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Moving beyond the 'cost centre' perception

Steve Johnson of Transfirmation Partners tells HCTV how HR can shake off it's perception as a cost centre and start adding value at a strategic level.

Video transcript below:

Reporter:  Despite gaining ground in the hearts and minds of many organisations, HR is still seen by some as a cost centre.  Steve Johnson of Transfirmation Partners says that in order to change this perception, HR needs to be contributing in a strategic way.

Steve Johnson, Transfirmation Partners
Steve Johnson:
 Cost centres imply low value or commoditised value.  Commoditised values suggest that it’s not strategic.  What’s important is to get the commoditised activities or the lower value activities under control, but at the same time HR actually needs to be contributing in a strategic way and in order to do that HR as a function needs to get to grips with the industry challenges and changes that are coming down the pipeline, get a clear understanding of the business strategy as it relates to their current business model and the business strategy that relates to future business models.

Reporter:  Johnsons explains that it’s not just the size of an organisation that has bearing on strategy.

Steve Johnson:  Size of the organisation has some bearing on the organisational strategy, but what’s more important is the time horizon of the strategy, because it’s the time horizon and the strategy that will inform the organisational design and its complexity.  For example, the number of levels the organisation requires, the critical roles that should reside at each level and then that’s the starting point for deciding which people are best suited to fit into those particular roles.  So whilst organisational size matters, it’s not as important as the time horizon of strategy.

Reporter:  Johnson also emphasizes the need for HR to be thinking about strategy in a systemic way.

Steve Johnson:  In order for HR to become more strategic, it’s absolutely essential for HR to be thinking about strategy in a systemic way.  And what that means is thinking about the interplay between strategy, organisational design and leadership.  Because if those three areas aren’t brought together as a system, there is very little chance that any initiative the HRD puts together will be effective.  Because it’s the reinforcement of those HR initiatives linking back to the strategy, linking back to the organisational design and linking to the leadership that make the real difference.

Reporter:  Finally it’s clear to Johnson that in successful companies there are strong links between strategy and organisation structure.

Steve Johnson:  In the most effective organisations, there is a clear linkage between business strategy and organisational design.  There is a clear linkage between leadership and the role leadership plays in accountability and creating a sense of trust and fairness so that people are encouraged to give their best on a regular basis.  Of course that implies that leaders at all levels understand what their role is in terms of accountability for their people, but also accountability for themselves.  Leaders have to understand that it’s their job to actually be accountable for their team’s results and that’s a distinct power shift from the way most leaders see accountability.