Aligning HR Strategy with Business Strategy

© 2010 KPMG Al Fozan & Al Sadhan, the Kingdom of Saudi Arabia member firm of KPMG International, a Swiss cooperative. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.

January 2008

PEOPLE & CHANGE ADVISORY Practical Tools for Linking HR Strategy to Business StrategyPresented at the 2nd HR ForumJeddah

May 3, 2010

ADVISORY

AGENDA

1.So What is Strategic Planning?

2.Why Align Human Resources with Business

Strategy?

3.Barriers to Alignment

4.Practical Tools

So What is Strategic Planning?

The process of ensuring that today’s activities help to achieve tomorrow’s goals.

Strategic planning is an organization's process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy, including its capital and people.

Gain Clarity and

Insight

For What Purpose?

So What is Human Resource Strategic Planning?

“Defines how the organization’s goals

will be achieved through people, by

means of HR strategies and integrated

HR policies and practices.”

Having the right people in the right

place at the right time, suitably

rewarded and engaged, to meet or

exceed the standards of the job and the

needs of the customer.

The HR Value Proposition

People Management Solutions

Tailored to Fit

The Needs of Your Organization

Why Align HR Strategywith Business Strategy?

Contribution

Competition

Contribution

People are our most important asset.

- Jon Calhoun, Director, Producer

Get the right people in the right jobs – it is more important than developing a strategy.

- Jack WelchCEO

(retired)

Productivity Drives Profits

Competition

You Do Business in a Global World

The world of business is changing…

radically and fast!

Did You Know?

“Bank back office transactions are

being outsourced from Europe to

Saudi Arabia.”

- European Bank Executive, 2010

“The most important corporate resource over the next 20 years will be talent. It's also the resource in the shortest supply. Are you ready to fight for your fair share?”

- Fast Company

Did You Know?

…there are 1,500 people just like you.

Yet China will have a severe labour shortage by 2020.

Chinese labour shortage drives up wages

Published: 4 March 2010

“Emerging markets with high

population growth are not

immune to the talent shortage.

India, for example, has a

growing population but lacks

skilled professionals.” - Boston Consulting Group

“Malaysia … must send out the message

that they want skilled foreigners to come.”

- Hewitt Associates

Did You Know?

The Saudization of the oil and gas, and transportation industries has reached

roughly 70-100 percent of the workforce.

50 million population

by 2050

“Saudi hospitals need

100,000 nurses, but there are

currently only 1,000 Saudi

nurses and around 53,000

expatriate nurses recruited

from Asia, Africa, and the

West.”

- Migration Policy Institute, 2004

The World Bank anticipates that unmet

demand for nurses will more than triple

[worldwide] during the next 15 years.

California recruits Filipino nurses

California needs 108,000 new nurses by 2020

California nursing starting wages in 2008 were $75,000 plus benefits and perks

Brain Drain

Effective people management can reduce costs

Did You Know?

The Cost of Human Capital (wages, benefits, transportation, visas, subsidies, training) typically represents 77% of a typical Saudi organization’s annual operating budget.

Hiring mistakes can be costly!

Middle manager = 6 month wages

Executive = 18 month wages

Remittances by foreign workers cost the Saudi Arabian economy more than 60 billion riyal per year.

That’s 20% of GDPnot spent inside the country!

- Migration Policy Institute, 2004

CFOs admitted to Forbes that roughly 65% of restructuring activities failed to meet their financial targets during the past two decades.

The lack of [alignment] between

human resource management and

strategic business planning is

increasingly acknowledged as a

major source of implementation

errors.

It is alleged that companies develop

plans based on extensive marketing

and financial data but neglect the

human resource requirements

necessary to successfully implement

- K. Golden and V. Ramanujam

The Strategy Disconnect

• 60% of typical organizations do not link their strategic priorities to their budgets

• 2/3rds of HR operations develop strategic plans that are not linked to their organization’s strategy.

Prof. Robert Kaplan

When employees are not engaged earnings per share decline 11% on average.

Barriers to Alignment

Poor Service

Lack of Competence

Lack of Credibility

Human Resources is our weakest department.

- Saudi Arabian Petrochemical General Manager

60% of U.K. managers view HR as administrative

58% believe HR lacks the capability to develop talent management and other key strategies

- CIPD, 2009

Leaders Rely on their Best

HR is Overhead Cost

What is your ratio of HR staff to full-time employees?

1:80 1:125 1:200

Capability Assessment

Four Groups, UK

Micro Factors Transformational Transactional

Sponsorship of HR by the business

Strong Supportive

Minimal Sufficient

Perception of HR by the business

Efficient Creative Indispensable

Support function Impediment Inefficient

Type of work done Strategic Problem solving

Back office support Administrative

Nature of Work Advisory Integrated Facilitative

Enforcement Fragmented Rule-bound

Developing Capability

Listen to your internal customers

Meet their operational needs

Learn about the business

Grow competence

Faster, Better, Cheaper

If you can’t demonstrate

you’reeffective, you’re invisible

Practical Linking Tools

If you are invited to participate in

strategic planning…

Be Prepared

If the only tool you have is a hammer, every problem will look like a nail.

- Abraham Maslow, Psychologist

“Best Practices”

Analyze

Understand

Innovate

Alignment Tools

1. Business Context

2. Outcomes

3. HR Redesign

4. Accountability

Please send an email for those techniques discussed but not shown.

Business Context

Dialectic SWOT Analysis

Business Context (continued)

SWOT-SF Analysis This variation adds identification of Successes and Failures

Structured Interview1. Top objectives for the year?

2. Problems or barriers that may hinder accomplishment?

3. Then determine whether there may be a strategic role HR could play.

4. Ask if the manager would like assistance.

5. Negotiate performance outcomes, methods, timing and other details.

Outcomes

Importance-Performance

Analysis Matrix

Outcomes (continued)

HR Performance Benchmarking Be prepared to look outside your industry and operational

Be aware of current “Best Practise” concerns and use sound methodology

Be conscious of the need to adapt western HR methods to Middle Eastern culture and business norms

HR Redesign

Linking Vision to Objectives

Accountability

Kirkpatrick 4-Level Evaluation Model

Level Evaluation Type Example Who Conducts

1 Reaction Post-session assessment HR

2 Learning Post-session testing of knowledge gain, skill mastery, behaviour or process improvement

3 Transfer On-the-job assessment of skills, knowledge, behaviour or process improvement

HR and line management

4 Impact Evaluate impact on the firm HR, line management, specialists

Accountability (continued)

Metrics

1. Show line management where improvements in Human Capital

performance can enhance the bottom line.

2. Use international “benchmark” standards and be your own

toughest critic.

&Questions

Answers phurly@kpmg.com

Aligning HR Strategy with Business Strategy

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Transcript of Aligning HR Strategy with Business Strategy

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