How can HR become a trusted advisor to other business leaders? In a nutshell, start to demonstrate the value you bring to the business, writes Ian Till.
Does HR deserve a seat at the executive table? Given approximately 75-80% of the value of an organisation resides in intangible assets (human capital and everything else that relies on employees such as brand, IP and culture)[i], your first response is likely to be ‘yes’. Surely the fact that the costs associated with replacing a contributing employee range between 0.5 and 1.5 times an individual’s annual salary[ii], that talent is the second most critical challenge faced by CEOs[iii] and that organisations in Australia conservatively spend 1.5% of payroll on training and development per annum, equating to a spend of ~$12.7bn per annum[iv] underline that HR does deserve a seat at the table?
The above clearly shows that people ARE the most important asset of an organisation. So shouldn’t it follow that HR is already a critical strategic partner within an organisation?
When we look at some other statistics this is obviously not the case:
- The majority of CEOs don’t come from an HR background. CEOs come from a Finance (26%) Operations (24%) or Marketing (24%) background (Spencer Stuart 2004)
- In a recent survey of HR Directors, 45% of HRDs identified their most critical developmental need was to ‘become the trusted advisor to the CEO’ (The Octant Foundation, 2012).
So why the disconnect?
In my opinion, one of the main reasons that HR is not seen as a strategic partner is that HR often asks questions that are too operational and not strategic enough in nature.
Indeed, I recently had the pleasure of attending a thoroughly enjoyable HR conference. The content was varied, the speakers dynamic and engaging, and the attendees fully engaged throughout the day. While the conference left a positive lasting impression, there was one speaker who managed to shock me.
The Head of L&D for a multi-billion dollar global organisation employing tens of thousands of people worldwide was sharing a major change initiative he had been driving over the past two years to rationalise the diverse number of competency frameworks that existed globally and create a streamlined approach to organisational development. There were some great wins: internal stakeholders had bought in, a single competency framework was in place and development programs had been developed, implemented and were being positively received. What shocked me was his revelation that it was only two years ago (when he joined) that the organisation reframed the question of leadership development from ‘What should our leaders look like?’ to ‘What organisational capabilities do we need to be able to achieve our strategy?’
Having consulted to organisations across Asia Pacific over the last 20 years and spent a reasonable part of that time helping organisations to develop or refine their competency frameworks, I was astounded by the fact that this shift to a future focused, business outcome linked approach was only just taking place in this global organisation.
In the course of my work I frequently hear HR professionals lament the fact that they are not perceived as trusted strategic advisors, that they don’t have a seat at the table or that their contributions are undervalued by the business. The unfortunate truth is that for a large number of HR practitioners this is their reality.
So, how can HR step up and become the trusted advisor?
Simply put, start to demonstrate the value you bring to the business:
- Share your performance metrics (engagement, cycle time to hire, profit per employee, voluntary turnover rate etc.). But don’t just report the data – discuss the implications on the business and demonstrate the value you can add.
- Read the annual report and understand the financials. You can’t be a senior leader if you don’t understand the business.
- Be willing to be held accountable, be vocal and constructive, be visible and add value to executive discussions – don’t wait to be asked for an opinion – after all you have responsibility for most of the value of the organization.
- Communicate in business terms – become intimate with the business and financial metrics such as ROCE, ROI, and cost benefit analysis.
- Lastly, and most importantly, have a 1:1 discussion with your CEO about their expectations of you, and share with them how you can add value to the business.
At the end of the day HR shouldn’t just be having a seat at the table – it should be involved in planning and executing the entire experience – from soup to nuts!
About the author
Ian Till Is General Manager at The Octant Foundation. To find out more please visit: http://octantfoundation.com/
[i] Brookings Institution: Kaplan and Norton
[iii] The Conference Board, 2011
[iv] Australian Bureau of Statistics, 2012