In many companies, especially in small-medium sized ones, Human Resource Management (HR) has been viewed as a necessary evil, primarily an administrative function. Whether internal or outsourced, senior management often sees the major roles of HR to be ensuring compliance with workplace regulations, mitigation of legal risk, record keeping and dealing with employee problems.
But today, these perceptions of HR’s role are misguided. Certainly those functions must still be managed. But there are so many other critical business needs that are all centered around HR.
The vast majority of CEOs believe that some of their biggest business challenges today are:
- Attracting and retaining talent with the requisite skill sets for current and future job openings.
- Succession planning and next generation leadership development.
- Managing generational differences in the workplace.
Each of these business challenges are interrelated. To effectively address these issues, someone in the organization must be responsible for managing and driving the solutions in a holistic manner.
This can be accomplished through a modern and empowered HR department.
Importance of HR in Strategic Planning Process
Due to their unique perspective, it is critical that HR participates in the development of your strategic plan. They interact daily with employees at all levels of the company. They observe and recognize the talent in the organization. They recognize the company culture that exists, both the good and the bad. They understand employee and management skill deficiencies. And they know the future human capital needs required to achieve the company’s strategic objectives.
They should be tasked with evaluating current resources, identifying the gaps and then developing the necessary training programs to address those gaps.
Elevating HR to a strategic level in the organization will result in them being viewed as a true partner by the senior management team. They will also become a valuable, trusted advisor to the CEO.
Attracting and Hiring Talent
HR and corporate marketing must become joined at the hip. Company branding plays a critical role in attracting talent to the organization. Without a well constructed, intuitive and informative website - along with a comprehensive social media strategy - it will become increasingly difficult to attract qualified candidates to your company. Relying on job boards and recruiters to find qualified candidates will not be sufficient.
Today’s generation of workers will use the web and social media to research potential employers and their reputations. What will they see when they land on your home or career page? What impression will they get when they look at your Linkedin Profile? What will they find out when they go to Glassdoor?
If done well, the following will help attract top talent:
- Showcase things that speak to your company culture and values on your website.
- Include videos from front line associates explaining what it’s like to work there.
- Present evidence of diversity and inclusion in the workplace.
Attracting qualified potential candidates is only the first step. Making good hiring decisions is really the important part. This is where many companies make costly mistakes because they are using the same hiring processes that have been utilized for decades. They first review resumes, supervisors interview a few candidates then they make a hiring decision based mostly on the interviews and their respective “likeability” factor. Typically this process results in roughly a 50% successful hiring track record.
Dramatically improving this statistic will require efforts by HR in training managers on successful hiring and interviewing techniques, utilizing appropriate assessment tools and managing the entire hiring process.
We have found that developing the core competencies required for each position in the company is the cornerstone of improving hiring decisions. These core competencies are then utilized in developing interview questions, performance reviews, succession planning and individual development plans. Thus they permeate the entire spectrum of human resource management.
Talent Retention & Development
Retaining talented associates all starts with company culture. If they feel valued, trusted, empowered and appreciated, they are much more likely to stay with the company. For more insight into this important topic refer to my blog “Creating a Culture of Employee Engagement.”
We have also utilized regular (every three years) employee opinion surveys to get their candid feedback on an array of subjects and to gauge their overall satisfaction level. The key to success is paying attention to their feedback, telling them what you heard and then actively addressing the most critical areas based on the survey results.
One area that always ranks lowest on most employee opinion surveys is adequate training for associates. Employees want to be successful, be seen as knowledgeable by peers and customers, and feel like they are expanding their skills. So skills training makes them feel valuable and appreciated, and increases their self esteem.
Well done performance reviews can also be used as a retention tool. It is important to approach the performance review process as a way to create a two-way feedback culture, and not as a necessary administrative task that must be completed each year. If done well, nothing in the review should be a surprise.
Of course, to retain top talent, companies need to be sure their compensation is fair and in line with market value. Therefore it is critical to know what the market value is for each position.There is widespread acknowledgement that there will be a shortage of qualified talent as more Baby Boomers retire. This will only drive up the market value for skilled employees and top performers. Companies will need to have a good pulse on market values to avoid losing their best employees.
Many companies are facing a large exodus of talent and knowledge as Baby Boomers are retiring. They are challenged with how to capture that knowledge before it walks out the door. They are also challenged with understanding Millennials and how to best incorporate them into their environment. This is further complicated by the fact that most companies may have three to five different generations in their workforce, each having their own unique experiences, expectations and communication styles.
There are many resources that address the Millennial generation and their unique expectations. But a few key traits that we have discovered about them are:
- They are very smart and are hard workers.
- They can teach us things that we Boomers struggle to learn and understand.
- They like being assigned projects that stretch them.
- They want and appreciate frequent feedback.
- They want to learn and grow their knowledge base.
- Culture is very important to them.
- They value other things besides work, but will work tirelessly to complete assigned tasks.
Educate all employees on generational differences and their respective values within the organization. Any company will need significant contributions from all generations in order to succeed long term.
Create a co-mentoring culture where Millennials and Xers teach Baby Boomers how to use the communication tools that are instinctive to them. Have the Boomers and Xers teach the Millennials on how to effectively run, and sustain a business. Assign project to teams that include all three generations.
If you do these things you will be surprised by their contributions, and how they can better position your company for the future.
This is a huge concern for many companies of all sizes, and is not only related to executive levels in organizations. Even if successors are already identified for senior positions, who will fill their roles as they move up the ladder?
HR must develop a well conceived succession planning process and drive the execution of it throughout the organization. Here are the steps that should be included:
- Start by identifying succession candidates, both internal and external for all senior level positions. Then do the same for all levels of management in the company, and for all “highly valued or skilled ” employees. Create standard succession planning forms that indicate relative readiness.
- Next, identify all the high potential candidates in the company. These are internal successor candidates, but also employees who appear to have the potential for higher responsibility in the organization.
- Create Individual Development Plans (IDPs) for all successor candidates and high potentials. These IDPs should include:
- Core competencies required.
- Specific plans to address any “gaps”.
- Formal training required.
- Stretch assignments that better prepare them for the next level.
- Leadership development training.
- Specific coaching and mentoring plans.
- Review and update them at least annually and during performance reviews.
Doing succession planning well requires a lot of work and direction. HR is the logical choice to lead this initiative.
Cross Company Results
We elevated HR to a strategic role several years ago and the results have been transformational:
- We’ve hired 88 new employees in the last three years and have a 90% average “New Hire Success Rate” (employees still in their job after 12 months). The industry norm is approximately 50%.
- Our total employee retention rate is 94.2% (or 5.8% employee turnover), again well above the industry norm.
- Millennials now represent 19% of our total employee population.
- We have succession plans in place for all executive, mid-management, & key associate positions.
- We have Individual Development Plans (IDPs) in place for all successor candidates and high potential associates.
- Additionally, managers are provided behavioral and personality assessments along with 360 degree feedback and coaching. We are also developing our own internal executive management training program to prepare the next generation of leaders.
- Our financial performance has also been stellar. Our organic sales have increased 35% over the last five years and our ESOP per share stock price has increased 334%.
I hope you see that HR has become an integral part of our strategy to prepare for the future needs of the company - attracting, hiring, developing and retaining talent, developing our next generation of leaders, and sustaining the culture that is so valued by our associates.
Human Resource Management has been just as important to our company’s recent success as our sales, marketing and business planning efforts have been. It has helped position us for long term growth, sustainability and managerial continuity. It can for you as well.
About the author:
Steve Earley is the CEO of Cross Company, a 100% employee-owned ESOP headquartered in Greensboro, NC. Their mission is “applying technologies to improve machine and manufacturing process performance.” Since 1974, Cross has acquired 18 companies and successfully integrated them into their unique ESOP culture. For more blogs from Steve, please read his Leadership Series. You can contact Steve directly by e-mail.