Will HR Ever Be Strategic?

Thomas Otter on the Vendorprisey blog throws down the challenge to a variety of bloggers and analysts to discuss the disconnect between survey data that shows most C-level executives believe people issues are strategic, yet do not see HR leaders as playing a crucial role in creating corporate strategy.  I will take up the challenge.  So, why is the HR organization not playing a crucial role in creating corporate strategy?

• It may not be doing the basics well -- If HR cannot deliver basic services with high quality at competitive costs, then it does not have credibility with C-level executives.  HR should also take the lead in, not be forced into, evaluating alternatives such as HRO.  It is important that HR has the data (showing the facts to C-level executives will be a common theme here) that it can share with C-level executives that shows that it is doing the basics well compared to alternatives (or a plan to take advantage of an alternative if this is the best answer). 
• HR does not really understand the business strategy -- If HR does not understand the business strategy, it cannot proactively provide insight on how to leverage human capital to achieve that strategy.  This is not a new concern and I think HR leaders are getting better at understanding the business strategy.  However, I still see a lot of companies making HR technology investments without thinking through the ties to business strategy.
• HR does not provide the information C-level executives need to make strategic decisions about human capital -- Even if an HR organization understands the business strategy, it needs to have something to meaningful to contribute to the strategy discussion.  Too many HR leaders come to the table without the necessary facts to help make strategic decisions.  Many HR leaders provide anecdotes, cite studies, or suggest the best practices of others to answer strategic questions about human capital.  These can provide color around strategic decision making, but make a poor substitute for facts based on data that comes directly from the company. 

This is the area I believe that HR needs to improve the most.  I was at a conference earlier this week held by InfoHRM on Workforce Planning.  One of the speakers was an EVP of Workforce Planning at Countrywide Financial.  He was a CFO earlier in his career.  So, he had a unique perspective of HR and its position as a strategic contributor.  As a CFO, he was often put in the position of shooting down the ideas of HR, not because they were not good or necessary, but because they did not have the proper substantiation (i.e., business case).  He pointed out, rightly, that investments in human capital are not made in a vacuum.  Investments in human capital need to be weighed against alternative investments that the company may make to achieve its strategy.  So, that was where HR fell down, in his mind.  It did not make the case it needed.

If HR is going to be strategic, it needs to understand the business strategy and support managers and executives in executing that strategy.  It needs to provide the necessary facts about the impact of human capital on business strategy and then provide the insight and experience to make the best decisions. 

It sounds simple.  It is not.  HR needs to develop competencies in new disciplines to be successful.  It is starting to happen.  As more non-HR professionals (an HR professionals get more direct business experience) take leadership roles in HR organizations, we are starting to see new thinking emerge.  To me, it is not a question of if, it is when, fact-based, strategic HCM decision-making becomes a mainstream concept.  So, I look at much of the survey data as a "call to arms" for HR leaders.  If they do not answer the call, they will be pushed aside by those who do.

Comments

[Luis]

I really agree with your third point. Even further, I would say that HR still does not understand the link between talent management and corporate performance. I have slightly expanded on my blog on this. The idea is that we have to work on human capital valuation and the link with corporate valuation

[Roger T Howland]

I am a new visitor to your Human Capital Management Blog; I have enjoyed the perspectives shared by all.

As well as the classic Fast One:

Fast Company: Why We Hate HR
http://www.fastcompany.com/magazine/97/open_hr.html
From: Issue 97 | August 2005 | Page 40 | By: Keith H. Hammonds

Best regards,

Roger Howland
Chief Recruiting Officer and CEO
The Job Dr., Inc. RogerH@TheJobDr.com www.TheJobDr.com
949-360-1800 Tracking Technology Talent since 1987

[Priyanka - BPO]

Yah, I also think that HR has more to do with corporate performance and talent management..So this aspect of HR should be strengthened more than any other aspect.

[Hamed Elbarki]

Great information. It's always nice to get another person's perspective.

[john gallagher]

AS technology evolves, the human element is even more critical, expecially from "c" level executives.