Aligning HR and Business Strategy

Human Resource Management is a process of bringing people and organizations together so that the goals and objectives of each are achieved. In this chapter, we will discuss how important it is to ensure that the HR functions are properly aligned with the overall business strategy of an organization.

Today, human resource departments have a more precise, strategic role in companies, and an HR strategy affects the bottom line.

Presently, we can say that HR technologies have become an integrated engine in advancing the broader needs of businesses, supporting far more than the basic transactions, and advancing HR and business agenda for future.

Human resources information system (HRIS) is integral to the progress of performance management, recruitment, selection. It also plays a vital role in the rejection of candidates, their promotions and postings, etc.

A business strategy is a future-oriented plan for creating and maximizing competitive advantages to accomplish the organization’s mission. To successfully execute that strategy, each function within the business needs to align its departmental strategy with the overall business strategy.

However, it is easy for functional and departmental leaders to slip into a narrow “silo” perspective of their strategy. After all, each function has distinct areas of responsibility – finance and accounting, sales and marketing, operations, HR, information technology and production. But aligning individual departmental strategies with the overall business strategy helps the business plan to be executed efficiently.

The HR function, more than other functions, is involved in and affects the operation and execution of all the other business functions. This is identified most readily in HR’s enterprise-wide staffing responsibility, but extends to the entire life-cycle of employment. The HR function intersects and affects the other business functions in the following areas:

• Talent acquisition;
• Performance management;
• Training and development;
• Employee retention and engagement;
• Employment law compliance;
• Compensation and benefits; and
• Safety and security.

Therefore, properly aligning the HR strategy with the organization’s business strategy is critical to achieving the organization’s mission.

Alignment is the connection of strategy and execution through communication. Aligning strategies requires HR to:

• Understand the business strategy;
• Assess current conditions;
• Plan and implement the HR strategy; and
• Measure and evaluate results and adjust as needed.

Why HR should align?

Today, business moves faster than ever—it’s a platitude, but it’s also never been truer. Technologies, industries, and consumers themselves are continually evolving in a digitally-driven market, and companies are continuously shifting their strategic focus to keep pace.

This culture of change has a significant impact on people. Every business decision has a real-life impact, and HR departments are specially equipped to inform strategy and help employees navigate the resulting changes.

Consider these reasons why it’s so important for HR to align with business strategy:

• Move in lockstep with the rest of the company: Goals are always more achievable when there is universal buy-in and alignment across teams.
• Give HR initiatives a strategic focus: In today’s changing economy, there are countless ways to recruit, train, attract, invest in, and support employees. But it’s impossible to tackle every initiative all at once. Aligning with business strategy gives HR a strategic focus and helps prioritize goals.
• Secure the right talent: Good talent is always valuable, but companies may need to invest in different skill sets or roles at different times. Understanding the strategic goals of the business will help HR attract and retain the right talent at the right time.

HR Role in strategic planning

So how does HR become part of the broader business decision-making process? How do HR departments move from a reactive, service-oriented function to a more executive-level, strategic one?

It starts with setting clear objectives for the department and strong values for the entire organization. Companies with documented values are less likely to ignore the real-life impact of any strategy shifts or big decisions.

Align and set your HR goals

The main strategic role of HR is to create goals to help meet key business objectives. Goals may vary depending on the company’s strategic plan, but focusing on HR fundamentals is an excellent place to start. Here are some areas of HR most commonly affected by broader strategic business shifts.

Organizational structure

The way companies are organized largely depends on their current strategic objectives and growth stages. If a company is in a high-growth stage, it may have a sales-driven culture with more sales employees and sales executives in decision-making roles. Mature companies with a retention-focused strategy may hire more customer success roles.

Employee compensation

Maybe current business goals are more focused on employee retention or culture-building. Conversely, perhaps the company needs to cut costs. In either case, compensation structure may be an important consideration. When HR is aligned and informed on these goals, they can make strategic decisions to help the organization meet them.

Employee development

Depending on the business goals and immediate initiatives, it may be necessary to train employees on new skill sets. Some employees may resist additional roles and responsibilities, so the role of HR in these situations is to both evangelize additional training and ensure teams are developed to keep pace with shifting needs.

Performance reviews

Clear business strategies are also tied to clear KPIs. With HR aligned on these performance benchmarks, it can better evaluate employee performance and provide more actionable feedback during review discussions.

Change management

As a people-focused department, HR often has the best pulse on employee sentiment throughout the organization. It makes sense, then, that HR can act as effective advocates and change agents in implementing business strategy, creating a blueprint employee engagement and success. HR departments can encourage employees to share their feedback on new business strategies or technology investments to ensure any changes or strategic shifts make sense from an operational perspective.

Formulate specific actions to hit those goals

Once you’ve aligned and set goals, it’s time to develop action plans to execute your HR strategic vision. Focus on developing and improving processes for recruiting, hiring, employee development, and performance reviews.

When creating an optimized action plan, it’s important to have a clear understanding of your organization’s current structure and identify any gaps or shortcomings in your processes. Where should you invest more in recruiting? If budgets are tight, what training or employee development programs need to be in place to maximize the productivity and effectiveness of your existing talent? How many sales reps does HR need to hire in a specific territory?

The ability to visualize where every player fits into the larger organization can help HR departments align employees to business strategy, maximize efficiency, and see data in context to drive better decisions. Org charts and related visuals can help HR departments optimize organizational structure at every level and make better people decisions, such as:

• Assigning employees where their skills can make the most significant impact
• Making informed decisions about pay, equity, and performance
• Modeling current and future org structures to determine how best to scale your business

Track and measure performance

Historically, the role of HR has lied in the “softer,” people-focused side of the business. However, people analytics are now the new HR, and HR departments are just as responsible for reporting on the performance of their initiatives as any other department.

With human resource alignment around data-driven goals, HR leaders can ensure that decision-making not only aligns with strategic business objectives but also helps drive those goals. HR leaders can analyze data from sales, marketing, and accounting to break down departmental silos and better align with overall business goals.

Data-driven human resource alignment

According to a Bersin by Deloitte study, data-driven HR teams are four times more likely to be respected by their business counterparts, which can result in more input in strategic decision-making. By combining departmental data and HR data and visualizing it all in a single workspace, HR departments can better align their decisions to business strategy. Consider the ways these types of people analytics can impact the broader business:

Employee analytics: Measure the performance of all the HR initiatives in terms of cost, time, performance, then use a dashboard to track recruiting times, onboarding speed, employee satisfaction, and employee salaries. This data-driven approach to people management helps HR departments evaluate pay disparities, track employee retention, identify trends, and see critical employee metrics that will provide quick insights for better decision-making.

Talent analytics: Today, effective talent acquisition goes way beyond budget and headcount. HR departments can rely on algorithmic data to quickly sift through deep pools of qualified applicants to attract and retain top talent.

Predictive analytics: Set up indicators to see when an employee is at risk of leaving the company. HR departments can use data to identify risk facts and predict employee churn and how this will affect the company.

Invest in better people planning

Modern human resources departments manage much more than hiring, onboarding, and benefits. Aligning HR with business strategy can boost employee satisfaction and performance, ensure teams are aligned to help the business achieve its strategic objectives, and increase their influence and decision-making power across the organization.