This is article is part of The Excellence Files series --a forum where contributing Stevens faculty and staff members share practical insights and reflections to reinforce the mindset of “excellence in all we do” and to focus, engage, and align employees with our mission, values, and strategic priorities.
HR as a Strategic Partner in Transformation and Growth
by Dr. Gregory Prastacos
Dean, School of Business
It is widely agreed that people are a company's most important asset and a source of competitive advantage. This is especially true in today’s dynamically changing knowledge-intensive economy, in which organizations seek transformation and growth, and where talent is the most sought-after resource for an organization. It is therefore critical to develop strategies that will both attract the right talent, and create an environment that enables employees to realize their potential and achieve corporate and personal goals. What is the role of HR in this process? Can HR become a strategic partner in an organization’s effort for transformation and growth?
My answer to this question is emphatically yes! I see HR as potentially a strategic partner in this effort. Before I elaborate, let me first go over what I consider to be the key human-capital-related challenges and trends organizations face today. Taking these challenges and trends in consideration I then adopt a framework – role that HR can play as a strategic partner for transformation and growth; I conclude with a suggested path going forward and a set of assumptions than need to be satisfied in order for this to be achieved.
Key Challenges Today
Here are eight challenges that play a major role in today’s business environment that relate to human capital, and must be taken into account as we consider HR’s strategic role.
- Sweeping changes in technology. Tech-driven changes impact jobs and create the need for new skills, while other jobs become obsolete. These changes also create many opportunities to simplify HR processes, reduce errors, and eliminate bureaucracy.
- Major changes in demographics. Globalization, changes in the geopolitical environment, an increasing emphasis on diversity and inclusion, and the growing percentage of millennials in the workplace are some of the factors that have contributed to large demographic changes, thus creating a more diverse work environment.
- Need for team-based organizations. As organizations become more digital, they move away from traditional hierarchical structures, toward models where work is accomplished in teams, thus achieving much needed agility, collaboration, knowledge sharing, and speed.
- Falling engagement. Employee engagement is the biggest contributing factor in growing productivity and retention. However, today’s increased employee mobility indicates a reduced engagement. Action needs to be taken to improve engagement.
- The importance of culture cannot be overemphasized. As Peter Drucker, the father of management once said: “Culture eats strategy for breakfast.” This saying underlines the importance that organizational culture plays in achieving the corporate goals. A good corporate culture is behind the success we see in breakthrough organizations.
- The role of diversity and inclusion. Diversity and inclusion has become a top-level issue around the world. It not only contributes in creating a culture characterized by innovation, openness and fairness, necessary ingredients in any business culture, but it also contributes towards the efficient operation of teams, which is the desired mode of operation.
- The relentless war for talent. The war for talent is stronger than ever, and getting the best talent is among an organization’s most critical goals. New methods and tools need to be used to be able to identify and recruit talent.
- Attracting and growing leaders. All organizations face an urgent need to develop leaders at all levels. However, leadership today is not the same it used to be. New challenges need to be addressed in a global, STEM-dominated world. What is the role of HR in this new reality? In addition to the more traditional administrative functions that HR performs – and for which there is definitely room for improvement – HR can undertake or contribute  to three strategic roles of the organization: attraction and engagement of talent, development and growth of employees, and participation in the transformation and reinvention effort of the organization to adapt to today’s environment.
Role 1: Attract and Engage
It is not a secret that the war for talent is going strong, and getting the best talent is among an organization’s most critical goals. However, many of the old ways to identify, and recruit talent are no longer effective enough. Social media are extensively used to identify and recruit candidates; they can also be helpful to strategically target groups, like minorities, veterans, and other groups for potential recruiting. Web pages of companies are used to create friends, fans, and followers, who may seek opportunities there, and could also be accessed should opportunities arise. Analytics are used to make sense out of large amounts of data of potential candidates, while marketing techniques are widely used to draw and cultivate new prospects. Finally, like in product marketing, reputation is very important; creating and maintaining a good reputation about the culture and practices of the organization is bound to bear fruit in the medium term.
However, just bringing in top talent is not enough. Employees today change jobs much more rapidly than ever. This mobility reflects economic trends, but also indicates reduced engagement. Unfortunately, this happens at a time when management gurus indicate that we need to move “beyond engagement” to passion. This is because, according to research, employee engagement is probably the biggest factor that contributes to improved retention and increased productivity of employees. Especially today, when every organization is trying to achieve the maximum and is asking its employees to perform their best and beyond, achieving a high level of engagement is absolutely essential. How does an organization achieve employee engagement?
There are a number of factors − both organizational and managerial − that drive engagement . Organizational drivers include setting a compelling direction, engaging in open and honest communication, providing opportunities for career growth and development, recognizing and rewarding high performance, and providing benefits that demonstrate a commitment towards the employee’s well-being. Management drivers focus on the employee’s relationship with his/her supervisor and co-workers, such as receiving clear expectations for the work that needs to be done and feedback on his/her performance, feeling supported by one’s supervisor, receiving recognition for good work, and being empowered to accomplish his/her job and to make decisions. HR can lead the effort in increasing engagement in an organization.
Role 2: Develop and Grow
There are three aspects of the develop-and-grow role: Identifying the skills needed, especially in view of the sweeping technology changes, developing learning and career opportunities within the organization, and attracting / preparing the future leaders across the organization. The changes in technology and the move towards automation and artificial intelligence (AI) are changing things rapidly. Algorithms that make decisions on stock trades, or machines capable of reading X-rays and making medical diagnoses, are just two examples of technology innovations that are improving our lives, but they also introduce a number of challenges that have to do with the future of work . What will the jobs of the future be? Which jobs will disappear, and what skills and capabilities will be needed to perform new kinds of jobs successfully? HR can play a role in identifying these capabilities and skills, and prepare the ground for retraining the employees with the capabilities needed in the forthcoming AI-dominated world.
HR can also play a major role in offering learning and career development opportunities in an organization. Continuous learning is critical for business success, but this is also a key expectation of the millennials, who expect that learning is always available over a range of mobile platforms, and covering a wide range of topics. The good news is that there is an explosion of high-quality, low-cost content, available for organizations and employees interested in continuous learning. With the various MOOC platforms, YouTube channels and others, getting a new skill is often only a click away. Of course, continuous learning needs to be accompanied by career opportunities, where the newly acquired skills can be put in use. These tasks that relate to learning and career development also fall within the HR’s role.
The last issue to address here is the need for growing leadership. All organizations face an urgent need to develop leaders at all levels, and leadership remains the top talent issue facing organizations around the world. However, leadership in a STEM-dominated world is not the same it used to be. I had the opportunity to discuss this in my remarks last December in honor of Rick Roscitt ‘73, who donated an endowed chair of leadership at the School of Business. In my remarks I argued that leaders today need to possess certain abilities to address the challenges mentioned earlier. They need to understand technology and capitalize on it for the benefit of the organization, be aware of the global environment and be fluent with it, demonstrate agility and be able to build and drive cross-functional teams, and be flexible, adapt to the continuous changes happening today, and innovate, while at the same time they mentor and develop millennials, and inspire their teams to perform in a hyper-competitive environment. HR can be of help in identifying and preparing potential leaders that possess these skills for the different levels of the organization.
Role 3: Transform and Reinvent
There are two issues in the transform and reinvent role: Facilitating the transformation towards a model of work with teams − beyond the silos of units − to provide agility and knowledge sharing, and developing a winning culture in the organization. As mentioned, organizations move toward models where work is accomplished in teams, as they become more digital. This has always been the case, especially when addressing complex problems or launching new projects; however, two factors are now contributing to this becoming the standard : as IT is becoming an integral part of most product/service development or delivery teams, the agile approach used extensively in IT projects permeates most projects. In addition, as rapid innovation becomes key, organizations look at software companies, and adopt their agile practices for managing projects.
Research  shows that smaller teams work better, and that we spend two orders of magnitude more time with people near our desk than with those more than 150 feet away. Teams provide agility, speed, knowledge-sharing, and collaboration as individuals meet within a team, share information transparently, and move from team to team depending on the issue to be addressed, while at the same time they “carry” knowledge that can be used to address future issues in other teams. HR can facilitate the creation of winning teams by combining skills from employees across units, and in this process, can learn from IT how to apply agile talent practices throughout the organization.
Probably the biggest contribution of HR in undertaking this new strategic role in the organization is the creation, together with leadership, of the organization’s culture. Peter Drucker’s statement mentioned above, later popularized by Mark Fields, President of Ford, does not mean to underestimate the importance of strategy. Instead, it means to emphasize that strategy and culture have to be aligned for the organization to succeed, and that the best strategic concept won’t work if it conflicts with the overarching culture of a company. For example, Apple’s commitment to innovation is cultural, not process driven, and hence has been very successful. Another good example has been Google. The book by Laszlo Bock  contains the 10 “work rules” that have transformed Google and have created an unparalleled culture of innovation, while striking a balance between creativity and structure.
When we define culture, we define values, goals, beliefs and habits. A good culture will engage the teams to achieve superior performance, it will provide a supportive and inclusive environment, and it will guide everybody in the organization so that their daily decisions making is aligned with the organizational goals, without the need of immediate supervision. What are the elements of a good culture? Well, a lot can be said here, but I would argue that a good organizational culture should be: open, high performing, empowering, and transparent. An open culture encourages collaboration and sharing between the members of its community, provides support to them, and encourages diversity and inclusion. The importance of an open culture cannot be overemphasized: Research  shows companies with above average diversity in their management teams report almost half their revenues from innovative products or services − about 20 percentage points more than companies with below-average diversity in their management teams − as well as better overall financial performance. In a high-performing culture each member is expected to perform at the highest of his or her abilities. This assumes a vision and mission of the organization that is well communicated and strongly adopted by its members, as well as a set of values that are authentic and widely shared. An empowering culture provides autonomy and gives the manager the power and the tools to make decisions within their area of responsibility. It will encourage him/her to feel a certain “ownership” of a problem, and to take initiatives and explore new and innovative solutions to address it. Finally, a transparent culture encourages disclosure and honesty in all decisions and behaviors, both internally and externally. There is no doubt HR can play a major role in creating, together with leadership, a winning culture in an organization, as these elements of the culture have to be communicated and adopted down to the unit and individual level.
The Road Ahead: What Needs to Be Done
However, even though I believe HR can become a strategic partner and contribute significantly towards the above critical functions, I also believe that there are certain conditions that must be satisfied first in order for this to happen. Assuming that some of these conditions pre-exist, the process will be easier to implement.
HR Must Understand the Business
HR must broadly and deeply understand the business they support and know the business’ strategy and needs. Only then will HR be a useful partner to the revenue generating units, and contribute towards finding solutions to problems, simplifying processes, identifying skills that are needed, and identifying best candidates. Once this happens, it will also be able to contribute towards improved strategic decision making by providing insights about where to invest in human capital, and by identifying the key leverage points where human capital contributes most to the organization’s success.
HR Must Understand the Technology and Its Implications
The advances in automation and cognitive technologies are transforming all aspects of business, including managing human capital. Analytics are now widely used to facilitate the HR administrative functions, and provide insight about existing employees, or future recruits. HR systems need to take these technologies in consideration and simplify processes. In today’s environment we have grown to have little patience for bureaucracy or duplication of effort, and HR needs to realize this, and make sure its administrative systems correspond to this expectation. This will increase HR’s credibility as a strategic partner. In addition, HR needs to understand the implications of the future of work, and work with the divisions to prepare the workforce for the skills that will be needed in an AI-dominated workplace.
HR Must Adopt a Customer-Centric Mentality
HR must be open to what the business units want and what is important to them. What additional information, skills or assistance do people need? What new channels are available? It needs to align its practices with the requirements of internal and external stakeholders.
HR Must Develop (with Leadership) a Culture of Agility, Engagement and Growth
HR has to be agile and project this culture to the rest of the organization. Foresee, plan and adapt simultaneously to change, master technology, develop talents and their potential and allow flexible working environment and terms, whenever possible. Together with the leadership of the organization, HR must help create a culture of agility, engagement and growth to the rest of the units, very important objectives of the organization.
HR Must Adopt a Culture of Evidence-Based Management
For HR to become a strategic partner, it needs to adopt an evidence-based management approach with quantifiable goals and metrics that have to be set and monitored, and action plans need to be developed that will achieve these goals.
Organizations are continuously transforming to adapt to the new realities of the digital, global and continuously evolving marketplace. HR can be a strategic partner in this effort. To achieve this, a number of steps will have to be taken, in order to change existing mentalities, or familiarize HR in depth with the business units. Time is crucial in this journey, competition is relentless, and therefore, these efforts have to start now.
- Deloitte University Press, Deloitte Global Human Capital Trends, 2014, 2015, 2016, 2017
- James Mnyika, et.al., “Jobs lost, jobs gained: Workforce transitions in a time of automation,” December 2017, McKinsey Global Institute.
- Society for Human Resource Management (SHRM), “Developing and Sustaining Employee Engagement,” March 17, 2017
- 4. Laszlo Bock, “Work Rules: Insight from Inside Google that will transform how you live and lead,” Twelve Publishing, New York, Boston, 2015.
- 5. Peter Cappelli and Anna Tavis, “HR Goes Agile,” Harvard Business Review, March-April 2018. 6. Rocio Lorenzo, et.al., “How Diverse Leadership Teams Boost Innovation,” Boston Consulting Group, January 2018