Have you ever found yourself wondering why and how some companies have all the luck getting the best people? That’s how Mark felt when he reached out to me last year. As with anything in life, luck has very little to do with finding and keeping the best talent. What does help is an effective HR Strategy. In this blog post, I’m going to give you a step-by-step plan on how to develop an effective HR strategy for your business.
Mark started a private equity firm three years ago with two partners. They each had their roles defined and their motto was “work hard and play hard”. Within a year, they had grown their small team of three into a team of twenty with analysts and researchers at junior and mid levels.
That’s when the problems started. The work was grueling and the analysts started dropping one by one, claiming long hours, inadequate pay, and a career-stifling work environment. The one female they had hired quit after only two months claiming she’d “had enough” of the misogyny. Furthermore, the work the team was producing was riddled with errors and the partners were reviewing every piece of work. This was a huge time drain.
So, what went wrong?
Mark and his partners made the classic mistake of “winging” their talent strategy. Mark said to me, “We knew what we wanted to hire and we went out and got it. We figured the work would be interesting enough for everyone to stay motivated and engaged. The truth is I didn’t expect to oversee every little thing our analysts produce – we just don’t have the time for it.”
No matter how sexy the company or the work, if leaders don’t prioritize working conditions and employee development, good people will leave. So, when Mark came to me, one of the first things we did was develop an effective HR strategy that would work for his company.
Before we begin, download out our HR Strategy Creation Guide. Now, let’s go through the steps.
Develop an Effective HR Strategy Step 1: Defining the Business Strategy
Before we start working on an HR strategy, we need to examine the business strategy. Your business strategy will have your vision, mission and values, as well as a high level overview of what your business objectives are and how you will achieve them. The good news is that most companies spend a decent amount of time on a business strategy and Mark’s team was no exception.
Typical business strategic plans are over a 3-5 year period. Lately, more and more companies are shortening their strategic planning process because the external landscape changes too quickly for a long time horizon. Seeing 5 years out into the future is virtually impossible these days. If you don’t have a business strategy, I suggest this resource for steps to develop one.
Step 2: Figure out what work needs to be done
Before you post that first job, you’ll need to know what work needs to be done over the strategic planning period. This is breaking down your business strategy into key buckets of work. It could be one broad task that encompasses all others, or it could be several buckets. Typically the work that needs to be done centres around revenue generation.
In Mark’s case, they needed to close 5 deals, at least one every year, within the strategy plan period. Everything they did needed to centre around that one strategic objective.
When they initially thought about hiring people, it came from a sense of need, rather than any strategy. The three partners were swamped and needed someone to help them. Their first few employees were referrals from business contacts and friends. The rest of the employees were hired during peak busy times when deal work was in full swing. It was no wonder they didn’t work out.
Mark, his partners and I sat down and hashed out all the work that was involved in closing a deal, from the deal origination to managing portfolio companies. We ended up with five main buckets of work: business development, research, finance, deal negotiation, and portfolio company operations. Keep in mind these are not roles, but groups of roles.
From there, we move on to breaking down the skills needed for each group of jobs.
Step 3: Determine what skills are needed to do the work
Once you have your buckets of work defined, it’s time to figure out what skills are attributed to each bucket of work. In Mark’s case, we needed people with sales experience in business development, we needed finance and analysis experience for the research and finance buckets, we needed legal and private equity experience in the deal negotiation bucket, and finally, we needed people with board experience, or specific functional experience for the portfolio company operations bucket.
Step 4: Determine which people are needed for the jobs
Once you know the broad skills needed on the team, it’s time to group those skills into the people needed for each role. At this point, we’re not looking at headcount yet, we’re simply looking at what sort of person we would hire (i.e. what education, experience and personality) in each of those buckets. Doing this exercise upfront makes going through the following steps easier.
One interesting thing that emerged during my discussions with Mark was that in some of the roles, experience at Mark’s firm was critical to success in the role. So, for those roles, we decided talent had to be homegrown. Getting external people for those roles would only set them up for failure and wouldn’t benefit the company in any way. “Promoting from within” was then a key component of Mark’s HR strategy and we needed to consider how to make it work.
Step 5: Evaluate the existing organization
Once you know the broad skills needed on the team, it’s time to evaluate whether you have those skills on the current team. This is an important step to developing an effective HR strategy. You need to know what’s happening inside before you outside for talent. In Mark’s case, we looked at his existing team of 17 people, excluding the partners, and assessed the skills they brought to the table. In most cases, the skills matched the roles they were in. For the ones that didn’t, we needed to have a plan to either train and develop them or exit them out of the organization.
Step 6: Do an HR SWOT analysis
Once steps 1-5 are completed, you’ll be in a position to complete a SWOT analysis. This resources explain what a SWOT analysis is.
Doing a SWOT for your HR strategy is slightly different from doing it for your business strategy. The main thing you need to remember is the strengths and weaknesses are those of your existing internal talent. And opportunities and threats are of the broader labour market.
In Mark’s company, the main strengths were that they already had some homegrown talent. Their weaknesses were that there was virtually no diversity on the team and the partners wanted to correct that. The opportunities in the marketplace were that there was a program dedicated to private equity at the local university and a ready source of fresh talent to choose from. The threats were the other private equity firms in the financial district of their city that were competing for those same resources and losing talent to those companies was a real possibility they needed to account for.
Step 7: Put the Strategy together
With the SWOT analysis done, the HR strategy pretty much writes itself. You now know what skills you need on your team to successfully implement your business strategy and you know what your internal strengths and weaknesses are as well as your external threats and opportunities. Here is an example of HR strategic objectives
In Mark’s company, we ended up with the following HR Strategy:
- Attract, develop and retain top talent to facilitate closing 1 deal a year
With these HR strategic objectives:
- Develop and implement a diversity and inclusion plan
- Develop and implement an internal promotion plan to keep good employees for as long as possible
- Build a partnership with the finance program at the local university to get new talent in
- Develop a compensation plan that rewards high performers and exits poor performers
Our 7 steps to develop an effective HR strategy is a requirement for any company. With a strong strategy in place, you have a plan for attracting the talent you need to for your business to be successful. The HR strategy also helps to structure your HR practices in a way that is aligned with your business objectives. Download our HR Strategy Creation Guide before you begin this exercise on your own. It will help you keep your notes and thoughts in one place.
One question many leaders ask is how long it takes to develop an effective HR strategy. Developing an HR strategy doesn’t take long, however, the one key to building an effective HR strategy is ensuring that all decision makers in the company are at the table. So, if you’re an HR professional and are facilitating these discussions, this is a non-negotiable.
I’d love to know if this was helpful. Comment below and tell me if you used these steps to create your company’s HR strategy and if you have any feedback. Is the HR strategy you developed helping you attract and retain the talent that you need to execute on your business strategy?