Strategic Planning for Human Capital
February 2008
Co-Authored by:
Jim Schultz
Bill Welter
President
President
Pretty Good Consulting, Inc.
8101 E. Dartmouth Ave. #20
Denver CO 80231-4258
Adaptive Strategies, Inc.
235 Lamont Parkway
Bartlett IL 60103-4528
Phone: 303 671 6658
Fax: 303 671 6659
Phone: 312-802-6476
Fax: 630-289-7340
Email: Schultz1@aol.com
Email: bill.welter@AdaptStrat.com
www.prettygoodconsulting.biz
www.adaptstrat.com
1
Strategic Planning for Human Capital
The challenge for leaders, no matter what their industry or where they are
located in the hierarchy is to manage three “musts.” Leaders must:



Get positive results with today’s business model and assets
Set the direction for the business
Build the capabilities that will be needed in the future.
We have seen superior execution of the first “must” over the past fifteen years.
Organizations have downsized, rightsized, outsourced, off-shored, and become
“lean and mean” to protect the profit line of the latest quarterly income
statement. However, unless tomorrow is going to be a linear extrapolation of
today, we think most executives have been pressured into paying today’s “Peter”
by robbing the “Paul” of tomorrow.
Over the past few years organizations have awakened and collectively come to
the realization that, in the long run, the top line has to grow and it has to grow
significantly. Strategic thinking for top line growth has started to come to the
fore and organizations are struggling with the paradigm shift from efficiency to
effectiveness. Furthermore, few industries will win because of technology alone –
it’s really all about the people who use the technology and other “hard assets” to
bring about success. Technology and assets can be copied and, therefore, are
essentially “table stakes” in the game of business. Winning requires talent. And
talent is found in the capabilities and capacity of our managers and workers.
Human Capital and Strategic Planning and Execution
As little as 25 years ago a company’s strategy was built around automation, hard
assets and financial projections. Strategies were built around sophisticated
spreadsheets and we fell in love with “the numbers” and technology. For
example, in the early 1980s Roger Smith committed GM to a “factory of the
future” program that was focused on eliminating factory people and driving
automobile success with robotics. GM spent enough money on that program that
they could have bought Toyota – and they failed! Following that, we saw
companies embrace “knowledge” as an asset, but they saw technology, not
people, as the preferred route. More money down the drain.
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Let’s cut to the chase – strategy has to include people. People make judgments,
computers crunch numbers. People execute strategy and tactics, equipment just
runs. People understand context. People anticipate the future. And so on and so
on. So why do we relegate people (and HR) to secondary status when it comes
to strategy? It’s a mystery to us, but we’d like to see it changed.
Strategic Results: Intention and Execution
Our position is that getting desired results from any business requires the
ongoing interplay of intention and execution, as depicted in the following
graphic. Developing goals and the associated strategy without considering the
capabilities and capacity on-hand and needed is a fool’s errand that sets an
organization up for early failure. However, we see this all too often. Goals are
defined and a strategy is built with the assumption that execution will happen
because the executives say so.
There is an old axiom that we need to consider on an ongoing basis: a marginal
strategy that is well executed will always beat a brilliant strategy that is poorly
executed. Our advice is simple: consider execution capabilities and capacity while
you develop strategy. And since execution depends on people, HR better be
involved from the beginning!
Organizational
Success
Intention
Goals
Execution
Strategy
Capabilities
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Capacity
Strategic Planning Process
We’re not sure what your strategic planning and execution process looks like, but
more likely than not, you’ll find your process looks something like this.
Prepare
To
Plan
(Re)define Vision
&
Mission & Goals
Define
Grand
Strategies
Conduct
Environmental
Scan
Develop
Portfolio of
Projects
Perform
S.W.O.T.
Analysis
Implement the
projects
Evaluate
performance
to plan
Ongoing feedback
****************************************************************
A Sidebar For the H.R. Practitioner - The “Strategy Table” Question
There has been no shortage of articles devoted to the issues surrounding H.R.’s
place at “the table.” Our focus here is not to discuss whether you should or
shouldn’t be at the table but merely to ask “Are you there?” as the answer
depends on where we start the process of integrating and aligning your H.R.
strategic plans with the corporate strategic plan.
Assuming that you have a place at the table the process begins with input to the
strategic discussions. Failing to have a place at the table will cause us to begin at
the point where someone hands you the Strategic Plan and you’ll need to
deconstruct its H.R. impacts.
Either way, you’ll need to have fairly rapid access to your data as we have found
that Business Plans gain momentum with time. If you need to suggest a change
in direction, the time to do it is now!
****************************************************************
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Preparing to Plan
Our favorite way to prepare for a strategy session is to get a cross-functional and
cross-hierarchical group of managers and executives together and explore the
ten questions, below. If there is not an open and candid conversation around
these questions then you can prepare to fail. If executives feel that lower level
managers are not interested or are not capable of conversation at this level then
either they are too arrogant for their own good or the managers need to be
educated or replaced. If the management team is not capable of this discussion,
the company is not capable of intercepting the future.
Ten Strategic Questions
When we work with clients about business and H.R. strategy
we often focus them on ten questions. Here is the list.
1.
2.
3.
4.
5.
Executive questions
Where are we?
How is our reality changing?
Where are we going?
Why are we going there?
How will we transition from today to our desired
tomorrow?
Middle management questions
1. Do the managers know and understand the answers
to the five executive questions?
2. What has to change here?
3. What barriers exist to making the needed changes?
4. How will we deal with the barriers?
5. What don’t the executives know that they should?
Vision & Mission
The work around an organization’s vision and mission was very much in vogue in
the early 1990s and then seemed to drop from favor. What a pity! How can you
expect the workers to be engaged in their work and their organization if they
don’t know what it stands for and where it’s going? Pride is a huge motivator.
Do you want a motivated workforce? Of course.
However, a word of warning, this is not an exercise to give to the consultants.
This takes time on your part to sit with workers and managers and have a
conversation about the company’s mission (Why do we exist?) and vision (What
do we want to look like in X-years?)
Don’t try to do this with a broadcast speech or a series of e-mails unless you
really want to build cynicism in the organization.
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The Environmental Scan
Environmental scanning is a tool used by futurists, business trend analysts and
corporate issue managers to identify emerging issues and trends. It involves
collecting data from as wide an array of sources as possible in order to obtain
the broadest scope of information from which to base decisions as well as to
avoid being blind-sided by a development you could have foreseen. The scan
allows you to really step back, or as some like to say, “Take the helicopter view”
in order to answer the question of “What is going on here?”
One common acronym used to help categorize your environmental scan is
PESTLE, for Political, Economic, Social, Technological, Legal and Environmental.
The World Future Society categorizes trends by Demography, Economics,
Environment, Government, Society & Technology. Neither is sacrosanct but both
are useful to help you think about the external issues that could weigh heavily on
your planning. Pick the set that works best for your situation.
Scanning is best done continuously. Trying to do it once a year requires too
much episodic activity and you are unlikely to do it well. Set up file folders,
either electronic or manila, or both. Clip & copy your way through the year and
as planning time comes around sort through the files.
Though the collection of data can be systematic and the structures put in place
for data gathering can be quite detailed, environmental scanning is always
considered a subjective exercise since it involves making decisions about
which kinds of information are most relevant. For this reason, many
organizations that use environmental scanning rely on teams of individuals to
collect data, so that information is viewed from a number of different
perspectives. An environmental scanning team will be a boon to your results.
You may be able to find external sources of data for your environmental scan.
For example, The Society of Human Resource Management (SHRM) puts
together a bi-annual environmental scan that can save you a good deal of work.
For example, the 2006 Workplace Trends Forecast found 10 issues at the top of
the HR list.
1. Rising health care costs.
2. Increased use of outsourcing (off-shoring) of jobs to other countries.
3. Threat of increased health care/medical costs on the economic
competitiveness of the U.S.
4. Increased demand for work/life balance.
5. Retirement of large numbers of baby boomers around the same time.
6. New attitudes toward aging and retirement as baby boomers reach
retirement age.
7. Rise in the number of individuals and families without health insurance.
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8. Increase in identity theft.
9. Work intensification as employers try to increase productivity with
fewer employees.
10. Vulnerability of technology to attack or disaster.
We’re reminded of an old professor who stated, “You can save yourself a lot of
work by seeing who else has researched your topic before you start doing your
own.”
Once you have collected your data, what are you seeing? Your answers should
help you with the answer to Executive Question # 2 and maybe Middle
Management Question # 5. How is our reality changing? What do we think we
know given our environmental scan?

What will your future customers want and need? Consider the foundation
questions that come from Blue Ocean Strategy1, the best selling book
from Kim and Maughborn. They raise the basic issue of knowing “Why do
people buy your products or services.” Then ask yourself four questions
and, most importantly, consider the impact of and on the people who
provide your products or services.
o What should
value it?
o What should
o What should
o What should
before?

we stop providing because the customer does not
we give the customer more of?
we give the customer less of?
we give the customer that they have never had
What impact would those trends have on our Human Capital?
o Think about the quantity of people you’ll need. More? Fewer?
o What about their skill sets? Same? New? Less?
o Will higher skills or more in demand skills require you to have more
stability in your workforce ?

What about the supply of the types of people you’ll need?
o Will they be easier to find or more difficult?
o How will you differentiate yourself from your competitors?
Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition
Irrelevant, Chan Kim and Renee Mauborgne, 2005
1
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SWOT Analysis
SWOT derives from Strengths, Weaknesses, Opportunities and Threats. All of
which should be playing into your thinking about your people. Strengths need to
be maintained, weaknesses overcome, opportunities developed and threats
avoided.
The data from your environmental scan should easily transfer into the External
Threats and Opportunities of your SWOT analysis. The answers from the prior
10 Questions should have helped you to fill in the Internal sides of the Strengths
and Weaknesses.
Where are we?
o Quantity? Are retirements threatening our supply of talent?
o Quality? Are our people a strength or a weakness?
o Stability? Are we running up our learning costs and lowering our
productivity by high turnover rates?
o Supply? Are the schools providing enough “raw material?”
Where are we going? Why are we going there?
o What will the talent profile of our people need to look like when we get
there?
o Do our people view this journey as a “Forced March” or an “Exciting
Journey?”
What are our competitors going to do? Can we do something that would be hard
or impossible for them to do?
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Defining Grand Strategies
The consulting world’s plethora of two by two matrices has one that fits our need
as we explain the challenge of growing a business.
Products & Services
C
u
s
t
o
m
e
r
s
Existing
E
x
I
S
T
I
n
g
N
e
w
New
Defend
the Cow
Or
Exit
Extend
Build
Or
Attack
Expand
Basically, the business plan is going to get generated from this concept:
o Your plan is going to call for increasing sales, reducing costs or, more likely,
both.
o On the sales side, it’s going to be selling to new customers or selling more to
existing customers or both.
o On the products & services side, you’ll either be selling existing lines or new
lines.
No doubt the verbiage will sound much more complicated when it hits the plan
but in truth it’s not much more complicated than this.
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Human Capital embedded in strategy
All strategies inevitably come down to make a portfolio of decisions that, in
hindsight, are almost “common sense.” For example, a company like Walgreens
bases its growth strategy on understanding the aging Boomer population and
providing products and services that will appeal to them. Additionally, they try to
“lock-in” as many pharmacists as possible inasmuch as they are the limiting
factor to growth. They also move stores to high-traffic locations and position
them for drive-through convenience. Many of the policies and procedures are
“HQ centric” and the company is as command and control oriented as the
military. Suppliers are controlled and monitored through strict procedures.
When you look at the decisions that underlie any company’s strategy you see a
portfolio of decisions about:
 Customers
 Products and services
 People and organization
 Resources
 Locations
 Technology
 Policies and procedures
 Metrics
 Suppliers
The challenge is to build a strategy that recognizes the interdependencies of
these nine decision areas and, by doing so, avoids “holes in the strategy.” As you
consider the nine categories and their interdependencies you have to look at
thirty-six pairs of relationships. Consider the following graphic.
Customers
A
AB
Products &
Services
B
AC
BC
People /
Organization
C
Resources
D
AD
BD
CD
BE
CE
DE
Location
E
DF
G
Evaluation
Metrics
H
FJ
J
t
ap
Ad
e
iv
S
10
,
es
gi
te
tra
c.
In
AJ
BJ
CJ
DJ
EJ
GJ
HJ
BH
DH
FH
AH
CH
EH
GH
Suppliers
CG
EG
FG
AG
BG
DG
F
Business policy
& processes
AF
BF
CF
EF
Technology
AE
Human capital strategy must consider, at a minimum, the obvious relationships
between people / organization and the other eight categories. The end game for
Human Capital is to have the right people, in the right place, with the right skills,
at the right time and at the right price. And this is never accomplished in a
vacuum. Decisions in the other eight areas will impact your people decisions and
vice versa.
Think back to our 2x2 matrix: Are we planning to sell more to existing
customers? Sell new things to existing customers? Sell new things to new
customers. Sell new things to existing customers? Are we abandoning a business
line or a category of customer?
Now, consider the following interrelationships between people and organization
decision and the other eight decision categories. We have provided three items
for each interrelationship as “starters”; add your specific considerations to our
list:
AC –



People/Organization meets Customers
Do we know what customers want and need?
Do we have the right people and are they in the right places?
Are our people more effective than our competitors’ people?
BC – People/Organization meets Products/Services
 Do we have the requisite skills to provide the products and services?
 Have we become so “lean and mean” that we have a fragile organization
that cannot respond to increases in demand?
 Do we have the right mix of people if we have been a “product company”
and now we want to provide “services” as well?
D – People/Organization
 Do we have enough people and are they organized optimally?
 Is the talent pipeline adequate?
 Too many layers or not enough? Silo’s or Teams?
CD –



People/Organization meets Resources
Do they have the tools and systems they need to be productive?
Is information available to them?
Do our people have decision authority over the resources they need to do
their job?
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CE – People/Organization meets Locations
 Do we have enough people in the right places? If not, do we move
people?
 Do we build new human resources? Is there sufficient time? If not, can we
hire skilled people?
 Are our managers skilled in dealing with a virtual workforce?
CF – People/Organization meets Technology
 Can our people utilize the technology we have for them to use?
 Is it “friendly” or do our people resort to a work-arounds?
 Is it productive? Does it provide competitive advantage?
CG – People/Organization meets Business Policy & Practice
 Is there any freedom within the framework of our policies and
procedures?
 Are all of our managers skilled project managers?
 Are we flexible enough to keep up with the market? Are we retaining the
“best & brightest?”
CH –



People/Organization meets Evaluation/Metrics
Is our Gross Revenue per FTE the highest in the industry?
Is our turnover rate healthy or deadly?
Is our compensation system rewarding the right people for the right
performance?
CJ – People/Organization meets Suppliers



What kind of relationships do our employees have with our suppliers?
Adversarial, Win-Lose, looking over the shoulder? Productive, Trusting &
Cooperative?
Are our employees in danger of getting “snowed” on technical issues by
suppliers with newer technologies?
Have our employees been given guidance in various negotiation
techniques or do we let them “learn on the job?”
Your answers to the questions above should provide the basic elements for your
H.R. Plan. The gaps between “What Is” and “What Should Be”, ranked by value,
are the points of attack. The next phase is the search for cost-effective solutions.
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Develop a portfolio of projects
Strategy inevitably produces a portfolio of projects that have to be implemented
in a timely and coordinated fashion. We have facilitated workshops in project
leadership for a number of years. Every workshop starts with a simple flipchart
exercise called “Best of Times / Worst of Times” in which we ask participants to
consider the best project they ever worked on and what made it so good. We
then ask the same question for the worst project they ever worked on.
Every time we do this – no matter what industry or what level of project
expertise – we get the same answers that point out the difference between great
projects and failures. The answers always revolve around behavioral and
organizational issues – around people issues! Motivation, communication,
fairness, listening, information sharing... and on and on.
Think about this and think about this hard: espoused strategy is made
operational through projects – and people skills make all the difference between
success and failure. Have you developed GREAT project management skills and
knowledge throughout the organization? Remember, strategy is implemented
through a series of projects and most organizations have a terrible track record
when it comes to implementing projects (“strategic” or otherwise) on-time, onbudget, and with scope intact.
Implementation
Given the right amount of time and effort, any organization can come up with a
good (or good enough) strategy. Now comes the tough part – turning espoused
strategy into actual reality.
As you roll-out your newly developed strategy we would have you consider the
following four factors:
1. Is there enough visibility of the “promise” that you have made to the
organization? Strategy that has not been shared is likely to slip because
the team will not feel the embarrassment of missing a promise. Make
your strategy public to the organization and you suddenly have some skin
in the game. The boss may understand, but your peers will be merciless.
2. Have you built a coalition of the willing? Or have you lobbed your
strategy in the direction of other departments and expect them to step
up to the plate? Many companies worry about “silos” and the impact they
have on cooperation. Consider this – HR is the only horizontal silo in the
organization. It touches every department that is staffed with living
bodies and, therefore, should have (good) relationships with every
department manager.
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3. Is your strategy backed-up with a plan that is explicit and time based?
Strategies that present issues of “coordinate” and “work with” are like the
US Congress when it passes a “resolution” instead of making a law. We
can pat ourselves on the back and feel good about doing the “right thing”
but, in the end, nothing changes. We want to know what will actually
change and when will it change!!!
4. Spend as much as you can on getting every manager and professional as
competent as possible in project management skills – especially the skills
that relate to organizational behavior and “people” skills. Think of the
payback you could achieve if everyone was capable of bringing projects
in on time and on budget!
Evaluate Performance to Plan
If the only time your plan sees daylight is during the annual review you are
doomed. Remember things are changing, faster than before. Your plan needs to
adapt just as you organization does. You need a feedback loop to insure you
were right about your assumptions.
Although metrics seem to be the bane of H.R., measurement is necessary. More
than necessary, it’s crucial. How can you expect to become more effective if you
have no idea how effective you are?
Although each of the projects will no doubt have its own metrics we favor a
system that runs both top-down and bottom-up. The best tool we have found to
help inculcate the values of strategy and measurement within an organization is
Norton & Kaplan’s Balanced Scorecard. Catching both past performance and
future performance drivers the four key categories of Learning and Growth,
Business Process, Customer Perspective, and Financials, they manage to grasp
the essential of any business plan.
The balanced scorecard goes beyond being a measurement system and becomes
a management system that allows organizations to spell out their vision and
strategy and convert them into action. Both internal business processes and
external outcomes are monitored to constantly improve strategic performance
and results.
Conclusion:
An unknown writer left us with this quote, “Write it down. Written goals have a
way of transforming wishes into wants; cant's into cans; dreams into plans; and
plans into reality. Don't just think it -- ink it!
We wish you well on your path to integrating People and Strategy!
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About the Authors
Why We Exist
We’re willing to bet that sometime over the last couple of years you found yourself saying,
“When things get back to normal around here, I’m going to ….”
We’re also willing to bet that things haven’t gotten back to normal and we’re pretty
confident that they won’t. Welcome to the 21st Century!!! More is happening… and it’s
happening faster. E-mail, crack-berries, cell-phones. No more vacations from work. No more
time to relax and reflect. Things are different now.
A survey of CEO’s by the World Economic Forum found broad agreement on three general
pressure points for today’s organizations.
“• First, corporate competitiveness: Pressure continues unabated to deliver profits
and shareholder value in a period of economic downturn, high levels of competition, and
greater international risk and uncertainty. This calls for business leaders and their
companies to focus relentlessly on operational efficiency, cost effectiveness, productivity,
customer service and innovation. It also points to working with others, including
government bodies and academic institutions, to enhance national competitiveness.
• Second, corporate governance: In the wake of corporate governance scandals and
public concern over accounting failures, conflicts of interest and inadequate market
oversight, there is massive pressure on business leaders to rebuild public trust and to
restore investor confidence in their own roles, in their companies, and in the capital
markets. This calls for a relentless focus on corporate integrity, accountability and
transparency. It also calls for proactive engagement between private sector leaders and
public authorities to ensure that new rules and norms are suitable for protecting
investors without destroying the spirit of entrepreneurship, innovation and risk-taking
that drives markets and economic progress.
• Third, corporate citizenship: In the face of the high levels of international insecurity
and poverty, the backlash against globalization and mistrust of big business, there is
growing pressure on business leaders and their companies to deliver wider societal value.
This calls for effective management of the company's wider impacts on and contributions
to society, making appropriate use of stakeholder engagement. Once again it requires
new types of public-private partnership to address challenges that are beyond the
capacity or responsibility of an individual company or the private sector. These include
issues such as access to training and education, healthcare, water, energy, credit and
markets, as well as tackling problems such as corruption, money laundering, crime and
terrorism.
These three pressures of corporate competitiveness, corporate governance and corporate
citizenship, and the linkages between them, will play a crucial role in shaping the agenda for
business leaders in the coming decade.”2
Are these issues on your mind? Our’s too. So what’s the answer? “People Are Our Most
Important Asset.” Have you heard that? Have you said that? And you’re right. Not much
happens without people… the right people… in the right place, at the right time, with the
right skills and, of course, at the right price.
2
http://www.weforum.org/pdf/GCCI/Findings_of_CEO_survey_on_GCCI.pdf
15
A recent survey by the Society for Human Resource Management determined that for HR
professionals, the most critical demographic issues appeared to be the large numbers of
baby boomers slated to retire around the same time and the implications this had for
leadership, knowledge retention and generational issues in the workplace.3
Adaptive Strategies and Pretty Good Consulting can be the linchpins between your business
plan and your H.R. plan. We take a strategic operations view of people management.
We have 6 specialty areas:
1.
2.
3.
4.
5.
6.
Business Plan to H.R. Plan Analysis & Alignment
Leadership & Talent Supply & Demand Forecasting
Leadership Candidate Identification & Selection Tools
Succession Plan Development
Leadership Development Gap Analysis
Leadership Development Services: Seminar Development & Delivery Emerging
Leader Coaching & Counseling, Individual Training Sourcing, Mentoring Program
Design & Development
Who We Are:
Bill Welter
Bill is the President of Adaptive Strategies Inc. working out of Bartlett, IL.
Bill specializes in business education and consulting, and is the author of “The Prepared
Mind of a Leader”, published by Jossey-Bass in 2005. Mr. Welter has over 40 years of
varied military, business, consulting and teaching experience.
Jim Schultz,
CPT
Jim is President of Pretty Good Consulting, Inc. Jim had over three decades of
experience building a “Good to Great” company as Div. V.P., Performance Development
at Walgreens, the largest drug-store chain in the nation. His responsibilities covered a
wide range of H.R. areas: training, management & executive development, productivity
improvement, knowledge management, human factors engineering, human resource
planning and information systems. A member of ISPI, ASTD, SHRM and the World
Future Society, Jim received his Certified Performance Technologist designation in 2003.
Associates:
We pride ourselves in having a wide range of business associates who are even better
than we are. (At least in their specialty areas.) We don’t hesitate to involve them in
projects in order to better solve the problems or leverage the opportunities.
3
http://www.shrm.org/trends/061606WorkplaceForecast.pdf
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