are more entrepreneurial, more technologically savvy, and more workplace transient than other generations. • Baby boomers are starting to retire. Succession planning and how Generation Ys will feature in the long-term strategy should be a priority. Average tenure at an organization is 2 years More likely to question workplace regulations Raised with technology and instant gratification Gen Y Able to grasp new concepts: learning oriented Source: NAS Insights, Generation Y: The Millennials • HR needs to review recruitment and retention strategies and practices to address this permanent change in potential employees.

22. Trend 2: The Fight for Talent – The battle is on now and will only get more intense as skills gaps widen The most important corporate resource over the next 20 years will be talent. HR departments with a formal HR strategic plan feel better prepared to fight for available talent. • In the US (source: Mercer, What’s Working survey): • The number of people planning on leaving their jobs, even without securing another one, is increasing. In October 2011, 1.1 million US employees left their jobs without another job in place. • Currently, 32% of American workers are considering leaving their job, which is up 40% since 2005. In addition to the 32% considering leaving, 21% are not considering it as an option, but they are dissatisfied with their current working conditions and therefore are not working at their optimal level. • In Canada (source: The Conference Board of Canada): • A shortage of 1 million skilled workers is predicted by 2020. • 2.6 new jobs are expected to be created for every person entering the workforce. Maturity of HR Strategic Plan The key to attracting and retaining scarce skills is to be – and be seen as – a first-tier employer that can meet the needs of high potential and high performance employees. Workforce planning focused on skills gaps analysis is critical. Once the nature of the gap is determined, it becomes clear what talent to hire, lay off, develop, or transfer, and what it will take in terms of planning and effort to make these things happen. Readiness for Talent Competition Source: McLean & Company, N = 82 Readiness was measured on a Likert scale ranging from: 1 = Not Ready 2 – 3 – 4 – 5 – 6 = Extremely Ready

23. Trend 3: A Healthy Workplace – Keep up with increasing demands for employee wellness and work-life balance There is no competitive advantage in exhausted, sick, and stressed out workers. Address the issue now to gain an advantage over competition. There is a definite link between the work environment and the health and well-being of its employees. Further, employers are now recognizing the connection between employee well-being and its impact on the bottom line. Amongst North American workers: Over half in large organizations feel stressed. One in three feels burned out or depressed. Many are thinking of quitting their jobs. Absenteeism is costing employers billions each year. A business strategic plan that calls for increased or modified performance levels will cause additional stress levels in the workforce. Increased stress will lead to increased burnout, which will lead to increased turnover. • Surveyed workers identify work-life balance as their greatest concern. The likelihood is that this will only increase with the next generation. 29% Work-Life Balance 27% Opportunity to Grow 20% Ability to Accomplish Goals 13% Comraderie with Coworkers • Your HR strategic plan needs to take these conflicting demands into account when projecting needs over the next three years. Proactive measures must be built in to the HR strategic plan to help reconcile potentially costly and counter-productive competing agendas. 11% Relationship with Boss Area of Greatest Concern for Workers Source: Wellness Strategies, SHRM, 2011

24. Trend 4: The Impact of Technology – Understand what’s available and appropriate to optimize opportunities and mitigate risks HR needs to look at technology in two ways: as an HR management tool, and as a potential threat if abused by employees. Technology as an HR tool: Technology allows HR to speed formerly manual processes, capture data about an employee in a single view, and carry out advanced metrics tracking and data analysis organization-wide or down to the individual employee. The biggest opportunity for HR is in analyzing large volumes of data for strategic planning purposes. Hard numbers always carry more credibility with business leadership, and technology can help collect and crunch them. Technology as an area of HR oversight: The right technology can make employees more productive (e.g. mobile devices), and HR has a role to play to make sure people get the tools they need. The challenge for HR will be working with IT and management to develop standards and policies about who gets access to what for business purposes, and how it should be used. Top Three Technology Trends for HR to Watch: • Social media: • Opportunity: HR can more specifically target and reach out to recruits, while building a more tech-savvy employer brand. • Challenge: Use of social media by employees (e.g. Facebook) during work hours decreases productivity if uncontrolled. • Compliance and reporting requirements: • Opportunity: Technology reduces manual paperwork, allows system-wide change updates, and automates reporting. • Challenge: Technology adoption can bring upfront costs, and adjusting to a new way of doing things can take time and training. • Workforce analytic tools: • Opportunity: In-depth data analysis for problem assessment and strategic planning. • Challenge: Establishing data needs and metrics in the first place. • HR practitioners tend to focus more on controlling the use of technologyby employees than leveraging it themselves for advanced HR practice. Be mindful of any in-department resistance to technology use and start to flip the focus.

25. Assess the Current State of HR Make the Case Collect Strategic Plan Inputs Assess the Current State of HR Envision the Future State of HR Develop and Prioritize Key Initiatives Set Measures and Evaluate Progress Review HR’s role in the organization: Administrative, Functional and Strategic. Set the scope for your strategic planning project. Understand HR’s current capabilities and capacity. Conduct a current state SWOT Analysis. Conduct a current state COPS Analysis.

26. The first step in HR strategic planning is to assess the current state – know where you are today to plan for tomorrow The focus here is to use due diligence to get an information snapshot that reflects what’s really happening in your organization, good and bad. Inputs + + KeyEvents HR Trends Business Plan Five Key Steps in the Assess Phase • Identify your HR persona • Effort: 0.5–1 hours • Develop a strategy scope statement • Effort: 2–3 hours • Inventory HR capabilities and projects • Effort: 1–2 hours • Conduct a SWOT analysis • Effort: 4–6 hours • Conduct a current state COPS analysis • Effort: 4–6 hours A 1 B Assess the Current State C Envision the Future State D Develop Initiatives and Tactics E Evaluate the Progress The outcomes of the HR capabilities and projects inventory and the COPS analysis will be summarized in the “Gaps in HR” section of your final HR Strategic Plan document.

27. Identify your HR persona to determine the focus of your HR strategic plan and how you can best serve the business A • Your persona is the role your HR department plays in the organization in terms of competencies, primary areas of practice, and influence. Administrative • The Administrative HR persona looks solely at basic or core administrative duties like payroll, but doesn’t have formal focus, expertise, or depth in other HR functional areas like recruitment, performance management, and employee development. • This persona is more typical of new or young organizations that have not achieved operational maturity or stability. Functional • The Functional HR persona includes core administrative duties plus a formal focus, expertise or depth in a few HR functional areas like recruitment, performance management, and employee development. However, this persona is not involved in strategic planning activities or advanced HR practice areas like succession management or leadership development. • This persona is often found in stable small and mid-sized organizations. Strategic • The Strategic HR persona performs core administrative duties, shows maturity in the full range of HR functional areas, and is also an active and influential player in organizational strategic planning and execution. • While more typical in large organizations, it’s possible for organizations of all sizes to have a strategic HR department based on need and perception of HR capability.

28. Your HR department’s persona in the organization dictatesthe strategic plan’s depth and breadth – set your expectations A HR Persona Recommended Approach to HR Strategic Planning Administrative • An HR strategic plan may be a non-starter. In all likelihood, there is no business strategic plan on which to base an HR strategic plan, and the organization as a whole doesn’t really need long-term strategic planning from its individual departments. • Invest in showing the executive how you plan on running your core activities more efficiently instead. Even if you don’t aspire to change your role to Functional, or the timing isn’t right, you can always do yourself a favor by demonstrating efficiency and cost control. Functional • An HR strategic plan may not be expected of you, but you can create one to show business awareness and communicate interest in moving to a more strategic role. • If shifting to a more strategic role is desired, focus your plan on your existing functional areas, with the addition of one more to give your department a growth path. Including an initiative around building an HR metrics program is worthwhile as well – you’ll need as many metrics as you can get as you strategically mature. • If staying in a Functional role is in the cards for the longer term, focus on augmenting existing functions and demonstrating the value of those functions to the organization. Strategic • A full HR strategic plan is expected of you as a strategic HR department. • Attach hard numbers in the form of expenditure, savings and metrics. Being a strategic partner involves not only achieving HR goals, but also those of the organization as a whole. Each proposed HR initiative should come from a projected business need and use standard business methods to support the case for doing it.

29. Next, set the boundaries of the project by developing an HR Strategic Planning Project Scope Statement B A scope statement is one of the most critical project communication tools since it sets expectations and itemizes the steps you plan to take. What exactly is a scope statement? It places firm boundaries around the HR strategic planning project, namely what’s included and excluded. It lays out clear and common understanding of the HR strategic planning project into terms of definitions, milestones and time frames for the purpose of facilitating communication and setting expectationsamong and between stakeholders. Finally, it represents a written agreement among the HR strategic planning team, the HR strategic planning sponsor, and key stakeholders. How will a scope statement help you? It helps lock down the money, time, and people required to complete the project. It also serves as an effective tool for measuring whether your project has hit its intended targets. An HR strategic planning project should be treated no differently than any other project, thus a scope statement is critical. • Use McLean & Company’s HR Strategic PlanningProject Scope Statement Template. It includes: • Project goals and objectives. • What is in and out of scope. • Description of interim and final outputs. • Resourcing requirements, including project participants, stakeholders, and their roles. • Project communication strategy. • Potential challenges and how they will be overcome.

30. Understand HR’s current capability and capacity – knowif you can do the work before you commit to anything C Use the McLean & Company HR Capability and Capacity Inventory Tool to help identify and document all current HR skills, tasks, and projects. What exactly is a capability and capacity inventory? A place to create a consolidated record of all current HR tasks and projects, and rank and prioritize projects according to continued applicability, importance, and alignment with changing business goals. A place to list current knowledge, skills, and aptitudes on the current HR team. For example, building a management development program could be a tall order if you don’t have instructional design and delivery expertise on staff. How will this inventory help you? Find out if your plate is already full. Taking on new initiatives may be difficult or impossible without hiring more HR staff. If an increase in HR headcount isn’t possible, you may have to drop, scale back, or seek alternative means to handle something you’re already doing to make room for anything new. This tool helps you focus on identifying any and all commitments currently on HR’s plate. • Use McLean & Company’s HR Capability andCapacity Inventory Tool. It includes: • Project inventory and priority assessment. • HR skills inventory. • Keep the results in mind as you move through the upcoming SWOT and COPS analyses, and reference your findings when building the business case for each initiative your propose. • TIPS for completing this exercise: • Be honest – only your team will suffer for committing to an initiative it can’t carry out. • Be sure to bring the outcome of this assessment to the table when you do your SWOT analysis (next slide).

31. D Conduct a SWOT analysis to put your HR inventories intoa broader business environment context • Use the McLean & Company HR Strategic Plan SWOT Analysis Templateto help determine what to focus on and how. What exactly is a SWOT Analysis? • It’s a thorough examination of internal and external factors that affect the organization. • These factors are labeled as strengths, weaknesses, opportunities and/or threats depending on the role they could potentially play in reaching your goals. How will a SWOT analysis help you? • Know what trends are playing out in your industry, the economy and the business environment at large that will influence business decisions and activities. • Determine the people, processes, and programs that will either help or hinder future efforts. • Bring reality-based facts to the table that business leadership can appreciate to help justify your decisions. HR Strategic Plan SWOT Analysis This exercise helps you identify the factors that will make it easier or harder for you to act on your strategic initiatives. • TIPS for completing this exercise: • Borrow from the SWOT analysis in your organization’s business strategic plan (if you can get it). Don’t reinvent the wheel, particularly when identifying broader industry or economic factors – they should be the very similar. • The fresh thinking in your HR SWOT analysis will be around factors that hurt or help your ability to acquire or retain the right employees and skills, management/executive attitudes towards HR issues, and HR’s ability to get initiatives done. Conduct your own assessment usingMcLean & Company’s HR Strategic PlanSWOT Analysis Template.

32. D Use these guidelines to help interpret and organize your SWOT analysis Once SWOT analysis is done… Example SWOT Summary and Related Goals 1 • Schedule a meeting with your team. 2 • Start with strengths, then move on to the other three categories. • Get a consensus on two to four important strengths and weaknesses of the department and two to four main opportunities and threats. • Record the agreed-upon major SWOTs in the chart (right). 3 • Turn the major strengths, weaknesses, opportunities, and threats into goal statements and action items for the department. • Enter these goals in the Goals sections of the chart. • When outlining the organization’s management profile, define these goals in management terms (to achieve goals, what capabilities and attitudes are required of the management team).

33. E Finally, do a COPS analysis to determine the current statesof culture, operations, people, and systems Document life as you know it in your organization – the good and the bad. Resist the temptation to describe the organization you wish you could have. • A COPS analysis is essentially a diagnostic exercise that helps you pin down the current realities in your organization. • Some of these realities will be advantages, some will be constraints, and others will be things that you’ll want to change using the HR strategic initiatives you eventually select. • Yet the ultimate goal of the COPS analysis is to establish a baseline description that will tell you how far you need to go, how hard you’ll need to work, and how much money you’ll need to spend to get from where you are today to where you want to go. A full COPS analysis consistsof a current state and futurestate assessment. Use the McLean & CompanyCOPS Analysis Worksheetto carry out the current state analysis described here so that you can easily record your thoughts. In the next section of this report, you will use this same tool to conduct a target state COPS analysis. • TIPS for completing this exercise: • This exercise is from the perspective of the HR department, so leverage the people in your HR team. There’s no need to bring in other members of management or the executive (unless you want to). • You may opt to tackle culture, operations, people, and systems in separate sessions so that you can stay fully focused on one at a time and not get distracted.

34. E After conducting a current state COPS analysis, many organizations find that the following descriptions fit well

35. Assess: The HR manager of a young manufacturing firm assesses the company’s business goals and HR capability Company Description • A five-year-old specialized manufacturing firm that supplies processor chips to the automotive industry. • Approximately 180 non-unionized employees: • Majority of staff is unskilled manufacturing labor. • Additional staff include software engineers and product developers, IT, sales, shipping/logistics, management, and administration. • Revenues in 2011: $35,000,000 • Demand for their specialized product has grown significantly in the past two years. Have experienced significant increases in both revenue and headcount. This growth is expected to continue into the foreseeable future. Business Strategic Goals • In order to support continued high growth, increased operational stability and maturity is the primary goal for the next year. • Hiring for all roles is required. • HR has a substantial role to play in achieving this goal through standardizing workforce management processes and programs, as well as strengthening its recruiting engine. HR Description • HR consists of three staff, all from HR generalist backgrounds. • The HR department matches the Administrative persona. It handles recruiting, payroll/benefits, and workforce scheduling. Sufficient performance management activities are being carried out. • No major projects are in play. The focus is almost exclusively on day-to-day operations. • Given significant recent increases in headcount and an evolving workforce, HR is barely keeping up with its administrative duties.

36. Assess continued: HR works through the SWOT and COPS analyses to establish a complete picture of current state SWOT Analysis Strengths • Limited competition – niche product. • Very strong post-recession economic growth. • Largely unskilled manual labor required – commodity. • HR – Expertise in workforce scheduling/planning, performance management, and policy management. Weaknesses • Operational inexperience – young management team. • HR – Low/no expertise in compensation planning. Limited profile in the organization. Opportunities • New chip product under development. • Option to sell to non-automotive industry buyers. • HR – Policy management expertise yet to be tapped. Threats • Owner-operated – controlling personality. • Location is rural – limited talent pool available. • Connection to automotive industry has driven rumors of unionization amongst manufacturing floor staff. • HR – None. Current State COPS Analysis Culture • Staff are tight-knit. Most don’t feel empowered. • Management style leans towards “top down,” which has created disconnection with staff (i.e. us vs. them). • Quality is king, but innovation is limited to product development teams. • Operations • Structure and roles are defined, but are being outgrown. Lack of flexibility is a hindrance. • Productivity is important, but there are few metrics. • Formal policies/procedures are few. • There are no formal forecasting tools in place. People • Job knowledge, skills, and understanding of performance expectations are good. • There is no coaching or development in place. • No incentives are available for non-managers. • Systems • A basic performance appraisal program is in place. There is recruiting competency, but no formal strategy. • No other formal systems exist.

37. Envision the Future State of HR Make the Case Collect Strategic Plan Inputs Assess the Current State of HR Envision the Future State of HR Develop and Prioritize Key Initiatives Set Measures and Evaluate Progress Conduct a target state COPS Analysis. Create a shortlist of proposed changes. Carry out a Gap Analysis to understand the distance between your current and target states.

38. The second step in HR strategic planning is to envision a future target state – decide what you can realistically aspire to This is your opportunity to think big and bring the best ideas forward before reining them in for practical application in the real world. Inputs + + KeyEvents HR Trends Business Plan Assess the Current State Key Steps in the Envision Phase • Conduct a target state COPS Analysis to identify change goals for the future • Effort: 4–6 hours • Conduct a Gap Analysis between current state and target state • Effort: 3–4 hours A 2 Envision the Future State B Develop Initiatives and Tactics The outcomes of the target state COPS analysis will be directly summarized in the “Gaps in HR” section of your final HR Strategic Plan document. Evaluate the Progress

39. With current state identified, determine the projected target state of HR programs and practice using COPS A The goal of this exercise is to imagine what your organization and its HR programs and practices could look like if additional investment was made. • Conduct abrainstorming session; it’s the best way to get all of the great ideas out on the table. • Include your HR team and leaders from across the organization to get multiple points of view. • Pull out the results of your latest employee engagement survey, if you have one, since it can identify the areas most in need of improvement from the employees’ point of view. For each factor you explore under each COPS area, ask: Do we want to change it? What would that change look like? What would be the positive and negative impacts of that change? • TIPS for completing this exercise: • Keep an open mind. It will be tempting to shut down some ideas early because they seem unrealistic, but avoid doing so at this point. • Without realizing it, you or your colleagues may have adopted a conservative or negative outlook because you’ve been told “no” often in the past or had trouble getting buy-in. Worry about short-listing achievable initiatives later. • Even the craziest ideas might contain a nugget you can use – so don’t reject any ideas yet. • Leave no stone unturned! To start exploring whatyou want the future targetstate of your organization tolook like, return to McLean & Company’s COPS Analysis Workbook.

40. After conducting a target state COPS analysis, many organizations opt to make changes in the following areas A

41. Now that you know where you are and things you might want to change, it’s time to set your target state in stone A Pare back on your “blue sky” ideas with a dose of reality. Your ideal “organization of the future” just might be too far away. • Bring out the business strategic plan. Trim out change ideas from the future state COPS analysis that are not aligned with the business plan. • Example: You want to sharpen your employer brand, but initiatives on the business strategic plan are about cost control. Hiring is not prominently featured, so there’s little appetite for investing in attracting recruits. • Start prioritizing changes on your shortlist that are most important to the business. • Example: A new product launch is on the horizon. Hiring a new marketing manager to fill a current vacancy trumps all other needs in terms of urgency. • Next, look at your SWOT analysis. What will impact your ability to achieve the shortlist of changes from your future state COPS analysis? If challenges are severe enough, you may opt to remove some changes as contenders. Otherwise, be prepared to do a lot of work, or even fail. • Example: Your HRIS is five years old. Recent headcount growth has it at capacity. However, your company is ripe for acquisition – investment in new software that may be supplanted by that of a new parent company may be a waste. • Finally, draw up a description of final target future state. You’ve stripped away the proposed changes that aren’t important or feasible. Now imagine that if the remaining changes were successfully implemented what the new organization would look like. You can use COPS headings and bullet points for this description. It’s worthwhile to describe your target state side-by-side with your current state so that you and others can see the magnitude of the changes (and improvements) that you’re proposing. Thisapproach will prove helpful in your upcoming Gap Analysis. Use the “State Description”Tab in the McLean & CompanyCOPS Analysis Workbookto capture the descriptions of your organization.

42. B Conduct a gap analysis between current and target state to forecast the amount of work involved in making changes Some changes will be harder to make than others, and will require more expertise, time, and money to turn into a reality. For each change you’re proposing to reach your target state, assess and document the following. This information will be important for any business cases you need to present in the final HR strategic plan. What skills and knowledge need to be developed or acquired by HR staff, the management or leadership team, and regular employees to make the change? Achieve this by developing existing staff, hiring new staff, outsourcing the expertise, or using a mix of all three methods. Take a conservativeapproach whenmaking estimations. Assume everything will require more expertise, more time, and more money than first glance indicates. Initiatives that seem to require less investment may pass the approval process with greater ease, but your credibility will be hurt if you’ve underestimated the investment required or misrepresented the truth. Expertise Time How long will the change take to implement in its entirety in terms of both absolute people hours and relative calendar days? Determine if the change be broken down into smaller, shorter milestones. Determine whether pieces of the change can be tackled concurrently, or if it must be done in linear sequence. How much money will it cost to make the change? What will need to be purchased or sourced? Calculate the salary costs of the people working on the change. Identify the predicted long-term ownership costs of anything new that will be implemented (e.g. maintenance and administration). Money

43. B Grab the low-hanging fruit identified in the gap analysis – some changes won’t require permission or investment While most major changes will require some degree of approval and planning, some quick wins may also emerge from the gap analysis exercise. Based on the gap analysis, label each item as one of the following: A minor gap between current and target A moderate gap between current and target A major gap between current and target. • Traversing a gap requires some combination of time, skills, and money. The various gap levels are defined by each of the three factors. • A minor gap takes very little or no time, skills, or money. • A moderate gap may take some to above average investment of one or two of time, skills, and money, but probably not significant amounts of all three together. • A major gap will require substantial investment across all three of time, skills, and money. • Next, triage the proposed changes in the following way: • Minor gaps can be turned around quicklyas long as they are not dependent on other changes or, when implemented, will not create new gaps in other areas. • Free and clear minor changes are the low-hanging fruit mentioned above. You may be able to address these easily without escalating them to your strategic plan. • Mission-critical changes should be prioritized if they are central to achieving high priority business goals, regardless of the gap size between current and target state. • Gaps that are impacting a high number of other areas should be identified. By addressing them, a wide range of problems would be solved. Prioritize these next. • Finally, list the remaining gaps in the order of minor gap, moderate gap, and major gap.

44. Envision: The HR team in the chip manufacturing firm envisions its target state and what it will take to get there Gap Analysis Culture: Major gap • While relations between staff and management are not hostile, management is traditional and authoritarian. Buy-in for change will be tough. • Operations: Minor gap • Productivity metrics required are few and simple. • Only basic policies and procedures required. Knowledge required to create these is sufficient. • People: Major gap • The local talent pool is running dry. It will be challenging to convince recruits from more populated areas to work in the rural location, let alone ensuring that those who don’t wish to move can get to work on time everyday. • Implementing coaching relies on cultural change. • The company owner is not fond of incentives. • Systems: Moderate gap • Developing a sourcing strategy will require research and creativity, and execution will require some determination, but selection skills are solid. • Developing other basic programs is a factor of time investment vs. skill. Target State COPS Analysis ( = Priority) Culture • Open communication and trust exists between management and staff. • Staff feel empowered to bring improvement ideas to the table. Operations • Structure is defined. Job roles are defined, but flexible. • Productivity metrics are established, tracked, analyzed, and acted on. • Formal policies and procedures are in place. • Basic sales forecasting tools are used to predict volume and future staffing requirements. People • The right people with the right skills are in place. • Regular performance coaching is in place. • Incentives are in place for all employees based on company performance and achievement of quality, productivity and revenue targets. Systems • A rigorous performance management program is in place. • A talent sourcing and selection strategy is in place. • A new hire onboarding and orientation program is in place.

45. Develop and Prioritize Key Initiatives Make the Case Collect Strategic Plan Inputs Assess the Current State of HR Envision the Future State of HR Develop and Prioritize Key Initiatives Set Measures and Evaluate Progress Explore logistical issues with achieving proposed changes. Identify estimated costs to implement proposed changes. Identify your final list of HR strategic initiatives and build business cases for each. Document your analysis and initiatives in an HR strategic plan.

46. The third stage in the strategic planning process is to finalize your list of initiatives and develop your final plan This is where your hard work takes a concrete form. Your final plan will ultimately be presented to the executive team for approval. Inputs + + KeyEvents HR Trends Business Plan Five Key Steps in the Assess Phase • Convert your proposed changes into tangible initiatives • Effort: 3–4 hours • Build a business case for each initiative • Effort: 4 hours per initiative • Develop the final HR strategic plan • Effort: 3–4 hours • Get executive buy-in on the final plan • Effort: 1–2 hours A Assess the Current State B Envision the Future State C D 3 Develop Initiatives and Tactics Evaluate the Progress The outcomes of the building a business case exercise will be directly summarized in the HR Strategic Plan document you create during this stage.

47. A Convert your proposed and prioritized changes into tangible initiatives – any logistical issues will soon come to the fore You know what you want to change and what those changes will look like when implemented – how to make those changes requires tactical thinking. For each shortlisted change, think through how each change would be planned as a project: Identify the steps required to implement the change. • List all the activities and milestones involved. For example, implementing an HR policy portfolio involves shortlisting required policies, prioritizing policies to be developed, conducting research, writing drafts, reviewing drafts, and so on. • Calculate how many hours should be invested in each step to complete it. For example, developing the presentation for a coaching training module could take 30 FTE hours. Identify the interdependencies of each step of each change. • Determine what must be done first before tackling other steps. For example, managers must be trained on a new compensation plan before employees are notified. • Determine what impact interdependencies have on timelines. For example, two HR staff can work on two policies concurrently (shortening timelines), but the single reviewer for all policies can only look at one at a time sequentially. Identify the people and skills required to implement the change at each step. • Determine if you have the people you need. For example, you will need IT expertise if implementing a new HR Information System. • Make sure key people won’t be spread too thin or unavailable if you have them tackle changes at the same time. For example, you only have one person with development expertise, but are creating five training initiatives concurrently. Hold a series of team brainstorming sessions. Your goal is to develop concrete solutions to making changes that will close the gap between current and target state. This exercise will help determine each change’s logistical feasibility, namely: • If tackling all the proposed changes on your shortlist means that you’ll be biting off more than you can chew. • If there are logistical complexities that will make change implementation too challenging at this point.

48. B Next, figure out what it will cost to get each change off the ground and weigh it against benefits to build a business case Costs may determine whether an initiative is approved. While a change may be important to the business, some people just can’t get past the numbers. For each change on the shortlist: Estimate the people costs: • Time required for an individual staff member to make the change multiplied by their hourly earnings. • Costs to acquire needed skills through creating and hiring into a new role, or outsourcing change-related tasks. Estimate the purchase or acquisition costs: • Cost to procure and implement required technologies, such as a Learning Management System or Talent Acquisition System. • Cost to procure any content-based information or tools, such as assessments or learning modules. Estimate the opportunity costs. If you choose to pursue a given change, are there other things you will no longer be able to do or have to bypass? The logistics exercise you just completed may have knocked some proposed changes off the list because you’re too far away from getting the time and people resources you need, or they’re just too complex to be realistic. With your new condensed shortlist, check the fiscal feasibility of each remaining change, namely: • If some changes can be easily absorbed with minimal or no additional costs. • If some changes will require a significant financial investment. • If some changes will force you to sacrifice other money-making or money-saving activities. Don’t forget about risk! Some changes may have adverse effects, such as a short-term dropin employee engagement that results in increased employee turnover. These are costs in their own right. Predicting these potential costs and expressing them as hard dollar values may be hard. At the very least, be ready to itemize them as risks and include any risk mitigation strategies that help avoid their associated costs.

49. Build a business case for each initiative to clearly explain the goals, solution, and impact of the HR strategic initiative The business case for each of the identified HR initiatives should include the following four items: 1. Assumptions and Methods List all assumptions, scope and boundaries, and information sources you plan to use. Also describe various scenarios based on different actions taken, including what would happen if it was “business as usual” and nothing was done at all. 2. Business Impacts Show a top-level cash flow for each scenario – benefits, expenses, and assets – project over multiple years. Use charts and graphs to highlight these items more effectively. 3. Sensitivity and Risks Spell out the risks and contingency plans if the assumptions you’ve made turned out not to be accurate or true. Risk analysis is always welcomed by senior management. Use McLean &Company’s HRInitiative Business Case Templateto guide the documentation of the business case for each initiative. Leveraging this template will help you build a defensible business rationale for each initiative. 4. Conclusions and Recommendations Ensure that you reiterate business objectives, outline all decision criteria included, and explicitly state the results and findings. Recommendations must be concise, but should formally state how you think the organization should proceed. Doing financial calculations can be daunting. Talk to your Finance department to find out what methods the organization uses to calculate the relative costs and benefits investments, and arrange for a tutorial.

50. C With a final shortlist of initiatives in hand, use this checklist to confirm that you’ve done your analysis thoroughly Before you draft your final HR strategic plan document, make sure one last time that you’re not wasting effort on the wrong initiatives. Have the objectives and benefits of each initiative been outlined? Do the strategic initiatives recognize the organization’s strengths and weakness? Are the strategic initiatives relevant to the organization’s position in the external market, including any opportunities or threats? For example, do they consider competitor positions, organizational size, and financial strength? Will employees throughout the company understand how these initiatives affect them, and how they as employees contribute independently and collectively to the defined initiatives? Are the strategic initiatives realistic and feasible? Have timelines for benchmarking progress and targets for completing initiatives been set? Will the organization realistically be able to identify the success or lack of success in the accomplishment of strategic initiatives in some quantitative fashion? Can the strategic initiatives be linked back to the company’s overall strategy? If you answer “no” to any of these questions, you’ll need to either collect and document the appropriate information so that you can honestly answer “yes,” or else strongly consider dropping the initiative from your shortlist.