Historically, it’s been a challenge to make data-driven HR decisions. While that is changing, there are still steps some organizations are missing on the path to creating a successful HR strategy.
In Why Chief Human Resources Officers Make Great CEOs, Dave Ulrich and Korn Ferry’s Ellie Filler studied the prevalence of 14 leadership traits across C-suite roles, and found that — except for COOs — CHROs had traits that were the most similar to those of the CEO. The implication according to Ulrich: Great HR leaders who know the business are well-positioned to become successful CEOs.
However, if this is the case, what is holding HR back in some companies from playing a driving strategic leadership role in the business? Having a great HR strategy is essential, but often organizations place too much emphasis on how they can improve HR. The truth is, the solution isn’t just to make HR better. HR analytics are now better than ever, but organizations need to properly access them, align their information with decision-making, and act accordingly.
What is an HR strategy?
The term “HR strategy” refers to an organization’s plan to align its people with its business objectives. This is the concept of knowing and applying an in-depth understanding of organizational dynamics based on data.
However, for decades, HR has been dealing with challenges related to a lack of access and insights to their workforce data. Without data, it becomes difficult to build accurate, fact-based strategies.
This is unfortunate because this kind of HR strategy empowers leaders to make better business decisions with clarity. As your workforce and the demands on your organization grow, taking a strategic approach to HR becomes increasingly important.
5 steps to create an effective HR strategy
A successful strategy requires you to look beyond the traditional HR role and leverage data to establish and evaluate your plan. Not sure where to start? Use these steps to create an HR strategy that supports your organization’s needs.
1. Understand business strategy
To craft an effective HR plan, you first have to understand the business strategy overall, and the opportunities and risks your organization faces. This will help you understand how to prioritize initiatives and how HR influences outcomes.
Communicate with your internal stakeholders and get their input. What are their goals? What issues have been preventing those outcomes from being realized in your organization? Uncover the areas where new initiatives can have the most significant impact. Gathering that data makes it possible for your leaders to be at the forefront of the business strategy and leverage opportunities for growth.
2. Assess your current workforce
Next, you need to look at the skills and abilities of your current workforce. You’re likely to have existing data on what your people are capable of, but taking time to assess this can reveal skills that your organization is not currently utilizing.
Using people analytics, you can discover which employees are the best candidates for reskilling, and quantify who is likely to succeed at training and likely to stay with the organization. This gives your employees room to grow and ultimately leads to better business outcomes.
3. Define your HR strategy
Before you can address any talent gaps you need to figure out exactly where they are across the entire lifecycle. People analytics can help organizations identify attributes that produce long-term hires and high performing employees. It can help organizations know where they get their best candidates and whether or not they have a solid succession pipeline.
Aim to answer questions such as: Do you have sufficient coverage for each of the key positions? Is there a retirement risk among the succession candidates on your slate? Understanding and analyzing that data can help you build a better succession plan for your business and significantly reduce turnover.
4. Align initiatives
At this point, look at your workforce data and business objectives. What does HR need to prioritize and invest in to align with the organization’s goals? The answer to that question will help you determine what actions to take.
Remember: Even if your organization is reaching your overall business goals right now, this is only contingent on making sure you’re able to continuously retain and/or hire the right people. To accomplish that, HR has to connect their plans to business initiatives and outcomes.
5. Forecast your needs
If you wait for a possible future to present itself before adjusting your workforce plan, you’ll be too late. External and internal factors will change your workforce over time. You need to keep a close eye on evolving data, update your strategy, and shift priorities when necessary.
The key to success lies in your ability to plan several steps ahead of where your organization is now. This means workforce planning can’t be a once a year exercise. People analytics allows you to be proactive and use agile workforce planning methods to adjust to changes before they have a negative impact.
How to implement strategic human resource management?
To build a strong HR strategy, you need to pivot from looking from inside the business outwards, to looking from outside in. During a Visier Outsmart keynote, Ulrich shared how to develop this critical mindset shift.
1. Connect decisions to business outcomes
A lack of business acumen will hurt any business leader, including those in HR: if you don’t know “why” business decisions are being made, you cannot connect decisions to business outcomes. Ulrich and his team call this being a “strategic positioner.”
As described in the paper, The New HR Competencies: Business Partnering from the Outside-In:
“High-performing HR professionals think and act from the outside-in. They are deeply knowledgeable of and able to translate external business trends into internal decisions and actions. They understand the general business conditions (e.g., social, technological, economic, political, environmental, and demographic trends) that affect their industry and geography. They target and serve key customers of their organization by identifying customer segments, knowing customer expectations, and aligning organizational actions to meet customer needs.”
According to Ulrich, to become a strategic positioner you need to know:
- Your company’s financial and business strategy
- How your company is going to win
- Who your stakeholders are, both internally (e.g. c-suite and board) and externally (e.g. customers and investors)
- What the conditions are that generate risks and opportunities for your business
If you gave your HR department an economic literacy test, what would the result be? Do you know who your company’s top customers are? Do you know who your competitors are? These were a few of the questions posed by Ulrich to the audience.
2. Evolve from “trusted advisor” to “credible activist”
In some ways, Ulrich explained, HR is its own worst enemy. If you look at the results of Ulrich and Filler’s mapping of leadership traits, while CEOs and CHROs were very similar, they differed the most in one trait: confidence. When it comes to confidence, the CEO and COO took top marks, followed by the CIO, CMO, and CFO, and lastly the CHRO.
To build confidence, HR needs to know the organizational strategies and communicate the value of workforce programs, plans, and decisions in the terms of the business. As Ulrich explained, “HR that starts with the business, doesn’t get as much resistance from the business.” In other words, value is in the eye of the receiver. Connect your ideas and plans to specific business issues or goals, and you are more likely to win support.
3. To be great, you need to have grit
Ulrich emphasized the need for HR leaders to increase their resilience and become more comfortable with taking risks. Referring to Dr. Angela Lee Duckworth’s popular TED Talk, Grit, Ulrich talked about how perseverance and passion for long-term goals is a more significant predictor of success than IQ or EQ (you can take the Grit test yourself).
According to Ulrich, to develop more grit, HR leaders need to lower their fear of failure and make it OK to fail.
In his book, Failing Forward: Turning Mistakes into Stepping Stones for Success, best-selling author John C. Maxwell discusses how the difference between average and achieving people is their perception of and response to failure. Most people — not just those in HR — are never prepared to deal with failure. Rather, failure is something feared, misunderstood, and avoided.
4. Be agile, and bring solutions
To fail forward you need to reduce your fear of failure and — when failure happens — focus on learning from it instead of being defeated by it (as Maxwell expresses: “Stop failing backward and start failing forward!”).
- Set strategy;
- Manage talent; and
- Build human capital for tomorrow
Examples of successful HR strategies
Ulrich also shared many compelling examples and stories of HR playing a role “from the outside in,” emphasizing the need for HR to be about creating business value. The trick to accomplishing this? Include the phrase “so that” in every conversation with business leaders:
- We want to reduce resignations of pivotal employees in Product Design so that we can meet our product innovation goals.
- We have developed a plan to improve employee sentiment in our retail outlets by 10 percent so that we can improve customer satisfaction, which will increase profits by 2 percent.
- We are going to not react to the increase in voluntary turnover in this department so that we can better meet our cost efficiency initiative for the next fiscal year.
Passing on the HR strategic mindset
By building the competencies Ulrich and his colleagues have defined for “business partnering from the outside-in,” HR leaders have the ability to play a much more impactful role in the business. And, once they have developed themselves as great leaders, they can focus on the next effective way for HR to drive results: developing other great leaders within the business.