Let’s begin with a definition. Most people when asked about strategic HR respond with a description of activity. Views of “traditional” HR are best mirrored by Keith Hammond in a Fast Company article from 2008, “Human resources long ago proved itself, at best, a necessary evil.” – a perspective shared by many operational managers and executives. In contrast, writers about strategic HR cite value added activities – strategic workforce planning, talent management, retention strategies and predictive comp and benefit activities. Instead of necessary evil, they see themselves as key partners in the business of the business. As a working definition, let’s use Dave Ulrich’s proposition in his 2005 book The HR Value Proposition – “Strategic HR is a perspective that establishes the linkages between employee commitment, customer attitudes and investor returns,” to which we would add “and manages them.”
What prevents HR departments from being perceived this way? There are four commonly cited root causes:
- HR does not understand the business.
- HR doesn’t use or understand “business speak”.
- HR does not understand or calculate ROI on HR projects and processes.
- HR has not explained its own internal business acumen to others.
Let’s look at the story of three HR departments that were able to successfully transform themselves from traditional, transactional HR departments into strategic business partners with a “seat at the table.”
Company A is a large international mortgage company. The head of HR was co-located in Pennsylvania with the head of North American HR. She also supervised supporting HR functions in Asia, Europe and South America. In all, she had 17 direct reports. The “burning bridge” for her company was cost containment. In the view of the COO and CEO, if HR was merely transactional, the function could be performed off shore at a much cheaper “per head” HR overhead.
Company B is a privately owned manufacturing company. The third generation owner had recently taken over and was challenged to significantly grow the business. The executive team had identified that the choke point on their growth was human capital – talent acquisition, management, retention and succession.
Company C is an international buildings material company headquartered in Paris. In this case, there was no burning platform to incite a change in approach. Instead, there was a reasoned long-term approach to make HR a strategic partner in the business that was led by the North American VP of HR.
Each HR executive knew that an HR organization that values a strategic business partner approach is successful in five different arenas:
VALUE PROPOSITION:
Rather than focusing just on HR specific issues, the HR staff understands how the business makes money. They understand the competitive landscape, cost and revenue drivers, and requirements of customers and other stakeholders. These insights make them better able to make recommendations consistent with high level business plans and strategies.
BUSINESS ACUMEN:
The HR staff understands the overall vision of the business, where the business is going and why. They are proactively involved in business decisions. They contribute to building the company’s brand with customers and other external stakeholders.
STRATEGIC RELATIONSHIPS:
HR is seen as a key member of the organization. They communicate across functional silos and are able to find common ground for problem solving. They are seen as cooperative, competent team players.
RETENTION STRATEGIES:
HR is an enabler of retention. They assist employees in seeing their career paths forward, being engaged with the company and developing to their full potential. They are empathetic in areas outside of pure business situations and represent the interests of employees in areas such as flex time and other quality of life issues.
TALENT MANAGEMENT:
HR is the central agent for talent management. They are familiar with employment needs and local job markets. Once new employees arrive, HR coordinates an on-boarding process to ensure the new employee has the knowledge and resources to succeed. They facilitate identification of high performers, and develop and implement programs to keep them engaged and satisfied with the company.
While the companies they were in represented a broad spectrum of size, business niche and revenue, there are similarities in approach that made the transformation projects work. A common set of goals and a common approach to problem resolution led to successful transformations. All three companies built in the following aspects:
- Brought in business leaders in the planning stages of the project
- Involved the entire HR team
- Linked individual and organizational development by using robust competencies
First, HR leadership worked with the business leaders and obtained their buy in to the transformation process. These briefings shared common content: the reasons that the HR leaders wanted to transform their function, the business case for doing so (i.e. the overall benefits to the business) and the vision of what the relationship would look like and how it would operate once the transformation was complete. This involvement of the business leaders achieved several necessary preconditions for success. Business leaders were willing to provide the necessary resources (time, people, training and so forth) to ensure success. Additionally, they helped refine the vision from their perspective, giving them ownership of the project along with HR. Finally, inviting key business unit leaders to planning meetings and seminars showed the entire HR team, as well as other executives, that the business leaders were playing an active role. They fundamentally created what John Kotter refers to as a “powerful guiding coalition.”
Next, when the transformational plan is complete, the entire HR team must be involved in implementation. Each member must feel that they are contributing and have a voice in the roll out. A transformation done solely by the head of HR and the business leaders becomes “their program” and not “our program.” Generating ownership increases enthusiasm and the probability that staff members will embrace the program and aggressively pursue its implementation.
The final factor is building the transformation around competencies. The use of competencies increases the probability that the new state will be embedded in the culture of the company. Competencies also help create a common language and a framework for talking about issues. By using competencies to generate normative behavioral statements for jobs and job families, the company is able to develop both at the aggregate company level as well as at the individual development level.
AFTER COMPLETING THIS PROCESS:
Company A … The HR staff developed business acumen and internalized the value proposition. They learned how to read company spreadsheets and balance sheets. They developed HR ROIs. These new skills enabled them to stop using cost avoidance as the only rationale for policies and programs in HR. Instead, using the concept of value added, they were able to demonstrate how HR procedures linked employee engagement, customer satisfaction and company profitability. As of this writing, 4 of the 11 members of that team are now heads of international HR organizations in other companies and all, save one, have been promoted to positions of significantly increased responsibility.
Company B introduced a competency based system, jointly developed with business leaders as the knowledge experts on the technical needs and HR partners as knowledge experts on competency and development skills. HR also demonstrated their expertise by designing the framework, facilitating the sessions, and incorporating the competency based system into all hiring and performance management processes. The talent management improvements and retention strategies yielded the best first Q results in 50 years in the company. Additionally, HR and the businesses partnered on a staff development framework that placed HR staffers into business roles and vice versa, so they could further develop their business acumen.
Company C … To achieve their goals, an overall human capital plan was developed, with the HR VP as the functional leader but with the CEO and COO involved in all major decisions. This plan was grounded in a value proposition which clearly identified the HR ROI for the initiative. They implemented several company-wide strategies based upon competency research. They implemented a flex time program. They obtained approval from corporate headquarters for competency based HR training which covered all identified competencies in quarterly 2 week sessions on an annual basis. The North American VP of HR was promoted and transferred to Corporate HR to head one of the three major HR business units.
Noted HR expert Dave Ulrich argues that we should look at what HR achieves, not what they perform. If your business leaders are aligned with your HR goals on Value Proposition, Business Acumen, Strategic Relationships, Retention Strategies, and Talent Management; you’ll find yourself being described as a strategic partner. As an aspirational goal, the successful business partner continues to seek out those opportunities where they can increase their understanding of high level business decisions and hence their influence. Just making the effort inherently makes you better.
