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Can HR Strategy Improve Organisational Performance? (Report Date: April 2005, Full Report: 20 pages) Summary Can HR Strategy improve organisational performance? Yes, HR Strategy can improve organisational performance considerably. An extensive study by Watson Wyatt released in 2002 revealed strong links between HR Strategy and business value. It found that good people management practices can increase shareholder value by as much as 90 percent. The time has come for the human resources department to play a greater role in a company’s strategic direction. The role of HR should no longer be limited to operational services and administrative activities within the organisation. The current business climate calls for a more sophisticated HR approach which aligns HR Strategy with wider corporate objectives. Since today’s knowledge economy requires organisations to differentiate themselves according to the skills and expertise of their workforce, the HR department is facing one of its most difficult and pressing challenges to date. Key HR issues such as leadership development, recruitment and retention, training and development, reward strategies, outsourcing, change management, and performance management should make up the core of an organisation’s HR Strategy. However, in order to get senior-level support for investments in value-adding HR initiatives, HR executives must be able to demonstrate to company leaders their contribution to organisational performance and must be able to explain the return on investment of a carefully devised HR Strategy. Only then will the HR department be able to direct HR Strategy towards organisational goals and redefine itself as a strategic partner in the organisation. Furthermore, both senior executives and HR directors must understand which features of the HR function can contribute towards business strategy in order to formulate a human resources strategy which can deliver sustainable business results. This report demonstrates the link between HR Strategy and organisational performance and describes the main features of an effective HR Strategy in today’s business environment.
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