In the wake of the credit crunch, relationship management and the ‘soft stuff’ are now more important than number crunching and commercial offerings. Neela Bettridge discusses HR’s role in ‘The New Normal.’
There is a huge opportunity for human resources professions emerging in the wake of the credit crisis. And there is a new term to get to grips with: ‘The New Normal’.
Among the causes of the banking crash was the formulaic approach to measuring market risk, and crude, short-term measures for traders’ bonuses. This fitted with the orthodoxy of the past 30 years, in which companies were seen as collections of resources, mathematical modelling has been to the fore, and simplistic incentives have been used to reward people.
It is increasingly evident that, to prevent a recurrence, banks and corporations are going to have to become more sophisticated in their approach. And the reason this is of particular relevance to HR specialists is that much of the required change involves far more attention being paid to reward, to the psychological contract, and to long-term alignment of people and business strategies.
The ‘New Normal’ should not be considered as a fad, but rather as a recognition that economies and organisations depend upon inter-connectedness.
Since the late 1970s, business leaders have been guided by the convention that focusing on the bottom line and quarterly results has been best for business, and that concern for the wider employee population and society is a matter of conscience. This view does not adequately reflect the reality of a global, high-skill, inter-connected economy. It is often observed that the phrase ‘our people are our greatest asset’ only receives lip service. But this tokenism actually presents a business problem, as well as one of social responsibility. After all, if people really are the greatest asset (which, ultimately, they are), then they should command the bulk of executive attention – for business reasons as well as wider ethical concerns.
The complaint that business strategies and people strategies are often misaligned begs the question: why? Why is a ‘business’ misaligned from its key source of value? This should be of paramount concern to shareholders as much as anyone else. One doesn’t come across a football manager who has excellent ideas for tactics, but doesn’t know who’s playing in the team.
The coin is dropping
Belatedly, the coin is dropping with intellectual leaders in business. A recent Harvard Business article, The Fallacy of Financial Metrics states: ‘We too often spend time focusing on the desired financial performance target, rather than the inputs that drive those numbers.’ (Anthony Tjan, 8 June 2009).
HR executives will be asked for more detailed analysis of the people ‘inputs’ that drive organisational performance. It’s time to step up to the plate – but this does involve a challenge. No longer will generic, untested training or competency models but just nodded through – they will have to prove their worth in business terms. For people and business strategies to be aligned, we have to understand how they come to be misaligned, and ensure that all the company is in step moving forward.
This means that CEOs and CFOs need to learn more about the people in their company and how they generate value. But it also means that HR people need to begin to understand the commercial objectives, read a balance sheet and understand project management and risk management, so that they can help to identify and ensure that the organisation has the skills and the teams needed to meet the objectives. There will be less hiding place for self-indulgent or ineffective HR investments (though the recession is stripping out many of these in any case).
In the 20th century model, organisations were seen as collections of assets and resources, one of which was people. As well as being dehumanising, this model is extraordinarily inaccurate. The real organisation, especially in the 21st century, consists of highly complex webs of teams, joint ventures and outsourcing relationships – inter-connected groups rich in human capital. It is more like an organic brain than a Meccano set.
Relationships within organisations, and with customers, used to be seen as a fringe matter, or as the ‘soft stuff’. In the transformed 21st century model, they become central – and this is in strictly commercial terms, not just for matters of social responsibility.
There is also a role for HR executives in facilitating the transition to the ‘New Normal’. Senior executives, especially those with a financial background whose instinct is to ‘drill down’ into the numbers, may need coaching to adapt to a reality in which relationship management, and the nurturing of scarce talent, are skills that are seen to present more value to the company.
Looking at the wider society, another lesson from the banking crisis is that no organisation can pretend indefinitely that it is unconnected from other stakeholders. Politicians who now part-control many of our banks, will have greater authority to insist upon management for the longer term and the greater good.
In the New Normal, for those whose expertise is communication, coaching, teamwork and skills, there will be a huge role to play in equipping corporations for the new century. But these must be allied to a keen understanding of the commercial reality, helping the organisation meet its goals. HR executives who can combine these attributes are very handily placed indeed.
Neela Bettridge is an executive coach and mentor, as well as a highly skilled practitioner in the field of organisational sustainability and governance. Learn more at www.article13.com or contact Neela Bettridge on +44 (0)20 8840 4450 or [email protected] A new research report by Article 13 looks at the impact on governance of recent developments. It is entitled “Sustainability Inside-Out: Investigating coaching’s role in sustainability”.