For many people and business owners alike, HR is just a supporting function. It’s not critical in an organization. In fact, you don’t need HR if you’re a small business. 

These are common HR myths and misconceptions. If HR began as a support function, it’s no longer the case. 

HR has become part and parcel for the success of companies, startups, enterprises, and other types of organizations. Its functions have become ‘strategic HR functions.’

Case in point, research suggests that a single bad hire can cost a company up to 30% of that employee's first-year salary.

Meanwhile, organizations with proactive HR strategies can see a 21% increase in profitability.

What does this show? HR isn’t about paperwork and compliance. It’s not just a support system anymore. It’s a core function that shouldn’t be disconnected from core business objectives.

In this article, we’ll explore the transformation of HR from an administrative function to a strategic business function along with the pillars of modern strategic HR.

From Administrative Burden to Strategic Asset 

To understand the full scope of this transformation, we need to examine the journey from the old understanding of HR to the new strategic model. 

Consider this journey as a 3-stage development process.

The traditional, reactive model 

As mentioned, for decades companies treated HR as a support function. HR teams were those responsible for paperwork, payroll processing, preparing compensation and benefits packages, and compliance with labor laws and tax regulations. 

In other words, HR was a reactive function. This traditional view positioned HR as a necessary function, but one that wasn’t tied to profitability or business objectives. The focus was on tactical tasks rather than long-term organizational health.

Naturally, this view came with limitations. HR professionals were often seen as administrative employees, whose daily work centered on essential but non-strategic tasks like managing recruitment cycles, payroll, among others. 

HR addressed issues as they arose instead of proactively shaping the future of the organization.
 

The business case for strategic HR

The shift to a strategic HR mindset is not a trend; it's a business imperative. It recognizes that a company's human capital, its talent, is a competitive advantage. 

This modern approach moves HR from a reactive, administrative function to a proactive, strategic business partner. 

Instead of simply processing paperwork, a strategic HR team works alongside executive leadership to develop and execute long-term business strategies, ensuring that the organization's people are a direct driver of growth and success.

This strategic shift has a measurable impact on the bottom line. 

Research by Gallup has found “highly engaged business units achieve 10% higher customer loyalty and 18% higher sales productivity.”

For example, strategic workforce planning helps a company forecast its future talent needs, allowing it to proactively develop skills internally or build a pipeline of external candidates. 

This can reduce costly last-minute recruitment efforts and improve overall productivity by ensuring the right people are in the right roles at the right time.
 

Key elements of a strategic HR mindset

The shift to a strategic HR mindset is guided by three core principles.

First is business acumen, which means HR professionals understand the company's goals, finances, and market. This knowledge allows them to design HR initiatives that directly support business success.

Second is a future-oriented perspective. Strategic HR teams don't just react to daily issues. They use data to predict future needs, such as upcoming skill gaps, and plan ahead with training or new hiring strategies.

Third is a focus on measurable results. By tracking metrics like employee retention and productivity, HR can demonstrate its impact and show how its efforts contribute to the company's overall performance.

The Pillars of Modern Strategic HR 

Modern strategic HR rests on 5 key pillars. Each is a distinct practice that transforms employee management into a value-adding business partner.

1) Strategic workforce planning 

Referred to as manpower planning, this involves anticipating future talent needs and proactively building the right workforce to meet them.

Instead of simply filling vacant roles, strategic HR analyzes long-term business goals to predict future requirements. 

This includes conducting a skills gap analysis to identify where current employee capabilities fall short of future needs, creating succession plans for critical leadership roles, and building talent pipelines for key positions.

2) Creating a high-performance culture 

A high-performance culture is a company's engine for growth. The strategic HR mindset builds and nurtures this culture, which in turn attracts, engages, and retains top talent. 

It involves implementing regular employee engagement surveys to understand employee sentiment, offering comprehensive wellbeing programs that support physical and mental health. It also ensures the company's core values are actively communicated throughout the organization.

3) Data-driven talent development 

Strategic HR plays a critical role in developing employee capabilities to align with business goals. This is no longer a one-size-fits-all approach. 

For example, HR can design targeted training programs based on the results of a skills gap analysis. Alternatively, they can implement a continuous performance management system that provides real-time feedback and fosters a culture of growth. 

Studies show that companies with strong talent development programs have 40% lower turnover rates.

Further reading: 6 Expert Tips to Help You Create a Training & Development Budget

4) Benefiting from HR agencies 

Businesses without extensive in-house HR resources can benefit from external support. 

Strategic HR agencies, like Tawzef, provide expert support in 3 key areas: complex recruitment for niche roles, consulting services on competitive compensation, and providing outsourced HR leadership during rapid growth."
 

5) Managing organizational change 

HR acts as a key change leader, guiding the organization and its people through significant transitions. This involves more than just a company-wide announcement. 

HR professionals are responsible for communicating changes effectively and transparently, managing employee resistance through proactive engagement and listening, and providing the necessary training to ensure a smooth transition to new processes or structures.

Wrapping It Up 

We've explored how a strategic HR mindset, grounded in business acumen, a future-oriented perspective, and a focus on measurable results, directly impacts an organization's bottom line.

The pillars of modern strategic HR, from workforce planning to fostering high-performance-based cultures to data-driven talent development and navigating organizational change, can have a profound impact on a company's growth and success.

Ultimately, the most thriving businesses recognize that their people are their most valuable asset. Investing in strategic HR isn’t about managing this asset, but about actively cultivating it to drive growth and innovation.

CEOs, general managers, and HR leaders need to assess their current HR functions. Identify opportunities to elevate the role of HR in the organization, and transform it into a strategic contributor to your business's overarching success.

Need help unlocking your organization's full potential through strategic HR? Get in touch with Tawzef, your strategic HR business partner.