HR business alignment and perceptions of its limited strategic business, financial, and operational relevance and impact continue to haunt its leaders, many of whom struggle to overcome those despite their best efforts. The problem seems to be captured in industry research that suggests a behavior- or task-focused issue where 82% of HR leaders report strategic misalignment with the business, 66% report that their talent strategies fail to support overall business objectives, and 47% state that they are not involved in developing the company’s strategic plan. With a shocking 48% reporting that they do not regularly collaborate with the C-Suite, one is left to ask, “why?” A lack or shortage of HR business acumen and associated ability to make meaningful contributions to those plans and discussions is a likely root cause.

Evidence supporting this unfortunately abounds: for example, one study found that over 50% of organizations' HR services and programs are not connected to specific business purposes, and fewer than 15% of HR teams can explain how their policies, practices, or programs impact business goals. It also found that alignment between HR strategy and business goals ranks among the lowest priorities for HR leaders. Other research by LinkedIn demonstrated that only 9% of companies understand how their talent programs and practices influence or drive organizational performance. 

As organizations race to realize the promise of AI and related technologies, HR faces enormous pressure not only to adapt, but also to guide the organization through what is becoming radical change at tremendous scale. In fact, that led us at Wowledge to propose major HR changes with the “Human Readiness” model. Executing such changes to the HR operating model requires even greater HR business acumen, which still constrains many HR leaders and their teams.

Defining and understanding HR business acumen

Before planning and taking action, HR must define and set standards for HR business acumen that can be used across hiring, development, performance management, coaching, and staffing/deployment decisions. That requires each organization to clarify the capabilities it wants to build in targeted roles and across its HR teams, and a timeframe within which it needs to achieve a basic level of competence in each. In general, Wowledge experts agree that any definition should include, at a minimum: general market, commercial, and financial management concepts; specific industry fundamentals; customer requirements; and the business, financial, operational, and talent analytics used to assess, track, and support decision-making. The purpose of building HR business acumen is to increase the function's ability to best target the full range of HR efforts, policies and practices, processes, programs, and technologies to impact essential business, financial, operational, and talent outcomes. As a result, the three primary elements of HR business acumen include:

Contextualization 

Understanding what and how the business is striving to achieve. This includes an awareness and operational fluency in the market and competitive dynamics of the industry(ies) and economy(ies) in which the organization does business. It involves knowledge of the company/business unit/function strategic plans and direction; the operating model and business processes it needs to optimize to achieve those ends; the capabilities and outputs that attract customers; how it creates value for stakeholders and customers; and the key levers of operating success.

Business data and analytic literacy

Having the skill and ability to review and interpret business, financial, and operational analyses, trends, and reports. Understanding how results or fluctuations (up and down) relate to the relevant business benchmarks, standards, or expectations. Having an operational knowledge of budgets, revenue levels, and expenses and how they influence and direct business decision-making. Of equal value is the ability to assess and/or interpret the quantitative impact of HR activities on market, financial, operational, and customer success.

Customer and stakeholder requirements 

Knowledge of who the targeted customers are, and an appreciation of their expectations, evaluation and decision criteria, and demands to which they hold the organization and its products or services accountable (e.g., quality, reliability, timeliness, availability, pricing). Understanding of the stakeholders (owners/stockholders, board of directors, regulators, suppliers, employees, communities) and their unique interests and needs.

Perhaps most critically, HR business acumen goes beyond mere knowledge or understanding, although that is a critical starting point. It must be activated and demonstrated in decision-making, design and evaluation, and continuous improvement/adaptation of HR offerings.

Building a sustainable HR business acumen strategy

Like any major capability shift, a sustainable HR business acumen strategy requires a comprehensive, structured approach. The key is to prioritize it, align line and HR leadership as vocal champions, embed the elements and standards into the HR employee lifecycle, and track progress (or lack thereof) to make it a measurable cultural capability.

1. Adopt a new strategic HR perspective

Start by establishing HR business acumen as a cultural priority and marker. Move HR leaders and their teams to fresh views and approaches through exposure and education on business alignment that requires and tests their business acumen. Build expertise in the strategies successful CHROs and HRBPs use to engage and collaborate with business leaders, establishing credibility as leadership coaches and consultants, and requiring a deep understanding of the business environment, its unique drivers, and the decision-making processes that steer the organization. 

Expand that worldview across the HR team; consider adopting new operating perspectives such as outcomes-based HR, which forces fresh thinking and goal-setting on issue assessment/solution design that directly targets business, financial, and operational impacts.

2. Define and promote the skills, capabilities, and outcomes to be developed

Update or create competency models that clearly define HR business acumen and how it should be practiced and demonstrated at every level of HR. Start with the HR leadership team, and then adapt the model to senior leaders, managers, and individual contributors (e.g., HRBPs). Over time, interpret and adapt those standards for generalist and specialist roles across HR functions and operating model units (e.g., Shared Services, COE’s, business unit-deployed team members). Ensure all team members understand the rationale by presenting a business case for how better-aligned, business-savvy HR teams deliver greater value to the targeted business and associated talent outcomes (e.g., productivity, team effectiveness, employee engagement, workforce stability).

Build excitement for a more business-focused perspective by recognizing and rewarding current and early adopters who demonstrate the values and approaches in the efforts they design and implement to support their internal “customers'” business, financial, and operational challenges.

3. Establish shared HR governance councils 

Consistent engagement and interactions with business leaders, managers, and subject matter experts create a continuous learning ecosystem for HR leaders and professionals. Formally charter governance bodies such as a corporate executive HR council or business unit/function talent or learning councils that bring HR and business leaders together. These become forums for reviewing performance and business alignment, where participating HR leaders can join the conversation as issues are raised, insights are shared, solutions are proposed, debated, and decisions are made. This enables HR to participate regularly in strategic and tactical conversations, build trust, deepen relationships, and ultimately position itself as a contributor to business-aligned solutions. As a result, with growing HR business acumen, team members are better equipped to detail plans and strategies, adapt priorities to address the business’s most pressing issues, sideline or delay less critical goals and efforts, and educate line leaders on best-fit options.

4. Adopt structured approaches that develop HR business acumen

Creating an ecosystem that supports, develops, and encourages HR business acumen is best supported by adopting structured models that define, train, and reinforce business-aligned approaches to delivering HR services and support. For example, evidence-based HR (EBHR) requires HR teams to leverage deep operational understanding, leader and employee participation, and a focus on (internal and external) data and proven approaches to unearthing root causes and targeted solutions that impact the business (not just employees). Similarly, using organization development (OD) and performance consulting approaches requires consultative, ongoing engagement with business leaders and managers. This, in turn, drives heightened business alignment that keeps HR practitioners involved in deeper dives that expose them more fully to operational nuances and success drivers/barriers.

Other tactics that build HR business acumen include requiring an HR business case to justify and build support for every solution recommendation process for the benefit of their assigned line leaders and their teams. Also impactful is creating a balanced HR scorecard that continually exposes HR team members to the targeted business outcomes they need to attend to and respond to fluctuations in.

5. HR business acumen skill learning and development

While training classes and reading assignments can be useful, skills and expertise become lasting employee capabilities through repetition, practice, application, evaluation, and expert coaching. Basing L&D approaches on competency models related to capabilities such as internal HR consulting is an excellent starting point to expose HR practitioners to techniques for understanding how a business runs, delivers value to its stakeholders, and evaluates its effectiveness and success. Similarly, building data and analytic literacy supports the ability to review and understand business, financial, and operational KPIs and analyses. After learning the basics, consider a blended learning strategy that follows a pattern to encourage knowledge acquisition, retention, application, and adaptation, such as a learn-articulate-apply-practice-evaluate-iterate model. 

The apply-practice-evaluate portion of the approach can be implemented most effectively through experiential development where employees build HR business acumen by practicing and honing learned skills in simulated (controlled) or actual work environments. Examples include participation in cross-functional project teams, special short-term assignments in other business units or operations, business process improvement efforts, and (HR or non-HR) technology or system implementations. 

At the same time, employee mobility adds value by helping employees learn about operations across different businesses, types of operations, and circumstances (e.g., start-up, turnaround, high growth, decline). The latter exposes those employees to unique circumstances and challenges them to learn those businesses and adapt accordingly. This further deepens HR business acumen, builds cross-functional understanding, and requires adapting best practices to the specific business challenges and needs of different parts of a company.

6. Embed HR business acumen into the HR employee lifecycle

Integrate the knowledge, skills, competencies, and capabilities into every aspect of the HR employee journey. Engage in job design by updating role descriptions to include these tasks, behaviors, actions, and decisions as hiring criteria. Create and/or install formal and informal learning programs and objects that educate and provide opportunities to build proficiency levels from basic to mastery. Formally include the frequency and demonstration of successful (or lack of) leveraging of such expertise in work efforts to inform performance ratings, promotion considerations, mobility/transfer or deployment, high potential (HiPo) designation, and named successor status decisions. Use skills-based approaches to better assess and confirm not only the presence of skills, but also the proficiency level employees have demonstrated.

Establishing individual HR business acumen priorities and activities

To support and drive individual action that reinforces the programmatic approaches above, build specific behaviors and actions into performance expectations for roles at all levels of the HR organization. Apply these to practitioners from the CHRO down to HR assistants, business partners and generalists, and COE and Shared Services team members.

Actions for HR leadership role holders

1. Schedule regular check-ins with assigned business unit leaders and other key stakeholders. Be prepared to ask about, discuss, and analyze their unit’s performance status and issues 
2. Attend internal customer strategy sessions. Proactively request a seat at the table if one is not initially offered. Prepare for the sessions and come with insightful questions, perspectives on the people-operational success equation, and cross-HR solution opportunities. 
3. Charter and participate in cross-functional projects. Create opportunities to immerse oneself (or assigned team members) in cross-functional projects that expose the basics and nuances of how operations and corporate functions operate, interact, and generate value.
4. Build and exploit internal networks of experts. Use strong peer and subject-matter expert relationships for ongoing conversations, collaboration, and learning about the business (economic projections, detailed operational plans), techniques that can be applied to added-value HR approaches (e.g., advanced statistical analysis), and emerging industry or product and service design and delivery trends. Use employee listening techniques to go beyond the standard HR (engagement, experience) topics and generate insights into current or future operational issues and barriers.
5. Leverage and rely upon industry research and networking. Become an active reviewer of business, operational (and yes, even HR) research into market forces, industry trends, best practices, and case studies that expose fresh thinking and relevant perspectives. Establish and maintain external networks (functional and industry) that provide insights into business challenges and opportunities, from peers (HR and non-HR leaders), consultants, and influential thought leaders.
   
   

Actions for HR managers and individual contributors

1. Actively pursue business and operational training. Consider taking local college and university (or online) classes on the basics of corporate finance, manufacturing, sales and marketing, or supply chain. Attend internal classes and access resources related to the same (e.g., Finance for non-finance employees 
2. Spend time with peers and mentors in relevant functions. Build relationships with non-HR peers and line managers, and schedule time for “discovery sessions” to learn how (and why) their organizations operate, make decisions, track performance KPIs, interact with other functions, and manage operations. Come prepared with questions and topics to cover, and make these regular, recurring events (e.g., monthly, quarterly). 
3. Organize collaborative learning sessions. Bring co-workers and internal customer team members together for “lunch and learns”, presentations, or discussion groups on business, financial, or operational subjects of interest. Invite operations and business leaders and subject matter experts to present, answer questions, etc. 
4. Participate in business, operations, or functional process improvement initiatives. Proactively request a place on teams for professional development and exposure to the details and nuances of business issues, and to build or expand an internal network of cross-functional experts to share ideas and innovations in the future. 
5. Attend operational and unit performance reviews. Take advantage of opportunities to regularly review and learn about operational successes, challenges, and what drives each in different functions, operations, and business units. Listen for trends common across operation types, or unique to specific ones.
6. Attend and participate in internal customer staff meetings. Demonstrate both curiosity and operational understanding by not only attending, but actively participating (as appropriate) in those meetings. Find opportunities to ask questions (like an executive coach) that deepen the team’s understanding and increase the awareness of other perspectives and possibilities. Bring one or two key insights to the HR team staff meeting, listen to others' summaries to find common challenges, and identify opportunities for peer interventions.
   
   

HR business acumen enhancing skills to develop and encourage

Understanding the skills required of HR leaders and professionals at every level is an essential step in developing performance standards, competency models, and evaluation criteria to use when assessing candidates for hiring, evaluation, development, promotion, mobility, and placement decisions. That said, HR teams can build the foundational skills needed to become highly capable, sustainably aware, business-aligned partners. Those include:

Emotional Intelligence

The ability to manage one’s own actions and reactions, and to listen to, interact with, and process others' actions and reactions, lays the foundation for solid, reliable relationships with internal customers. This opens the door to deeper, more trusting relationships marked by greater transparency and a willingness to share operational insights and opinions.

Curiosity

The trait and process of wanting to understand things better, the broader context that influences occurrences and trends, and how and why processes work and people make decisions opens an HR professional to greater insights and awareness of the business they support.

Continuous learning

The operationalization of curiosity, a desire and drive to expand one's knowledge and understanding of the world around them, is one critical capability of those with strong HR business acumen. This enables them to expand both the depth and breadth of operational expertise, keep up with trends, and make meaningful contributions to the business they support from an HR perspective.

Coaching skills

The skills and techniques used in organizational coaching, including asking powerful questions, active listening, and bringing objectivity to expand otherwise limited perspectives, enhance practitioners' HR business acumen. This happens because it encourages line managers to be transparent, generate possible reasons for an issue, and propose solutions that reveal nuances in how the business operates and is affected by internal and external forces, which educates and further informs the HR professional’s operational expertise.

Structured HR consulting methodology expertise

Skills rooted in organizational development, performance consulting, change management, and performance optimization techniques are critical, as they all involve internal customer interactions and engagement. From contracting and problem scoping that identify business issues, to root cause analysis that exposes objective problems over symptomatic assumptions, to joint solution development that targets operational improvements, these focus HR on line problems rather than HR processes. This deepens HR business acumen.

Analytics and data literacy, mastery

Every HR professional, whether a leader, manager, or individual contributor, can differentiate themselves through their ability to understand the business, financial, operational, and HR/talent measures and analyses that track and define performance. An appreciation and awareness of what good performance and progress towards goals looks like based on the critical business measures and analytics, whether they are below, at, or above standards and benchmarks, enables greater insights into possible solutions. The deeper the understanding of what those indicate and how they measure parts or outcomes of the process, the more easily they can identify the need for a deeper dive or action planning.

Relevant Practices & Tools

Core HR Strategy Practices to Define a Foundational Direction for the HR Function. >

An HR Strategy sets business-based human resource (HR) tactics that will constitute a comprehensive multi-year approach to managing the HR function's structure, governance, programs, policies, and practices... more »

Understanding Business Strategies to Align the HR Direction. >

Core to the development of an HR strategy is building an understanding of the key business strategies and initiatives that must be accomplished during the term of the plan... more »

Applying Organization Development Principles to Uncover Opportunities for Improving Organizational Performance and Health. >

Organizations are constantly in flux, with multiple change efforts underway. HR is being called upon to facilitate more and more of these endeavors, using Organizational Development tools, methodologies, and frameworks... more »

Lessons Learned in Aligning with Business Goals: Perspectives. >

Aligning organizational efforts with business goals is essential for both short-term effectiveness and long-term success... more »

CHRO Success Profile: Deep Dive. >

The Chief Human Resources Officer (CHRO), once perceived as merely a support function, has undergone a significant evolution, now standing as a strategic partner and a critical member of the executive leadership team... more »