Human Resources is evolving rapidly within many companies, but is the function doing enough to meed today’s business needs? Craig Donaldson reports
Human resources is evolving rapidly within many companies, but is the function doing enough to meet today’s business needs? Craig Donaldson reports
A recent survey, conducted by The Economist Intelligence Unit, found that senior executives around the world rated their HR departments as the worst performing of all their business functions (see page one for story). Only 4 per cent rated the performance of their HR function as excellent, while a third rated HR as below average to poor.
“Alone of the functions under review, more people rated the performance of HR bad than good. No other function – not even the notoriously unlovable IT department – came close to being this unappreciated,” the report said.
So, why is HR held in such low regard? HR professionals need to make a better case for itself to start with, according to Andrew Palmer, author of the report. HR also needs to prove its importance to the organisation in hard financial terms, he says, and take control of key people-related processes. This “requires hard-hitting senior HR professionals with the skills to influence and persuade the people at the top of the company”.
Where is HR at present?
HR is on a roller coaster ride at the moment. With a converging number of critical issues for both the function and the wider business in which it operates, many HR professionals are struggling simply to keep their heads above water.
But being on this fine edge is where individuals can learn best, and some HR professionals are rising to the occasion. Mark Newton, regional human resources director A&NZ with Microsoft, believes the HR profession is maturing. “I see a lot more HR professionals focused on important things like strategy and aligning that with business needs. Prior to that there was a lot of administration and personnel functions in HR, but that certainly seems to be changing, which is great,” he says.
HR as a profession is starting to understand why they exist, he points out. “They don’t exist for themselves, they exist because the business needs them to help drive their people strategy. HR professionals are getting more and more involved as true business partners,” he says.
This comes back to the purpose of HR and its strategic alignment with the business, according to Newton. HR is beginning to realise the need for great people strategy and how that can impact the business, he says. “We’re on the same team and we have the skills to help drive the business into new markets, make sure it’s got all the right people in place and those people believe in themselves. That can absolutely make a difference to the business, and that’s the change I’m hearing about when I talk to HR professionals.”
Roger Collins, professor of management at the Australian Graduate School of Management (AGSM), agrees that HR professionals must focus on how the business model works and how it drives performance and profitability. Businesses are becoming more aware of the need to hire higher calibre HR professionals on the one hand, and on the other, line managers are increasingly taking up HR roles, he says. “I think that sometimes help to focus the HR people beyond just tree hugging.”
Likewise, Collins believes there’s much stronger agreement about critical business and HR issues. More importantly, there’s more agreement between what CEOs and HR directors say. “More HR people are members of the executive team, so they’re able to draw the attention of senior managers to some of the important issues.
“We went through a period in the ‘70s’ when finance was pretty important because of high inflation. Today, the business drivers are more people focused. Therefore, CEOs can’t ignore the war for talent and related issues such as retention and employment branding. This is business imperative stuff – they pay attention to it or they don’t survive,” Collins says.
Multi-skilling comes to the fore
So, what sort of professional does it take to make the increasingly tough HR grade? While HR professionals have traditionally been those interested in all things warm and fuzzy, it’s increasingly obvious that such individuals aren’t suited to more strategic tasks.
Alec Bashinsky, Deloitte’s national partner for people and performance, says the first step is to know what skills are in need of development, and then examine how it’s possible to attain them.
“It’s about being business focused. If you work in retail, for example, it’s knowing what the margins are, what’s selling, what’s not selling, what the stock levels are and hot buttons in the industry,” he says. When professionals understand the issues specific to their line of business, Bashinsky says, they can then look at what skills they need to pull out of their toolkit and examine how to apply it to their problems.
Collins also says there are a number of specific steps HR professionals can take in order to improve their future standing in business. “One is coaching. I see a lot more senior HR people being coached. However, the real opportunity is to perhaps coach the HR leader and CEO together,” he says. This would provide a good opportunity for them to understand each other’s priorities by drawing two overlapping circles and then focusing on the issues in the middle.
Another step HR professionals can take is taking up line management positions. “Too many HR people stay in HR all their career. The best ones go and ask for line management experience. This tells us more about them and their self-insight. Sometimes they have to be encouraged,” he says.
“Often, a good CEO will also understand they have to send some of his high potential managers into HR, because if they don’t understand that side of the business then they will never be well rounded senior leaders. Good CEOs will see that as part of the succession planning in their career path.”
Another option for HR professionals is to take a sabbatical in different areas, whether it be teaching or taking up work in not - for - profit organisations, according to Collins. This forces individuals to reflect on growth and development, and provides them with a different context in which they can explore professional skills.
Will the CEO go in to bat for you?
It’s a catch 22 for a lot of HR professionals. Many old school CEOs are stuck in their ways and either unwilling or reluctant to accept that good HR can make a difference in business. The flip side is that HR has to prove its worth in the first place, but that can’t happen without CEO support.
If the CEO of a business doesn’t get the value that HR can help deliver to the business around people, Bashinsky says, the CEO will hire HR practitioners who just focus on process and administration. “You then have the wrong calibre of HR practitioner involved. If a proactive sales, business development or marketing business leader comes across a process and procedure person in HR, their credibility disappears really quickly. So it’s important for the CEO, as a leader, to understand how a professional HR person can add value and really put people on the agenda,” he says.
Newton says that when HR professionals do have the skill set and business understanding in the first place and CEO support in the second, they can make a tremendous difference. “If the CEO is what I call a true believer, then you can really make a difference in an organisation. If the CEO isn’t, you can still make impact, but you will struggle a bit harder. But if the CEO and executive team really are believers in people, that’s the best place for you to be in your career as a HR professional. You can do your absolute best work in your career with those ingredients in place,” he says.
The future of the HR profession
Converging business issues are forcing HR to evolve, and the function has no choice other than to step up to the plate or become redundant. Bashinsky says business needs more HR leaders who understand the importance of people in business, and for many, this will be a shock revelation as the talent bank dries up in Australia over the coming years.
“The great HR influencers and leaders seem to be coming from global companies over the past five years. Australian CEOs need to ensure they’re hiring the right proactive and business focused HR practitioners to tackle the right people issues for their business, yet be able to steer other business leaders in people leadership in order to grow the business and revenues,” he says.
Collins believes there will be a convergence of HR with other functions, to make the most of organisational knowledge and skills in order to deal with an increasingly complex business and employment landscape. “What we’re seeing in organisations is a lot of the silos are being broken down. While ever we hold onto HR as a profession by itself, that can be dangerous. What we need is hybrid professions. For example, there’s a real opportunity for HR and IT here – people who are multi-skilled in both could help with problem solving, decision-making and databases. These are complex issues,” he says.
“Another one would be finance and HR, so HR would be much more effective in cost benefit analysis. If they’re investing all this money in their people, they could understand what’s happening to that investment? That requires a financial mindset as well as an HR mindset.”
Collins also gives the example of marketing and HR. In employment and corporate branding, he says it takes both functions to understand this interface.
It begins at university
Some organisations have already taken steps to converge relevant functions, but the process should begin at the university level, according to Collins.
“We need dual degree professionals who are more multi-skilled in order to deal with the problems we face in organisations,” he says. “What are our educational institutions doing to actually orientate HR people in ways that aren’t relevant? Why aren’t we getting them to think more realistically about what they do? I think the universities do have a bit do answer on that one.”
Bashinsky also believes there is a lack of understanding among academics and universities about the HR skills needed to achieve business results. In addition to university education, he says some organisations also reinforce this through some forms of short-term development. “In other words, they’re still just looking at the basics such as delegating and managing people. These are really good basic skills, but there’s nothing in there about how to influence a leader, provide facilitation skills or coaching teams effectively –these lead to more strategic HR skills,” he says.
