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HUMAN capital management is becoming increasingly important to organisations, casting HR firmly in the spotlight as an increasing number of executives are citing human capital – how best to develop, engage, manage, and retain talent – as their biggest challenge

“This is a significant opportunity for HR,” Panuwat Kanchanosot, partner at Pragma and Will Group said. “As organisations face the many and varied challenges of operating in an increasingly complex, fast paced and volatile business environment, the function is uniquely positioned to support the business in achieving strategic goals. In particular, HR has the potential to provide vital insights and direction to leaders on organisational and employee effectiveness, and what it takes to really drive performance.”
However, a general consensus persists among business leaders that the HR profession has so far fallen short of making a real impact. And recent Hay Group research indicates that almost two thirds of HR professionals agree. So how can HR really make a difference? Here Hay Group unveils the six key requirements for building a strategic HR function that is fit for your organisation’s needs both today and in the future.
1. Align to the business strategy
To really add value at board level, HR professionals must understand and leverage the linkages between strategy, people and work. And that begins by asking the right questions like ‘what are the organisation’s human capital requirements over the next five years in line with our strategy?’
Determining the answer requires a solid understanding of the business, as well as the impact of a number of external factors on the organisation’s human capital needs. These include economic conditions, competitor activity, industry and market trends, regulation and advances in technology. This understanding must then be translated into robust workforce plans to deliver the ‘five rights’ – the right number of people, with the right skills, in the right place, at the right level and at the right cost.
2. Focus on the right things
Understanding where there is a requirement for basic – versus cutting edge – HR practice and service is critical to becoming a strategic partner. Exploring what ‘lean’ HR could look like, and then identifying where additional resource should be focused to deliver the strategy, enables the function to have a commercial conversation around the value it adds and its return on investment. It also maintains focus on those key services which are essential to the organisation’s future.
3. Balance standardisation and differentiation
The dominant focus on functional standardisation over recent years has failed to meet business needs, leading to shadow resources and creeping costs. The reality in today’s increasingly complex business environment is that some level of differentiation in HR practice and service is required. It is essential to understand how much flexibility is really needed, whether by business segment, market, region or employee group.
By balancing this flexibility with the advantages of standardised global practices – and by understanding the value of difference – HR can play a critical role in developing organisational agility at the right price.
4. Create an integrated HR operating model
Thinking about how the function works and creating an HR model which is fit for purpose now, yet scalable for the future, is critical to delivering short and long-term functional value. This means translating HR activity into detailed processes and policy, delivered by the right number and level of capable people, in the right structure and location, supported by the right data and technology. It also means putting the right governance and performance management in place to ensure focused delivery, and designing for scalability in line with changing business requirements.
5. Ensure pragmatic, sustainable implementation
Delivering pragmatically and sustainably means acceptance of constant change, and recognition that adapting quickly is key to organisational agility and competitive advantage. This necessitates incorporating ‘future proofing’ into the design of discrete, stand alone solutions, and understanding the interdependencies across key HR activities and processes for larger scale programmes to maximise value.
6. Build HR capability
The final requirement for building a strategic HR function that is fit for today and for the future, is creating a confident, capable and agile HR team. By developing HR professionals who have the necessary skills to understand the business environment, translate the organisation’s strategy into human capital requirements and engage with the business effectively, the HR function can have real strategic impact.
The most important mean to endorse the altering role of HR to a ‘strategic partner’ is to change people’s mindset and attitude to be more open and acceptable of changing expectation. Moreover, it is necessary to initiate HR development plan to help nourishing HR to possess proper competencies that align with organisation’s expectation, especially a solid understanding in the business. Therefore, HR will be confident in discussing and providing advises, as well as being the strategic partner of the organisation. In the meanwhile, the organisation will be able to rely on HR to achieve the strategic goals.