The Dilemma of HR Strategy: Finding an Anchor in Fluid Business Strategies

When Strategy Is No Longer Clear: HR's Classic Assumptions Are Crumbling

Over the past four decades, "HR strategy" has become a standard concept in corporate management. Its core logic is clear: HR departments should design a set of practices—recruitment, training, performance, compensation—that are highly aligned with the company's business strategy, thereby supporting the organization in achieving its unique competitive positioning. This idea originates from Michael Porter's strategic theory, which states that companies must choose among basic options such as low cost or differentiation, and guide internal operations accordingly.

However, this classic assumption is facing unprecedented challenges. Peter Cappelli, a management professor at Wharton School and a fellow of the National Academy of Human Resources, points out in his latest commentary that most companies no longer have long-term stable business strategies, making "alignment" in HR strategy nearly impossible.

The "Liquefaction" of Business Strategy: Even CEOs Can't Articulate It

Cappelli cites a study of 262 CEOs who were asked, "What is your company's strategy?" The evaluation criteria ranged from 1 (completely unable to summarize) to 5 (a formal, concise statement). The results showed an average score of only 2.5, closer to "no strategy" than "clear strategy." More worrying, when asked whether the implementation of the strategy had fully considered the execution obligations of various functions during the formulation stage, the average score was even lower at 2.1.

This means that strategy is often "selected" by senior leaders, and the organization only later scrambles to figure out how to execute it. HR, as a key function in execution, is often excluded from the front end of strategic decision-making.

Behind this strategic ambiguity is a drastic change in the competitive environment. Differentiated products are quickly imitated, the effectiveness cycle of marketing tactics shortens, and new competitors constantly emerge. CEOs' attention has shifted from long-term positioning to portfolio management: when to exit a market, when to enter a new field through M&A, when to double down on existing businesses. As Cappelli observes, CEOs behave more like investors deciding where to place bets, rather than traditional strategists setting competitive strategy.

Classic Example: The Alignment Lessons of Coca-Cola and PepsiCo

In the era of clear strategy, HR practices naturally diverged based on business differences. Coca-Cola adopted a slow, deliberate internal talent development model because its strategy was to manage the world's most valuable brand, requiring deep understanding of the brand; while PepsiCo, spanning multiple beverage categories and continuously launching new products, tended to bring in fresh talent from outside to stimulate innovation. Both different HR practices effectively supported their respective business strategies.

But this clear strategic alignment is rare today. When companies frequently enter new fields through M&A and quickly divest non-core businesses, long-term HR planning becomes difficult to sustain.

HR's New Dilemma: Without a Target, Where Is the Bullseye?If the business itself lacks a clear or coherent strategy, how can an HR strategy be formulated? Simply handling basic tasks (such as recruitment and compensation compliance) is necessary but does not constitute true strategic value—these tasks can be outsourced and fail to prove HR's irreplaceability as a strategic partner.

This is the "strategic dilemma" facing HR: in theory, it should have its own strategy, but in practice, it lacks an anchor to attach to. Cappelli believes that the key to overcoming this dilemma lies not in pursuing alignment, but in HR functions proactively engaging in the enterprise's strategic decision-making process.

Four Directions for Redefining HR Strategy

1. Participate in Front-end Decisions for Mergers and Acquisitions: Many M&A failures stem from personnel and cultural issues during integration. If HR can participate in deal design early on, assessing talent risks, cultural compatibility, and organizational integration pathways, it can significantly improve deal success rates. 2. Help Organizations Accelerate Market Entry and Exit Capabilities: In a fast-iterating competitive environment, companies need to form teams and reallocate resources more quickly. HR should design agile talent mobility mechanisms to support business units in flexibly forming and disbanding project teams. 3. Focus on Relatively Stable Organizational Cornerstones: Although business strategies frequently change, some elements—such as corporate culture, leadership frameworks, and employee value propositions—change more slowly. HR can make these long-term focal points to build sustainable organizational capabilities. 4. Build Data-Driven Strategic Insight Capabilities: Leverage employee data, market benchmarks, and workforce analytics to provide senior management with insights on talent supply, skill gaps, and organizational effectiveness, making HR a hub for decision-making information.

Conclusion: From Alignment to Embedding

Traditional "alignment" thinking assumes that companies have a stable strategic trajectory. In an era where fluidity has become the norm, HR must shed its passive support role and embed itself into the dynamic process of strategy formation. This not only means that HR needs to have a seat at the table, but also that HR must redefine its own strategy: no longer asking "how to support the established strategy," but asking "how to help the organization create competitive advantage amid uncertainty."

A true HR strategy is no longer a static planning document, but a sustained adaptive and proactively shaping organizational capability.