How To Create The Best HR Function: Link HR To The Business Strategy

We're a leading HR consulting and outsourcing firm, which means we field a lot of questions from business leaders about human resources. Perhaps the most common question is: how can I get more from my HR team?

HR teams are filled with talented professionals who are skilled in leadership, communication, and project management. Despite this, the HR department doesn't always support business growth in an obvious way. In fact, projects can sometimes slow down due to HR issues, such as a too-long recruitment process or a lack of training resources.

The real problem here is a lack of HR strategy. When your HR team has a strategy that's aligned with your core business strategy, you'll find that your Human Resources function becomes a powerful driver of succcess.

What is an HR Strategy?

An HR strategy serves as your roadmap to cultivate and sustain a high-performing team that can effectively achieve your organization's desired business outcomes. A typical HR strategy will cover elements such as:

• Recruitment and onboarding
• Training and professional development
• Employee engagement
• Organizational culture and work environment
• Operational policies and compliance
• Compensation strategy and Total Rewards
• Employee retention
• Succession planning

A comprehensive HR strategy takes into account the diverse aspects of human capital. This includes evaluating the individual employee experience and determining their level of engagement, as well as assessing the effectiveness of your Total Rewards program.

Additionally, it is crucial to examine your strategy from an organizational standpoint. This involves considering factors such as business resilience, demand planning, and succession. By doing so, you will gain a deeper understanding of why HR strategy is essential for the overall success of your organization.

Why is HR strategy important for business strategy?

In a new organization, HR plays a critical role in recruiting and integrating top talent into the team. However, HR leaders understand that their responsibilities extend far beyond day-to-day tasks such as payroll and compliance. They recognize that the business relies on them to think strategically and contribute to the long-term success of the organization. Business strategy depends on human capital factors, such as:

• Employer reputation: According to Glassdoor, 75% of candidates are likely to apply to companies that actively manage their employer brand. An excellent HR strategy can help you build a reputation as an employer of choice or best place to work.
• Cost management: Labor is the biggest expense for most companies. A good compensation strategy can help keep these costs down. Training and development can also reduce costs by empowering workers to be more productive.
• Team stability: Staff turnover can be a massive disruptor for your business strategy, especially when you're trying to grow. The right HR strategy can help engage and retain your most important team members, ensuring you've got the correct people in place to deliver your goals.
• Depth of skills: Your organization's skills requirements will change over time. For example, you might need people who can work with a new technology or connect with clients in new markets. Your HR strategy can support these changes through recruitment and professional development initiatives.
• Compliance: Regulatory compliance is non-negotiable for every business. From payroll laws to OHSA to anti-discrimination rules, employee legal protections can be a minefield. The right HR strategy will help you stay compliant and avoid costly fines that might threaten business growth.
• Strategy and planning: Strategic HR leaders can help develop and implement the company's long-term strategy. They understand the current team's strengths and weaknesses, so they know if the company is prepared for the next stage in its development.

Having a solid HR strategy can give your organization a competitive edge. However, it's not sufficient to simply have a plan for HR. It is equally important to ensure that your HR strategy aligns seamlessly with your overall business strategy.

Recommended reading: HR Trends 2024: Your Strategy Guide for the Year Ahead

Five steps to align HR strategy with the business strategy

How can HR leaders ensure they are contributing to long-term business success? Like any other leader, they achieve this through careful planning, effective employee communications, and thorough analysis. Here's a step-by-step guide on aligning your Human Resource strategy with the broader corporate strategy.

1. Understand the main strategic goals

All strategies should be aligned towards the same outcomes. If the main business goal is growth, the HR strategy should aim to reduce time-to-hire, improve onboarding, and scale up training and development. If the goal is business resilience, HR needs to look at operational efficiency and compensation planning.

You will also need to understand the current state of the organization. Are there budgetary pressures? Regulatory issues? Market movement, such as a new competitor arriving on the scene (or an existing competitor departing)? If you understand where the company is and where you're going, you'll be in a better position to support the main corporate strategy.

2. Map out a skills matrix

How does your current team contribute to the company strategy? Each individual brings something different, so you'll speak with team members one by one and discuss their strengths and weaknesses. This approach will help you prioritize training resources where they're needed most.

You can also work with strategic leaders to map out a skills requirements matrix. For instance, if your company plans a major digital initiative, you might need a team with strong IT skills. You can compare these requirements to your current skills matrix, which will help you decide if you need to invest in training or recruitment.

3. Formalize your talent strategy

Once you know where the organization is headed and what it requires of its people to get there, you must determine the gaps between its current workforce and what is necessary to accomplish the main business goals.

Define strategies needed to acquire, train, develop, performance manage, and reward the very high-performing talent that will carry your organization into the future. It's a good idea to document and formalize this strategy to get everyone on the same page.

4. Measure HR goals and outcomes

Whether you use an HR scorecard or other HR metrics, these measures indicate if your HR talent strategy is successful or when a course correction is necessary. Pay close attention to things like:

• Time-to-hire
• Engagement survey or pulse survey results
• Professional development progress
• Stay interview and exit interview results

People metrics such as these will help you ensure that you're headed in the right direction. If the HR strategy is failing to support the main business strategy, then it's time to review the HR strategy.

5. Stay in touch with the key strategists

But what happens if the business strategy changes? That's why it's essential to have a connection between HR leadership and primary decision-makers and stakeholders. You can't support a well-rounded business strategy unless you know what that strategy is.

Aligning with the core strategy can be tricky, especially if HR doesn't have a voice in the board room. Some companies benefit from having a CHRO that can help shape the people-focused business strategy. If you don't have an executive in charge of human capital, then the HR leader needs to have a good relationship with the CEO or COO.

Need help with your HR strategy?

Strategic HR requires a lot of experience in human resources management. If you've got a veteran human resources team, then they will be able to help you build a responsive, resilient strategy that helps deliver your business goals.

But what if you don't have that in-house expertise? Or if your HR team is too snowed under to think about strategy?

That's when you need an HR outsourcer. An HR consultant can give you the benefit of their years of expertise in delivering measurable business outcomes.

Book a no-obligation chat with a Helios HR consultant today. Let's talk about how you can build a winning HR strategy.