For the past several years, there’s been a lot of talk about HR “becoming more strategic.” Company leaders are beginning to seriously appreciate the HR department’s value in helping achieve broad bottom-line goals – looking beyond the basics of personnel management, payroll and benefits administration. But to actually become more strategic, we have to understand what the development of HR strategy really means in this day and age of constant change.
Taking a big picture view can be challenging if you’re among the many HR departments that spend a significant amount of time managing day-to-day operations. The goal of this blog is to explain the importance of strategic HR and to help you better understand what components to consider when developing a unique HR strategy that will guide your company in 2020 and beyond.
The essence of strategic HR
The Society for Human Resource Management defines strategy-based HR as “a future-oriented process of developing and implementing HR programs that … solve business problems and directly contribute to major long-term business objectives.” Over the last decade, the labor market changed due to shifts in the economy and the increasing popularity of contract work. As a result , it became more important for HR to build stronger connections to all other departments.
When HR is deployed in a truly strategic way, it is most apparent in the synergy that develops between other operational groups and the functions of HR. Instead of existing in a silo, strategically deployed HR activities and services help channel the company’s resources toward completing its most critical bottom-line objectives. There are a variety of ways HR can make this system work, which we’ll explore below, but what it comes down to is having a well-crafted plan to ensure that the department’s daily activities are always in alignment with company goals.
HR strategy vs. tactics
In I Have a Strategy (No You Don’t), – author Howell J. Malham Jr. points out common hurdles that come up when HR departments try to pivot to a strategy-centric approach. Mistaking tactical decisions and actions for strategic ones is a key issue to overcome in such situations.
- As an example, let’s say you change your website’s layout and color scheme with the goal of attracting more sales. That is a tactic, not a strategy.
- The overarching strategy of your organization might be to increase sales by 10%, and the aesthetic changes you end up making can be action items related to the implementation of such a strategy, but they are not a strategic act.
- There have to be additional elements supporting the strategy, like multichannel marketing pushes, limited-time discounts, connecting to customers via social media and more.
Now let’s look directly at a similar example specific to HR: the difference between paying retention bonuses (a tactic) and trying to retain employees to improve customer service (an element of strategy). The latter has a larger scope, and requires multiple tactical actions to execute it, while the former is an isolated action that benefits individual employees without necessarily improving the organization as a whole.
Business alignment is another key element of any strong HR strategy. Your overarching plan should involve more than offering training or benefits in a vacuum. Instead, decisions need to be made to connect each of those activities (and the skills related to them) to the business objectives they can most readily support.
Strategic HR use cases
To best illustrate how HR operations executed through strategic management practices can benefit your business, it’s easiest to start with a bottom-line organizational objective and work backward to figure out exactly how HR might support it. Ultimately, this can be true whether you’re looking to improve internal compliance or boost your conversion rate for sales leads.
Let’s say that your customer service department has been struggling. From an HR standpoint, there are numerous ways to create a strategy for improving customer service scores, even though that specific department isn’t directly under the purview of HR. Consider the following actions:
- Training: Develop training tools and performance support assets to help customer service reps at the point of need.
- Evaluation: Use carefully chosen key performance indicators to determine which reps excel at making clients happy – especially those who do that while also generating steady revenue for the business.
- Compensation: Create monetary awards or other attractive perks (like extra PTO days) for reps with higher-than-average customer service scores over a particular period. You can even make a tiered rewards structure for excellence in months, quarters and years.
- Retention: Focus your retention efforts on employees who have the best track records of developing and maintaining customer satisfaction.
- Recruiting: When searching for the best candidates to fill vacancies in the customer service or support department, center your applicant assessments around behaviors associated with a service mindset.
Each of those actions represents a specific tactic – and together, it forms a significant part of the overarching strategy to improve customer service across the organization. And HR wouldn’t be limited to just those actions when pursuing such a goal. You could also explore tactics such as coaching, informal learning and peer recognition. Streamlining pivotal HR tasks will be key to strategically serving the organization at large.
As you likely guessed when we alluded to KPIs in the list above, strategic HR is also valuable because you can measure it. Linking those activities and their KPIs to metrics regarding company goals will help you determine the extent to which HR supports business outcomes such as sales, staff retention or customer satisfaction. If the department isn’t serving that purpose, close examination of the HR analytics will bear this out – and can also point you toward corrective measures that unify the organization. This approach will allow HR to become a true business partner in a more beneficial way than ever before.