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What exactly is ‘strategic HR’?

For years, we have been hearing how human resources needs to be more strategic as a function and a profession.

The idea is that the people strategy of an organization should be more closely aligned to its overall corporate strategy.

There are many clichés about this, but one of the most common is that HR needs to have a “seat at the table” with membership in the organization’s C-suite.

Ideally, the most senior HR leader — typically a chief people officer, chief human resources officer (CHRO) or vice president, human resources — in such an organization will report directly to the CEO.

The truth is that a CEO can spend up to half of their time on people-related issues, and senior executives are really beginning to understand the importance of people issues to organizations.

After all, in most industries, employee compensation is the single largest expense, and a company’s workforce is often a key strategic differentiator for the organization and can represent a competitive advantage.

Importance of managing human capital

Clearly, it benefits employers to try to manage such an important resource effectively and strategically.

While people management is an important consideration for all leaders, having someone at the very top of the organizational hierarchy focused on attracting, acquiring, retaining, engaging, compensating, motivating, developing and deploying employees effectively helps to establish and signal the importance of those issues to the senior leadership team, the board of directors and the organization itself.

Nevertheless, after hearing so long about the need for a seat at the table, some commentators are starting to change the discussion to one based on the fact HR already has that proverbial seat.

The question then becomes, “Now that we have a seat at the table, what are we actually going to do with it?”

Developing overall corporate strategy

I am not sure that question has been answered definitively, but at its most strategic levels, taking a strategic approach to human resources management allows an organization’s most senior HR leaders to have input into the development of the overall corporate strategy.

So, rather than just developing and implementing a people strategy in alignment with the overall corporate strategy, the senior HR executive will bring the people perspective to strategic planning for the entire organization.

Another often repeated cliché is that “HR doesn’t understand the business.” This is important because HR needs to help improve the bottom line by maximizing the efficiency and effectiveness of an organization’s human resources.

This requires HR to become the strategic business partner it has aspired to be over the past 40 years or so. It also requires HR practitioners to walk around and truly understand the business by being aware of and appreciating what’s keeping executives, managers and employees up at night.

HR also needs to help the organization with strategic planning and tactical implication of an organization’s strategic moves and the attainment of its overall goals and objectives. Every business decision of a strategic nature has a people element to it.

For example, if the organization decides to enter new markets or develop a new product line, it is important to have the right people onboard to be able to do that.

Business strategy and strategic HR

But what is business strategy, and just what is strategic HR?

There are many definitions of business strategy, but I prefer to keep things simple. To me, strategic concerns focus on the bigger picture and the longer-term.

This is true, despite so much technological advancement, social change and the disruption of entire departments, functions and industries (think taxis and Uber, video stores and Netflix).

While today’s organizations need to be nimble and agile, it is still important to consider the big picture and existential questions about why an organization exists, who its customers are, what products and services it delivers and which markets it is going to serve.

Any fundamental considerations about an organization’s identity and where it is going are likely to be of a strategic nature.

According to the U.S.-based Society for Human Resource Management (SHRM), “Strategic human resource management involves a future-oriented process of developing and implementing HR programs that address and solve business problems and directly contribute to major long-term business objectives.”

In my next column, I will provide some specific examples of how this might work and give an indication of how to evaluate if an organization’s HR function is operating strategically.

Brian Kreissl is a product development manager with Thomson Reuters in Toronto. He looks after HR, payroll, OH&S, records retention and Triform. He can be reached at brian.kreissl@thomsonreuters.com or (647) 480-7467.