Proving the skeptics wrong – how HR can deliver real value to the business
If HR is so ‘business critical’ (as we would like to think we are!) why is it that HR was one of the hardest hit professions during the ‘credit crunch’? It seems the brakes were put on HR spending very early and it is only recently that there has been any perceptible relaxation on the HR budget. The reality is that there is a disconnect between HR’s own perceived value and level of credibility against the organisation’s actual experience of HR.
The responsibility for proving HR’s value lies solely with HR and it has to learn that by over-promising whilst constantly under-delivering the business benefits of HR Partnership is just reinforcing the image amongst HR’s many detractors that we are nothing more than an unavoidable cost and an unfortunate irritant.
The good news is that it doesn’t have to be like this – the bad news is that HR recognises that it is actually weak at measuring HR value. Recent research for the European Club for hr actually highlights that most HR Leaders assess themselves as being weak in HR metrics (77% of respondents). The reasons given are lack of time, lack of appropriate measurement tools and lack of HR expertise. At CourageousHR we recognise that if HR is to have any significant future in organisational life it needs to ensure that it is able to use a range of business and people measures to demonstrate how it has become more efficient and more effective in what it does. That is the first step towards proving the HR skeptics wrong but in our opinion it is not enough if HR has any desire to rightfully play a strategic role within the business.
People are the heart and brains of all organisations and therefore should be treated as resources to nurture and grow rather than commodities to trade and discard. HR has the potential to position itself within organisational life as the ‘people experts’ and through the development of such expertise find ways to actively create organisational value rather than limit itself to merely adding value. Who is currently better placed to maximise the return from its employee’s talents than HR?
If HR is courageous enough to ask itself this question then it needs to relook at what it does and how it measures its contribution. From our experience proving that HR can create value to the business is a three step process:
1. Creating a HR Business Value Chain
Human Resources can add significant business value. The HR Partnership structure, when implemented well, is a systematic way of consistently delivering business ‘value’. However, in order to successfully implement a HR Partnership organisation, it is critical to start with the basics and understand what the key HR building blocks are and how they influence what HR delivers.
1. At its core, the Value Chain recognises that an HR Partner Community has to have deep understanding about HR and the Organisation it serves.
- HR Technical Knowledge is no longer enough to succeed as a HR professional. In addition, our own research shows that ‘Business Acumen’ is a critical key HR competency however it is one which HR Leaders acknowledge their team consistently falls short on. Without a good understanding of the business you serve how can you build core HR Deliverables which deliver business value?
2. This knowledge is then used to create and align to the business the most appropriate blend of people programmes, policies and processes. These activities will be both Organisational and Business Unit specific.
- HR Partnership refers to both an alignment with the Organisation as well as with itself. Too many HR Functions fail to sort out their own structure and ways of operating and then wonder why they fail to deliver quantifiable business value.
3. HR needs to be clear what its purpose is, defines its ‘distinctive contribution’ through a HR Strategy and then ensure it develops its in-house capability to consistently deliver a quality service. Only then is it in a position to start creating value through focusing on its core HR deliverables.
- Delivering the ‘HR Fundamentals’ (i.e. key HR transactions) to a consistently high quality
- Creating powerful partnerships with the business
- Bringing about and managing change
- Co-delivering the People Strategies of the organisation and each business.
4. The final element of the Value Chain is the role of the HR function and its members. As the HR Function and individuals develop their skills, competencies and partnership mindset (in other words HR starts displaying ‘courageous leadership’) the mix of what HR delivers will be fine tuned and then how HR delivers will ensure HR maximises the value it creates for the organisation and each business.
While potentially different HR teams could take the same basic organisation and HR knowledge and promise the identical HR deliverables, the ‘courageous leadership’ element of each member within the HR creates different levels of value.
2. Linking Business Strategy to Personal Objectives
One of the greatest failings of organisations is not the lack of a business strategy but the failure to implement the one they have got. As People (employees) implement strategies, the organisational secret is to translate the business strategy into personal objectives. In order to do this, the business strategy needs to be broken into a people strategy, which in turn can be subdivided into team/function strategies and finally into individual objectives.
3. Establish business and people measures for HR
The definition of any metric is “an agreed indicator of a process or outcome”. This definition applies to popular metrics such as ‘profit’ and ‘loss’ (where the rules which define what they mean can be very different in different countries) to potential measures of HR.
Unfortunately, HR metrics are not perceived to be as ‘robust’ as financial or marketing metrics as there are neither standard definitions for even popular measures (such as employee turnover or productivity) nor a history of their use in organisations.
However, HR metrics can provide real value as they can:
- Link employee Return On Investment to organisation financial objectives
- Help managers to manage by providing pre-agreed indicators of success
- Help leaders to lead by
- Defining strategy in operational terms (linking strategy and people);
- Quantifying the organisational vision;
- Articulating leadership expectations
Although you need to be careful what you measure as;
- Measurement can be an industry in itself
- Focus can often be on short-term, narrow, or easy metrics and therefore inappropriate
- Metrics can be used as an excuse for driving inappropriate behaviour – ‘winning’ at any cost
- Over use of metrics can make people feel like ‘cogs in the machine’
What is your next step?
The activities of HR, like any other part of an organisation, can be measured and judged. However, unlike more established functions such as Finance, Sales and Marketing, HR does not have a heritage or regulatory framework of established metrics to draw upon and therefore faces a further difficulty in gaining organisational agreement to potential metrics before they are implemented
However, even though HR is at a credibility crossroads its’ destiny is in its own hands. If HR chooses to own its distinctive contribution, and have the courage to go into the organisation and make it a reality then HR will become both a value creator and a strategic leader. The choice is ours!