Has HR Finally Arrived

June 22, 2007
Are we there yet? This is the refrain that children ask parents over and over as they journey to their desired destination. At times, the question gets redundant and tiring, but it still needs to be answered.

    It is the same question that seems to be repeated over and over by many HR professionals. Are we there yet? Are we having an impact? Are we considered credible? Are we really partners, players or drivers (pick the metaphor) for the business?

    The answer to this question lies in rethinking how we in HR approach our work. In doing workshops with HR professionals, I often start with the exercise, "Assume you have been asked to write a chapter (or give a talk) about the future of HR. What would be the theme of your thinking?" The list that is generated is often insightful and creative:

  • Sourcing talent globally

  • Managing demographics

  • Changing a company’s culture

  • Building sustainability into HR

  • Using technology to improve HR processes

  • Building future leaders

How HR can better meet the needs of business leaders
    Each of these ideas captures a part of the "Are we there yet?" question. Each identifies an area where HR professionals and HR practices can have an impact. But, sometimes we need to see the forest rather than the trees. The meta-message of this list is the extent to which HR creates value. Too often in HR, we focus on what we do (create talent, shape culture, invest in technology, create leaders, etc.) rather than what we deliver.

    To know where we are going as a profession requires starting with the premise of value. Value is defined by the receiver more than the giver. When I give my spouse a gift, she defines the value of the gift (my giving her basketball tickets did not endear me to her). Likewise, in HR we need to figure out who receives the value we create and then figure out what each stakeholder gets when we do our work well. By focusing on stakeholders and the value they receive, we determine if and how HR makes a difference.

    Work that I and my fellow researchers at the RBL Group have done has shown that good HR practices (and good HR professionals) can create value for five stakeholders, both inside and outside the company. They are: employees, line managers, customers, investors and communities. As we consider the value each can and should receive from good HR, we help answer the question "Are we there yet?"

Value for employees
    Employees receive value from HR as evidenced by employee competence, commitment and contribution. When HR works well, employees are competent to perform not only today’s work, but tomorrow’s work too. This requires identifying what knowledge, skills and values future work will require. It means seeing that employees have the needed competencies and are in the right jobs to deliver on them.

To know where we are going as a profession requires starting with the premise of value. ... By focusing on stakeholders and the value they receive, we determine if and how HR makes a difference.

    In the 1980s and ’90s we learned how to do competencies right—by aligning individual competencies with future business requirements, by engaging line managers in articulating those competencies, and by integrating HR practices around desired competencies. Leadership consultants and Lominger International co-founders Bob Eichinger and Mike Lombardo continue to do excellent work in this area.

    In the past decade, we learned that competencies are not enough and HR investments can also help employees be committed. Commitment, or engagement, is not just satisfaction, but is marked by employees who give discretionary energy and effort to accomplish good work. Now we are starting to find that while competence ensures the mind and knowledge and commitment—the hands, feet and head, if you will—we also need to capture employees’ hearts and souls. I have called this trait "contribution," and it comes when employees feel that their work enables them to feel an abundance in their life through the work they do. HR makes a difference by building employee competence, commitment and contribution.

Value for managers
    Line managers want to make strategy happen. The strategy may be globalization, customer intimacy, product innovation, reducing costs or some other effort to either grow revenues or decrease costs. HR delivers value when the practices align with strategies and help execute them. We have learned that to turn strategy into sustained (not isolated) results requires that HR practices be woven into a set of organizational capabilities. Those capabilities are the things an organization is good at doing and what it is known for.

    Starbucks’ strategy for growth requires the capability of building leaders at every level who represent the Starbucks brand. Apple’s strategy of creative design and product invention requires building the disciplines of innovation into the workforce and workplace. Marriott’s strategy of growth through customer intimacy requires building the capability of service. HR professionals make a difference to line managers when we help diagnose the right capabilities and build clear and specific action plans to make them happen.

Value for customers
    Customers want to do business with suppliers that have the ability to meet their needs over time. When a company’s HR leaders forge stronger relationships with targeted customers, they increase the amount of business those customers do with the company. To accomplish this, HR practices that have traditionally been an internal matter are attuned to external customers. Wanting to be the employer of choice is insufficient. We want to be the employer of choice for employees our customers would choose. Customers set the criteria for who we hire.

    We could take our performance appraisal forms to our best customers and ask them if we are measuring the behaviors and outcomes that they would most like to see in our employees. We could invite customers to participate in training programs as designers, presenters, live case studies or participants to ensure that the training we offer meets customer expectations. When internal HR practices are aligned with external customer expectations, we make a difference in building customer share of targeted customers. GE often engages customers in its training programs as participants, presenters or designers.

Value for investors
    Investors want to have confidence not only in what has happened (financial indicators of performance), but in what will happen (intangible indicators of future confidence). In today’s marketplace, an increasing share of a firm’s market value is tied to the intangibles. About 50 percent of a firm’s market value is now tied to intangibles. These intangibles are confidence in future earnings that are rooted in the firm’s ability to meet expectations, articulate a clear strategy, develop core technical competencies to deliver the strategy and build the right organizational capabilities.

When we are invited to 'the table' we now have something to talk about. ... When we focus on ding this or that new and innovative HR practice,
we can make sure that the
practice integrates with the value
we want to produce.

    HR professionals make a difference when we participate in conversations with investors and analysts and help them see that we have created capabilities like a leadership brand, a capacity for rapid change, an ability to collaborate and integrate, a talent pipeline, an ability to manage costs or an ability to provide service. These and other capabilities may be defined, measured and shared with investors to increase their confidence in future earnings. My fellow researchers and I say that there is a new ROI for HR—the return on intangibles—where HR initiatives may be likened to the market value of a firm. When Boeing brought in Jim McNerney as CEO from 3M (and formerly GE), the stock price went up. Investors showed increased confidence in future earnings because of the leadership he brought with him

Value for Communities
    Communities provide a broad societal view of a firm’s reputation. In a world where there is increasing concern about social responsibility and sustainability, HR can help an organization create and manage its reputation.

    By focusing on reputation and the firm’s brand, HR professionals shape an organization’s internal culture and align it with external expectations. HR professionals may ask senior leaders, "What do we want to be known for by those who use our services?" In this conversation, we ensure that the public reputation matches societal expectations. This reputation results in current employees being more likely to stay with the firm. It means future employees are drawn to the firm. And other stakeholders are more inclined to sustain relationships with the firm.

    HR makes a difference by being an advocate of corporate social responsibility and reputation. GrupoNueva in Santiago, Chile, has a public and strong commitment to sustainability as part of its business philosophy. Leo Schlesinger, GrupoNueva’s head of HR, is an avid spokesman for making sure the organization remains a good corporate citizen.

Closing in on the goal
    Are we there yet? No. The HR profession has a long way to go to fully arrive at the impact we desire. But by being clear about how we make a difference to key stakeholders, we can begin to recognize not only where we are going, but what it will take to get us there. The implications of focusing on how we make a difference to key stakeholders are telling.

    When we are invited to "the table" we now have something to talk about. We can talk about how to build employee, line manager, customer, investor and community value through internal HR practices. When we focus on doing this or that new and innovative HR practice, we can make sure that the practice integrates with the value we want to produce. We can begin to change our HR conversations from what we merely do to what we deliver and the value we create. HR makes a difference not because we in HR declare it or even because we demand it, but because our stakeholders need what we know and find value when we turn our knowledge into results that matter to them.

Workforce Management, June 25, 2007, p. 51-54 -- Subscribe Now!