Role of HR in Business Strategy

Published by MBA Skool Team, Published on May 16, 2015

HR professional being just a people person with outstanding soft skills has long passed. Earlier HR managers were viewed as just support staff who helped in processing the transactions related to the employees of the organization. But now the role has gone much ahead of that. The bar has now been raised from being the traditional personnel manager to the out of the box thinker. Today HR manager has taken a role of being the strategic business partner and affects the bottom line of business.

Why Include HR in Business strategy?

HR is considered as a cost-center rather than a profit center by most of the organizations. Even though it helps in managing the most important resource that is the human capital of an organization, still an HR manager is given the least importance as compared to marketing or a sales manager at the same place. But a successful business owner realizes the solid connection between the HR strategy and the business’s success and the return on investment becomes a major concern for making HR a strategic business partner.

HR being a Strategic Business Partner is not a cliché. It can take major decisions like where to invest

• The human resources

• Succession planning

• Performance planning

• Training and development

• Employee retention

• Employee engagement

• Compensation management; and last but not the least

• Effective recruitment

But the question is how can all these be implemented?

What Can HR Ideally Do?

The first and foremost thing for an HR to do is to understand the business, to know how the people strategy affect the end results of the business and what kind of the talent is required for that and at what cost.

The second thing is to leverage the power of the data. For the HR to play a strategic role, it is important to stay up-to-date with the current happenings of the world. In practice, the most important skill of an HR professional is to experience transformation and change management that means actively seeking to involve oneself in changing situations, like mergers and acquisitions and disinvestments, taking top level leadership roles in big change management programs, moving markets to an emerging economy.

The Power of Technology

With the growth in technology, the HR leader needs to leverage the vast potential of technological innovations. Social Media serves another important platform today, for recruitment, selection and hiring of the best candidate from a diverse pool of candidates, thus strengthening the employer branding by engaging talent in an open and a personal environment. HR manager playing the role of a change and transformation agent is the need of the hour and through social media, HR professional can improve employee advocacy and engagement, and thus proactively recruit talent who is passionate about the brand. This way HR manager can play a significant role in strategic decision making.

Approaching the Holistic Approach

There are five different strategies that HR can follow to supplement the overall business strategy:

• Restructuring Strategies

• Recruitment Strategies

• Training and Development Strategies

• Outsourcing Strategies

• Collaboration Strategies

Picture Courtesy: ace-alliedconsultants

In today’s era HR serves as a catalyst and HR professionals need to take a holistic approach while understanding their projects, businesses, and share thoughts with the stakeholders, analyzing the different functions in business terms. Strategic HR does not focus on the input employed but focuses on the end results. Likewise, in the case of training and development, strategic HR does not intend to count the number of trainees registered for the program. Instead it focuses on the learning of the trainees to equip them better for the organization. Productivity, efficiency, quality of work, customer satisfaction or conversely, number of customer complaints received defines performance improvement. Despite the fact that output results are more difficult to measure than input deployed, more accurate metrics of the success and effectiveness can be measured directly and indirectly by strategic HR.

Another important aspect of strategic HR is succession planning. Earlier, the main role of HR was external recruitment which helped in acquiring employees from a diverse pool but at the same time added to the cost and risk of the organization. Now with the advent of strategic HR, HR professional identifies the prospective candidates for different roles from the existing pool of employees by employing certain grooming techniques like training and development, leadership development etc. With such initiatives, the organization does away with the risk of differences in the company’s culture and the employee’s culture and attitude. The existing employees already identify themselves with the value and ethics of the organization and have already blended well with that, so it becomes a lot easier to align their goals and objectives with the company’s goals and objectives, as a result increasing the chances of success and reducing attrition rate.

Talking about performance planning, strategic HR aligns performance management systems with business goals and strategies that are the VMO of the organization rather than traditional functions. The traditional approach was to observe how well the employees satisfied their immediate bosses and were ratings were provided on that basis. But now, performance management system outlines important criteria like quality of work, productivity, efficiency, customer satisfaction, innovations, personal development, mind works, number of defects, reworks, time management etc. It puts less weight on vague criteria like boss satisfaction, attendance, teamwork, and neatness.

One of the main advantages of Performance Management System in fulfilling business strategy is that it can align the organization goals to individual goals by percolating the VMO down to the individual goals and objectives. As a result, we can do the gap analysis which would help in performance appraisal, recruitment and learning and growth strategies. In other words, the structure follows the strategy of the organization. Also, we can formulate the business strategies as per the current workforce and set realistic goals by analyzing the competencies of the current workforce. In that way strategy would follow the structure of the organization.


Hence HR is no longer about just recruitment or a support function in terms of carrying out transactions for employees. It is in the forefront of business strategy and is at par with all other functions of business like sales, marketing or operations. HR professional plating the role of a strategic partner will provide competitive advantage to a company over others and can lead to sustainable growth of an organization. Lastly, the main motive of being a strategic partner is to ensure high performance, high involvement and high commitment of the people in the organization.

This article has been authored by Shibani Panigrahi from XIMB

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