We’ve been researching how HR contributes to organizational success. One of the key issues to consider is the division between strategic and transactional HR issues.
To get an idea of how much consensus there is on that topic, I asked an identical question of three of today’s most widely discussed generative artificial intelligences: “What kinds of HR issues are strategic and what kinds are transactional?” Here’s how they responded. The only change I made was to bold a few words.
In general, HR (Human Resources) issues can be classified as either strategic or transactional based on their nature and impact on the organization. Here’s a breakdown of each category:
Strategic HR Issues:
- Workforce Planning: Developing long-term strategies to ensure the organization has the right people with the right skills in the right positions to achieve its goals.
- Talent Acquisition and Retention: Attracting and retaining top talent by implementing effective recruitment strategies, employer branding, competitive compensation packages, and employee development programs.
- Succession Planning: Identifying and developing potential leaders within the organization to ensure a smooth transition in key positions.
- Performance Management: Establishing performance standards, providing feedback, and implementing performance improvement plans to align individual and team goals with organizational objectives.
- Learning and Development: Identifying skill gaps, designing training programs, and implementing initiatives to enhance the knowledge and capabilities of employees.
- Organizational Culture and Change Management: Shaping the desired culture and managing change processes to facilitate organizational effectiveness, employee engagement, and adaptability.
- Employee Engagement and Satisfaction: Developing strategies to enhance employee morale, satisfaction, and motivation, leading to improved productivity and retention.
- Diversity and Inclusion: Promoting diversity, equity, and inclusion within the workplace through initiatives such as diverse hiring practices, creating an inclusive environment, and addressing unconscious biases.
Transactional HR Issues:
- Payroll and Benefits Administration: Managing payroll processing, tax deductions, and administering employee benefits programs, such as health insurance, retirement plans, and vacation accruals.
- Employee Onboarding and Offboarding: Handling the paperwork and processes associated with bringing new employees into the organization and managing employee departures.
- HR Policies and Compliance: Developing and communicating HR policies, ensuring compliance with labor laws, and managing employee records and documentation.
- Time and Attendance Management: Tracking employee attendance, leave requests, and managing time-tracking systems.
- Employee Relations and Conflict Resolution: Addressing employee grievances, managing disciplinary actions, and facilitating conflict resolution within the workplace.
- HR Data Management: Maintaining accurate and up-to-date employee information, managing HR databases, and generating reports related to workforce analytics.
- HR Technology and Systems: Managing HR information systems, implementing technology solutions, and ensuring data security and privacy.
It’s important to note that some HR issues may have elements of both strategic and transactional aspects, and the categorization can vary depending on the organization and its priorities. Additionally, the strategic and transactional aspects of HR are interrelated and require collaboration to ensure the overall effectiveness of HR functions.
Transactional HR is the day-to-day work of HR, such as:
- Hiring and onboarding new employees
- Managing employee benefits
- Enforcing company policies
- Resolving employee conflicts
- Complying with employment laws
Strategic HR is the work of HR that is aligned with the organization’s overall goals and objectives, such as:
- Developing a talent strategy
- Creating a culture of engagement
- Measuring employee performance
- Driving innovation
- Reducing turnover
Here is a table that summarizes the key differences between transactional and strategic HR:
|Characteristic||Transactional HR||Strategic HR|
|Focus||Day-to-day operations||Alignment with organizational goals|
|Role of HR||Supportive||Strategic partner|
Transactional HR is essential for the smooth functioning of an organization, but strategic HR is what can help an organization achieve its long-term goals. The best HR departments are able to balance both transactional and strategic work, and they use their knowledge of both to help the organization succeed.
Here are some examples of how transactional and strategic HR can work together to achieve organizational goals:
- Transactional HR can help to identify and recruit the best talent for the organization. Strategic HR can then work with the organization to develop a talent management plan that will help to retain and develop that talent.
- Transactional HR can help to ensure that employees are compliant with company policies. Strategic HR can then work with the organization to develop policies that are aligned with its values and that will help to create a positive work environment.
- Transactional HR can help to resolve employee conflicts. Strategic HR can then work with the organization to create a culture of respect and inclusion that will help to prevent conflicts from happening in the first place.
By working together, transactional and strategic HR can help organizations to achieve their goals and objectives.
According to some sources ² ⁴, strategic HR issues are those that are value- and future-focused, such as culture and retention strategies, recruitment and selection programs, developing onboarding programs, increasing value out of employees through training programs, developing outreach programs for recruitment sources, developing best practice guides or assistance, etc. Strategic HR helps implement strategies that help focus on an organization’s goals and address the challenges that need to be met by the human resources.
Transactional HR issues are those that are routine and administrative, such as payroll, workers compensation, benefits management, compliance with employment laws, etc. Transactional HR encompasses everything that makes hiring, training, paying, and managing your employees. Transactional HR is necessary but not sufficient for achieving organizational success.
For example¹, a transactional approach to hiring new employees is to write 10 job descriptions, post them, interview candidates and fill the positions. A strategic approach means partnering with the manager to understand the challenge that needs to be addressed, developing a long-term plan for a talent pipeline and networking to uncover the best passive candidates.
Source: Conversation with Bing, 5/15/2023
(1) Transactional and Strategic HR: What is the Difference, and … – SolveHR. https://solvehr.com/transactional-and-strategic-hr-what-is-the-difference-and-why-do-you-need-them/.
(2) Separating transactional from strategic HR not cut and dry. https://www.hrreporter.com/news/hr-news/separating-transactional-from-strategic-hr-not-cut-and-dry/310103.
(3) HR Strategy: Stop Being Transactional and Start Being Strategic. https://www.adp.com/spark/articles/2018/03/hr-strategy-stop-being-transactional-and-start-being-strategic.aspx.
(4) Traditional vs. Strategic HR: How to Guide Your Business into the …. https://www.hrci.org/community/blogs-and-announcements/hr-leads-business-blog/hr-leads-business/2022/02/14/traditional-vs.-strategic-hr-how-to-guide-your-business-into-the-future.
Who Has the Best Response to the Question?
I wish I could say there’s a clear winner here, but the truth is that they gave similar answers but in a form that complements the strengths of each one. ChatGPT gave a very straightforward and well-numbered response, demonstrating why it became the most widely adopted software tool in the history of the Internet.
Bard‘s response went to the trouble of creating a table that abstracts the characteristics of strategic and transactional in an interesting way, and it took the extra step of showing how the concepts are complementary. It’s interesting to note that the AIs don’t entirely agree on whether talent acquisition is strategic or transactional.
Meanwhile, Bing did what Bing tends to do best, which is provide a relatively succinct answer but one that provides links to original sources that supposedly support its arguments. I say “supposedly” because I’ve found that sometimes the sources it provides do not really support the assertions it makes in its summaries. Bing also wrote one incomplete sentence.
I found them all useful. In practice, I tend to use Bing a lot because it gives me sources I use to verify (or not) its assertions. This is very useful to a researcher, and I think Bing is underutilized for that reason.
That said, I’m impressed by Bard’s advances in recent weeks and will probably use it more than I have been. But ChatGPT3.5 is still a very impressive and intuitive tool, and it provided, in my eyes, the most straightforward answer.
Vive la différence! There’s room in the world for more than one scary-smart-but-annoyingly-hallucinogenic AI, it seems. May we (including us human intelligences) all learn to get along in a civil manner. That would the hallmark of a rich and interestingly complex intelligence ecosystem.
Note: The image featured is from Microsoft Bing Image Creator, in which the prompt was “In the style of Utagawa Kuniteru, show three sumo wrestlers wrestling one another”. Please note that there’s no implication that today’s AIs are somehow Japanese. I just wanted an image of three powerful wrestlers illustrated in the style of an excellent artist who has long since passed on and would have no concerns about copyright issues.