In many organisations the human resource function is being put under the corporate microscope and many times it has been found seriously wanting
In many organisations the human resource function is being put under the corporate microscope and many times it has been found seriously wanting, writes Les Pickett
“You head up the human resource function don’t you? What do you really do?”
“What does our HR department actually contribute to the organisation?”
“How much would we save if we outsourced the work done by the HR department?”
“Wouldn’t we be more effective if the HR department was eliminated and executive management became fully accountable for the management of people in the organisation?”
These questions and others like them are increasingly being asked by members of senior corporate executive teams around the world.
In many organisations the human resource function is being put under the corporate microscope and many times it has been found to be seriously wanting.
HR people have seen a number of human resource positions eliminated during organisational restructuring and have watched as technology driven initiatives have distributed information traditionally maintained by the HR department throughout the organisation. As a result of these changes, greater responsibility is being placed on line managers to carry out some of the activities previously performed by HR staff.
Not all line mangers are happy with this transition as they regard doing what they have for many years regarded as HR responsibilities as beyond the scope of their position.
While many HR people regard the transition as a diminishment of their role there are others who are finding that they are expected to perform wider and more senior strategic functions. This frequently requires the acquisition of new capabilities.
A survey published late last October by the Chartered Institute of People Development in the United Kingdom identifies developing HR strategy and policy, business strategy and providing specialist HR input to wider business issues as the most important activities in terms of contribution to the organisation.
The respondents reported that they spend nearly three-times the amount of time on HR administration as they do on business strategy emphasising the problem of needing to address urgent matters rather than those that are important in terms of adding value to the enterprise.
One of the more interesting aspects of the report was the amount of time being devoted to the provision of consultancy and process support to line managers reflecting the increasing trend towards the devolution of traditional HR responsibilities to operating management.
It has been obvious for many years that unless operating management accepts and actively supports an organisation’s HR and people management policies, programs and practices they will be ineffective and remain a set of documents and guidelines that belong to the HR department.
Until this happens, line managers will continue to regard HR as an inconsequential overhead that causes distractions from their prime role and provides comfortable employment for a team of people who are seen as not really doing anything positive to enhance organisational performance.
The change of attitude and the accompanying development of the capabilities of operating management to accept that effective people management is an integral component of their managerial role is one the most important challenges facing HR practitioners and senior corporate executive teams.
Some examples of potentially valuable management tools that are often under utilised include position descriptions (once done, rarely used or updated) and performance reviews (completed and filed as a paper moving exercise). Where this is standard practice, the feedback from operating managers is that the elimination of both of these activities would be a positive step in improving managerial practices.
We still see examples of the critical success criteria for the corporate HR department being the completeness, accuracy and timeliness of regular monthly and quarterly reports – the essential admistrivia which are sometimes required by law and regulation – but what value and active outcomes designed to improve the effectiveness of the enterprise do we see?
Over the years there has been a lack in the ability to provide measures that evaluate the effectiveness of investment in HR and people management. There have been a range of helpful indicators including those that provide information about labour turnover, absenteeism, accidents, compensation claims and so on. Recent work in the area of the impact of investment in HR and people management on business success and corporate profitability is showing considerable promise and will become an increasingly important item in the HR executive toolkit.
The conflict between transactional and transformational HR is not new. Nor will it go away. It is a challenge that must be met if HR is to actively address criticism (some deserved and some unfair) from members of the senior executive team and operating managers and optimise the potential contribution of HR to organisational achievement.
Around the world increasing attention is being paid to outsourcing the HR function and many organisations will be forced to evaluate the cost/benefits of outsourcing their HR function.
Key drivers for outsourcing include enabling corporate management to increase their focus on the core competencies of their organisations while reducing headcount and capital costs, to minimise operating costs and increase bottom line profitability. The objective of accessing the latest technology to improve service levels without capital outlay is high on the priority list.
In the US members of the Professional Employer Organisation, a group that provides outsourced administrative and HR services, reports that its 550 members have averaged growth of around 35 per cent for each of the past five years.
Gartner Dataquest research indicates that the US market for HR outsourcing is expected to increase from US$21.7 ($27.92) billion in 2000 to around US$58.5 ($75.3) billion by 2005.
While there are reports of successful HR outsourcing initiatives that have achieved the anticipated benefits, there are also many horror stories. These include major failures to deliver the anticipated benefits caused by a lack of clarity in defining the real expectations of the outsourcing, poor systems design and failure to check out the actual capabilities of the prospective provider.
One of the worst outcomes of these failures is the resultant drop in morale of the employee and their reduced confidence in their management team’s ability to manage effectively.
Cost reduction alone is not really the most effective criteria for HR outsourcing. There should be other visible benefits such as improved access to personal data, more informative reporting, higher levels of service to employees, more timely and usable information to improve decision making.
There are predictions that well over half of current HR services provided in-house will progressively be outsourced to external organisations that have the technology available to automate routine processes.
There is a need for caution. Senior corporate management sets the organisational culture and climate. These roles cannot effectively be delegated or outsourced. Nor can the responsibility for setting strategic directions, including the development and implementation of HR strategies. These remain the responsibility of senior executive management, which should include HR representation.
The role of the HR function is changing demanding a greater strategic focus with a far more active participation in HR and people management activities by operating management at all levels. This will significantly impact on both the role and critical core capabilities of the effective HR executive of the future.
Les Pickett is a senior advisor to the United Nations System Staff College and a member of Human Resources’ editorial advisory board
