Testing times for HR

by 03 Nov 2009

The human resources function faces many organisational and financial hurdles, particularly in a gruelling business environment. Hiring and training budgets are being slashed, which makes the attraction and retention of talent challenging at best.

At the same time human resources is confronting a continued perception problem in that many organisations view it as a services provider rather than critical business partner. It is notable, therefore, that in a new survey of 199 senior executives worldwide, 66 per cent of respondents from the HR function say they have identified opportunities to streamline processes and cut costs during the economic downturn, but only 49 per cent of non-HR respondents agree that HR has done so.

The findings of the report, the role of HR in uncertain times, written by the Economist Intelligence Unit and sponsored by Oracle, clearly underscore the need for HR professionals to find ways to close this gap by becoming an acknowledged strategic partner within the business.

CK Prahalad, a professor at the University of Michigan's Ross School of Business and best-selling author of The future of competition, explains the perception gap by noting how rare it is for HR to comprehend the operations of the business as a whole.

"Show me a company where senior HR leaders fully understand the business and are as comfortable with profit-and-loss statements as any business manager," he says. "HR has to speak the language of business if it wants to reach its full potential."

Survey respondents say that a big obstacle for HR is that when there is a need for a reduction in headcount, human resources has an inadequate understanding of how such reductions will affect business goals. Of course, this might be due to the fact that senior managers have not discussed the company's goals. Yet the poor perception of HR at certain organisations could be improved by a more intimate knowledge of the business, as it has the potential to play an important role during the global recession, the study notes.

It adds that while the economic downturn has taken a toll on businesses worldwide, the tumultuous environment also provides a unique opportunity for HR to demonstrate leadership and creativity.

Indeed, the majority of survey respondents agree that when business conditions become unfavourable, senior managers rely on HR more than they do in good economic times.

"Doing more with less resources makes it imperative that HR be in sync with the business," says Gilda Stahl, an editor at the Economist Intelligence Unit. "Developing an awareness of the skills of each employee can help HR align these to its business strategy."

Other key findings of the study include:

Thirty-nine percent of respondents say performance management is a top priority at their organisation, and 43 per cent say it should be.

An overwhelming 93 per cent of respondents say their HR organisation has developed or is in the process of developing a quantitative performance management program.

Survey respondents cite four methods that are about equally successful in gaining additional productivity from employees without raising compensation costs: creating additional training programs (44 per cent); adopting more efficient methods of service delivery (44 per cent); adopting more quantified and/or stringent performance evaluations (47 per cent); and adopting mentoring programs (47 per cent).


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