2006 Strategic HR Management

Transcription

1 2006 Strategic HR Management Survey Report A Study by the Society for Human Resource Management

2 2006 Strategic HR Management Survey Report Shawn Fegley Survey Specialist SHRM October 2006

3 This report is published by the Society for Human Resource Management (SHRM). All content is for informational purposes only and is not to be construed as a guaranteed outcome. The Society for Human Resource Management cannot accept responsibility for any errors or omissions or any liability resulting from the use or misuse of any such information Society for Human Resource Management. All rights reserved. Printed in the United States of America. This publication may not be reproduced, stored in a retrieval system or transmitted in whole or in part, in any form of by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of the Society for Human Resource management, 1800 Duke Street, Alexandria, VA 22314, USA. For more information, please contact: SHRM Department 1800 Duke Street, Alexandria, VA 22314, USA Phone: (703) Fax: (703) Web:

4 2006 Strategic HR Management Survey Report Contents v About This Report v About SHRM v About SHRM v About the Author v Acknowledgments 1 Introduction 2 Methodology 4 Key Findings 5 Survey Results 22 An HR Prospective 24 A Look Ahead: Strategic HR Management 25 Demographics 29 SHRM Survey Reports

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6 SHRM About This Report In June 2006, the Society for Human Resource Management (SHRM) conducted the Strategic HR Management Survey, which asked HR professionals to what extent their HR department strategically contributed to the organization and used metrics and analytics to measure specific organizational functions. The survey also looked at potential barriers that limit the ability of HR to more effectively contribute to the organization s bottom line and what organizations can do to develop the strategic HR skills of their HR staff. This report discusses the results of the survey by exploring the differences between HR departments with and without a formal strategic plan in place. Interpretations about current applications and future trends are presented at the end of the report in the sections titled An HR Prospective and A Look Ahead. About SHRM The Society for Human Resource Management (SHRM) is the world s largest association devoted to human resource management. Representing more than 210,000 individual members, the Society s mission is to serve the needs of HR professionals by providing the most essential and comprehensive resources available. As an influential voice, the Society s mission is also to advance the human resource profession to ensure that HR is recognized as an essential partner in developing and executing organizational strategy. Founded in 1948, SHRM cur- rently has more than 550 affiliated chapters within the United States and members in more than 100 countries. Visit SHRM Online at About SHRM SHRM, as part of the Knowledge Development Division supporting SHRM, produces high-quality, leading-edge research and provides expertise on human resource and business issues. It acts as an advisor to SHRM for the purpose of advancing the HR profession and generates and publishes cutting-edge research used by human resource professionals to develop their knowledge and to provide strategic direction to their organizations. As leading experts in the field of HR, SHRM works closely with leading academics, policy makers and business leaders. About the Author Shawn Fegley is a survey research specialist for SHRM. His responsibilities include designing, conducting and analyzing surveys on HR-related topics. He has worked in survey research for the past seven years. Acknowledgments This report is the culmination of a team effort. Steve Williams, Ph.D., SPHR, director of, provided valuable expertise adding to the content of the survey report. Deb Cohen, Ph.D., SPHR, chief knowledge officer; Steve Miranda, SPHR, GPHR, chief human SHRM 2006 Strategic HR Management Survey Report v

7 resources and strategic planning officer; and Jessica Collison, director of strategic planning, provided valuable expertise adding to the content of the survey instrument. Jennifer Schramm, manager of the Workplace Trends and Forecasting Program, contributed by providing insight on future trends, and Nancy Lockwood, SPHR, GPHR, manager of HR Content Program, contributed by providing insight on practical application. Strategic HR Management Survey was developed by the SHRM Survey Program. The SHRM Organizational Development Special Expertise Panel (specifically Maggie Aldrich, SPHR, Charlotte H. Anderson, SPHR, Fernán R. Cepero, Patricia A. Miller, SPHR, GPHR, and David Rock), SHRM HR Consulting/Outsourcing Special Expertise Panel (specifically Tom Kelley, David Kippen, Jim Nys, PHR, Don Packham, SPHR, and Mary-Jane Sinclair, SPHR) and SHRM Workforce Staffing and Deployment Special Expertise Panel (specifically Tom Darrow, Becky Strickland, SPHR, and Dorothy J. Stubblebine, SPHR) provided valuable insight and recommendations for the survey instrument. vi SHRM 2006 Strategic HR Management Survey Report

8 SHRM Introduction In recent years, the field of human resources has experienced a significant transformation and redefinition. In the past, HR was heavily inundated and responsible for personnel and transactional activities. In many organizations, HR has moved from merely an administrative role to that of a strategic partner and facilitator. Today, organizations are realizing HR s potential to positively affect a wide range of activities such as budgeting, talent management, succession planning, analysis of trends and forecasting, executive-level compensation, and corporate social responsibility programs. For an organization to be successful in today s highly competitive and changing international business environment, it needs targeted strategic initiatives that are integrated throughout the entire organization. Many successful organizations are realizing that their HR department is a resource that provides a competitive advantage. These organizations have recognized the value of addressing human resource and business functions from a strategic perspective that can ultimately be linked with overall business strategy. Currently, HR helps already successful organizations further distinguish themselves from their competitors. Strategic human resource management is a term that is being used to describe an assortment of strategic initiatives HR professionals use to effect bottom-line objectives. The HR function in many organizations has been segmented into two areas: one that focuses more time on operational functions and the other on strategic activities. Even though HR has advanced extensively over the last 20 years, the profession still faces considerable barriers, such as the legacy of being an administrative contributor and still having the responsibility for dealing with many operational functions, that prevent many HR professionals from focusing on strategic initiatives. This report explores to what extent HR strategically contributes to specific functions within organizations, examines how often HR uses metrics and analytics to measure specific organizational functions, looks at potential barriers that limit the ability of HR to more effectively contribute to the organization s bottom line and discusses what organizations can do to develop the strategic HR skills of their HR staff. The report also examines the differences between HR departments with and without a formal strategic plan in place. SHRM 2006 Strategic HR Management Survey Report 1

9 Methodology A sample of HR professionals was randomly selected from SHRM s membership database, which included approximately 210,000 individual members at the time the survey was conducted. Only members who had not participated in an SHRM survey or poll in the previous six months were included in the sampling frame. Members who were students, consultants, academics, located internationally or had no address on file were also excluded from the sampling frame. In June 2006, an that included a link to the Strategic HR Management Survey 1 was sent to 3,000 randomly selected SHRM members whose titles were HR manager and higher. Of these, 2,530 s were successfully delivered, and 427 HR professionals responded, yielding a response rate of 17%. The survey was fielded for a period of two weeks, and four reminders were sent to sample members in an effort to increase the response rate. Notes and Caveats Analysis: Throughout this report, analyses by respondents organization staff size, HR department size and the existence of a formal strategic plan are presented and discussed, when applicable. For the purposes of this study, strategic HR is defined as the process of taking a long-term approach to human resource management through the development and implementation of HR programs that address and solve business problems and directly contribute to major long-term business objectives. Operational HR is defined as focusing on the day-to-day approach to human resource management through policies, practices and processes. Throughout this report, the terms HR function and HR department both refer to the HR department within an organization. Differences: Conventional statistical methods were used to determine if observed differences were statistically significant (i.e., there is a small likelihood that the differences occurred by chance). Therefore, in most cases, only results that were significant are included, unless otherwise noted. Generalization of results: As with any research, readers should exercise caution when generalizing results and take individual circumstances and experiences into consideration when making decisions based on these data. While SHRM is confident in its research, it is prudent to understand that the results presented in this survey report are only truly representative of the sample of HR professionals responding to the survey. Number of respondents: The number of respondents (indicated by n in figures and tables) varies from table to table and figure to figure because some respondents did not answer all of the questions. Individuals may not have responded to a question on 1 This survey instrument is available upon request by contacting the SHRM Survey Program at surveys@shrm.org or by phone at SHRM 2006 Strategic HR Management Survey Report

10 SHRM the survey because the question or some of its parts were not applicable or because the requested data were unavailable. This also accounts for the varying number of responses within each table or figure. Confidence level and margin of error: A confidence level and margin of error give readers some measure of how much they can rely on survey responses to represent all of SHRM members. Given the level of response to the survey, SHRM is 95% confident that responses given by all responding HR professionals can be generalized to all SHRM members with a margin of error of approximately 5%. For example, 49% of HR professionals reported that their organization had in place an established method to measure the effectiveness of HR strategy through metrics and analytics. With a 5% margin of error, the reader can be 95% certain that between 44% and 54% of SHRM members would report that their organization presently measures the effectiveness of HR strategy through metrics and analytics. It is important to know that as the sample size decreases, the margin of error increases, and therefore the margin of error for each individual question will vary depending on the number of responses to that particular question. SHRM 2006 Strategic HR Management Survey Report 3

11 SHRM Key Findings Three-quarters of HR professionals indicated that their organization had a strategic business plan in place. Among these respondents, more than two-thirds indicated that the plan had been articulated and communicated throughout the organization. More than one-half of HR professionals indicated their HR department had a strategic plan in place. Among respondents that reported that both their HR department and their organization had strategic business plans in place, the vast majority indicated that HR s strategic plan was aligned with the delivery of the organization s strategic plan. Almost one-half of HR professionals reported their organization had in place an established method to measure the effectiveness of HR strategy through metrics and analytics. The functions HR departments used most frequently with metrics or analytics were recruitment and selection processes, performance management, compensation management/ reward programs, benefits management and employee relations. HR departments with a strategic plan in place were more likely than those without a strategic plan to have established methods of measurements in place and were more likely to indicate that their HR department was involved with various aspects and functions within their organization. The most frequently cited barriers that limited the ability of the respondents HR department to more effectively contribute to the organization s bottom line were their department s strong focus on administration and the inability to directly measure HR s impact on the bottom line. 4 SHRM 2006 Strategic HR Management Survey Report

12 SHRM Survey Results In this very competitive global marketplace, it is difficult for an organization to reach its full potential without a well-conceived strategic business plan that focuses on the organization s short- and long-term visions, goals and objectives. An organization is at a competitive disadvantage if it is weighed down by short-term matters, because without a longterm focus as the source for a vision, an organization will likely be inundated with immediate concerns and not sufficiently prepared to anticipate opportunities. Overall, 75% of HR professionals indicated that their organization had a strategic business plan in place. These data are depicted in Figure 1. As shown in Tables 1 and 2, large organizations (500 or more employees) and HR departments with 10 or more employees were more likely to have a strategic business plan. This may be due to the complexity of these organizations, which brings about the need to have a strategic business plan. Figure 1 (n = 426) No 18% Organizational Strategic Business Plan in Place Not sure 7% Yes 75% Table 1 Organizational Strategic Business Plan in Place (by Organization Staff Size) Overall (n = 412) Small (1-99 Employees) Medium ( Employees) Large (500 or More Employees) Differences Based on Organization Size 75% 66% 74% 84% Large > small Note: Sample size is based on the actual number of respondents by organization staff size who answered this question using the response options provided. SHRM 2006 Strategic HR Management Survey Report 5

13 Table 2 Organizational Strategic Business Plan in Place (by HR Department Size) Overall (n = 416) 1-4 Employees 5-9 Employees 10 or More Employees Differences Based on HR Department Size 75% 69% 80% 92% 10 or more employees > 1-4 employees Note: Sample size is based on the actual number of respondents by HR department staff size who answered this question using the response options provided. To ensure success, an effective strategic business plan should clearly communicate and articulate what the organization wants to achieve. This plan should be presented to every individual who will be affected in the organization. Such communication makes the entire organization aware of the plan s rationale and applications and, as a result, helps provide the best opportunity for a business plan to succeed. Among respondents from organizations that had a strategic business plan in place, 68% indicated that the plan had been articulated and communicated throughout the organization. These data are depicted in Figure 2. Figure 2 (n = 319) No 24% Strategic Business Plan Articulated and Communicated Throughout the Organization Not sure 8% Every business unit or department within an organization should have a plan that is supported by and associated with the overall strategy of its organization. As illustrated in Figure 3, overall 56% of HR professionals indicated their HR department had a strategic plan in place. Once again, large organizations (500 or more employees) and HR departments with 10 or more employees were more likely to have a strategic plan. These data are depicted in Tables 3 and 4. Note: Only employees who indicated that their organizations had a strategic business plan in place were asked this question. Yes 68% 6 SHRM 2006 Strategic HR Management Survey Report

14 SHRM Table 3 HR Department With a Strategic Plan in Place (by Organization Staff Size) Overall (n = 412) Small (1-99 Employees) Medium ( Employees) Large (500 or More Employees) Differences Based on Organization Size 56% 43% 59% 64% Large > small Note: Sample size is based on the actual number of respondents by organization staff size who answered this question using the response options provided. Table 4 HR Department With a Strategic Plan in Place (by HR Department Size) Overall (n = 416) 1-4 Employees 5-9 Employees 10 or More Employees Differences Based on HR Department Size 75% 51% 54% 76% 10 or more employees > 9 or fewer employees Note: Sample size is based on the actual number of respondents by HR department staff size who answered this question using the response options provided. SHRM 2006 Strategic HR Management Survey Report 7

15 The most effective way for HR to deliver strategic initiatives is through the alignment with the overall strategic business plan of an organization. Among respondents who reported that their HR department had a strategic plan and their organization had a strategic business plan in place, the vast majority (96%) indicated that HR s strategic plan was aligned with the delivery of the organization s strategic plan (see Figure 4). HR should be an active participant in the development and implementation of business strategy; if HR is not aligned with business initiatives, then it is almost impossible for HR to strategically contribute and enhance business-related initiatives. In many organizations HR is required to perform a variety of roles that could vary from operational to strategic in nature. Even though the HR function has evolved in the last 20 years from providing administrative support to acting as a dynamic strategic provider, in some organizations HR is still fighting to gain recognition from its colleagues. Tables 5 and 6 examine the gap between how HR professionals view their roles and the role of their departments compared with how they feel employees perceive these roles. Overall, the majority of HR professionals indicated that they considered their own role (73%) and the role of their HR department (75%) as a combination of strategic and operational functions. However, while Figure 3 HR Departments With a Strategic Plan in Place (n = 421) Not sure 4% Figure 4 (n = 212) HR Strategic Plan Aligned With the Organization s Strategic Plan No 2% Not sure 2% No 40% Yes 56% Yes 96% Note: Only employees who indicated that their HR department had a strategic plan and their organization had a strategic business plan were asked this question. 8 SHRM 2006 Strategic HR Management Survey Report

16 SHRM Table 5 Role of the HR Professional Respondents perception of how employees view the role of HR professionals in the organization (n = 426) Respondents view of their own role in the organization (n = 422) Primarily Strategic Primarily Operational Combination of Both 4% 37% 60% 12% 15% 73% Note: Excludes respondents who indicated not sure. Percentages are row percentages and may not total 100% due to rounding. Table 6 Role of the HR Department Primarily Strategic Primarily Operational Combination of Both Respondents perception of how employees view their organization s HR department (n = 413) Respondents view of their HR department s role in the organization (n = 423) 2% 59% 39% 9% 16% 75% Note: Excludes respondents who indicated not sure. Percentages are row percentages and may not total 100% due to rounding. the majority of HR respondents (60%) perceived that employees viewed the role of HR professionals as a combination of strategic and operational functions, 59% felt that employees perceived their HR department as mainly having an operational role. HR professionals were provided with 21 organizational functions and were asked to indicate to what extent they thought HR departments could contribute to each function in general. As illustrated in Figure 5, 89% of HR respondents indicated that HR could contribute to a large extent through employee relations and recruitment and selection processes. This was followed by benefits management (86%), compensation management/reward programs (85%), diversity practices (83%), employee communication programs (80%), performance management (80%) and retention programs (76%). These findings are not surprising since functions very commonly believed to be associated with or driven by HR were the most frequently noted, while functions not perceived as being closely related to HR, such as analysis of trends and forecasting (57%) and budgeting (37%), were less frequently cited. SHRM 2006 Strategic HR Management Survey Report 9

17 Figure 5 To What Extent HR Departments Can Strategically Contribute to Specific Organizational Functions Employee relations (n = 424) Recruitment and selection processes (n = 425) Benefits management (n = 421) Compensation management/reward programs (n = 423) Diversity practices (n = 421) Employee communication programs (n = 419) Performance management (n = 423) Retention programs (n = 420) Leadership development (n = 423) Employee engagement initiatives (n = 417) Human capital measurements (n = 408) Work/life programs (n = 414) Talent management initiatives (n = 417) Succession planning (n = 417) Skills development initiatives (n = 422) Health, safety and security programs (n = 426) Employment brand strategy/employment branding (n = 408) Retirement planning (n = 421) Corporate social responsibility programs (n = 416) Analysis of trends and forecasting (n = 415) Budgeting (n = 419) 89% 11% 0% 89% 11% 1% 86% 13% 1% 85% 15% 0% 83% 16% 1% 80% 20% 1% 80% 19% 1% 76% 22% 2% 74% 24% 2% 72% 27% 1% 72% 25% 3% 70% 26% 4% 69% 28% 3% 69% 25% 6% 68% 30% 2% 65% 34% 2% 64% 33% 3% 63% 33% 5% 60% 37% 3% 57% 40% 3% 37% 61% 2% To a large extent To some extent To no extent Note: Percentages may not total 100% due to rounding. This figure is sorted in descending order by the percentage of respondents who answered to a large extent and excludes respondents who indicated "not sure." 10 SHRM 2006 Strategic HR Management Survey Report

18 SHRM Tables 7a, 7b and 7c examine the 21 organizational functions that were rated in Figure 5, but from the perspective of strategic contribution to each function by the HR department at the respondents organization. Overall, 70% of HR professionals indicated their HR department strategically contributed to a large extent through employee relations. This was followed by recruitment and selection processes (68%), benefits management (65%), performance management (54%) and compensation management/reward programs (48%). These data are depicted in Table 7a. There were virtually no differences between the rankings of how HR professionals believed HR in general could contribute to these functions and the extent to which Table 7a To Which Extent the Respondents HR Department Could Strategically Contribute to Specific Organizational Functions (Overall) To No Extent To No Extent (n = 406) To a Large Extent To Some Extent (but this is an area in which my organization can contribute more strategically) (unlikely an area in which my organization can contribute more strategically) Employee relations 70% 25% 5% 0% Recruitment and selection processes 68% 27% 5% 1% Benefits management 65% 27% 5% 3% Performance management 54% 38% 7% 2% Compensation management/reward programs 48% 40% 11% 1% Employee communication programs 45% 43% 11% 1% Health, safety and security programs 45% 41% 12% 3% Diversity practices 45% 34% 18% 3% Employee engagement initiatives 38% 41% 19% 2% Retention programs 38% 40% 20% 2% Leadership development 37% 47% 14% 2% Work/life programs 32% 38% 28% 3% Retirement planning 30% 44% 21% 6% Skills development initiatives 29% 49% 19% 3% Talent management initiatives 29% 40% 28% 4% Human capital measurements 29% 39% 27% 4% Employment brand strategy/employment branding 29% 39% 24% 8% Succession planning 29% 34% 31% 7% Corporate social responsibility programs 27% 39% 25% 9% Budgeting 17% 55% 23% 6% Analysis of trends and forecasting 15% 49% 29% 7% Note: Sample size is based on the actual number of respondents who answered this question using the response options provided. This table is sorted by percentage of respondents who responded to a large extent for each statement and excludes respondents who indicated not sure or not applicable. Percentages within each category may not total 100% due to rounding. SHRM 2006 Strategic HR Management Survey Report 11

19 their individual HR department strategically contributed to these functions. Tables 7b and 7c examine the differences between respondents from departments with a strategic plan in place and those without such plan. HR professionals from departments with the existing strategic plan were significantly more likely than those without a strategic plan to report that their HR department strategically contributed to a large extent within these functions. HR departments with a strategic plan in place were very likely to have these plans aligned with Table 7b (n = 236) To What Extent the Respondents HR Department Could Strategically Contribute to Specific Organizational Functions (by HR Department With a Strategic Plan) To a Large Extent To Some Extent To No Extent (but this is an area in which my organization can contribute more strategically) To No Extent (unlikely an area in which my organization can contribute more strategically) Employee relations 78% 19% 3% 0% Recruitment and selection processes 76% 22% 2% 0% Benefits management 69% 24% 4% 3% Performance management 61% 35% 4% 1% Compensation management/reward programs 57% 35% 7% 1% Diversity practices 56% 30% 13% 1% Employee communication programs 54% 38% 8% 1% Health, safety and security programs 49% 37% 12% 2% Leadership development 48% 44% 9% 0% Employee engagement initiatives 47% 41% 105 1% Retention programs 46% 41% 12% 1% Work/life programs 40% 38% 23% 4% Succession planning 38% 35% 23% 4% Talent management initiatives 37% 44% 17% 2% Human capital measurements 37% 40% 20% 3% Skills development initiatives 36% 51% 12% 2% Retirement planning 36% 45% 14% 5% Employment brand strategy/employment branding 36% 40% 20% 4% Corporate social responsibility programs 34% 42% 18% 6% Analysis of trends and forecasting 22% 54% 23% 2% Budgeting 19% 58% 19% 4% Note: Sample size is based on the actual number of respondents who answered this question using the response options provided. This table is sorted by percentage of respondents who responded to a large extent for each statement and excludes respondents who indicated not sure or not applicable. Percentages within each category may not total 100% due to rounding. 12 SHRM 2006 Strategic HR Management Survey Report

20 SHRM the overall strategic business plans and were usually larger-sized organizations. There are many ways that an HR department can contribute to its organization. HR professionals were provided with a series of statements and were asked to rate the extent to which their HR department was involved with various aspects and functions in their organization. As illustrated in Table 8b, HR professionals from departments with a strategic plan in place were more likely than those without a strategic plan to rate their function as being involved to a larger ex- Table 7c (n = 170) To What Extent the Respondents HR Department Could Strategically Contribute to Specific Organizational Functions (by HR Department Without a Strategic Plan) To a Large Extent To Some Extent To No Extent (but this is an area in which my organization can contribute more strategically) To No Extent (unlikely an area in which my organization can contribute more strategically) Employee relations 59% 35% 7% 0% Recruitment and selection processes 58% 33% 8% 2% Benefits management 58% 32% 7% 3% Performance management 45% 42% 10% 3% Health, safety and security programs 39% 46% 13% 3% Compensation management/reward programs 35% 48% 16% 2% Employee communication programs 33% 50% 15% 2% Diversity practices 30% 39% 24% 6% Retention programs 28% 40% 31% 2% Employee engagement initiatives 26% 41% 31% 3% Leadership development 22% 52% 22% 4% Retirement planning 22% 41% 30% 6% Skills development initiatives 19% 47% 30% 4% Work/life programs 19% 37% 38% 6% Human capital measurements 18% 38% 37% 7% Employment brand strategy/employment branding 18% 37% 30% 15% Corporate social responsibility programs 16% 35% 35% 14% Talent management initiatives 16% 34% 43% 7% Succession planning 16% 32% 41% 11% Budgeting 13% 51% 29% 7% Analysis of trends and forecasting 6% 43% 39% 13% Note: Sample size is based on the actual number of respondents who answered this question using the response options provided. This table is sorted by percentage of respondents who responded to a large extent for each statement and excludes respondents who indicated not sure or not applicable. Percentages within each category may not total 100% due to rounding. SHRM 2006 Strategic HR Management Survey Report 13

21 tent on all 12 subjects that were addressed. The aspects that were rated the highest by HR professionals from departments with and without a strategic plan in place included the following: 1) HR works closely with senior management in implementing organizational strategies (68% for HR departments with a strategic plan in place and 38% for HR departments without a strategic plan in place); 2) HR works closely with senior management in creating organizational strategies (56% and 27%); 3) HR has achieved a level of respect that is comparable with other departments in the organization (49% and 26%); 4) senior management realizes that investments in HR make financial sense (47% and 27%); and 5) HR implements strategies and processes to drive business results (46% and 19%). These findings reveal that having an HR department with a strategic plan in place is important to the level of contribution that HR can offer. Table 8a Extent of HR s Involvement in the Organization (Overall) (n = 406) To a Large Extent To Some Extent To No Extent HR works closely with senior management in implementing organizational strategies 56% 39% 6% HR works closely with senior management in creating organizational strategies 44% 45% 11% HR has achieved a level of respect that is comparable with other departments in the organization 40% 51% 10% Senior management realizes that investments in HR make financial sense 39% 50% 12% HR implements strategies and processes to drive business results 35% 52% 13% HR is involved in the communication of the business goals 33% 48% 19% HR is involved in the alignment of the business goals 32% 49% 19% The role of HR is increasingly more focused on strategic interests 31% 50% 19% HR involvement is essential in all major business activities and decisions 28% 56% 16% HR creates strategies and processes to drive business results 25% 56% 19% HR is involved in the development of the business goals 24% 52% 24% HR is involved in monitoring the achievement of business goals 21% 49% 30% Note: Sample size is based on the actual number of respondents who answered this question using the response options provided. This table is sorted by percentage of respondents who responded to a large extent for each statement and excludes respondents who indicated not sure. Percentages within each category may not total 100% due to rounding. 14 SHRM 2006 Strategic HR Management Survey Report

22 SHRM Table 8b Extent of HR s Involvement in the Organization (by HR Departments With a Strategic Plan) (n = 236) To a Large Extent To Some Extent To No Extent HR works closely with senior management in implementing organizational strategies 68% 29% 3% HR works closely with senior management in creating organizational strategies 56% 38% 6% HR has achieved a level of respect that is comparable with other departments in the organization 49% 45% 6% Senior management realizes that investments in HR make financial sense 47% 47% 6% HR implements strategies and processes to drive business results 46% 49% 6% HR is involved in the communication of the business goals 46% 41% 14% The role of HR is increasingly more focused on strategic interests 43% 49% 8% HR is involved in the alignment of the business goals 42% 49% 10% HR involvement is essential in all major business activities and decisions 36% 57% 7% HR creates strategies and processes to drive business results 36% 54% 10% HR is involved in the development of the business goals 31% 55% 14% HR is involved in monitoring the achievement of business goals 30% 49% 21% Note: Sample size is based on the actual number of respondents who answered this question using the response options provided. This table is sorted by percentage of respondents who responded to a large extent for each statement and excludes respondents who indicated not sure. Percentages within each category may not total 100% due to rounding. Table 8c (n = 170) Extent of HR s Involvement in the Organization (by HR Departments Without a Strategic Plan) To a Large Extent To Some Extent To No Extent HR works closely with senior management in implementing organizational strategies 38% 52% 10% HR works closely with senior management in creating organizational strategies 27% 55% 18% Senior management realizes that investments in HR make financial sense 27% 54% 20% HR has achieved a level of respect that is comparable with other departments in the organization 26% 58% 15% HR implements strategies and processes to drive business results 19% 57% 24% HR involvement is essential in all major business activities and decisions 18% 55% 27% HR is involved in the alignment of the business goals 18% 51% 31% HR is involved in the communication of the business goals 17% 57% 26% The role of HR is increasingly more focused on strategic interests 14% 51% 35% HR is involved in the development of the business goals 13% 48% 39% HR creates strategies and processes to drive business results 10% 58% 32% HR is involved in monitoring the achievement of business goals 10% 48% 42% Note: Sample size is based on the actual number of respondents who answered this question using the response options provided. This table is sorted by percentage of respondents who responded to a large extent for each statement and excludes respondents who indicated not sure. Percentages within each category may not total 100% due to rounding. SHRM 2006 Strategic HR Management Survey Report 15

23 Metrics and Analytics Organizations should closely examine a vast array of information before making any recommendation or decision. Metrics and analytics are critical measurement tools that help uncover opportunities, identify problems, measure progress and help recognize differences between performance and expectation. These measures should be linked closely to the organization s strategic business plans and goals. As illustrated in Figure 6, 49% of HR professionals reported their organization had in place an established method to measure the effectiveness of HR strategy through metrics and analytics. Figure 6 (n = 423) No 48% An Established Method to Measure the Effectiveness of HR Strategy Through Metrics and Analytics Not sure 3% As shown in Tables 9 through 11, large organizations (500 or more employees), HR departments with 10 or more employees and organizations with an existing strategic plan within the HR department were more likely to have an established method of measurement in place. Yes 49% Many organizations have a wealth of internal data available that could be used to measure and evalu- Table 9 An Established Method to Measure the Effectiveness of HR Strategy Through Metrics and Analytics (by Organization Staff Size) Overall (n = 412) Small (1-99 Employees) Medium ( Employees) Large (500 or More Employees) Differences Based on Organization Size 49% 31% 48% 66% Large > small Note: Sample size is based on the actual number of respondents by organization staff size who answered this question using the response options provided. Table 10 Overall (n = 416) An Established Method to Measure the Effectiveness of HR Strategy Through Metrics and Analytics (by HR Department Size) 1-4 Employees 5-9 Employees 10 or More Employees Differences Based on HR Department Size 49% 39% 57% 78% 10 or more employees > 4 or fewer employees Note: Sample size is based on the actual number of respondents by HR department staff size who answered this question using the response options provided. 16 SHRM 2006 Strategic HR Management Survey Report

24 SHRM ate a wide range of traditional and nontraditional activities. HR professionals should look into ways to use these data to strategically contribute and show value. HR professionals from organizations with established methods in place were asked how frequently their HR department used metrics or analytics in conjunction with specific HR activities. As seen in Table 12, the majority (59%) indicated that their HR department frequently used metrics or analytics in association with recruitment and selection processes. This was followed by performance management (52%), compensation management/reward programs (51%), benefits management (51%) and employee relations (49%). Less traditional functions such as corporate social responsibility programs (17%) and employment brand strategy/employment branding (21%) were less often linked with these measurement systems. Barriers Although the field of HR has evolved in recent years to become a more strategic entity in organizations, HR still encounters significant barriers that limit its ability to more effectively contribute business results that are related to the bottom line. In this section, HR professionals were asked to rate to what extent various factors may limit their HR department s ability to more effectively contribute to the organization s bottom line. As illustrated in Figure 7, 86% of the respondents felt that their department s focus on administrative duties rather than on strategy limited their ability to contribute either to a large or to some extent. Additionally, 78% of HR professionals reported that their department was not able to directly measure HR s impact on the bottom line and lacked an established method for measuring the effectiveness of HR strategy through metrics and analytics. It is not surprising that focus on administrative duties and lack of measurement processes were the most commonly cited barriers. HR professionals could overcome administrative burdens by outsourcing some of these functions or hiring staff dedicated specifically to strategic initiatives, thus providing their HR department a better opportunity to focus on strategy. It is very difficult for HR to add value without the ability to measure the direct impact of HR initiatives; however, at the same time, HR does not have consistent measurement systems to assist in this process. These measurement systems are continuously becoming more sophisticated, and great advancements are being made in this area every year. In due time, refined measurements will be available that will provide HR professionals with the data they need to help their organizations run more effectively and will aid HR in measuring its direct impact on the bottom line. In the meantime, HR professionals should strive to perfect their HR-related metrics and attempt to utilize any available data that could be used in conjunction with organizational and human capital measurement issues. Another factor that could hinder the strategic progression and development of an HR department is related to its proximity to the organization s chief executive officer (CEO)/president. HR professionals were asked to whom the person overseeing the HR department directly reported. The closer HR is associated with Table 11 An Established Method to Measure the Effectiveness of HR Strategy Through Metrics and Analytics (by HR Departments With and Without a Strategic Plan in Place) Overall (n = 406) HR Department With a Strategic Plan HR Department Without a Strategic Plan Comparison by HR Departments With and Without a Strategic Plan in Place 49% 66% 29% With > without Note: Sample size is based on the actual number of respondents who answered this question using the response options provided. SHRM 2006 Strategic HR Management Survey Report 17

25 Table 12 How Often Metrics or Analytics Are Used With Specific Organizational Functions Frequently Sometimes Rarely Recruitment and selection processes (n = 197) 59% 31% 10% Performance management (n = 196) 52% 41% 8% Compensation management/reward programs (n = 199) 51% 34% 15% Benefits management (n = 192) 51% 34% 15% Employee relations (n = 194) 49% 31% 20% Health, safety and security programs (n = 193) 43% 39% 18% Budgeting (n = 189) 40% 38% 23% Retention programs (n = 191) 35% 40% 25% Employee communication programs (n = 185) 34% 44% 23% Diversity practices (n = 188) 32% 42% 26% Employee engagement initiatives (n = 180) 31% 43% 27% Analysis of trends and forecasting (n = 180) 29% 45% 26% Leadership development (n = 187) 28% 51% 21% Human capital measurements (n = 175) 28% 37% 35% Retirement planning (n = 169) 27% 38% 36% Talent management initiatives (n = 176) 26% 39% 35% Skills development initiatives (n = 192) 21% 53% 27% Work/life programs (n = 171) 23% 44% 33% Succession planning (n = 174) 22% 41% 37% Employment brand strategy/employment branding (n = 161) 21% 40% 39% Corporate social responsibility programs (n = 156) 17% 38% 45% Note: Percentages are row percentages and may not total 100% due to rounding. This table is sorted by percentage of respondents who responded frequently for each function and excludes respondents who indicated not sure or not applicable." the C-suite, the more the organization will expect from it. As illustrated in Figure 8, the majority (63%) of HR professionals indicated that the individual overseeing HR directly reported to the CEO/president. This was followed by the vice president (11%) and the chief operating officer (COO) (8%) positions. As illustrated in Table 13, HR departments from smaller-sized organizations (1-99 employees) were significantly more likely than those from larger organizations to have their head of HR report directly to the organization s CEO/president. It is important that all levels of HR professionals reinforce and improve their business acumen, strategic HR knowledge and competencies. Further develop- 18 SHRM 2006 Strategic HR Management Survey Report

26 SHRM Figure 7 Factors That Limit HR From Contributing to the Organization s Bottom Line HR department lacks an established method for measuring the effectiveness of HR strategy through metrics and analytics (n = 406) HR department focuses more on administrative duties rather than strategy (n = 411) HR department has limited involvement with the board of directors (n = 399) 35% 43% 22% 31% 55% 14% 27% 36% 38% HR department is not able to directly measure HR s impact on the bottom line (n = 405) HR department is not able to set and focus on a small amount of central priorities (n = 400) HR department lacks HR professionals trained in business strategy (n = 411) HR department spends an insufficient amount of time on business management matters (n = 399) HR department is too focused on people management issues (n = 405) 24% 54% 22% 19% 48% 32% 16% 47% 37% 16% 55% 29% 14% 52% 34% HR department does not outsource enough administrative functions (n = 396) 13% 36% 50% HR department lacks HR professionals trained in HR strategy (n = 413) HR department does not receive respect from senior management (n = 404) 13% 41% 46% 11% 40% 49% HR department is not aligned with the organization s business strategy (n = 390) 7% 31% 62% HR department is not willing to take chances (n = 404) HR department is reluctant to adopt new technology (n = 408) 6% 37% 57% 5% 22% 73% To a large extent To some extent To no extent Note: Percentages may not total 100% due to rounding. This figure is sorted in descending order by the percentage of respondents who answered to a large extent and excludes respondents who indicated "not sure." SHRM 2006 Strategic HR Management Survey Report 19

27 Figure 8 To Whom the Person Overseeing the HR Department Directly Reports (n = 410) 80% 70% 60% 63% 50% 40% 30% 20% 11% 10% 8% 7% 0% CEO/president Vice president COO CFO 4% Director 2% 2% 3% General manager Board of directors Other Table 13 To Whom the Person Overseeing the HR Department Directly Reports (by Organization Staff Size) Overall (n = 410) Small (1-99 Employees) Medium ( Employees) Large (500 or More Employees) Differences Based on Organization Size CEO/president 63% 75% 60% 59% Small > medium, large Vice president 11% 7% 8% 16% COO 8% 5% 12% 7% Chief financial officer 7% 7% 8% 6% Director 4% 4% 4% 6% General manager 2% 0% 4% 3% Board of directors 2% 3% 1% 2% Other 3% 1% 4% 3% Note: Sample size is based on the actual number of respondents by organization staff size who answered this question using the response options provided. Blank cells in the comparison column indicate that no statistically significant differences were found. 20 SHRM 2006 Strategic HR Management Survey Report

28 SHRM ment within these areas enables HR professionals to increase and improve their skills. Ultimately, this could lead to the advancement of the strategic HR function within various elements in the organization. As illustrated in Figure 9, 92% of HR professionals indicated their organization provided development opportunities for its HR staff. Among these respondents, almost two-thirds (63%) offered professional development opportunities. This was followed by memberships in business professional associations (53%) and individual informal mentoring (44%). These data are depicted in Table 14. Figure 9 (n = 427) Strategic Developmental Opportunities for HR Staff No 8% Yes 92% Table 14 Ways Organizations Develop the Strategic HR Skills of Their HR Staff (n = 394) Yes No Professional development opportunities 63% 37% Memberships in business professional associations 53% 47% Individual informal mentoring 44% 56% Attending a strategy conference 32% 69% Participating in teams focused on HR strategy and/or business 31% 69% Assisting a senior HR leader in strategy initiatives 30% 70% Participating in strategy meetings for exposure 27% 73% Shadowing a senior HR professional who works on HR strategic initiatives 7% 93% Participating in a formal mentoring 9% 91% Note: Percentages may not total 100% due to rounding. SHRM 2006 Strategic HR Management Survey Report 21

29 SHRM An HR Perspective By Nancy R. Lockwood, SPHR, GPHR, M.A., Manager, HR Content In today s competitive environment, effective communication strategies are at the heart of strategic planning. According to this survey report, 80% of HR professionals see employee communication programs as an area to which HR can strategically contribute (see Figure 5). The best place to begin is to establish a communications strategy for all internal and external stakeholders. For example, employee communication programs in organizations serve important strategic functions, such as 1) supporting organizational success and sustainability; 2) retaining talent/ employee engagement; 3) rolling out new HR and/or organizational initiatives; 4) gathering feedback; and 5) sharing information. Without question, energizing the organization through improved communication is an HR strategic contribution. New organizational initiatives present an excellent opportunity for HR to strategically contribute to the company s goals through employee communication programs. To maintain a competitive edge, many companies today are taking a closer look at the perception of their products and services as well as the company reputation overall. Utilizing their interpersonal communication skills, HR professionals can help set organizational strategy and effectively communicate change management initiatives, thus providing important value-add around key initiatives such as branding, talent management, corporate social responsibility and diversity to keep employees engaged and focused, promote productivity, strengthen employee commitment and encourage a respectful employer-employee relationship. In addition, HR professionals are uniquely placed to support management and employees alike through employee communication programs. In general, topdown and bottom-up employee communication programs allow for more effective communication and promote well-informed decisions. HR can facilitate opportunities to ensure good communication between management and employees by establishing a variety of employee communication programs to keep staff informed, thus casting a wide net for all parties to inform and become informed on issues of importance to both the organization and the workforce. Thoughtfully selecting the best medium for the message is an important strategy to effectively get the message across. Employee attitude surveys, focus groups, management report cards, employee suggestion programs and employee communication boxes are examples of bottom-up communication programs. In addition, the HR function can provide strategic support to the organization through employee communication programs with face-to-face presentations that convey a message of partnership between management and employees as well as emphasize company values. Face-to-face meetings are important because they offer the opportunity for employees to ask questions. Broader communication programs such as monthly company-wide meetings, staff briefings, round-table luncheons with cross-departmental groups, lunch with the CEO, HR and all-staff s, and a company intranet are top-down employee communication programs that reach out to many employees and provide a sense of inclusiveness that helps generate good will, respect and trust. Finally, in addition to the recommendations above, HR can also strategically contribute to the organization by 1) assessing, evaluating and measuring the effectiveness of current employee communication programs; 2) thoroughly understanding the goals of initiatives in advance 22 SHRM 2006 Strategic HR Management Survey Report