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 Strategy
Presented at the 2nd
HR Forum
Jeddah
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 Strategy
with Business Strategy?

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 Welch
CEO

Productivity Drives Profits
+18%

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

…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

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

Cost

Effective people management can
reduce costs

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 GDP
not 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
them.
- 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’re
effective,
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

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 Interview
1. 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
unit

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

unit
 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
HR
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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