Aligning Human Resources and Business Strategy This page intentionally left blank Aligning Human Resources and Business Strategy Second edition Linda Holbeche AMSTERDAM • BOSTON • HEIDELBERG • LONDON • NEW YORK • OXFORD PARIS • SAN DIEGO • SAN FRANCISCO • SINGAPORE • SYDNEY • TOKYO Butterworth-Heinemann is an imprint of Elsevier Butterworth-Heinemann is an imprint of Elsevier Linacre House, Jordan Hill, Oxford OX2 8DP, UK 30 Corporate Drive, Suite 400, Burlington, MA 01803, USA First edition 1999 Paperback edition 2001 Reprinted 2002 (twice), 2003, 2004 (twice) Second edition 2009 Copyright © 2009 Roffey Park Institute and Linda Holbeche. Published by Elsevier Ltd. 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British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloguing in Publication Data A catalogue record for this book is available from the Library of Congress ISBN: 978-0-7506-8017-2 For information on all Butterworth-Heinemann publications visit our web site at www.elsevierdirect.com Typeset by Macmillan Publishing Solutions (www.macmillansolutions.com) Printed and bound in Great Britain 09 10 11 12 13 10 9 8 7 6 5 4 3 2 1 Contents Preface to the First Edition vii Preface to the Second Edition ix Acknowledgements xiii P a r t I The Need for Strategic Human Resources 1 1. Introduction: From Business Partnering to Leadership 3 2. The Context for Strategic HR 29 3. Transforming HR into a Strategic Partner 66 4. Measuring the Impact of Strategic HRM 89 5. Aligning Business and HR Strategy 124 P a r t I I Strategies for Managing and Developing Talent 163 6. Recruitment and Retention Strategies 165 7. Managing and Rewarding for High Performance 194 8. Strategies for Developing People 232 9. Developing Effective Career Strategies 263 10. Developing International Managers 288 11. High-Potential Assessment and Succession Planning 308 P a r t I I I Human Resources as a Strategic Function 339 12. Skills for HR Strategists 341 13. Working Across Boundaries 365 14. Global HRM 381 P a r t I V Implementing Strategic Change 405 15. Bringing about Culture Change 407 16. Mergers and Acquisitions 437 17. Creating a Learning Culture 460 Conclusion 477 Index 489 This page intentionally left blank Preface to the First Edition So much has been written about the changing role of HR that the reader might wonder why I have sought to add to the debate. It seems that being an HR professional is a tough proposition these days and that there are endless require- ments to prove that value is being added by HR interventions. The pressures on the function are enormous and in many cases, resources are thinly stretched. The HR function is frequently accused of being reactive. Yet I believe that the situation need not be so bleak and that HR has potentially the most significant contribution to make of all the functions, if it manages to combine operational excellence with a really strategic approach. My motivation in researching and writing this book is to find out how excel- lent professionals are delivering value. That is not to say that I believe that the practitioners featured in this book have a blueprint for success but some of the approaches described here are likely to provide food for thought for other organizations. Similarly, I am not attempting here to address all aspects of a stra- tegic and operational HR agenda. I have focused on some of the performance and developmental issues which I consider key if business and HR strategies are to be aligned. This is not therefore a technical book, but one which highlights what practitioners are doing with respect to strategic recruitment, organizational development, management and international leadership development and change management. I have tried to illustrate the theory with ‘live ’ cases where time permitted, and have included checklists which I hope will be useful to HR teams and line managers in assessing their needs and service provision. I hope that the ways in which the HR strategists featured in this book are approaching the challenges of aligning business and HR strategies in their organ- izations will provide evidence that outstanding value can be added by HR and offer encouragement to practitioners who are finding the quest to add value hard going. This page intentionally left blank Preface to the Second Edition Since the first edition of this book was published, so much has changed in terms of the employment landscape, HR theory and priorities, that simply updating the text has not been enough. HR is undergoing perhaps more rapid transformation than any other function on its journey to delivering value. In today’s fast-chang- ing economic context equipping organizations to deal with the pressures they are likely to experience calls for a truly strategic response from HR. And of all the functions HR has potentially the most significant contribution to make, if it man- ages to combine operational excellence with a really strategic approach. Building talent pipelines, changing organizational structures and cultures are just some of the opportunities for HR to exercise leadership. At the same time, much has stayed as it was ten years ago. Alongside the opportunities sit the pressures. It still seems that being an HR professional can be a tough proposition and there are endless requirements to prove that value is being added by HR interventions and, in many cases, resources remain thinly stretched. As the HR agenda moves on so the nature of HR interventions contin- ues to expand, demanding new disciplines, skill sets and behaviours, even within HR’s traditional heartland. Strategic workforce planning can put organizations ‘ on the front foot’ when it comes to optimizing the changing labour market and demographic trends. Employer branding, employee segmentation and other analytical techniques, and holistic approaches to reward enable organizations to attract and retain the talent they need for success. Organizational design and development, geared to building flexible, agile cultures are an essential part of the HR role. Continuous professional development is key to raising the game. Similarly, the capabilities HR is required to demonstrate have also moved on significantly in the last decade since I wrote the first edition of this book. No HR professional can expect to be taken seriously if he or she is unable to understand and speak the language of business, to translate the business strategy into rel- evant people processes and goals which are appropriate to the context dynamics facing their organization. HR needs the ability and credibility to work collabo- ratively with line managers to continually push up the standards and practice of people management and development. x Preface to the Second Edition The evolving HR role is moving ever more swiftly to becoming a core busi- ness leadership role, in which HR’s own contribution is to ensure that the organi- zation is equipped for success, now and in the future. And in the wake of various corporate failures, particularly within the global financial services sector, there is increasingly a spotlight on HR’s developing role in governance, raising questions such as what is HR’s role with respect to building cultures where accountability and ethical practice become the order of the day rather than letting high bonuses form part of a culture of excess and irresponsibility? Similarly, should HR pro- fessionals more obviously have a role to play as non-executives on boards, ensuring that good practice in appointments and reward at the most senior lev- els in organizations reflects the very best emerging practice and encourages high standards of executive behaviour? So in writing this second edition of the book I have attempted to update my overview of the HR landscape, agenda, skill set and challenges in the light of the changing context, theory and practice. My motivation in researching and writing the book is to find out how excellent professionals are delivering value. I have tried to illustrate the theory with ‘ live ’ cases where time permitted as well as drawing on published research. In some cases I have revisited and updated where possible case studies featured in the first edition of the book as well as adding other examples of what I consider interesting practice. That is not to say that I believe that the practitioners featured in this book have created a blueprint for success but I hope that some of the approaches described here will provide food for thought for others. Similarly, I am not attempting here to address all aspects of a strategic and operational HR agenda. I have focused on some of the per- formance and developmental issues which I consider key if business and strategy are to be gainfully aligned. This is not therefore intended as a technical book, but one which highlights what practitioners are doing with respect to strategic recruitment, organizational development, management and international leadership development and change management.