From the Ask Tom mailbag –

Question:
I read, with interest, your post about the impact of HR at Stratum III level of work. What about Stratum IV?

Response:
When companies are able to pull the silent switch in HR from S-II to S-III, they shift HR from a cost center to a value add center. The shift in HR at S-III to S-IV drives HR from a value add center to a strategic center. Sounds glib and trite, but here is what that means.

Understanding tactical to strategic can be measured in time span. The shorter the time span, the more tactical, the longer the time span, more strategic. HR at S-III maintains a 12-24 month outlook, HR at S-IV maintains a 2-5 year outlook. We still call it HR, but the roles are very different. There are three challenges for the HR professional in search of the context for this S-IV role.

The first challenge is to get beyond the annual strategic planning retreat, because most annual strategic planning retreats are really tactical planning retreats. To prove this, look at any published action plan from any strategic planning retreat. No goal or objective is beyond 12 months time span.

The second challenge is that conversations have to happen at levels-of-work above S-III. Conversations with managers S-III and below still arrive at tactical issues less than two years time span. So, this conversation has to happen with S-IV managers and the S-V Business Unit President.

The third challenge is the futile reference to the company’s strategic documents, Mission and Vision statements. As they exist, they are rarely helpful, mostly filled with Pollyanna statements about premier providers and exceeding expectations. So, yes, we have a problem.

Most small to medium size companies don’t think out 2-5 years, at least, not very clearly. Specifically related to HR, here is a short list of S-IV workforce issues.

• Aging of the workforce, succession planning at all levels of work, 2-5 years.
• Workforce trends of generational transitions, boomers, Xers, millennials, 2-5 years.
• Impact of technology on workforce, 2-5 years.
• Market scarcity of workforce, 2-5 years.
• Wage management, 2-5 years.
• Skills training of workforce, 2-5 years.

A funny thing happened during the last recession in some construction markets. As constructions projects slowed and finished, with no new backlog, foreign workers returned home while others discovered air conditioning. Now, as construction resumes in a growing (albeit slowly) economy, there is a shortage of direct labor. Market scarcity of workforce is driving up wages for work inside fixed amount contracts. This is an S-IV HR issue.

Business models are shifting. McDonald’s built into their business model a young transient workforce. Using automation and with an emphasis on training, they were able to constantly recruit first-job employees with the knowledge that employee was going to leave in 1-2 years to their second job or college. Now, McDonald’s is faced with a work-force that chooses life-long employment in the fast-food industry, demanding a minimum wage of $15 per hour. This is an S-IV HR issue. McDonald’s is already testing self-serve kiosks to replace some of their fast-food workforce.

Technology is replacing labor. Robotics replace welders. BIM (Building Information Modeling) reduces labor hours, at the same time requiring new skills to run the software. This is an S-IV HR issue.

John Donovan, Chief Strategy Officer and Group President of AT&T Technology and Operations describes AT&T as a company with very little turnover, 3rd generation employees, now facing competition from Google and Amazon armed for war. Basic math tells them that “ten-thousand employees are behind the curve, about 50,000 are about to be behind the curve, and in the next 24 months another 20,000. 80,000 employees are in an alarm state of need to change.” That is an S-IV HR issue.

Greg Coppelli, CEO, Apollo Education Group says that most organizations who spend (billions) recruiting talent see an ROI on that effort less than 50 percent of the time. That is an S-IV HR issue.

Here are some HR S-IV questions to ask.

• What do we see happening in our market over the next 2-5 years?
• If we do nothing to respond in the next month, what will happen?
• If we do nothing to respond in the next year, what will happen?
• If we do nothing to respond in the next two years, what will happen?
• If we do nothing to respond in the next five years, what will happen?