Strategic HR
How Small to Medium-Sized Businesses Can Get the Most Out of the HR Function
“For the world is changing: I feel it in the water, I feel it in the earth, and I smell it in the air.” These words were spoken in the movie and written in the book “Lord of the Rings,” and very accurately sums up what is happening in our world today. The fast pace of change for businesses due to recent social unrest, economic recession, and a global pandemic shined a light on just how unprepared so many companies, regardless of size, industry, or sector, were when it came to crisis management. If there is one lesson small to mid-sized business leaders have learned, it likely is the value, importance, and absolute need for strategic human resource professionals.
Years ago, when I joined an underground utility company as the HR Manager, I knew nothing about the business. If I were going to add value to the organization, I had to understand the business— what they did, how they did it, their competition, and how the company could compete. Only then could I collaborate with superintendents on staffing planning, project managers around their pipeline of projects that would feed the revenue wheel, and the employees to understand how to keep them engaged and reduce turnover.
In small to medium-sized businesses, many business leaders struggle with understanding the strategic partnership that HR can have within the organization. This is too often because HR does not properly understand the business and because many business leaders only understand the transactional support HR provides. Many business leaders determine a need for dedicated HR personnel only when the transactions become more burdensome than they are willing or able to handle. For HR to demonstrate the strength of the strategic partnership, they must be intimately familiar with all aspects of your business, understand when to outsource transactional tasks, and when to bring those back in-house.
To get the most out of your HR department or function, business leaders should differentiate the transactional tasks of HR from their strategic partnership with the business. Transactions can be outsourced and automated. Many solutions are available, some of which were shared in a previous article, Resistance is Futile, that addresses many affordable HR compliance solutions (the primary transactional tasks of HR) for small to medium-sized businesses. The low to no-cost solutions available are numerous, and when employed, these services free up the HR team member(s) to become true strategic partners.
There is a time in the business life cycle where outsourcing transactional tasks is the right strategic move, and when bringing such tasks in-house is best. A May 8, 2019, Gartner article, Gartner Survey Reveals That CEO Priorities Are Slowly Shifting to Meet Rising Growth Challenges, indicates that in the annual Gartner 2019 CEO and Senior Business Executive Survey, “a growing number of CEOs… deem financial priorities important, especially profitability improvement.” The survey also states that “at the same time, mentions of financial priorities, cost, and risk management also increased.” The appropriate treatment of transactional HR tasks can be a huge help in addressing such concerns in your organization.
Outsourcing can stabilize cash flow, especially in a seasonal business, make it more predictable and easier on the budget. It can introduce automation, such as self-service portals, reporting, and file maintenance. Outsourcing transactional HR tasks can even shift the risks of non-compliance to a vendor, potentially saving your business hundreds of thousands of dollars in fines, fees, and government-imposed remedies.
Typically, much later in the business life cycle, insourcing these transactional tasks is the right strategic move. It will provide more control of data, improve the quality of service transactions, develop deeper metrics and tracking, and improve innovation and creativity around HR initiatives. Due to economies of scale, it may even be more cost-effective to insource than outsource.
Knowing the right time to do each is somewhat challenging, but HR becomes a more strategic partner to your business when done right.
To help HR be more strategic, now that the transactional tasks have been appropriately addressed, we need to immerse them in the business fully. Take HR under your wing and teach them the business from the ground up. Company history is part of that, but only a small part. For example, in horticulture, your HR function needs to understand what growers do and what various crops and systems challenge them. They need to know the role and responsibility of those leading operations, whether they are working with plants in a field or a greenhouse, and the relationship between customer service, sales, product development, marketing, and operations.
HR should visit and have a chance to shadow every department or function within your business, meet the key leaders, and have a chance to talk with entry-level employees. Invite HR to meet with key customers to understand this relationship and the customer’s challenges your company is trying to help them solve. Expose them to the entire industry through the various trade show events and conferences such as Cultivate, MANTS, Far West, or the Plug & Cutting Conference so they can learn about all the companies that make up the horticulture industry as well as interact with other HR leaders to share best practices. Expecting HR to stay in their silo, their office, or behind their cubicle separates them from the business. It hinders their innovation and creativity when tasked with solving real business problems.
Strategic elements that HR brings include assisting with developing the organization’s strategic and tactical plan, organizational development and design, strategic workforce planning, succession planning, and learning and development. Even the development of compensation and benefits programs, collectively the total rewards program, is strategic. In a March 14, 2019 article by The Predictive Index, Top CEO Priorities Are Business Strategy and Talent Strategy, the top two priority concerns are… well, as the title states… business strategy and talent strategy, two core areas addressed with an HR function that performs a strategic role. Add to that the January 17, 2019 article by the Conference Board, In 2019, CEOs are Most Concerned About Talent and a Recession, which reflects that talent and leader development are top internal concerns. These are not transactional issues. The strategic elements HR brings directly impact the ability to attract and retain top talent regardless of industry, drive organizational strategy, and align development with the strategic plan.
With the appropriate treatment of transactional HR tasks, imagine the difference this makes when you ask your HR function to recruit, build a strategic staffing plan, or identify and prepare succession plans.
Having immersed them in all aspects of the business, when it comes to organizational design, learning and development, and performance management, HR will have the strategic understanding and capability to best advise and inform leadership to make the correct business decisions.
Reports and metrics that are meaningful can be developed to improve efficiency and effectiveness, enhance innovation, and drive your business’s competitive advantages in the industry. This is HR’s true value— STRATEGY!
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