HR has often been criticised for failing to understand the priorities of a business and its managers at an operational level. Craig Donaldson speaks with a number of chief operating officers about this issue and examines what HR can do in order to make a more effective contribution at this level
What are your impressions about the business effectiveness of HR?
Bruno Fiorentini, COO, Yahoo!7: HR should be much more active than it is today. When you look at your average company, HR is not really attached to the business strategy. I’ve seen other companies where HR is relegated to more general duties rather than hard operational issues. HR is more about organising and understanding head counts, the bureaucracy of benefits and so on, instead of really being active in strategy.
HR definitely needs to understand the business, the core mission of the company. HR needs to understand this from a business level, so it can interact with finance, operations, marketing and sales from the same strategic level. To make that possible, HR needs to step up and operate from this level. So you need generalist professionals with broad HR skills, but they need to be specialist in terms of understanding the whole business and not just one function.
Keith Skinner, COO, Deloitte: I guess I’d have to say it’s mixed for a variety of reasons. First of all, to have an effective HR group, you’ve got to have the top leadership of the organisation absolutely committed to it. And I know there are companies or organisations that maybe do not have that level of commitment to make HR a real part of the business, a partner in the business if you like. So it is varied.
I also think that the whole HR and human capital area has become a lot more important – it’s had a lot more focus on it in recent years, and it’s probably still growing the capability. I don’t think there’s enough of those people with that capability in the market yet, so that probably holds back the ability to develop it too in some organisations.
Richard Boggon, vice-president Asia Pacific, Saba: In many organisations I am and have been involved with, it becomes apparent quite quickly whether or not HR is effective. There is a clear sense of purpose, clear understanding of what the organisation is trying to achieve, and an even clearer focus within HR of what needs to be done to achieve those goals. HR will have a clear framework in place for building and sustaining organisational capability, and line management will be able to clearly articulate the framework, and demonstrate commitment to key priorities. HR will be present and contributing in the planning process at the executive, and then can be found at strategic points in the organisation to assist line management implement, execute and report on progress to deliver against the priorities in the business plan.
What holds HR back from making contributions at the operational level?
Skinner: In my view, HR can add significant value. But I think the biggest limiting factor is when executive teams don’t understand, support or invest in areas which would allow HR to add value. Sometimes the actual depth of HR people that have the capability to strategically lead good HR groups is limited.
If HR doesn’t have that executive support, that obviously makes it tough. Whether it’s HR or any other function, you’ve really got to be able to demonstrate the value that you can add to an organisation. HR needs to look carefully at the strategy of an organisation, what its priorities are, maybe tick one or two things that it could really work on, deliver well and demonstrate value and grow from there. You also need to get someone in the organisation that will help sponsor you and promote whatever that area of endeavour may be. It’s pretty hard to do on your own.
Fiorentini: In general, I think HR professionals need to reposition themselves. We’ve passed the time where business was in an economic environment of uncertainties and finance was important. You had a time where operations was very important in order to save money and maximise the business. Today, there is a lower differentiation between products and commodities and people make the difference.
So, HR is in a position to make a difference here. But I don’t think they are doing that today, because sometimes they are not directly reporting to the CEO of the company. Sometimes they are not part of the executive group, and because of that, they are not close to strategic decisions. I think HR should impose their position as a key contributor in order to understand the business priorities in which people can make a difference.
Boggon: Bandwidth and lack of it is, in my view, the most common constraint. Business and consulting skills must also be exceptional if HR is to be effective, and add value. HR, as does any part of the organisation, has limited and finite resources. HR is often the first place of call for managing day-to-day transactional and exceptional issues. In this environment, it is easy to get caught in a cycle that offers little time for involvement in strategic issues, or in cross-functional organisational initiatives. If HR is caught in such an environment then it must find a way to better manage or simplify transactional service delivery, so that it is more effective in focusing on the strategic issues and also partnering with the operation to ensure effective execution. HR has licence to operate across the organisation and at all levels, and so it is important for HR to assume the role and engage.
Often in situations where HR has largely been transactional, it may also be a confidence issue. Where confidence is down then practitioners may end up missing the mark or focusing effort in the wrong area. The relationship between individual HR practitioners and line management is critical, as is the understanding of the business. It is often the strength of this relationship and the business savvy skills and abilities of the HR practitioner that will determine the value of HR’s contribution.
How can HR make an effective contribution at the operational level?
Boggon: HR is ideally positioned to facilitate alignment of workforce priorities and capability with key business drivers and organisational priorities. Imagine a large organisation where the business planning process has just recently been completed, the executive have agreed organisational priorities, and business groups have also mapped their specific objectives as they relate to the achievement of organisational goals. Successful execution of the business plan will require clear understanding of what needs to be done at a group, team and individual level and consistency in the quality of execution.
Traditionally, most organisations will rely on “effective communication” and the ability of frontline management to manage day-to-day tasks and activities to get the job done. In this environment, traditionally HR will assist by exception, and will run its traditional performance management processes bi-annually to check on the outcomes and assure the right level of remuneration is applied at annual bonus time. This is akin to reporting after the fact what happened – line management already know how they went, if the strategy needed adjusting they have already done it.
Fiorentini: In organisations that really drive HR, they make it a part of their strategy – HR can help drive business by understanding the profile of the people it needs and the values that it needs to generate for these people. If you think about all disciplines that are related to HR today, I think the most important ones should be related to values of a company, the DNA of the company. And this should be directly related to the core business of the company. If we can make this connection, HR should definitely be much more important.
So HR really needs to understand the needs of the people inside the organisation. Training is very important here. Sometimes people are promoted to managerial positions because they have very good technical skills, but lack the people skills. In other companies I have seen engineers, designers or other specialists being promoted without having these people skills, and sometimes without the willingness to be managers. So HR can make a contribution here –it needs an impartial eye inside the organisation in order to improve the mentoring skills of managers. There needs to be consistency across the company in how this is done, so by understanding the business of the company, the DNA of the company, HR can add value at that level through training that is underscored by a homogenous voice of the company.
Skinner: It starts at the top really. The chief executive needs to understand the value that HR can add and the importance of it to their meeting their objectives. That’s probably the key focus, along with getting properly trained and professional HR people to be able to do that as well. Once leadership is committed, you’re off to a flying start.
Aside from that, formal training is always a good place to start, and there are more and more opportunities for that. There are more industry and networking groups that HR can be members of and participate in. Getting involved with organisations that do have this HR focus is key. Experience is obviously a very good way to learn. Obviously there’s lots of reading and other things you can do, but just having a passion for it and getting involved in organisations that do place a value on it is the bottom line.
How can HR best demonstrate the value it brings?
Skinner: If you look at it from a strategic and an operational sense, it’s not difficult to create some performance indicators that can demonstrate the value. Employment turnover is obviously a key one, and that obviously will have a cost impact on the business. Engagement scores, where HR people work with service lines around engagement and culture, can be all measured.
So HR has got to understand each of the business units, and be able to talk the talk of the particular business. Here HR gets involved in our planning process, so they understand what the plans are of the wider firm and the business units. They also develop their own plan of what they’re going to provide through service to the individual units, and that’s communicated as part of the planning process.
Boggon: HR can go beyond the strategic planning process, and sit alongside executive and line management in the execution of the business plan. HR is ideally positioned to add enormous value in delivering enhanced service innovation, and assist line management to streamline business process and remove impediments to business performance. To ensure effective alignment of organisational goals with workforce activities, HR must build business plan priorities into the personal plans of executives, line and frontline management, and enable team collaboration around progress. By wrapping development needs and compliance requirements around the performance plan, HR provides a single plan from which individuals and their managers can measure success from a holistic perspective, and adjust inputs as required.