HR Management as Strategic Business Contributor

One of the most important shifts in the emphasis of HR management in the past
few years has been the recognition of HR as a strategic business contributor. Even
organizations that are not-for-profit, such as governmental or social service entities,
must manage their human resources as being valuable and in a “businessoriented”
manner. Based upon the research and writings of a number of scholars,
including David Ulrich of the University of Michigan, the importance of HR
being a strategic business partner has been stressed.16 This emphasis has several
facets to it.
SOURCE: Reprinted with permission from Bulletin to Management (BNA Policy and Practice Series) Vol. 49

Enhancing Organizational Performance
Organizational performance can be seen in how effectively the products or services
of the organization are delivered to the customers. The human resources in
organizations are the ones who design, produce, and deliver those services.
Therefore, one goal of HR management is to establish activities that contribute to
superior organizational performance.17 Only by doing so can HR professionals
justify the claim that they contribute to the strategic success of the organization.

INVOLVEMENT IN STRATEGIC PLANNING

Integral to being a strategic partner is for

HR to have “a seat at the table” when organizational strategic planning is being

done. Strategically, then, human resources must be viewed in the same context as

the financial, technological, and other resources that are managed in organizations.

For instance, the strategic planning team at one consumer retailer was considering

setting strategic goals to expand the number of stores by 25% and move

geographically into new areas. The HR executive provided information on workforce

availability and typical pay rates for each of the areas and recommended

that the plans be scaled back due to tight labor markets for hiring employees at

pay rates consistent with the financial plans being considered. This illustration of

HR professionals participating in strategic planning is being seen more frequently

in organizations today than in the past.

DECISION MAKING ON MERGERS, ACQUISITIONS, AND DOWNSIZING

In many industries

today, organizations are merging with or acquiring other firms. One

prime illustration is the banking and financial services industry, in which combinations

of banks have resulted in changes at Bank of America, Wells Fargo, Nations

Bank, First Union, and others large and small. The merger of Chrysler and

Daimler-Benz has had significant implications for the automobile industry. Many

other examples could be cited as well.

In all of these mergers and acquisitions there are numerous HR issues associated

with combined organizational cultures and operations. If they are viewed as

strategic contributors, HR professionals will participate in the discussions prior to

top management making final decisions. For example, in a firm with 1,000

employees, the Vice-President of Human Resources spends one week in any firm

that is proposed for merger or acquisition to determine if the “corporate cultures”

of the two entities are compatible. Two potential acquisitions that were viable financially

were not made because he determined that the organizations would

not mesh well and that some talented employees in both organizations probably

would quit. But according to one survey of 88 companies, this level of involvement

by HR professionals is unusual. That study found that less than one-third

of those involved in mergers surveyed have adequately considered HR issues.

REDESIGNING ORGANIZATIONS AND WORK PROCESSES 

It is well established in the

strategic planning process that organization structure follows strategic planning.

The implication of this concept is that changes in the organization structure and

how work is divided into jobs should become the vehicles for the organization to

drive toward its strategic plans and goals.

A complete understanding of strategic sources of competitive advantages for

human resources must include analyses of the internal strengths and weaknesses

of the human resources in an organization. Those in HR management must be

the ones working with operating executives and managers to revise the organization

and its components. Ulrich likens this need to that of being an organizational

architect. He suggests that HR managers should function much as

architects do when redesigning existing buildings.19 In this role HR professionals

prepare new ways to align the organization and its work with the strategic thrust

of each business unit.

ENSURING FINANCIAL ACCOUNTABILITY FOR HR RESULTS

 A final part of the HR management

link to organizational performance is to demonstrate on a continuing basis

that HR activities and efforts contribute to the financial results of the organization.20

Traditionally, HR was seen as activity-oriented, focusing on what was done, rather

than what financial costs and benefits resulted from HR efforts. For instance, in one

firm the HR director reported every month to senior management how many people

were hired and how many had left the organization. However, the senior managers

were becoming increasingly concerned about how long employment

openings were vacant and the high turnover rate in customer service jobs. A new HR

director was hired who conducted a study that documented the cost of losing customer

service representatives. The HR director then requested funds to raise wages

for customer service representatives and also implemented an incentive program for

those employees. Also, a new customer service training program was developed. After

one year the HR director was able to document net benefits of $150,000 in reduction

of turnover and lower hiring costs for customer service representatives.

In the past HR professionals justified their existence by counting activities and

tasks performed. To be strategic contributors, HR professionals must measure

what their activities produce as organizational results, specifically as a return on

the investments in human resources.21 HR management that focues on highperformance

work practices has been linked to better financial performance of

the organization.