HR and the Search for a Strategic Contribution
HR and the Search for a Strategic Contribution Russell Connor, Dynamic Link (www.dynamic-link.com) Russell is the Managing Director of Dynamic Link. Dynamic Link uses a Work Levels framework to provide integrated human resource services. Introduction There are three main domains that require management and leadership attention, namely; money, markets and people. Yet, despite the tired old mantra of ‘people are our most important asset’, it is clear that the people domain is very often the neglected area of the three. This is surprising in today’s climate given that more than half of the value of many companies is found in the intangible assets that include intellectual capital and a diverse, knowledgeable and skilled workforce. The lack of attention given to the people domain is reflected in the status of the people related function. The constant cry in the HR profession’s magazines over the last 30 years has been to elevate the stature of the Chief People Person so that they naturally sit on the right-hand side of the Chief Executive. These pleas still continue and the theme of improving the strategic impact of the function is often referenced in keynote speeches at professional conventions and conferences. This article identifies the journey that the HR profession is on, reveals why effort does not necessarily translate into contribution and provides the lessons from other functions to signal a new direction. The Search for a Strategic Contribution The HR functions lack of impact on the business is not for want of trying. The services provided by a modern HR function bare little resemblance to 40 years ago when the emphasis was mainly on welfare provision. Since then the model of the Personnel Manager providing a general service to a unit or geographical area has been swept aside by the creation of centres of expertise, resource centres, employee self-service and Business Partners.
1
White Papers series
Changing from the widely used Personnel Management to Human Resources (HR) was intended to signify the central importance of the people asset to an enterprise and to elevate the function’s strategic contribution. Driven by the twin aims of cost reduction and improved contribution, HR functions have often outsourced ‘transactional’ services to concentrate on more strategic issues. Alongside this many organisations created Business Partner roles. Freed from the constraints of providing transactional services, this new breed within the people function aimed to do ‘strategic work’. Yet despite the many changes to the form of the function, the contribution has often failed to make the impact the changes sought to bring about. Why Has Delivery Often Fallen Short of Expectations? One of the first lessons learnt about the Business Partner model was that freeing resource in the People function from routine and administrative duties does not mean that strategic work automatically results. And this is no reflection on the quality of the person filling the role. If the managers that they are providing a service for are focused on introducing best practice and improving productivity then the opportunity to undertake genuinely strategic work is very limited. Much of the problem lies with the overuse of the word ‘strategic’. Strategic now covers anything that is important and even urgent. The word ‘strategic’ should only refer to work that involves bringing into being new possibilities and moving the organisation to a different place. Strategic work is very different from operational work with its focus on resource effectiveness, efficiency and best practice.
© Dynamic Link
HR and the Search for a Strategic Contribution Requirements for Strategic Work Where there is the opportunity to undertake genuinely strategic Human Resource related work, the fulfilment of this requires three inter-related activities: Using an integrated framework, Producing HR information in the form that executives typically use when making risk-related decisions, Capitalising on the learning of other resource related disciplines such as logistics, supply chain management and quality. Let’s take each of these in turn. Integrated Framework The HR discipline easily fragments into highly specialised and unconnected areas that often require external consultancy support. This fragmentation happens because there is a lack of an integrated framework. Without an integrate framework ‘people’ and ‘jobs’ become disconnected concepts With the different technologies and methods associated with job evaluation and psychometrics, it is as if jobs are measured in units of time and people in terms of weight. When trying to relate people and jobs using different measurement systems it is like trying to ask, ‘how many minutes are there in a kilo?’ This disconnect between people and jobs has many negative consequences. By way of comparison, this is akin to the unhelpful mind-body split in medicine where the psychological underpinnings of bodily symptoms can be easily ignored. It is only after decades of treating the symptoms of disease that health practitioners understand the value of a holistic approach. Whilst health professionals are beginning to see the cost of a ‘dualist’ approach, HR is largely blind to its disconnect and it is only the rare practitioner that understands that there is a holistic alternative. The consequences of this disconnect are most evident in the area of resourcing. The people and job matching processes including recruitment, selection and the management of talent have become complex, time-consuming, massively
2
White Papers series
costly and inefficient. Not only that, the result of the matching process is often a wrong fit. Despite advances in technology, recruitment continues to be very expensive for a recruiting manager and the selection process often involves difficult to articulate (and defend) factors such as ‘personal chemistry’. At a time when Chief Executives are asking all of their functions to justify costs and identify the link to performance and profit, this lack of an integrated framework prevents a straightforward response. Not only that, but it results in the risks associated with selecting, developing and organising people not being adequately considered. HR Information Compare HR to finance. Within the finance discipline, money is described in clear and consistent terms and there is a common language that enables financial factors to be compared across organisations. The good news is that accounting and management professions recognise that traditional corporate measurement systems must be enhanced to take into account the value-add of the people domain - especially in the knowledge based economy. However, the diversity of human beings, and the fact that an organisation’s financial health is always context dependent, makes a simple translation between people and profit an impossible quest. Despite this, there are ways in which companies can assess their human capital. In looking for ways to measure and manage the value of the people asset there is much to learn from other decision sciences such as Finance and Marketing. The frameworks and principles used within these functions generate valuable data that provides the support for strategic decisions taken by the most senior executives. For instance, organisations are not just interested in how much money is sitting in the bank or tied up in the manufacturing or service delivery process; they want to know how hard their capital is working. Ratios such as Return on Investment are generated within the Finance function to help to answer this question. This is what executives are used to when making business decisions. © Dynamic Link
HR and the Search for a Strategic Contribution
Compare this to the position within the people domain. Despite the investment in sophisticated software systems and balanced scorecards, HR measurement is largely focused on the outcomes of work that is undertaken by the HR function. In the words of John W Boudreau and Peter Ramstad, ‘HR measurement is largely produced by HR people for HR people’. Capitalising on the Learning from other Resource Related Functions Logistics used to be a fancy word for warehousing and transport services. Supply Chain Management, if it existed at all, was within a purchasing function and Quality was a control or inspection function. Not any more! All these functions moved from focusing on the activities of the department to appreciating how their discipline actually impacts the organisation within its business context. To ensure that supermarket shelves are filled on demand, suppliers provide high quality parts just-in-time and to make quality a cultural phenomenon required that these resource related disciplines stopped focusing on providing measures of departmental effectiveness. Instead they expanded their remit to providing end-to-end processes and producing information that enabled managers wherever they are in the organisation to make good decisions. Each of these resource related functions use sophisticated supply and demand models. They understand the factors that drive demand and establish the processes that lead to supply of resources in ways that build the reputation of the brand. When Personnel Management ‘en mass’ changed its name to Human Resources, there was the opportunity to move the discipline to another level. The use of the word ‘resources’ could have heralded a new supply and demand model. However, this opportunity was largely missed. Instead it remains the case that one of the main reasons that the people domain is often neglected is that the term HR is exclusively linked to the doings of the people-related function. Human Resources is not a department! Rather it is the total capability of the people and the way that they are organised and managed.
3
White Papers series
If the people function wants to use the term HR, it needs to genuinely become a business discipline. Just as with other business disciplines HR has to take into account the business context and provide integrated processes that efficiently and effectively ensure that supply meets demand now and in the future.. Conclusion With the effects of a worldwide recession, CEOs are beginning to question the value of HR functions. At the same time it is also possible to detect that HR professionals are no longer happy with their name badges. Maybe it is the jibes around Human Remains, Remnants or Remorses but there is definitely a swelling feeling that calling people ‘resources’ (and probably treating them in the same way that you would buy in other ingredients) has not done the profession the service that was intended. If re-branding can be seen as a confidence builder, maybe a new name for the profession is just around the corner. Although a nice new name may signal a fresh approach, such a move would wither on the vine unless a re-branded HR adopts a new model and provides a new suite of HR indicators, measures and ratios. The lesson from the Finance and Marketing disciplines is that the goal should be to provide data that supports decisions designed to increase the effectiveness of the organisation. HR will never have measures that are equally significant as those produced in Finance so long as they lack an integrated model and focus on the activities or benefits of the HR function or programmes - after the event. To be strategically significant they must focus on improving people related decisions that are made by senior management. A new HR model would have to be one that is integrated, allows for the people and jobs to be measured using similar dimensions and produces information that executives can use to manage the demand and supply of people now and in the future.
© Dynamic Link