The short answer is yes. Strategic HR can really improve business operations! In fact, world-class HR organizations (as opposed to average or typical HR organizations) operate at 25% lower cost and with 31% fewer staff, according to the “World-Class HR: Transforming HR to Prevail in the Next New Normal” report from The Hackett Group.
More to the point, world-class HR organizations are also 91% more likely – almost twice as likely! – to “act as strategic partners to the enterprise.” And according to the Hackett Group’s separate 2021 CHRO Agenda report, HR’s role as a strategic advisor is HR’s #1 priority this year.
So, how can organizations implement or strengthen a strategic approach to HR?
Many organizations simultaneously recognize HR’s importance while systematically deprioritizing it. That can take many forms. When HR doesn’t report to the CEO, it’s being deprioritized, as is also the case when it’s understaffed or underbudgeted. HR must have the capacity, position, and reputation within the organization to be able to contribute strategically. This step is foundational; strategic HR can’t realistically exist without it.
This is particularly crucial in smaller businesses, where HR teams might be small (down to one person), or HR tasks might be handled by a business owner or office manager. But if the people responsible for HR don’t have the bandwidth to develop and implement HR-related strategy, “strategic HR” will wither before it has a chance to bloom. This may mean growing the HR team, outsourcing all or some transactional tasks, or revisiting priorities so that the HR people can re-focus their efforts. For example, over half of HR departments outsource at least some functions, like benefits administration and payroll, according to HR Dive’s 2021 Identity of HR Survey. Other options including automation or introducing employee self-service options.
HR can’t develop workforce-related strategy to support the business’s larger goals if those goals and the strategy to achieve them haven’t been defined or well-articulated. HR needs to have a seat at the table while these conversations are happening.
At the end of the day, it always comes back to people. It’s people who make the organization’s strategy happen, and it’s HR that directly impacts how the workforce is managed across an organization.
From this perspective, HR’s role as a strategic partner makes logical sense: by taking a strategic approach, HR has more power than almost any other function in the organization to promote employee productivity and identify where the workforce can be honed to produce desired business outcomes. Along the way, as researchers in the journal Strategic HR Review write, “It simply requires the alignment of every HR function with business strategy. It establishes relationship between HRM and strategic management of the organization and facilitates the HRM to change its image as a ‘cost center’ to that of a ‘strategic business partner.’”
CoAdvantage, one of the nation’s largest Professional Employer Organizations (PEOs), helps small to mid-sized companies with HR administration, benefits, payroll, and compliance. To learn more about CoAdvantage’s ability to create a strategic HR function in your business that drives business growth potential, contact us today.