HR has come a long way since its previous incarnation as ‘personnel’ but that’s not to say its long-term future is assured. Louise Druce looks at some of the challenges that could lie ahead over the next few years.

There’s no doubt technology has been one of the key drivers in HR transformation over the last 10 years but it has also come with a shift in mindset. The latest mantra is that people are a company’s most important asset. Whether the same could be said of the HR function in another 10 years from now is another matter.

The problem with HR, according to the experts, is that it has always struggled to prove its value. There are many facets to consider in the role such as recruitment and retention, talent management, reward and recognition, managing absenteeism, policies and legislation, coaching and training… the list goes on. But, as Dr Peter Samuel, lecturer in human resource management at Nottingham University Business School, points out, some of the softer skills needed are still seen as a bit ‘fluffy’.

The success of HR’s performance comes down to company expectations. When all’s said and done in terms of value, is it the bottom line that should ultimately be measured? If so, what are the markers? Are you measuring other stakeholder values as well? What sort of practices are you using and are they seen as best practice? Is one practice more important than the other? “It’s the silver bullet managers are always looking for in times of uncertainty,” says Samuel.

“HR is constantly reinventing itself. There is an argument that HR is strategic. If it is, you would expect to see HR directors sitting on boards and being involved in the strategic planning process in organisations, but research evidence shows that while most private companies do have a voice on the board of directors, it has been declining.”

The research he refers to is figures that show influence at board level peaked just over 20 years ago, with 76% of companies having an HR director on the board. This now sits around 64%. His argument is that if the people are your most important asset, you would expect this figure to increase, rather than drop. “It suggests to me that HR is becoming more operational,” Samuel says, slightly mirroring its personnel days.

He goes as far as to say that HR could be blamed for the ‘fat cat’ culture. Whereas in the past personnel played devil’s advocate between employer and employee, they now seem to gravitate towards management sympathies. “HR hasn’t had the ability to bring in moral judgements and say, ‘hang on, if people are our most important asset you can’t do that’. It’s got to justify itself.”

Does money or talent make the world go round?

It’s open to debate. But is Britain still too focused on costs rather than people? Samuel believes the overall corporate governance framework places the premium on shareholder value and short term returns.

“I’ve had clients who, frankly, only cared about how to move work from Western to Eastern Europe without having an industrial relations issue,” says HR transformation expert Tim Palmer, of PA consulting. “They didn’t really get talent management. It was all about costs and being competitive.”

He questions what is likely to happen in regard to talent management over the next two or three years as we face economic downturn. “The really interesting thing is whether companies can retain and motivate the best people during that period so they come out fit and ready to compete in a meaner world,” he adds. “In previous downturns and recession, it is always the companies that have retained the best people that have come out stronger.”

Samuel is less convinced by terms such as talent management, believing it could be an “insidious means of segmenting the workforce.” He explains this by highlighting that the so-called ‘talent’ is likely to get all the investment, skills training, support and quality of working life, while the rest of the workforce is left out in the cold. In other words, what is being glossed over is that you’ve got HR for a few and ‘personnel’ for everyone else.

He suggests this could be partly down to a lack of CEO buy-in. However, he does believe the potential managers starting to come out of university are more immersed in this environment and will start to deliver accordingly. “As the new generation are exposed to the importance of HR and managing people effectively and fairly, that is in their blood and becomes matter of course for the future CEOs.”

Model of success

Two other potential key influences in future HR are business partnering and outsourcing. The Ulrich model has been the beacon. Yet, Palmer points out that while many companies strive to operate in this way, few have achieved their goal.

It comes back to value. “HR business partners are slightly at risk,” he says. “They have become a standard but there are lots of precedents where people haven’t done much with the business partner community and haven’t upskilled the team or recruited new people into these roles.

“The key to success and continuation of that role will be what business partners do to make themselves relevant. [Currently] it’s not well done or uniformly defined.”

Samuel goes further: “There are far more business partnerships but they are susceptible to shocks, especially political. Their days could be numbered,” he predicts.

The future’s bright

The future is slightly brighter for outsourcing. Palmer says the problem at the moment is a lack of evidence for the longer-term benefits for HR. He believes these will become more prevalent in the next few years, with mature outsourcing contracts and shared services revealing the attractive consistency of process and data quality. “It’s about workplace cost and efficiency,” he adds.

“There are three roles for HR: delivery (which is where outsourcing, shared services and the division of labour in a logical way come in), policy and strategy. The centre of expertise is absolutely key to looking after the people assets.”

Samuel adds that the future is rosier for HR than it might seem and stresses it is unlikely to disappear altogether. Instead, it could mould itself into a more consultative type of role. “When it comes to legislation and performance objectives, you will still have HR, but line managers are determining the skills and training they want, rather than HR,” he explains.

“We are educating future managers. They will see the bigger picture and that HR is still a vital function. Managers are increasingly more aware of how to manage people, which is the fundamental of what HR does.”