Mercer: Business-Aligned HR Strategy Can Produce Rich Payoffs

July 22, 2003 ( - Having a formal strategy in place to govern human resources operations can pay off handsomely for HR executives and their companies, a new Mercer Human Resources Consulting study says.

The biggest reward, according to the Transforming HR for Business Results study: HR viewed across the company as a strategic partner focusing on financial goals. “The HR function that stays focused on aligning its services, programs, and practices with the company’s business strategy will begin to distinguish itself in the organization as a strategic partner, ” Mercer researchers wrote in their report.

Those companies with business-aligned HR strategies were more likely to have leaders who:

  • understand the value of employee contributions,
  • view people as assets, rather than expenses, and
  • cultivate homegrown talent from within the organization.

The benefits of having an HR strategy in place include:

  • HR executives being able to spend more time on strategic, value-added activities and less time on administration
  • giving HR greater control over budgets and allocation of resources.
  • making HR more effective at using metrics to manage its operations and to influence business decisions throughout the organization.
  • using their HRIS technology more effectively and are more likely to have realized their expected return on their HRIS investments.
  • being viewed as a strategic business partner by the organization’s leadership.

Responsibility for HR Decisions

The study also examined who tends to handle personnel type issues. Some 54% of respondents said setting their company’s human capital budget was a shared responsibility between HR and finance, while 28% said that ball is in HR’s court and 18% said finance handled it. HR and finance also shared decisions on allocating that human capital budget (52%), while 41% said HR performed that duty and 7% said finance dealt with it.

Meanwhile, bringing in a new top dog apparently drives HR change in many companies. One in three respondents said leadership changes sparked HR reform, while 29% pointed to organizational changes and 17% said HR changes were merely part of overall change going on at the company.

“One thing is certain: having an HR strategy that is linked to business goals matters – and is one of the best ways to ensure that management and development activities remain relevant and consistent with corporate strategy. By transforming its capabilities into measurable strategic value, HR is working more collaboratively with leadership across the organization and demonstrating its contribution to the company’s success,” the Mercer researchers wrote.

The study covered 300 US companies with nearly 30% having annual revenue of $1 billion to $4.9 billion. Some 54% of respondents were in top HR executive jobs.

For more information and a copy of the study, go to .