Being proactive means looking ahead and developing a vision of where the company wants to be and how it can use human resources to get there. In contrast, being reactive means responding to problems as they come up. Companies that are reactive may lose sight of the long-term direction of their business; proactive companies are better prepared for the future. For instance, companies on the brink of bankruptcy need to hold on to their key talent, perhaps offering special inducements for star performers to persevere through hard times. Although it might appear counterintuitive to spend money on employee compensation during economic difficulties, it is crucial to retain key employees.157

Strategic HR planning can help a firm develop a focused set of strategic objectives that capitalizes on its special talents and know-how.

For instance, 3M has had an explicit strategy of competing through innovation, with the goal of having at least 25 percent of revenues generated from products introduced during the past five years. To achieve this goal, 3M’s human resource strategy may be summarized as “Hire top-notch scientists in every field, give each an ample endowment, then stand back and let them do their thing. The anything-goes approach has yielded thousands of new products over the decades, from sandpaper and magnetic audio tape to Post-it notes and Thinsulate insulation.”158 One hundred years after its foundation, 3M clearly expresses the philosophy that guides its HR practices: “Every day, 3M people find new ways to make amazing things happen.”

Managers often depend on their personal views and experiences to solve problems and make business decisions. The assumptions on which they make their decisions can lead to success if they are appropriate to the environment in which the business operates. However, serious problems can arise when these assumptions no longer hold. For instance, in the 1980s IBM deemphasized sales of its personal computers because IBM managers were afraid that PC growth would decrease the profitability of the firm’s highly profitable mainframe products. This decision allowed competitors to move aggressively into the PC market, eventually devastating IBM.159

Strategic HR planning can stimulate critical thinking and the development of new initiatives only if it is a continuing and flexible process rather than a rigid procedure with a discrete beginning and a specific deadline for completion. This is why many firms have formed an executive committee, which includes an HR professional and the CEO, to discuss strategic issues on an ongoing basis and periodically modify the company’s overall HR strategies and programs.

Strategic HR planning can help a firm identify the difference between “where we are today” and “where we want to be.” Despite a $1 billion budget and a staff of 7,000, 3M’s vaunted research laboratory was not able in recent years to deliver fast growth, partly because some of the R&D lacked focus and money wasn’t always wisely spent. To speed up growth, 3M announced a series of performance objectives for individual business chiefs who had previously enjoyed much free rein. In addition, 3M introduced specially trained “black belts” to root out inefficiencies in departments ranging from R&D to sales.160

For HR strategy to be effective, line managers at all levels must buy into it. If they do not, it is likely to fail. For example, a large cosmetics manufacturing plant decided to introduce a reward program in which work teams would receive a large bonus for turning out high-quality products. The bonus was part of a strategic plan to foster greater cooperation among employees. But the plan, which had been developed by top executives in consultation with the HR department, backfired when managers and supervisors began hunting for individual employees responsible for errors. The plan was eventually dropped.

When overall business strategy planning is done in combination with HR strategic planning, firms can identify the potential problems and opportunities with respect to the people expected to implement the business strategy.

A cornerstone of Motorola’s business strategy is to identify, encourage, and financially support new-product ventures. To implement this strategy, Motorola relies on in-house venture teams, normally composed of five to six employees, one each from research and development (R&D), marketing, sales, manufacturing, engineering, and finance. Positions are broadly defined to allow all employees to use their creativity and to serve as champions of new ideas.

A substantial amount of research shows that, in the long run, organizations that have a strong sense of “who we are” tend to outperform those that do not. A strategic HR plan that reinforces, adjusts, or redirects the organization’s present culture can foster values such as a customer focus, innovation, fast growth, and cooperation.

Any competitive advantage enjoyed by an organization tends to be short-lived because other companies are likely to imitate it. This is as true for HR advantages as for technological and marketing advantages. For example, many high-tech firms have “borrowed” reward programs for key scientists and engineers from other successful high-tech firms.

The challenge from an HR perspective is to develop strategies that offer the firm a sustained competitive advantage. For instance, a company may develop programs that maximize present employees’ potential through carefully developed career ladders (see Chapter 9), while at the same time rewarding them generously with company stock with strings attached (for example, a provision that they will forfeit the stock if they quit before a certain date). One company that takes this very seriously is Zappos (whose name is a short form of the Spanish word zapatos) because its main business is to sell shoes online. All Zappos’ employees, regardless of their positions, are required to undergo a four-week customer loyalty training course that includes at least two weeks of talking on the phone with customers in the call center at full salary. After a week of training, the new employees are offered $3,000 to leave the company immediately if they wish, no strings attached. This is to ensure that people are there for the love of the job and not the money. Over 97 percent of new employees turn down the buyout. Zappos was recently purchased by Amazon in a deal that was worth $1.2 billion. Zappos’ employees received $40 million in cash and stocks.

Developing HR strategies that support the firm’s overall business strategy is a challenge for several reasons. First, top management may not always be able to enunciate clearly the firm’s overall business strategy. Second, there may be much uncertainty or disagreement concerning which HR strategies should be used to support the overall business strategy. In other words, it is seldom obvious how particular HR strategies will contribute to the achievement of organizational strategies. Third, large corporations may have different business units, each with its own business strategies. Ideally, each unit should be able to formulate the HR strategy that fits its own business strategy best. For instance, a division that produces high-tech equipment may decide to pay its engineering staff well above average to attract and retain the best people, whereas the consumer products division may decide to pay its engineers an average wage. Such differentials may cause problems if the engineers from the two divisions have contact with each other. Thus, diverse HR strategies may spur feelings of inequity and resentment.

Some managers are so busy putting out fires that they have no time to focus on the long term. Nonetheless, a successful HR strategy demands a vision tied to the long-term direction of the business. Thus, a major challenge of strategic HR planning is prodding people into stepping back and considering the big picture.

In many small companies, staffs are so absorbed in growing the business today that they seldom pause to look at the big picture for tomorrow. Also, strategic HR planning in small companies is often synonymous with the whims of the company owner or founder, who may not take the time to formalize his or her plans.

No two firms are exactly alike. Firms differ in history, culture, leadership style, technology, and so on. The chances are high that any ambitious HR strategy or program that is not molded to organizational characteristics will fail.161 And therein lies one of the central challenges in formulating HR strategies: creating a vision of the organization of the future that does not provoke a destructive clash with the organization of the present.

Just as no two firms are exactly alike, no two firms operate in an identical environment. Some must deal with rapid change, as in the computer industry; others operate in a relatively stable market, as in the market for food processors. Some face a virtually guaranteed demand for their products or services (for example, medical providers); others must deal with turbulent demand (for example, fashion designers). Even within a very narrowly defined industry, some firms may be competing in a market where customer service is the key (IBM’s traditional competitive advantage), whereas others are competing in a market driven by cost considerations (the competitive advantage offered by the many firms producing cheap computers). A major challenge in developing HR strategies is crafting strategies that will work in the firm’s unique environment to give it a sustainable competitive advantage.

HR strategies that originate in the HR department will have little chance of succeeding unless managers at all levels—including top executives—support them completely. To ensure managers’ commitment, HR professionals must work closely with them when formulating policies.

The acid test of any strategic plan is whether it makes a difference in practice. If the plan does not affect practice, employees and managers will regard it as all talk and no action.

Cynicism is practically guaranteed when a firm experiences frequent turnover at the top, with each new wave of high-level managers introducing their own freshly minted strategic plan. Perhaps the greatest challenge in strategic HR planning lies not in the formulation of strategy, but rather in the development of an appropriate set of programs that will make the strategy work.

Debate continues over whether strategies are intended or emergent—that is, whether they are proactive, rational, deliberate plans designed to attain predetermined objectives (intended) or general “fuzzy” patterns collectively molded by the interplay of power, politics, improvisation, negotiation, and personalities within the organization (emergent).162 Most people agree that organizations have intended and emergent strategies, that both are necessary, and that the challenge is to combine the best aspects of the two.

Intended strategies can provide a sense of purpose and a guide for the allocation of resources. They are also useful for recognizing environmental opportunities and threats and for mobilizing top management to respond appropriately. On the downside, intended strategies may lead to a top-down strategic approach that squashes creativity and widespread involvement.

Emergent strategies also have their advantages and disadvantages. Among their benefits: (1) They involve everyone in the organization, which fosters grassroots support; (2) they develop gradually out of the organization’s experiences and, thus, can be less upsetting than intended strategies; and (3) they are more pragmatic than intended strategies because they evolve to deal with specific problems or issues facing the firm. On the negative side, emergent strategies may lack strong leadership and fail to infuse the organization with a creative vision.163

Effectively combining intended and emergent strategies requires that managers blend the benefits of formal planning (to provide strong guidance and direction in setting priorities) with the untidy realities of dispersed employees who, through their unplanned activities, formulate emergent strategies throughout the firm.

Strategic HR plans must be flexible enough to accommodate change.164 A firm with an inflexible strategic plan may find itself unable to respond to changes quickly because it is so committed to a particular course of action. This may lead the organization to continue devoting resources to an activity of questionable value simply because so much has been invested in it already.165 The challenge is to create a strategic vision and develop the plans to achieve it while staying flexible enough to adapt to change.

Work flows are the ways tasks are organized to meet production or service goals. Organizations face several choices in what they emphasize as they structure work flows (Chapter 2). They can emphasize:

• ▪ Efficiency (getting work done at minimum cost) or innovation (encouraging creativity, exploration, and new ways of doing things, even though this may increase production costs)

• ▪ Control (establishing predetermined procedures) or flexibility (allowing room for exceptions and personal judgment)

• ▪ Explicit job descriptions (in which each job’s duties and requirements are carefully spelled out) or broad job classes (in which employees perform multiple tasks and are expected to fill different jobs as needed)

• ▪ Detailed work planning (in which processes, objectives, and schedules are laid out well in advance) or loose work planning (in which activities and schedules may be modified on relatively short notice, depending on changing needs)

Staffing encompasses the HR activities designed to secure the right employees at the right place at the right time (Chapter 5). Organizations face several strategic HR choices in recruiting, selecting, and socializing employees—all part of the staffing process. These include:

• ▪ Promoting from within (internal recruitment) versus hiring from the outside (external recruitment)

• ▪ Empowering immediate supervisors to make hiring decisions versus centralizing these decisions in the HR department

• ▪ Emphasizing a good fit between the applicant and the firm versus hiring the most knowledgeable individual regardless of interpersonal considerations

• ▪ Hiring new workers informally or choosing a more formal and systematic approach to hiring

Employee separations occur when employees leave the firm, either voluntarily or involuntarily (Chapter 6). Some strategic HR choices available to the firm for handling employee separations are:

• ▪ Use of voluntary inducements (such as early retirement packages) to downsize a workforce versus use of layoffs

• ▪ Imposing a hiring freeze to avoid laying off current employees versus recruiting employees as needed, even if doing so means laying off current employees

• ▪ Providing continuing support to terminated employees (perhaps by offering them assistance in securing another job) versus leaving laid-off employees to fend for themselves

• ▪ Making a commitment to rehire terminated employees if conditions improve versus avoiding any type of preferential hiring treatment for ex-employees

Managers assess how well employees are carrying out their assigned duties by conducting performance appraisals (Chapter 7). Some strategic HR choices concerning employee appraisals are:

• ▪ Developing an appraisal system that is customized to the needs of various employee groups (for example, by designing a different appraisal form for each job family) versus using a standardized appraisal system throughout the organization

• ▪ Using the appraisal data as a developmental tool to help employees improve their performance versus using appraisals as a control mechanism to weed out low producers

• ▪ Designing the appraisal system with multiple objectives in mind (such as training, promotion, and selection decisions) versus designing it for a narrow purpose (such as pay decisions only)

• ▪ Developing an appraisal system that encourages the active participation of multiple employee groups (for example, supervisor, peers, and subordinates) versus developing one that asks solely for the input of each employee’s supervisor

Training and career development activities are designed to help an organization meet its skill requirements and to help its employees realize their maximum potential (Chapters 8 and 9). Some of the strategic HR choices pertaining to these activities are:

• ▪ Choosing whether to provide training to individuals or to teams of employees who may come from diverse areas of the firm

• ▪ Deciding whether to teach required skills on the job or rely on external sources for training

• ▪ Choosing whether to emphasize job-specific training or generic training

• ▪ Deciding whether to hire at a high wage people from outside the firm who already have the required talents (“buy skills”) or to invest resources in training the firm’s own lower-wage employees in the necessary skills (“make skills”)

Compensation is the payment that employees receive in exchange for their labor. U.S. organizations vary widely in how they choose to compensate their employees (Chapters 10, 11, and 12). Some of the strategic HR choices related to pay are:

• ▪ Providing employees with a fixed salary and benefits package that changes little from year to year (and, therefore, involves minimal risk) versus paying employees a variable amount subject to change

• ▪ Paying employees on the basis of the job they hold versus paying them for their individual contributions to the firm

• ▪ Rewarding employees for the time they have spent with the firm versus rewarding them for performance

• ▪ Centralizing pay decisions in a single location (such as the HR department) versus empowering the supervisor or work team to make pay decisions

Employee and labor relations (Chapters 13 and 15) refer to the interaction between workers (either as individuals or as represented by a union) and management. Some of the strategic HR choices facing the firm in these areas are:

• ▪ Relying on “top-down” communication channels from managers to subordinates versus encouraging “bottom-up” feedback from employees to managers

• ▪ Actively trying to avoid or suppress union-organizing activity versus accepting unions as representatives of employees’ interests

• ▪ Adopting an adversarial approach to dealing with employees versus responding to employees’ needs so that the incentive for unionization is removed (enlightened management)

Employee rights concern the relationship between the organization and individual employees (Chapter 14). Some of the strategic choices that the firm needs to make in this area are:

• ▪ Emphasizing discipline as the mechanism for controlling employee behavior versus proactively encouraging appropriate behavior in the first place

• ▪ Developing policies that emphasize protecting the employer’s interests versus policies that emphasize protecting the employees’ interests

• ▪ Relying on informal ethical standards versus developing explicit standards and procedures to enforce those standards

Firms that operate outside domestic boundaries face a set of strategic HR options regarding how to manage human resources on a global basis (Chapter 17). Some of the key strategic HR choices involved in international management are:

• ▪ Creating a common company culture to reduce intercountry cultural differences versus allowing foreign subsidiaries to adapt to the local culture

• ▪ Sending expatriates (domestic employees) abroad to manage foreign subsidiaries versus hiring local people to manage them

• ▪ Establishing a repatriation agreement with each employee going abroad (carefully stipulating what the expatriate can expect upon return in terms of career advancement, compensation, and the like) versus avoiding any type of commitment to expatriates

• ▪ Establishing company policies that must be followed in all subsidiaries versus decentralizing policy formulation so that each local office can develop its own policies