What Separates Great HR Functions From the Rest?

Every HR leader wants to believe their function is doing a quality job. But here's a question worth asking: How do you know?

You may be filling positions quickly, delivering training programs, managing employee relations, and keeping your organization compliant. Those are important responsibilities. But do they tell you whether HR is making the business better?

That's a question my colleagues and I have spent considerable time examining at SHRM. We wanted to understand what distinguishes a truly effective HR function from one that's simply getting the job done. More importantly, we wanted to establish a research-based standard for HR excellence.

What we found surprised even us: Our research, involving 1,287 organizations, revealed that only about one in eight HR functions achieves high maturity. Roughly 80% fall somewhere in the middle, with another 8% at low maturity.

Think about that. The vast majority of organizations have considerable room to improve how HR operates and contributes to business performance.

And the difference matters. Our research found that organizations with higher HR maturity were significantly more likely to experience revenue growth, stronger employee engagement, and lower turnover. In fact, the modeled likelihood of revenue growth increased from approximately 35% at the lowest maturity level to 88% at the highest.

That doesn't mean improving HR maturity automatically causes revenue to grow. Business performance is influenced by many factors. But the relationship is strong, even after accounting for differences in organizational size, industry, and sector.

So, what are the most effective HR functions doing differently?

First, they connect HR decisions to business strategy. Hiring, compensation, development, and workforce planning aren't independent activities. They're investments intended to help the organization achieve specific objectives. High-maturity functions understand those objectives and continually align their decisions with them.

Second, they use evidence to make decisions. Rather than relying primarily on intuition or established practices, they use data to understand workforce needs, evaluate programs, and determine where investments will produce the greatest value.

Third, they anticipate change. They look beyond today's vacancies and immediate staffing challenges. They examine emerging skills, labor-market conditions, technology, and future business needs so they can prepare rather than react.

Finally, they work across the organization. HR excellence requires strong relationships with Finance, Operations, IT, Legal, and senior leadership. The most effective functions understand that workforce decisions affect every part of the business.

These characteristics are reflected in SHRM's HR Excellence Framework, or HR-X, which examines HR maturity across four dimensions: Talent Optimization, Organizational Impact, Functional Acceleration, and Market Discernment.

Together, those dimensions provide a more complete picture of what an effective HR function looks like and where opportunities for improvement exist.

Consider the experience of Chris Courneen, vice president and global head of HR at MS International, a building materials company. Courneen recognized that his recruiting team was spending 20% of its time simply scheduling interviews. He introduced an AI-powered platform that eliminated the administrative burden, then retrained recruiting coordinators to take on more valuable responsibilities, including screening candidates.

Courneen didn't need to reinvent every aspect of HR to make a meaningful difference. He identified a specific problem, applied technology where it could improve productivity, and invested in helping his people contribute at a higher level. That's what progress toward HR excellence looks like in practice.

Courneen's experience illustrates an important lesson from our research: HR excellence is about continuous improvement, not perfection. Even the highest-maturity organizations have areas where they can improve. Nor does it necessarily require a large HR department or an unlimited budget.

What matters is understanding your organization's priorities, recognizing where your HR capabilities need strengthening, and making deliberate improvements that produce meaningful results.

That's also the thinking behind SHRM HR-X Live!, our reimagined SHRM26 in Chicago next June. We're using the research to help HR professionals develop deeper expertise, apply what they've learned to workplace challenges, and earn credentials reflecting applied expertise in specific dimensions of HR.

But whether you're attending a conference, developing your team, or evaluating your organization's HR strategy, I'd encourage you to start with three questions:

Where are we today? Where do we need to be? And what will it take to get there?

Those questions are the starting point for HR excellence. And our research suggests that the answers can make a meaningful difference to the business.

Register for SHRM HR-X Live! webinars