HR software’s second wave is all about aligning human capital to execute business strategy

Consider the classic strategic execution challenge. In 1961, John F. Kennedy mandated NASA to put a man on the moon before 1970. It wasn’t necessarily a SMART goal, falling short on the ‘attainable’ and ‘realistic’ scales. But it was definitely specific – crystal clear, in fact – measurable, and time-limited.

In eight short years, NASA attained JFK’s goal – without the technology that we now take for granted. They started so far from scratch that they had to build the tools to build the parts to build the equipment. But they had the one timeless resource essential to executing any strategy, no matter how astronomical in scale: They had people. Human capital, or more specifically brainpower and sheer determination, proved that NASA’s goal was attainable and realistic. JFK would have been proud.

Fast-forward four decades. Most companies are setting strategic goals that are just as ambitious, but in many ways far more complex and difficult to communicate. And human capital is still our most valuable asset for executing those strategies.

The challenge now is to break through the complexities and distractions, to align a highly diverse, global workforce with a common strategy. As the Balanced Scorecard’s Kaplan and Norton say in their latest book, Alignment, “If employees don’t understand the strategy or are not motivated to achieve it, the enterprise’s strategy is bound to fail. Human capital alignment is achieved when employees’ goals, training and incentives become aligned with business strategy.” Unlike the Apollo project, however, companies don’t have virtually unlimited funding, the luxury of jettisoning equipment after one use. We have to create shareholder and stakeholder value. Among other things, that requires efficiency.

HR 1.0, the first wave of HR technology
HR 1.0 was all about efficiency of HR processes – in the same way companies sought to make every business process more efficient. We built databases of employee data and automated every possible HR transaction. We figured out how to access HR tools and data on demand. We saved ourselves loads of time, effort and stress.

As HR 1.0 has matured, we’ve come to agreement on the requirements and functionality. Data security, system reliability, integration with other enterprise systems – those are table stakes for any HR software vendor. In the employee performance management (EPM) space, HR 1.0 brought us tools to set and track goals, monitor and assess performance, efficiently use 360 feedback throughout an organization, enable self-service access to development resources, and even link pay to performance.

With HR 1.0, companies focused not so much on getting more value from human capital, but on doing what they were already doing faster and easier. The goal was to gain efficiency, and the gains came from logistics such as integration with other systems, process monitoring and controls. And, of course, elimination of paperwork.

Enter HR 2.0, Strategic Edition
We have now entered the era of HR 2.0. On the surface, this version is much like 1.0, but the difference is in how we use it. HR 2.0 focuses on a different dimension – not just making employee performance management processes faster or more accessible, but directing that capability toward bigger picture issues such as aligning the workforce, making business intelligence an everyday expectation, and identifying internal human capital opportunities that will drive company success.

Take goals for example. HR 1.0 allowed automated goal setting and tracking, and even enabled goal cascading from manager to supervisor to line employee. It got teams working on the same thing. But did it get the entire organization working toward the same thing?

HR 2.0’s strategic goal alignment means communicating strategic goals with the entire organization in a useful, motivating way. Each business unit, department or other entity takes a critical look, determines their role in executing those strategic goals, and sets group-level goals accordingly. Individuals then set goals to ensure their contribution to executing the group-level goals. The cascade rolls through the organization, not through the hierarchy.

Once the goals are aligned and performance is tracked, reporting enables management to determine which strategic goals are being executed – and which goals require a re-direction of resources. This approach closes the executive/employee communication gap, increases employee trust in management, and provides extrinsic motivation to employees. That’s alignment.

What’s even more exciting about HR 2.0 is that the data captured enables strategic talent planning. Kaplan and Norton say companies can most effectively accelerate strategic results by focusing on the job families most critical to executing strategy. If you look back at our the NASA example, in the early 1960s NASA recruited test pilots to become astronauts. Many were also engineers or physicists, but none were geologists. That aligned with their strategy, because their primary strategic goal was simply to get to and walk on this giant rock, not necessarily to understand it. Once there, however, NASA realized that the ability to observe from a geological perspective was a strategic competency, and they trained their test pilot astronauts accordingly. They finally included a geologist on the sixth (and last) successful moon landing.

The lesson here is that even if you identify strategic job families which would be entirely new to your organization, it’s a pretty sure bet that most of the competencies required already exist or can be developed – sometimes in surprising places. If you start now, identifying, developing and measuring strategic competencies, then you’ll be well on the road to building the depth required to execute strategy.

Strategic talent planning demands that the HR team and every company decisionmaker know the business, the competitive environment and the strategy. It creates a cultural shift, because once the HR team demonstrates their business savvy and makes a tangible contribution to strategy execution, the executive team will place ever-increasing confidence in HR.

So, which version to implement?
Recent research has shown that more than 50% of companies still use paper EPM processes. So in a sense, half of us are still looking for HR 1.0 functionality. That’s okay; it simply means that more than half of enterprises have an opportunity to make more strategic EPM software purchasing decisions, with 2.0’s strategic applications in mind. For those companies already using EPM software, all it takes is viewing the software’s capability from a human capital alignment angle to find new ways to maximize its strategic value.

HR 1.0 and 2.0 don’t exist on anyone’s shelf, of course. They are simply a metaphor for two major steps in the evolution of human resources software, providing a structure for evaluating HR software and the ways your company can use it. Consider the functionality and the process efficiencies you can achieve, certainly. But if you expect to make a real contribution to business results, look for a solution that will help you align human capital and execute strategy.