Aligning h rwithbusiness

Aligning Human Resources with Business Strategy: Creating Value & Competitive Advantage

A SilkRoad TalentTalk Research Report

2 Aligning Human Resources with Business Strategy: Creating Value & Competitive Advantage

HR Strategy SurveyTwo companies merge, but don’t have a clear plan for absorbing the workforce. HR is handed an annual budget, without having input into the cost of its initiatives. A firm is unable to meet staffing needs for a tightly scheduled technology project.

All of the scenarios above point to a divide between HR and the business at large: last-minute decision making, disregard for human capital planning, and financial ineffi-ciencies. In short, an inability to align HR with business strategy.

Yet, HR departments can’t bear the sole responsibility of aligning talent management with business imperatives. HR must work within a company’s processes and culture to manage talent. Do organizations have consistent practices for connecting business strategy with HR’s priorities? And how can HR be positioned to help drive the economic engine of a business?

In a recent SilkRoad survey, 316 professionals revealed how HR departments align with their companies’ business strategies. This report analyzes their responses and explores some of the most pressing topics confronting talent management leaders today:

∑∑ The biggest obstacles preventing HR from aligning with

company strategy

∑∑ The methods that HR has used successfully to align with

company goals

∑∑ How closely linked HR planning processes are with company

strategy

∑∑ How often HR meets with other departments and the C-suite

to assess HR effectiveness

Read on to find answers to these and other questions, and of course, share this information with your colleagues.

“The challenge for HR is not just to establish the importance of talent, but it is to link talent management to the business strategy.”

—What Should HR Leaders Focus on in 2014? Forbes, January 2014, Edward E. Lawler III

I In Their Own Words: Professionals’ Speak Out

Business Savvy

“Lead as if you were the business owner: Know the business, understand the financials, insist

on accountability.”

“HR fully understands business strategy.”

3

Principal FindingsHR Plans to Linked to Business Strategies

Key Points:Well-integrated HR plans should reflect a company’s strategic goals: its financial objectives to support profitability, as well as its aspirations for the organization’s vision, mission, and values. According to survey respondents, the majority of companies are doing a fine job of connecting HR to business strategy. From the results, it appears that HR has been successful in becoming a corporate partner, integrating its planning process for talent management with the overall business agenda.

Still, this finding doesn’t tell the entire story. Investigating further, we found that 1 out of 3 larger companies (more than 1,000 employees) versus 1 out of 4 smaller companies (less than 1,000 employees) report their HR processes extremely well-linked to business strategy. One possible explanation is that smaller companies tend to have unstructured, less formal processes.

The results of the next question were even more revealing. How exactly do companies define HR’s strategic priorities?

“ Human Resources work does not begin with HR—it begins with the business… Competitive advantage exists when afirmdoessomethinguniquethat competitors cannot easily copy. HR passes the wallet test when it creates human abilities and organizational capabilities that are substantially betterthanthoseofthefirm’s competitors.”

The HR Value Proposition, Ulrich and Brockbank, Harvard Business School Press, 2013.

Extremely well linked 23%

48%

25%

3%

1%

Linked

Weakly linked

Not at all linked

Don’t know

How well is HR planning linked to overall business strategy?

71% perceive that the HR planning process is either extremely well linked or linked with the company’s overall business strategy.71+29+J71%


IdentifyingHR’sStrategic Priorities

Key Points:Results showed that joint planning sessions with cross-departmental teams were not as widespread as might be expected; fully integrated planning processes with the entire company were less common. And, nearly a third (32%) either interpreted the company strategy, dealt only with operational priorities, extrapolated from last year’s strategy, or had no approach. This finding raises the question: Do a third of survey participants have a clear understanding of their companies’ strategic initiatives?

In Professionals’ Own Words

“ We make HR decisions like any business decision, calculate risk and make sure it is in the best interest of the company and the bottom line.”

Some joint planning sessions between HR and other business units.

Fully integrated planning process with the company and HR.

HR interprets the company’s strategy.

HR only deals with operational priorities, not strategic priorities.

Our company has no approach.

HR extrapolates from the previous year’s strategy.

Don’t know.

Other (please specify)

35%

28%

12%

11%

6%

3%

3%

2%

What methods do you use to identify HR’s strategic priorities?

When it comes to setting HR’s strategic priorities, about a third of professionals

reported some joint planning sessions with other business units (35%). About a quarter

reported a fully integrated planning process with the entire company and HR (28%).

35+65+J35%

5

Evaluating Strategy: TechniquesUsed

Key PointsEvaluation of strategy is particularly vital for companies wrestling with dramatic changes—such as dramatic growth, acquisitions, or downsizings. Moreover, in times of economic turbulence, strategy must be assessed more frequently: Evaluation enables HR professionals to redirect or “course correct” if the strategy is not delivering projected results.

In general, ad-hoc/periodic reviews and peer feedback were techniques that professionals said they used always or most often. Interestingly, gap analysis—a powerful and rigorous technique—was the least popular among respondents. Gap

analysis is rooted in benchmarking and metrics: If the HR team is able to measure actual organizational performance, they can compare the results to specific standards that have been set. Of course, peer feedback, reviews, and anecdotalreporting are all fine tools for measurement. Still, evidence-based numbers tell a compelling story: They prove how and whether strategy is effective.

Periodic initiative review

Peer feedback

Formal post-completion reviews

Anecdotal reporting

Gap analysis (actual vs. targeted performance)

40%

39%

34%

34%

29%

Which of the following best describes your company’s approach for identifying HR’s strategic priorities?

Of four different techniques used for evaluating and redirecting strategy,

the most commonly used was periodic initiative reviews (40%), closely followed by peer feedback (39%). The lowest rated

technique was gap analysis (29%).

40%


Leadership: the availability of qualified leaders at all levels to mobilize the

organization toward its strategy.

Strategic Skills/Competencies: the availability of skills, talent, and know-how to perform activities required by

the strategy.

Strategic Alignment: alignment of goals and incentives with the strategy at all

organization levels.

Culture & Strategic Awareness: awareness and internalization of the shared vision, strategy, and cultural

values needed to execute the strategy.

Strategic Integration & Learning: the sharing of knowledge and staff assets

with strategic potential.

4.4

4.2

4.2

4.2

4.0

Average Ratings for Human Resource Dimensions

Respondents rated a variety of HR dimensions in their importance to company strategy on a 1 – 5 scale (1 = Not at All important, 5 = Extremely

Important). The average ratings for Leadership; Strategic Skills/Competencies; Strategic Alignment;

Culture/Strategic Awareness; and Strategic Integration/Learning were roughly similar (4.4 to 4.0)1

Always

Often

Sometimes

Seldom

Very Seldom

Never

Don’t know

Dimensions of HR: Leadership Matters Most, Learning Least

Key PointsEssentially all respondents rated these dimensions of human resources as important to their companies’ strategic direction. Intriguingly, the lowest rated dimension was “Strategic Integration & Learning” (4.0). Insights from SilkRoad’s 2013 Learning Survey echoed the findings shown here: Results indicated that companies could better align their learning and performance practices strategically with business goals in order motivate and retain top talent.2 Forward-looking companies use Learning as a foundation for leadership and skill development, as a well as a means to reinforce employees’ understanding of organizational mission, vision, and values.3

1. SHRM Balanced Scorecard Collaborative: Aligning HR with Organization Strategy Survey, November 2002. The dimensions above were defined as a framework to describe human capital. Working groups at SHRM identified these dimensions as those that executives think are most relevant to strategy.

2. SilkRoad TalentTalk 2014 State of Talent Management and Learning and Development Survey, May 2013. The survey showed that company practices linking Performance to Learning are loose and unstructured. Employees generally self-direct learning. Training and employee development plans are not typically linked.

3. Predictions for 2013, Josh Bersin, Bersin by Deloitte. Driven by technological changes, the subject of knowledge sharing or “continuous learning” has become more visible than ever, including social, mobile, e-learning, and communities of practice.

7

Bridging the Gap: Cross-Departmental Evaluations

Key PointsIn general, HR gets good marks for meeting with other departments to evaluate HR effectiveness in achieving their goals. Totaling the numbers, we discovered that 65% meet often or sometimes. This wasn’t a complete surprise. But what was news is that nearly a quarter of professionals (24%) seldom, very seldom, or never meet with other departments.

HR professionals should aim to move from occasional episodic meetings to regular, scheduled evaluation sessions. And, those professionals who seldom or never meet with colleagues should seek to build better partnerships and feedback mechanisms.

Always

Often

Sometimes

Seldom

Very Seldom

Never

Don’t know

12%

36%

27%

12%

7%

5%

2%

How often does HR meet with other departments to assess goals?

Thirty six percent of professionals said that they meet with other departments often to

assess HR effectiveness. Three out of four meet sometimes or more frequently.

36%


Grappling with Alignment

“No success at all. Our HR leader lacks a strategic mindset.”

“HR is an afterthought, because our company focuses on operations and cash flow issues.”


Time with the C-Suite: Assessing HR Success

Key PointsResults showed that HR does have a feedback loop to the executive suite in the form of meetings to assess HR effectiveness. These sessions with the C-suite can also be used as a channel to exchange information about the processes, technology, and tools that HR needs to create value. As the next graph shows, some HR professionals are experiencing distinct challenges that make it difficult for them align with company strategy.

14%

34%

31%

8%

6%

3%

3%

How often does HR meet with C-level executives to assess HR effectiveness?

HR professionals report that they have fairly open channels to the C-suite. 80% indicated that they met sometimes or more frequently with C-level executives to assess HR effectiveness in achieving company goals.

Always

Often

Sometimes

Seldom

Very Seldom

Never

Don’t know

80%


Partnerships, a Seat at the Table

“Consistent and continuous inclusion in the planning process ensures alignment.”

“Partner with C-level leaders.”

9

The Key Challenge: Reactive Company Culture

Key Points

Professionals report that a reactive company culture is the #1 obstacle keeping them from aligning with business strategy. Reactivity becomes the norm when organizations focus on short-term activities or performance, rather than long-term results. Because executive leadership plays a vital role in defining the company culture, HR alone can’t effect change.

Professionals’ second biggest challenge, a lack of technology, also prevents them from aligning HR with business goals. Without the technology for analysis, HR will have difficulty determining whether employee performance impacts the bottom line. With the right software systems and workforce data, HR can compile a snapshot of workforce utilization to better analyze gaps and forecast future business needs.

Unsurprisingly, we found that HR’s challenges did vary by company size: Professionals in the largest companies (more than 10,000 employees) were more likely to report “overcoming tactical mindset on the part of HR” and “developing partnerships across teams to achieve business objectives.” In companies of 10,000 or less, professionals were more likely to report “lack of HR technology” and “securing HR’s seat at the table;” perhaps this second group includes companies that have fewer resources to invest in technology and less formal processes, thus excluding HR from business decisions.

Working in a reactive company culture, constantly fighting fires.

Lack of HR technology to support company objectives.

Securing our HR team a “seat at the table” in making business decisions about the organization.

Performing to expectations despite a reduced budget.

Developing partnerships across teams to achieve business objectives

Overcoming a tactical mindset on the part of HR.

None, don’t know or other.

Lack of support from the executive team.

What are the challenges or obstacles your HR department faced in aligning HR with overall company strategy? Please check all that apply.

56%

45%

34%

31%

31%

30%

20%

15%


HR Responds: Our Contribution is Substantial

Key PointsEven in the face of evident challenges, most professionals perceive that their HR department makes a sizeable contribution to achieving company goals. Still, HR pros can raise their game a notch or two, advancing their HR organization’s contributions from “considerable” to “great.” Those respondents who perceive that their contribution is “slight” should aim for “considerable.”

This finding led to the next question: What methods are HR teams using to align with business goals? Are there ways the HR department can accelerate its forward momentum?

17%

56%

26%

2%

Rate your HR department’s contribution to achieving company goals.

The majority of respondents rate their contributions to company goals as

“Considerable” (56%). Roughly a quarter (26%) rate their contribution as “Slight.”

Great

Considerable

Slight

None

56+44+J56%


Proven Techniques

“Capability mapping. Quarterly reviews. Coaching and advising. Strategic evaluations.

Employee surveys.”

“When we receive a tactical request, we meet with the client to identify the enterprise goal

and the performance obstacles that prevent or promote meeting the objectives.”

11

Summary of Results

Key Points

Company downsizings, mergers, acquisitions, and startups in recent years have no doubt changed the way that talent is managed: The transformation of the workforce has put greater stress on HR to think strategically, plan deliberately, and to de-velop a business mindset.

With this research, SilkRoad’s goal was to provide professionals with an understanding of companies’ methods for defining HR priorities, the techniques used to align HR with business strategy, and hurdles to success. This report highlights several insightful findings from the survey:

∑∑HR professionals perceive that their function makes a substantial, positive contribution to business goals. Nearly three quarters say that HR planning was extremely well linked or linked with their companies’ overall business strategy. Still, smaller companies were less likely than larger ones to link HR planning to business strategy.

∑∑ In general, talent management professionals have open channels to the executivesuite—especiallywhenitcomestoevaluatingtheeffectiveness ofHRefforts. They are also doing a good job of meeting with their partners in other departments to assess their efforts.

∑∑On the downside, explicit company-wide planning processes for identifying HR’s strategic priorities were less common. Only a third reported some joint planning sessions with other business units. And just over a quarter reported a fully integrated planning process between the company and HR.

∑∑Some HR professionals voiced serious challenges about aligning HR with company strategy. They’re not entirely satisfied with the ways their companies operate.

∑∑ In general, HR leaders indicated that “reactive company culture and firefighting”wereforemosthurdlesforHR. Yet, HR alone can’t effect a culture change. Culture comes from the top—the C-suite. Also, many professionals noted that they lacked the right technology to support strategic company goals.

Moving forward, HR leaders must address organizational weaknesses and build on strengths identified here, in order to make a difference in their companies’ financial performance. Properly aligned with business strategy, HR leaders can reinforce their role as contributors to “people strategy” that creates value and competitive advantage.

Copyright 2014, SilkRoad. All Rights Reserved. All trademarks are the property of their respective owners. AlignHRwithBus-082714


MethodologyandRespondentProfileSurvey dates: July, August 2014Delivery system: Conducted online and delivered to Recruiting, Learning, Development, or other HR professionals via email and social media sites.

316 professionals responded.

89% of respondents plan, manage, or administer Recruiting, Learning, Development or another HR program.

59% of respondents have more than 10 years of experience in the field; 83% have 5 or more years of experience.

36% have more than 1,000 employees at their company.

Titles ranged widely, including many organizational levels and job descriptions, from HR Generalists to Managers, Directors, V.P.s, and C-level executives.

The four largest specified industries for the respondents were Professional and Business Services; Finance, Insurance & Real Estate; Manufacturing; and Technology.

SilkRoad is a leading global provider of cloud-based, end-to-end talent management solutions that enable customers to find, attract, develop, and retain the best talent. The award-winning SilkRoad Life Suite includes Talent Acquisition, Talent Development, and HRMS solutions that are delivered through a tablet-friendly Talent Portal. The suite is easy to deploy and use – a single platform to rapidly boost employee engagement and business performance. Visit www.silkroad.com, follow on Twitter @SilkRoadTweets or call 866-329-3363 (U.S. toll free) or +1-312-574-3700.

Aligning h rwithbusiness

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