By Simon Court, CEO Value Partnership

The Human Resources function should play a central part in value creation, yet all too often it fails to make this contribution effectively.

The issues facing businesses today (globalisation, competition, opportunities using technology, the imperative to create value) all mean that people in the organisation are more central to sustained business competitiveness than ever before.

Ultimately business strategy is only real and effective if the organisation can deliver it and HR should be playing a leading role in creating that organisational capability.

Value Partnership is typically called in to an organisation when the business strategy or circumstances have changed and HR is expected to make a very different kind of contribution to the one it has been used to.

What we often find is that the HR team sees itself (and is seen by others) as a ‘functional profession’ with little connection between its administrative and legal activities and more operational and strategic roles it could and increasingly should be playing.

Our starting point is that if they are to be forward looking and strategic HR leaders they need to be able to make the transition from being a policy owner to a ‘business partner’ and ‘player’.

This means taking a long hard look at the function and the capability within. The transition from developing policy to playing a central role in the business generally requires a substantial commitment to a programme of strategic change within the function as well as personal and professional development within the team.

So how do you manage HR for value?

1. Develop a change strategy for the HR function

The first step is to develop a change strategy for the function itself. This will typically involve scoping out the agenda for change, and will include determining which processes need re-engineering and what HR information systems are needed. It will also look at the way HR is organised, and involve an honest appraisal of the current team’s capability.

HR usually has specialist areas including compensation and training with some HR generalists providing HR services to different parts of the business. A value-based HR function increasingly needs to be organised around what it is expected to deliver to the business. So, if HR administrative services are expected to deliver lower costs and increased customer satisfaction, then this aspect of HR should be set up as a customer service organisation. However, outsourcing also means that the HR function that is left behind must quickly develop new capabilities and be repositioned as business partners and players.

2. Develop the senior HR leaders

A whole new way of looking at the development of HR people is urgently required, one that is not separate from the business.

HR people now need:

• Knowledge of the business, its challenges and how it is doing – HR can be weak in this area, and without a step change improvement, the function cannot contribute to value creation.
• Insight into the whole organisation and how it functions at every level – HR may have this knowledge but not always realise the value of putting its senior managers in touch with day-to-day realities.
• Knowledge of leading approaches to organisation and people management – HR, like any other field, has new practices emerging all the time, and awareness of these, coupled with the capacity to learn from others’ experience, is important.
• Engagement with management colleagues – HR has to be able to use its knowledge in ways that build credibility with other parts of the business.

Personal and professional development must take precedence if the function is to move up a gear and secure a leading role in making success happen.

3. Initiate a strategic people, organisation and management review process

It is only by reviewing employee capability and organisational structure and relationships that an enterprise can start to really manage for future success.

Close attention to people and organisation shows what is really possible and is a key factor in sustainability. Here business strategy, building organisational capability and planning are drawn together into a single and systematic business planning process.

People create the future – through what they do and don’t do. And more importantly through what they can and cannot do. Ultimately the value of companies stems from the people who work there, the skills they possess and their potential to transform.

4. Develop strategic HR processes (performance management, talent management, career management, leadership and management development)

The capability of managers, and the ways the business and organisation are managed, are the most crucial keys to sustained performance in turbulent times.

HR needs to be making the case, and taking the lead in ensuring that key strategic management processes, such as performance management and career management, not only exist but are making a real difference to business performance.

This means engaging with business and organisational issues and strategic challenges, as well as implementing procedures and programmes. It also means managing these processes, by regularly reviewing the outcomes they deliver.

If managed well, these strategic processes can ensure that the business has the managers it needs for the future, and that today’s managers and ways of managing add value to the business, not just cost.

5. Shape rather than simply accept the context

Accounting measures rather than value-based measures are still common.

But good HR people seek to influence their context and develop the thinking of their colleagues. If the way results are measured is the problem, they should work to argue the case for a balanced scorecard, or work with the Finance Director to create the conditions for real value based management.

If the lack of understanding about organisational and people issues is the problem, HR leaders should seek to influence this by working with senior colleagues to develop a shared view of the key capabilities the business needs to build. Typically by introducing an organisational review process as outlined above, involving a dialogue between the CEO and key senior people.

6. Making the journey

In our experience, visible and lasting change in the HR function takes time. From starting out on the roadmap for change to seeing a real difference in outcomes and behaviours typically takes around two years. The actual HR process and systems re-engineering might only take a few months – but embedding the capability within the function to deliver in a consistent and value-adding way, takes longer.

The message is that re-engineering the function (which the HR outsourcing industry is championing) is not the answer. Nor is today’s effective HR the same as the short term initiatives that have characterised the past decade. Today, organisations need to create a culture of continuous improvement, innovation and added value.

If senior HR professionals tackle this agenda effectively; they are ideally positioned to move their organisations into a successful future – to take them beyond even their current ambitions.