Speaker 1

Module four. Welcome to Module Four, Business Strategies in the Strategic Planning
Process. In this module, we will look at what constitutes a business strategy and
what the strategic planning process looks like. It's important to note at this point
that as we move through the strategic planning process, I will refer to ideas and
notions we covered in corporate strategy in module two. You'll need to have a firm
understanding of those different corporate strategies as we move forward in this
module The definition of business strategy is quite simple. It's building a
competitive focus in one line of a business Remember, a corporation could have
three, four, five, or even more different lines. A business strategy looks at a line of
business and determines the best way to successfully compete within that
individual market or product line. For example, Carnival Cruise Lines owns a number
of different cruise brands, including Holland America, Princess, Seaborne, and
Kunard, to name just a few Each of these cruise lines offers a slightly different
experience, targeting a slightly different audience Another example would be
Loblaw Corporation that owns many brands of grocery stores such as President's
Choice, City Market, and No Frills. By applying a business strategy, they are trying to
address the question, how do we win within this specific market? And we need to
understand, as I've mentioned before, how we link these objectives to our corporate
level strategy and put in place the supporting human resource programs. But before
we delve any further into the business strategic planning process, we need to first
consider more broadly the reality of strategic planning. Overall, strategic planning
can result in four more narrow types of business strategies. These strategies
identify where we presently are and where we're going. The first is the intended
strategy. The intended strategy is the agreed-upon approach arrived at through
some type of formal planning. It's the general actions brought about in order to
achieve the things that we thought we would be doing. The emergent strategy is
one that is created from new ideas, new conditions, or new environmental
conditions. In a dynamic environment, new strategies are always emerging in
response to opportunities and threats. The discarded strategy is a strategy deemed
inappropriate at that point in time due to changing circumstances or changing
company or corporate strategies or direction. The business strategy is continually
shifting, continually moving forward, and they sometimes make existing strategies
no longer relevant or effective. A realized strategy is the implemented plan. This is a
strategy in the events stemming from a strategy that was actually seen through to
fruition. Let's consider an example My intended strategy may be to help our
business lines by providing various HR programs. The emergent strategy is to help
those businesses strengthen their organization or leadership development Our
discarded strategy tosses aside the notion that we are going to affect these
changes across all the different business. Instead, we're focusing only on the large
businesses, excluding the smaller ones. My realized strategy is, well, whatever
actually happens once our programs and policies are put into effect. As strategy
progresses, you may have a formal planning process in place, but you also may
have new ideas based on new conditions, new priorities, and different ways of
looking at human resources or the leadership function. Moving along, we are going
to take a look at the seven steps in the strategic planning process. Let's first come
to a definition of what the strategic planning process is. The strategic planning
process describes the organization's future direction. its performance targets, and
the process it follows in order to achieve its targets, as noted in a formal written
statement. This obviously can be a long process and can involve numerous steps.
For our purposes, we are going to examine a process using seven steps. I've seen
examples that involve as few as three and as many as ten steps, but standard
business and HR textbooks more commonly identify seven steps. Let's begin with
more of an overview of the strategic planning process. Step one is looking at the
mission vision and values. In other words, what the organization does, where it is
going, and what it believes in. Step two prices you to develop business objectives,
both from the business perspective and from the HR perspective. Objectives define
where you want to be. They allow you to measure progress. Step 3 analyzes or
makes sense of the external environment. Who your competitors are, for example,
and what they are doing. Once this is complete, step four examines what your
organization's competitive advantages are, what you bring to the table better than
any other organization Particularly something that can't be imitated. In step five,
the organization further determines its competitive position. This answers the
question: how will we compete? This will eventually lead into step six, which is
implementing the strategy and defining the programs that will result in success.
Finally, step seven is where you evaluate performance. For our purposes, it's great
to have these seven steps, but it is also important to remember that we should be
continually evaluating performance. Continually analyzing the environment and
continually looking at the mission, vision, goals, and values, all of which may
necessitate the creation of new objectives or a change in competitive positioning.
So in reality, strategic planning is not an event. It is an ongoing process that is most
often iterative, in other words, back and forth, as opposed to linear Step one sets
out to establish the company's mission, vision, and values. Simply put, at its core,
the mission statement asks. What is the organization's reason for being? What is it
actually doing? The mission statement clearly states the reason for the business's
existence. It doesn't outline the entire business model. Instead, it outlines why the
business is there, its purpose, what it's doing for its employees, what it's doing for
the community. what it's doing for its stakeholders and its shareholders. It needs to
be realistic, credible, and compelling. So Microsoft's mission statement is to
empower every person and every organization on the planet to achieve more.
Wendy's mission is to deliver superior quality products and services for our
customers and communities through leadership, innovation, and partnerships. And
Google's mission is to organize the world's information and make it universally
acceptable. These statements communicate what these organizations do. The vision
statement is a clear and compelling statement about what the organization wants
to achieve. This statement should, in reality, unite people. I have been witness to a
number of instances where you would ask employees and senior management what
the business's vision was and found that, all too often, they didn't know. They
typically only had vague ideas of their company's vision and goals. It is important
that the vision statement be clearly and concisely written The more clear and
compelling your written statement, the more you'll be able to attract people into the
business and align the business's priorities to those of its people. The vision
statement is an important element of what we call the employee value proposition.
In other words, the why behind why employees join an organization. Microsoft's
vision statement is to help individuals and businesses to realize their full potential.
Wendy's vision statement is to be the quality leader in everything we do. And
Google's vision statement is to provide access to the world's information in one
click. The vision statement paints a picture of the future that is better than today,
and ideally, it gets employees excited about getting there. Together, an
organization's mission and vision statement should differentiate it from other
organizations in the marketplace. People will leave or avoid joining a company
whose mission or vision statement doesn't coincide with who they are. A constant
concern for HR is how one achieves employee engagement. In other words, how do
you, as an HR manager Set the tone for a culture that attracts, retains, and
motivates people to do their best. The answer lies within the company's value
statement. The value statement identifies what the organization cares about. It
outlines the organization's basic beliefs that govern how they operate and therefore
shapes employee behavior By doing so, it helps employees identify with the
organization. A well-written, well-reasoned value statement will generate employee
commitment to something bigger than themselves. Value statements can include
words that describe an organization's commitment to such things as integrity and
honesty, passion, accountability, teamwork, perseverance, or respect for diversity.
Once a company has developed and established its vision, mission, and values, it
needs to develop objectives for the organization to work towards in order to make
the vision and mission come true. This is step two. Objectives that can include a
series of soft goals such as better leadership or even defining corporate social
responsibility Or they can also include a series of hard goals, like achieving a 10%
return on net assets by the end of the year. The balance scorecard is a common
approach that organizations use to organize their objectives and goals into four
categories that then can be communicated. tracked and measured. The four
categories include goals pertaining to the organization's financial results, Customer
satisfaction, learning and growth characteristics, and internal business practices.
For example I once helped an organization create an objective to address what
corporate social responsibility meant for the community at large, what it meant for
HR, and what it meant for its employees. Coming to these sets of determinations
took over two years. So, step two can take time, and it is important that HR be a
part of that process since, ultimately. people will be carrying out the objectives that
are created. In step three, once the company objectives have been developed, it is
necessary to analyze the organization's internal and external environments. This
can be done through a SWOT analysis. The results of the SWOT analysis will identify
the organization's competitive advantage Competitive position, as well as the
programs and action plans designed to implement the organization's strategy. From
a SWOT analysis point of view, We first look at our external environment, the threats
and opportunities facing the organization. What's the opportunity? Is there
something in the environment we can take advantage of? For example, are there
employees being laid off from another company that we could possibly hire in order
to fulfill our growth strategy? What's the threat facing the business? Maybe there is
a threat of someone buying it because of your profitable return on investment. It is
important to always be aware of what is happening in the environment. Analyzing
the internal environment will expose what the organization is good at and what it is
not so good at. It will help the organization identify its strengths and weaknesses
Are we good at performance management? Are we good at learning and
development? Are we good at securing customers or keeping old ones? We need to
understand both our strengths and our weaknesses in order to leverage our
strengths and address our weaknesses Step four asks, What is our competitive
advantage? It further questions the company needs to differentiate itself. Typically,
the company's ability to properly and better use its resources is what enables it to
earn higher rates of profit or greater returns on assets than its competitors So, what
resources does it have at its disposal? Tangible assets, intangible assets, and
capabilities. Tangible assets are assets that have substance and can be consumed.
Tangible assets include raw materials, finished goods, machinery, as well as
property and buildings. Companies that can manage their tangible assets better
than another company can find themselves with a sizable competitive advantage
within the industry. Intangible assets are not concrete and can be harder to put a
dollar value on. Intangible assets include the perception and reputation of the
company along with any attached goodwill. Goodwill is the premium placed on the
value of the organization during the merger and acquisition process. It is the value
of the company's brand name. solid customer base, good customer relations, good
employee relations, and any patents or proprietary technology For example, when
one company pays $3 billion for a company that has been appraised value of $2. 5
billion, then the goodwill value is said to be the $500 million difference. Capabilities
are things like employees' skills, abilities, and expertise, as well as a company's
core competencies. From an HR perspective, these all represent the human capital
assets that an organization can take advantage of in order to differentiate itself in
the marketplace. Securing and building those capabilities is a big part of how HR
can make a strategic contribution. Step five in the strategic planning process is
determining your competitive position. Every customer wants to know that they are
buying something that is of value to them based on their personal priorities and
preferences. They are always shopping. They are always looking. They are always
investigating. They are always keeping informed. Your employees do the same thing
So, your organization's competitive position defines its value proposition. A value
proposition is a statement of the benefits you offer through your products and
services. This is also true of an employee value proposition that clearly outlines for
employees the various tangible and intangible benefits they receive as a result of
working for your organization. The clearer the value proposition, the greater the
chances you will be able to attract employees that align with what your organization
has to offer. This in turn results in increased employee retention. Next comes
defining the organization's competitive strategy. When developing a competitive
strategy, we sometimes use Porter's model of competitive strategies as our guide.
Porter's model notes five competitive strategies. The first three strategies are low-
cost leader strategy. broad differentiation strategy, and best core provider strategy.
With a low-cost provider strategy, you look to provide your products and services at
a low cost in order to appeal to a broad range of customers. A low cost provider's
HR department will likely provide employee benefits and training programs that are
themselves Low cost. With a broad differentiation strategy, you seek to differentiate
your products from your competitors' products in order to appeal to a broad range
of customers. Whole Foods is a good example of a company using this strategy.
Quality and customer service are two ways in which they strive to differentiate
themselves. This will likely result in more attention being paid to the purchasing
competency within the organization, and perhaps to employee customer service
training. With a best cost provider strategy, your organization may want to provide
higher values to its customers at a discounted price. It may not be a low cost
product, but it will provide a consumer with more bang for their buck. IKEA is a
perfect example of a best cost provider, offering more affordable yet very
fashionable furniture. The two remaining strategies from Porter's model are focused
or market niche strategy based on differentiation. and focused or a market niche
strategy based on lower cost. Both of these strategies target a niche market, in
other words, a small segment of consumers that have a specific interest. An
organization that serves a select market with a desire for differentiation is likely
providing a very high-end product. something that only a small segment of the
population would desire. A Rolls-Royce, for example, would fit the bill here. On the
other hand, an organization that serves a focused market with a desire for a lower
cost for the product they seek may include Maybelline versus Chanel Step six is
where the strategy you developed is implemented. Recall that earlier we spoke
about realized and intended strategies At the intended strategy level, we still don't
yet know whether our preferred strategy is going to happen. Similarly, we don't
know what is going to unfold after we institute our strategy. That is to say, we don't
know whether it is going to unfold in the manner we think or hope. At this stage,
however, we do know that we need to do something. Similarly, at this stage, HR is
working with the business unit, putting necessary activities or steps into place to
accomplish the stated goal or objective. Strategic implementation in the operational
planning process can be broken into budgets, programs, and procedures. If we used
HR as an example, a program may include leadership development, performance, or
succession planning programs, all in support of some organizational objective. Each
of these programs would also have procedures in place to deliver them successfully.
Also, each would have a budget attached Ideally, the benefits realized from
implementing these programs would outweigh their costs, resulting in a positive
return on investment. Which takes us to the last step: evaluating performance.
Obviously, there are ways we can measure the impact a particular strategy has on
an organization. As mentioned, in my opinion, the concept of evaluating
performance should be done at every stage of the strategic development process,
just as a balanced scorecard does When looking at the company's vision, its goals,
and mission, you are, in essence, also looking at its strengths, its weaknesses, its
opportunities, etc. But there is no way to be sure that you are achieving your vision,
mission, and goals without knowing your market, without knowing you can change a
certain price or process, or without knowing that you need certain types of
employees. Similarly, while you ideally need to track and evaluate all the measures
you have put into place at each and every point in the process. Step 7 is
nevertheless placed last as an ultimate means of ensuring that we don't forget to
formally evaluate performance. Some operational indicator questions we can ask at
this stage include, are you growing your market share? Are you selling more
products? Are you offering more products? Are you differentiating your products?
Are you optimizing your competitive position? Are your people performing the way
they need to perform? Ultimately, regardless of when you choose to evaluate your
performance, you need to ask yourself. What indicators will best measure our
progress and success? It is also important to consider the possible errors that can
occur within the strategic planning process. We are going to highlight three in no
particular order of importance. Not involving key people or key decision makers
throughout the strategic planning process can be detrimental. Excluding certain skill
sets or keeping individuals out of the loop can have serious ramifications for the
design and completion of a project. Developing a racy chart can help avoid this
problem. A racy chart plots who is responsible for an action item. Who's
accountable, who's informed, and who needs to be communicated with when
necessary. Basically, it is an accountability matrix. It is key that someone be given
authority for decisions over each area. key strategic decision makers involved
throughout the process. They weren't necessarily involved on a daily basis, but
when we needed them. They were able to add their input to what we were doing, or
more specifically, what HR was doing. We needed key decision makers involved
throughout the process in order to keep the project on track but also to ensure that
the end result would be accepted by the organization's senior leaders Failing to use
the plan you developed in the strategic planning process as a guide is another
possible error. After spending days or even months involving a variety of
stakeholders in developing a guide from which the strategic plan can be
implemented, and then not using it, can be another issue. Going freelance and
deviating from the plan usually results in poor performance and does not allow the
planning process or the resulting plan to be properly assessed, because it was never
implemented. It also means that the time spent formulating the plan may have
been wasted, and the people involved will likely feel alienated. Failing to align
incentives of other HR programs with your strategy can be a concern as well. For
example, not redesigning your sales compensation plan to reflect a shift in the
customer target market will not reshape the sales force's behavior to go after those
customers. Also, generally speaking, and I know there can be exceptions, you
should not be hiring permanent employees in a failing business And you should not
be offering new expensive benefits if you are in the process of being acquired. HR
programs are an essential part of strategy. So, their mutual alignment is an
essential component of the success of any strategic plan. Before leaving this
module, I want to also cover off the governance issues pertaining to the execution
of strategies and in particular HR strategies. Put simply, governance establishes
who has power, who makes decisions, who is accountable for carrying out those
decisions, and how other players make their voice heard. It includes all the policies,
practices, and processes that are put in place to help organizations achieve their
goals ethically and in the shareholders' best interests When we talk about HR
governance, we're talking about the oversight and leadership of the HR strategy,
related policies and programs. It starts with the Board of Directors, who is
accountable for such matters as leadership compensation and succession, and
trickles down to management, who are responsible for managing people. It's
important to realize the authority for most people management decisions within
organizations rests with line managers, as opposed to HR. Therefore, HR
governance is important for ensuring that people managers make decisions that are
in line with organizational policies, guidelines, philosophies, and cultural norms.
Within the HR department, it establishes who has authority to approve certain
transactions and make decisions relating to various policies, procedures, practices,
and programs. Finally, when properly designed and implemented, a governance
structure guards against conflicts of interest and ensures due process for those who
feel unfairly treated.

Speaker 2
This ends Unit 1 on strategy. Thank you for listening.