Strategic HR: First Question to Ask…What Kind of Business Are You In?

By BLR Founder and Publisher Bob Brady

In a survey we conducted nearly 15 years ago, HR managers identified “strategic HR” as a high-interest issue, so we did a book on the subject, telling HR managers how to do strategic planning.

It was a pretty good book, but it bombed in the marketplace. No one was interested.
So much for the accuracy of surveys, right? Wrong.

It had more to do with our misunderstanding of how HR affects organizational strategy. It is the rare HR manager who makes strategy. More often, HR is in a service role, charged with making sure that its policies and practices support organization strategy.

This is not a bad breakdown of responsibilities. As someone who has studied and written about HR for 30 years, I’m more sympathetic to HR than many CEOs. But wearing my hat as a business owner, I know that our HR department is here to serve our strategy, not to serve it up.

It’s not that HR doesn’t have to be strategic. Not at all! In his book, Winning, Jack Welch, former CEO of General Electric, says that the HR Director should be equal in stature to the CFO. That’s good for HR, and it should pump up our sagging egos. But then he turns around and deflates us by urging CEOs to find the best marketing manager or the best operations person and make him or her head of HR! His argument? They really understand the business and, thus, the organization’s people needs. In other words, they live and breathe strategy.

That Welch ignores career HR people is disappointing, but it points to what HR managers have to do to get ahead and be taken seriously. We have to understand what makes our organizations “click”—how we really serve our customers and make money. If we think of ourselves as “just HR guys,” that is the way everyone else will think of us, too.

If you know what drives your business—just another way of saying what its business strategy is—it will be much easier to formulate the right HR strategy. And note the word right. Just because an idea is a good idea doesn’t make it right for your organization. What’s good for GE might not be good for a small start-up.

Three Kinds of Companies, Three Kinds of Strategies

Some time ago, I read a book that said that there are three kinds of people: those who like people, those who like things, and those who like ideas. Similarly, there are three kinds of businesses that roughly correspond to the people types: customer, operations, and products.

Aligning HR strategy to business strategy can be a lot easier if you first identify your business type, then see what this means for HR. If you are a “products” company, you need innovators. “Operations” organizations need people who are detail-oriented and driven for results. “Customer” companies are about relationships, so you need people who thrive on that.

Finding out what drives your business will usually be relatively easy. When I look at my company, BLR, for example, it is pretty clear that we are a products company.
When we’ve had big success, it has been because of a new, innovative way to serve our customers. Sure, we are good at customer service and value our relationships, and, yes, we are good at operations, but the real “secret sauce” has come from thinking up products that help our customers do their jobs.

Making sure that we hire people who can create; that we set compensation programs that reward creativity; and that we have policies and practices that promote innovation — in other words, that we have an HR strategy that supports our business strategy — has been HR Job #1 at BLR. There have been times when we’ve hired great people who haven’t worked out primarily because they were “people” or “things” people, and they couldn’t really understand and appreciate our “ideas” culture. Either they became very frustrated, or worse yet, they took us in their direction, creating misalignments.

So ask yourself: What kind of business am I in? Are you a products company (think Nike or Bloomingdales)? Operations (think Wal-Mart or Southwest airlines)? Or
Customer (Nordstrom or the new, service-oriented IBM)? Think about this and talk it over with your peers.

Next time we’ll explore the different kinds of policies and practices appropriate for each type of business. Have a successful HR week!