In far too many cases HR is sanctioned only to play the role of watchdog and police officer, making sure that policies and procedures are adhered to and that the business is keeping on the right side of employment legislation; and yet we know in our bones this approach isn’t about adding value.
While the administrative functions of the department such as recruitment and payroll etc are important, the HR Director needs to think objectively about how they can contribute to the delivery of the business strategy, business plans and engage business managers in educating them as to the true meaning of that contribution.
The business needs it spelt out
The HR function is as much an educator of the business as it is anything else. That ‘education’ will be partly delivered through execution and the efficient running of its administrative functions. After all, we all know that when an HR related administrative process works as it should do, no one notices; but when it breaks down, the HR department gets blamed.
But the ‘educator’ role is also about engaging in a more explicit dialogue with the business about how HR activity has added value to what the business it is trying to achieve strategically. Line managers often don’t get it; and there is a real need to spell it out.
Way back in the early 1990’s, Harvard HR guru David Ulrich, gave us his descriptions of the four ways in which the function should be defined; not by its activities, but by what it delivers – the results that enrich the company’s value to employees, customers, and investors.
Ulrich gave us the now well known roles of Strategic Partner, Change Agent, Employee Champion, and Administrative Expert. But these roles and accompanying ways of operating remain the reserve of HR professionals themselves. They aren’t truly understood by managers, and frankly I’m not sure they really care.
You can’t spell it out using a foreign language
So here is the nub of the matter, if they neither care nor understand, how will the wider business be able to appreciate the true contribution that HR can make to the strategic success of an organisation if it’s not spelt out for them? Well for a start, they won’t ‘get it’ if HR professionals insist on using HR-speak to make their point. The onus must be on HR professionals to learn the language of the business in order to communicate more effectively.
Talking about the value of intangible concepts such as employee engagement, organisational development and the like can be a real turn-off to managers and, for many, difficult to understand. After all, they are ultimately accountable for the outcomes of the company’s efforts to deliver the strategy and execute the business plan.
They are only interested in inputs and processes in so far as they can see a direct link with performance improvement; unit cost reduction, volume increases, revenue etc. They can see that a motivated and skilled workforce will enable the organisation to meet its business objectives, but only philosophically or through intuition.
Many managers have no real idea as to ‘how’ human processes operate to deliver business results. So HR Directors and their teams have to talk in language that the business understands, helping managers to make a more tangible link between human input and processes and the business results the organisations sees. Then, maybe then, the HR function can start to be taken more seriously.
The onus of measurement
It has often been said that “if you can see it, you can measure it; and if you can measure it, you can manage it”. Trouble is, of course, people aren’t widgets. Despite the fact of years of that well espoused line of “our people are our greatest asset” in company reports and accounts, the thorny problem of actually measuring those assets have been notoriously difficult.
Since April 2005 all publicly quoted companies are required by the DTI to include a section on their approach to human capital management within their annual Operating and Financial Review (OFR). “At last”, the HR Director shouts, “a legal requirement that will mean we will definitely have to be taken seriously”.
Not so fast! Research in 2005 by the Chartered Management Institute indicated that many companies struggle to meet even the basic guidelines for OFR, and while a majority (about 90%) claimed they measured the value of their workforce, only 20% believed that the information was of any use. Quantitative methods previously used by HR professionals don’t say whether, or by how much, they contribute to business results.
There have been several attempts to demonstrate the value of the workforce, but efforts to predict its contribution to the balance sheet have, so far, been inconclusive. While HR wants the respect of business for being able to show how good people practices contribute to business value creation, it won’t get it by continuing to use jargon or ‘soft’ measures.
So how does HR get listened to and respected?
The single most powerful way HR can achieve either of these two aspirations is by demonstrating exactly the causal connection between the effective HR strategy it is delivering and bottom-line business performance. And in so doing HR has to drum into the heads of business managers, through evidence and explanation, the results the department is achieving in partnering the business.
There are some key principles for measuring the value of HR’s contribution. The first of these is to measure those things that make a difference and are, in themselves, valued by business managers. Measures of workforce performance and value need to focus on issues with a direct bearing on business performance, like what percentage of total operating costs is represented by people costs.
That should start to get their attention. The measures used need to be simple, clearly understood and demystified from HR jargon. Emphasis should be on the value of the chosen measures in helping to manage the organisation more effectively. If information is collected that helps monitor and manage the organisation, compliance will follow.
Over time what is created is an aura of credibility based on a true understanding of the business, its challenges and principle agenda – delivering the strategy and executing business plans. Applied with influence and other inter-personal skills, education of the business about what HR offers and truly contributes immediately raises its standing.
Joe España is MD of Performance Equations
Other articles by this author:
- Help – I’m the new HR Director, now what?
- Employee engagement – fad or JGMP?
- Culture – help or hindrance?
- Opinion: Turning a vision into reality
- How Did I Get Here? Joe Espana, MD of Performance Equations