Employers can potentially establish various forms of relationships between business strategy and HR strategy; the type of link elected essentially reflects the extent of the impact HR makes on organizational strategy and to some degree the level of trust placed by the organization in the function.
The diverse options available to employers are properly summarized by Torrington et al (2008), who identify five possible alternatives: separation, fit, dialogue, holistic and HR driven (table 1).
It is an axiomatic fact that an organization human capital has nowadays great importance for employers and definitely represents the most significant organizational resource, its main distinctive feature being inimitability. Individuals can indeed make a difference and are thus regarded by employers as the real key to competitive advantage.
Proceeding from the “separation” to the “HR driven” approach, in the order showed in table 1, the role played by HR becomes increasingly significant, insofar as prevailing over organizational strategy in the case of the adoption of the HR driven approach; yet, the role of human resource drastically evolves. Butler (1988, 1989) contends that from strategy executor individuals become the centre around which employers develop their business strategy. Human capital is thus no longer regarded as a means to an end, that is, the attainment of organizational strategy, but as an end in itself (Torrington et al, 2008).
The decision about the most suitable link to be created between organizational strategy and HR strategy, nonetheless, cannot be exclusively made on the basis of the significance attached by employers to human resources. Human capital unquestionably represents the most important organizational asset; nevertheless, the type of relationship which has to be established between organizational strategy and HR strategy should be exclusively strategic-dictated.
Inasmuch as it can be agreed with Boxall (1996) that organizational strategy should be regarded as a jigsaw whose pieces are represented by different organizational strategies, HR strategy included, employers constantly seek the talent enabling them to pursue their intended strategy; do not aim at developing the strategy which can be pursued according to the abilities of the individuals haphazardly recruited by the business.
Recruiters’ activity essentially aims at identifying the individuals who can enable employers to go in the direction they point in and who have the capability to promptly adapt to sudden changes of direction. Talented individuals may clearly also help employers to develop their strategies, but the final decision about the direction to point in invariably rests with employers, which clearly need the support and readiness of all the employees to attain their objectives. This essentially is the same purpose served by learning, that is to say put employees in a position to effectually support employers in the pursuance of their strategies.
It is nowadays broadly believed that an organization capability to gain and maintain competitive edge is increasingly depending on its employees’ soft skills rather than on their technical knowledge. The latter can be gained more easily, in comparison with the former, which are definitely harder to learn and whose acquiring process may be sorely influenced and inhibited by individual personality and character traits. Developing and tailoring a business strategy exclusively on the basis of the current employees’ characteristics and skills might hence prevent organizations to actually gain competitive edge in their relevant market(s) rather than favouring the attainment of this objective. Notwithstanding, the role of HR can be on no account regarded as that of a mere executor, which slavishly obey to the business.
The role played by the HR function may be essentially intended by employers in two different ways: as the function supporting the business in the implementation of its strategy or as the function helping the organization to develop and hence formulate its strategy; in both cases HR plays indeed a strategic role. Albeit HR might not be invited by an employer to sit at the strategic table, its role is crucially important for supporting the organization in the attainment of its business objectives and in the pursuance of its intended strategy. HR may not participate in the business strategy development process, but the formulation and implementation of HRM practices, which are in turn of paramount importance for the successful pursuance of business strategy, can be regarded as strategic on their own. Human capital management practices have a huge, direct impact on individual behaviour so that also this HR role has to be considered as sorely strategic.
HRM policies should essentially ensure organizations that individuals feel to be treated fairly and with equity by employers, that employees feel at ease in the workplace insofar as to describe this as a great place to work, and that the employer is openly recognized as an employer individuals would like to work for, that is to say as an employer of choice. Attaining this objective in practice can definitely prove to be a daunting task for HR so that its efforts and resources have to be respectively focused and deployed so as to ensure that nothing interfere with the individuals’ capability to express and use their skills at their best. Since the one size does on no account fit all, the approach adopted by HR to attain this objective definitely needs to be strategic. It can be indeed hardly contended that this is a role HR plays as a mere executor in that it is highly unlikely that an employer might be capable to tell an HR manager or director how to practically achieve this objective.
HR may have no voice in the business strategy development process; albeit to a different extent, nonetheless, its role can be invariably regarded as strategic. It does not typically act as a mere executor but as a partner ensuring the smooth unfolding of the organizational activities. The primary aim of HR is to make sure that all of the employees have the skills, expertise and capabilities required to properly perform their activities, feel recognized and perceive positively the employer and the workplace so as to go the extra mile and exercise discretionary behaviour.
Also in those cases in which HR is invited to sit at the strategic table its overall strategic extent is indeed rather limited. HR is not in a position to establish the direction the employer should point in and the strategy the employer should pursue to gain competitive edge. Making this type of decisions does not only entail business acumen, but an overarching, thorough knowledge of the market and of the financial resources available to the managing director, which HR does not typically have. The role of HR, notwithstanding, is important and thus strategic in that it is in a position to assess whether the employer can realistically meet its objectives banking on the human resources this already has and judge whether this can successfully retain and attract the talent necessary to pursue its intended strategy.
In many respects it can be contended that it is in the employers’ best interests to invite HR to sit at the strategy table. Inasmuch as HR is not in a position to suggest the direction the employer should point in to attain competitive advantage, the employer is not in a position to properly and effectually manage human capital practices. The synergy these create together is of paramount importance and necessary for the successful attainment of the business objectives. General management and human capital management responsibilities, which require different expertise and knowledge, rest indeed with different individuals just to ensure that these can be properly and professionally managed.
It can be hardly averred, for instance, that HR may authoritatively recommend an employer to consolidate in the current market rather than to adopt a market penetration approach or that HR may suggest a market development strategy as preferable to diversification, and infallibly foresee competitors’ reaction. With regard to this specific aspect, the employer should rather listen to the sales director recommendations. In contrast, HR definitely is in a position to assess the organization human capital readiness and aptness to the eventually required change of strategy and to take action so as to enable the employer to pursue the strategy this considers necessary to gain competitive advantage and stay ahead of competition or the strategy the market urges this to pursue. The role played by HR can be thus unquestionably regarded as strategic.
A change of strategy may entail the organization requiring new skills and competencies, which may not invariably be promptly available to the employer in that the existing workforce may lack these. HR should timely and openly provide employers a thorough picture of the current state of play so as to eventually obtain permission to promptly acquire the talent required to effectually pursue the new strategy from the exogenous environment.
Such an approach can nonetheless be deemed reactive, but the HR strategic significance may remarkably increase whether it would adopt a proactive approach to constantly identify the talent needed to face the future challenges and come up with new, original ideas to prepare employees to the likely future changes of strategy. In this regard HR may even prompt employers to envisage the future business strategy, anticipating trends rather than suffering their consequences, and consequently make the necessary arrangements for the organization acquiring the skills and capabilities needed in the future. Proactivity will also enable HR to develop talent from within rather than “buying” it in the exogenous labour market. Yet, change of strategy more than requiring additional skills and capabilities may entail a broader change of the organizational needs in terms of talent. Acquiring additional talent from the exogenous environment, for necessary it may prove to be, would anyway negatively impact the overall personnel budget, whereas developing talent from within would not; never mind the benefits in terms of employer branding, engagement and retention the adoption of such an approach would secure to the employer.
It can be averred that the role of HR is indeed strategic by nature, but to properly and effectively play its role HR, arguably prior to any other organizational function, needs to gain the skills, expertise, talent and professionalism necessary to perform such a daunting, ambitious task. It is otherwise hardly believable that HR may gain the employer trust and confidence and attain valuable objectives in practice.
The strategic role of HR can be taken for granted; it can be argued that every HCM practice is strategic and should be therefore strategically formulated and executed. The relationship that HR should establish with employers should be regarded somewhat of in between the “dialogue” and “holistic” approaches shown in table 1. Despite the dialogue approach entails a two-way communication between HR and business strategy, in contrast with the HR driven method it also entails the predominance of business strategy, which is symbolized in table one by the lower dashed line. The holistic approach implies a close collaboration between employer and HR, somewhat of HR contributing to identify the business direction, which can be in many respects regarded as extreme. Albeit human capital assumes a paramount importance in order for the employer to attain competitive advantage, it can be hardly agreed that HR strategy may be considered as an end in itself. Regarding HR strategy as the core element from which business strategy actually stems entails a limitation of the employer latitude to develop the strategy this considers most suitable for the organization. As discussed above, HR and the employer need to do whatever they can to procure respectively the human and non-human resources necessary to pursue the most profitable strategy; should not aim at developing the strategy they can easily pursue with the current resources, the risk being the organization to be eliminated by the competition.
A concerted approach, as outlined in table 2, stresses the importance of HR and the employer engaging in a genuine, equitable dialogue where the employer and HR constructively work together for a shared purpose.
The distinctive feature of this approach is that it aims at producing synergy and thus to more effectively serve the employer best interest, which beyond any rhetoric should actually coincide with the interest of the entire employee population. The adoption of this approach, which ideally implies HR to sit at the strategic table, can indeed enable the employer to gain a thorough, realistic view of what can or cannot be actually achieved and of what it is required to eventually pursue the desired strategy.
A genuine collaboration between HR and the employer can stimulate the discussion and investigation of future scenarios and of the likely future direction the organization might be prompted to point in by reason of the likely emerging market trends. This in turn helps HR to foresee the skills which may be required by the employer in the near future and hopefully distant future, and make plans to ensure that these will be made timely available.
This methodology assumes even greater practical importance whether it is considered the circumstance that many exogenous and endogenous factors do influence the employer intended strategy, insofar as Mintzberg (1994) contends that strategy is “formed” rather than “formulated” and that it is can be only retrospectively identified. Despite this interpretation might be regarded as exaggerated in the extreme, it can be hardly denied that business strategy is subject to a considerable number of variables. Employers and HR should do whatever they can to keep abreast of any future developments and take appropriate action so as to assume full control of the business strategy, HRM practices and of the talent requirements necessary to effectually support its pursuance.
The role of HR is actually crucial for the success of any organization so that employers should never ever hesitate to closely, actively collaborate with this naturally strategic organizational function. HR on the other hand, to gain its invitation to the strategic table, should show and prove to have the knowledge, professionalism and expertise to strategically support the employer. The task this is prompted to perform is everything but straightforward and no employer aims at running the risk of entrusting such a delicate task to individuals who do not have the necessary expertise and may hence jeopardize rather than consolidate the business stability.
Longo, R., (2016), HR Strategy between myth and reality; Milan: HR Professionals, [online].