The Future of HR's Role in Organizational Success

Build a more strategic and potent HR function

Most HR professionals know they need to become more skilled as strategists, but according to the HR Research Institute’s latest research, the majority aren’t there yet. In fact, since 2021, HR may have actually lost ground in terms of its ability to meet the strategic needs of the organization.

In their defense, HR professionals have been very busy just trying to keep up with all the social and economic changes wrought by the Covid-19 pandemic. Many had to scramble to make remote work relationships effective during the pandemic and have since been trying to figure out the best ways to handle return-to-work and hybrid work arrangements. They’ve also faced a series of challenges such as the “Great Resignation,” an erosion of employee engagement (sometimes known as “quiet quitting”), dissatisfaction that compensation rates haven’t kept up with inflation, large downsizings in much of the technology industry and now the promise and perils of generative AI.

HR has been reacting to events, often with great energy and even creativity, making it especially hard to “get ahead of the curve” to act and think strategically. To learn more about the key challenges HR professionals face, how well they are positioned to thrive, the roles where they are succeeding and struggling, how the function will change over the next several years, and more, the HR Research Institute conducted a study entitled, The Future of HR's Role in Organizational Success.

Key Findings

• Most HR departments are average at best in meeting the strategic needs of stakeholders.
• HR is an equal partner in the strategic planning process in about half (49%) of organizations and has average performance in key performance areas.
• Talent shortages are the most influential external challenge facing HR.
• HR suffers from a number of skills gaps affecting its preparedness for the future.
• Leadership development and maintaining positive organizational culture are top focus areas in the near future.
• Technology is anticipated to influence employee experience, succession planning, and learning over the next two years.

HR Struggles to Meet the Strategic Needs of Its Stakeholders

Almost half (48%) of respondents believe HR struggles to meet the strategic needs of employees.
In 2021, HR had risen to the challenges of the pandemic and most of the strategic requirements revolved around setting up remote work and ensuring the physical and mental well-being of employees. However, with time, HR now has to balance the varying requirements of executive leaders, who often demand greater productivity, and the needs of employees, which revolve around greater flexibility at work.

While contributing to the strategic needs of the organization is important, the transactional activities of HR cannot be overlooked. For instance, errors in attendance, payroll, or other routine HR activities can cause significant disruptions in employees’ lives and can negatively impact their employee experience.

How well does HR balance these needs? We found that just under half (48%) believe HR is equally good at managing both strategic and transactional activities, while about two-fifths (42%) say HR is better at transactional activities. A slim minority (11%) say HR is better at strategic activities.

HR Is Sometimes a Full Strategic Partner, But It’s Not So Great at Future Planning

For HR to make a full contribution to business strategy, it needs a seat at the executive table when strategic planning takes place. This ensures any strategic decision incorporates people management needs and goals. However, HR is an equal partner and is involved early in the process in the strategic process in only about half of organizations (48%). 

In about a quarter of organizations (27%), HR is only asked for talent-related input during the planning process. And, in 17% of organizations, HR is asked to develop a talent strategy only AFTER the strategic plan.

How good is HR at driving and achieving business-related HR goals?

We asked respondents to choose to what degree HR engages in a list of activities ranging from 1 (very low extent) to 5 (very high extent). HR professionals are most likely to give themselves high ratings for maximizing employee experience—almost 7 in 10 (68%) say HR does this to a relatively high extent (4 or 5).
 

What Are Challenges Facing the HR Function?

What external challenges will impact HR over the next two years? We asked respondents to identify their top four. They are, in order:
 

• talent shortages (60%), a problem that has hindered many organizations in recent years and is likely to continue ¹
• economic conditions (49%), an issue that could become dominant if the economy truly turns sour and that already has a serious impact given the recent rates of inflation
• changing workforce demographics (38%), a factor becoming more important as Boomers continue to retire and Gen Z enters the workforce and as the workforce becomes increasingly ethnically diverse ²
• changing work arrangements (37%), an issue that organizations continue to struggle with regard to return-to-work, hybrid work and other flexible work arrangements

HR Has More Success in Some Areas Than Others

As we’ve seen, talent acquisition remains a top challenge facing organizations today, but it’s also an area in which HR professionals feel they are at least fairly successful. Nearly three-quarters (72%) say they are fairly (52%) or very (20%) successful at attracting and hiring great employees. They’re also relatively successful in the areas of ensuring a positive corporate culture (68%), engaging employees (64%) and ensuring employees have the necessary skill sets (63%).

HR Needs to Close Various Skills Gaps to Succeed Better in the Near Future

HR’s preparedness for the future has remained relatively stable over the last three years. That is, the proportion of respondents rating their preparedness for the future 8 or above on the 10-point scale was 47% in 2021, 43% in 2022 and 49% in 2023.

In a separate survey, HR professionals were asked which five HR-related issues will be especially important in their organization over the next 12 months. The top issue chosen by 295 ^* respondents is employee retention. This is followed by employee experience. These two top issues are interconnected and organizations must take a cohesive approach to these issues. Other top issues are talent acquisition, legal and compliance issues, and employee well-being.
 

Notes
¹ Glass, G. (2023). You need to address skills gaps before it's too late. here's how. Entrepreneur. Retrieved from 
https://www.entrepreneur.com/leadership/you-need-to-address-skills-gaps-before-its-too-late/441584  
² U.S. Bureau of Labor Statistics. (2022, September). Employment projections: Civilian labor force by age, sex, race, and ethnicity. Retrieved from
https://www.bls.gov/emp/tables/civilian-labor-force-summary.html 
* This number of respondents is as of May 2, 2023.
 

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