Passing the baton: Restoring trust in the HR profession

by 19 Aug 2009

The HR profession faces a crisis of trust and a loss of legitimacy in the eyes of its major stakeholders. However, as Tom Kochan writes, the profession can redefine its values, professional identity and responsibilities, and in doing so pass on the baton to a new generation

The two-decade effort to develop a new strategic human resource management (HRM) role in organisations has failed to realise its promised potential of greater status, influence and achievement. To meet contemporary and future workplace challenges, HR professionals will need to redefine their role and professional identity to advocate and support a better balance between employer and employee interests at work.

The next generation of HR professionals will need to be more externally focused and skilled at building networks and productive alliances with other groups and institutions, become more analytical and able to document the benefits associated with effective HR policies and practices, and be skilled at managing in an increasingly transparent society and information-savvy workforce.

Last year, Hewlett Packard CEO Carly Fiorina said: “We have to remember that corporate executives serve at the pleasure and for the interests of shareholders, employees and their communities, not the other way around.”

She went on to redefine the role and responsibilities of CEOs and their corporations as follows: “Managing a company, not a share price, means balancing the requirements of shareowners, customers, employees and communities. And managing a company for the long-term, not just the short-term, requires building sustainable value for shareowners and customers as well as employees and communities. And these relationships of sustainable value require real trust and real candour.”

The HRM profession faces the same crisis of trust, in part because it is – or should be – part of senior management in corporations, and even more so because it has always had a special professional responsibility to balance the needs of the firm with the needs, aspirations and interests of the workforce as well as the values and standards society expects to be upheld at work.

The central challenge facing the HRM profession is to ask what needs to be done to rebuild a viable social contract at work, how do we do it, and who needs to be involved and engaged with us to rebuild the trust essential to the success of this effort?

Meeting the challenge: what can be done?

1. Building knowledge-based organisations

A good starting point for rebuilding trust and closing the gap between firm and employee interests is to focus on generating value for all organisational stakeholders from the one unique asset that employees bring to their organisations, namely, their knowledge and skills. A defining task for contemporary and future HR professionals lies in translating the rhetoric regarding the ‘knowledge economy’ into tangible benefits for the economy and society, for individual firms, and for the workforce. This will not be as easy as some thought it would be.

The 21st century burst upon us in an era of seemingly unbounded optimism about the future of what some called the knowledge economy. This was expected to be the century in which knowledge and skills, or more technically, human capital, finally found its place as the most critical resource and strategic asset to organisations. Yet three years into the new century, a new worry has arisen. Even knowledge work is now at risk of being outsourced to independent contractors or ‘off-shored’ to lower cost employees in developing countries.

Companies as respected as IBM are worried about this trend. Its HR executives were recently overheard commenting in a conference call that they would be forced to offshore more knowledge-intensive IT work in the future because “everybody else is doing it”. This example is a reminder that human resources is both an asset and a cost to business. It falls on the shoulders of HR to ensure that those most concerned about labour as a cost do not drown out investments and organisational policies needed to ensure the asset side of labour is fully developed and utilised.

How is the need to invest in and treat knowledge workers as valuable assets to be reconciled with cost pressures that put them at risk of being outsourced? Clearly some of the more routine knowledge intensive work will move to lower cost environments. Blanket opposition is likely to fail. Instead, the key lies in staying on and pushing out the frontiers of knowledge, invention and innovation in products and processes. But what can we do to help our IBM colleagues overcome their legitimate concern that if they follow a strategy of investing in while others are off-shoring their work, IBM will be at a competitive disadvantage?

The only viable answer to this question is for the HR profession to reach out to external parties and build the collective efforts needed to develop the necessary skill base. HR professionals need to work together to help schools and universities to graduate people with the capabilities to both invent the next generation of products and services and to move quickly and effectively from invention through the innovation process to the market.

While support for schools is important, companies will remain important sources of lifelong education, training and human capital development. It is well known, however, that individual firms will under invest in education and training if their competitors are not contributing their fair share to the workforce development process. This is another reason that the profession must look outward at rebuilding links with others and generating collective support for these investments.

Another reason why HR professionals need to become more externally focused as knowledge becomes more important is that managing knowledge work and workers may increasingly involve multiple organisations, contracting relationships and informal networks. As the movement of work to off-shore contractors increases, for example, so too does the complexity of monitoring and managing these relationships and ensuring that the core knowledge and skills needed to remain competitive are maintained within the organisation or available from a network of trusted, proven suppliers. Managing these mixed types of employment arrangements and multi-party networks in which they are embedded will likely be an increasingly important and challenging aspect of HR work.

2. From knowledge workers to knowledge-based work systems

Too often the terms ‘knowledge worker’ or ‘the knowledge economy’ are equated with the elite professional, managerial and technical workforce. Yet we know that frontline workers likewise can, indeed must, be mobilised to contribute their knowledge and skills to the modern workplace.

As the former President of South Korea Kim Dae Jung once said: “In the age of the knowledge-based economy, every citizen must become a new intellectual. Everyone should acquire the skill to make the most of their minds to create new value for society and generate income for themselves.”

A great deal of effort, experience and evidence has been amassed in the past two decades over how to build knowledge-based work systems that allow frontline workers to develop and utilise their skills at work. This is to be the signal achievement of HR scholars and practitioners of the strategic HR era. And the way it was achieved illustrates a second feature of what is needed in the next HR paradigm – a deeper analytical focus.

The effects of positive human resource and related workplace practices on performance can be measured and knowledge-based work systems can contribute to bottom line performance in a variety of settings. Research has found that on balance, since workers respond well and report high levels of satisfaction with these systems, they hold considerable potential for narrowing the gap between the needs and interests of companies and employees.

3. Looking beyond workplace performance: the dual agenda

As much as significant progress has been made in understanding and implementing knowledge-based work systems, the singular focus on workplace outcomes such as productivity and quality needs to expand to take into account the changing labour force and the increasingly close interdependences between work and personal/family life.

The growing need to better balance or integrate work and family needs has not gone unnoticed in American companies. Over the past decade or so many firms have implemented ‘family friendly’ policies, however experience shows that these policies suffer from a fundamental problem: they are seldom used.

Engaging the workforce and their professional societies in rethinking how work and careers are structured is only the first, necessary step in engaging the broader set of stakeholders that will need to be engaged if the challenge of integrating work and family responsibilities is to be met. Australia and the US share the dubious honour of being the only two industrialised countries that lack a paid family leave policy.

The question is whether HR professionals will engage in constructive dialogue, analysis, and negotiations with women and family advocates and policy experts to design a sensible approach to this and other aspects of work-family policy, or hunker down, oppose new policies, and then have to live with whatever policies if and when new policies are enacted.

The above political stance is typical of the approach the HR profession in the US to nearly all employment and labour policy issues. As a result, the political impasse between employer and labour groups that has blocked all efforts to update our employment policies to catch up with the changing labour force and economy continues with no end in sight. This also is not likely to continue indefinitely, however. The question is whether this generation of HR leaders will begin to engage in a productive dialogue with other stakeholders over how to update our policies or leave this task to the next generation.

4. Labour management relations: partnerships with a focus

One consequence of the inward turn of HR in recent decades has been an increase in anti-union or union-avoidance ideologies and strategies. In the US, HR professionals may have been too successful for their own good (not to mention its detrimental effects on workers and society). Because only 8.5 percent of the private sector workforce is now unionised, the vast majority of American HR professionals have little or no experience in working or negotiating with employee representatives.

Yet history suggests that the void in worker representation now present in American society is not likely to remain unfilled in perpetuity. The evidence is clear that a simple return to traditional arms-length labour management relations would not well serve the workforce, employers or the larger economy and society. Thus, the question is whether HR professionals will have the skills and experience base to help build the types of constructive and modern labour-management relationships and partnerships that are required in settings where employees are represented.

Where HR has been successful in building labour management relations, management does not give up its role as the initiator of partnership activities, and the focus is on achieving bottom line results rather than worrying about whether they have all the joint consultative structures and processes in place. That is, they are strategic in understanding what is needed from the employment relations system and design everything they do to achieve and reinforce the behaviours needed. This can only be achieved in settings where HR professionals are skilled in working with employees, union leaders, and line managers and executives. They must have credibility with all these stakeholders to make their organisation’s strategies work and to maintain high levels of employee commitment and trust.

5. Rebuilding trust with an information hungry and savvy workforce

Carly Fiorina’s earlier quotes lay out the scope of the problem facing management today. The scandals of American companies came after a decade of boom and bust economy in which the old social contract that promised loyalty and good performance would be returned with increased employment and long term financial security had already broken down.

A generation of young people watched as their parents put in long hours of work only to be rewarded with increased insecurity or actual loss of jobs or pension savings. This generation, the ones now in our universities, appear to have made a solemn vow to themselves: “It will never happen to me because I will never commit my total loyalty to a single firm. Instead, I’ll build the networks I need to know where the next job opportunity might lie and keep one foot in the labour market at all times.” Whether young people can deliver on this personal pledge remains to be seen. What is clear to most HRM professionals in the US already, however, is that they are inheriting a more sceptical workforce that is not ready to simply bestow its trust in top management.

How can trust at work be rebuilt? It will start with a new openness and transparency. One thing all employees want from their organisations is good, honest and open communication as well as information needed to assess the risks and potential rewards associated with continuing to invest their human capital in the firm. Employees will be expecting the same rights and access to information as do financial investors. As any parent can attest, most young people today are highly skilled in using the internet to satisfy their information needs. This implies that HR professionals will have to become as skilled as the people employed by their organisations.

The need to modernise HR processes to fit the internet age will affect all functional areas of HR, including collective bargaining negotiations. Recent experiences in the US airline industry illustrate how the workforce can be out in front of developments in this area. Labour and management negotiators in the airline industry in the US have experienced a great deal of difficulty in ratifying collective bargaining agreements in recent years with approximately 18 per cent of agreements having been rejected by rank and file employees.

In a number of these cases, rank and file groups have built their own websites to comment on negotiations and critique tentative agreements, sometimes by sending out information even before the officially designated negotiating teams could describe the terms of the agreement. In conversations about this development a number of labour and management professionals lamented this development, almost in hopes that somehow they could return to the old days where they controlled all communications with the media and to constituents. Instead of lamenting the new phenomena, HR and labour relations professionals will need to figure out ways to use the new technologies in negotiations to keep members informed with accurate and current information.

Some organisations have done so. Boeing, American Airlines and the Association of Flight Attendants have all set up interactive websites where employees can log on, input their personal data (job title, seniority, age and so on), and instantly get a personalised report on how changes in a proposed contract will affect their earnings, benefit calculations, and other features of their employment relationship. The race is on between HR professionals and a workforce with a great thirst for information and sophisticated ability to get it – accurate or not. On whom would you put your bets?

Changing demographics of HR professionals

In the 20th century, when labour relations was the dominant functional specialty in employment relations departments, the field was largely the province of men. Today, the top level HR executives remain largely, but not exclusively a male domain. Yet, currently, women constitute an increasing proportion of professionals entering and working in our field.

This raises several interesting questions. How long will it take for women to break the glass ceiling and reach the top leadership positions in the HR profession? Will they experience or break the ‘glass ceiling’ that seems to continue to exist in other areas of top management? And if or when they do, what effects will the feminisation of the HR function have on the profession? One unfortunate effect, if American data is an indication, is that the feminisation of the profession may lead to a decline in salaries. As more women were entering the profession between 1983 and 2002 in the US real wages of HR professionals declined by eight per cent.

On a more positive note, another possible effect could be a greater sensitivity to the need for flexible policies that support efforts to integrate work and family responsibilities. And, if or when more women also move into positions of power in unions, working hours, paid family leave as well as flexible work systems and careers may surface as higher priority issues in bargaining.

Perhaps it will take this demographic shift for the HR profession to strike a better balance between the interests of firms and the workforce. There is no need to wait for this transition, but, if indeed that is what it will take, I for one say, bring on the women!