Organizational strategy is a plan for evolving a business over time. You might want your company to be a leader in “green” technology in five years, or maybe you envision raising sales by 20 percent during the next 24 months. Whatever your plans, you need employees to carry them out and human resources leadership to prepare them for the task.
Linking HR strategy to organizational strategy can be profitable. Towers Watson, a company specializing in human capital, reports in the study “Watson Wyatt’s 2002 Human Capital Index” that shareholders’ total returns were 64 percent over five years under progressive HR practices, compared with total returns of 21 percent under weak HR practices. Using a progressive strategy, HR can identify the skills your business wants employees to have and close existing skill gaps through aggressive recruiting and training.
High turnover, excessive absenteeism, low productivity and overall employee dissatisfaction disrupt your business operations. These obstructions not only raise your operating costs — hiring and retraining replacement staff is especially expensive for small businesses — they also derail organizational strategies. As your chief “employee problem-solver,” HR often conducts exit interviews with departing employees to find out why they’re leaving and take corrective action, or the company might make managers more responsible for keeping staff on board by tying their pay to retention rates. To raise productivity and retention, HR can recommend such low-cost incentives as flexible work schedules, performance awards or money-saving discounts from retailers.
Organizational strategy has a better chance of succeeding when employees understand and buy in to your plan. HR is the liaison between management and staff. It can influence employees’ attitudes and behaviors towards your company and gain their support for your strategic plan. The HR strategy that’s focused on developing staff loyalty, for example, can give your organizational strategy the employee support needed to make your company a leader in green technology or increase your product sales.
When HR strategy is linked to organizational strategy, companies have the benefit of HR’s expertise on workplace regulations and employment laws. HR is responsible for keeping organizations in compliance with safety regulations, anti-discrimination laws and other state and federal workplace requirements. When your organizational strategy conflicts with workplace mandates, your business could be sued or fined. For instance, plans for a new manufacturing process that significantly raises temperatures on the plant floor could violate Occupational Health and Safety Administration standards.