07.07.2022 Human Resources International

Why HR is crucial to business strategy success

HR, Business strategy

In a constantly and rapidly changing world which presents unprecedented challenges for business, organizations are forced to assess their strategies and core priorities. Persistently driving value and competitive advantage often lead to driving transformational change across all levels of an organization.

It is widely accepted that human capital and talent management are at the heart of business performance. Indeed, business success is largely based on the alignment of individual initiatives with strategy and the collective capacity for change. The role of HR in skills development is critical to success. Mobilizing people around strategic priorities and putting the right skills in the right places are key to any strategy and are the core concern for top management teams.

In fact, when participants of the current Remuneration Survey edition were asked: “What has been the main focus of your HR department since last year?”, the importance of HR strategy and policy featured as one of their primary concerns among the top three. More than ever before, HR has a strategic role to play. The context in which companies evolve has changed. This means major changes in HR, the success of which will strongly determine a company’s ability to roll out its strategy.

HR departments are too often perceived as a simple support function for operational staff, without a driving role in a company’s direction for the future. A company’s success, however, is frequently based on the coherence of individual initiatives with strategic orientations. The human dimension, therefore, deserves to be at the heart of strategic concerns.

Next Generation HR Framework is KPMG’s approach to delivering HR transformation that enables the configuration of HR structures and services supporting the business strategy. It enables the HR function to understand how it delivers real value to the business by designing a fit-for-purpose people function as well as putting the appropriate structure, capabilities and systems in place.

To help our clients develop their HR functions to drive their company strategy through the implementation of the framework, we guide and accompany them through the following three phases:

Understanding the strategic value proposition

This involves identifying all the actions, choices, decisions and methods implemented to achieve the long-term objectives that the organization has set itself. It is also about acknowledging how the organization differentiates itself and gains competitive advantage through the implementation of the best possible strategy. The strategy implemented impacts the whole organization, so it is crucial for our clients to be able to answer these two key questions:

  1. What are the organization’s critical success factors for achieving the strategy?
  2. What are the required core competencies?

Perceiving how value is created through people and knowing the people agenda

This phase is all about understanding the broader human capital challenges and needs within the organization. The focus? People. And the purpose? To convert the strategic business drivers and capabilities into people requirements, backed by an understanding of how people can contribute to differentiated added value. To ensure all aspects of the human capital value creation are taken into consideration, we conduct interviews with C-suite level executives to gather their perspectives. Here are just some of the questions we ask them:

What are the key roles in your organization?

What is the company culture and what behavior is expected from employees?

What are the key employee competencies and skills?

At which level are important decisions made and who makes them?

Which HR levers can be used to enable this value creation?

Figuring out how HR can drive and enable this value 

At this stage, we design the HR structure in order to generate specific value for the business. For us, the key ingredient for a good HR strategy is to avoid copying what big corporations have put in place.

It is essential to personalize the HR strategy and architecture in accordance with specific organization goals. For example, if the prevailing business strategy is underpinned by product leadership (i.e. the company’s competitive advantage is derived from ideas/innovations and the implementation of new products and services), we then break down this imperative into long-term objectives, a business model and a short-term strategy. The outcome? A list of priorities to achieve the business ambitions. In other words, we design the structures, processes, activities and measures to foster and reinforce the business imperative for innovation.

The right HR configuration for each unique organization

Establishing an HR strategy to support the business strategy is not just a matter of going through the three above-mentioned phases. This framework method allows our People & Change team to methodically accompany our clients in the translation of their organization’s business strategy into the value-through-people agenda and, in turn, identify the ways in which HR can add value to the people agenda. This is how we can help to identify the right HR configuration for each unique organization, regardless of its size or sector.

As a group, these components of HR architecture (i.e. strategic value proposition, people agenda, HR value proposition, HR design principles and HR operating model) have a direct impact on an organization’s culture, core competencies and profit per employee. They can also have a direct bearing on the people agenda and when they drive value, this can result in the HR function being integral to business strategy execution.

KPMG Expertise

The demands of today’s world require companies to be both efficient and innovative meaning flexible organizations must be able to adapt continuously to an uncertain and complex landscape. As at KPMG we know that the human factor is essential to the success of a company’s strategy, we have developed solutions designed to accompany the HR function in its pivotal role in this “transformation” of the organization and all its practices.

Want to know more? Our People & Change team are here to answer your questions. Get in touch!

Sabrina Bonnet, Director, People & Change KPMG Luxembourg

Pauline Hortal,  Senior Adviser in Management & Regulatory Consulting

This article was originally published on blog.kpmg.lu

Source: Communicated by KPMG