Many organizations manage human capital reactively without considering its strategic integration. Led by the Executive team and Human Resources (HR), strategic management aligns employee needs with organizational goals, promoting a transparent culture and talent retention. Appropriate organizational design and a focus on compensation and benefits make it easier to attract and develop talent. This ensures efficiency, retention, and transparency, contributing to a strong and sustainable culture.
Context
Many organizations, beyond carrying out traditional HR functions, have ongoing initiatives focused on specific aspects of human capital management, which mostly represent reactive measures to situations or behaviors observed within the organization. Consequently, the multiple aspects of human capital management and the way they are intertwined to generate value for the employee are frequently not strategically revisited, but rather addressed urgently and in silos.
Human capital management involves strategic planning, with the purpose of aligning employee needs with the organization’s objectives. This alignment enables the development of a strategy to attract, retain and develop the necessary talent to fulfill the operation and sustain long-term success. In addition, it promotes a culture of transparency that in turn helps to promote the well-being of employees.
Successfully developing a human capital management strategy requires the participation of all parties that in one way or another influence the organization’s performance. It is essential for this effort to be led by the executive team in conjunction with the Human Resources role to ensure that it brings strategic perspective not only from a business point of view, but also from the talent and capabilities aspect that the organization needs to support the value proposition.
Figure 1 summarizes the main pillars and enablers of our Human Capital Management framework. Each pillar requires the development of its own plans and strategies, and although each may seem independent, they all require interaction between them given their interrelationship. Therefore, there is no set order to address the elements of the framework, and it’s dependent on the organization’s needs and priorities.
However, although there is no specific order for the development of strategies for the pillars, there are some that, when revisited at the beginning, considering the mission and vision of the organization as a focus and guide, provide direction to continue aligning the rest. Among these, Organization and Capacity stand out, along with Compensation and Benefits. By achieving clarity in both, the organization can put in place certain objectives and plans that serve as a basis to strengthen Performance Management and Talent Development, in accordance with the functions and objectives outlined by unit.
Approach
Aligning efforts based on a customer-centric mission and vision helps to set the objectives and a clear goal for which everyone must work. This will make it easier to establish guiding principles that meet the needs and level of service expected by customers, leading the organization towards a coherent and sustainable operation in the long term. For this, it is necessary to consider the history, purpose over time, strengths and areas of opportunity of the operation.
A change in vision and mission directly impacts the human capital management strategy. Initiating its review by addressing Organization and Capacity together with Compensation and Benefits, contributes to advancing that mission.
Working with the Organization and Capacity pillar in parallel to the Compensation and Benefits pillar, allows the necessary calibrations to ensure that the two complement each other coherently. An organization must have an adequate structure, necessary resources, and well-defined internal capabilities to reach its strategic objectives. This is achieved by addressing the Organization and Capacity pillar, through an organizational design and a robust capacity analysis. Building the units and functions of an organization is an iterative process that starts from deciding the type of structure needed to fulfill the vision.
An Organizational structure design involves evaluating the approach to which the organization aspires, considering whether it would be by type of customer served, or type of service offered. On the other hand, the final decision depends on considering the current maturity of the organization and the existing internal capabilities, beyond having a customer-centric vision. This often requires the construction of a transition plan to ensure the transformation’s feasibility.
After establishing an organizational structure, a capacity analysis allows quantifying the number of employees needed per role and defining the optimal distribution of tasks to meet the proposed performance metrics. Meeting a service level or completing tasks in a predetermined time, for example, will directly impact the total number of employees required.
Achieving the optimal level and the right balance of personnel per function requires having an attractive employee value proposition, which enables an effective recruitment and retention process to maintain the necessary level of capacity. However, achieving this has its challenges, such as filling positions that are difficult to recruit for professions with high demand in the labor market, and the difficulty of filling supervisory and management positions.
A focus on the Compensation and Benefits pillar, after gaining a good understanding of Organization and Capability, facilitates the development of compensation initiatives specifically aimed at attracting positions that are difficult to recruit and, likewise, initiatives that support reasonable career progression for internal talent development, which promotes lower-ranking incumbents having the possibility of promotion to fill those supervisory vacancies. The design of the compensation plan is closely tied to the organizational structure, given its impact on existing positions, responsibilities, education and specific experience of each position, levels of supervision and potential career development paths within the organization.
In addition to base salary, the organization can evaluate the marginal benefits offered to become more competitive in its respective market. However, when selecting and designing them, it is important to consider the common needs of the employees, in addition to, like the base salary, market trends and offerings.
Addressing these two pillars separately can lead the organization to devise separate idealistic goals that later become too difficult to implement, given their interdependence and effect on other pillars. For example, in the case of Organization and Capacity, the idealistic goal could be to fill all the vacancies that the organization has and attract the most qualified talent for those functions. On the other hand, for Compensation and Benefits, the best outcome could be having the most competitive compensation offer in the market, including a diverse and attractive benefits package. However, when implemented, this could result in very high operational costs, for instance.
Developing both pillars together helps mitigate these setbacks, involving the necessary decisions and readjustments so that the resulting strategy is realistic and favors the organization. The plan to fill necessary positions, for example, can be developed in phases, mitigating needs in certain functions, and considering the fiscal impact of implementing the compensation design. Having visibility of the impact that personnel movements could have due to potential promotions, exits or interdepartmental preferences when incorporating new salary scales, allows for more organized transitions, ensuring greater benefit in the operation.
Closing
The alignment of objectives that occurs throughout the design process of the Organization and Capacity and Compensation and Benefits pillars helps to sustain operational efficiency, talent retention and transparency within the organization. These factors, in turn, help build a solid culture that drives organizational performance and sustainable success over time.
In V2A Consulting’s organizational practice, we can support the development of Human Capital strategies, starting with the design of organizational structures and compensation plans. Contact us by email at info@v2aconsulting.com or leave us your information on the contact form on www.v2aconsulting.com.
