Human Resources Strategy and Budgeting Checklist

Where is your company heading this year? What is the strategic plan? And how does that impact hiring needs, headcount or your programs? All answers every HR leader needs to know. Having a clear human resources strategy that aligns with your organization’s short- and long-term business goals enables you to prioritize—and budget for—activities that support those goals. The problem is, in many organizations, the HR function is largely operational, lacking the resources (or time in the day) to develop strategy and still stay on top of day-to-day administration functions, like payroll and benefits administration. While you may not be ready for a total HR transformation, there are steps you can take to start operating more strategically, budgeting more effectively, and ensure human resources is well-positioned to contribute to your organization’s success.

Formulating an HR strategy

An HR strategy is a plan that creates alignment of the company’s culture, employees and operating philosophies to help the organization achieve its business goals. So, it follows that the first step in your strategy creation is gaining a clear understanding of what those company business goals are, and how they fit with the overall mission and vision. Are you in a period of retraction, maintenance or growth? Where are the greatest opportunities and needs? And does the company need to support those opportunities and goals? When you understand the objectives, you can put a short- and long-term plan in place, including specific goals, budget and timelines, to fill in the gaps, and better contribute to the company’s success.

Evaluating your current state and past performance

It’s also important to look back on the previous year’s programs, to see what’s working, what’s not and identify any other requirements to execute your plan. Do you need new technology, services or personnel? If you had attrition, use your exit interviews and manager feedback to identify why, and what steps you propose to correct it. According to Payscale’s annual flagship report, a full 44 percent of those surveyed said that pay is the reason they’re losing talent. 75 percent of respondents expected compensation to be more challenging this year, and 70 percent plan to invest more time in compensation management.

Developing your budget

Your HR strategy should drive the creation of your annual budget, which should include:

• Compensation and Benefits
• Hiring and Onboarding
• Training and Development
• Employee Relations
• Health and Safety
• Performance Management
• Employee Experience and Retention
• Operations and Technology

As you’re mapping out the year ahead, make time to take a long, hard look at your compensation strategy, based on new or changing talent requirements, changes in the competitive landscape and other factors. In addition to updating or creating job descriptions, consider benchmarking these as a reality check of your current compensation structure—and, if needed, as a way to justify additional funds.

Invest in compensation data and compensation management software

If, like most, you’re an HR professional who wants to operate more strategically and take a more data-driven approach to compensation, consider adding funds for real-time market data, and compensation management software. There are a variety of data sources available at many different price points. The key is making sure the sources match your talent markets, job types, company size and geographic location. There are three primary sources for validated, external salary data, each with their own strengths, use cases, and price points. They are:1. Crowd-sourced dataThis data is selected through surveys filled out by actual employees, which is beneficial, as they are best suited to provide detailed information on the skillsets, education and expertise required for each job. Payscale administers the largest real-time survey of this type in the world, collecting and validating data from more than 10 million website visitors a month. The breadth ensures, in addition to more standard positions, there is also ample data on fast-moving and emerging jobs in the technology and healthcare sectors, jobs with specialized skills, and white-collar jobs in both major metropolitan areas as well as more rural locations. However, they may lack many blue-collar jobs and data on executive compensation. 2. Data sharing networks/Company-sourced dataThis salary data is sourced from participating employers. For example, Payscale has a network in place that allows customers to share data across our compensation platform. By leveraging customer’s in-product behaviors and their previously uploaded HRIS data, Payscale aggregates this information and automatically generates updated compensation benchmarks every quarter, specific to each market. This aggregated data includes about 3,500 unique positions around 12 industries, including some unique job types. The greatest benefit is that acquiring and compiling this data requires no work on the part of the user, as Payscale has automated this process. While some groups may be underrepresented, data sharing networks are typically particularly good sources for executive pay and technical jobs. 3. Employer-sourced surveys from Consulting Firms or Professional OrganizationsConsulting firms and various trade associates collect data from their customers and members, verify and crunch the numbers, and distribute the aggregated data, sometimes for a fee. While these surveys use sound methodologies and verification techniques because they’re published annually, they may not reflect current market conditions or cover newer, emerging jobs. When looking at your options, remember that no single source of data will cover all of your jobs. Find the best sources to cover the jobs you care about, your industry locations and your competitive set that also fits within your budget.

The ROI of compensation management software

For most HR organizations, the greatest deterrent to approaching the entire function more strategically is due to the lack of time and resources. Investing in compensation management software can alleviate some of that burden by automating manual processes, centralize job descriptions, and drive more equity in pay practices. You and your HR organization become more efficient, more effective, and get the reporting you need for better insight and oversight.

Now is the time to start building a more strategic HR organization

By taking the first steps to move to an HR strategy, or expand upon what you’ve already put in place, you will align your initiatives with your company’s strategic goals, and more effectively contribute to your company’s success. Wherever you are in the journey, the next step will be a step in the right direction.