Case Study on HBR People Before Strategy: A New Role for the CHRO

1.0 Introduction

Organisations are increasingly recognizing human capital as an important locus for organisational competitiveness (Augusto et al., 2014; Kianto et al., 2013; Okoro & Washington, 2012), helping organisations build unique competencies, achieve operational excellence, and remain innovative to address the demanding challenges of the 21st century competing landscape.  Employees are a powerful source of human capital in an organisation, and therefore organisations should not view them in isolation, but rather as important as other organisational assets that help companies remain competitive. In their study of emerging roles of human resource management in contemporary firms, Kianto et al. (2013) attribute the growing need for talented and motivated employees to the increased competition brought about by the internet and increased globalization. On the globalization front, the study observes that an increase in free trade agreements and the growth of the internet has permitted the growth and proliferation of global brands (Kianto et al., 2013). Therefore, firms no longer face competition from domestic peers. Rather, there is increased competition from multinational firms with more resources and strong brand presence to seize market share from domestic firms. The increase in competition has forced companies to pursue a differentiation strategy, which is key to remaining relevant to a consumer in light of an increasing variety of products and services to choose from. 

Secondly, Augusto, Couto and Caiado (2014) study observed that the internet has lessened the geographical and cultural barriers that prevented consumers from purchasing products outside their current borders. Alike, there is an increased flow of information that customers use to make buying decisions. Therefore, a consumer in an emerging economy such as India can purchase a product from the US through the power of e-commerce. Therefore, firms are facing growing competition requiring a change in strategy to remain relevant to consumers facing a sea of choices (Haucap & Heimeshoff, 2013). Employees are the only vehicles through which an organisation can become agile enough to withstand the level of competition in the current dynamic global economy. Consequently, human resource management is witnessing increasing significance from the reactive department it used to be to become a more proactive department with a crucial contribution to an organisation’s competitiveness (Haucap & Heimeshoff, 2013). 

However, the transformational role that human resources can play in an organisation has not reduced the challenges that human resource managers face in contemporary organisations. In their case study on people before strategy, Charan et al. (2009) articulate challenges that face human resource function in contemporary firms while suggesting on the new roles CHRO must fulfil to address the challenges. Therefore, this paper critiques the author’s approach to HR and HR leadership functions, articulates how these views address challenges faced by HR and leadership, examines the different roles HR takes, and makes an argument for the future role of Human Resource Business Partner (HRBP) in helping firms address human resource challenges. 

2.0 Growing Importance of Human Resources Management

The importance of human resource management to an organisation has not been always high in contemporary organisations. As Wright and Ulrich (2017) outline in their study on the past, present, and future of human resources in contemporary organisations, human resource management has long been an outlier department in most organisations in the past. The study findings suggest that the 19th and 20th century was a primitive year for human resource management. Specifically, organisations saw workers as a cost driver that a company must strive to reduce. Kaufman (2008) contextualizes the findings by discussing human capital management during the era of big business in the US. Railway lines were the first big business in the US with some raid road companies having employees in the excess of 50,000. However, working conditions were poor, there were no insurance and retirement benefits, and salaries were as minimum as possible (Kaufman, 2008). Employers never viewed employees as an asset. After the progressive movement, Kaufman (2008) records the beginning of modern human resource management. Specifically, workers’ rights improved while wages and working conditions rose dramatically in the age of the organized workforce (Sanders et al., 2014). However, employees were seen as weakened decision-makers with little or no voice in the management of an organisation. As most companies dealt with simple and undifferentiated products, cost leadership was the primary competing strategy.

During the era of the assembly line, Sanders et al. (2014) observed that human resource management had not developed as an idea. Rather, hiring occurred at the departmental level as little knowledge was required to operate machines. Therefore, there was a little focus on investing in employees as investing in large factories and achieving economies of scale remained the main source of competitive advantage until the late 20th century. However, Sanders, Shipton and Gomes (2014) observe that the maturity of management science in the 1980s and 1990s encouraged companies to pursue a differentiation strategy to remain ahead of the competition as the internet era began. Theories such as Kurt Lewin’s theory change and motivational theories such as Maslow’s Hierarchy of Needs and Herzberg’s two factors theories helped to usher in the modern era of human resource management (Farndale et al., 2019). Specifically, organisations became aware of the performance and productivity performance that would come with treating employees as an asset and talent needed to compete in the changing competitive landscape. Huang et al. (2016) and Wright and Ulrich (2017) add that towards the 21st century, high-performance organisations began making use of strategic human resource management as a vehicle for improving organisational competitiveness. Mostafa and Gould-Williams (2013) suggest that technology companies such as Google introduced new employee management practices that focused on empowering employees to delivery by allowing for flexibility and innovation (Mostafa & Gould-Williams, 2013). As the wave of technology boomed in the US and became the foundation of big business in the 21st century, the competition for specialized talent and the need to retain strategic employees saw the increased proactive role of human resource management in enabling organisations to become competitive. 

3.0 Identifying Authors’ points-of-view about HR and Leadership Function

In their case, Charan et al. (2009) begin by outlining the mismatch between the CEO’s views about the HR function and their emphasis on the human capital needs for an organisation. Specifically, the case outlines that CEOs have a sufficient understanding of the critical role that human resources play in achieving this success. In fact, a cited research by McKinsey underlies the invaluableness of human resources from the perspective of CEOs based on a survey of CEOs of leading global brands. The survey established that most CEOs outlined having the right capital as the most important challenge faced by contemporary firms. Surprisingly, the same CEOs ranked HR function as the 8th most important function in a company. The survey underscores the mismatch between the leadership and HR function that could be inhibiting organisations from achieving their full potential. Based on the findings of the survey, the authors suggest points of view on the potential complementary roles that leadership and HR function could pursue to enable companies to meet their human capital needs.

First, Charan et al. (2009) suggested a new CHRO CEO contract where CHRO should help the CEO by building and assigning key talent needed to unleash organisation talent. Through collaboration, the authors argue that CHRO could have the same level of importance as a CFO, who helps the CEO lead the business strategy through prioritizing allocation of financial resources. Shafer et al. (2001) study on the role of human resource management in agile organisations complements the authors’ views on HR function role in the execution of an organisation’s business strategy. The findings of the study suggest that strategic human resource function takes a central role in the formulation and execution of an organisation’s strategy as developed by the CEO and senior management. Specifically, Shafer et al. (2001) argue that a strategic HR function helps an organisation address the issues of talent when developing a long-term strategy. Oliva et al. (2019) add that strategic HR is proactive in helping an organisation implement its strategy by aligning hiring goals with the overall organisational objectives. Therefore, the author’s views that CHRO should help the CEO build a talent pool that is critical in faster and effective implementation of a strategy reflects the shared beliefs in existing research on organisational management and strategy HR function (Lengnick-Hall et al., 2011).

Secondly, the authors hold the view that it is the role of the CEO to invest in HR function to ensure it rises into a level where the CHRO becomes a strategic partner in the execution of a company’s strategy. Specifically, the authors’ decry CEOs complaint that administrative functions bog down CHROs hence limiting their understanding of the business. Therefore, CEOs should work to elevate the HR role and human capital management into the same position they succeeded in improving the finance function into one of the most important organisational functions. Kim and Sung-Choon (2011) study on role HR function in organisational competitiveness share similar views on the role of organisational leadership in enabling HR function to become a central player in aiding execution of an organisation’s strategy (Glover & Butler, 2011). The findings suggest that CEOs of higher performance organisations have managed to elevate the role of HR into a key contributor towards organisational success through making talent acquisition, employees’ needs, and talent retention central to the organisation’s success (Kim & Sung-Choon, 2011). Using the case of Google, the study finds that the company has made employee well-being central to the company’s long-term strategy, which has helped the company HR function influence the way technology companies manage their workforce. 

Lastly, the authors suggest that the CEO should redefine the role of a CHRO and focus on creating a new contract where the CHRO role is more of a leader than a supporting role. Specifically, the authors envision a new alliance they call the G3, which is a coalition comprising the CEO, the CFO, and the CHRO where the three roles complement each other in developing and executing an organisation’s strategy. Through the arrangement, the author’s argument that the HR function will become a strategic role rather than the supporting and fringe role it still serves in modern organisations. Gollan (2012) reflects these sentiments in their study on the role of strategic HR in the creation of high-performance workplaces. The study findings suggest that HR function must become proactive from the reactive role it still serves in current organisations. Specifically, Gollan (2012) observes that making the HR function proactive will enable human resource managers to become decision-makers, which help them align the hiring goals and objectives with the needs of the larger organisation. The latter move would help transform the HR function from a supporting partner in the implementation of already made decisions by the CEO and the CFO to a player in helping the leadership align the strategy with existing talent (Lengnick-Hall et al., 2011). 

4.0 How Authors’ Views Addresses Challenges Faced by HR and Leadership

4.1 Predicting future outcomes

The views that Charan et al.(2009) present can help address the challenges faced by CHRO and CEOs in multiple ways. First, the authors suggest that increased collaboration between the CEO and CHRO would help the management predict future outcomes. Specifically, the CHRO could help the management understand the effects that key people will have on the ability of an organisation to achieve its goals and objectives. The authors use the case of the CEOs and CFOs use of a one-year or a three-year to understands how different operational issues could affect the ability to deploy a strategy to exemplify the role the CHRO could play in helping the CEO have an understanding of how key people such as a certain leader or a given important team can affect the organisation’s strategy. Long et al. (2013) views are similar when offering suggestions on how organisations can convert HR function into a source of organisational competence. The study findings suggest that considering talent needs and challenges in strategic plans would help CEOs and top leaders have a greater understanding of the effects of organisational behaviour on the attainment of strategic goals (Long et al., 2013; Ulrich, 2014). Specifically, when a company is developing a strategic plan to transition from current situation to a desired situation in the future, it should consider the availability and affordability of the talent needed to meet the desired vision. Recognizing these challenges and hindrances that employees could place on the implementation of a strategic plan will help CHROs become strategic partners in an organisation with the ability to proactively contribute to the attainment of organisational (Cascio & Boudreau, 2016; Ulrich, 2014). Leveraging a deeper understanding of the linkages between strategy implementation and employees, the CHRO will help the CEO achieve a greater fit between peoples and jobs. Existing studies have linked improvement in employee-job fit with increased productivity, improve quality of work, and improve employee job satisfaction (Cascio & Boudreau, 2016; Meijerink et al., 2015). Such are organisational attributes that will improve the leadership and have easier time implementing strategic plans as the employees will be supportive of change initiatives needed to realize the benefits of the strategy. 

Secondly, the authors argue that increased collaboration between the CEO and CFO would help the CHRO become a strategic partner by helping predict how key employee metrics such as performance indicators, talent assignments, and human resource budget contribute to the desired organisational outcomes. The authors suggest that if CHROs can help develop insights that the CEO finds useful in attainment of the organisational goals, there would be increased support for the HR function from the organisational leadership. Wright and McMahan (2011) echo similar sentiments in their study on the strategic human resources place in improving organisation performance. The findings suggest that other functions such as finance and accounting have become more important than HR functions because they provide insights useful in improving organisational financial performance (Wright & McMahan, 2011). However, the HR function has remained a fringe function as the management has challenges linking it to the financial outcome of the firm. Therefore, Kramar (2013) suggests that CHROs could increase their usefulness in the corporate strategy level by helping the management articulate how aspects such as performance measurement and rewards systems affect desired organisational outcomes. Such insights will make CEOs appreciate the role of human capital management in improving organisational performance, which will help CROs elevate the role of HR function in organisational decision making. 

Lastly, the authors’ belief that increased collaboration between the CEO and the CHRO could result in improved competitor analysis, which would be crucial in enabling the organisation to become ambidextrous. Specifically, Charan et al. (2009) suggest that CHROs should undertake analysis of the human resource management approaches that competing firms are using to attract and retain the best talent and the contribution this has on the overall competitor performance. Barigozzi and Burani (2019) share similar sentiments noting that companies are no longer competing for market share. Rather, the increased reliance on technology and intellectual property as a source of competitive advantage mean that organisations are competing for the rare talent needed to support research and development endeavours. Farndale et al. (2010) argue that the competition for specialized and unique talent stems from the realizations that it is employees and not the management who create organisational competence. Therefore, companies are competing for the limited talent that can enable them to create solutions to keep the competitor behind (Farndale, Scullion & Sparrow, 2010). Consequently, increased collaboration between the CEO and the CHRO would help the management understand competitor moves in acquiring and retaining the best talent, which will help the company respond to competition accordingly. 

4.2 Diagnose Problems 

The authors suggest that making CHRO more of a leadership function will help CEOs have a better understanding of the root causes of organisational underperformance in meeting goals. The authors argue that currently, CEOs often overlook the HR department in favour of consultants when an organisation fails to meet its objectives consistently. However, CHROs could help the CEO and operational managers figure out human capital related problems that could be inhibiting organisational performance. While leaders like to attribute falling performance to external environmental factors, Charan et al. (2009) suggest that inefficiencies in how employees work together could be the cause of poor performance. These are the challenges a CHRO could help an organisational address through the proactive implementation of strategies that ensure all teams and workers are working in harmony joined together by the desire to achieve organisational goals. Specifically, a CHRO can help the management detect job mismatches, employee attitudes, and motivational factors that could be reducing employee enthusiasm in helping the company realize its objectives. Albrecht et al. (2015), Alfes et al. (2013), Kehoe and Wright (2010) studies suggest similar findings noting that human resource managers have a greater understanding of organisational behaviour and its influence on employees. Therefore, where human resource management function plays a leadership role in an organisation, the CEO can receive recommendations and pre-emptive plans that limit the likelihood of a breakdown in employee relations, lack of motivation, and lack of effective knowledge sharing mechanisms inhibiting organisational performance. 

4.3 Prescribing Actions that Add Value

Lastly, the authors suggest that making increased collaboration between the CHRO and the CEOs could help the CHRO suggest actions that add value to the company. Charan et al. (2009) observe that agile companies excel in moving physical capital in areas with new business opportunities. For example, a company can increase its research and development spending by taking money from other operations not adding value to the company. However, companies tend to have very huge inertia in moving human capital to areas that generate value to the business. Charan et al. (2009) attribute the inertia to disconnect between the leadership and the human resource function. Specifically, the CEO and operational managers lack an understanding of competencies that each employee has, which could be tapped and add to organisational competence. The disconnect arises from the fridge HR function where CHROs do not contribute to helping an organisation capture employees with hidden talent and move them to sections of the company where they could add the greatest value. Charanet al. (2009) observe that by elevating HR function into a leadership role, the CHRO can help put mechanisms that help a company capture rare talent buried in lower levels of the organisation and move such employees in positions where they can create value by helping an organisation create new competencies. 

The suggestions of Charan et al. (2009) on HR function that proscribes actions that add value reflects findings in the existing literature on contributions HR could make to organisational success. Jiang et al. (2012) and Zhouet al. (2019) studies explored linkages between effective human resource management and organisational outcomes such as innovation. The findings suggested a strategic HR function could help organisations unearth special skills and talents that lower-level employees have but lack chances to deploy them. Such talents could be used to improve decision making and creating innovative solutions to organisational and operational problems. Camelo-Ordaz et al. (2011) study had similar findings underscoring the negative effects of a passive HR function on organisation competitiveness. The findings linked a passive HR function to lost talent and blanketed special skills in the production line and lower management level workers who have limited chances of demonstrating unique skills. Therefore, elevating the CHRO role into a leadership role could help the leadership perfect internal hiring and talent acquisition by helping identify employees with special talents that could become sources of organisational competence (Do et al., 2016).

5.0 Roles that HR Take

5.1 Talent Acquisition and Retention

In the case study, Charan et al. (2015) suggest that an empowered HR function in an organisation would assume the role of talent acquisition and retention. The case emphasizes that making CHRO a leadership role would help create mechanisms to improve internal hiring and talent identification. Specifically, a strategic HR role would help in identifying unique talents that employees in middle and low-level management have and moving them into positions that help them create organisational value. Existing studies on a proactive HR function has suggested other approaches that HR can use to help an organisation acquire and retain specialized talent. Jackson et al. (2014) study suggests that the strategic human resource role differs from a traditional human resource role in that it focuses on helping an organisation identify employees with the right skill needed for further organisation goals and objectives. However, a reactive HR role focuses on filling vacancies. Therefore, when CEOs invest in making CHRO a strategic partner, HR function becomes an asset to an organisation as it helps an organisation pinpoint long-term human resource needs while putting mechanisms to identify specialists and leaders who will be instrumental in fulfilling an organisation’s strategy. Jackson et al. (2014) add that strategic HR function helps an organisation generate leads using strategies such as diversity in hiring top talent using external recruitment approaches. Besides, CHROs with a leadership mindset will adapt talent acquisition to align with organisational values, mission, and visions. Boon et al. (2017) offer a different perspective noting that strategic HR function also focuses on retaining recruited top talent. Specifically, the study suggests that a strategic HR role helps the management understand the motivations and drivers of its most crucial talent, which helps to create approaches that encourage talented employees to spend more years in the organisation. Kramar (2013) suggests strategic retention strategies that include a strong and ethical organisational culture, task autonomy, healthy working environment, and an attractive compensation and benefits pack. Sikora and Ferris (2014) study findings suggest that organisations that excel in leveraging HR competencies to improve talent acquisition and retention tend to have higher levels of innovation, which leads to improved competitiveness. Harsch and Festing (2019) findings also linked talent retention to increase organisational agility and better financial performance. 

5.2 Work-Life Balance and Employee Well-being at Workplace

In high-performance organisations, existing studies indicate that human resource managers play a crucial role in designing job requirements and benefits that help improve employees well-being by enabling them to achieve a balance between family life and work-life. Nayak et al. (2016) study suggests that HR make use of surveys to collect employees' views on how the organisation can help them improve work-life balance and well-being at work. The findings suggest that surveys help HR managers understand the unique needs of each employee as the needs change based on the employment situation. Similar were the observations of Rodríguez-Sánchez et al. (2020) who noted that work-life balance policies that favour a married employee will be significantly different from that of an unmarried colleague. Therefore, using surveys to collect employees’ views and using the results to create flexible and responsive work-life balance arrangements is a crucial role that strategic HR managers play in an organisation. Bui et al. (2016) suggestions focus on the role human resource managers can play in helping operational managers design work arrangements that offer flex-time. Specifically, the study notes that HR managers create job requirements and job design based on the needs of the operational manager. Where the HR function is strategic, HR managers work with operational managers to create job design and schedules that give employees more flexible schedules that can help them strike a balance between work and family life (Cullinane et al., 2014; Daniels et al., 2017). Bui et al. (2016) further opined that a strategic HR function should help embed flexible work schedules into an organisation’s culture to reduce the conflict between family and work life. Zheng et al. (2015) finding suggested that improved work-life balance has a significant positive effect on overall employee-welling. Specifically, the survey results showed that participants who reported higher levels of work-life balance also reported higher levels of well-being, increased job-satisfactions, and better performance evaluation results (Huang et al., 2016; Zheng et al., 2015). Therefore, making the HR function a strategic role will help organisations improve employee satisfaction and performance, which aids in talent retention and improves overall organisational performance. 

5.3 Compensation and Benefits

Lastly, HR takes the role of developing compensation and benefits to plan to keep employees motivated and satisfied with their job. Adeoye and Fields (2014) observe that ordinary HR function focuses on developing salary schemes the organisation feels suits each job. Besides, benefits are universal and not intended to help organisational goals. However, Adeoye and Fields (2014) suggest that a strategic HR function helps an organisation develop a compensation and benefits plan intended to help an organisation achieve its objectives. Specifically, CHROs can help develop a compensation plan that ensures the organisation is offering salaries and benefits that competitors of the same talent are offering. Dwarakanath (2019) adds that CHROs playing a leadership rather than a supporting role collaborates with the CFO and the CEO to help develop a compensation and benefits strategy that improves talent acquisition, retention, and improved employee and team-based performance. The suggestions reflect the G3 framework proposed in the case, where the authors felt that formation of collaboration the CFO, CEO, and the CHRO would give the human resource management the ability to mobilize resources that allow the development of a flexible and responsive compensation and benefits scheme that encourage employees to produce the best quality at the optimal productivity while using a fair rewards and benefits system to keep employees satisfied with their job and loyal to the company. Dwarakanath (2019) adds that a responsive benefits and rewards system would help improve organisational performance and competitiveness through boosted productivity.

6.0 Role of Human Resource Business Partners

Human Resource Business Partners (HRBP) will play a central role in improving the importance of HR in contemporary organisations. Quinn (2014) and Chudzińska (2018) define HRBPs as human resource professionals who partner closely with senior leadership to develop a human resource strategy and agenda that aligns with the goals and objectives of the organisation. Consistent with the existing research, HRBP will benefit HR in five key ways. First, they will help elevate HR from a supporting role to a strategic function helping organisations solve complex employee relations problems. As Bagga and Srivastava (2014) study findings suggest that a proactive human resource management strategy will help identify employees issues long before they happen, which will help reduce strikes and conflict between the employees and the management. Secondly, HRBP will help transform HR into a data-driven organisational function as opposed to the passive role HR plays in an organisation (Kryscynski et al., 2017). Specifically, HRBPs will help collect internal and external data to inform key human resource practices depending on their effectiveness in helping the organisation achieve its financial and human capital objectives. Third, Lo et al. (2015) suggest HRBP will help transform HR into a role that empowers talent and value leaders. Specifically, HRBP will make HR role proactive in identifying employees with unique talents and skills that could be improved through training and nurturing. The talent will end up creating value for the organisation, which helps elevate the importance of HR function as an operational area in contemporary organisations (Lo et al., 2015). Lastly, HRBP will help improve linkages between line managers and human resource managers, which will improve HR managers’ ability to make suggestions for talent types that could help line managers achieve operational objectives. The improved presence of HR in the top and middle-level management will help underscore the value of relying on human resource managers’ advice to improve operational performance (Chudzińska, 2018). The increased importance of human resource managers in senior-level and middle-level decision making will help improve the strategic importance of HR function in contemporary organisations. 

7.0 Conclusion and Recommendation

The case study focused on exploring the author’s views on HR and senior leadership, how the views can address challenges faced by HR roles and leaders in running contemporary organisations, evaluating strategic roles HR can play in an organisation, and suggesting the place of HRBP in future workplaces. The authors’ emphasize the need for CEOs to elevate HR roles into a top organisational function, forging a new partnership between the CEO, CFO, and CHRO, and according to priority to human capital management, the same way CEOs emphasize managing financial capital. The authors view that elevating CHRO into a strategic partner will help make human resource management a source of organisational competitiveness and value. Specifically, closer collaboration between senior leadership and the CHRO would make the HR department as a source of valuable insights for linking people management to organisational performance, troubleshooting endemic organisational problems, and predicting outcomes. The views appear consistent with existing literature, which suggests that improving HR function into a strategic business unit is key to attracting and retaining talent and addressing employees’ issues that affect performance and productivity, hence the overall organisation performance. The need for a close collaboration between human resource roles and senior leadership is underscored on the suggestions in the existing literature on the future role of HRBPs in human resource management in the future. As managing human capital becomes increasingly important in the success of knowledge-based organisations, the findings suggest that HRBPs will help human resource management function become more proactive in enabling businesses to improve short-term and long-term competition. 

Therefore, this report suggests that senior leadership in contemporary organisations should make human capital management the locus of organisational strategy. As competition rises in the globalized markets, financial capital alone will not be sufficient in making an organisation remain relevant in rapidly changing markets. Rather, the quality of an organisation’s human capital will help an organisation remain agile enough to respond to changing current consumer demands while being proactive in predicting future trends that might change the operating landscape. The agility will only be possible if the senior leadership works closely with CHRO to devise a human resource strategy that meets the current future talent needs of an organisation.