View from the top: CEOs on HR

by 01 Nov 2006

Executive impressions of HR have not always been the most glowing. In the first of a four-part series of executive roundtables, Craig Donaldson speaks with the officers in chief from four companies about HRs strengths, shortcomings and areas for improvement

HR has often been seen as a cost centre within businesses, unable to add real value or demonstrate meaningful contribution to the bottom line. However, there are promising signs that HR is beginning to understand strategy, with business and people savvy CEOs working more closely with their HR teams.

Where does HR struggle in making a strategic contribution to business?

Steve Parker, managing director, Unisys AsiaPacific: I’ve seen three different areas where HR struggles with strategy. First and foremost, there’s a fundamental question here as to whether executives really know what they require from HR. A lot of people would assume that HR does the transactional stuff and they’ve had experience with that, but really, does a senior executive understand what they require from a strategic HR perspective? Typically executives at my level have had lots of training in the legal, financial and perhaps operational aspects of business, but have we really spent a lot of time understanding this in terms of what we expect of HR? This impinges on whether you can get good strategy out of HR.

The second point is, in my experience, I have seen what I would call site managers at the CEO level, who are themselves are damaged goods. If these people have a large blind spot, that makes the HR work exceptionally difficult. They would make it difficult to appreciate good HR strategy. Let’s call it a fatal flaw in some executives that just make good HR almost impossible.

Thirdly, there’s HR itself. If you have HR people who are more theoretical than practical, not focused on the current reality of the organisation and just wanting to put in place programs that perhaps interest them from a theoretical perspective, regardless of the current state of the organisation, then obviously HR is not attuned to what is required in the organisation.

Jeff Fairbairn, managing director, UPS Australia:HR really needs to fully understand the business. Within UPS, HR is engaged from the business planning standpoint. So right from when we start writing business plans, HR is involved. That flows because we have a corporate-region-district-country structure that is standardised through all those levels. UPS employs around 400,000 people across the world. Our business is driven by people, so HR in this business really has to be very effective in what it does.

There’s no doubt there will continually be challenges associated with new laws and regulations that we have to meet in the workplace, be they health and safety or industrial relations issues, such as the workplace reforms that we’ve seen. I think sometimes HR might be reactive to a lot of those issues. HR should be pre-empting that stuff a little bit more – be there for businesses before the regulatory regime tells them to be there.

Tony Faure, CEO, ninemsn: I’ve worked in a number of companies in my career, and HR struggles when it is not regarded as being strategic to the business. And typically, when HR doesn’t work well, it has no senior representation in an organisation. It functions as a department which is part of some sort of administrative overhead.

There are businesses I’ve seen in the past – the distant past, happily for me – where I felt that HR, rather than being a great enabler of vision and culture, became a kind of grudge centre for the business, where the neutral role of HR to listen to feedback, became somewhat destructive at times. The HR director and team here enable our business by providing a great feedback loop, but I think there’s a real danger for some companies if that becomes a negative, not a positive.

Richard Boggon, vice president Asia Pacific, Saba:I believe the reasons why there is constant and relentless debate about whether or not HR is effective, is because there are too many examples where HR generally does not have anything significant to add when the opportunity does arise. Perhaps this is because we are so busy in HR managing tactical issues, we do not have the head space or the benefit of the right business context that can only be gained through an involvement in the history of executive discussions on a particular topic or issue. Perhaps it is because HR is seen as the facilitator, to ensure smooth running and cover for the errors of line and executive management. Perhaps it is because when HR do get time in the diary of executive and line managers, managers become frustrated if they perceive that what HR want to discuss are issues that seem to be unimportant to people who are under significant pressure on more important issues.

In many cases, there is a perception that many of the issues people want to discuss are in tier three when it comes to level of importance. In the same way sales carefully plan for the limited time they have with client executives to ensure most impact, does HR consider their approach to key executives in much the same manner?

How can HR best balance strategic andtransactional work and become an effective business partner?

Faure: There are two different issues here. First of all, if HR isn’t an effective business partner, that problem can come from a business that doesn’t regard its people as being strategically important. If the organisation doesn’t regard its people as a major strategic asset, then the way that it looks at HR tends to be as an administrative, departmental partner in the business. And in that case, quite often the skill set that’s hired into HR therefore lacks the ability to step up a level. That’s a pretty hard one for HR to deal with, if that’s the corporate view.

However, if the corporate view is right and HR isn’t doing what it needs to, then the reason for that normally is that HR hasn’t demonstrated the role that it plays in the business, or should play in the business, and the upside of that is great HR teams do a great job of enabling the recruiting, retaining and motivation of the best people. Similarly, I think HR departments that don’t do that regard themselves as carrying out some sort of narrow function, like recruiting, or some involvement in annual salaries only. In that kind of situation, the rest of the business doesn’t understand the value that they bring.

In the end, where HR hasn’t stepped up, it’s because it hasn’t shown clearly the business impact of what it does. HR needs to be able to know and communicate issues such as how well it recruits, the impact this has on the business, the quality of intellectual property it gains across the business, the impact of retaining top people, and so on. That’s what HR can do really well. Where it struggles is when it doesn’t make that case.

Parker: HR can structure itself so there’s a distinction between strategic and transactional roles. That’s easy to say, but can be hard to execute. Even if you had a group of four people in HR, I would very much want more junior representatives to focus on the administrative side so they learn the basics, while the HR director needs more elbow room to focus on strategy. But I’d also be sensible about the fact that, until you get the transactional engine working properly, HR is not going to do any strategic work. Or if they do, it might be a little bit of hit and miss.

The structure within Unisys is good, and we use third parties to do some of the more transactional based work (at a lesser cost I might add), and we’ve seen this to be very effective. In speaking to my HR colleagues in those areas where this is used, there’s been a huge relief. It’s been a breath of fresh air in terms of making sure the transactions work properly, and effectively liberating the incumbent HR people from a lot of that work so that they can focus in on case management and strategy work.

Having said that, strategy work is probably only about at best 20 per cent of the HR function, in areas such as engagement, leadership management development and working with the senior leadership team to drive and discipline that group as a team.

Boggon: Many effective HR partners I work with start first with the business plan and priorities. Validate their understanding of the priorities, and influence enhancement or innovation if it is needed. Then they agree with executive and line management on the top two or three contributions that HR can make to help achieve immediate success or improvement in the result the executive and line management are seeking. Get a quick win or two. Work with executive and line management to simplify and streamline people management processes, so that it is easy to align people management and measurement processes with the priorities in the business plan – and reduce noise (stuff that does not matter and clutters the environment and communication).

Approach the business as a business manager first, and a HR manager second. Keep it simple and focus only on one or two issues at a time when agreeing what contribution will make – keep it manageable and as easy as possible to focus on getting a result. Keeping it simple also keeps noise to a minimum and makes it bearable to widen the executive decision making process to include HR. Over time, introduce the longer term strategies but keep the execution and reporting of these strategies separate and clearly defined from the day to day wins that are becoming more regular.

Relationship manage executive and line management as if you were head of sales and line management your client – while maintaining the integrity and credibility of the HR function as both a strategic contributor and keeper of good organisational governance. Relax in the process, and focus on what is important.

Fairbairn: HR really needs to understand what happens at the coalface I think, right at the pointy end of your business – as we usually say “where the rubber hits the road.” Otherwise HR could be putting policies out there that may be don’t exactly have any real impact. You could get a disconnect there. There’s lots and lots of things written about HR and there’s lots of HR professionals around, but HR has got to fit your business, not come straight out of a textbook.

What else can HR professionals do to build credibility and move up the executive ladder?

Fairbairn: Generally the top jobs would tend to go to either the head of finance or maybe sales, but I’d like to think that more and more companies would probably look at their HR resources for these jobs. I think a professional HR manager in a business would probably make a pretty good CEO if your business employs a lot of people and if your business has a strong people focus.

Boggon: Replicating success, and building capability for sustainable ongoing success is critical. This is more than just job profiling and skill development, it is also about job process simplification, improvement and management. To do so effectively though, HR must start at the end point, where the rubber hits the road with the client or community. And it must finish at the point of management who need to be able execute effective and simply. The line of sight between the two must be clear and concise.

If HR overcomplicates the issue, or seemingly goes off on a tangent trying to implement a complex process in order to try and improve the outcome, then too much noise will be generated and HR will be sidelined or even ignored – yet again. Replication of what works, understanding what makes people’s jobs hard, what causes a disconnect, and helping to solve these issues will have direct and immediate business benefit. This is true for both the commercial and the government sectors.

Focusing on common and core issues, and collaboratively working with executive and line management to plan, design and execute the resolution is not hard. The focus simply needs to be on the issues, rather than from any particular input. For example, an effective CFO will first focus on the business issue, develop an empathy for the situation and an understanding of stakeholder interests, and then work with the line to figure out how to make it work. Rather than coming at the problem from purely a financial or a numbers perspective. Execution follows strategy, which follows the problem or opportunity, not in any other order. So be a business manager first, and HR manager second in the approach and the partnering thing will come naturally. And it won’t be an awkward spectacle either – it will look good as well as be good. Sounds simple and I know it is not – but it is a good start.