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This is in response to Thinking Strategically.

Friday, June 3, 2011
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Loved Sue's article on strategic thinking -- and especially loved her insight that it "can be learned"! (When I was young and asked my boss to teach me labor relations, his answer was "It can't be learned!" Needless to say, I learned it!)

Great article, Sue.

Susan Warner, J.D., SPHR

Faculty, SHRM Certification Preparation Seminars

Villanova University HR Professional Management

President/General Counsel, Human Resource Trouble Shooters

* * * *

You and Peter Cappelli, along with countless studies that have been completed over the past 20 years, have reiterated the same fact over, and over, and over again -- that HR executives do not think and, therefore, do not implement appropriate human resources strategies for their organizations.

In my view, this stems from their lack of business acumen relating to board matters, financial (income statement, cash flow and balance sheet) matters and line management (sales, R & D, product development, manufacturing, information systems, operations, customer service, etc.) priority matters.

This lack of knowledge prevents them from interacting with their line-management peers and the board on the most important matters that affect the company's operation and future growth.

The question becomes: Why don't they do it? I contend it is because of the lack of business acumen stated above. They do not fully understand the company's current operating objectives or strategic objectives.

However, even if you disagree with me regarding the lack of business acumen being the cause of the problem, the crucial practical issue is how do we get the current cadre of HR executives to think strategically as well as tactically?

Let me propose a suggestion to experts like you and Peter. Perhaps the time has come to challenge the experts to develop several detailed "case examples" (not a case study) on fictitious companies -- a manufacturing company, a computer software/hardware company and a financial institution -- that would demonstrate: (a) how strategic HR objectives are developed and (b) what they might look like after an analysis of the company's key financial documents, and board and top management strategic objectives.

In doing so, you would rely heavily on key financial and operating metrics (not words alone) that the company uses to measure its overall performance. These case examples could serve as a practical written guide for HR executives to use at their own companies.

Here are some items for consideration, in an outline format, for a case example of a typical manufacturing company.

Board Concerns

1. The company's earnings per share need to improve from "X" to "Y" while maintaining or increasing the dividends to stockholders.

2. The market strategy for the main product line needs to expand via acquisition and/or internal new product development so that its market share can increase from "X" to "Y" over the next two years.

3. There is a need to develop a deeper and stronger management team in all functional areas, but especially general managers who can run large business units and eventually the company.

4. The industry is rapidly changing with a much greater emphasis on product innovation that will stem from technology enhancement using technical skills which do not currently exist in the company.

5. Study the feasibility of acquiring a current competitor in an effort to dominate the market for your main product line.

Top Management Objectives

1. Establish new product quality and performance standards, and market/product strategies for each major product line.

2. Identify some profit-improvement opportunities for each major product line and functional areas and quantify their impact on the company's net income.

3. Improve product quality from "X" to "Y" so that we are considered the industry leader, which can serve as the basis for a new product advertisement strategy.

4. Conduct a thorough due diligence on several acquisition candidates so a product comparison can be made with an internally developed product.

5. Improve cash flow by $"X" to help fund potential acquisitions or increased product development costs.

6. Reduce the product time to market for "X" product from "Y" months to "Z" months.

7. Reduce the technology-employee turnover rate from "X" to "Y", while enhancing our technology skill base by adding a "X" software-language capability in both management and technical employees that is needed for future growth.

Human Resource Objectives (Tactical and Strategic)

1. Develop a new corporate culture that encourages, supports and rewards new and different companies, products, innovation and technical employees regarding compensation, benefits, performance appraisal, employee recognition, employee communications, etc. (Strategic)

2. With finance and line management, develop and implement a productivity improvement/cost reduction workshop to identify potential profit improvement opportunities. (Tactical)

3. Develop a new company compensation strategy for stock, incentive and salary that will help retain current top and middle management and technical personnel, while being able to seamlessly embrace a totally new technology discipline. (Strategic)

4. Develop a new executive recruitment and education strategy with a top-tier business school that will improve executive retention and development while increasing the quantity and quality of top-management candidates who can manage in our new technology environment. (Strategic)

5. Enhance the product training and sales incentive compensation programs for the company's main product line that will accommodate the new and existing products. (Tactical)

6. Lead a management review of all the internal processes in product development, manufacturing, quality assurance, marketing and sales, and make appropriate recommendations that will improve the time to market for the main product line from "X" to "Y". (Tactical)

Note: The above Human Resources Objectives recognize the practical reality for most, if not all, companies that the HR executives must be able to concentrate on both strategic and tactical objectives at the same time.

Jack Bucalo

Retired CHRO for a Fortune 500 company

Susan Meisinger responds:

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Thanks for your feedback on my column. I appreciate it.

Yes, it is quite frustrating that we still have HR professionals with a gap in business literacy, and it's something that continues to be a struggle to rectify. Frequently, I believe it's because HR positions are often held by someone who views it as just a job, and not a profession. 

I also think many HR professionals are in positions where they are simply doing what executive management is asking of them. Since the executives never had experience working with a strategically minded and business-savvy HR professional, they don't know what they're missing or should be expecting.

I found, while at SHRM, that one of the real challenges was the mish-mash of preparation people had for the role. Too often, people just "ended up" in HR.

Before we could push a more rigorous academic preparation for the role, we had to first investigate and understand what was being offered in higher education. What we found was course requirements that were all widely divergent in their requirements.

Unlike accounting or other professions, where there are standard course offerings at every school, we found significant variability. Indeed, we even found one HR program in the "home economics" department! (I couldn't believe there even was such a department somewhere!)

I firmly believed that this had to be fixed if we were to promote more rigid academic preparation, and for that reason I launched research into what should be required in an effective HR curriculum; what should be taught to prepare graduates for entry-level positions in the field. 

Based on that research, SHRM published a curriculum template -- which is updated every few years -- that is now being followed by more than 100 higher education institutions. Here's a link to it.

One of the first principles of the template was that HR should be taught in the business school -- which, as you might imagine, wasn't embraced by schools that had placed the program in Psych or elsewhere.

A second challenge we found was that those business schools that did have an HR program didn't have a lot of HR case studies to work with. To address this deficit I commissioned the creation of case studies and learning tools to be made available for free to academics, the members and the public. You can see the latest list here.

One area that I think still needs work is the certification program offered by HRCI. I fear there's not enough of a focus on financial literacy in the exam, although it has been steadily increasing.

Of course, this isn't a small challenge for a profession that's spread across all sizes of businesses in all industries. Some will never get it. Rather than letting myself get depressed about this, however, I remind myself that, just as every accountant won't be able to be a CFO, every HR professional won't be able to be a CHRO.

Thanks for your input -- I really appreciate it!

Peter Cappelli responds:

Thanks, Jack. I think that would be a great idea.

A simple way to do it in terms of a story would be to put those hypothetical business problems to a group of HR consultants who claim to do that kind of work of aligning HR to business need and see what they come up with. What they don't seem to be doing is getting into the metrics of this -- how will we measure costs and benefits?

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