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A major factor in the success of high performing organizations is their people. Hence today, HR function is faced with the challenge of developing people to perform better and help in achieving the business goals. Shortage of talent and high employee turnover rates has made the HR issues a top priority while developing the business strategy of an organization. Earlier HR department was considered as an administrative function and a cost centre. But now, HR is taking a strategic role in the business with HR strategy being aligned with the business strategy. Organizations today realize the importance of people in achieving their business goals. Hence, there needs to be a sound HR strategy which can convert this critical resource into a competitive advantage for the organization.
Deloitte has developed a generic HR strategy framework that helps the companies to develop HR services which are needed for businesses to survive and grow in today’s challenging environment.
Define Value: This requires a clear understanding of the business environment and of the business strategy.
Develop an understanding of the business strategy
Define a comprehensive HR strategy
Define the HR performance levers
Align HR Services: After defining the HR strategy, the HR department must ensure that it is aligned with the overall business strategy or not.
Do proper segmentation of stakeholders
HR investments then need to be prioritized
Design the HR services
Deliver Value: In order to have an impact on the business and hence create value, a proper delivery technique and well-defined performance measures are required.
Establish an HR delivery model
Develop requisite HR capabilities
Continuously improve upon the HR services
Communicate the HR services’ value to the entire organization
Deloitte has established a relation between some human dimensions which include reward management, succession planning, manpower planning, etc. and business drivers which include growth, productivity, asset efficiency, etc. (Deloitte Enterprise Value Map™ for Human Capital). This linkage helps the business leaders in understanding the importance of HR strategy to the overall business strategy, thus aligning the HR with the business goals.
As the HR function takes a more strategic role in the organization, the company constantly keeps a check on the skills required by the workforce in future. This involves the knowledge and skills that are required and hence identify the competencies which need to be developed. This forms a basis for the HR staff to identify the training needs of the employees. There is still a debate as to whether training actually helps in achieving the business goals. But according to the concept of learning organization (Senge, 1990), individuals whose personal goals are aligned to the business goals result in higher productivity than those who do not work in alignment with the organization. If a large number of employees are not aligned to the overall business strategy, then it leads to a shift in the organization’s performance from the intended direction (Thompson, 1995). It also helps in identifying as to how to source the talent, i.e. whether to develop talent or buy talent from outside.
The HR strategy also includes policies on succession planning, employee retention strategies, etc. This helps the company to be prepared for the dynamic business environment and helps it to deal with risks more effectively. According to the expectancy theory (Vroom, 1964), people perform better when they are motivated to do so. Hence, if HR strategies are developed in such a way as to motivate employees like performance-based pay, employee engagement, and appropriate job design, etc. it will result in higher performance and will thus result in achieving the business goals as well. HR, thus, helps in increasing its contribution to the business in the following ways:
Succession Planning: Developing future leaders by starting leadership development programs
Talent Management: Providing attractive career paths to star performers and keeping the employees engaged to work towards achieving business goals.
Employee Retention Strategies: providing high incentives to critical talent to develop a high performing culture.
Training and Development: Providing training opportunities to the workforce to upgrade their skills and capabilities, and thus making them more employable.
Involving the employees of the organization in the strategy formulation process results in successful implementation and achievement of the business goals. Also, if HR policies and practices are designed to achieve the organization goals (Guest, 1987), then it results in higher performance at work and hence higher organization performance. But the major problem occurs in quantifying the impact of HR on business. This is done by defining measurable HR parameters at the time of development of HR strategy itself. These include parameters like employee productivity, employee turnover rates, etc.
Hence, in order to achieve business excellence, there needs to be an integration of the HR strategy with the business strategy which will make the organizations proactive towards risks and are easily able to change their strategy according to changing business environment.
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