How to Align Your HR Strategy With Your Corporate Strategy
Discover how connecting your HR strategy to your overall business strategy can take your business to the next level.
Your employees are the lifeblood of your organization. Having an engaged, diverse, well-performing workforce is key to building a thriving business. As such, your people strategy—sometimes dubbed your HR strategy—needs to be closely correlated to your business strategy. This is vital because people problems turn into business problems. Solving a complex business challenge can only be done with people involved. As business priorities and challenges evolve, so do your people priorities.
A business strategy can be understood as the course of action which assists your workforce in achieving specific business objectives. It’s the master plan that management implements to secure a competitive position in the market, carry on its operations, please customers, and achieve the desired ends of the business. It’s a scheme of corporate intent and action, which is carefully planned and flexibly designed with the purpose of achieving effectiveness, perceiving and utilizing opportunities, meeting challenges and threats, and directing efforts and behavior.
The 3 Different Types of Business Strategies
A business strategy outlines how business should be carried out to reach the desired ends. There’s always a need for multiple strategies at various levels, as a single strategy will be woefully inadequate. Therefore, a typical business strategy should cover these three levels:
1) Corporate-Level Strategy
Corporate-level strategy is a long-range, action-oriented, integrated, and comprehensive plan formulated by the top management. It’s used to ascertain business lines, expansion and growth, takeovers and mergers, diversification, integration, new areas for investment and divestment, and so forth.
2) Business-Level Strategy
The strategies that relate to a particular business are known as business-level strategies. They’re developed by the general managers, who convert mission and vision into concrete strategies. Think of it as a blueprint of the entire organization.
3) Functional-Level Strategy
Developed by the first-line managers or supervisors, functional-level strategy involves decision-making at the operational level for functional areas like marketing, production, human resources, research and development, finance, and so on.
Business Strategies vs People Strategies
Business strategies fall within the following categories, or combinations of these:
Product or service innovation
Growth through acquisitions
Customer intimacy differentiation
While a company typically focuses on several of these, it’s more likely that one of them has more senior leadership attention than others.
People strategy is a lever through which organizations can effectively rally their employees, including senior leadership, around a unified, forward-looking vision. And while it may seem like this more operational aspect of people strategy is mostly tactical in nature, its implications on an organization’s long-term success and even culture extend far beyond that.
Unlike business strategies, people strategies are most often formulated on a corporate level and then pushed down through all levels of the organization to meaningful tasks and priorities for managers and individuals. People strategies fall within the following categories or combinations of these:
Innovation and technology
Responsiveness to workforce challenges
Simplification & automation
Case example: A company seeking to grow organically will naturally have a focus on customer retention as well as customer acquisition. From a people perspective, this translates into hiring new team members as well as ensuring existing team members stay. The business strategy of “growth” has a direct linkage to the people strategy of “retain employees.”
Ensuring there’s a connection between your business strategy and your people strategy is pivotal to ensuring that you work toward the same goals and objectives.
The Importance of Leadership
To align the people strategy with the business strategy, it’s important that the people leadership—your HR function—understands the main strategic goals of the business and the current situation. All strategies and tactics must be aligned toward the same outcomes.
It’s also just as important that people leadership maps out a skills matrix so you understand how your current team contributes to the company strategy. Then the people priorities can be laid out and cross-checked with the business leadership. Just like the business uses financial metrics to measure business success (such as revenue, EBITDA, cost of sales, etc.), people strategy should be measured on relevant metrics to measure the success of the people strategy (such as retention rate, manager rate, diversity rate, and new hire rate). Communication within the HR department and with leaders of the other business functions is key to accomplishing this.
Ensuring this linkage requires that the goals are built in collaboration and frequently revisited and adjusted. If a business strategy or priority changes, there will likely be effects on your people strategy. And vice versa.
Understand how connecting your HR strategy to your overall business strategy can take your business to the next level. Effective People has a dedicated practice devoted to helping customers achieve the best possible outcome. Get in touch to learn more.
About the author
Erik Ebert is the People Analytics & Business Development Director at Effective People.
Erik joined Effective People in 2005 and has supported organizations across industries for many years implementing digital transformation strategies to improve performance. He has a track record of building lasting relationships through a consultative approach resulting in happy, effective processes, successful engagements, effective teams, and a positive bottom line.