How to Create the Best HR Function: Link HR to the Business Strategy
As an HR consulting and outsourcing firm, we often hear from business leaders who want to get more out of their HR function. We find that the biggest opportunity is the chance to redefine and reset the expectations that HR's role doesn't have to be solely administrative.
With the right professionals and leadership, HR can be a function that helps the organization achieve its goals through the right talent. Read below to discover how HR activities support the organizational strategy.
What is HR strategy?
An HR strategy is your plan to build and maintain a team capable of delivering business objectives. A typical HR strategy will cover elements such as:
- Recruitment and onboarding
- Training and professional development
- Employee engagement
- Organizational culture and work environment
- Operational policies and compliance
- Compensation strategy and Total Rewards
- Employee retention
- Succession planning
An effective HR strategy looks at human capital on multiple levels. You will need to consider the individual employee experience and ask whether people are engaged and if your Total Rewards offering is sufficient.
You will also need to examine your strategy on an organizational level. To do this, you'll need to consider factors such as business resilience, demand planning and succession. Here, you'll see why HR strategy is so crucial for the overall organizational strategy.
Why is HR strategy important for business strategy?
In a new company, HR often has one urgent job: to help recruit great people and help integrate them into the team. After that, the team may switch its focus to day-to-day HR practices like payroll, compliance and benefit administration.
But HR leaders know that the business needs them to think beyond the day-to-day. Business strategy depends on human capital factors, such as:
- Employer reputation: Business success often relies on your ability to attract the people you need, and it's easier to attract those people if you have a strong employer brand. An excellent HR strategy can help you build a reputation as an employer of choice.
- Cost management: Labor is the biggest expense for most companies. A good compensation strategy can help keep these costs down. Training and development can also reduce costs by empowering workers to be more productive.
- Team stability: Staff turnover can be a massive disruptor for your business strategy, especially when you're trying to grow. The right HR strategy can help engage and retain your most important team members, ensuring you've got the correct people in place to deliver your goals.
- Depth of skills: Your organization's skills requirements will change over time. For example, you might need people who can work with a new technology or connect with clients in new markets. Your HR strategy can support these changes through recruitment and professional development initiatives.
- Compliance: Regulatory compliance is non-negotiable for every business. From payroll laws to OHSA to anti-discrimination rules, employee legal protections can be a minefield. The right HR strategy will help you stay compliant and avoid costly fines that might threaten business growth.
- Strategy and planning: Strategic HR leaders can help develop and implement the company's long-term strategy. They understand the current team's strengths and weaknesses, so they know if the company is prepared for the next stage in its development.
A good HR strategy can be a competitive advantage. But it's not enough to just have a plan for HR. You must also ensure that HR works in alignment with the overarching business strategy.
Recommended reading: Achieving Your Organizational Goals with Strategic HR
Five steps to align HR with the business strategy
How do HR laders know that they're helping to deliver long-term business success?
The same way as every other leader. Through planning, communication, and analysis. Here's how to align your HR strategy with the larger corporate strategy.
1. Understand the main strategic goals
All strategies should be aligned towards the same outcomes. If the main business goal is growth, the HR strategy should aim to reduce time-to-hire, improve onboarding, and scale up training and development. If the goal is business resilience, HR needs to look at operational efficiency and compensation planning.
You will also need to understand the current state of the organization. Are there budgetary pressures? Regulatory issues? Market movement, such as a new competitor arriving on the scene (or an existing competitor departing)? If you understand where the company is and where you're going, you'll be in a better position to support the main corporate strategy.
2. Map out a skills matrix
How does your current team contribute to the company strategy? Each individual brings something different, so you'll speak with team members one by one and discuss their strengths and weaknesses. This approach will help you prioritize training resources where they're needed most.
You can also work with strategic leaders to map out a skills requirements matrix. For instance, if your company plans a major digital initiative, you might need a team with strong IT skills. You can compare these requirements to your current skills matrix, which will help you decide if you need to invest in training or recruitment.
3. Formalize your talent strategy
Once you know where the organization is headed and what it requires of its people to get there, you must determine the gaps between its current workforce and what is necessary to accomplish the main business goals.
Define strategies needed to acquire, train, develop, performance manage, and reward the very high-performing talent that will carry your organization into the future. It's a good idea to document and formalize this strategy to get everyone on the same page.
4. Measure HR outcomes
Whether you use an HR scorecard or other metrics, these measures indicate if your HR talent strategy is successful or when a course correction is necessary. Pay close attention to things like:
- Engagement survey results
- Professional development progress
- Stay interview and exit interview results
Stats such as these will help you ensure that you're headed in the right direction. If the HR strategy is failing to support the main business strategy, then it's time to review the HR strategy.
5. Stay in touch with the strategists
But what happens if the business strategy changes? That's why it's essential to have a connection between HR leadership and primary decision-makers. You can't support the business strategy unless you know what that strategy is.
Aligning with the core strategy can be tricky, especially if HR doesn't have a voice in the board room. Some companies benefit from having a CHRO that can help shape the human capital aspect of strategy. If you don't have an executive in charge of human capital, then the HR leader needs to have a good relationship with the CEO or COO.
Need help with your HR strategy?
HR strategy requires a lot of experience in human resources management. If you've got a veteran HR team, then they will be able to help you build a responsive, resilient strategy that helps deliver your business goals.
But what if you don't have that in-house expertise? Or if your HR team is too snowed under to think about strategy?
That's when you need an HR outsourcer. An HR consultant can give you the benefit of their years of expertise in delivering measurable business outcomes.
Set up a no-obligation chat with a Helios HR consultant today. Let's talk about how you can build a winning HR strategy.