The HR Value Proposition

1. HR must deliver measurable value to all stakeholders

Value is defined by the receiver more than the giver.

Stakeholder-centric approach. HR professionals must shift their focus from internal activities to delivering measurable outcomes that create value for key stakeholders: investors, customers, line managers, and employees. This requires developing a clear line of sight between HR practices and stakeholder results.

Measurable outcomes. HR should focus on:

• Increasing intangible value for investors
• Building customer share and connections
• Helping line managers execute strategy through organizational capabilities
• Enhancing employee abilities and engagement

By aligning HR practices with stakeholder needs and measuring their impact, HR can demonstrate its strategic value and earn a seat at the decision-making table.

2. Align HR practices with external business realities and stakeholder needs

HR must deliver value. HR practices must create value in the eyes of investors, customers, line managers, and employees.

External awareness. HR professionals must understand key external business realities shaping their industry:

• Technological advancements
• Economic and regulatory changes
• Workforce demographics
• Globalization trends

Stakeholder alignment. HR practices should be designed to meet specific stakeholder needs:

• Investors: Focus on building intangible assets and capabilities
• Customers: Align HR practices with customer expectations and involve customers in HR processes
• Line managers: Develop organizational capabilities to execute strategy
• Employees: Create a compelling employee value proposition

By grounding HR practices in business realities and stakeholder needs, HR can ensure its work remains relevant and impactful.

3. Develop a culture-based HR strategy to drive organizational capability

HR's primary deliverable is organizational capability and that the most central aspect of organizational capability is organizational culture: the collective mindset of the company.

Culture as capability. Organizational culture - the shared ways of thinking and behaving - is a critical driver of business performance. HR should focus on shaping culture to build key organizational capabilities that enable strategy execution.

Strategic culture-building process:

1. Analyze external business realities
2. Identify sources of competitive advantage
3. Define desired cultural capabilities
4. Align HR practices to reinforce culture
5. Measure cultural impact on business results

By systematically shaping culture to support strategy, HR can drive sustainable competitive advantage and demonstrate clear business impact.

4. Transform HR from administrative to strategic through shared services

HR structure aligns with business organization as shown in figure 8-1. As this figure suggests, a single business calls for a functional HR organization, a diversified business (related or unrelated) for a shared-services organization, and a holding company for embedded HR.

Shared services model. To become more strategic, HR should adopt a shared services model that separates:

• Transactional work: Handled through service centers, technology, and outsourcing
• Transformational work: Delivered through centers of expertise and embedded HR partners

Key components:

• Corporate HR: Sets overall direction and strategy
• Centers of expertise: Provide specialized knowledge and services
• Embedded HR: Partners with business units to diagnose needs and implement solutions
• Service centers and technology: Handle administrative tasks efficiently

This model allows HR to focus on high-value activities while ensuring efficient delivery of core services.

5. Master five key HR roles to create sustainable value

HR professionals are employee advocates, charged with making sure the employer-employee relationship is one of reciprocal value.

Essential HR roles:

1. Employee advocate: Ensure fair treatment and engagement
2. Human capital developer: Build workforce capabilities for the future
3. Functional expert: Design and deliver effective HR practices
4. Strategic partner: Align HR with business strategy
5. HR leader: Drive the HR function and collaborate across the organization

Balancing roles. While the emphasis may vary based on position, HR professionals should develop competence across all roles to maximize their impact. This multi-faceted approach allows HR to address diverse stakeholder needs and drive business results.

6. Cultivate essential competencies for HR professionals

To contribute to management team discussions about economic and regulatory issues, HR professionals need to be aware of the basic trends relative to these issues and know where to find them.

Critical competencies:

1. Strategic contribution: Drive business results through HR initiatives
2. Personal credibility: Build trust and influence through integrity and results
3. HR delivery: Design and implement effective HR practices
4. Business knowledge: Understand industry trends and company operations
5. HR technology: Leverage technology to improve HR efficiency and effectiveness

Continuous development. HR professionals should assess their competencies and create personal development plans to address gaps. This may include formal training, on-the-job experiences, and self-directed learning.

7. Implement a four-phase process to transform HR

Transformation requires integrating the various HR practices and focusing them jointly on value-added agendas such as intangibles, customer connection, organization capabilities, and individual abilities.

Four-phase transformation process:

1. Theory: Develop a clear vision and criteria for HR effectiveness
2. Assessment: Evaluate current HR function against effectiveness criteria
3. Investment: Implement targeted improvements in HR practices, organization, and capabilities
4. Follow-up: Measure impact and continuously refine HR approach

Key success factors:

• Visible leadership support
• Cross-functional transformation team
• Clear communication of transformation goals
• Quick wins to build momentum
• Integrated approach addressing all HR elements
• Ongoing measurement and adaptation

By following this systematic process, HR can drive meaningful change and elevate its strategic impact on the organization.

Last updated: August 11, 2024