Aligning HR Strategy to Corporate Strategy

(How HR professionals can contribute to better integration of corporate and business strategy with HR strategy)

Recognition of the link between corporate and business strategies and HR strategies is not new. McKinsey’s 7-S framework that emphasized the need for the alignment of seven organizational variables (Super ordinate goals, Strategy, Structure, System, Staff, Skills and Style) for organizational effectiveness is about twenty years old. As businesses have become more knowledge and technology driven the importance of people to organizational success has if anything, only multiplied.

Corporate and Business Strategy

Business strategy focuses on achieving competitive advantages on a sustained basis. The four building blocks of building a competitive advantage are

Superior efficiency
Superior Quality
Superior customer responsiveness
Superior innovation

Companies achieve these drivers of competitive advantages through the creation of distinctive competencies through resources and capabilities. While resources are created by deliberate actions by the organization, capabilities get embedded in an organization’s routine and processes. Capabilities are often the result of a complex interaction between the structure, system and values of an organization. It is possible for an organization to take deliberate actions to create capabilities. The deliberate actions taken to create resources and capabilities spring from the functional strategies adopted by an organization.

Linking HR strategies to Strategic requirements:

For corporate, business and HR strategies to be integrated well it is apparent that the top management, business heads and HR professionals need to work closely with each other. There are five ways in which HR professionals can enhance their ability to contribute to this integration process.

1. Spend more time and effort understanding the business environment and the key strategic issues faced by the company

HR professionals need to be able to anticipate issues that will be of concern to the top management before they actually come on table. They also need to build credibility with the top management. With the increasing uncertainty in the business environment, and the volatility of different markets, organizations are increasing forced to take drastic decisions at short notice such as the rapid downsizing etc. HR professionals need to be mentally prepared for all possibilities, to be able to give a clear picture of change to fellow employees and to be able to look ahead and foresee changes on the horizon that could involve changes in HR policies and practices, understanding the business environment and the key strategic issues faced by the company on a continuing basis is essential.

2. Get involved in the nitty-gritty’s of the business, i.e. in operational details and issues:
Organizations want to focus more on performance issues. In this context HR professionals have no option but to get their hand dirty by understanding as much of operational issues as they can. Better understanding of operational concerns will also help HR professionals play a more useful role in training and development, transcending behavioral training programmes and “leadership”. This is particularly important in an era when domain knowledge and technical expertise are becoming more important.

3. Take an integrated look at the people in the organization, bridging the gap between HR and IR (Industrial Relations):
The worker on the shop floor is becoming more qualified, multi skilled. In service organizations in spite of repetitive nature of the work, employees see themselves more professional than blue collar workers. This is therefore an opportunity for HR professionals to bring a single HR perspective to the organization, and to cast aside the confrontational mindset often inherent in IR paradigm.

4. HR should act as facilitator of knowledge flows within the organization:
Organizations are increasing dependent on leveraging knowledge from within the organization to be competitive in the marketplace. Documentation and sharing of such knowledge helps organizations do this effectively. Performance appraisal process and incentive systems need to reflect the importance of this activity. Besides creating such systems within the organization, HR professionals need to first internalize the knowledge creation and dissemination mindset within themselves.

5. HR need to change from a support paradigm to value creation paradigm :
To be recognized as an important contributor to the performance of the company, HR contributions need to be measured in the right framework. HR professionals often measure themselves in a very limited way such as “we hired 120 people” instead of we enabled the addition of Rs. 5 crores to the EVA of the company”. Human resource valuation may never enter balance sheet, but concepts like EVA are here to stay, so HR has to find ways of linking itself to such measurement concepts.