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Part 1: Jump-shifting HR's impact on business performance

Part 1: Jump-shifting HR's impact on business performance

Part 1 of 3: HR’s pivot-point opportunity to sharpen its focus

Chief Executive Officers, Innovation Officers, Human Resource Officers, and other senior leaders all know the increasing urgency of integrating HR strategies with business priorities and needs. J. Craig Mundy, VP of HR at Ingersoll Rand, highlights the challenge: “To truly be partners to the business, we must identify those critical points of the business where the strategy succeeds or fails, and provide relevant talent solutions.”

Indeed, Deloitte’s 2016 Global Human Capital Trends report states that 51% of the 7,000 surveyed business and HR leaders actively strive to correlate business impact with HR programs. And that’s up from 38% in 2015.

This alignment between HR and business priorities provides the highest impact on overall HR effectiveness. That’s according to the HR Trends and Priorities 2016 study by the highly-respected McLean Group (covering almost 600 executives in North America, 30% of whom are not in HR). But McLean also found that such alignment is achieved in only 35% of the surveyed organizations. More often than not, HR operates as a tactical group rather than a strategic function.

However, a perfect storm has arisen in business pressures, business priorities, and HR maturity that offers HR a pivot-point opportunity to transform – to jump-shift – its impact on overall business needs. That opportunity is to concentrate its internal functions and priorities on the single most important, highest priority driver of business success today.

And just what is that driver? It’s to be found at the intersection of current CEO priorities and HR priorities – revealed by an analysis of global executive reports from Deloitte, KPMG, the Conference Board, the McLean Group, BCG, and others.

For that analysis, let’s first enter the world of CEOs as they deal with the complexities and challenges of this day and age…

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KPMG’s 2016 Global CEO Outlook study (surveying almost 1,300 CEOs in 10 of the world’s largest economies) narrates that 88% of CEOs are concerned with customer loyalty, and 82% are concerned with whether their products/services will be relevant to customers in 3 years’ time – given the relatively frequent and fundamental changes in the behavior of customers.

In addition, KPMG recounts other pressures that are on the minds of over 80% of the CEOs, including:

  • The impact of the global economy on their company’s growth, especially in slow economic regions
  • The forces of disruption and innovation shaping their company’s future
  • How Millennials and their differing wants/needs will affect their business
  • The potential of talent and skill shortages
  • Competitors’ ability to take business away from their company (especially new competitors with disruptive business models)
  • Whether their enterprise is keeping up with new technologies (such as the “fourth industrial revolution” involving the integration of cognitive computing and artificial intelligence)

CEOs are also having to address greater expectations of their stakeholders. PWC’s 2016 Annual Global CEO Survey of over 1,400 CEOs globally cites that 69% of CEOs in their study link their organization’s purpose to the interests of a broad set of constituents in society, not just to benefit their shareholders. For example, they are having to address the growing trend of the “good consumers” who make choices not only on the quality of the service provided, but on the causes that a company supports. “CEOs acknowledge that their customers as well as other stakeholders increasingly want them to do more to tackle important problems. The response for many has been to focus even more strongly on customer needs as well as drawing on their companies’ own sense of purpose – what they stand for – to define a more comprehensive view of how their businesses operate within society.”

In response, these CEOs are largely aligned on the key strategies needed to deal with such business pressures. Reports from the Conference Board’s CEO Challenge 2015 (with data from over 900 executives) and KPMG both name the following as the top 4 CEO strategic priorities:

  1. Accelerate/sustain business growth
  2. Attract and develop human capital
  3. Enable innovation throughout the entire organization
  4. Focus relentlessly on customers

After that, for the 5th and 6th priorities, the Conference Board adds “Operational Excellence” and “Sustainability” while KPMG added “Implementing Disruptive Technologies” and “Stronger Marketing and Branding.” Significantly, the Conference Board report adds that CEOs are placing a strong emphasis on trust-building behavior, ethical accountability and transparency to meet an array of challenges. “Trust-building is viewed as fundamental to growing their businesses.”

So, those are the strategic priorities that are on the minds of CEOs globally in order to deal with the opportunities and challenges that lie ahead.

What’s going on in the world of HR at the same time?

Deloitte’s 2016 Global Human Capital Trends study named key trends that have enormous implications (and stresses) for HR:

  • Demographic upheavals have made the workforce both younger and older - Millennials make up more than half the workforce; Baby Boomers working past their 60s must adapt to new roles
  • Digital technology is now everywhere, disrupting business models and the way work is done
  • The pace of change has accelerated in business, requiring organizations to be more agile
  • The challenges of an increasing use of freelancers as part of the workforce
  • The use of analytics is becoming pervasive, even (especially) in HR
  • Pressures growing from evidence that correlates HR capabilities and financial performance
  • “A new social contract is developing between companies and workers… leading to expectations of rapid career growth, a compelling and flexible workplace, and a sense of mission and purpose at work.”

HR has its hands full addressing such challenges in a wide variety of its internal functions. In the McLean report, these functions are ranked by HR leaders according to their relative importance with respect to overall HR impact:

  • HR Strategy (includes strategy, culture, organization design, change management, and analytics)
  • Employee engagement
  • Talent acquisition
  • Talent management
  • Performance management
  • Learning and development
  • Total compensation
  • HR operations (including regulatory compliance)

It’s the challenges involved with these functions that can at times be so time consuming that it relegates HR to more of a tactical unit than a strategic one. Yet, within the context of these pressures and the goal of aligning HR strategy with business needs, the top strategic priorities for HR have been consistent over the past few years. As reported by Deloitte, KPMG, and the McLean Group, the top 3 HR priorities are:

  1. Develop leaders
  2. Engage employees
  3. Change the culture

And this year, according to Deloitte, a 4th high-priority need has also emerged from the multitude of business pressures: to redesign the organization itself to make it more agile and flexible through a “network of empowered teams.” 92% of the executives they surveyed saw this as a critical priority.

So, there we have it. On the one hand, we have global CEOs largely aligned on 4 strategic business priorities to deal with the pressures and challenges of the next 3 years:

  1. Accelerate/sustain business growth
  2. Attract and develop human capital
  3. Enable innovation throughout the entire organization
  4. Focus relentlessly on customers

On the other hand, we have HR with 4 key strategies for getting its job done:

  1. Develop leaders
  2. Engage employees
  3. Change the culture
  4. Re-design the organization

Take a moment to examine the two lists together. Do you have any insights about…?
What could be HR’s concentrated focal point to jump-shift how it impacts business success?

What do you think?

Here’s a hint…  In order to survive and thrive in the coming years, CEOs see the necessity for, and perhaps the inevitability of, large scale change in just about every facet of their companies. KPMG reports:

  • 41% expect to be running significantly transformed companies in 3 years’ time
  • 50% are currently attempting to change their culture
  • 72% say the next 3 years will be more critical for their industries than the last 50 years
  • 80% are currently restructuring their organizations or have recently completed that restructuring

Continue to Part 2: A laser-like focal point for transforming HR’s value to the business

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William Miller's picture
About the author

William C. Miller, co-founder of Values Centered Innovation, is passionate about integrating emotional intelligence, human values, and mental discipline with our innate capabilities to be innovative.