Boom or Bust for HR?
Boom or Bust for HR? | Human Resource Executive Online
Is 2009 the year the HR function finally enters its ascendancy as organizations place greater emphasis on talent management and putting strategic HR activities at the heart of the business? Or is HR destined to remain a transaction-based cost center as leaders still struggle to rise to the challenge?
By Bruce Lewin
While stock market and business news swings from bad to worse and the outlook for the economy is uncertain, at best -- the long-term prospects for the HR function are equally unsure.
On the one hand, the function may find itself forced to focus on administration, restructuring activities and transactional support, a "Great Depression" for HR, if you will. On the other hand, there may be a silver lining as HR will have an opportunity to undertake wide-ranging strategic and developmental work and problem solving, and add genuine value to the business. Or, to borrow words from Franklin Roosevelt, the dawn of HR's "New Deal."
Whether it is boom or bust -- the "Great Depression" or a "New Deal" -- and the reality will probably be less clear cut and end up somewhere in between -- there are some factors that will influence both of these states. It is the way human resource executives respond to historically intangible problems that is likely to determine the definition of HR for its stakeholders.
HR's Great Depression
Considering the breadth and depth of the HR function, there are a number of possible factors that comprise the possible "Great Depression" scenario.
Business Partnering
The "HR business partner" model espoused by management consultant and University of Michigan professor Dave Ulrich has been long heralded as HR's "White Knight." In many ways, this perspective is entirely justified.
While the strategy of business partners, specialists and shared services has been enthusiastically embraced by HR (putting aside questions about a three- or four-legged stool), questions remain, however, about implementation and turning theory into practice.
Research by Roffey Park, a UK-based research and executive education organization, found that half of 479 mangers surveyed thought that HR business partnering was less than successful in their organizations.
And external perceptions of HR's capabilities appear to be consistent -- and consistently less than optimistic than the perceptions held by those in HR.
In January 2008, in Making Talent a Strategic Priority, research consultancy McKinsey finds that 58 percent of managers see HR as lacking the capability to develop talent strategies, while only 25 percent of HR practitioners hold the same view (that might make for an interesting conversation come appraisal time!).
In a similar vein, 60 percent of managers -- and 51 percent of practitioners! -- view HR as an administrative department.
Meanwhile, a PricewaterhouseCoopers report, Managing Tomorrow's People: The Future of Work to 2020, identified the top 10 barriers to organizational change -- and it lists six that are arguably the responsibility of HR.
1, Competing resources: 48 percent
2, Functional boundaries: 44 percent
3. Change skills: 42 percent
4. Middle management: 38 percent
5. Long IT lead time: 35 percent
6. Communication: 34 percent
7. Employee opposition: 33 percent
8. People issues: 32 percent
9. Initiative fatigue: 32 percent
10. Unrealistic timetables: 31 percent
Clearly, there is a perception gap here with many HR practitioners believing they have more to offer the business than a traditional administrative role. The trouble is breaking down the perceptions held by other managers; managers who are unlikely to embrace the new kid on the block and unlikely to look to HR to set the change agenda.
Given the current economic difficulties, it is difficult to see this perception gap closing. All but the bravest revert to type in tough economic times.
Unfortunately for HR, this may mean that that if companies abandon the idea of HR business partnering (seen by HR as the Trojan horse of getting the function into a more strategic role), HR will be further marginalized as a purely administrative function.
HR's New Deal
For those that prefer their glasses half full, it is possible to make the argument that these challenging economic times represent instead an opportunity for HR to leverage its position within the organization; an opportunity to develop a holistic role where, rather than working in a fragmented manner, the role of HR is redefined in a radical and innovative manner.
Research from Deloitte, Aligned at the Top: How Business and HR Executives View Today's Most Significant People Challenges -- And What They're Doing About It, in May 2007, finds that 82 percent of executives believe HR will be seen as a strategic, value-adding function within three to five years.
Jackie Orme, CEO of the Chartered Institute of Personnel and Development, a membership organization for HR professionals in the UK, spoke recently of "the headroom to grow our role as a function," noting that "this gives us tremendous opportunity."
While the positive rhetoric is welcomed, it is even more encouraging to see it supported, in part, by results in the field.
PwC's research found that between 2002 and 2006, the HR function's staff to FTE ratio changed, from 105 to 90, while the number of HR managers and professionals, as a proportion of total staff in the HR department, increased from 59.8 percent to 65.7 percent. This progress can be seen alongside an increasingly efficient HR department, with efficiencies rising by 14.8 percent.
Whether these trends have continued over the past 18 months is uncertain; however, it does give some credence to the claim made by organizations that they are placing people and talent development at the heart of their strategy.
This point, then, dovetails nicely into the next statement for the defense.
The Talent-Management Agenda
While current economic circumstances may be occupying the minds of senior executives, the significance of talent management has arguably never been greater. Toyota's treatment of its employees as fixed costs to be developed and enhanced provides interesting food for thought in contrast to the "employees as a variable cost" approach adopted by Detroit's Big Three.
Looking further into 2008 research, PwC's Managing People in a Changing World, Key Trends in Human Capital, A Global Perspective finds that 89 percent of 1,150 CEOs surveyed agree that the people agenda is a top priority, and a further 67 percent believe this is where their time is best spent.
In support of this, McKinsey writes in a December 2007 Global Survey that "by far, the most significant trend -- cited by 47 percent of the executives -- is the intensifying battle for talented people. Shifting centers of economic activity and increasing technological connectivity were the next most important trends, each with 34 percent."
If -- and it is a big if -- organizations are going act in a manner consistent with these statements in the coming years, then HR is inevitably going to be at the center of the talent-management agenda.
How have we ended up here?
Clearly, compelling arguments can be made for each case. So, how has HR ended up in the singular position among all business functions where its future within the organization is so unclear?
Ignoring the structural factors that preceded the credit crunch and its impact on the wider economy, there are both external and internal factors that govern the perception and attitude towards HR in every organization.
In terms of external (
PESTLE
-- Political, Economic, Socio-cultural, Technological, Legal, Environmental) factors, these are wider issues that individual HR practitioners have little or no control over.
These factors take into account issues such as the current and future regulatory landscape, the economic climate and outlook, social issues concerning demographics and other social trends and technology, and ways the impact of new technology changes the perception and ability of HR to function.
Arguably more important for individual practitioners are the internal issues that influence the role and perception of HR. Unlike external factors, these issues can, to a greater or lesser extent, be controlled by HR professionals and, as such, should be seen as representing the landscape facing each HR practitioner. Interestingly, all these issues are linked and feed into each other.
These factors start and end with the level of sponsorship of HR in the business and create the circle that lies at the heart of the HR conundrum. For example, the level of sponsorship of HR within the organization is likely to govern the type of work done by the HR department -- is it strategic or transactional in nature?
This, then, impacts the nature of work undertaken. Is the work holistic in nature or is it fragmented? This picture is further clouded by the fact that HR practitioners are likely to experience varying degrees of openness and collaboration throughout the organization.
For example, one part of the organization may be very open to suggestions and input from HR, while other departments may be considerably less so. These factors then impact on the overall perception of HR within the organization, thus coming full circle back to the degree of sponsorship available.
Without a high level of sponsorship, it is going to be very difficult to move the HR function into a more strategic role.
A good way to imagine this problem is to visualize the transactional side of HR as an inner circle with the more holistic, strategic approach represented as the outer circle. The question that then arises is how best to enable or manage the transition from the inner to the outer circle?
That transition can't happen unless the transactional elements of the job are being performed efficiently and to a high standard. Delivering the basics, although unglamorous, is key to HR's ability to drive the long-term talent agenda. Without credibility and trust, a place at the table is never going to be achieved.
However, this is only half the equation. Performing the transactional side of the job effectively is only ever going to go so far. In addition, HR needs to leverage its unique position in the organization with regard to people and talent -- to identify opportunities and offer solutions to traditionally ongoing organizational problems.
In effect, HR needs to develop a new language for innovation and problem solving. Specifically, this means that HR needs to offer solutions for the management of traditionally intangible issues.
Put simply, there is no other function better positioned to address the three key issues of people, relationships and organizational culture. By focusing on these high-value issues and offering systematic solutions, HR can position itself at the heart of decision-making.
Given new tools and technologies on the market, it is only now that this approach to the intangibles is becoming possible. Focusing on solving problems that are specific to line managers and their teams is likely to yield the best results.
Perhaps the most intriguing idea given current times comes from Emily Lawson of McKinsey, whose recent comment at the CIPD conference stated that, while talent management has changed much over 10 years, there are currently no definitive answers for organizations.
Given the access and resources of McKinsey's research, this idea arguably legitimizes the existence of the "New Deal" scenario, while leaving unanswered the means of fulfilling its potential.
For those who appreciate a challenge, has there ever been a better time to be in HR?
Bruce Lewin is co-founder of Four Groups Ltd, a London-based software and consulting firm. He works with major companies to help enhance the relationship between HR and the business with particular focus on relationships, behaviors and culture. Having helped developed Four Groups' model for this purpose, Bruce helps clients benefit from a new method to optimize people-based issues in a systematic and structured manner. He also authors the Four Groups'
blog
.
January 1, 2009 Copyright 2009© LRP Publications
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