Human capital is key to any company's long-term success and financial performance. Successful businesses foster a high-performing culture aligned with company goals and values, driving employee engagement and driving overall organization results.
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HR co-creation requires individuals to engage in collaborative use and co-design of HR practices, creating new practice adaptations which better suit user needs. To successfully co-create HR services requires trust between participants.
What is the HR Value Chain?
The HR Value Chain is an indispensable model for HR teams as it illustrates how Human Resources processes contribute to meeting corporate goals. This approach can help HR departments convince business management of their contributions toward company expansion while also offering an analytics framework.
Questioning what value HR brings to an organization has long been difficult to ascertain, yet with people analytics and other advanced tools for measuring performance and impact it is now possible to establish positive correlations between HR practices, outcomes and organizational goals.
One key way HR provides value to a company is through increasing employee productivity and retention, achieved through training programs, regular promotions and fair pay. HR also adds legal protection against discrimination or wrongful termination claims by staying up-to-date on employment laws as well as training managers and business owners regularly to prevent these claims from arising.
HR adds value by encouraging diversity and inclusivity within the workplace, which in turn attracts talent from diverse backgrounds and boosts innovation. HR also ensures employees remain engaged with their jobs - thus adding another valuable service.
HR can also assist a company in meeting its business objectives by offering strategic advice and consultation. This may involve helping plan future expansion, identify opportunities, analyze risks and provide feedback on current operations while suggesting changes that can increase efficiency.
HR can also contribute to a company's bottom line by cutting costs. This is accomplished through cost-cutting processes, talent recruitment efforts and increasing efficiency within existing staff.
How to Use the HR Value Chain to Align Your HR Strategy with Your Business Goals
The HR Value Chain can help you demonstrate how your people practices add value to the organization. In order to do this, it is necessary to link HR outcomes with strategic business goals; analytics are an effective tool for this.
When your company plans to introduce new products or services, Human Resources (HR) can ensure it has access to all necessary resources through training and development programs that increase employee productivity while meeting your company's business goals.
HR can assist your company if it is having difficulty maintaining customer satisfaction by improving the customer service experience, such as investing in better training programs or hiring more qualified employees - leading to greater customer satisfaction rates and sales increases.
Note that while the HR Value Chain model can demonstrate how human resource activities contribute to business outcomes, it does not offer an accurate way of weighting individual activities as their relationship can change depending on a variety of factors such as economy or competition changes.
Another difficulty associated with HR value demonstration lies in its being unique to each company; thus making it hard to apply one single model across situations.
To overcome this challenge, use the HR Value Chain as a framework for your organization and tailor it specifically to meet its business needs. For instance, you could change step names or alter how the model is set out so it reflects the way processes and procedures in your own workplace work.
Remember, however, that any HR strategy relies on the success of the business as a whole. Thus, you must keep communicating with leaders of businesses to learn their goals and how HR can support them.
For instance, when your company undergoes major business changes like merger or restructure, HR can help smooth the transition by being aware of potential employee concerns and actively alleviating them. This could prevent employees from leaving and seeking employment elsewhere.
The Benefits of Applying the HR Value Chain to Your People Analytics Projects
As 2021 begins, much attention has been devoted to what will unfold economically, socially, and psychologically. HR professionals have also expressed a need to reinvent themselves from being mere service delivery functions into true catalysts of value creation.
HR professionals need access to accurate and timely data in order to achieve this objective, and technology increasingly provides this access. Many HR departments now rely on analytics tools such as data visualization or time series analytics as an aid for pinpointing where processes could be improved, employee engagement increased or productivity enhanced - though with so many tools and apps out there it may be hard to know which are suitable.
The HR Value Chain can provide an effective framework for selecting the appropriate technologies for your organization. It outlines how analytics can support and align with business strategy and goals of your business, while emphasizing technologies which add measurable value to HR functions instead of simply automating existing manual processes.
Step one is to identify which HR activities and processes are of greatest significance to your company, then determine KPIs to measure. Select metrics directly related to your business objectives for ease of connecting HR initiatives to tangible financial business results while proving analytics value of people practices.
Once you have selected which KPIs you wish to track, it's essential that you find a solution which allows for quick analysis and interpretation of data. This allows you to quickly identify areas for improvement or changes which could positively impact your organization's bottom line - for instance if employee turnover is high, an initiative to enhance employee satisfaction or boost manager performance might be needed to bring retention down further.
Once you understand the advantages of HR analytics, it's time to take your people management skills a step further by adopting an enterprise-wide strategic approach to workforce planning and development. To do so successfully, it's essential that you comprehend how the HR Value Chain model can apply to your people management strategies - its model provides a useful framework for linking HR efforts directly with larger business goals while helping persuade management that HR plays a pivotal role in company success.
How the HR Value Chain Can Help You Demonstrate the Value of HR to Your Stakeholders
At a time of increased emphasis on accountability and impact, HR departments must demonstrate their worth to prove their worth to organizational goals. One effective tool to do so is the HR Value Chain model which shows how HR activities and processes contribute to organizational goals; its model also allows HR leaders to prioritize initiatives which deliver the greatest benefit to their organizations; at a McKinsey virtual conference held in May of 2020, many HR leaders indicated their interest in prioritizing priorities such as responding with agility while driving leadership and culture development.
HR value creation begins with designing and customizing HR practices to meet user needs, either independently or collaboratively with HR co-creation. Through HR co-creation, stakeholders collaborate together on creating value by discussing tradeoffs between needs and exploring synergies among them - which can create a virtuous cycle that increases engagement while strengthening relational ties.
An HR organization at Level 2 might increase its L&D spending in order to encourage learning and development, leading to higher knowledge retention, employee satisfaction and productivity - which will in turn boost business unit performance while simultaneously increasing organizational profitability.
HR value creation takes two forms. One approach is the delivery of actual value by means of HR services; this serves as the core activity for HR professionals and includes day-to-day employee management including coaching and development programs, managing disciplinary actions and conducting training evaluations - activities which ultimately contribute to greater workforce productivity and customer service levels.
HR Value Creation encompasses three stages. First is the transformation of actual and perceived value into tangible financial benefits for an organization; this could be seen as the transformation of HR services into financial value for them. This could include showing ROI of HR investments or quantifying benefits they bring; for example using value chain models can demonstrate how investing in better employees (Generic Human Capital) results in improved service performance and overall business expansion (HR Outputs), leading to higher revenue for an organization.
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