What exactly is strategic HR?

Culture is the primary agenda through which HR earns the right to be called strategic, writes Wayne Brockbank

One legacy question in the Human Resource Competency Study of the University of Michigan and the RBL Group is, “What should be the balance between operational and strategic HR?” In the 1987 and first round of our ongoing research, high performing firms successfully achieved high focus on both strategic and operational HR.

Intuitively, that sounded reasonable. In the 1992 round, a shift occurred. Under economic pressures from the 1990–1992 recession, most companies shifted focus from high strategic and high operational to high operational and low strategic. Under increasing economic duress, these firms reverted to the basics.

However, the high performing firms shifted to a balance of high strategy and low operational focus – they retained their emphasis on strategic HR issues while spending less time and effort on operational issues. This was achieved through HRIS, outsourcing, process reengineering, and work elimination. Remarkably, since 1992 – through both challenging and munificent economic times – the high performing companies have continued to focus on strategic HR agendas.

These findings, of course, raise the issue: “What constitutes strategic HR?” Answering this question requires a definition of “strategic”. In surveying hundreds of executives, we have found five criteria for designating something as strategic:

1. Competitive advantage: It allows your firm to do something that other firms cannot do that results in greater market share, revenue growth and profitability than your competition.
2. Long term: It creates sustainable competitive advantage.
3. Comprehensive: It influences the success of the entire organisation and not just subcomponents.
4. Integrated: It provides a unifying focus that brings tighter all aspects of the institution.
5. Implementable: It can be formulated into a plan that can be implemented through a series of pre-planned steps.

All of the above are necessary and sufficient for a practice or agenda to be designated as strategic.

Having defined “strategic”, we may then ask: “What does HR do that is strategic?” Jim Walker, the founder of the Human Resource Planning Society, provides a useful way to approach this issue.

	Business	HR
Strategy	Growth through geographical expansion	Culture
Tactic	Open up an office in Mumbai	Transfer Hire and train Compensate

In the above example, the business strategy is to grow through geographical expansion. The business tactic to implement the business strategy is to open up an office in Mumbai. In most companies, the next step is to implement the HR tactics of transferring someone from the home office to Mumbai, hiring and training the local talent, and providing market competitive remuneration.

Notice that we can link HR tactics to business strategy through the channel of business tactics without ever raising the issue of HR strategy. So maybe we use the term HR strategy to make the HR function sound more important.

The above logic flow must be followed, but it creates no competitive advantage. Your company knows how to do the above; the problem is that all of your competitors can do almost exactly the same things. You have the tactical HR, but in most cases it will create no competitive advantage.

So, what does HR do that meets the criteria of being strategic; that is, what does HR do that creates competitive advantage, that has long-term impact, that covers the whole organisation and not just part of it, that pulls all the pieces of the organisation together into a unified whole, and that can be planned and implemented?

The most pronounced answer is to design and implement a market-focused organisational culture. Culture represents the way people think and behave through the entire organisation. When designed and delivered to meet customer requirements better than the competition, culture meets each of the criteria for being designated strategic.

Culture has long-term impact, covers the whole organisation, provides unity and cohesion, can be planned and implemented, and certainly creates competitive advantage. Culture is the primary agenda through which HR earns the right to be called strategic.

Action items for HR:

1. Ensure that your HR department gets the basic HR practices in place.
2. Clearly define your company’s culture that is based on the realities of the external marketplace.
3.  Ensure that all of your HR practices are designed and delivered with disciplined focus on the required market-based culture.