The personnel administration function of human resources has become outdated in the past 20 years. Today, human resources departments have a more defined, strategic role in organizations, and an HR strategy affects the bottom line. One of the challenges for HR leaders is convincing executive leadership teams that human capital is one of the most important resources in which the company can invest. This return on investment is an essential part of the argument for including HR as part of an overall business strategy.
HR Strategy Is Business Strategy
In an ideal world, there is not a line drawn in the sand between human resources strategy and business strategy. A successful business owner realizes the strong connection between the two. Developing human capital is important to the longevity and success of a business. In the past, personnel administration was merely the processing of payroll, benefits and applications. Human resources strategy today involves executive leadership teams conferring with human resources experts to develop complementary goals for human resources and the overall business.
HR Strategy and Business Productivity
The recruitment and selection process of your human resources department is paramount in building a productive workforce. Developing a human resource strategy for recruiting and selecting the best employees affects your organization’s bottom line. Maintaining a workforce where employees enjoy high levels of job satisfaction and job security translates into a workforce that helps achieve business goals. According to HR experts, human capital, or human resources, is your most valuable resource.
Trends Affect HR and Business Strategy
In a study conducted by consulting giant Towers Watson, business executives are paying close attention to a trend toward blending human resources strategy and business strategy. According to the results of a 2010 Towers Watson study, “[W]e may be witnessing a tipping point — where HR technologies become the integrated engine for advancing the broader needs of the business, supporting far more than basic transactions, and advancing the HR and business agenda of the future. … Human resources information systems are integral in the development of performance management, recruitment and selection.
Interaction Among Executive Leadership
The real test of a relationship between human resources and overall business strategy is the quality of the interaction between human resources executives and other company executives. Many times, human resources leaders who are denied access to the boardroom complain that organizations don’t appreciate the value of human capital. The way to improve the relationship between HR and C-level executives is by demonstrating the return on investment (ROI) in human resources activities. This may involve explaining the connection between a reduction in employee turnover and an improvement in job satisfaction that improves the bottom line.
A number of factors affect the relationship between human resources and business strategy. Executive leadership needs first to understand the benefits of aligning HR goals with overall business goals. Forward-thinking concepts may need to be approached carefully to avoid skepticism among old-school executives who still consider human resources as merely personnel administration. Building the relationship may also require the assistance of an HR consultant to map the strategy for effecting change in your organization.