As organisations reflect on the achievements and challenges of the previous year and plan for the new year, human resources (HR) leaders who are desirous of adding value to their organizations and want to “get a seat at the table” should be crafting a “business-enabling” HR strategy to drive organizational success.
Again, this is an area where most HR professionals struggle. In the last 15 years, I have facilitated corporate strategy sessions where HR executives are asked to speak about their strategic initiatives. In some cases, their responses have been adequate, but in most cases, they have been disappointing—asking for salary increases and better welfare packages alone without articulating how to enable the people assets to create sufficient value for the customers so that the value created can be passed on to employees as higher salaries and welfare packages.
So, I would like to share some ideas from these experiences, supported by empirical studies that can help well-meaning HR leaders and professionals develop and implement business-enabling HR strategies for their organizations. But before I jump into the ideas, I would like to share a basic theory of strategic human resources management to set the context.
Strategic human resources management, as distinct from personnel management, requires HR activities and interventions to achieve both vertical and horizontal fit (Wright & McMahan, 1992). Horizontal fit is about the internal alignment of HR activities with each other: recruitment and selection; training and development; performance management; and compensation and reward. These activities must support and feed into each other, driven by organisational design and competency frameworks that cut across these vertical areas. Is it enough, however, to simply state that we will improve performance management, hire better people, and invest in staff training along the horizontal fit? No, there is much more that is required.
In addition, there must be vertical alignment: HR initiatives must support the organization’s value chain, which consists of its primary activities like product design and development, production, sales and marketing, and distribution and customer service, as well as its secondary activities like administration, procurement, information technology, and compliance. This is where the HR initiatives from the horizontal fit described above now interact with the various departments in the organization to add value to the primary and secondary activities of the organization and create value. This interaction must be based on a thorough understanding of the strategic priorities of each part of the horizontal scope, deploying the core strategic capabilities of HR, and collaborating with these functions and leaders to co-create an innovative HR strategy that is truly business-enabling and adds value.
The first step in developing a business-enabling HR strategy will be for HR professionals to tap into one of the four strategic HR capabilities of “Strategic Partner” (Ulrich, 1997) to carry out a proper strategic analysis of the organisation, both internally, using tools like SWOT analysis, and also on the macro-level, using tools like PESTEL and Porter’s Five Forces. The strategic analysis, if done properly, will give you similar insights and perspectives that the executives in the primary and secondary departments of the organisation have. This will ensure that before you sit down with your colleagues for a corporate strategy retreat, you are already thinking in the right direction.
Then you need to tap into your knowledge of the various departments and units in your organisation. This would be best achieved if the HR department runs on the HR Business Partner Model (Brockbank and Ulrich, 2009), wherein the HR Business Partner engages actively with the other departments to understand their specific needs and priorities. HR would be in a strong position to develop HR initiatives that support the overall strategic agenda of the organisation and enable functional strategies at the departmental level if the strategic analysis of the organization is combined with a thorough understanding of the priorities of each department.
Another important value that HR can bring to the strategy development process in their organizations is to help functional heads and leaders translate their high-level ambitions—what we call “Big Hairy Audacious Goals”—to tangible and S.M.A.R.T. key performance indicators. As HR professionals, we should be experts in performance management, which is one of the key elements of vertical fit and at the heart of the employee life cycle. Unfortunately, too many HR professionals are not comfortable with developing business KPIs and are not able to support their colleagues in other departments in this regard. This is also related to the HR capability of administrative expertise, where HR professionals should be able to design and implement dashboards and HR metrics to analyze and track data about HR activities, which is very valuable for driving business strategy.
Finally, but not exhaustively, HR professionals can drive business strategy by supporting the organization to manage all the changes that will arise from the new strategy. If strategy is done properly, it should create transformational change in the organization that will require proper change management. This is an area that HR professionals should be experts in based on the HR Champion Model by Dave Ulrich, but again, is an area that HR professionals need to develop.
Overall, for HR to develop and implement a business-enabling strategy, we need to go beyond our typical personnel management thinking and start paying attention to the vertical and horizontal fit that is at the heart of strategic human resources management. In practice, HR professionals need to carry out their own strategic analysis, use HR business partnering to understand business priorities better, develop strategy-aligned KPIs and performance dashboards for the various functional areas, and develop and implement change management plans to support the transformational changes that will arise from strategy.
