Human resources has undergone a massive transformation in recent years, and the industry continues to evolve. Make no mistake, this isn’t just a facelift from new tech tools that help HR professionals do their jobs. It’s a shift in the function of human resources.
See also: The real cost of performance reviews
While traditionally HR focuses on benefits and compensation, overseeing employee engagement and retention, recruitment, diversity, workplace issues, or installing new processes under budget, the new function is a strategic business unit. In other words, HR is shifting from a cost center to a strategic profit center that leverages human capital.HR is shifting from a cost center to a strategic profit center that leverages human capital Click To Tweet
What’s the reason for the shift? Organizations are realizing that people are their greatest asset. Unfortunately, it took a crisis of high turnover rates and low employee engagement for this fact to come to light.
Research consistently shows that human capital is the top challenge for CEOs. People drive productivity, innovation, creativity, and execution, which all impact a business’ bottom line. So if an organization can invest in the right people, put them the right positions, and contribute to their development, the enterprise will profit.
That’s why HR is more valuable than ever as it takes on a new dynamic function — one that drives strategic initiatives that maximize profits and unlock an organization’s potential.
Benefits of the New Approach to HR
HR is no longer just an administrative function; it now includes a strategic approach that addresses and solves business problems and supports long-term business goals and outcomes.
In most large organizations, HR leaders are involved in the strategic decision-making process, and their primary function is strategic planning. However, many medium and small organizations are stuck in the status quo, viewing HR strictly as a service unit.
The good news is companies are starting to see the light, realizing that expanding the role of HR makes dollars and sense. According to SHRM, some key benefits of the strategic function include:
- Promoting employee productivity and overall organizational success
- Providing a sense of direction to positively affect how work gets done
- Keeping employees focused on organizational goals
- Providing strategic focus to guide training and development initiatives
Showing the Business Value of HR
While you may understand the changing function of HR, it doesn’t mean the rest of the C-suite recognizes the value. It may take some convincing, but research shows it can be done.
In a recent HR Certification Institute report, seven out of 10 leaders said their organizations adopted strategic HR after listening to HR leaders or seeing industry research to support their claims.
So executives are listening — you just need to show the value in a strategic HR function. According to the HRCI report, there are few ways HR leaders can have a more bottom-line influence.
1. Strategic Hiring of Candidates that Add to Future Growth of Company
Organizations are always looking to the future, projecting growth and target goals in one-, three-, and five-year plans. HR leaders can assess the chances of meeting those business goals and contribute to the success by hiring and placing people with the right skill sets.
Financial projections are pointless if you don’t have the right people to help hit those targets. A company’s performance depends largely on having the people with specific skill sets in the key positions that drive growth, and that’s a key function of HR leaders.
2. Using Total Rewards to Invest in Greater Employee Performance
While perks such as benefits and compensation fall under traditional HR functions, they also provide a strategic business value to organizations. As the shift is to view the workforce as a capital investment, total rewards should be treated as a means of strategically investing in the company’s most valuable asset.
3. Enhanced Departmental & Employee Performance Tracking
By using consistent and advanced performance tracking, organizations can identify high and low performers and make necessary changes that contribute to the strategic growth of the company.
For example, this may mean moving a person from one position to another to boost innovation or growth in a department, using coaching or training to develop necessary skills to meet new market challenges, or reassigning managers to meet a challenge that is two years away.
4. Measuring HR Performance by Company-Wide Goals
For HR to become more of a business unit, organizations should measure HR performance by overall company goals instead of traditional HR metrics. The more HR is tied to the overall performance of the company, the more it will be elevated to a strategic role.
Get the report: Gartner Cool Vendors in Human Capital Management, 2017
That means companies must consider talent assessments when reviewing their key performance indicators. When financial goals or growth numbers hit or miss, organizations should evaluate their social system and talent to remedy issues or reinforce the positive.
5. Work with Senior Organizational Leadership to Integrate Mission and Purpose
Since mission and purpose drive companies, it’s important to implement that vision in every division and job function. HR leaders play a key role with this integration.
This may involve taking part in organizational meetings and collaborating with the C-suite to ensure department objectives are aligned with the company mission, and key messages are communicated to managers, employees, and new hires.Organizations are realizing that people are their greatest asset Click To Tweet
HR is changing, and it’s taking on a larger role in organizations. As companies realize how an effective workforce contributes to profit margins, HR is becoming more of a value creator than a cost center. This new function means HR leaders should approach their jobs from a strategic perspective, as their roles are more aligned with business goals and outcomes.
Further reading: How Accenture overhauled its performance reviews
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