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cess to finance or capital, but within the organisation, in people and processes capable of delivering business strategies such as customer satisfaction or rapid innovation (Bawany, 2004).
HR professionals who have the business acumen to contribute to business strategy at the highest organisational levels are leading the shift in the HR profession from administrators to strategic advisors. Those HR professionals who understand the language of business, who speak in financial terms and who express the value of their work in relation to its impact on the bottom line make HR a compelling component in strategy discussions. A CEO quickly connects with the head of HR who can present an investment and return, rather than an expense view of the function.
All too often, Human Resource (HR) organisations transform themselves in a strategic vacuum, responding to the business’ day-to-day operating needs without a clear view of the big picture. To be effective, HR needs to align its improvement efforts with the company’s business strategy. This requires an HR transformation strategy that is realistic and executable – with accurate plans, schedules, resource requirements and estimated benefits that the company can rely on.
The nature of the linkage between human resource management and business strategy has attracted considerable interest over a long period (Purcell, 1989; Schuler and Jackson, 1997; Gratton, 1999). In this article we seek to move the debate forward by further developing the nature of HRM’s strategic role and contribution in managing the organisation of today and tomorrow.
There is a considerable debate about what ‘Strategic Human Resource Management’ (SHRM) actually means. There are many definitions, including:
nA human resource system that is tailored to the demands of the business strategy’ (Miles and Snow 1984).
n‘The pattern of planned human resource activities intended to enable an organisation to achieve its goals’ (Wright and McMahan 1992).
Such definitions range from a portrayal of SHRM as a ‘reactive’ management field where human resource management is a tool with which to implement strategy, to a more proactive function in which HR activities can actually create and shape the business strategy.
The range of activities and themes encompassed by SHRM can be seen, for example, in Mabeyet al (1998), which looks at the subject from four perspectives:
1.The social and economic context of SHRM – including the internal (corporate) and external environments that influence the development and implementation of HR strategies.
2.The relationship between SHRM and business performance, emphasising the measurement of performance.
3.Management style and the development of new forms of organisation.
4.The relationship between SHRM and the development of organisational capability, including knowledge management.
HR role as a strategic business partner revisited
Strategy defines what we are going to do, why we are doing it, and how we will know we are done.What business will we be in?Who are our customers and what are their needs? How will we reach them?What products and services will we offer?How will we compete – by low price or by differentiating in other ways?How will we create value for customers, investors, and employees?
There are many faces of business strategy, ranging from very formal and explicit planning processes to informal, implicit, shared understanding of future direction and priorities.Strategy may emphasise external competitive analysis and positioning or, as is the current emphasis in many companies, the development and leveraging of internal resources and capabilities to gain and sustain a competitive advantage.Strategy may be very aggressive, calling for radical business repositioning and transformation, or it may be relatively passive, adapting to changes in the business environment as they unfold.
Most discussions of our strategic partner role focus on human resource implications of business strategy – aligning people with strategies to enable strategy implementation.We recruit, develop, and retain required talent.We build organisational capabilities.We communicate performance expectations and goals, and we provide rewards for results achieved.We adapt human resource practices to support new business priorities and to facilitate strategic change.
Business strategy charts a course of action designed to achieve an advantageous and sustainable market position (market share, margin/profitability, product or technical leadership, etc.).The strategic management process includes strategic analysis, strategy formulation, and strategy implementation. Great human resource strategies are developed within the context of this ongoing strategic management process. Elements of this integration are shown in Table 1(Bawany, 2004).
Today’s role of HR and challenges
People and organisation issues are related directly to specific strategic business issues and, in turn, derived from forces driving the business and critical business success factors.Table 2 highlights issues currently being addressed through human resource strategies by leading companies (Bawany, 2008):
In a published KPMG Research, Rethinking Human Resources in a Changing World (KPMG, 2012) there seems to be a continued vast gulf between the perceived importance and the perceived effectiveness of HR today.
Whether deserved or not, this stigma is clearly evident in the survey. For example:
n81% of respondents see talent management as a key competitive advantage over the coming three years.
nOnly 15% see HR as able to provide insightful and predictive workforce analytics.
nJust 17% view HR as able to demonstrate measurable value to the business.
Traditionally, HR departments often had limited involvement in the company’s business affairs and goals.HR leaders were often only concerned with making staffing plans, providing specific job training programs, or running annual performance appraisal programs (the results of which were sometimes put in the files, never to be used).They were poorly informed on strategic and business issues and therefore focused on the short-term – perhapsday-to-day – needsof human resources.
With the growing importance of human resources to the success of the business, HR managers and their departments have become more involved in the business. They know the needs of the business and are helping address those needs.One consequence of this role is an increased involvement in the longer-term, strategic directions of the organisation.A second consequence is a new emphasis on long-term activities in addition to the more typical medium- and short-term activities.
HR challenge # 1: Adapting to a rapidly changing worker profile – Demographicshifts are creating a diverse, multigenerational workforce
An ageing population is very apparent throughout the developed world, raising concerns that the remaining working population will not be able to bear the strain of increased expenditure on elderly care and pensions.
Governments have responded to this reality through immigration and by raising the pensionable or retirement age. Meanwhile, much of the developing world is confronting a very different demographic challenge, and is seeking to devise the appropriate education systems to prepare an overwhelmingly young population for the workplace.
As the world’s population grows, the global workforce is getting younger, older, and more urbanised. Millennials are entering the workforce in greater numbers and reshaping the talent markets with new expectations. They are projected to make up 75% of the global workforce by 2025, and they are letting us know that they are ready to take the lead soon. But as new research shows, Millennials or Gen Yers want to be creative. They want to run their own businesses. They want accelerated career growth (Bersin, 2013).
HR challenge # 2: The world is much more global and interdependent
In 2013, the developing countries contributed 50% of the world’s GDP. This is expected to grow to 55% by 2018, a significant increase in business opportunity centring on these newer economies.Trends in leadership, talent acquisition, capability development, analytics, and HR transformation are all impacted by globalisation. Companies that learn to leverage global talent markets while localising their HR strategies will be poised for strong performance.
HR challenge # 3: Technology’s evolving role in redefining work and workforce demand with mobile, social, and cloud
computing continue to explode
All this technology has transformed the world of recruiting, the world of education and training, the world of analytics, and even the way we work. Today we are online 24/7 and relentlessly flooded with information, messages, and communications. Not only has technology become a critical and pivotal part of human resources, but we have also identified a new human capital issue discussed in this report: the overwhelmed employee. Organisations face an imperative to find ways to absorb more technology while simultaneously making it simple. The rapid growth of technology is opening up new frontiers and undermining old ways of working. It has created new jobs, while eliminating others. It has enabled previously isolated countries to participate in global business, and allowed work to be more easily distributed and performed far from its original source. An increasing number of jobs that rely on human interaction are likely to be conducted virtually, either because the individual worker volunteers to work in that way, or because the employer makes telework compulsory to save on the costs of premises.
Finally, technology has changed the nature of collaboration, expertise sharing, and the skills one needs to succeed. Collaborative technologies continue to make it possible for teams to work in remote locations across the world, easily accessing experts within and outside the organisation. The skills we need today and in the future are dramatically different than what they were only five years ago.
The future of HR
These changes in the workforce and workplace are significant, disruptive, and here today. How can human capital strategies power companies to thrive in this era of rapid change?
Table 3 outlines the specific recommendations HR could implement to address these organisationalchallenges in their role as Strategic Business Partner which are summarised below (Deloitte, 2014):
