Creating value through HR Strategy

HR Strategy
One of the key success factors of high performing organisations is putting their people first. Today HR executives
are challenged to develop efficient and effective, simple yet powerful solutions to the people side of business.
However it remains difficult to determine the exact contribution of the HR function to achieve these objectives.

Based on the HR Strategy Framework, Deloitte is uniquely positioned to assist your organisation to strengthen
its strategic role and contribution of your HR function to ensure the execution of business strategy. Our 10-step
approach helps organisations to define and execute an effective HR strategy as well as develop and deliver
services and capabilities that today's organisations need to survive and grow .

Deloitte HR Strategy Framework

Define human capital value

Define 1. Understand the business strategy
human 2. Define HR strategy
capital
value

Align HR
products and
services
Align HR products and services
3. Segment HR customers
Deliver value
4. Prioritise HR investments
5. Design HR services

Deliver value
6. Ensure right HR service delivery model
7. Establish right HR capabilities
8. Improve HR operational excellence continuously
9. Build HR brand
10.Measure impact of HR products and services
Define human capital value
The first step towards an effective HR strategy is to define value and to understand how
business value is created. This requires a deep insight into the overall business
environment as well as a clear understanding of the organisa-tion’s overall business
strategy.

Step 1: Understand the business strategy

Understand market forces, trends and the business strategy and identify their impact on the
HR strategy and priorities required to execute the business strategy.

Step 2: Define HR strategy

Provide a roadmap for creating a unique competitive advantage by outlining how the
organisation will leverage the organisation’s human capital to address business
challenges and achieve business objectives.

• Translate your organisation’s strategy into an effective and actionable HR strategy, priorities and business plan
• Translate your HR strategy into key people initiatives and programs
• Identify the best ways to attract, motivate, and retain new and existing workforce segments
• An effective HR strategy provides a roadmap to create value through the
organisation’s workforce. It also includes guidelines for the organisation to follow when
competing for new talent or retaining existing talent. These guidelines can cover a broad
range of issues, such as which skills and competencies are most critical for achieving
future goals and objectives, how to source talent (grow or buy), and how to create and
maintain a high-performance culture.
•
• Deloitte helps organisations to focus on people and HR, to identify the most
practical ways to get things done and to ensure that your Human Capital initiatives deliver
their intended business value. The Deloitte enterprise value map for Human Capital™
makes this process easier by accelerating the identification of potential improvement
initiatives and depicting how they can contribute to greater shareholder value.
•
•
• Deloitte enterprise value map
•
Shareholder value

Revenue growth Operating margin Assest efficiency Expectations

Spelling Cost of Property,

Price Income Receivables Company External
Volume general & good plant & Inventory
realisation taxes & payables strengths factors
administration sold equipment
•
Define
Align HR products and services
Once a strategic direction has been defined, the organisation must review its HR policies, programs and practices
to ensure they are aligned with the defined HR strategy.

Step 3: Segment HR customers

Identify the critical workforce segments and tailor specific programs and services.

• Define and determine which workforce segments are most critical to achieve the desired results
• Assess the needs of each workforce segment and draw up programs and services tailored to their needs

Step 4: Prioritise HR investments

Identify all HR projects and understand their expected costs, benefits, and primary focus to properly allocate
scarce resources.

• Identify and develop prioritisation criteria that are aligned with the organisation’s strategy and priorities
• Analyse the cost, benefit and risk of delivering each offering across the workforce life cycle
• Allocate funding for parts of the people services portfolio

The HR function should focus on value-adding activi-ties to support the execution of the business strategy and
objectives. HR leaders are asked more frequently to measure and improve the efficiency and the effective-ness of
their HR function. However, understanding and managing sources of cost and value creation can be a challenging
task. Several factors need to be taken into consideration, including the key deliverables that are to be used in a
selected organisation and the investments in HR practices and programs that drive these outcomes. Furthermore
the criteria for prioritising HR investments need to be defined to ensure the greatest return on investment for the
organisation. Finally, HR services and activities that should be reinforced or created need to be identified as well
as those that should be scaled back or eliminated completely.
Human Capital Cost Management is a Deloitte service offering which aims to identify, measure and manage the
sources of cost and value creation. This method entails a precise evaluation of the allocation of resources (e.g.
money, FTEs, time) within the HR function, allowing the client to measure and track the actual and expected costs
and benefits of existing HR activities and projects. Consequently, these HR activities and projects can be prioritised
in accordance with the cost-benefit analysis.

HR Prioritisation Matrix - Illustration

Re-examine Investment Ideal Position

High

T
Performance

T
C

C
C

C
Low
Stay the Course Increase Performance
Low Medium High
Strategic Value

HR Capability Current state Target

Talent strategies
Learning & development
Change management and transformation
Organisational strategies
HR strategy and services

Step 5: Design HR services

Design and implement HR solutions that are critical to ensure the execution of the HR strategy
for every phase of the workforce life cycle.

• Perform an HR process analysis and identify all HR processes that should be streamlined or
reengineered
• Analyse the current people services portfolio, (re)design and implement HR services and solutions

Deliver value
Converting HR strategies and initiatives into tangible business value requires the appropriate delivery approach,
a solid foundation of HR capabilities and infrastructure and the definition of business-driven performance
measures to track whether the expected results are being delivered.

Step 6: Ensure right HR service delivery model Think through people-related business challenges to design the
right HR service delivery model.

• Analyse the current HR service delivery model and assess its ability to effectively meet the organisation’s needs
and objectives
• Define specific roles, governance mechanisms, and delivery options
• Identify key delivery enablers such as systems, processes and infrastructure

More than ever it is critical for every organisation to question - and if necessary - revise the way the HR function is
organised. This implies the assessment of the organisation’s current and future ability to support the business and
to execute the defined corporate strategy. To do so, organisations can rely on a wide range of choices to deliver
their HR services and solutions.

The Deloitte HR service delivery framework includes the key elements that should be considered to (re)design an
effective and efficient HR service delivery model. The starting point of the framework consists of the business and
HR strategies and the identification of the unique needs and requirements associated with each customer
segment, such as employees, managers, executives or new hires. Next, the framework emphasises HR’s various
roles by focusing on how service is delivered through retained and outsourced HR roles. Finally, the required
technology and business enablers are identified and considered as key variables in the (re)design of the HR
service delivery model
HR service delivery framework

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Based on the HR Strategy Framework, Deloitte is uniquely

positioned to assist your organisation to strengthen its strategic
role and contribution
•of your HR function to ensure the execution of business strategy

2
 Define
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capital
value

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Step 8: Improve HR operational
excellence continuously
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Design supporting tools, processes, and

Deliver value

infrastructure to help the HR staff succeed.

• Assess the efficiency of HR-related services and

activi-ties through qualitative and quantitative
analyses (HR Cost and Activity Analyses)
• Assess the cost structure of the HR function
and control significant long-term and short-
term HR-related costs

Step 9: Build HR brand

Understand and communicate the value of HR
to business leaders and key stakeholders.

• Design, develop and implement an integrated

commu-nication process in order to market the
Step 7: Establish right HR capabilities HR function within the organisation
Identify and build the advanced skills, competencies and • Obtain feedback on how HR is and
capabilities required for HR to fulfill its strategic role. should be performing

• Identify the skills and competencies required to

deliver the HR Strategy
• Conduct a skills analysis, develop training
and recruiting plans to fill any critical gaps

The HR function plays a central role in delivering people

services solutions to the organisation. Therefore the
capabilities of the HR function and its staff are critical to
achieve these objectives. Given current trends of central-
ising or outsourcing administrative or non value-adding
activities, HR leaders are being encouraged to focus on
the strategic aspect and added value of HR. To do so, HR
leaders must be able to identify and prioritise the key
strategic HR objectives that will help their organisations to
execute the business strategy.

HR Scorecard - Illustration

HR Key Performance Indicator Dashboard

development % training cour
pant satisfacti
Criteria Measure Description Result Target
Succession % of internal a
Changes in workforce numbers and hours planning ments above l
Headcount Number of FTEs 440,0 450,0
utilised by employee category % of appraisa
% new hires achieving 6 Staff retention performance throughout the Performance completed on
75,0% 80,0%
months service organisation management % of individua
Recruitment
Average time to fill a Recruitment performance throughout the plans complet
20,0 25,0
vacancy (days) organisation
Average training hours Time commitment to staff training and
30,0 40,0
Training and per employee development
Variance to target

10,0

5,0%

5,0

10,0

2,0%

0,0%

10,0%

0,0%
Step 10: Measure impact of HR products
and services
Identify key performance measures to track the
return on investment of HR products and services.

• Link the corporate strategy, strategic HR

priorities and key performance measure for
HR and for the workforce
• Identify the right key performance measures
and ensure the right balance between value-
and cost-related measures
• Design and implement an HR Scorecard to The 10 steps of Deloitte’s HR Strategy Framework
track HR impact, value and costs are combined in an HR Roadmap which outlines
the defined HR priorities and actions.
An HR Scorecard is a tool for measuring the contribution
of HR to the overall performance of an organisation. It Certainly many challenges lie ahead for HR executives
includes key performance indicators on HR investments, wanting to transform their HR function and optimise the
costs, practices and competencies. As HR responds to the added value of HR. In order to achieve this end, an HR
challenge of making a greater strategic contribution to the Roadmap can be developed which provides a practical
organisation, HR functions are using scorecards in order guide for the transformation of the HR function.
to manage HR as a strategic asset.
In the end an HR function that stays focused to this
roadmap by aligning its services and capabilities with
the organisation´s business strategy will begin to
distinguish itself as a strategic partner; the only viable
alternative in today´s competitive environment.

HR Roadmap - Illustration

… Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 …

HR transformation
program
Program management management

Define HR Design Communicate HR

HR vision department people HR people Evaluate and review Evaluate and review
& strategy HR vision/strategy HR vision/strategy
vision vision vision

Execute transition plan Operationalise HR organisation

HR organisation Define HR transition
& HR governance plan & HR governance
Implement HR governance Evaluate & review HR governance

Process design Process implementation (incl. employee engagement survey,...)

Knowledge transfer and coaching

HR core
processes Package harmonisation implementation Employee package management

Change and culture program

 HR support
processes Design, implementation Identification/assessment of HR tools & develop HR IT long term strategy
& testing
& technology
Reporting & Define HR metrics and HR measurement framework
HR scorecard KPIs / HR scorecard Evaluate & review HR metrics/scorecard

HR budget
Budget approval Budget follow-up Budget follow-up
(HRB)
.
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