The research insights at a glance
In partnership with Revelio Labs, our analysis of 50 top-performing companies reveals seven surprising insights. We also share recommendations on how to enhance your HR strategies in the future.
- Insight 1: Successful HR strategies go beyond the business
- Insight 2: Good HR strategies prioritize an inside-out or outside-in approach
- Insight 3: Even though focus areas are similar, successful companies execute them differently
- Insight 4: Successful HR strategies have multiple narratives — but one message
- Insight 5: When defining success, they make the metrics count
- Insight 6: Successful HR strategies proactively factor in risk
- Insight 7: Even successful companies underinvest in HR, leading to sustainability challenges.
HR leaders dedicate significant time to crafting, aligning, and measuring HR strategies, considered the golden thread linking HR activities to business value and impact. These strategies guide decisions on resource allocation, hiring, and HR investments. In the longer term, HR strategies support and enable the business to deliver on its strategic intent and remain profitable and sustainable.
While many HR leaders assert that their strategies are unique and provide a competitive advantage for their businesses, a closer look shows that most emphasize similar themes: The importance of people, the battle for talent, and the creation of great workplaces. The generic nature of HR strategies often leads business leaders to adopt the mentality of “if you’ve seen one, you’ve seen them all.”
To investigate this perception, we examined successful and top-performing organizations to see how their HR strategies drive financial results and foster engaged and productive employees. We defined success not only by financial performance but also by organizations recognized as some of the best places to work by their employees.
Based on our findings, we share seven surprising insights and offer recommendations on how to enhance HR strategies in the future.
Insight 1: Successful HR strategies go beyond the business
Successful HR strategies align closely with the overarching business strategy and market positioning. These top-performing companies ensure that their HR strategies are guided by how the business wants to compete in the market. They are built around the core capabilities that provide a competitive advantage.
However, we found that highly successful companies extend their HR strategies beyond the requirements of their business alone. They move away from a strategy process that starts by solely incorporating the business strategy as the guiding influence on HR objectives.
We observed commonalities across various HR strategies, reflecting these companies’ industry, legislative environment, and workforce context. Companies often develop similar strategic focuses across sectors by using these factors as key inputs to their HR strategies.
Insight 2: Good HR strategies prioritize an inside-out/outside-in approach
Our research shows that successful organizations clearly define the focus of their HR strategy in terms of an inside-out or outside-in approach.
Companies with an inside-out focus in their HR strategy emphasize the importance of internal HR processes and practices and their impact on the employee experience. They track and measure specific metrics related to talent development, employee engagement, leadership development, and culture, viewing these as critical indicators of success and value.
Conversely, companies with an outside-in focus in their HR strategy are concerned with the organization’s external image as an employer, its relations with the external labor market, and its role and impact in the broader community and society.
These companies emphasize the visibility of their employer brand, external recognition of their HR practices, participation in industry and community projects, and accessing scarce talent pools. They track and measure net promoter scores, ESG and DEIB targets, the participation of designated groups in the labor market, HR practices, and the organization’s attrition and retention rates.
Insight 3: Success lies in the execution of focus areas
Successful companies all focus on the same things. When describing their focus areas, they highlight that ESG, DEIB, and employee engagement are critical to their success. This is reflected in their HR strategy focus areas, and they actively monitor and report on relevant metrics.
However, how successful companies execute the activities related to these focus areas in the context of their business and operating markets sets them apart.
We found that successful companies make distinct decisions about operationalizing ESG, DEIB, and Employee Engagement. These distinctions are closely linked to their inside-out or outside-in focus, guiding how they execute these focus areas.
For ESG, successful companies first focus on employee development and upskilling, ensuring they have the skills for the future. This may also extend to the communities they serve. The second area focuses on the societal impact of the organization and its HR practices in the future.
We found that companies with an inside-out focus tend to concentrate their ESG efforts first on internal upskilling before contributing to the broader community. In contrast, organizations that adopt an outside-in approach focus on community and society first, then turn inward to their employees.
The HR strategies analyzed reflected two different approaches to DEIB.
- Approach 1: Some organizations focus their DEIB efforts on increasing the representation of designated groups and, in turn, on initiative-based practices.
- Approach 2: On the other hand, some organizations focus on making systemic changes through their policies and practices that impact certain excluded or disadvantaged groups.
The DEIB efforts of inside-out companies focus first on the organization’s internal representation before setting their sights on ensuring systemic barriers within society are addressed. This is achieved through policies and procedures that have a long-term impact on equity and access to opportunities.
Lastly, the companies we analyzed had different approaches to employee engagement as a shared focus area. For some, employee engagement practices are centered around monitoring employee satisfaction levels and managing disengagement through directed efforts that address this. In other cases, employee engagement focuses on a holistic employee experience and the levers that enable this within the organization.
Insight 4: Successful HR strategies have multiple narratives — but one message
In the past, the HR strategy was considered well-communicated if business leaders were aware of it. However, successful organizations get two things right when they communicate the HR strategy.
The first is understanding the broader stakeholder landscape beyond managers and business leaders. Based on that, the second step is understanding their needs and interests in the HR strategy and communicating what success will look like.
In essence, successful companies have one core message related to the focus of the HR strategy, yet depending on the audience, the story is positioned aligned to the needs of the relevant stakeholder. Successful companies translate and communicate their HR strategies to five distinct audiences.
Successful organizations:
- Include broader societal considerations and the impact of their HR strategy on communities, sustainability, and the environment.
- They translate their strategy into clear impact and value for shareholders and investors keen to understand the long-term value the HR strategy unlocks for the business.
- The executive team is particularly interested in the HR strategy’s key performance indicators and metrics and how they support and enable the business strategy.
- Each strategic focus area is translated into clear objectives and measures for this audience.
- The strategic HR focus areas are embedded into the culture, values, and HR practices to ensure leaders understand and contribute to the overall HR strategy. This approach clarifies how leaders contribute and delineates what HR is accountable for.
Finally, successful organizations recognize the pivotal role of their HR strategy in shaping their employer brand (what is promised externally) and the employee experience (what is delivered internally), which is a crucial area of interest for employees and a cornerstone of the organization’s success.
Insight 5: When defining success, they make the metrics count
The success of the HR strategy is about more than defining focus areas and the KPIs that are tracked and measured. It is also about more than reporting on activities and efforts. This delicate balance, a significant challenge for even successful organizations to achieve, underscores the complexity of managing an HR strategy.
They rigorously showcase changes and impact over time, just as their other functional counterparts. This proactive approach ensures that the link between the HR focus areas, success metrics, and broader impact is transparent, allowing for clear accountability and transparency of the HR strategy.
The graph below shows how the 50 top-performing companies incorporate different metrics into their strategies:
Insight 6: Successful HR strategies proactively factor in risk
Operational plans are essential for executing strategy, which also holds true for HR strategy. However, successful organizations understand that it is crucial to go beyond outlining activities, timelines, and responsibilities. They recognize the importance of proactive risk management in HR strategy, as it helps to anticipate and address potential risks, ensuring the strategy remains resilient and adaptable.
Within most organizations, people risks are highlighted and reported on across the organization through other risk categories, such as operational, financial, and cybersecurity risks. This makes risk management an operational activity of tracking and mitigating while no clear ownership is assigned.
Successful organizations adopt an integrated approach to risk management. While some risks span multiple business areas, clear accountability is established within HR in the broader risk framework. Risks are also proactively identified and managed when developing and implementing HR strategies. Companies doing this well can link the risks monitored and reported in their strategic HR focus area.
Insight 7: Even successful companies underinvest in HR
In successful companies, the size of the HR function (in relation to business size) is larger than the national U.S. average (1.9% versus 1.3%). The size of the HR function is seen to grow with the business size, although it remains relatively small compared to the business headcount.
Successful companies tend to invest more in transformational HR skills such as leadership development, talent management, and performance enhancement than their counterparts, aligning to the previously mentioned focus areas of ESG, DEIB, and Employee Engagement.
Despite their success, our findings indicate evidence of underinvestment in HR, which can have significant long-term consequences. Our data showed that average HR salaries in these companies have declined relative to other business roles.
Given the high levels of burnout generally observed within HR, there is a risk that underinvesting in HR can lead to reduced wellbeing, decreased engagement, and increased attrition rates. This trend is already evident in the workforce data of the 50 companies we analyzed.
Within these organizations, the average tenure of HR professionals is shorter than that of other business roles. The attrition rate of these HR functions is significantly higher than other functions. This signals that an underinvestment in HR has a detrimental effect on HR retention and the sustainability of the function.
Final words
HR strategy is crucial in clarifying the focus and intended value that HR brings to the organization. However, many HR strategies fail to achieve successful execution. Instead of enabling the function, they often create confusion, loss of credibility with key stakeholders, become too generic to provide value, or lack metrics to demonstrate HR’s impact.
As this article proposes, learning from top-performing organizations can help HR leaders develop more impactful strategies, which can then be used as a vehicle for future and sustained HR success.
Research methodology
