Where does HR add most value in helping business achieve strategy?

I think HR has long been overlooked in designing strategy. Because HR Directors often haven’t been directly involved in the “making” or “selling” of the company’s products and services, they can sometimes be overlooked as critical contributors. HR are often seen as implementers that teams to call on to manage and effectively implement resource decisions, but they are somehow overlooked as advisors on what those decisions should be. The risk is that once a strategy is decided, it’s too late to bring new ideas or perspectives. HR are sometimes mistakenly seen as uninvolved with the company’s revenue and profit, when in reality they are fundamental to both.

As companies begin to realise that the most effective strategies are fundamentally based on people, they are starting to acknowledge that it is important to bring HR in from the beginning. Thinking of an acquisition? Harvard Business Review estimates 70-90% of all acquisitions fail, and the most important reason acquisitions fail is a poor cultural integration. When growing our management consulting business from $60 million to over £1 billion in the US, our first acquisition, even though it was a perfect strategic fit, failed on culture. We got none of the planned upsides and eventually all of the executive leadership quit. We learned quickly that people are they key to a successful merger. We began involving HR during the due diligence phase. Our CHRO recommended we do “culture fit” surveys to identify pitfalls and plan for them. Soon, our track record in acquisitions dramatically improved. It was about the people.

Bringing new ideas to the table

HR professionals are also very good at bringing strategies from one company into a new one. Because HR are involved in confidential performance reviews, they know more than most executives in the company the real “inside story” of what was truly successful and what was well-rehearsed storytelling.. In one company, our CHRO recommended a brand new sales training system she had seen work in her prior company. We implemented it and revolutionised our sales almost overnight. Internally, they also know the capabilities of leaders in the business to take on and manage change. Executives may assume a person is capable of doing something different because of their title, but the HR team will know more about their true capabilities and potential.

Predicting the impact of change

HR can also predict how planned company changes will impact employee engagement and retention. The best strategic idea, without employee buy-in, could be a disaster for the company. Estimates of the cost of employee turnover range from £10k-70k per employee. Lack of employee engagement impacts real productivity and profits… the difference in discretionary effort given by a motivated employee can make the difference between a company that is losing money and one that is making good profits. And of course HR understand the real legal and regulatory impact of any planned strategy. I’ve been surprised at how many executives create a plan that impacts personnel without understanding the legal impact they may face.

How HR people can make themselves invaluable in strategy development

To be valuable to CEOs and MDs in developing strategy, HR people should ensure they understand the business. What do they sell, and how do they make money? Business needs to be an ongoing concern, and ideas that have a commercial impact are going to be the most digestible. Learning to quantify ideas by financial impact on the business can help your ideas get more traction. Employee engagement? How does it reduce the costs of turnover? Recruitment? How does it increase productivity and profit? Training & Development? Improved benefits? The same applies

HR teams should also use their special expertise to inform executives on managing the company better. What are emerging risks? What do you see as trends in the company (good or bad)? How will the needs of employees and the company change in the next five years? Does the company have any legal risks?

Unconscious bias among CEOs

As a CEO, if you have a bias against HR as “those people who hire and fire, do payroll, and think of ways to make employees happy”, fix your perception. HR is a strategic expertise that if you are not using, you are missing out. Make sure you have regular time with your HR director to discuss business and market challenges (as well as people challenges), and get input into how the company is trending. Give them access to forums where they will meet other HR directors and learn from other companies how they are successfully handling challenges – and listen to them.

If you’re an HR practitioner, and there are execs in your organisation who show signs of bias, there are ways to challenge that. To get your voice heard, pay attention to what the executive cares about. How does he/she speak? Repeat his her words/themes when talking about ideas you have. For example, “You know, I noticed what you said we need to improve our prices….”, then talk about how your idea fits into that. Pay attention to the CEO’s direction, and suggest things that fit in that direction. Draw on both your expertise (how do you know this works) and examples (when has this worked before?).

Measuring success and impact

HR has more difficulty measuring KPIs than other parts of the business, and especially relating them to commercial results. Everyone knows a talent development programme will improve company performance, but it is very hard to quantify. Where possible, it’s helpful to assign numbers… how much does employee turnover cost? How have people who got training improved their performance? Using an employment engagement survey (especially a pulse one that comes out monthly or bimonthly) can demonstrate improvements the company is making and the positive impact of a good strategy.

Also, companies are beginning to pay more attention to ESG (environment, social, and governance) responsibilities. HR often play a key role in these kinds of initiatives. Showing you are up to speed on what other companies are doing, and have ideas to improve the company’s ESG scores, is a great way to contribute now to executive’s strategy.

HR as a business asset

At a time when organisations are more aware than they’ve ever been about the power of their people, it is critical that the individuals and teams within the HR function play an integral role in harnessing that power and ensuring it is considered at every stage of strategy development.

If you don’t have a CHRO at the table, you are overlooking your most important asset. It is difficult for HR to support effectively if they are not privy to the debates and discussions in the boardroom. And even if they aren’t in the boardroom, it is important to bring potential strategy to them in draft, when there is still time to make course corrections. If you’ve overlooked HR in the past, it is not too late to bring them on board, but make it a priority.

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By JC Townend, CEO, LHH.