Squeezing more value out of HR

Apr 19 2007 by Nic Paton Print This Article

Managers may complain that HR spends too much time in its own little world of matrices and scorecards, but with HR now potentially accounting for a fifth of a business's bottom line, it is imperative personnel professionals are not just left to their own devices.

A study by HR firm The RBL Group and the Ross School of Business at the University of Michigan has concluded that where once HR was primarily seen as a back-room, transactional function, it is now a vital part of an organisation's competitive edge.

But concerns remain about whether HR as a function has the sort of skills, drive and attitude to take on the more front-line role demanded of it.

"A company's intellectual capital, talent, intangibles, and capabilities all derive from the competence and commitment of its human resource professionals," said Dave Ulrich, partner and co-founder of The RBL Group and a professor of business at the Ross School of Business.

"It's no longer enough for human resource professionals to just want to contribute to the bottom line. They need to know how to do this, and have the ability to use what they know," he added.

As a result, HR professionals needed to become adept in a range of new competency areas, the most important of which was becoming a "credible activist", or performing as "human resources with an attitude", he argued.

"Human resource professionals must be both credible and active. They need to be trusted, respected, admired, listened to but, above all, have a point of view and take a position," Ulrich said.

"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 ideas, but will not be listened to," he warned.

Yet, worryingly for managers, just a fifth of HR professionals were currently proficient in being credible activists for their businesses, Ulrich estimated.

"Sixty per cent of HR professionals can master this crucial skill with the right training and awareness, while the remaining 20 per cent may not have the right skills and/or personality to listen and take action," he said.

In addition to being a credible activist, HR professionals needed to be "culture and change stewards", he argued.

"Culture involves a pattern of activities, rather than a single event. It starts with being clear about the expectations of external customers, and then translates these expectations into internal employee and organisational behaviours," said Ulrich.

Successful HR professionals needed to help make culture happen and develop disciplines to drive changes throughout the organisation.

"Through implementation of strategy, projects, or initiatives, they help turn what is known into what is done," advised Ulrich.

They also needed to become a "talent manager/organisation designer", able to master theory, research and practice in both talent management and organisation design.

"Talent management focuses on how individuals enter, move up, across, or out of the organisation. Organisation design focuses on the capabilities an organisation has that are embedded in the structure, processes, and policies that shape how the organisation works," said Ulrich.

HR was therefore not just about talent or organisation, but about the two of them together.

"Good talent without a supporting organisation will not be sustained, and a good organisation will not fully deliver without good talent," added Ulrich.

On top of this, HR professionals needed to become "strategy architects" with a vision for how the organisation could win in the future, as well as play an active part in the establishment of the overall strategy.

"This skill incorporates recognising business trends and their impact on the business, being able to forecast potential obstacles to success and facilitating the process of gaining strategic clarity," said Ulrich.

HR professionals, he advised, also needed to be able to execute the operational aspects of managing people and organisations, such as drafting, adapting, and implementing policies.

The basic needs of employees – pay, relocation, training, hiring – must not be overlooked either, but as time goes on will need to be delivered more and more through technology, shared services and/or outsourcing.

Finally, HR needed to become a business ally, argued Ulrich. HR professionals contributed to the success of the business by knowing the social context or setting in which their companies operated.

"They know how the business makes money – who their customers are and why they buy the company's products or services.

"And they have a basic understanding of the functions of various corporate departments such as finance, marketing, R&D, and engineering, so they can help the business make money," said Ulrich.

The top four HR competencies – credible activist, culture and change steward, talent manager/organisational designer and strategy architect – between them accounted for more than three quarters of the success of an HR professional, the study concluded.

"HR professionals need to ensure that human resource practices are aligned with customer expectations and strategy, integrated with each other and innovative. This linkage helps make customer-driven business strategies real to the company's employees," added Ulrich.