Only 28% of HR leaders claim they understand their company's strategy well enough to support it effectively
April 10, 2024
By Chris Harvey
CHROs report that acquiring and being respected for their business acumen is a top attribute to successfully leading the organization's people function. By delving into their organization's business strategy, mastering financial fundamentals, honing data analysis skills, nurturing cross-functional relationships, and committing to continuous learning, HR leaders can significantly enhance their credibility and influence within the organization. This heightened business savvy enables HR leaders to align initiatives with overarching business objectives, make data-driven recommendations, and collaborate effectively with leaders across various functions. Consequently, HR leaders can expand their contribution to the organizational decision-making processes, solidifying their position as valuable contributors to the C-suite and the broader business operation.
Let's delve into five strategies HR leaders can employ to enhance their business acumen and increase their influence.
1. Understand the Business Strategy:
HR leaders play a pivotal role in translating business strategy into actionable HR initiatives. Surprisingly, only 28% of HR leaders claim they understand their company's strategy well enough to support it effectively (Harvard Business Review). Aligning HR initiatives with the broader strategy is crucial for organizational success. Companies with a strong alignment between HR and business strategies are 1.4 times more likely to outperform their competitors (Deloitte).
- Actionable suggestion: HR leaders can request regular meetings with executives or attend strategy sessions to gain insights into the organization's goals and objectives. Additionally, seeking mentorship from leaders in other departments can provide valuable perspectives on how HR can better support the overall strategy.
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2. Learn Financial Fundamentals:
A solid grasp of financial principles is imperative for HR leaders to make informed decisions impacting the bottom line. Research indicates that 72% of HR professionals believe understanding basic business and financial principles is critical for HR success (Society for Human Resource Management). Furthermore, companies with financially savvy HR leaders are more likely to achieve higher profitability, with reported 15% increases in profit margins (Corporate Executive Board).
- Actionable suggestion: HR leaders can enroll in finance courses or workshops to improve their understanding of financial principles. Collaborating with the finance department on projects or initiatives can provide practical experience and insights into financial decision-making processes.
3. Develop Data Analysis Skills:
HR owns people analytics containing key metrics driving business success. HR analytics can lead to significant improvements, including 15% reductions in employee turnover and 5% increases in employee productivity (Bersin & Associates). Furthermore, organizations with HR leaders who leverage data analytics are 2.3 times more likely to achieve better performance compared to their peers (IBM).
- Actionable suggestion: HR leaders can start by familiarizing themselves with HR analytics tools and platforms. Leveraging key HR metrics, identifying relevance to their organization, and tracking and analyzing data can uncover insights. Attending training sessions or workshops on data analysis techniques and best practices can further enhance skills.
4. Build Cross-Functional Relationships:
HR is all about building relationships. A strong partnership between HR leaders and department heads is essential for HR leaders to gain insights into the broader business context. Employees who have strong cross-functional relationships are 29% more likely to say they can make a positive impact at work (Gallup). Moreover, organizations with high levels of cross-functional collaboration experience a 20% increase in innovation (Harvard Business Review).
- Actionable suggestion: HR leaders can initiate cross-functional projects or task forces involving collaboration with other departments. Organizing networking events or team-building activities can facilitate relationship-building with leaders from different areas of the organization. Additionally, participating in cross-departmental meetings or committees can help stay informed about initiatives and challenges across the organization.
5. Stay Informed and Continuously Learn:
HR leaders can lead the organization by investing in learning paths for themselves and the entire organization, aligning learning goals with business objectives. A staggering 94% of employees would stay at a company longer if it invested in their career development (LinkedIn). Additionally, organizations prioritizing learning and development initiatives see 24% higher profit margins compared to those that don't (Association for Talent Development). By staying informed and continuously expanding their knowledge base, HR leaders can position themselves as trusted advisors within their organizations and drive meaningful change.
- Actionable suggestion: HR leaders can allocate time each week for learning and professional development activities such as reading industry publications, attending webinars, or listening to podcasts. Joining professional associations or networking groups related to HR or their industry can help stay connected with peers and access resources for continuous learning. Setting goals for skill development and tracking progress over time can ensure consistent expansion of knowledge and expertise.
In conclusion, cultivating strong business acumen is essential for HR leaders to elevate their influence and drive organizational success. By understanding the business strategy, mastering financial fundamentals, developing data analysis skills, nurturing cross-functional relationships, and committing to continuous learning, HR leaders can position themselves as strategic partners within their organizations. These five recommendations provide actionable steps for HR leaders to enhance their credibility, influence decision-making processes, and ultimately contribute to achieving broader business objectives. With a proactive approach to developing business acumen, HR leaders can make significant strides in advancing their careers and making a tangible impact on the organizations they serve.
