Take Steps To Ensure HR Tactics Support Business Strategy

By Charlotte H. Anderson May 30, 2008
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Q: How do I align our HR tactical plans with the organization’s business strategy?

A: Before setting HR plans, it’s important to have an understanding of the overall business strategy. Discussing the nuances of the company’s business plan and knowing who its competitors are and why are very important. But beyond that, in order to align its practices and tactical plans with an overarching business strategy, HR can ensure adherence to the business strategy through the following actions:

  • Determine the appropriate organizational structure, job designs for the company.
  • Emphasize key attributes of successful candidates during recruitment and selection.
  • Identify key competencies in all performance management programs.
  • Ensure that all training and development programs build company bench strength.
  • Design compensation and rewards systems that reward desired behaviors.
  • Create employment branding initiatives that communicate desired customer experiences.

Strategy Type

What It Looks Like

Implications for HR

Cost differentiation: Provide great value and low cost.

Emphasize acquiring low cost materials, streamlining processes, reducing waste, maximizing efficiencies (e.g., Wal-Mart, Hyundai).

Structure jobs, depts. to maximize cross training, knowledge sharing.

Design compensation programs to reward efficiency, cost savings.

Select employees with versatile skill sets.

Product differentiation: Deliver product/service that is similar to competitors but incorporates a feature(s) that differentiates it.

Emphasize creativity and innovation. Consumers faced with multiple choices; identify those features that make the product/service stand out (e.g., Beanie Babies).

Design compensation systems to reward creativity, innovation.

Educate employees about product/service differentiating features.

Create marketing campaign to promote special product features.

Customer Intimacy

Emphasize relationship between consumers, point person. Personalized service differentiates the product/service from competitors (e.g., local hair salon, Nordstrom).

Recruit and select job candidates with strong customer service and customer relations skills to help fortify the provider/consumer relationship.

Focus reward strategies on customer attraction, satisfaction and retention.

Customer/Market Focus

Emphasize the needs of a specific target market, like generational or lifestyle (e.g., Abercrombie & Fitch).

Use strong market research to drive recruitment and selection so employees have a strong understanding of the target market.

Emphasize versatility and adaptability as products and services are subject to rapid change.

For example, let’s propose potential HR roles that could support a product differentiation strategy in a business designing automobiles.

Organizational Structure, Job Designs

Organizational structure addresses whether the organization is centralized or decentralized, with functional, divisional or matrix reporting structures and with narrow or wide spans of control.

In this example, one might suggest a decentralized structure, allowing for localized business units to determine precisely what features of the product are of greatest appeal to the local target customer, considering the presence of local competitors’ products. In this scenario, there would need to be close communication among the business units so that continual emphasis is placed on the features of the product and how they differentiate the vehicle from the competitors’. As such, either a divisional (separation by product, market or region) or matrix structure (dual reporting to a functional leader and product leader) would be appropriate.

Rather than traditional functional silos that can inhibit communication, HR might suggest a web of cross-functional work teams to discuss and share all aspects of product development, including market research, design, manufacturing, marketing, sales and cost accounting.

Once the organizational structure is determined, HR can assist by creating the most relevant and accurate job designs. Designing a job includes not only the process of determining the knowledge, skills and abilities (KSAs) needed to perform the job but also addressing such factors as:

  • Degree of autonomy.
  • Task identity and significance.
  • Skill variety vs. job specialization.
  • Work pace.

In this case, many of the roles would require employees with a propensity toward innovation, creativity and flexibility—as product features will likely need to change often—along with a desire for high task variety, a rapid work pace, more interdependence than independence and a high level of autonomy for good performance in manager-less work teams. Understanding these subtle differences and how all the factors come together to create individual jobs is a key functional skill for HR practitioners.

Performance Management

Performance management always begins with determining job standards and metrics for measuring a particular job function. What does success look like, and how will it be measured? Understanding the core competencies for a job is a shared requirement across business strategies. In a product differentiation environment, special consideration is also given to competencies beyond employees’ functional skills, such as:

  • Business acumen.
  • Strategic planning.
  • Teamwork and business relationships.
  • Managing vision and purpose.
  • Organizational agility and drive for results.

Compared to a price-differentiation strategy, where knowledge management has its core in sharing efficiencies, past practices and lessons learned so that prior “nonsuccesses” aren’t repeated, this strategy calls for a different approach. Heavy emphasis on employee education is geared toward understanding the product and the competitors’ products. What are the distinct feature areas that differ? What is the value of those differences to the corporate image and to the customer? Who are the customers? What are their needs? How is the company attempting to predict requisite product changes that might be necessary in the future to keep pace with the target customers’ evolution? Emphasis is likely placed on promoting critical thinking skills, innovation and creativity.

Compensation and reward strategies need to support the foundation of this strategy: To what degree do the employees understand how and why the company’s product or service differs from its competitors’, and how does this add value? Because this is not the price-differentiation strategy (where value is the only separation between products and efficiency is valued highest), all employees need to be committed to the product or service and understand the specific value of the differentiating features. Reward programs, in turn, might emphasize marketing points, sales outlets and innovation, among other performance metrics.

Because the customer experience is vital to this strategy’s success, all employees need to be immersed in an understanding of what the desired experience looks like and how to create it. The employment branding process is a great opportunity to do this (think Disney World compared to all other theme parks); employees live and breathe the product. Making the product available for employee use, having employees shop the competition with a feature debriefing, and creating a forum for employee suggestions and recommendations are all important pieces.

The link between overarching business strategy and hands-on HR tactical plans becomes a little clearer when these differentiating points are examined. It also can be helpful to observe or benchmark the HR practices of another company that shares the same type of strategy.

Charlotte H. Anderson, SPHR, GPHR, is president of the New Jersey-based organizational design and talent development consulting firm Amethyst & Iris and a member of the Society for Human Resource Management's Organizational Development Special Expertise Panel. She can be reached at Charlotte@AmethystandIris.com.

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