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A Roadmap for Aligning HR Strategy to Organizational Imperatives

Date: July 1 2005

Over the past ten years, organizations have taken an increasing interest in more closely aligning HR practices and services with the needs of their businesses. However, integrating workforce issues into the total business picture still seems to lag behind in practice regardless of the much-publicized theories about why organizations should do so.

Managing a highly diverse, discerning, mobile, and independent workforce has created new challenges and raised important questions about how people systems fit into overall corporate strategy, questions like:

  • How can the organization measure and manage its growing investment in hiring and retaining key talent?
  • What are the direct and indirect costs of turnover?
  • What type of cost/benefit analysis should the organization use to quantify the effect of people on business performance?
  • What payoff should an organization expect from its people investments, i.e., how does an organization calculate its HR return on investment?
  • How does an organization prioritize, adjust, increase, or reduce HR programs and practices based upon their effect on business performance?

Questions such as these continue to redefine the value-added services and processes HR organizations are providing. Most recently, Aon has introduced a framework based on the "employee life cycle" that can give HR professionals a means by which to better align their programs and practices to the short- and long-term goals of their organizations.

4 + 2 Formula for Business Success
In a recent groundbreaking five-year study (Joyce, W.; Norhia, N.; Roberson, B.: What Really Works, Harper Collins, Inc., 2003), consultants and business school professors at top universities analyzed ten years of data on 160 companies and more than 200 best practices and discovered that all successful companies simultaneously master eight specific management practices. The eight practices were divided into four primary and four secondary categories that directly correlated with superior corporate performance as measured by total return to shareholders. Further, the study revealed that winning companies achieved excellence in all four primary practices plus two of the secondary practices. Losing companies failed to do so.

These practices are as follows:
Primary Practices Secondary Practices
- Strategy - Execution - Talent - Leadership
- Culture - Structure - Innovation - Mergers and Partnerships

They also report that companies that consistently follow this formula have better than a 90% chance of sustaining superior business performance. The authors called the winning combination the 4 + 2 Formula for Business Success.

Life Cycle Questions for Aligning HR Strategies to Organizational Imperatives
Below are critical questions in each employee life cycle category that HR must answer as they align people strategies to organizational imperatives.

Sourcing and Selecting:

  • To what degree is the organization attracting the talent necessary to align with the organization´s strategic direction?
  • To what degree is the recruitment process defined as an HR activity versus a strategic priority where HR and senior management collaborate on important talent investments?
  • How is talent introduced and integrated into the organization? To what degree do people experience excitement and a positive work climate from day one?

Rewarding and Retaining:

  • To what degree do employees understand how their jobs contribute to the organization´s success?
  • To what degree are career development/succession planning processes drawn upon to maximize the contributions of top performers?
  • What is the difference in total compensation between low-performing and high-performing employees?

Developing and Counseling:

  • What percentage of jobs are filled from within compared to sourcing from the outside?
  • To what degree are training and development programs linked to the strategic direction of the organization?
  • What percentage of employees participate in formal performance planning and appraisal sessions?

Managing Communication:

  • How effectively is information communicated to employees to help them in their job performance?
  • What steps has the organization taken to ensure employees can describe the organization´s HR strategy?
  • What is the commitment to knowledge-sharing issues across the organization?

Redeploying and Retiring:

  • To what degree is a talent management process drawn upon to identify key talent for critical jobs/roles?
  • What programs are in place to help employees successfully transition out of the workplace as retirement nears?
  • How is the experience and knowledge represented by long-term employees being drawn upon to mentor and coach others?

Implications for HR
The implications emerging from this study are many, and for HR the message seems abundantly clear: in order for HR to enhance its impact on company success, it should focus its priorities, service delivery channels, and capabilities to support the organization´s business strategy. Or, in essence, it should be the definitive resource that enables the company to harness its human capital--the sum of skills, experience, and knowledge--and leverage it for maximum competitive advantage.

The Employee Life Cycle Framework
The framework Aon developed links five strategic HR employee life cycle functions-sourcing and selecting, rewarding and retaining, developing and counseling, managing communication, redeploying and retiring--to the four primary practices that emerged from the research study. At the core of the framework is talent--those skills, knowledge, and personal attributes that account for exemplary performance in a job role, organization, or culture. By adopting this integrated framework as a roadmap, HR can begin addressing the critical questions outlined in the adjacent column to more closely align its contributions to the organization´s imperatives.

As mentioned earlier, the core of the process represents an organization´s talent base. The intent of this approach is to help organizations introduce and strengthen those practices and approaches that will have the greatest impact on attracting, motivating, developing, retaining, and redeploying this talent base.

The Road Ahead
Certainly formidable challenges lie ahead. Operational practices still define HR as primarily administrative. Tremendous gaps exist between where HR spends its time versus where it can add the greatest value, and people are still regarded as a cost on the balance sheet versus an investment that should be appropriately applied and developed. Yet, organizations seeking to align their people strategies with business strategies must remain committed to a, sound strategy for achieving this end. An HR function that stays focused by aligning its services, programs, and practices with the organization´s business strategy will begin to distinguish itself as a business partner: the only viable alternative in today´s competitive environment.


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