Strategic Human Resource Management and Business Strategy

Introduction: Human Capital and Competitive Advantage

Every business requires human resources that demand substantial attention when cultivating and maintaining a successful business strategy. A successful business strategy is grounded in the ability to predict the future — or at least to win the argument about what the future will look like (Kearns, 2010). For business leaders, this must be about creating value — namely the greatest possible value — from all capital resources at their disposal, and this includes the crucial component of human capital (Aston, 2010; Becton & Schraeder, 2009; Gross, 2004; Leopold, 2010; Kearns, 2010; McKinsey, 2011; Odden, 2011).

On this subject, Ohmae (1982) considers the crux of any business strategy to be competitive advantage, because without competition there is no need for strategy. Within the development of a business strategy, the need to maximize one's strengths to be more effective than competitors is therefore implied. From this logic, Kearns (2010) suggests the best way to gain competitive advantage is for a business to focus on managing human resources better than its competitors. Kearns (2010) maintains, "any business strategy that does not explicitly and consciously integrate with an HR strategy will no longer qualify as the best strategic option" (p. 1). The idea that businesses should prioritize effective management of their human capital is long overdue in the business world.

Formulating an HR-Business Strategy

Kearns (2010) makes it clear that the management of human resources is a responsibility that is both inseparable and indivisible from an organization's business strategy. In other words, the two lines of operations — human resource management and business strategy — should be inextricably linked throughout all operations and processes of formulation, development, implementation, evaluation, management, and adjustment.

In formulating an HR-business strategy that ensures a company remains competitive, the focus should center on core competencies, synergy, and value. Strategic formulation is the result of the planning and decision-making necessary to establish an organization's overall goals and objectives, the expectations for performance, and the action steps required to achieve them. During this stage, leaders must address the following key questions:

1. What does the organization seek to do?
2. How does the organization seek to do this better than others?
3. How do we best communicate our goals and expectations to the entire organization and solicit feedback in an organized and appropriate manner?
4. What markers for success are expected?
5. How do we ensure that all parts — primarily human resources in connection with other resources — interact and function in a way that people feel they belong to a greater whole?
6. How do we ensure that our people feel valued?
7. How do we empower people rather than direct them, and ensure they understand and realize their full potential within the system?
8. Are our expectations and formulations realistic? How does our plan come to fruition? Where do we need revision?

Gathering the necessary information during the formulation stage and developing an effective strategic plan that honors the inextricable link between strategic management and human resource management is far more complex than the implementation of the strategy. This is not to say that the implementation stage is without its own challenges, but within the formulation stage, leaders must constantly consider the "how," because the greatest plan is only as effective as its ability to be implemented.

As the economy struggles, businesses struggle — but effective organizations have a better chance of surviving challenging times. Leaders must keep in mind that it is the workforce, the human resources at their disposal, that is hardest hit during economic downturns. Ironically, even in times of economic growth and vitality, it remains the workforce that is most vulnerable. Traditionally, organizations focus on the bottom line, cutting corners, making adjustments, and making decisions that maximize profits and competitive advantage — even if it means compromising their integrity in the way they treat and manage employees.

Employee Wellness, Benefits, and Strategic Models

Kearns (2010) states, "An HR-business strategy is a conscious and explicit attempt to maximize organizational value by gaining a sustainable competitive advantage from human capital" (p. 10). To establish certain foundational elements, Aston (2010) suggests using the Workwell Model — a business model that focuses on employee wellness and engagement in order to boost performance at the individual level and, ultimately, at the organizational level. This model employs the following approaches:

1. Employers cultivate a working environment that encourages employees to make healthy lifestyle decisions both inside and outside the workplace.
2. Employers effectively give employees control over their own work-life and cultivate an engaging, positive work environment.
3. Employers establish protocols and procedures for early intervention and proactive management in supporting wellness and recovery.
4. Employers ensure best practices in communication to emphasize the importance of healthy relationships at all levels — horizontally, vertically, and outside the workplace.

In the Workwell Model, collaboration and open communication are heavily valued and essential to its success (Aston, 2010). Another action-plan model described by Reed-Woodard (2010) suggests a simpler structure rooted in the equal importance of being strategy-focused, people-focused, market-driven, and value-minded. The U.S. Office of Personnel Management (1999) discusses human resource alignment — the integration of decision-making with respect to people and organizational effectiveness — emphasizing similar elements: relational connectedness, well-being, communication, and collaboration among human resources, management, and executives.

Leopold (2010) speaks more directly to employee benefits as an important investment for management to make in creating value and aligning with business strategy. He states, "A company's investment in employee benefits is significant — and when managed effectively, has the potential to deliver invaluable returns in the form of employee attraction, retention, and productivity" (p. 24). Again, the emphasis is on employee health, well-being, security, and work/life balance. Becton and Schraeder (2009) focus on elements such as education and training, communication protocols, HR systems and practices, employee orientations, and the maturity of management in transforming human resource processes "from their traditional administrative focus to a more strategic business contribution…. A key to improving performance of individuals and the organization" (p. 1).

Ultimately, an organization must make its own decisions about the specific strategies that best meet its performance demands and expectations. The common factor among all the above-mentioned frameworks is this: an HR-business strategy is more holistic, more dynamic, more mature, and more effective than traditional approaches.

Conclusion: Characteristics of an Effective HR-Business Strategy

Gross and Friedman (2004) offer the most concise checklist of characteristics for an effective human resource business strategy: (1) HOLISTIC; (2) INTEGRATED; (3) ALIGNED; (4) MEASURABLE; (5) DELIVERABLE (p. 12). There is little doubt that the transformation away from traditional strategies toward an HR-business strategy is necessary. The only remaining question is who will lead the way and most effectively establish the expectations for organizational success as we move into the future.

References

Aston, L. (2010). Helping workers help themselves. Occupational Health, 62(11), 29–32. Retrieved from EBSCOhost.

Becton, B. J., & Schraeder, M. (2009). Strategic human resources management. Journal for Quality & Participation, 31(4), 11–18. Retrieved from EBSCOhost.

Gross, S. E., & Friedman, H. M. (2004). Creating an effective total reward strategy: Holistic approach better supports business success. Benefits Quarterly, 20(3), 7–12. Retrieved from EBSCOhost.

Kearns, P. (2010). HR strategy: Creating business strategy with human capital. Burlington, MA: Butterworth-Heinemann.

Leopold, R. S. (2010). A fresh perspective: Employee benefits as a strategic business investment. Benefits Quarterly, 26(4), 21–24. Retrieved from EBSCOhost.

McKinsey. (2011). Retrieved from www.mckinseyquarterly.com.

Odden, A. (2011). Manage "human capital" strategically. Phi Delta Kappan, 92(7), 8–12. Retrieved from EBSCOhost.

Ohmae, K. (1982). The mind of the strategist: The art of Japanese business. New York, NY: McGraw-Hill.

Reed-Woodard, M. A. (2010). Maximizing employee value. Black Enterprise, 41(2), 56. Retrieved from EBSCOhost.

U.S. Office of Personnel Management. (1999). Strategic human resources management. Office of Merit Systems Oversight and Effectiveness. Retrieved from http://www.opm.gov.