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Here is the big idea for 2010. HR must become customer centric, not shareholder or managerial centric. 

In recent years we have seen the triumph of maximising shareholder interests over just about everything else. [1]

HR mainly stood back and let it happen, or worried about the overall function of HR and how it could retain credibility.

Now with evidence that focusing on shareholder value actually produces worse results than making customer value the top priority, we may need to challenge the entire direction of much of the HR effort. [2]

The president of the CIPD announced recently [3]  that she wanted the HR profession to have stronger and more confident professionals.  That can only happen when practitioners have a clear sense of their role, importance and ability to connect with business goals.

If these goals though are concentrated on maximising shareholder value it is time to stand up and be counted. In practical terms this means being willing to question business goals, not simply accept them as a given.

Just as HR can make a real difference through a focus on integrity and challenging prevailing behaviour, so it can also usefully focus on the very nature of business goals and whether these are the right ones.

Of course this is easier to say than do. HR professionals may conclude they have little real influence over business goals. Yet this is not necessarily true. The selection of these goals is seldom an entirely rational, numbers-based piece of analytics.

Instead, business goals tend to emerge through intense discussions, reviews of options, opportunities and assessments of risk, understanding of employee behaviour and so on. 

HR has as much a contribution to make here as the accountants, production people and marketers. As the president of CIPD has argued, this requires professionals who “see themselves as business people.”

In its simplicity the whole idea of maximising shareholder value has been fatally attractive. Like motherhood and apple pie it seems to make sense and helps guide all kinds of tricky organisational decisions. In reality, it represents the triumph of profitability over responsibility.

It is also destructively short term. For a while you can indeed make everything revolve around shareholder returns as a basic way of life. Maximise shareholder value goes the argument and the rest, including profits, will surely follow.

In fact, over the longer term maximising shareholder value that takes no account the life cycle of companies is rather like the earlier erroneous assumption of traditional economists that companies should always seek to maximise profits. Neither stance proved credible in the face of reality.

Moving towards a focus on customers instead means managing shareholders’ expectations, hardly an area of HR expertise. But that does not stop HR professionals from understanding the wider challenge, which is that you cannot maximise shareholder value if expectations are out of line with reality.

As the Dean of the School of Management of the University of Toronto has put it: “the harder a CEO is pushed to increase shareholder value the more the CEO will be tempted to make moves that actually hurt shareholders.” Simply knowing this tendency gives HR professional quite an edge.

One of the best examples of a company really understanding this tension is Johnson and Johnson where in essence customers come first and shareholder last.  The company is sure that by putting customers at the top of the pecking order shareholders will do just fine.

Procter and Gamble is another company that has famously put customers firmly at the top of its hierarchy of goals. It assumes that an increased shareholder value is one of the by-products of a focus on customer satisfaction.

So what will it mean if HR professionals become customer centric? It means being willing to pursue at least five basic questions such as

·         “Is this (goal, target, action) good for our customers?”

·         “What do our customers actually think of us?”

·         “To what extent are our staff customer-minded?”

·         “How do we alter staff behaviour to become more customer-minded?”

·         “What is getting in the way of us being more customer focused?”

 

www.maynardleigh.co.uk 

 

 

 


[2] The Age of Customer Capitalism by Roger Martin, in Harvard Business Review Jan-Feb. 2010

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