Human resources (HR) plays a critical role in driving organisational performance, but its impact is often debated. The report, Driving Organisational Performance: HR’s Critical Role, by the Corporate Research Forum explores this connection in-depth, offering valuable insights into how HR functions can align their strategies with business objectives to create meaningful outcomes.
The complex relationship
At its core, the HR function is designed to help organisations achieve their objectives by influencing employee behaviour and aligning human capital practices and interventions with the business’ strategic goals.
However, the link between HR activities and business performance is not always clear. The report highlights that many HR functions do not significantly drive organisational performance due to various internal and external factors.
One of the key challenges is the difficulty in observing and measuring the direct impact of HR on business performance. While it is widely accepted that HR practices can shape organisational outcomes, the actual mechanisms are often hidden within what is referred to as the “black box”. This black box represents the gap between HR inputs and measurable business outcomes, where the exact processes linking the two are difficult to observe.
Context matters
The effectiveness of HR practices is highly context-dependent. The report emphasises that HR functions need to tailor their strategies to the specific needs of their organisation, considering factors such as the company’s strategic objectives, organisational structure, labour market conditions, and industry trends. This means there are no universal “best practices” that can be applied across all organisations.
Instead, HR must adopt a “best fit” approach, aligning HR practices with the unique context and goals of the business.
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For example, in an organisation focused on innovation, HR might need to prioritise talent acquisition and development in roles critical to driving innovation.
Conversely, in a cost-driven business, HR may focus on improving operational efficiency and reducing turnover.
Strategic alignment
The report suggests that one of the most effective ways for HR to impact organisational performance is by focusing on the company’s strategic objectives. This involves understanding what the business is trying to achieve and then designing HR initiatives that directly support those goals.
In many cases, HR functions are too focused on operational tasks — such as payroll, disciplinary matters, compliance and administration — rather than aligning their efforts with the strategic direction of the business.
Strategic HR management, particularly through talent management, can play a crucial role in driving performance.
Identifying key roles within the organisation that contribute disproportionately to business success allows HR to focus on recruiting, retaining, and developing top talent in these positions.
Evidence-based HR
The report advocates for the adoption of evidence-based HR practices, where HR functions base their decisions on data and evidence rather than tradition or intuition. This approach helps HR leaders make more informed decisions that are more likely to impact business outcomes positively.
However, the report also acknowledges that the scientific evidence linking HR practices to business performance is not as robust as one might expect. This is partly due to the challenges of conducting high-quality research in real-world business environments, where numerous factors can influence both HR practices and performance outcomes.
As a result, HR professionals must rely on a combination of research, business acumen, and contextual understanding to drive performance effectively.
Key takeaways
HR functions have the potential to impact organisational performance significantly, but they need to overcome certain challenges to realise this potential. The report offers several key takeaways:
Focus on strategic objectives: HR should start by understanding the strategic goals of the business and then align their practices to support those objectives.
Tailor HR practices to context: There are no one-size-fits-all HR practices. HR leaders need to design their strategies based on the unique needs and circumstances of their organisation.
Adopt evidence-based HR: By using data and evidence, HR can make more informed decisions that are more likely to drive business performance.
Move beyond operational HR: While it is important to get the basics right, such as payroll and compliance, HR must focus on activities that drive value, such as talent management, performance management and strategic workforce planning.
Conclusion
HR can and should play a pivotal role in driving business performance. However, it requires a shift in focus from operational tasks to strategic alignment and evidence-based practices.
As organisations face increasing complexity and competition, the HR function must evolve to meet these challenges and contribute meaningfully to organisational success.
- Nguwi is an occupational psychologist, data scientist, speaker and managing consultant at Industrial Psychology Consultants (Pvt) Ltd, a management and HR consulting firm. — https://www.linkedin.com/in/memorynguwi/ Phone +263 24 248 1 946-48/ 2290 0276, cell number +263 772 356 361 or e-mail: [email protected] or visit ipcconsultants.com.
