Studies show HR professionals are honing their skills as activists, change champions and capability builders who can turn external business trends into organizational actions.
No one can deny the incredible uncertainty global businesses have been facing in the last five years. Their list of challenges grows almost daily: prolonged recession; national and organizational debt crises; government bailouts; the Arab Spring and other political uncertainty; rise of cloud technology and social media; and increased employee skills, uncertainty and cynicism.
These business contextual changes have required a new set of competencies for HR professionals.
Since we began our Human Resource Competency Study in 1987, our research has helped to identify the skills effective HR professionals must have. The research has a strong empirical foundation with rigorous statistical analyses, a global sample, a measurement-approached focus on personal and business performance, and perspectives from both HR professionals and their HR and non-HR associates. (See sidebar for more on the study's methodology.)
These 2012 metrics represent the sixth wave of data collection -- since the study began -- on what makes an effective HR professional. Over these past 25 years, the fundamental skills required have remained much the same (know the business, deliver value-added HR practices, manage change and have personal credibility), but the specific competencies have evolved based on changing business conditions and expectations for the HR profession.
When we started this research 25 years ago, key HR competencies we found included managing change, delivering HR and knowing the business. Today, HR professionals need to do much more. They need to focus on the outside/in; being aware of the changing business context and the demands of customers, investors and communities, then being able to translate these external expectations into internal HR actions.
They need to have activist points of view, not only about HR issues, but about business success. They need to integrate HR practices into organizational capabilities that define and shape the organization. They need to initiate change, but even more, they need to sustain it. Lastly, they need to move technology from efficient administration of HR work to connect employees and shape their organization's brand. HR professionals today are true contributors to business success.
In this round of research, we have identified six domains of competencies that HR professionals must demonstrate to be personally effective and impact business performance. These competencies are driven by three basic themes facing businesses today:
1) Outside/in, which means HR must turn outside business trends and stakeholder expectations into internal actions;
2) Individual/collective, which means HR targets both individual ability and organizational capabilities; and
3) Event/sustainability, which implies that HR is not about an isolated activity (a training, communication, staffing or compensation program) but sustainable and integrated solutions.
With these three trends, Figure 1 points out three spheres of influence of HR work:
* Individual -- what high-performing HR professionals do, as individuals, to build effective relationships and reputations within their organizations;
* Organization -- how effective HR professionals design, develop and deliver HR systems and practices that enable the organization to create capabilities, manage change, innovate and integrate HR practices, and deploy HR technology; and
* Context -- what respected HR professionals do to ensure understanding of the external trends and realities facing the organization, as well as ensure responsiveness to external stakeholders.
With this as background, each of the six domains of HR competencies seen in Figure 1 captures the role and responsibility of HR professionals in creating value.
* Strategic Positioner. High-performing HR professionals think and act from the outside in. They are deeply knowledgeable of external business trends and are able to translate them into internal organizational decisions and actions.
They understand the general business conditions (e.g., social, technological, economic, political, environmental and demographic) that affect their industry and geography. They target and serve key customers of their organization by segmenting customers, knowing customer expectations and aligning organization actions to meet customer needs.
They also co-create their organization's strategic response to business conditions and customer expectations by helping frame and make strategic and organizational choices.
A consequence of outside/in thinking is the increased tendency for organizations to choose line executives to lead their HR organization. For example, Shira Goodman, head of HR for Staples, was previously head of marketing. Christian Finckh, CHRO for Allianz, the global insurance company, was chief operating officer of the asset-management business and began his career as a mergers-and-acquisitions attorney. These line leaders coming into HR may underscore the need to infuse the function with a stronger business focus so that HR can play a more strategic role.
* Credible Activist. Effective HR professionals are credible activists. Credibility comes when HR professionals do what they promise, build personal relationships of trust and can be relied on. Being a trusted adviser helps HR professionals sustain positive personal relationships.
As an activist, an HR professional has a point of view, not only about HR activities, but about business demands. As an activist, an HR professional learns how to influence others in a positive way through clear, consistent and high-impact communications.
Some have called this "HR with an attitude." HR professionals who are credible but not activists are admired, but do not have much impact. Those who are activists but not credible may have good ideas, but will be ignored. To be credible activists, HR professionals need to be self-aware and committed to building their profession.
A good example of this competency is Mars, the global consumer-products company. At Mars, there is an expectation that HR consultants (or, as they describe their function, People and Organization, or P&O) will operate as "co-pilots," working closely and collaboratively with the chief financial officer and other executives in activities that drive the business forward.
It is expected and required that HR professionals will build the quality and consistency of relationships that allow them to do this.
* Capability Builder. An effective HR professional creates an effective and strong organization by helping to define and build its organizational capabilities. An organization is not a structure or a process; it is a distinct set of capabilities. Capability represents what the organization is good at and known for.
HR professionals should be able to audit and invest in the creation of organizational capabilities. These capabilities outlast the behavior or performance of any individual manager or system.
Capabilities have been referred to as a company's culture, process or identity. HR professionals should facilitate capability audits to determine the identity of the organization.
One of the emerging capabilities of successful organizations is to create an organization in which employees find meaning and purpose at work. HR professionals can help line managers create meaning so the capability of the organization reflects the deeper values of the employees.
The International Labor Organization of the United Nations has been a nonprofit HR leader in this area. Working closely with the senior management team, ILO's HR leaders have made a significant investment in building accountability as an organizational capability for the future. HR has been in the forefront of enabling the ILO to enact a more results-focused performance discipline. This has been particularly critical at a time when government sponsors of the UN and ILO expect more impact, sooner and sustainably, from their investments in the organization.
* Change Champion. Effective HR professionals make an organization's internal capacity for change match the external pace of change. As change champions, HR professionals help make change happen at institutional (changing patterns), initiative (making things happen) and individual (enabling personal change) levels.
To do this they play two critical roles in the change process. First, they initiate change, which means they build a case for why change matters, they overcome resistance to change, they engage key stakeholders in the process of change and they articulate the decisions to start change.
Second, they sustain change by institutionalizing it through organizational resources, organization structure, communication and continual learning. As change champions, HR professionals partner to create organizations that are agile, flexible, responsive and able to make transformation happen.
Walgreen's HR head Kathleen Wilson-Thompson is a good example of an HR change champion. After she started there as CHRO, Wilson-Thompson and her team worked hard to understand the key business challenges facing the increasingly competitive market, and they built the business case for an increased emphasis on leadership development.
Their work has resulted in a significant long-term organizational investments of time and expense, but also a strong agreement among the senior-management team that the effectiveness of current leaders and development of the next generation of leadership is fundamental to the organization's performance.
* Human Resource Innovator and Integrator. Effective HR professionals integrate innovative HR practices into unified solutions to business problems. To do that, they must know the latest insights in key HR practice areas related to human capital (such as talent sourcing and talent development), performance accountability, organization design and communication.
They must also be able to turn these unique HR practice areas into integrated solutions -- generally around leadership brand -- that match business requirements on a global scale.
Effective HR professionals help the collective HR practices reach the tipping point of high impact on business results by ensuring that HR practices are focused with discipline and consistency on a few, but centrally important, business issues.
A few years ago, two of the authors were invited to work with the top 75 HR leaders of a prominent airline. One of us met with the heads of functional areas -- compensation and benefits, industrial relations, learning and development -- and found out these individuals and their teams had never met (in memory) to look at the integration, or lack thereof, of their systems' and practices' operations.
Not surprisingly, the airline suffered a traumatic strike less than two years after we met, attributed to demonstrably poor employee relations.
* Technology Proponent. In recent years, technology has changed the way HR people think and do their work. At a basic level, HR professionals need to use technology to more efficiently deliver HR administrative systems such as benefits, payroll processing, healthcare costs and other administrative services.
In addition, HR professionals need to use technology to help people stay connected with each other. This means technology can be used to improve communications, to do administrative work more efficiently and to connect inside employees to outside customers.
One emerging trend is the use of technology as a relationship-building tool through social media to position the business for future growth. HR professionals who understand technology will create improved organizational identity outside the company and improve social relationships inside the company. As technology exponents, HR professionals have to access, advocate, analyze and align technology for information, efficiency and relationships.
A.P. Moller-Maersk provides a useful perspective on the broader domain of technology. William Allen, group senior vice president of human resources, commissioned some selected young high-potential professionals to comment on needs for improvement in how the organization communicates internally. Their guidance: Apply the new technologies of social networking. As the team pointed out, the new generation of employees will text before phoning, and tweet instead of email.
These six domains of HR competencies have an impact on both the perception of the effectiveness of the HR professional and the business performance where the HR professional works (see Table 1).
This data shows that, to be seen as personally effective, HR professionals need to be credible activists who build relationships of trust and have strong business and HR points of view.
They also have to have a mix of competencies in positioning the firm to its external environment (strategic positioner), doing organization capability and culture audits (capability builder), making change happen (change champion), aligning and innovating HR practices (HR integrator), and understanding and using technology (technology proponent).
These competencies explain 42.5 percent of the effectiveness of an HR professional.
We found this same pattern of HR competencies holds across regions in the world, across levels of HR careers, in different HR roles and in small to large organizations.
These competencies also explain 8.4 percent of a businesses' success. Interestingly, the competencies that predict personal effectiveness are slightly different that those predicting business success, with insights on technology, HR integration and capability building having more impact on business results.
These findings begin to capture what HR professionals need to know and do to be effective. Some takeaways (based on the reported data in Table 1 and additional insights from this survey that are available on www.rbl.net) include:
* Build a relationship of trust with your business leaders by knowing enough about business contexts and key stakeholders to fully engage in business discussions, by offering innovative and integrated HR solutions to business problems, and by being able to audit and improve talent, culture and leadership.
* Learn to do HR from the outside/in, which means understanding the social, technological, economic, political, environmental and demographic trends facing your industry and knowing specific expectations of customers, investors, regulators and communities to be able to build HR responses that align with these external requirements.
* Be able to do an organizational audit that focuses on defining and assessing the key capabilities your company requires for success and then integrating the HR practices in the areas of staffing, training, compensation, communication, organization design and leadership to build and sustain the key capabilities.
* Make change happen at individual, specific project and institutional levels. Help individuals learn and sustain new behaviors. Enable organizational change by applying a disciplined change process to each organizational initiative. Encourage institutional change by monitoring and adapting the culture to fit external conditions.
* Innovate and integrate your HR practices. Innovation means looking for new and creative ways to design and deliver HR practices. Integrate these practices around talent, leadership and culture within your organization so they offer sustainable solutions to business problems.
* Master technology, including social media, to both deliver the administrative work of HR and to connect people inside and outside to each other.
We also found that an effective HR department has more impact on a business' performance (32 percent) than the skills of individual HR professionals (8 percent). So HR professionals need to work together as a unified team to fully create business value.
We are optimistic about the present and the future of the HR function. We now have wonderful insights on what HR professionals will need to know and do to respond to the uncertain, global and complex business world in which they live.
We believe that, with this guidance, HR professionals can and should invest in themselves to fully deliver value to employees, organizations, customers, investors and communities.
Dave Ulrich is a professor at the Ross School of Business, University of Michigan, and a partner at the Provo, Utah-based RBL Group. Wayne Brockbank is a Clinical Professor of Business at the University of Michigan's Ross School of Business and an Emeritus Partner in the RBL Consulting Group. Jon Younger is a partner at the RBL Group and director of the RBL Institut. He leads the firm's strategic HR practice. Mike Ulrich is a doctoral student at the Moore School of Business at the University of South Carolina and a former research assistant with the RBL Group.