Business leaders take a dim view of HR

May 30 2007 by Brian Amble Print This Article

Although people issues dominate the business agenda across the globe, few business leaders think that their human resources teams are up to the task of delivering on key strategic challenges.

New global research by Deloitte Touche Tohmatsu and the Economist Intelligence Unit has revealed increasing tension between organizations' needs and HR's ability to deliver, with companies still struggling to build an effective partnership between business and HR to tackle key challenges.

More than eight out of 10 of the executives questioned view people as vital to all aspects of organizational performance. Yet fewer than a quarter (23 percent) believe that HR can play a crucial role in strategy formulation and operational success.

What's more, half the companies surveyed (52 percent) do not have a chief human resources officer or equivalent executive to people issues, with only two-thirds (68 percent) expecting to have one in three-to-five years.

And further highlighting the low esteem in which many HR departments are held, a mere three percent of participants described their organization as world-class in people management and HR, while nearly half (46 percent) said that their capabilities are only adequate and need to improve.

"It's a stunning paradox that HR is not being looked to for leadership on the people agenda," observes Jeff Schwartz, a principal with Deloitte Consulting and co-director of the study.

"Many top company executives believe the HR department lacks the business insight to drive strategic initiatives around top priority issues, such as leadership, talent management, creating a high-performance culture and training and development.

Conversely, he added, HR departments have traditionally been primarily administrative, dealing with policies and procedures rather than strategic thinking.

"While HR executives agree with these priorities, they continue to focus on their core role of improving HR operating efficiency, building scalable HR structures that can support the company's growth a 'dial-tone' level function that top executives already take for granted."

The upshot of this is that senior management often ignores HR even when apparently vital issues emerge. For example, almost two-thirds of executives (63 percent) said that they rarely or never discussed mergers and acquisitions with their senior HR team.

For it's part, however, HR functions do appear to recognize the challenge to be more strategic and are shifting their administrative transactions and other non-strategic activities to shared service centers or an outsourcing vendor.

As a result, both senior executives and HR professionals agree that the role of HR will change, with more than nine out of 10 expecting HR to be perceived as a strategic, value-adding function, not just a cost center, within the next three to five years.

"HR organizations globally recognize they have an opportunity to play a more strategic role, yet the question remains: has HR been taken by surprise by global demographic changes, a need for accurate employee data and strategic capability to tackle business leaders priorities?" said Brett Walsh, a Deloitte Consulting partner in London and co-director of the study.

"While the C suite's people agenda is clear, the roles that business and HR leaders will play in addressing the company's strategic people issues are not," he added.

"How business leaders approach the challenge - and how HR responds - will determine who takes the lead on managing People Strategy and HR Operations to address tomorrow's most significant people priorities."


Older Comments

A recent conversation I had with a CEO: 'What era are we in?' 'The knowledge era.' 'So the true capital of your company is sloshing around in the cranial cavities of your staff?' 'Yes.' 'Which would make those people your company's most valuable asset?' 'Yes.' 'Indeed, we might go so far as to say that your people are the key to your future success and security?” “Yes” “And yet your HR and T&D functions report to the CFO - who has a significant other agenda, a conflict of interest even?” “Yes.” “And you keep doing this?” “Yes.” “Even though it’s, let's see, what's the word? ... Moronic? Cretinous? ... and ultimately may hamper your future success and security?” (very small voice) “Yes” “I’m sorry - I couldn’t hear you there …” “YES!” “Well then you’re crazy, aren’t you?”

Rowan Manahan Ireland

This research highlights a classic `chicken and egg` scenario. HR need to work in partnership with management if they are to have any hope of a strategic role that delivers to the bottom-line - yet they won’t be able to do this if they are not given a chance to prove themselves by management. At the same time, there is more that HR can do to show business how they can add value.

A key challenge is the ability of HR to sit down and build effective relationships with management. To show them that they understand and can help with the people issues that management face. Only then can the translation of the hr and business objectives into a language that both sides understand take place. This is essential if a relationship is to be built on a platform of mutual respect and trust where both sides work as a team.

Jo Sellwood, Strategi Search & Selection UK

Too many HR departments seem to think that they can hire people like, for example, engineers; without any REAL knowledge of WHAT engineers do, and without any supervision by engineering management. I am afraid that, too often, their reach exceeds their grasp. Perhaps this is why no one trusts them any more?

John McDougall Thailand (now), and previously, Saudi Arabia

This topic happens to be a passion for me. Rowan and Jo, great points; and John ' your post shows a common frustration. Granted, you’ve probably had experience with some HR people who have thought themselves more capable than they were. Unfortunately, more often than not I see people asking HR to find the “right” employee and nothing that resembles a duty and task list is provided. Hard to match skills with a rough outline. Another snag is when people misunderstand the various roles of HR (see my column on this site re: that topic).

The “HR” field is extremely broad and requires a LOT of knowledge. Non-HR types rarely realize this. Heck, a lot of HR types don’t realize this. But it’s still frustrating when managers blame HRM (hr management) people for not doing HRD’s job (hr development), or vice versa.

For issues like what John raises, I suppose it could be compared to the “Engineering” field when someone asks a structural engineer to do the work of a mechanical engineer. The difference is obvious to the engineers, but not to the majority of the population (ref. That’s a reasonable parallel to the difference between HRM and HRD.

My take is that if managers want HR to learn and accommodate the managers’ needs, then managers will get the biggest bang for their buck if they would work with HR (both ‘M’ and ‘D’) as partners in those needs. This RARELY happens.

Dan Bobinski