2014 The Decade of HR032014

HCI White PaperMarch 2014

The Decade of HR

The Decade of HR

2 Copyright © 2014 Human Capital Institute. All rights reserved.

by David C. Forman Chief Learning Officer Human Capital Institute

In the second decade of the 21st Century, the spotlight is squarely on the HR profession. For generations HR, like any function not directly involved in creating, making and selling products or services, has sought greater recognition and credibility. Perceptions and attitudes change slowly, but the tide is turning because of an unlikely source: irrefutable facts and business evidence that HR makes a difference. Consider the levers that HR influences, if not controls:

Fact: 83% of organizations believe they are losing the war for talent.

Fact: Intangible assets account for the largest share of market valuation for publically traded companies. Intangible assets are those that involve factors such as intellectual property, brand strength, network of partners, quality of customers, management’s ability to implement strategy and the talent of the workforce.

Fact: The biggest single cost of an organization is the cost associated with payroll and benefit expense. In many organizations this “people” cost is 60 to 70% of all costs.

Fact: Investment in people practices distinguishes leading companies from their competitors. This finding was advanced by McKinsey in the late 1990s, and has been corroborated by many others including Towers-Watson, the Boston Consulting Group, Gallup, Jim Collins and IBM.1 & 2

Fact: An engaged workforce can contribute to many business results including lower turnover, higher productivity, revenue growth, improved quality and higher profits. For example, Jack in the Box restaurants with higher alignment and

The Decade of HR

The Decade of HR


engagement levels provide 21% lower turnover, 10% higher sales and 30% higher profits.

Fact: Strong pipelines of talent for leadership and strategic positions lead to better financial performance, improved customer relationships, and the ability to attract and retain key talent. Examples of companies that have robust leadership succession plans in place are GE, McDonalds, Southwest Airlines, P&G and Johnson & Johnson.

Fact: Greater collaboration results in improved engagement, innovation and cross-functional participation. A shining example of such a collaborative company is the creative design firm IDEO, which was recently profiled in the Harvard Business Review.3

Fact: Organizations today are exposed to relentless change, and their ability to respond to this change is perhaps the single biggest determinant of their ability to succeed. Before organizations can transform and change, their people must do so first.

Fact: A strong culture is the most effective governance system. Cultures that emphasize strong social purposes, principles and high performance have higher engagement levels, better financial performance and stronger talent brands. In describing her research on these organizations, Kanter labels these Vanguard Companies.4

The one common element in all of these findings is that people are the primary drivers of business results. HR’s job is to partner with management to turn people costs into assets that strengthen the organization, both now and in the future. Just as CEOs turn to the CFO for financial matters, the VP of sales for revenue accountability and the CIO for technical resolutions, they must now turn to HR for improving the workforce and workplace.

Breitfelder and Dowling5 talked about their decision to go into HR directly from the Harvard Business School (as opposed to going to Wall Street, for example). They said that they had been trained in business school to look for undervalued assets with great potential; and they consider HR to be just such an asset. It is where the action is. It is where the greatest results and impact can be achieved, especially for organizations that value innovation and agility.

It is certainly reasonable to ask: Why now, why the second decade of this century as the tipping point? Much of the evidence on the impact of talent practices has been in existence for years, but past perceptions change slowly. The tipping point comes now because the business results—not opinions or perceptions—are too many and so compelling. The evidence is simply too great to dispute or disregard. The key to the new decade of HR is not to wait for more enlightened CEOs, but to seize this opportunity, develop a bold point of view, and focus on the skills and capabilities necessary to improve the workplace and workforce so that organizations can be more productive and successful.

We view human resources as the caretaker of the largest investment of the company. If you are not nurturing that investment and making it grow, you’re not doing your job.

—Libby Sartain

The Decade of HR


The HR Organization TodayThere are many ways that HR can be organized and structured. The size of the organization is certainly a factor as is the extent of global operations. Regardless of the structure, there is a movement away from large staffs of HR generalists to stronger functional skills, improved client services and technologies that lift some administrative and operational practices from HR. Increasingly, HR is structured around a lean leadership team, Centers of Excellence, Shared Services platforms and HR Business Partners.

Human ResouRces

centers of excellence

self service centers

s-HRBP s-HRBP s-HRBP s-HRBP s-HRBP s-HRBP

operational units Geographic units

Figure 1: HR Organizational Structure

The Centers of Excellence (COEs) are a cadre of experts in defined areas that are vital to strengthening the organization. Typically there are COEs in such areas as workforce planning, analytics, rewards and recognition programs, learning and development, and career development pathways. The role of the experts in these COEs is to become very knowledgeable in their field of endeavor, study other organizations, examine technology alternatives, become familiar with industry benchmarks, and to develop practices and systems that can be implemented across the organization. The COEs should point the way, and keep the organization in a leadership position.

Shared Services platforms are designed to provide information and direction to the workforce through technology so that employees can make decisions themselves. Shared Services platforms provide many advantages, including making processes such as benefits administration more efficient, equipping employees with the tools they need to become more self-sufficient, freeing time for other HR professionals to become more strategic, and providing analytics on the use and effectiveness of, in this case, benefits administration. Other HR processes are that are candidates for Shared

The Decade of HR


Services platforms are: recognition programs; payroll administration; personal profiles; and career planning. Gartner estimates that effective self-service systems can reduce HR administrative activities by 30 to 50%.5

HR Business Partners are not housed in corporate headquarters but are embedded in the business units and locations they serve. The HRBP provides the connective tissue between operational groups and the collection of people practices and technology as formulated by COEs and Shared Services platforms. The job of the HRBP is to optimize the business unit in terms of talent practices, be a trusted advisor, solve business problems, and be accountable for improved outcomes and performance. To underscore the importance of this role, CLC has found that improving the strategic effectiveness of HRBPs can result in 21% improvement in employee performance, 26% gains in employee retention, 7% increase in revenue and 9% improvement in profitability.

The Strategic Role for HRAll of these HR roles are important and provide value, especially when they work in concert. Shared Service platforms provide others with the opportunity to devote more focus and time on being strategic. The COEs help to ensure that the organization is “doing the right things” and will not be implementing substandard practices. But all of these benefits will be useless unless the business units are more effective in leveraging and optimizing their talent. Accordingly, the most strategic HR role in 21st century organizations is the HR Business Partner. This is where strategic intent is translated into action and where HR has failed in the past. The definition of a strategic role (as opposed to core or supportive roles) is one that, as the name suggests, leads directly to the implementation of strategic intent. This is the job of the HRBP: to improve the workplace and workforce so that the business unit executes its strategy and is successful.

The HRBP role has not always been viewed as making a strategic contribution. For many organizations it has been a junior role or proving ground for HR generalists. Also, the HRBP role has also not been seen as prestigious as being in a COE and valued as an “expert.” But this is the wrong lens to look through. If you take a business perspective—not an HR one—what could be more important than helping to make a business unit more efficient and effective?

The perception of the HRBP role—just like the perception of HR itself—is changing. Organizations like Accenture are putting senior people in HRBP roles because of the impact they can have. SAP is rotating senior people in COEs into field partnership roles. And with stronger Self-service platforms, more focus can be directed to strategic issues as opposed to operations and administration. There is also growing recognition that to become a trusted business advisor, more senior-level experiences and skills are needed. There is a dearth of development programs for HR in general, and it is time that the strategic role of HR Business Partner receives its fair share of developmental opportunities.

The Decade of HR


The Key Skills for HRBPsIn order to make the transitions first discussed by David Ulrich (Polite, Police, Partner, Player), the local business partner must become a trusted advisor who speaks the language of the business, understands organizational issues and follows through on commitments.7 HCI surveyed over 12,000 alumni and convened a board of HRBP advisors to identify the critical skills that HRBPs need to be successful. Three groupings of capabilities emerged.

Understanding the Business

Leveraging TalentBecoming a Consultant

and Implementing Change

Business AcumenThe Business Impact of

Effective Talent PracticesConsulting Skills

Financial LiteracyThe Whole Workforce:

Employee and Contingent Workers

Taking the Perspective of Business Unit Leaders

Financial Justification for HR Initiatives

Building TrustImplementing Change and Influencing Others

AnalyticsStrengthening

Engagement, Collaboration and Retention

Creating Compelling Cases for New Initiatives

Making More Data-driven Decisions to Leverage Success and Anticipate

Problems

Strategies for Improving the Workplace and

Workforce

HR becoming a Partner and Player

These three groupings are interrelated. For HRBPs to be accepted and successful, they must understand the business and speak its language. They need to leave HR jargon and rigid processes behind and become an influential member of the business unit. These are the “table stakes” to get in the game. Next, because HRBPs are focused on the people assets of the business unit, there will be ways to improve these assets and leverage their success. Specific actions that improve the workplace and workforce will be suggested, but then these have to be implemented. These are the skills related to Becoming a Consultant and Implementing Change. Influencing Skills are particularly important in persuading colleagues and partners. All three groupings are necessary but not sufficient by themselves to enable HRBPs to be successful and become a trusted, credible business advisor and partner.

Table 1: Key Skill Group for HRBPs

The Decade of HR


The Challenges Ahead1. Be Data DrivenIt is evidence, not intuition, tradition or convenience that should dictate actions and business decisions. HR in general, and HRBPs in particular, have been slow to become as disciplined and systematic as other major contributors to the organization. The argument goes that data about people are less accessible, objective and valid than data about production lines, technology cycle times and financial return. Added to this belief is the perception that HR people are good with words, but not numbers. It is time to fight these myths with data, models, tools, research and methodologies that bring just as much rigor to decisions about people as those for tangible assets.

2. Drive Business outcomesAs David Ulrich has said, HR must add value from the outside in.7 It is about the strategy and business goals of the organization, not about HR measures or processes. HR Business Partners must adopt the same agenda as their business leaders, and as we have seen, people play an enormous part in affecting these outcomes. If HRBPs are to be seen as credible contributors that add real value, they must think like their business unit leaders and be accountable for the same outcomes and results. They need to be concerned with such outcomes as improving revenues, reducing time to market, enhancing quality and streamlining costs; and not with such HR-centric measures as cost to hire or number of people trained.

3. Become coachesAs HRBPs become more accepted, credible and valued, they will be asked to coach key members of the business unit, whether managers, directors or leaders. This developmental role is a logical next step in the value that HRBPs can bring to the organization, and is increasingly important in fast-paced, ever-changing environments in which new challenges are faced every day. Coaching is not nearly as significant an intervention in stable, secure times; but these hardly exist anymore, even in the most seemingly mature businesses. HRBPs will need new skills, tools, experience and wisdom to be able to achieve this next step in becoming a trusted advisor.

4. navigate changeGary Hamel has said that the single biggest characteristic of our time is the unrelenting and jarring change faced by organizations of all types and traditions.9 The military first coined the phrase VUCA—volatility, uncertainty, complexity and ambiguity—to describe the defining characteristic of the world today. While CEOs talk about disruptive innovation, VUCA and organizational transformation, they seem to forget that before organizations can change, people must. Since barely 20% of all change initiatives are successful, there is ample room for improvement, and HRBPs are the ones that must drive this process at the business unit level. This requires a deep understanding not just of the rational but emotional aspects of change, and a rich tool set that is taken from successful change initiatives.

HRBPs will need to work closely with business unit leaders to navigate through turbulence. CEOs often think in terms of Darwinian logic that survival depends on the

The Decade of HR


fittest, where fittest is perceived to mean “strongest”. But this perception is flawed because, for example, dinosaurs were quite big and strong, but now are only seen in animated movies. As Darwin understood, the essential attribute is adaptability, not strength; and adaptability is about people making changes. Once again, the HRBP role is vital to navigating through turbulence and helping to create sustained success.

5. Build meaningful and sustainable culturesCulture is the way decisions are made in organizations. It is what happens when no one is looking. Culture is certainly leader-driven, but it does not have to be leader dependent; in fact, a culture so dependent on one personality or presence will likely not survive. Every organization has a culture; the question is whether this default culture is what is intended or desired. Some believe that culture is too big, amorphous and too difficult to change; but increasingly there is ample evidence of organizations that have taken a very systematic approach to shaping the type of culture that matters to various constituencies, not just those in the boardroom. Values have become more than just words on a poster and have been the beacons for making decisions, attracting talent and creating a new compact with employees.

HRBPs, in conjunction with their business unit leaders, need to shape the context for a meaningful workplace. These “opt-in” cultures pay tremendous dividends, literally. Kanter has studied what she calls “vanguard companies” and has determined that they regularly outperform peer companies that do not have strong values, a meaningful purpose and who over-rely on rules to guide behavior.

The Time is Now This is the Decade of HR, only if we make it so. The business results are clear and unambiguous: it is the people processes that distinguish great from average organizations. It is easy to replicate the tangible assets of an organization; it is very, very difficult to mimic culture and people practices. These are the things that matter to enduring success, and we know this because the business evidence is too great to continue to ignore. HR needs to get over its inferiority complex, stop apologizing and seize the opportunity. We need to focus on the strategic role of the HRBP and realize that all the strategy and great thinking will go for naught unless it works at the business unit level. We need to develop HRBPs and equip them for success. And we need to develop an attitude and a bold point of view so that we are not just partners but leaders in moving our organizations forward. Turn on the spotlight; it is time to shine.

“I came to see in my time at IBM that culture isn’t one aspect of the game; it is the game.”

Lou Gerstner, former CEO, IBM

The Decade of HR


NOTES 1. Michaels, E., Handfield-Jones, H. and Axelrod, B. (2001). The War for Talent.

Boston, Massachusetts: Harvard Business School Press.

2. Benett, A. (2013). The Talent Mandate. New York, New York: Palgrave McMillan.

3. Amabile, T., Fisher, C. and Pillemar, J. (2014). “IDEO’s Culture of Helping,” Harvard Business Review, January-February, 2014.

4. Kanter, R. (2009). Supercorp. New York, New York: Crown Business.

5. Breitfelder, M. and Dowling, D. (2008). “Why Did We Ever Go Into HR?” Harvard Business Review, July 2008.

6. Bersin, J. (2013). Predictions for 2014. Bersin by Deloitte. Deloitte Development, LLC.

7. Ulrich, D. and Broadbank, W. (2005). The HR Value Proposition. Boston, Massachusetts: Harvard Business School Press.

8. Ulrich, D. and Ulrich, W. (2010). The Why of Work. New York, New York: McGraw Hill.

9. Hamel, G. (2007). The Future of Management. Boston, Massachusetts: The Harvard Business School Press.

The Decade of HR


About the AuthorDavid Forman joined HCI in 2005, and currently serves as Chief Learning Officer. As CLO, Mr. Forman is responsible for curriculum design, development of HCI’s certification and designation programs, and serves as a liaison to HCI’s academic and learning communities worldwide. Prior to HCI, Mr. Forman designed, developed and implemented technology-based training solutions for leading organizations, including IBM, Federal Express, DuPont, Deloitte & Touche, Exxon, Microsoft, the Ford Foundation, the Children’s Television Workshop, Sony and AT&T. Mr. Forman has written over 40 articles and books in the fields of human capital, globalization, training, evaluation, return on investment (ROI), and instructional design; and is a frequent presenter at major industry conferences and seminars, both in the United States and abroad. He is also the principal author and developer of the Global Learning System for the Society for Human Resource Management (SHRM).

Human Capital InstituteHCI is the global association for strategic talent management and new economy leadership, and a clearinghouse for best practices and new ideas. Our network of expert practitioners, Fortune 1000 and Global 2000 corporations, government agencies, global consultants and business schools contribute a stream of constantly evolving information, the best of which is organized, analyzed and shared with members through HCI communities, research, education and events.

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2014 The Decade of HR032014