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Strategic Versus Transactional HR: What Is The Difference?

Looking back, many of us in the field were inducted into transactional HR, as opposed to strategic. We grew through the ranks, experiencing along the way increasingly more sophisticated terminology and technology in our departments; and, increasingly more stringent delivery expectations from our colleagues and users.

Case in point colleagues, is there a difference between strategic and transactional HR? Isn’t HR generally recruitment, reward and eventual retirement of people? Or talent if you prefer? Are these just semantics deployed in the fancier corporate environments?

They are not semantics actually. There is a real difference and the earlier we get it as practitioners in this field the sooner we can present a more professional, more corporate, more business savvy standard of delivery that will help our colleagues in management understand that HR is not just about filing staff records. 

Strategic HR and transactional HR are two different elements of human resources -- the former is proactive, comprised of forward-thinking principles and ideas, while the latter occurs on either a regular, ongoing basis or as needed to support HR strategy. But they cannot function separately. The HR department that plans strategic development must have HR staff (or outsource vendors) to advance the HR department’s mission or strategy through handling routine transactional matters.

So in plain language, transactional HR is similar to the administrative functions once handled by the personnel department. Transactional HR deliverables include benefits administration, implementation of workplace policies, investigating disputes and other workplace issues, and delivering on general process based activities through all the stages of the employment relationship - from recruitment and processing new employees to processing terminations and conducting exit interviews.

Strategic HR on the other hand is about the strategic direction of the organisation. HR strategy complements the organisational strategy through long-term goals that are supported by implementing functional HR steps. For example, if the organisation’s goal is to become the industry leader in catering equipment design, the complementary HR strategy is to build an engaged workforce with superior talent in the research and development of cutting-edge catering equipment design.

If strategic HR designs the workforce infrastructure, transactional HR assembles and manages the components that create that infrastructure. Measuring how close HR is to meeting its strategic goals is accomplished through assessing the effectiveness of transactional HR steps. For example, building the brightest, most talented and engaged workforce can be measured through transactional steps such as hiring successes, turnover rate, employee retention and

administering employee surveys that obtain feedback on job satisfaction. So the two complement each other. They are not duplicates, or synonyms, of each other.

 If you are an HR practitioner currently pigeonholed into transactional services, while being expected to deliver at the strategic level, here are some ideas of how you can possibly straddle the two roles while hopefully growing towards the strategic role:


Introduce employee self- service through automation

Give staff the tools to manage their own employee records – such as ways to request leave without having to file too much paperwork; to edit and maintain their own personal details, such as contact information. Self-service, as well as freeing up your time, helps to create a stronger culture of empowerment, initiative and accountability. Explore a web based HR system if your company does not invest in ERPs (enterprise resource planning software)

Delegate repetitive tasks

Realistically, not everything we do can be automated. There will most likely still be day-to-day administration tasks to deal with. Delegate these transactional tasks to somebody who will do them accurately and efficiently – so that you can focus on long-term goals.


Start thinking 3 steps ahead

Transactional delivery is short term, which means ticking the boxes set for the day, and putting out any fires that may arise. Looking a bit ahead to mid-term means finding the source of that fire and maybe bracing yourself for the next flame. But long term strategic thinking means fireproofing your whole system! If you start thinking long term, in this example, three steps ahead, you’ll be working towards becoming a strategic business partner.


Report on meaningful workforce metrics

Eventually, through trial and error, you’ll start to learn which statistics matter, and which metrics should be measured. In my experience, here are the most common five: cost per hire, turnover, absenteeism trends, engagement/satisfaction levels and performance.


Stay ahead of the trends

Beyond supporting specific business goals, it pays to stay ahead of the curve. The world of HR is changing constantly and by your staying abreast of developments, you’re ensuring your employability, helping your organisation anticipate and absorb HR market changes, while realising the organisational strategic intent. It’s a win/win.

The H.R. Dashboard



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