Why HR leaders must drive strategic transformation: CHRO's Idea Incubator

If your organisation says it hasn’t experienced the disruptive effective of digital technologies then it is either myopic or has missed the inflection point and the only way is downwards.

Digitisation is changing the way companies deliver value to their customers, pushing them to move from traditional operational efficiencies to creating personalised, information-rich solutions. And HR has an important role to play in this strategic transformation.

And yet, says Dana Minbaeva, professor of HCM at King’s Business School, King’s College London, while HR functions have started digitising various processes, from recruitment to performance management, this is more of a "doing digital" approach, improving existing processes, as opposed to "being digital," which involves fundamental transformation of value creation.

For decades, says Minbaeva, we have talked about how HR can be a strategy implementor. We have talked about the need to get that ‘seat at the table’.  But now it has got that seat ‘everybody else has left the room’.

“Strategy formulation no longer takes place inside  that c-suite. It takes place in a close proximity to customers outside  organisational boundaries. And HR is still sitting inside that building, maybe even imprisoned by the notion of supportive function or blinded by this self-imposed role of a strategy implementor.  It is to a certain extent a self-imposed role that is preventing us from getting into the driver's seat of strategic transformation,” she says.

In this video Minbaeva discusses how HR can move from strategy implementor to strategy driver. She looks at what strategic transformation is today and how CHROs can grab the opportunity to focus on creating customer value through human capital.

Like this? Then check out the first in the CHRO’s Idea Incubator video series in which Patrick Wright, Thomas C Vandiver Bicentennial Chair in Business at Darla Moore School of Business, University of South Carolina, discusses how to deal with major disruptions.

This conversation was recorded as part of CHRO’s Idea Incubator – a collaborative initiative hosted by King’s Business School, Trinity College Dublin and the Center for Executive Succession at Darla Moore Business School, University of South Carolina.

Transcript

Why strategic transformation is unavoidable

So why do HR need to drive strategic transformation? Well, every business, in fact, every organisation these days is experiencing the need for strategic transformation caused by the digitalisation of business processes. And we know that in almost every industry, in every territory, digital technologies have had a profound effect on how we deliver value to our business.  You could say that it is no longer about organisational positioning or operational efficiencies, organisational processes and structure. It is rather about how organisations both create and deliver value to their customers. It is really about creating information-rich customer solutions that can be delivered in the technologically seamless and highly personalised way. So if the company or even organisations say that they haven't experienced this deceptive effect of digital technologies, they are either myopic in their strategic mission or they have already missed that inflection point and now going on the way down. 

From strategy implementer to value creator

So about HR. HR has been traditionally regarded as a strategy implementer. For three decades, we talked about HR in the implementation of business strategies. We talked about the need to get that seat at the table or a key to that C suit or a rule where all strategic decisions are being made. So today, one could argue, I would argue, HR finally has that key and even is seated at the table, but everybody else has left room.

Because of these sporadic changes and disruptions, because of, you know, all those things are happening outside of organisational boundaries, strategy making, strategy formulation is no longer takes place inside of that C-suite. It takes place in the close proximity with the customers outside of organisational boundaries, perhaps with new perceptions of what's permanent and what's temporary. And HR is still sitting inside of that building, you could say, maybe even imprisoned by the notion of supportive function or blinded by this self-imposed role of a strategy implementer changed to our very own HR view or view of annual processes. So you could say it is to a certain extent self-imposed role that's preventing us from getting into the driver's seat of strategic transformation. 

I think right now the timing is perfect. So everyone in that C-suite, every strategy or senior strategy maker suddenly realised that this question about how do we deliver that information-rich customer solution is tightly interlinked with organisational capabilities that are rooted in the individual behaviours and the way individuals interact with organisational structures and processes. And there is no other organisational function that knows more about how we influence individual behaviours. And how do we organise for interactions between individuals and that organisational structure and processes so we achieve synergies, complementarities, so that two plus two becomes five, right? And then because HR is so good in solving problems and finding the answers, we started naturally with ourselves, right? 

Doing digital versus being digital

So, what happened is that there's all this pressure for this arrival of digital technologies and AI, machine learning. In HR again, seeing lots of technologies, for example, in the whole shift towards evidence-based solutions and things like this. So we jumped very quickly on the train and started fixing ourselves. So corporate HR functions digitise their equipment, or actually outsource it to AI. They digitised some part of the performance management processes or establish certain operational systems for things like strategic workforce planning or analytics. And all these are examples of digitisation. Because again, we are doing the same things. We're just doing that a little bit better, faster, more efficient, hopefully also achieving the better result.

But this is really a technological makeover, face lifting, which our function views. It is very much about doing digital, which I would argue, and the strategy literature very much, know, goes in that direction as well. Very different from being digital. So doing digital is about doing things better, introducing changes in what we already producing right now, perhaps modifying ways how we deliver business value while being digital is about fundamentally transforming how we create business values. So fundamentally transforming our core. 

And you asked also where we are on this journey. Well, I think we are doing good on digitisation on that doing digital on the technological makeovers. Of course, some companies are doing better than others. Some industries are doing better than others. Some regions, some territories are doing better than others. But as for being digital, I think we are still very much at the beginning. 

The dual challenge of transformation

And it is so because there is actually a challenge which in strategy literature called a duality of digital. They need to simultaneously introduce changes in how we are improving business, going from good to great, but at the same time, changing that core. So it's almost like you need to kind of upgrade, if you wish, technologically everything you do, but at the same time change the core of what you're doing. And the challenge – and that's why it's called strategic transformation – the challenge is really not either/or, it's both ends. It is doing things better and doing things differently. It's about doing right things and doing things right. It's about managing human capital to become successful and at the same time doing things or managing human capital to stay successful. And in a sense, it's about decreasing costs of human capital while simultaneously increasing its value in use. So that's the true challenge because it actually requires two different mindsets, two different, very different operational models and perhaps, you know, even two different cultures. And that's the challenge of strategic transformation. For CHROs that are at the beginning of this exciting, not scary, exciting path of strategic transformation.

How HR creates value for customer

I think the first question should be how do we create value for customers through our human capital? So how do we create value for customers? Not organisations, not other functions. How do we create value for customers through the use of our human capital? And it's not about what we're doing right now. It's not about what we could do given etc. It's about what we should do because of the needs of the customer, right? And that answer, again, just to repeat myself, it should be that solution that should be definitely information-enriched, so evidence-based. It should, in its delivery, be technologically seamless, highly personalised. And in whatever we find, that answer, how do we create value, it should be focused on increasing human capital value in use rather than just focusing only on efficiency and things like this. 

And it's definitely should be around augmentation rather than automation. Although I have to say one doesn't exist without. And the final little thing I would say, there are lots of unknowns about the future of HR in this technologically-driven world. I think there are more opportunities than threats. HR is the only function that can actually, from its intellectual base, the question, answer the challenge of augmentation. Because we do know about people and we do know about how they act on the interfaces and we do know how to create the synergies and complementarity. So all eyes on us. I think technology is actually really giving us a second chance. By us, I mean both HR professionals as well as academics who are doing the research in HR. So I'm extremely excited about the future.