HR’s New Strategic Role

By Patrick Kiger

Sep. 29, 2006

These days, if you’re interested in a career in the human resources field, you’re going to hear an awful lot of talk involving the word strategy and its variations.

    It’s no longer enough to advise employees about benefits programs or post job vacancies. HR departments have to become strategic partners and practice strategic HR. Almost invariably, you’ll be told that the corporate HR positions of the future are likely to be reserved for HR strategists, and that if you hope to ever land one of those jobs, you’d better learn how to think strategically.

    “It’s a very popular word,” notes David Creelman, chief executive of Toronto-based Creelman Research, an HR consulting firm. “People throw it around a lot, even if they’re not quite clear about the meaning.”

    So what is strategy from an HR perspective, and just as important, how does one learn to become an HR strategist? Academics and consultants vary on the precise definition, but generally agree that strategic HR involves stepping outside the traditional duties of a corporate HR department and developing a broad understanding of what the larger company is trying to achieve, and how HR functions such as recruiting and talent development can be harnessed to help meet those larger goals.

    As for becoming an HR strategist, the experts say there isn’t a single path for everyone to follow. But future HR professionals can acquire the requisite knowledge, skills and experience from a wide variety of sources, ranging from MBA programs to volunteer work.

    “The best way to understand strategy is to think of it as mission-driven,” says Cathy Lee Gibson, director of the HR management program in Cornell University’s graduate business school, and author of several books.

    “You’re starting with the end in mind. Why does the company exist? What is it trying to achieve? From the top down, how do we align all our objectives and energies toward accomplishing that mission? The company doesn’t exist so that it can have an HR department; HR exists so that it can help the company meet its goal.”

    That’s the general concept, but there’s a lot more to it.

    Gautam Ahuja, professor of corporate strategy and international business at the University of Michigan’s Ross School of Business, explains that a company’s strategy is built from several main components: “What is the market in which the company is choosing to enter? Who is the customer? What are the opportunities and threats of a given environment? How does the company organize all its functions in order to compete successfully?”

    Consultant Creelman says those strategic decisions tend to involve the entire business over a long-term period, and the stakes usually are high.

    “When you’re thinking strategically, you shouldn’t just be thinking, ‘What is the effect next year?’ You should be looking three to 10 years down the line,” Creelman says. “And you don’t just look at how it affects your job or your department, but everything that every part of the organization is doing. One characteristic of strategic decisions is that they’re hard to undo. If you sell off the PC business, as IBM did, it’s not that easy to buy it back. Strategic moves always involve considerable risk—and a substantial payoff, or else you wouldn’t do them.”

    Benjamin Campbell, an assistant management professor at the University of Pennsylvania’s Wharton School, says that another element of strategy is understanding change and how to deal with it.

    “Competitive markets are dynamic,” he says. “Market conditions change, technology changes, competitors change. I think this is one area in which HR is really important but largely overlooked. You hear about companies changing their products or their production technology, but you don’t hear as much about how to change the workforce to support those things. That’s bad, because it’s people who make the products and develop the markets for them. In a dynamic environment, you need a dynamic workforce. You have to make sure you have the right employees with the right skills to support the strategic objectives of the company.”

    Since the goal of companies is to make money, finance is a business discipline that figures strongly in strategic thinking.

    “Strategic HR is being called upon more and more to measure the impact of human capital on business performance,” says John Chaisson, principal analyst for the Prophet Group, a New Orleans-based HR consulting firm. “In the past, when HR was called to provide metrics, it was looking at people as a cost factor for the organization–you know, what does it cost us to recruit someone? Today, the question is, what’s the return on each worker within our organization?”

    Chaisson says that as investors increasingly look at the impact of human capital upon a company’s market value, HR strategists will become increasingly important.

    “Factors such as the compatibility of teams, the loyalty and commitment of the workforce, the attrition rate–all these things are starting to figure in the due diligence that’s being done prior to mergers and acquisitions, Chaisson says. “Strategic HR players are going to be involved in the reporting of that information, and in understanding what it means.”

While some say that HR professionals must become strategic thinkers in order to prove their relevance, experts say it’s also true that HR can bring something to the strategy table that other players lack.

    “The conventional business strategist may not appreciate the subtleties of dealing with people and developing a good system for them,” says Wharton’s Benjamin Campbell. “I’ve heard a lot of anecdotal evidence of this in the corporate world–situations where the executive in charge of the technology strategy puts something in place, and then realizes, belatedly, that the company doesn’t have the right people to support the strategy.”

    So how does one prepare for playing a strategic role in HR? Some experts advise getting an MBA rather than an advanced degree in HR.

    “If you’re going to shape HR to support a corporate strategy, you first have to have a good understanding of the overall business model,” says Ed Lawler, founder and director of the Center for Effective Organizations at the University of Southern California. “That’s the sort of knowledge you start to develop with business school courses—finance, marketing, organizational design, business strategy.”

    But consultant Creelman thinks other, less orthodox academic routes can be useful for preparing a would-be HR strategist as well.

    “It may not seem as obvious as an MBA, but there are benefits to having philosophy or English literature at the master’s level, or maybe even a scientific field such as biochemistry,” he says. “All these fields involve a high level of abstract thinking, and the ability to understand complex systems and see both the details and the broad picture. All those abilities are very useful for someone who wants to do strategic HR.”

    The experts agree that having some non-HR experience on the operating side of the business is an increasingly significant credential for a would-be HR strategist.

    “I think it’s really important,” USC’s Lawler says. “The problem at bigger companies is that people tend to start in HR and stay in it, and then just do a single area of HR, such as compensation or training. They may not even understand the other parts of HR, let alone how the larger business works. So unless you started in on the operations side and rotated into HR, you’ve got to look for opportunities to get that operations experience. If you can’t get it at your own company, it may even be in your interest to take a different job at another firm for a while.”

    But if rotating into operations or taking a job elsewhere isn’t an option, there are other ways to get operations experience and develop a feel for how the larger enterprise functions.

    Even outside volunteer work can turn into a way to get operations experience, Cornell’s Gibson suggests.

    “Volunteering is a chance for people who don’t have hands-on experience to get some at low risk,” Gibson says. “The key thing is that you want to learn how to deliver a product or a service.”

    “Another thing you can do is hang around with people who think strategically,” Creelman says. “Any time that you have an opportunity to talk to a senior person in a strategy-level position or work with him or her, you should. You can pick up a lot by osmosis, just by listening to what kinds of questions they ask, by noticing what details they find interesting. You can get a better feel for the strategic worldview that way. Even if it means just sitting beside someone in the cafeteria and overhearing their conversation, you should do it.”

    Additionally, Creelman recommends that would-be HR strategists jump at any opportunity to interact with other departments or divisions, or with other companies. “Anything that gets you out of the narrow box of what you do daily—that’s going to help you develop a broader, strategic mind-set.”

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