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What is ‘Strategic’ HR Management?

The great (or is it not so great?) part of HR is that academicians,
practitioners and consultants associated with the field of Human
Resources have been trying for years to answer questions like:

  • How can HR get a ‘place at the table?’ 
  • How can HR become Business Partners?
  • What is ‘strategic’ human resource management?

I am sure you can add to this list of what I call ‘eternal,
evergreen’ questions.  Not that thought leaders in the field of HR have
not provided the answers; but for some reason these questions seem to
persist indicating that either the answers are not satisfactory, do not
lend themselves to easy implementation or practitioners have not been
able to implement them successfully for whatever reasons.

This is your opportunity to help find the ‘answers.’
 So feel free to provide your inputs, comments and let us see if we can
use our collective thoughts to find satisfactory responses.

What is ‘strategic’ HR Management?

To me, ‘strategic’ HR management is best defined by the outcomes of
the work done by the function that drives, or contributes to, attainment
of strategic business goals of the organization. By ‘strategic business
goals’ I mean goals that provide greater returns to stakeholders. Some
of these could be:

  • Goals that make the business stronger from a balance sheet
    perspective, that is enhancement of net worth or enhancement of return
    on assets, or 
  • Goals that solidify business performance providing greater
    confidence in the future of the business to stakeholders and analysts,
    as they seem to determine the market worth more than any one
    constituency. These would include either goals, which ensure greater
    financial returns in the near term or goals, which build the platforms
    for greater financial returns in the medium to longer term. Examples of
    the latter include, adding new products or services to the portfolio,
    diversification of business, forward or backward integration and
  • Goals that significantly enhance market share or build brands leading to longer term financial returns for shareholders.

If you accept my broad definition of ‘strategic business goals’ for a
minute, then the ‘strategic’ HR goals are those that drive or
contribute to such goals.
Let us examine what these could be.

  • HR’s contribution to enhancing net worth or solidifying business performance:
    HR’s chief contribution is building the organizational capabilities
    that enable businesses to enhance the bottom line. Organization
    capabilities are those, which enable an organization to consistently
    execute business strategies that give it a competitive edge. For
    example, Apple’s design capabilities, FedEx’s Operational capabilities
    and Ritz Carlton’s service. HR contributes by creating, or enhancing the
    effectiveness of, an ecosystem that supports the organization in
    effecting these strategies.  It involves creating an enabling culture,
    defining and executing how ‘right’ talent is defined and acquired, the
    way the talent is assessed, developed and rewarded such that the desired
    behaviours which contribute to the unique strengths of the organization
    are constantly demonstrated by its employees. Each of these functional
    areas of HR link to one another. Making them link with and feed on each
    other is the key here.
  • HR’s contribution to reducing costs:
    Management of employee costs as a percentage of revenues benchmarked to
    competition, reduction in cost of talent acquisition, appropriate
    distribution of finite rewards, building a culture of cost
    consciousness, enhancing employee engagement to reduce attrition which
    could, in turn, reduce the burden on benchmarking compensation
    aggressively are various ways in which HR contributes strategically to
    the business.
  • HR’s contribution to return on assets:
    Examining the feasibility of substituting physical assets that provide
    benefits to employees, like employee housing owned by the organization
    or cars, with an asset light expense model to serve the same purpose.
    This is relatively inconsequential financially today, as most
    organizations have moved away from asset heavy models of employee
  • HR’s contribution to brand building:
    Brands are built on delivery of certain promises that the brand is
    associated with in the minds of the customers. HR’s contribution to
    building brands is again about building the entire ecosystem in which
    employees are managed so that they consistently perform in a manner that
    leads to the brand promises being met. In this space, the focus is on
    building the culture, which promotes the desired behaviours in employees
    that leads to brand performance. Southwest Airlines, Ritz Carlton
    service, Indigo’s on time promise are all examples of brand promise
    being delivered consistently thanks to a culture, which promotes desired
    behaviours from employees in any role. HR contributes to building such a
    culture that enhances employee commitment to delivering the brand

All these strategic contributions of HR can be put into one of three buckets:

  • Building Capabilities
  • Building Culture
  • Building Commitment

How is your role contributing to one or more of these three Cs?

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