Strategic versus Transactional Human Resources
April 25, 2020What’s the difference between Strategic and Transactional Thinking? Transactional thinkers focus almost exclusively on the day-to-day things that a business or a business unit needs to do. It’s all about short-term thinking and the operations that support the long term Vision of an organization. It’s making sure that the important things get done operationally speaking to keep the “wheels of the business turning!” Strategic thinking on the other hand involves long term planning and understanding three critical characteristics of any good Competitive Strategy: 1. whatever your business values must Add Value to your customers or who cares that you value it, 2. whatever product or service you deliver must make you standout (Differentiation) from your competitors or why would anyone think you could meet their needs or satisfy their wants better than your competition, and 3. whatever products and/or service you provide must be difficult for your competitors to copy. If a competitor can copy what you do with relative ease then you just threw away any competitive advantage you may have had with your competition in the short term. This last point, Difficult to Copy, is by far the most challenging of the three key characteristics of a Competitive Strategy to deliver on.
Within the Human Resources profession there’s a reason why most HR professionals take a Tier Two seat in the Board Room C-suite. I thought organizations were all about people! Aren’t human beings the ones that do everything from the “grunt” work on the shop floor to making the key decisions in the Board Room? And yet, the leader of all the People programs within an organization are lead, planned, and delivered by Human Resource personnel. Go figure! Confused? There’s a good reason for this perceived inequality within the executive ranks of the an organization. Human Resource professionals don’t know how to make themselves Strategic Thinkers and practitioners.
Historically Human Resources professionals have concerned themselves with the four cornerstones of the profession: a. Employee Recruiting and Hiring, b. Employee Training and Development, c. Employee Reward and and Recognition, and d. Employee Performance Management. Don’t get me wrong, these are all very important elements of Human Resources and they need to be done well for an organization to function effectively. However, once you have the operational foundation in place within your organization, Human Resource professionals should shift gears into the world of a Competitive Strategist. How so?
Create alignment with your over-arching company or corporate “Competitive” Strategic Plan (that is if you actually have one, not so common in my experience). Step One: Put your operations in the four cornerstones of Human Resources under a microscope reviewing every process for Value-added and non Value-added steps and key deliverables. Step Two: Based on your Competitive Strategic Plan figure out where it makes sense for your Strategic Business Unit (SBU) to differentiate itself. Note: If you don’t do this you may be called a SBU but it’s in name only. You’re just another Business Unit (BU) like 95% of the Human Resource Business Units across the globe. Step Three: You can see where this is going. Based on your organization’s Competitive Strategic Plan and your decisions in Steps One and Two of this process, decide on what you can do to make yourself truly Difficult to Copy as a Human Resources enterprise when scanning your business landscape.
If you can begin to think and act in this way you have a chance to be the right-hand or at a minimum the left-hand of your Chief Executive Officer on the Executive Team. Human Resource professionals need to shift from a century plus of being Transactional Thinkers and stepping into the world of key Strategic Thinking decision-makers within an organization. It’s not a quick and easy change because of the beliefs I talked about in a previous blog that many CEOs carry. It’s not an impossible change and it will take teaching your team these concepts and approaches. Expect resistance as I encountered, and if you stay the course and persevere you’ll eventually succeed as I did. True Story: I had the second in command of an organization I worked in tell me and I quote: “I don’t like that you’re leading all this talk about Strategic Thinking and Planning with the leaders of our SBUs (in name only at this point). Stick to your job title!” Well, I took me two and a half years of talking, listening, planning, and delivering on my key BUs deliverables (my credibility) while helping the other leaders of SBUs deliver or exceed on their key deliverables while raising the level of their contribution in conversation at their monthly Executive Team meetings.
