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MOVING FROM TRANSACTIONAL TO STRATEGIC HR

In a talent management study in 2008 by McKinsey & Co, 60 % of the line managers interviewed agreed with the statement “HR is an administrative department, not a strategic business partner”. Disturbingly 51% of HR professionals agreed with the statement.

This finding is not surprising, given that in Australia, with the increasing amount of regulatory compliance around OHS, EEO, Affirmative Action and a raft of other IR/HR regulations HR gets bogged down in compliance rather than becoming a true business partner.

Yet CEOs feel a pressing need for HR strategists. In the 2009 PricewaterhouseCoopers 12th Annual Global CEO Survey 97% of CEOs ranked key talent as critical or important for sustaining growth over the long term. The HR function plays a pivotal role in ensuring the drivers of long term business success are in place. Today, with declining loyalty and greater job hopping, it is critical that CEOs partner with HR.

How can you make the shift to becoming a business partner and not drop the ball on compliance? Here are some do‟s and don‟ts that will definitely support you to win the right to be that partner.

1. Do - Consider Shedding Some

Non-Strategic Roles

What you work on is what you are seen to be. If you spend a vast proportion of your time on operational, transactional or compliance roles, you‟ll be seen as non-strategic. Consider how you can lighten this load perhaps through improving systems, outsourcing, delegation, shifting staff out of HR to Finance, Administrative or Risk and Compliance business units. Then you‟ll have the time to devote to more strategic, value-adding and business-focused activities.

2. Do – link HR priorities with key

business strategy elements

Strategic HR executives regularly and routinely challenge and influence the thinking and actions of the CEO. Start by putting yourself in the CEO‟s shoes. What is the CEO‟s primary motivation? A CEO is evaluated (sometimes) for leadership of significant shifts in strategy, and then (always) for the continuous, measurable improvement of business results. So in any context, the challenge will be to show a direct link between human

capital strategy, or any proposed changes in strategy, and a continuous improvement in business results. HR strategy should be a subset of the overall business strategy, not something off to one side driven by a different HR agenda. Effective influencers engage their stakeholders by deliberately and systematically uncovering the key drivers, needs and concerns that motivate their stakeholders - and then by working with them to generate creative solutions. Effective influence is achieved by being a good listener and then working to the top priorities of the CEO and the top team – not some other agenda you might prefer.

3. Do - Talk like a Business Strategist

Business acumen and an awareness of the operational and strategic challenges facing the business are vital. HR needs to talk about metrics and the ability to speak ROI is one to be mastered. One essential question is whether the HR executive can read and analyse a balance sheet and other financial reports. CEOs and Boards are more comfortable with people who „get the numbers‟. The perception is that HR is short on this and always has been. If this is a weak spot for you, talk to your CFO about mentoring you around the numbers and the language, or consider taking up some business-focused study.

HR can assume responsibility for the company‟s investment in human capital (not just the HR department budget). Begin by isolating your company‟s total investment in human capital, readily available from a company‟s financial system. A new generation of human capital metrics pulls data directly from an organisation‟s financial system to isolate and measure the ROI, productivity, and liquidity of the human capital investment. The HR executive can measure the financial impact of human capital and communicate results in the same language the CFO uses for financial capital. This is a huge step forward.i

4. Do – Stand up and be Counted

HR leaders are often stereotyped as saying yes to the CEO. Since HR‟s history is often rooted in administration and service, it can be easy to fall into a reactive mindset where the function is lost in the chaos of trying to make everyone happy.

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But if you don't have a firm point of view about what matters in an organisation, your chances of doing something remarkable drop to zero. Sales executives have specific points of view about how to develop customer relationships and finance executives have the same about budgeting processes. When HR leaders don‟t cultivate their own point of view credibility suffers.

In cultivating a defined point of view about how HR should be executed a point of view should be based on data first, and then your experience, expertise and beliefs. You need to view yourself as the expert (or certainly one of them) on HR within your organisation. To develop a point of view, answer these questions:

What is the purpose of HR?

How does HR create business value?

What are the attributes of a great HR

organisation?

How should HR‟s success be measured?

How do you define talent?

When should HR, or part of it, be outsourced?

What role does HR play in policy creation,

maintenance and enforcement? And why?

If you don‟t have easy answers that you are confident in and willing to defend, it might be time to do some work cultivating your philosophy. By cultivating your point of view on HR, you will be able to connect HR more successfully to the business.

5. Do – Reinforce the Professionalism

of HR

Some organisations believe a senior role in a HR is a rotation opportunity for senior executives that anyone can do. Would an organisation rotate a senior person with no legal, financial, supply chain, manufacturing or risk expertise into such GM roles in the business? Unlikely. This view that HR can be done by anyone compounds the problem that HR is not seen as an equal, professional partner in the executive team, requiring deep technical and professional knowledge and expertise.

You can demonstrate this level of expertise by offering professional, best-practice HR strategies and solutions around recruitment, talent management, leadership development, remuneration and reward, employee engagement and transformational change strategies that have a clear bottom–line impact and substantial benefit to the long-term health of the business.

For example, research on engagement increasingly links high engagement with a range of key business metrics: productivity, customer satisfaction, employer reputation, compliance and risk minimization. Make the case with summaries of this data, and then install the best tools you can source to capture key ongoing measures of engagement. The best of these will signal where attention is most needed in lifting management practices. Let the data drive action, rather than a raft of policies and imperatives.

As an HR professional it is also important to invest in your own professional development by maintaining up-to-date qualifications and attending and/or presenting at conferences in Australia and overseas.

6. Don’t – Limit Yourself to HR

strategy

In senior executive meetings, don‟t always talk from a human resources perspective, but look at the total company context. You will be excluded from many conversations if you only ask HR-related questions. Show your curiosity and critical thinking skills whenever you have the opportunity.

When developing an HR strategy, don‟t ask the CEO and senior executives what they want from HR! Ask them about the critical issues and priorities they face, then, go back to them with a strategy that may help them achieve their business objectives, and happens to be based around leveraging people.

7. Don’t - Get Embroiled in Politics

Some HRDs work from the premise that expressing opinions about people, cultivating alliances and working the politics is the way to success. The truly effective ones however steer clear of this, and win recognition as an honest broker: someone who can be trusted with confidences, someone with the courage to challenge management practice (in the right place at the right time) and not someone who peddles gossip. In short, someone the CEO and top leaders will trust, with honest counsel and integrity.

i We have a terrific paper on human capital analytics in our Reading Room. Check this out through our website.

Our aim in Macfarlan Lane is to be trusted and well-resourced advisors for senior individuals who are addressing career change and career

development.