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Recently completed KPMG market research on the state of human resources (HR) turned up some old and disappointing findings. The HR function in many organizations is still not viewed as, or performing as, a strategic asset. Despite the increased “war for talent” in an increasingly competitive and globalized marketplace, HR is too often viewed as being nonessential or ineffective. Part of the reason for this is that over the past several years, Western organizations have been preoccupied with cost optimization, cost reduction, and sustainable cost management. This has required HR to play its part, largely through making the HR function more efficient—for example, via downsizing and the increased use of shared services and outsourcing—but not necessarily more effective. Yet, long before the economic downturn, many organizations did not view HR as strategic.
The conceptual process to make HR more strategic is relatively straightforward; it involves answering three questions.
1) What is the organization’s business strategy?
2) How is value created through people, and what does the HR and people agenda need to look like?
3) How can HR drive and enable this value, especially at the strategic versus just operational level?
The more challenging part of the equation involves defining and gaining consensus among key HR and management stakeholders on answers to these questions, and then executing on them.
Organizations require a framework and approach to use to understand the implications of the above questions (and many others related to HR) in a disciplined and thoughtful manner. This approach can enable organizations to translate the business strategy into value through the people agenda, and in turn, identify the ways in which HR can add value to the people agenda. Figure one illustrates one example of such a framework.
Figure 2 provides the next level of detail to this framework for three common strategic organization initiatives (none of which have to do with cost cutting): operational excellence, customer intimacy, and product leadership.
The HR architectural implications provide a road map for an HR strategic improvement agenda and help prioritize initiatives. For example, in an organization focused on operational excellence, but perhaps because it deals with commoditized products, customer intimacy is secondary, HR should recognize that it should place relatively less emphasis on efforts such as providing high touch employee services.
Key to making HR more strategic is in having the talent at the management and operational level, and the skills to execute on change efforts. Yet, without a framework to connect HR to the business and an architectural model to execute on the framework, HR groups are unlikely to make any more progress in becoming more strategic than many have over the past 10 years.
Dig deeper into learning how your organization can become more strategic in our whitepaper Designing Next Generation HR.
Additional resources can be found by visiting KPMG’s HR Center of Excellence and by listening to our Advisory Institute podcasts Data-Driven Human Resources, Eradicating the Stigma: HR’s Future, and Rethinking Human Resources in a Changing World.