How Can We Increase The Strategic Value of HR?
If there is one thing that has been a constant over my years in HR and decades as a consultant, it has been the sense that the HR function is too often a supplicant to other functions and lacks the confidence to see itself as an equal. So, when clients ask me how they should be thinking about the evolution of their own HR function, in my mind is the question of how to overcome this mindset and establish a better understanding of how it can provide greater strategic value.
With that said,Winston Churchill’s words “It is always wise to look ahead, but difficult to look further than you can see” resonate with a challenge that faces HR: people and cultures take time to change so, what exactly should one be changing to and with what timeframe in mind?
I think it is often better to ask questions that help focus on being prepared for the unknowns that inevitably lie ahead, than to only solve the current issue. The priority should be on determining what tools and capabilities are required to be flexible enough to adapt quickly and avoid having too much inertia in your system. This applies to HR perhaps more than many other functions, because of its central and pervasive role in shaping the organization structure, cultural norms and behaviors of people. As Andrew Carnegie observed back in the mid-19th century, people are paramount: “Take away my people, but leave my factories and soon grass will grow on the factory floors……Take away my factories, but leave my people and soon we will have a new and better factory.”
Clients who ask “How can we increase the strategic value of HR?” have found it useful to start the conversation by answering a few really important questions:
- Given no constraints, what is the most positively impactful contribution HR could make to the organization?
- How can HR gain the “permission” and latitude to achieve its potential?
- What should HR be working harder at?
- How can HR gain sufficient agility to build and sustain a high impact contribution?
Given no constraints, what is the most positively impactful contribution HR could make to the organization?
In the past, I have found that there has been a tendency to under-estimate HR’s contribution as a business function. However, I am happy to see an increasing recognition that the value of focusing on maximizing the focus on people is huge. For this value to be manifested, the specialist skills within HR play a critical role.
In order to think ambitiously about the untapped impact of HR typically means momentarily stepping away from the annual planning and budgeting process. Starting the conversation with the budget will most likely result in tweaks (and, therefore, minimal shifts in value) to the existing HR function and what they do, only to be criticized for lack of strategic contribution.
So, more often than not, my recommendation to clients is to periodically step back, put aside a couple of days and rethink the HR function and how it contributes to the goals of the organization. Start with a blank sheet of paper and be guided by the company strategy. Then think in the most ambitious and creative ways you can to determine what types of inputs the organization requires of its workforce to produce the greatest results (outputs). A potentially useful way to avoid thinking in existing hierarchical and functional terms (e.g. talent acquisition, people development, compensation and benefits) is to break down what is required in the following way:
- Capacity (to get work done)
- Alignment (understanding and support of the agenda)
- Knowledge (acquired or developed)
- Efficiency (minimized cost and effective processes)
- Work delivered
- Cost of delivery
- Achievement and value of goals
The next step is potentially the most challenging of all, how to gain support for moving forward with your ambition.
Focus on the ambition, not the quick fix.
How can HR gain the “permission” and latitude to achieve its potential?
Proposing change is often met with political and other forms of resistance. All that change management stuff that, these days, can look a bit tired and unexciting is still highly relevant and useful. Why? Because people are still essentially guided by the same hopes, fears and ambitions that they were back in Carnegie’s days. But, in contrast, the ability of HR to make a huge difference has evolved – dramatically so.
Back when I first worked in what was then called Personnel Management, it was all about policies and procedures, supported by the most basic of systems. There was little expectation of HR being strategic. As a result, minimal effort was expended to enlist the support and contribution of leadership – they pretty much just had to sign off on workforce numbers and training plans. So much has changed.
The broader perspective and recognition of the potential impact of the HR function enables and requires thinking that encompasses the whole organization. Given that, the greatest difficulty and one that requires the most attention is often the gap in support from senior management – they need to be convinced of the value to the organization of transformative HR thinking. Getting leaders to support the vision is the single most critical success factor for CHROs. Too often HR is brought into the planning process only to support the plans of other functions, rather than as strategic partners. I advocate HR being in the lead pack from the start of the planning process and getting leaders involved as if they were CHROs themselves:
- Include all leaders in the vision thinking so that they see the potential that HR can bring
- Educate and inspire those leaders with the new tools and approaches that leading companies are using
- Engage them in sharing responsibility for ensuring the changes take root in the organization
- Involve them and reinforce their accountability in tracking and ensuring the outcomes are as expected.
Leaders who are working in collaboration with HR to develop the vision will have legitimate questions about where the opportunities to realize greater value lie and in which respects HR should be working harder. This is addressed in the next question.
Focus on and prioritize enlisting and aligning senior leaders in support of your vision.
What should HR be working harder at?
These days, every function in HR has the opportunity to be transformed by the power of analytics, AI, cloud based HR systems, Slack-like tools, on-demand learning, workspace management, to name a few.
Technology and analytics are having a massive impact, but they are not the whole story. There is also exciting new thinking that companies are implementing that targets the employee experience such as more fluid organization structures, different career paths, and strengthening of employee engagement.
Indeed, if we had to find a single measure of how successful an organization is at receiving the maximum value possible from its workforce, it might well be job satisfaction – a very human thing in amongst all this talk of AI and technology. Why? Because job satisfaction leads to performance gains that, in turn, lead to value.
While HR cannot be held solely responsible for the poor job satisfaction ratings that surveys consistently reveal (e.g. the Conference Board 2019 survey showed 54% satisfaction rates, which, sad to say, is a high – in sharp contrast to Gallup reporting only a 13% satisfaction rate!), they can be a relevant metric of HR’s contribution to organizations. And thus, yes, you can think in terms of point solutions that shift your compensation and benefits to a cafeteria system or develop a few online training and development programs, but wouldn’t it be so much more strategic, exciting and, potentially valuable to think more holistically and ambitiously about changing the culture around employee experience. Bear in mind the 19th century poet Robert Browning’s words: “Ah, but a man’s reach should exceed his grasp, Or what’s a heaven for?”
Sadly, too many companies claim people as their greatest asset, while focusing wholly on holding down costs, and therefore potentially missing out on longer term gains of investing in the people.
Costs are real and budgets need to be honored, so how one determines the return on investment needs considerable thought. During the process of aligning the HR vision with demands of corporate planning and budgets it is worth considering the words of Sandy Ogg and my friend Sumeet Salwan of CEO Works. Their “talent to value” methodology system teaches HR leaders and CEO’s to “focus on the fewest possible things you can do to bend the value curve …. and do those things, at the specific points of need in the business, with a precision mindset vs a zest to boil the ocean.” This will help to:
- Decide orders of priority, that in turn
- Guide on when and where to invest, and
- Clarify how to articulate the value that justifies the investments.
To adopt this thinking and to identify the content and timing of initiatives will not come easy. However, starting with the blank sheet mentioned earlier, coupled with focused, intense and creative thinking, inspired by pioneering approaches of other organizations will be central to how you increase the strategic value of HR and achieve lasting benefits for the organization. One challenge remains, however: increased value will only be sustained if changes are made that enable continuous improvement and an agile mindset.
Focus on HR as a value creator and utilize new people technologies and workforce strategies
How can HR gain sufficient agility to build and sustain a high impact contribution?
This is really at the heart of the problem, because the current accelerator we are all riding isn’t about to slow down. The agility that is needed comes from building a project based mindset, the capacity and ability to shift resources quickly, a willingness to let go of existing processes and tools that are no longer fit for purpose, regular replanning, and establishing cultural norms of well-managed change to avoid a chaotic environment. These are all important components of achieving a more agile and adaptable organization. In addition, investing in systems and processes that have built in obsolescence and adaptivity, such as cloud tools that constantly update or employee choices that can evolve over time, can help with the evolving nature of the workplace as it relates to employee experience.
One example of this is the Agile software development philosophy (see note below for definition) that has resulted in some welcome and valuable thinking beyond the world of technology, showing how we can adapt quickly to the ever changing environments in which we work. As an example, only a few weeks ago a major European health and nutrition company was asking about how to apply Agile to their organization design practices. Agile’s potential benefits lie not just in respect of organization design, there are worthwhile lessons that all aspects of HR can learn from the concept as companies seek to make themselves more adaptable to changing organizational needs and business environments.
Focus on “what’s next?” while still working on the here and now and utilize tools like Agile that facilitate constant rethinking of why and how things get done.
Transforming the approach and reach of HR requires a shift in both the mindsets of those in HR and the wider leadership of an organization. Realizing the potential requires ambitious thinking, and support from leadership. Also, a realistic evaluation of goals within planning and budgeting while working with the understanding that the evolving environment requires adaptivity to build sustained positive impact for the people and organization as a whole. No doubt, all of this has big implications for the quality, experience and mindset of HR people and the wider organization. However, the first step is the blank sheet of paper to clear the path for ambitious thinking amongst HR and senior leaders. Thereafter comes the grunt work of implementing the new vision.
The opportunity for HR to transform its contribution to organizations has never been higher. Sometimes it is not easy to separate the wood from the trees or to bring a new perspective to one’s thinking. Redwood Advisory Partners works with HR executives to help them transform their organization and the value it contributes to the company. If you are looking for support on your journey, let’s chat.
Follow or connect with Stephen on LinkedIn or visit our website at www.redwoodadvisorypartners.com. You can contact Stephen direct by email at [email protected]
Note – The Agile approach:
“requirements and solutions evolve through the collaborative effort of self-organizing and cross-functional teams and their customer(s)/end user(s). It advocates adaptive planning, evolutionary development, early delivery, and continual improvement, and it encourages rapid and flexible response to change.”
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