News & Articles

Human Resource Management
Published in the Rochester Business Journal
October 10, 2005
© 2005 HR Works, Inc.

Demonstrating HR’s value to the business

By Candace Walters

A recent issue of Fast Company features an article titled “Why we hate HR,” a scathing critique of HR professionals and the departments in which they work. The article contends that the typical human resources department adds little value to an organization and is, at best, a necessary evil.

Some human resources people, weaned on the transactional nature of 20^th-century HR practice, have felt threatened by this article. Many were trained to tend to the details of administering payroll, health and retirement benefits. They’re experts at day-to-day employee relations, tracking data and serving as the “personnel police.”

But business is changing. Competition is fiercer, and the movement toward a knowledge-based economy highlights the importance of hiring and retaining the best talent. While companies still need the transactional HR function performed, particularly as legal and regulatory requirements become more complex, more organizations are automating or outsourcing those tasks.

While it’s true that many HR departments have not kept up with business demands, it’s important to acknowledge that the HR function has come a long way in the last 20 years. The best HR minds are spawning innovations, analyzing crucial data regarding employees’ productivity, finding meaningful ways to quantify the results of human capital programs, and demonstrating the economic value of well-managed HR. Savvy HR professionals are investing in thoroughly understanding their employers’ internal and external environments. They’re implementing programs that ensure the best people are performing in optimal ways that fuel the organization’s goals.

These kinds of skills and ambitious visions are certainly not as prevalent as they need to become, but those who seek evidence of innovation in HR will find it.

Acknowledging the talent gap

As the Fast Company article correctly pointed out, only a fraction of the HR professionals working today possess the expertise, confidence and business acumen to keep up with changes in the HR function, much less shape its new direction. The same can be said of finance, marketing and information technology professionals: The ability to apply skills and vision varies dramatically. As well, many company leaders remain stuck in outdated mindsets, thwarting any attempts at innovation that their HR managers may propose.

But the truth is undeniable: As much of the traditional, transactional HR work is taken over by technology or outsourced, many HR professionals have been or will be forced either to transform their approach or to find work in another field.

From the perspective of business owners and CEOs, the evolution of HR presents a wide-open opportunity – particularly for those whose competitors are hamstrung by old-school notions of HR’s role. For executives who recognize that a transformed HR function can make the difference between company success and failure, the next step then is to hire the HR talent necessary to realize that ambitious vision.

Where business owners are open to changes but unsure of the potential, talented HR professionals can take the initiative to demonstrate the significant economic value that cutting-edge HR approaches can deliver. In order to do so, HR professionals must commit to deeply understanding the business and the climate in which it operates. HR must learn to speak the language of business by internalizing this truth: Excellent HR strategy is whatever allows the people who work in a company to serve the organization’s purposes to the greatest degree possible.

HR’s multiple responsibilities

Make no mistake: In today’s economy, organizations that attract, retain and develop the most talented people will enjoy an edge over competitors. As Fast Company puts it, once the day-to-day transactions are outsourced or automated, what’s left for the HR function is to do is “raise the intellectual capital” of the organization.

This enticing but daunting challenge depends on top HR talent. It also requires company leaders who can see the potential and will provide the support and tools to allow HR to meet these new, higher expectations.

That doesn’t mean that HR administration can be neglected; efficient, accurate administration is a given in any well-run organization. But transactional HR activity is only the foundation on which comprehensive HR management will be based.

To build the right workforce and ensure optimal productivity, we all should realize by now that money alone won’t do the job. Offering career advancement, recognition, flexibility, benefits and excellent supervision are important as well, but they’re still not the full answer.

Looking to other companies’ best practices also gets an organization only so far. Where HR professionals have long relied on industry benchmarks to design compensation and benefits plans and develop other HR strategies, many are realizing that the kind of human-capital strategy that works for a Microsoft is not going to work for a financial services firm. Knowing what competitors are doing is important, of course, but just as every organization must develop a distinctive marketing strategy, so too must every company create a uniquely attractive environment that develops and encourages talented employees.

Getting to the next step

An article published on the WorkSpan website of WorldatWork suggests that visionary HR first must clarify what an organization’s work force needs to become, and then must build a blueprint of the necessary capabilities and actions. In that article, authors Haig Nalbantian and Colleen O’Neill of Mercer Human Resource Consulting write that these steps depend on an employer’s ability to find new information showing how HR initiatives do or do not fuel the organization’s objectives.

To obtain this information, the authors suggest that a company examine its own employee and performance data. Spearheaded by an HR professional who already deeply understands the business, the process should reveal honest answers to the following:

• Who gets hired
• Who stays
• Who advances
• Who leaves
• Which work force characteristics and behaviors are rewarded
• How rewards are distributed
• How talent is developed, on the job and in formal training
• How new hires perform compared with homegrown talent
• How vulnerable the organization is to changing labor market conditions

Only then is it possible for an organization to answer crucial questions such as:

• Do we offer the right mix of pay, benefits and career opportunities to attract the right people?
• Is our rewards program doing what we need it to do?
• What’s the real cost of turnover, and how do we most efficiently reduce it?
• If we enact a new training program, how will it affect customer service, innovation, turnover, performance, market share and profits?
• What ROI on human capital is the company seeing?
Can smarter investments be made?

Conclusion

Transforming the role of HR in organizations requires two levels of commitment. The business owner or CEO must raise the bar for HR, clearly articulating high expectations, hiring visionary HR people, providing the support and tools necessary for HR to deliver exceptional results, and rethinking the long-held concept of HR as a cost center.

At the same time, HR professionals must radically revise their notions of what HR can deliver. They must immerse themselves in every aspect of the business in order to leverage the expanded, influential role that HR can play in the context of advancing the organization’s strategic objectives.

Unfortunately, organizations may struggle with the reality that many of those working in HR today were trained to deliver a very different, limited set of skills. A painful shakeout is inevitable, as some HR professionals successfully transition to higher-level, visionary thinking and execution, while others do not.

But for the HR professionals willing to equip themselves to transform the HR function into one that demonstrates economic value, and the company leaders who are seeking high-level HR experts who can meet new expectations, the work world is becoming a very exciting place indeed.

Candace Walters is president and CEO of HR Works, Inc., an HR management outsourcing and consulting firm serving more than 600 clients in the Rochester, Buffalo, Syracuse and Baltimore/Washington areas. HR Works provides HR Department outsourcing, part-time and interim HR managers, affirmative action plans, HR*Stars recruitment services, legally reviewed employee handbooks and supervisor manuals, compensation programs, training and more. To offer comments, write walters@hrworks-inc.com

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