All businesses, no matter how small, have three categories of resources available to them: the technology they use to create a product or service; the finance they use to operate and grow the business, and the people whose talents they use to accomplish the company’s goals.
Strategic planning is the process of figuring out why the organization is in business and what long-term goals it wants to achieve with its available resources. Human talent is one of those resources, so there’s a direct link between strategic and human resources planning – neither one can exist without the other.
What Is Strategic Planning?
The purpose of strategic planning is out figure out what a company wants to do and why it is in business. For example, an organization might decide that it wants to diversify into new markets because it has gone as far as it can go in its current markets. The strategic options here include:
Developing new products to sell to its existing customers.
Selling the same products to a completely new group of customers, such as people in a different country.
Buying a company that operates a different business model that may or may not complement the company’s business model.
The process of strategic planning would involve investigating all of these options and deciding which one represents the company’s vision of the future. From there, the company’s leadership team would start drilling down into the specific strategies that can enable the company to meet its big-picture goals.
What Is the Strategic Planning Process?
Businesses typically look three to five years ahead when formulating a strategic plan, and the process results in a document that articulates the company’s vision, mission, big-picture goals and the broad strategies it will use to reach those goals. This planning document is intended to guide leadership in its decision-making.
A key part of strategic planning is assessing the company’s resources. It’s easy for any company to dream big and have stratospheric ambitions, but what the company can realistically achieve is limited by the number and type of resources it has at its disposal. For most businesses, those resources fall into three main categories:
Technology resources: This includes all the equipment, processes and infrastructure the business uses to create the products and services that it brings to market.
Financial resources: Finance comprises all the liquid resources the company can use to carry out its business operations – namely cash in hand, short-term and long-term bank deposits, liquid financial investments like stocks and bonds, and approved bank loans.
Human resources: This resource comprises the people whose talents, skills and personal characteristics the business can use to accomplish its strategic goals. While technology and money are important assets, human resources are the most important, because technology and money need people to manage them.
As you can see, human resources are an integral part of any strategic plan. If the business does not have the right skills and talent in place to achieve its goals, then the strategic plan will fail due to a lack of knowledge and manpower. Similarly, if talent is acquired and deployed without reference to the company’s strategic goals, then you’re going to end up with a lot of people doing jobs that don’t add value to the business, and which don’t move the company closer to where it wants to be.
What Is Human Resource Strategic Planning?
The purpose of human resource planning is look into the future and decide what skills, knowledge and competencies the business is going to need in one, three or five years’ time to meet its strategic goals. For example, if the company is currently outsourcing its marketing function but intends to bring this function in-house, then an obvious early strategy is to recruit a full marketing team, from a senior manager all the way down to a junior marketing associate or intern.
Whatever the mission of the business, one of the major objectives of human resource planning is to dig into the talent pipeline and answer the following questions:
How can the business attract the right type of people in the right numbers?
What kind of training and development can it offer to its current employees, to close any knowledge gaps?
How can it balance projected labor demand with supply so there is no labor surplus or understaffing?
Who are its key people, and how can it incentivize them to stay?
Answering these questions ensures the business has the right people in the right numbers in the right job roles to ensure the company’s profitability.
What Is the Relationship Between Human Resource Planning and Business Strategy?
Strategic planning and human resources planning basically have a symbiotic relationship, in that each function is dependent on the other. Here are some examples of how the relationship works in practice:
When leaders start developing a strategic plan, they will liaise with different department heads to see how the proposed business strategies might affect them. The human resources planning team will figure out the financial impact of the initiative based on the recruiting, training and retention strategies that may be necessary to support the plan. If the initiative involves downsizing, for example, then human resources managers must look at the various options for decreasing the labor supply through dismissals, retirements, transfers out of the department, sabbaticals and voluntary quitting.
Invariably, there will be a time cost associated with a new initiative. It’s up to HR to feedback how long it will take to hire or upskill permanent staff members and whether the company can work with contractors in the interim. This helps senior leaders develop a timescale for the new initiative.
Executing the plan
As soon as a strategic initiative receives the green light, the human resources team must ready the company’s employees for the changes that are about to ensue. This might include changing people’s job descriptions, moving people between job units, policy making, motivation strategies, developing training programs, and pinpointing and eliminating labor shortages through recruitment and outsourcing.
Feedback and monitoring
Once the strategic initiative is implemented, HR will monitor the changes that are being made to the workforce to establish whether the policies are sufficient, affordable and sustainable. Because the strategic plan is a long-term plan, it is crucial for the business to keep monitoring its talent pipeline, and keep updating its demand forecast, to ensure that the business always has the right people in place to meet its objectives.
Which Comes First, the Chicken or the Egg?
Because strategic planning and HR planning are interdependent, it really doesn’t matter which plan the leadership team begins to develop first. In fact, they probably should be developed in conjunction with each other. That’s because the strategic plan cannot be finalized until there are supporting talent strategies in place from human resources, and the human resources plan cannot be finalized until the long-term goals of the company are clear.
The most effective organizations are those that achieve alignment between the technology, finance and human resources of the business and the formulation and implementation stages of the strategic plan. It should be an integrative activity, rather than a leader-follower process.