Strategic performing roles of HR

When it comes to how involved HR managers should be in strategic planning, there is often disconnect between what CEOs say and do. HR professionals’ input is crucial as they identify problems that are critical to their companies’ business strategy, and forecast potential obstacles to success. When Rick Wagner took over as CEO of General Motors, he organized a senior executive committee (the “Automotive Strategies Board”). It included GM’s chief financial officer, chief information officer, and vice president of global human resources. Wagner expressed clearly that he wants to seek the HR vice president’s counsel and perspective constantly and continuously. The V.P of HR has demonstrated a tremendous capacity to think and act strategically, which is essential to the company’s HR function and to achieve the objective in making GM a globally competitive business.

A study from the University of Michigan concluded that high performing companies’ HR professionals should be part of the firm’s strategic planning executive team. These professional identify the human issues that are vital to business strategy and help establish and execute strategy. They provide alternative insights and are involved in creating responsive and market-driven organizations. They conceptualized and execute organizational change. Another study concluded that 39% of CEOs surveyed see HR as more of a partner than a cost center. In another study of 447 senior HR executives focused on the extent to which HR had been involved in executing mergers for their companies. Mergers in which top management asked HR to apply its expertise consistently outperformed those in which HR was less involved.

One recent survey of 1,310 HR professionals found that, in practice, only about half said senior HR mangers are involved in developing their companies’ business plans. A survey by the University of Southern California found that about one-fourth of large US businesses appointed managers with no HR experience as top HR executives Reasons given include the fact that they may find it easier to give the firms’ HR efforts a strategic emphasis. They may also sometimes be better equipped to integrate the firm’s HR efforts with the rest of the business. So in practice, HR managers don’t appear to be as involved in strategizing as perhaps they should be.

HR mangers do assume more strategic planning responsibilities, they will have to acquire new HR skills. This does not just mean technical skills relating to activities like selection and training. HR mangers will need “an in-depth understanding of the value creating proposition of the firm”. How does the company make money? What activities and processes are most critical for wealth creation as defined by customers and capital markets? Who in the firm executes these activities successfully?

Today’s HR managers fulfill two basic strategic planning roles: strategy execution and strategy formulation. Strategy execution is traditionally the heart of the HR manager’s strategic planning job. Top management formulates the company’s corporate and competitive strategies. Then, it formulates broad functional strategies and policies. Like the riverbanks for a boat steaming up a waterway, the firm’s functional strategies and policies set the broad limits that determine what the functional manager can and cannot do, and provide a set of signposts that the (HR or other) functional managers can use to decide the precise form the department’s specific policies and activities should take. The company’s HR (or other functional) strategies should thus derive directly from its company wide and competitive strategies.

While execution is important, HR increasingly plays an expanded strategic planning role today. In recent years, HR traditional role in executing strategy has expanded to include working with top management to formulate the company’s strategic plans. HR has “a seat at the strategy planning table” of successful organizations. This expanded strategy formulation role reflects the reality most firms face today. Globalization means more competition, more competition means more performance, and most firms are gaining that improved in whole or part by boosting the competence and commitment levels of their employees. That makes HR’s input crucial.

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