The rhetoric around HR delivering strategic value is everywhere. The conferences, media, educational and professional bodies around us never tire of telling how important we are, and the value we deliver. But the truth is otherwise. Executive boards frequently judge HR to be a tactical function concerned with day-to-day matters, rather than as a strategic partner to the business.
One of the latest pieces of evidence indicating we need do better comes from HR industry analyst, Fosway Group. It found the top three strategic priorities cited by business leaders to be performance and profitability, followed by agility and then customer satisfaction and service. Yet the top priorities for HR tend to be ‘diffuse’ says the analyst, with activities relating to employee performance being way, way down the list.
Clearly there is a large disconnect. But we can fix things. We know beyond doubt that HR does have a strategic role to play. To get there though, HR must re-design, reinvent and renew itself to align better with the strategic needs of the business and of the CEO.
Here are four big steps HR must take, to raise its strategic value:
- Understand and align with business goals: For HR to truly be effective as a business impact function rather than a service and support team, the boundaries between HR expertise and business expertise have to blur. Rather than being seen as a supporting player brought in to implement decisions that have already been made, the HR function has to play a central role in business decision making alongside other C level leaders.
- Partner with business leaders: In the past, HR has done well on driving employee engagement, building credibility with employees and managers, managing performance and simplifying processes. However, focusing just on employee experience no longer cuts it. In today’s dynamic working environment, we need to do more. We need to guide human capital decisions, align budgets with desired outcomes, deal with changing demographics, design and redesign career paths, invent dynamic and flexible work arrangements. We need to identify and address skills gaps, spot and manage talent risks and steer businesses and people through change and transformation. None of these roles is achievable, unless we partner with the key senior managers in the business and prove that we can be close and trusted advisors. HR resembles the thumb of a hand (the only finger which can touch all other fingers of the hand) HR must leverage and embrace this unique positioning within the organisation and learn to speak with fluency, understand and engage in the every-day business dialogue.
- Deliver quantifiable, strategic metrics: To demonstrate our worth, HR must move from loose statements of achievement in its reports and presentations, to quantifiable, strategic metrics. We need to show top business management the specific and measurable ways that HR services directly impact their departments and the business bottom line. We need to prove a clear relationship between investment in people and business outcomes. The Return on Investment (ROI) of a new employee onboarding program, for example, can be measured in terms of correlated reductions in staff turnover. Define and measure the right things and you can show top executives that a strategic and proactive HR effort delivers significantly more value than a ‘back office’ one. Of course, business aligned HR performance metrics also help us focus HR team effort on strategic business priorities.
- Use technology to automate the routine: Thankfully, modern HR technology provides the facility to automate many day-to-day tasks, freeing HR managers to focus on the strategic. Take advantage of it! HR tech also crunches the performance numbers for us and presents those all important analytics. But to make a success of HR tech, we must avoid outsourcing it to IT. It’s up to us to take charge and choose the ‘right’ technology that aligns with our needs, business priorities and HR’s short and long term goals.
Just as the chief financial officer (CFO) helps the chief executive officer (CEO) lead the business by raising and allocating financial resources, chief human resources officers (CHROs) need to rise to be seen as leading the optimisation of business outcomes through people – because it’s people who create all value, in all businesses. Once we achieve this, HR is no longer seen as a cost centre handling tactical administrative responsibilities, but a strategic ally in creating growth and value through people. The new HR provides the opportunity to create profits and growth – through performance enablement and performance optimisation.