HR as a Strategic Partner: Competencies and Business Alignment

Introduction to Strategic HR Management

In many organizations, Human Resources (HR) has come to be regarded as a source of competitive advantage. There is a growing appreciation that unique competencies are developed through highly skilled employees, distinctive organizational cultures, and effective management processes and systems. It is increasingly acknowledged that competitive advantage can be achieved through high-quality personnel who enable organizations to compete on the basis of market responsiveness, product and service quality, product differentiation, and technological innovation.

Strategic HR management can be defined as "connecting HR with the strategic targets and objectives so as to improve business performance and develop an organizational culture that promotes innovation and flexibility." Strategic HR means accepting the HR function as a strategic partner in both the formulation and execution of company strategies — carried out through HR functions such as recruiting, selecting, training, and rewarding employees. While strategic HR recognizes the partnership role of HR in the strategizing process, HR strategies refer to the specific courses of action an organization intends to pursue in order to achieve its objectives.

A comprehensive HR strategy plays an important part in the achievement of an organization's overall objectives, and clearly demonstrates that the HR function fully understands and supports the direction in which the organization is moving. A complete HR strategy will also support other specific strategic objectives pursued by the marketing, financial, operational, and technology divisions.

In its true meaning, an HR strategy should aim to capture "the people component" of what an organization expects to achieve in the medium to long term, ensuring that: (i) it has the right people in place; (ii) it has the correct mix of competencies; (iii) personnel exhibit the right attitudes and behaviors; and (iv) the workforce is developed appropriately. An HR strategy adds value to the organization when it (a) expresses more clearly the common themes underlying other plans and strategies that had not previously been identified, and (b) identifies fundamental concerns that any organization must address if its people are to remain motivated, committed, and effective. The HR strategy must demonstrate that careful planning of people issues will make it significantly easier for the organization to achieve its broader strategic and functional objectives.

Key Competencies of HR Executives

Furthermore, HR practitioners must ensure that the HR strategy is unified with wider organizational objectives, and must guarantee that the rest of the organization accepts the strategy. To achieve this, practitioners should: (i) consult with all stakeholders regarding the nature of the strategy; (ii) cultivate partners and supporters through the consultation process; (iii) emphasize the benefits being realized from the strategy with concrete examples of how it has helped; (iv) confirm that genuine commitment to the strategy exists at every level of the organization; (v) where possible, establish measurable results that can be observed and evaluated, making it possible to demonstrate impact; and (vi) embed the strategy in the recruitment process, particularly for senior managers.

As many businesses rethink novel approaches to HR, they are moving toward competencies and competency-based systems as a means of meeting organizational needs. According to Boyatzis, competency in HR refers to a fundamental characteristic of a person — which may be a motive, skill, trait, aspect of self-image, social role, or body of knowledge — that leads to effective and superior performance. According to Tucker and Cofsky (1994), competencies can be grouped as: (a) skills — the demonstration of expertise, such as making effective presentations or negotiating successfully; (b) knowledge — information accumulated in a functional area such as accounting or HR management; (c) self-concepts — attitudes, values, and self-image; (d) traits — a consistent tendency to behave in a particular way; and (e) motives — recurring thoughts that drive behavior, such as the drive to achieve.

Competencies are therefore a combination of Knowledge, Skills, and Abilities (KSAs) which, when acquired, enable an individual to perform a job or function at a defined level of proficiency. Among the various levels of competency, strategic competencies are the most sought after, as they represent the core competencies of the organization. These focus on organizational capability and include competencies that create competitive advantage, such as ingenuity, speed, service orientation, and technological capability. It is widely recognized that competencies can be used to facilitate change in HR, and that the role of HR is shifting from an emphasis on rules to a focus on results. To support this paradigm shift, many organizations are identifying new competencies that refocus the workforce on what is truly vital to success.

Competencies also provide a means of focusing on the technical aspects of a specific job and identifying a critical path through regulations and laws toward the outcomes desired by management. Competency models highlight competencies required by the organization and serve as instruments for change. In HR development, competencies are used to identify and address gaps in individual capabilities. In performance management, competencies and results are evaluated together to link how a job was performed with the results achieved. In compensation, remuneration can be based on the recognized skills and proficiencies applied on the job.

Aligning Business and HR Strategies

Many organizations expect competencies to help communicate preferred behaviors, control costs, and increase customer satisfaction. Competencies are also being used in the following ways to support the evolving HR role: (i) as a strategy to reinforce the connection between organizational culture, outcomes, and individual performance by emphasizing competencies required across occupational specialties; (ii) as a tool to help define work and what is expected of employees in a broader, more comprehensive way; and (iii) as a means to align individual and team performance with the organization's vision, strategies, and external environment.

A business strategy defines an organization's direction for the future — in the short, medium, and long term — with respect to vision, strategic themes, and a set of planned changes to which every program and project contributes. Without a clearly defined business strategy, the organization risks: (i) lacking business ownership of its change programs; (ii) missing opportunities to exploit new ways of working for business benefit; (iii) inconsistency in HR planning; (iv) inconsistency in investment in workplace infrastructure; (v) inability to share assets and information; and (vi) inflexibility when faced with changes in the business environment.

HR strategy is focused on aligning the HR function — its priorities, service delivery channels, and capabilities — to support the organization's human capital strategy and generate measurable business results. In a study conducted by Mercer Human Resource Consulting, respondents whose companies possessed a human capital strategy were also more likely to have an HR strategy. More than 79% of respondents indicated they had an HR strategy, and 88% of those said it was linked to their company's business strategy. Companies with an HR strategy reported spending more time on strategic, value-added functions and less time on administration. Specifically, they devoted more time to designing HR programs and systems and to strategic partnering activities, and less time to transactional record-keeping.

Organizations with an HR strategy were also more likely to measure activities, use benchmarks, and apply those measures to drive HR decisions. Developing human capital and HR strategies can be challenging and is sometimes considered non-essential, but research suggests that companies that have developed human capital strategies tend to invest more in their human capital assets and have a stronger sense of the value their people contribute. Those with an HR strategy are more likely to devote time to designing strategic partnering functions — those to which HR can add the greatest value. Such companies report spending comparatively less time on administrative activities, using technology more effectively, and being regarded more favorably as strategic business partners.

Conclusion

Organizations that treat HR as a genuine strategic partner — equipping HR leaders with broad competencies, formal strategies, and cross-functional relationships — consistently outperform those that relegate HR to a purely administrative function. As research demonstrates, having a formal HR strategy linked to business objectives leads to greater investment in human capital, more effective use of technology, and stronger organizational performance. The range of career paths now available to senior HR executives further reflects the growing complexity and strategic importance of the HR function in modern organizations.