All hail the HR leader of the future

by 11 May 2009

HR leaders of the future will need to exhibit personal proficiency and excel in a specific number of business domains. In the first of a two-part series, Craig Donaldson speaks with Dave Ulrich and other HR experts from around the world about what the HR leader of the future will look like

As the economic downturn continues to impact on organisations and their bottom lines, HR lead ers are under more pressure to deliver value and help improve performance and productivity. Many HR issues are centre stage in managing the downturn, and the first step for HR leaders is to under stand the nature of the downturn, according to Dave Ulrich, professor of business at the Ross School of Business, Uni versity of Michigan, and co-founder of The RBL Group.

“Some of the recession is cyclical and the business will (eventually) recover,” he says. “In these cases, it is impor tant to manage across the cycle. In other cases, the reces sion heightens the structural change in the industry and, in these cases, HR needs to help reinvent the firm and industry.”

Ulrich, who has been named the most influential person in HR by the US Society for Human Resource Manage ment for three years, says the second step for HR leaders is helping their companies navigate the paradoxes inherent in tough times. Examples of these include managing both cost and growth, innovation and execution, focusing on customers outside and employees inside, being local in home markets and global in emerging markets and so forth. In some cases, companies might overplay one of the dimen sions of these paradoxes, which could hurt them in the future. “HR leaders need to know when and how to bal ance these paradoxes,” Ulrich says.

The third point for HR leaders is that they need to adapt HR practices to new business realities. For staffing, he says this might mean managing targeted selection, downsizing, promotions and retention of key talent, while for com pensation, this might mean managing total rewards systems – even, at times, cutting financial salaries to match mar ket conditions. For communication, this means being pub lic and transparent with information both inside and outside the company, and for organisation design, Ulrich says, this means streamlining the organisation and remov ing work to match the decline in workforce.

“HR leaders who recognise that a ‘crisis is a terrible thing to waste’ will use the downturn as a license to make required changes to their organisation. This might mean pruning, streamlining, or simplifying products, people and processes. HR should also be an advocate and strong voice for maintaining a strong set of values while executing such difficult decisions,” he says.

At the bottom of the downturn, talented employees may not leave because they have nowhere to go, but Ulrich says these same employees will long remember the way the company treated them in tough times. “The risk of losing good employees rises as the economy recovers and [peo ple remember] when the company acted out of disrespect in tough times,” he says.

Ulrich also notes that the economic crisis heightens accountability and responsibility. As the bar has been raised on HR, it is imperative that HR professionals manage their performance to respond. “Those who do not respond will be moved aside,” he says.

What business requires of HR

Ulrich has studied the competencies of successful HR professionals since 1987 in con junction with Wayne Brockbank and other colleagues at the University of Michigan and the RBL Group. Every five years they conduct a large survey of global HR professionals and what makes them effective.

In the 2008 publication, HR Competencies, six domains in which effective HR pro fessionals needed to excel were identified:

Credible activist. It is not enough to have personal credibility or be a trusted advisor. The top HR leader needs to have credibility, but also to be an activist. An activist takes a position, offers opinions and advocates. Successful HR leaders will be activists, not only on traditional HR issues, but on business issues. When “invited to the table” some HR leaders wait for HR conversations to contribute. “They will probably only get invited when those conversations are on the agenda. Top HR leaders contribute in an active and informed way in business dialogues,” Ulrich says.

Business ally. To contribute to business discussions, HR leaders must know the busi ness. They should be able to pass a business literacy test around customer, financial, strategic, industry, competitor, regulatory and other challenges and trends. “We have been disappointed that, across the HR profession, when being ranked by their HR and non-HR associates, HR professionals have scored 3.6 out of 5.0 on business literacy since 1987,” according to Ulrich. “This flat score indicates that many in HR are not yet ready to be full partners in the business.”

Strategic architect. Strategy is owned by the line manager who is accountable and responsible for creating and implementing it. But Ulrich says that HR leaders as strate gic architects can help clarify the strategic unity by creating a strategic story that can be told both inside and outside, align HR and leadership actions so intended strategies actu ally happen, and facilitate the process of crafting and communicating strategy.

Operational executor. A lot of HR work requires discipline, accountability and exe cution. Payroll, benefits, on-boarding, policy management and other administrative serv ices must be done on time all the time, and HR leaders need to make sure HR systems work efficiently.

Talent manager/organisation designer. HR leaders have to be attuned to both individual ability and organisational capability. Individual ability is about making sure the right people with the skills and the right commitment are in the right jobs. But, individual tal ent is not enough without excellent organisations. “HR leaders also should be auditing organisation capabilities to make sure that the organisation culture and processes reflect customer and investor expectations,” Ulrich says.

Culture and change agent. In a world of constant change, those companies that respond will be much more likely to thrive than those who do not. HR leaders can help companies built capacity for change by bringing dis cipline to the change process and by creating the right cul tures where change can occur.

The HR leader of the future

The economic downturn has created much uncertainty about the business outlook, however, Ulrich says, there are three trends that HR leaders should prepare themselves for.

In addition to the above skill-sets, there will be an increased emphasis on HR delivering value to customers, investors, communities and other stakeholders outside the organisation. “Customers might not just buy a product or service, but a relationship with the firm. This relationship is embedded in talent, rewards, communication, and work – all HR domains,” Ulrich says.

The second trend is that HR analytics will become increasingly impor tant, and HR leaders will increasingly rely on intuition – but coupled with analytical data to make informed decisions, he says.

Third, globalisation will change the nature of competition for talent. “As skills become more specialised, the source of talent becomes increas ingly global. Sourcing and promoting top employees in emerging markets from those markets will require HR leaders who can adapt their practices to local conditions,” Ulrich says.

In addition to the four critical HR leadership roles already discussed – strategists who set direction; executors who make things happen; talent managers who engage others; and human capital developers who invest in the next generation – Ulrich says personal proficiency is at the heart of all leadership.

Taking care of oneself is the foundation of personal proficiency, and he says HR leaders need to take care of themselves physically (nutrition, exer cise, sleep, health), emotionally (identity, resilience, self awareness), socially (being connected, able to work with and through others who are not like them), intellectually (curious, able to see patterns, learning ability) and spir itually (having a strong moral code and set of values).

“Leaders who take care of themselves first and help others take care of themselves will have respect and credibility,” he says.

Opportunities for evolution

There is a significant opportunity for HR to evolve over the coming years, according to John Boudreau, professor of management at the Marshall School of Business and organisation and research director for the Center for Effective Organisations (http://marshall.usc.edu/ceo/).

In all areas of HR, including corporate HR, business partnership, functional excellence and HR operations, there is an opportunity to put more rigour around human capital - a process which Boudreau calls “talentship”. “It will be a decision-making discipline for decisions about human capital and organisation design that is akin to the decision science of finance for money and investments, or the decision science of marketing for customers and offerings,” he says.

“HR will extend its focus to the quality of decisions about talent and organisational elements throughout the organisation - not just within the HR function.”

Much has been written about the importance of HR leaders knowing the business, and Boudreau says this is often interpreted as having a better understanding of business disciplines such as finance and marketing and accounting. “That’s certainly something that we will see more of, in the future,” he says.

“However, I believe a more fundamental difference will be that HR leaders will increasingly not just understand the business, but bring a unique perspective to business strategy and decisions that reflects their unique understanding of the market and behaviour of human capital in organisations.”

He says that means HR leaders will be more adept at decision support, social and organisational networking, being visible and valued external organisational representatives and engaging with leaders outside their profession from the basis of unique expertise, and not just strong service delivery or advice.

Other core competencies of HR leaders, Boudreau says, will include adeptness at internal and external communication, organisation design, project and operational excellence, vendor management, technological expertise and analytical prowess. “Indeed, many HR functions in leading organisations now include the communications function, as well as significant elements of vendor management and human capital metrics and analytics.”

HR’s corporate responsibility

Mike Emmott, employee relations adviser for the Chartered Institute of Personnel Development (CIPD), says the line between HR and corporate responsibility is becoming increasingly blurred, as more organisations recognise that, if their CR initiatives are to be credible, employees have to be part of the action.

“A key role for HR leaders will be getting greater consistency in communications with different sets of stakeholders, building trust in the organisation and creating a meaningful employer brand. HR leaders will be looking after the reputation of the organisation, as well as helping to drive performance,” according to Emmott. If HR leaders are going to focus on organisational health, he says, they will need to be comfortable leading big initiatives on organisation development, including issues about structure and purpose.

In addition to this, HR professionals will need to have ongoing dialogue with other departments, including finance, about how human capital impacts on profitability, and what measures are useful as a way of predicting future business performance, Emmott adds.

CEOs are clear that what they are mainly looking for from HR leaders: behaviour rather than specific knowledge. As such, he says, HR leaders require competence at handling difficult conversations and the ability to minimise or deal with conflict. Beyond this, the model of engaging leadership adopted by professors Beverley Alimo-Metcalfe and John Alban-Metcalfe, asserts that leadership qualities include (among others) acting with integrity, being honest and consistent, inspiring others and building a shared vision.

“This underlines the importance of HR professionals being able to promote employee engagement within organisations,” Emmott says. “It is no longer possible to achieve sustainable high performance by telling people what to do: they have to be encouraged and supported to offer discretionary behaviour. This is a job for top management, who are responsible for the organisational culture, and for line managers, but HR leaders have to put in place a framework within which employee engagement can be effectively managed.”

Finally, if HR leaders are really going to add value to the business, Emmott says, they need experience of a range of functions outside HR. As the contribution of people management to business performance becomes more widely accepted, it seems likely that HR will attract a larger share of MBA students, who see themselves developing wider business careers. “HR will no longer be seen as focusing solely on people but as a mainstream business function with unique opportunities to shape the organisation,” he says.

Bigger boots for HR

CEOs will want HR leaders who can help business initiatives succeed because of the insights that come from their professional expertise, according to David Creelman, CEO of Creelman Research, which works in collaboration with Dave Ulrich and The RBL Group. “HR should be a key player in aiding mergers, innovation, globalisation and so on. HR leaders who have the business and professional savvy to do this will be in high demand,” he says.

The ideal HR leader of the future will be highly educated, because there is an enormous amount of subject matter expertise they need to be across, Creelman adds. This, he says, probably means formal education to the Masters level, but more than that it means a life-long habit of learning.

He predicts that the ideal HR leader of the future will probably spend a significant part of their career outside of HR. They will be seen as a capable manager who has been chosen to lead HR, and not someone with “HR manager” branded on their forehead.

The next generation of HR leaders will also be comfortable with analysis. “This is not to say that HR is becoming the kind of function you run by looking at the numbers,” he says. “However, there is increasing opportunity to do analysis thanks to the amount of data HR technologies now capture. Seniors HR leaders won’t be buried in spreadsheets themselves, but they do need to understand data analysis.

“In particular, they need to have had enough hands on experience that they know how much BS there can be in analytics. Knowing how misleading multiple regression can be is more important than actually being skilled in statistics. HR leaders need to know the value they can get from analysis without being ‘blinded by science’.”

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