The Value of Strategic HR

‘Ineffective people = ineffective businesses’; it is that simple, and that complex because every business depends on its’ people to effectively perform as a team to achieve its organizational goals and objectives.

Unfortunately, “Traditional HR” (which has historically been administratively focused) provides little value to financial goals and does not manage the people issues that keep executives up at night.  

The move to adopt human capital best practices, also commonly referred to as ‘Strategic HR Capabilities” or implement a “High Performance Workforce” has been occurring at the Fortune 500 level since the mid 90’s. 

The recent financial hardships, changes in laws and regulations, and a fundamental shift in small business economics has mandated that top performing companies invest in their workforce like never before. 

With the growing demands and challenges placed on small business executives, those that adopt best practices, utilize effective external help/support and business partners, and rethink their current approach to HR have a chance to preserve and create wealth. 

Numerous studies by “Great Places to Work Institute”, consulting firms like McKinsey and Towers Wyatt, and business thought-leaders like Jack Welch and Warren Buffet all agree: the investment and alignment of a company’s workforce directly impacts profitability and financial success. 

Need further proof of the value of Strategic HR?  Here is the Business Case for Strategic HR:

1. Time Savings and Focus for Executives: Within small businesses, organizational leaders are themselves often responsible for HR (i.e. the workforce’s engagement, productivity, and development), an area where they typically have limited training and experience.

2. Workforce Scale:

• Highly engaged employees are on average 26% more productive, have lower turnover, and greater shareholder return (see findings in Watson Wyatt’s 2008/2009 WorkUSA Report). 
• Talent Management Practices power engaged companies to achieve higher profit per employee by nearly 40% (McKinsey).
• “Imagine if your employees enjoyed coming to work. Great Places to Work have outperformed the market 2:1”  (Great Place to Work Institute)
• “Nearly 40 percent had no formal measures to gauge the impact of their HR and training efforts on the performance of their top three workforces, and nearly another 40 percent said they have only limited measures.” Accenture ‘High Performance Workforce Summary’ 2006.
• “HR equals constant upgrading.  100% transparency into performance. Take care of the best and move up the averages, much like a GM/ player personnel director in sports. The only way to win is to have a great team.” “Enormous chance [for businesses] to change and reset, but takes a culture of innovation. The one thing you have to do in a time like this is communicate like hell… so your people know every move that is going on. You don’t go in and just slash positions and they don’t know why. HR defines a company in bad times.” Jack Welch @ 2009 SHRM Conference New Orleans, LA.

3. Risk Mitigation: 1 in 4 privately held companies has been sued by an employee The average litigation and settlement costs are nearly $190.000. (Chub Insurance).

4. Cost Efficiencies: The average company saves 20% to 60% per year (HRO Association).

Did you know than only a third of companies tailor their people policies and development to align with their workforces needs?

The primary objective of Strategic HR is to align the Workforce Capabilities to the Business Objectives of the organization. This includes: creating a strong pipeline of leaders that will drive business growth, installing workplace programs that ensure engaged, motivated, and productive and employees as well as implementing scale and risk operating measures.

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