📝 usncan Note: How HR Can Regain Its Strategic Value
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“A reflection and outward view — symbolizing HR’s shift from mirror to window and its path to regaining strategic value.”
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Global employee engagement sits stubbornly at 21%. That’s the same level Gallup measured a decade ago. For a field that has spent billions on programs, surveys, and transformation efforts, the lack of progress isn’t just frustrating — it’s existential. And HR is in the eye of that storm.
Dave Ulrich, professor at Ross School of Business and renowned management thinker has seen this stagnation up close. Over the last 35 years, he has written more than 30 books, introduced concepts like the HR Scorecard, and shaped how CHROs think about their roles. When I asked him why the fundamentals haven’t shifted, he drew a sharp line between what endures and what must evolve.
“The principles of management are timeless,” he told me. “You still need direction, execution, organization, and credibility. But practices have to keep changing. Too often HR clings to the principle while missing the evolution of the practice.”
That distinction matters. Strategy statements still need direction, but today they must inspire, not just instruct. Execution still matters, but it has to be agile, not just accurate. Engagement is still vital, but now it has to encompass mental health, personalization, belonging, and hope. The principles haven’t changed. The practices have — and HR hasn’t kept up.
From Mirror to Window
Too often HR has acted like a mirror. Business leaders announce a strategy — growth, efficiency, innovation — and HR reflects it back through hiring, training, engagement surveys, or diversity initiatives. The reflection is tidy, but it leaves HR as a secondary player. It follows strategy; it doesn’t shape it.
Ulrich contrasted this with HR as a window: outward-facing, tuned to what customers and investors will value next, and designing people practices that create competitive advantage. “If you’re just reflecting, you’re always reactive,” he said. “The window forces you to anticipate. It makes you build capability for tomorrow’s expectations, not just yesterday’s goals.”
For HR, the real vantage point isn’t a mirror of what already exists. It’s a window into what’s next—talent, marketplace, and technology. Not just a reflection of today’s reality, but a view into the future.
Ulrich described working with a retail company struggling with customer service. The default HR instinct was to create a training program filled with case studies and role-plays. Instead, twelve customers who had stopped shopping there were invited in to share their experiences while managers sat in silence. The discomfort was raw. Managers heard directly how decisions had eroded loyalty. The follow-up training wasn’t theoretical; it was surgical, focused on fixing exactly what customers had described.
That’s the difference between mirror and window. A mirror reinforces the organization’s version of events. A window brings in the customer’s reality.
Gallup research underscores this point. When culture is shaped by customer truth—not just internal aspiration—the impact is clear. Only 29% of employees say they’re proud of the quality their organization delivers. Just 23% believe their company keeps its promises to customers. These are culture failures, not comms failures. But when employees feel connected to the culture, they’re nearly five times more likely to say they have the speed and agility to serve customers—and almost three times more likely to feel personally responsible for quality. Customer value doesn’t start with branding. It starts with culture.
Why Regeneration, Not Reinvention
Whenever HR is critiqued, the pendulum swings toward reinvention. Harvard Business Review carried a cover line from Peter Cappelli declaring “It’s time to blow up HR and start something new.” The provocation unsettled many in the profession — and for good reason.
But Ulrich and I agree the answer isn’t demolition. Reinvention assumes the foundation is rotten. It is crisis-driven and dramatic. Regeneration assumes the foundation is solid but in need of renewal. It builds on existing strengths while evolving practices to remain relevant.
“HR’s mission — developing people, building culture, creating organizational capability — is sound,” Ulrich said. “The problem is how we pursue that mission. Reinvention discards everything. Regeneration works with the potential that already exists and renews it.”
For HR, the call is to regenerate — not as a one-off project but as a discipline. That requires shifting the focus from program delivery to value creation.
The Accountability Gap
We’ve been saying HR should be “strategic” for decades. But in my experience, that has too often meant HR demonstrating business fluency without fully connecting people and talent optimization to hard business outcomes. I have seen “strategic” become shorthand for executive nods of approval when people and talent strategies are presented, but the real decision-making rarely carrying the weight of people implications.
Dave Ulrich has long argued that this is the heart of HR’s credibility problem. “Participation rates are stupid measures,” he told me. “The real questions are: Did customers buy more? Did investors give us a premium? Did our culture become a competitive advantage?”
That blunt framing exposes the gap. If a CFO entered a board meeting with participation rates instead of forecasts and margins, they’d be dismissed instantly. CEOs expect measurable, investor-grade outcomes from marketing and finance. They should demand the same from HR.
Yet too many HR leaders avoid that accountability. As Dave pointed out, “If I claim I can close a $2 billion valuation gap through better leadership development, then I own the outcome. That’s uncomfortable. It’s easier to run programs and measure participation rates.”
This avoidance creates a vicious cycle. HR leaders shy away from bold commitments, so business leaders stop expecting them. HR remains tactically useful but strategically marginal.
Metrics That Predict, Not Report
The lagging nature of HR’s metrics compounds the problem. Finance reports on last quarter’s results. HR too often follows that pattern — documenting what was spent on training, hours spent in classrooms, employee grievances, performance ratings. Useful, but backward-looking.
Ulrich argued HR needs to become predictive. “I don’t want to use HR to figure out how we did last year. I want to know what we’ll do next year.”
That means measuring the capabilities that drive future outcomes: innovation, speed, collaboration, resilience. It means tying HR metrics to the things investors pay a premium for and customers notice. Gallup data shows engaged companies outperform others by 23% in profitability and 18% in productivity. Those are still intermediate outcomes. The ultimate test is whether customers buy more and investors invest more. Gallup data shows that engaged teams have 10% higher customer scores, with some studies also showing linkages to EPS (earnings per share).
Learning From Private Equity
Private equity firms offer a glimpse of HR’s future. Their playbook once focused on cost-cutting and strategy refinement. But those are now table stakes. The real premium comes from organizational capability — leadership, culture, and systems that competitors can’t easily copy. Studies show that 69% of PE and portfolio company leaders cite talent, more than name operating efficiency (49%) or organic growth (30%), as the most important factor.
“PE firms will pay billions more for a company with strong culture and leadership,” Ulrich observed. “That’s HR’s arena — if HR claims it.”
Investors are beginning to look beyond the paint on the walls. They want to know if the foundation — the people and culture — can sustain value. For CHROs, this is both an invitation and a warning. The capital markets already price in people and culture. If HR doesn’t step up to lead that conversation, others will.
The Courage to Change
The path forward requires courage. Too often HR enters executive meetings with budget requests: money for a training program, a new survey, or a wellbeing initiative. Regeneration flips the script. The CHRO enters with a business commitment: a 20% increase in revenue from key customers, a $5 billion improvement in market valuation, a measurable expansion in customer share.
Ulrich described the difference starkly. “When HR walks in saying, ‘I’m here to help us close the valuation gap with our competitors,’ the executive team listens. That signals that HR is speaking the language of business, not retreating into its own shorthand.
According to Ulrich, courage also means embracing paradox. HR is still responsible for compliance and administration, but it cannot get stuck there. It must hold the line on policy while simultaneously driving growth. It must balance protecting people with creating competitive advantage. It must regenerate without clinging to the comfort of the mirror.
Recommendations for CHROs
So what does regeneration look like in practice? Here are the imperatives every CHRO should consider:
- Redefine your scorecard. Retire activity metrics. Build dashboards where at least half the measures tie directly to customer, investor, or growth outcomes.
- Step outside the mirror. Dedicate structured time each quarter with customers and investors. Include them in designing programs, not just as reference points.
- Claim accountability. Present business commitments — revenue growth, valuation improvement, customer share — not just HR initiatives.
- Liberate through technology. Use AI to offload administration and refocus HR on judgment, foresight, and discernment.
- Anchor regeneration, not reinvention. Build on HR’s timeless mission of people, culture, and capability, but continually renew practices to stay relevant.
Questions Every CHRO Should Ask
- If my CEO demanded the same rigor from HR as from Finance or Marketing, would my measures hold up?
- When was the last time a customer or investor directly shaped our people strategy?
- Could I credibly stand in front of the board and claim a billion-dollar valuation impact from HR’s work?
- Do I spend more time defending HR programs, or proving HR’s business outcomes?
- Am I regenerating our function to stay healthy and relevant, or just repainting the same walls?
Opening the Window
Ulrich left me with one line that captures the shift: “The best HR leaders I know don’t talk about HR at all. They talk about growth, market position, competitive advantage. They happen to achieve those things through people practices, but that’s not where the conversation starts.”
That’s the essence of regeneration. HR does not need to be blown up. Its foundations are sound. What it needs is the courage to stop being a mirror and start being a window.
The mirror reflects the past. The window reveals the future. CHROs must decide which one they’ll stand behind.
