HR strategy research insights at a glance
Based on our analysis of 50 top-performing companies, we determine the critical success factors of an HR strategy that delivers its intended value:
- Success factor 1: Strategic choices are aligned with the organization’s core purpose
- Success factor 2: The HR strategy is embedded into the HR value chain
- Success factor 3: A successful HR strategy needs to demonstrate its relevance, impact, and value.
Organizations are increasingly turning to HR to help them stay competitive and sustainable in the future. The HR strategy remains a key value driver for many companies, dictating focus and clarifying how they will drive impact.
However, a solid strategy on paper is just the beginning. In fact, even with a business strategy in place, 28% of managers cannot name the business’s top strategic priorities.
A robust HR strategy goes beyond a promise. It needs to be a clear, executable roadmap that addresses the business’s needs, reflects the external environment, and shows value and impact by guiding strategic choices and decisions. This kind of strategy builds confidence and encourages action among those who play a role in execution by clearly communicating its focus and providing a clear operationalization plan.
In this article, we share insights from analyzing 50 top-performing organizations to identify the critical success factors of an HR strategy that delivers the intended value. We begin by exploring why some HR strategies fail before outlining the common success factors in these top-performing companies.
What successful companies do differently
There are many reasons why HR strategies fail. The most common reasons for these failures are due to:
- Lack of clear strategic intent
- Limited involvement of critical stakeholders in developing the strategy
- Inability to turn strategies into actionable operational plans
- Insufficient investment to support strategy execution.
Our data shows that successful companies are intentional in addressing these issues. Here’s how they approach strategy development and execution:
Absence of clear strategic intent
HR strategies fail when there is no clear focus on their strategic intent.
Put simply, this implies that the HR strategy is unclear regarding strategic choices, how these relate to solving business objectives, and how HR activities contribute to success.
Successful organizations clearly define the strategic intent of their HR strategy.
They demonstrate to business stakeholders the focus areas and how these decisions position the business for success.
Limited involvement of critical stakeholders in strategy development
HR strategies fail without genuine co-creation between business stakeholders and HR.
The challenge lies in some HR teams attempting to sell the strategy to the business, seeking input only at predefined points instead of actively involving stakeholders throughout the development process.
This lack of collaboration results in strategies that lack alignment and support.
Successful organizations co-create their HR strategies, with businesses being active collaborators in the process.
Business stakeholders (such as executive leaders and line managers) form part of the core strategy team and, as such, have a stake in its success.
Failure to convert strategy into actionable operational plans
Many HR teams spend time and effort on driving various initiatives and activities that have little strategic impact.
Similarly, many HR strategies remain aspirational ideas on paper without adequate translation into operational roadmaps that drive effective execution.
Even when an HR strategy is well-conceived, translating high-level goals into actionable steps can be challenging.
Successful organizations distinguish between their overarching people agenda, HR strategy, and strategic implementation plans.
They use strategic objectives to align execution, track and measure impact to show progress, and continuously evolve the strategy process in response to business changes.
Insufficient investment to support strategy execution
HR strategy execution fails without adequate investments to deliver.
This investment goes beyond just financial resources. It also includes sufficient time, technology, training, and skills investment.
Successful organizations ensure that investment requirements are outlined within their HR strategy.
This strategy shows the trade-offs of resources versus execution capability, drives strategic decision-making, and manages expectations.
Along with taking mitigating steps to tackle common reasons for failure, our data shows that impactful HR strategies share key success factors that set them up for excellent execution.
3 critical success factors underpinning impactful HR strategies
Success factor 1: Strategic choices aligned with the organization’s core purpose
Successful organizations all share a focus on environment, social and governance (ESG), Diversity, Equity, Inclusion and Belonging (DEIB), and employee engagement. However, they make different strategic choices regarding how to operationalize and deliver on each of these domains. These choices are closely aligned with the organization’s core purpose.
The organization’s core purpose refers to the underlying beliefs around what makes the organization successful, how it competes and contributes in the market, and how its workforce and people contribute to that success. This purpose sets the tone for the organization’s business priorities, culture, values, and people agenda.
When the core purpose aligns with HR’s strategic choices, it fosters an integrated and relatable narrative about people. This connection ensures that HR priorities make a meaningful impact, align closely with business goals, create clear internal alignment within the HR function to a common purpose, and provide authentic employee experiences.
Practical example: Apple
When it comes to DEIB, Apple is an excellent example of how its HR strategy and strategic choices reflect the business’s core purpose.
At the core of their business and product development and design, they prioritize accessibility and representation. Internally, they drive this same commitment to belonging and inclusion through their employee groups and DEIB initiatives aimed at making a positive impact beyond the organization.
Success factor 2: Embedding the strategy into the HR value chain
Strategic focus areas represent the broad commitments and deliverables of the HR strategy, showcasing its value to the business. These areas are executed by multiple teams and functions within HR. A key factor for success is effectively translating these strategic focus areas into the HR value chain and supporting practices.
While translating strategic focus areas into HR practices is usually considered part of executing the strategy, it’s important to identify dependencies and interconnectedness from the beginning.
This proactive approach ensures that strategy execution permeates all levels of the HR function and clearly defines accountability throughout the process. It underscores the feasibility of the HR strategy, specifies where accountability rests, and explains the impact on various HR practices over time.
Practical example: Amazon
When Amazon describes its focus on customers, it links its employees’ career experiences to this focus. This includes learning and development, talent acquisition initiatives, diversity and inclusion, and employee benefits. There is a clear synergy in how their strategic focus area has been translated to various HR practices and processes to ensure that it delivers value in execution.
Success factor 3: Measurement, impact, and visibility
A successful HR strategy needs to demonstrate its relevance, impact, and value. This is achieved through accurate and timely measurement that reflects the impact that key stakeholders have agreed on for the HR strategy execution.
Firstly, the measurement of the HR strategy should confirm that the strategic focus areas are relevant and delivered and also help create a positive work environment.
Secondly, a strategy that is not monitored and measured against clearly defined key performance indicators has limited opportunity to show its impact and value. This includes connecting the links between the delivery of the strategy atond the longer-term business value it can provide.
Finally, the strategy’s impact and value should be visible to key stakeholders. The HR strategy must be measured with the same rigor and discipline as other business areas to build HR’s credibility and legitimacy in the longer term.
Practical example: Walmart
Walmart uses this three-part measurement approach to measure and report its diversity and inclusion focus areas. They highlight their strategic focus area and support these with clear goals and metrics.
The company shows progress against these metrics through year-on-year comparisons. They further outline why this is relevant to the business and society and how these are delivered through HR practices.
Governance and accountability are transparently outlined, and measurement is made visible to the board, the leadership team, employees, and prospective talent seeking to understand the experiences delivered through the HR strategy.
These three critical success factors ensure that HR strategy is formulated in collaboration with the business, has a clear focus, and is clearly translated into actionable execution plans. It is also measured against a set of pre-defined criteria in a disciplined and rigorous manner.
Take action
As Morris Chang famously said, “Execution without a strategy is aimless; strategy without execution is useless.” This requires a renewed focus on not only the process of defining the HR strategy but also the quality of the content that is included. It also challenges our perception that a good HR strategy contains the ‘right’ things.
For the HR strategy to deliver value, it must reflect the business’s priorities and demonstrate precise alignment with its long-term sustainability. This requires critically examining the inputs considered in defining the strategic focus areas and translating these focus areas internally within HR and to various audiences.
To show impact and value, the cadence of measurement, as well as metrics of success, must be included in the strategy.
