Current State
It is time to acknowledge the transformation that HR has undertaken as a profession from largely transaction-driven to an increasingly powerful strategic driver. When asked to rank HR priorities for 2024, alignment between HR strategy and business goals ranked near the bottom of the list. (Source: HCM Outlook 2024 Study). It is far more likely this finding indicates a significant amount of progress has been made rather than reflecting an ongoing disconnect.
Looking to other results from the survey, the clear strategic priorities for people and the future of work fall squarely on the shoulders of the HR organization.
Complexities
Ensuring strong alignment between HR strategy and business goals often proves challenging when the two groups focus more on their own primary goals and less on the overall needs of the business and the workforce. This often shows up in the following ways:
Miscommunication: Silos between HR and business leaders can impede understanding of strategic goals and employee needs.
Data Disconnect: Lack of integrated HR data systems hinders analysis and evidence-based decision-making.
Rapid Change: The business landscape is constantly evolving, requiring HR to be agile and adaptable in aligning its strategies.
Skills Gap: HR professionals may not possess the necessary business acumen to contribute meaningfully to strategic discussions.
Consequences
Misaligned HR strategies lead to difficulties in attracting, developing and retaining top talent. Disconnected employees are less productive and more likely to leave, hindering overall business performance. Failure to leverage HR as a strategic partner limits the organization’s ability to innovate and compete effectively.
Brandon Hall Group’s Retaining Talent study found that the inability of HR and the business to work together to effectively manage talent is a key contributor to turnover and lack of performance.
Critical Question
- Do HR leaders actively participate in strategic planning discussions?
- How well does our HR strategy align with the organization’s overall business goals?
- What data do we collect and analyze to measure the effectiveness of HR initiatives on business outcomes?
- Does our HR team possess the skills and knowledge to contribu
- Are our HR systems and processes agile enough to adapt to changing business needs?
Brandon Hall Group™ POV
Remain diligent to ensure their HR strategy aligns with and supports the organization’s overall business goals.
The key is for HR to be proactive vs. reactive, and to operate as a strategic business partner rather than just an administrative function. By aligning HR strategies with business goals, HR can help drive the organization’s success. Use a variety of tactics, including:
- Involve HR in strategic planning — HR leaders should have a seat at the table during strategic planning discussions to provide input on talent needs, organizational capabilities and people-related risks or opportunities. This helps ensure the HR strategy is developed in alignment with business priorities.
- Translate business goals into talent needs — HR should work with business leaders to understand the company’s strategic objectives and translate those into the skills, capabilities and talent pipeline needed to achieve those goals. Workforce planning should identify talent gaps to address.
- Design HR programs to drive business outcomes — HR initiatives in areas like compensation, performance management, learning and development, etc. should be designed with the explicit intent of driving the employee behaviors and building the organizational capabilities required to achieve business goals. HR should define success measures tied to business results.
- Align incentives with strategic priorities — Compensation programs, particularly incentive pay, should be structured to reward achievement of the company’s strategic objectives. This helps focus employee efforts in the right areas.
- Adapt to changing business needs — As business strategies shift based on changing market conditions, HR must be agile in adapting talent strategies as well. Continuous dialogue with business leaders and monitoring of workforce analytics help HR proactively adjust to changing business needs.
Upgrade Your Data and Analytics Strategy
To measure the effectiveness of HR initiatives on business outcomes, companies should collect and analyze a combination of HR-specific metrics and broader business performance data. Leveraging AI tools to build both predictive and prescriptive dashboards is critical for ongoing success in the new world of work.
Consider each of these categories:
Talent acquisition metrics
Time to fill open positions
Quality of hire (performance ratings, retention rates of new hires)
Recruiting source effectiveness (e.g., employee referrals, job boards, campus recruiting)
Candidate experience feedback
Employee retention and turnover data
Overall turnover rate and trends
Voluntary vs. involuntary turnover
Retention rates of high-performers and critical talent segments
Reasons for turnover based on exit interviews
Employee engagement and performance
Engagement survey scores and trends
Performance rating distributions
Objective performance metrics (e.g., sales per employee, error rates, customer satisfaction scores)
360-degree feedback results for leaders
Learning and development outcomes
Training participation and completion rates
Pre- and post-training assessments to measure skills acquisition
On-the-job application of training based on manager feedback
Correlation of training to performance improvements
Diversity, equity and inclusion (DEI) metrics
Workforce demographic composition across levels and functions
Comparisons of engagement, performance ratings, promotion rates, turnover across demographic groups
Feedback from employee resource groups
Inclusion indices based on employee survey data
Succession planning
Bench strength for key roles
Percentage of open positions filled by internal candidates
Diversity of succession pipelines
Business performance metrics
Revenue and profit growth
Market share
Customer satisfaction/ Net Promoter Scores
Productivity measures
Quality and safety metrics
Innovation indicators (new products launched, patents filed)
The most meaningful analyses will combine HR data with business performance metrics to uncover linkages. For example:
- Analyzing turnover rates of top sales employees in relation to overall sales and market share by region
- Comparing engagement scores of teams working on new product development to the number and speed of new product launches
- Examining the impact of leadership development programs on the financial performance of participants’ business units
Build Agility Into Your HR Systems and Processes
Adopt agile principles and methodologies
Embrace agile values like flexibility, collaboration, responsiveness to change, and rapid iteration.
Use agile techniques like sprints, minimal viable products (MVPs), and frequent releases to design and improve HR programs incrementally.
Form cross-functional agile teams to tackle HR projects and initiatives.
Leverage technology and data
Invest in cloud-based, configurable HR technology platforms that can be quickly modified as needs change.
Build robust people analytics capabilities to generate data-driven insights about workforce trends and the impact of HR programs.
Use artificial intelligence and predictive modeling to identify future skill needs and talent risks.
Create customizable self-service tools and chatbots to enable managers and employees to get HR support on-demand.
Design for flexibility and personalization
Create modular, adaptable job architectures and career paths to enable easier redeployment of talent as needs change.
Offer flexible work arrangements and benefits options that can be dialed up or down.
Use agile goal-setting methods that allow for more frequent goal pivots based on changing priorities.
Personalize learning, rewards and other talent programs based on individual needs and preferences.
Foster a learning culture
Emphasize continuous skill development to build change capability across the workforce.
Offer microlearning content and on-demand learning options to enable faster knowledge acquisition.
Encourage calculated risk-taking and experimentation to spur innovation.
Frame change as an opportunity for growth to build resilience.
Streamline processes and governance
Simplify and standardize core HR processes to drive efficiency and consistency.
Eliminate low-value HR activities to free up capacity for higher-impact work.
Establish HR governance committees to quickly assess and approve changes to HR programs and policies.
Use Agile budgeting methods that allow for reallocation of funds as priorities shift.
Monitor external trends
Regularly scan the competitive landscape to identify emerging trends and disruptive threats that could impact talent needs.
Participate in external networks and forums to spot leading HR practices.
Partner with business leaders to scenario plan for possible future business models and operating environments.
Ensure HR Has the Right Capabilities to be Strategic Business Partners
Hire for business acumen
Recruit HR professionals with strong business backgrounds, such as former line leaders, strategy consultants, or finance experts.
Prioritize candidates with experience in the company’s industry or related sectors.
Assess for strategic thinking, financial acumen and change management skills in addition to HR expertise.
Invest in training and development
Provide training on the company’s business model, competitive landscape and strategic priorities.
Offer rotational assignments for HR team members to work in the business units they support.
Support HR professionals in pursuing advanced business degrees (e.g., MBA) or other relevant certifications.
Bring in external experts to conduct workshops on design thinking, agile, analytics and other in-demand skills.
Create HR centers of excellence (COEs)
Establish specialized HR COEs in areas like people analytics, organizational design, leadership development, etc.
Staff COEs with subject matter experts who can provide strategic consulting and thought leadership to the business.
Use COEs to drive innovation and adopt cutting-edge HR practices across the enterprise.
Foster cross-functional collaboration
Include HR in cross-functional teams working on strategic initiatives to build relationships and knowledge.
Encourage HR to partner with finance, IT, marketing and other functions to develop integrated solutions to business challenges.
Have HR participate in regular business reviews and planning sessions.
Strengthen the HRBP role
Clearly define the role of HR business partners (HRBPs) as strategic advisors and change agents, not just process administrators.
Give HRBPs a seat at the leadership table for their client groups.
Hold HRBPs accountable for business metrics in addition to HR measures.
Provide HRBPs with dedicated time and resources to focus on strategic talent planning.
Measure and reward strategic contributions
Include strategic impact measures in HR scorecards and dashboards.
Recognize and celebrate examples of HR driving measurable business value.
Tie a portion of HR compensation to business performance, not just HR metrics.
Promote strong performers into HR leadership roles and high-profile assignments.
Benchmark and adopt best practices
Study how world-class HR organizations operate in comparable companies and industries.
Participate in external HR networks and conferences to learn about innovative practices.
Engage HR thought leaders as advisors or speakers to inject new ideas and challenge conventional thinking.
Continuously refresh HR skills and knowledge to keep pace with technological and societal changes impacting work and the workforce.
Conclusion
Ultimately, the goal is to position HR as a critical enabler of the company’s strategy and build a strong HR team with the business savvy, technical expertise and consulting skills to proactively address talent-related opportunities and challenges. This requires sustained investment in hiring, developing and empowering HR professionals to have maximum strategic impact.
Strategic alignment between HR and the business is no longer a luxury, but a necessity. By addressing the complexities and proactively seeking solutions, organizations can leverage HR as a strategic partner, driving employee engagement, talent development, and ultimately, achieving superior business results.
