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Think Competitively

November 16, 2006
Having the competitive advantage is now essential to the survival of any business function, especially human resources. In the past, it was possible for HR to focus 100 percent on internal issues, never demonstrating superior performance when compared with talent competitors.

    This internal perspective is no longer acceptable. The business world has changed dramatically, and global competition for talent has been ratcheted up several levels. Now more than ever before, the HR function and its activities affect the success or failure of the business.

    This increase in competitiveness has eliminated the tolerance senior leaders once had for any product, service or function that didn’t directly increase the firm’s competitive position in the marketplace. Building and proving a competitive advantage is now a requirement for every function, including HR. Human resource leaders must comply or face elimination through outsourcing or loss of their scope and authority to other functional leaders, such as those in operations and information technology.

    Unfortunately, HR has a long history of operating as if it were not in a competitive environment. All too often, HR people favor cooperation and consensus to direct competition. Contributing to this lack of competitiveness have been the facts that most people in HR have no P&L experience and that there are no universally accepted HR benchmark metrics to facilitate external comparison. HR professionals are about as keen to compete with other businesses as are the characters on Sesame Street.

    As proof, I offer the minuscule percentage of HR departments that conduct periodic competitive analyses that assess and report to senior management the performance and standing of HR on a deliverable-by-deliverable basis compared with major product and talent competitors.

    If you agree that HR must demonstrate a competitive advantage, here’s what you can do:

4First, conduct a function-by-function competitive analysis between your firm’s HR program offerings and those of your closest competitors, using benchmark research and interviews with individuals who have worked at those firms.

4Next, require that any presentation of HR performance metrics be accompanied by approximated data from select product and talent competitors. Use these comparisons to institute a "bad manager" identification program. Weak managers are the prime cause of weak recruiting, low employee productivity and high turnover.

4Also, leverage the comparisons to determine which of the HR functions need to be superior and which ones merely need to be "just as good" as prime competitors. The best approach is to go to top-performing managers in business units with high margins and high revenue growth and have them tell you which HR functions need to be superior to help them succeed. Generally, managers expect HR to excel in:

4Recruiting: Managers expect HR to build a strong recruiting function that manages the employment brand so that your organization leads a top performer’s "I want to work there" list. Managers expect HR to accurately source and procure rising talent. To find such talent, you need to improve the employer referral program, making every employee a recruiter. Work with hiring managers to improve their selling skills and help them tailor their jobs to make them more challenging and exciting.

4Retention: HR must help managers identify top performers who are at risk of leaving and develop a retention plan to motivate, develop and challenge each of them.

4Give away/take away: HR must become aggressive in recruiting and retention so that you give away less of your top talent to key competitors than you take away from them.

4Pay for performance: HR should increase the percentage of every worker’s pay that is "at risk," or based on their output. Pay for performance, more than increasing base pay, increases performance and attracts top talent.

4Development: Offer on-the-job development opportunities, so that your firm trains employees quickly with practical skills as opposed to theoretical skills. No one will leave citing lack of challenge and growth. Your ability to promote and move people laterally will increase.

    Other actions to consider include developing an alert system to warn managers of upcoming people management problems, as well as a SWAT-style rapid-response team that can head them off. Following such an intervention by human resources, conduct an HR "postmortem" to identify a situation’s causes. Then, circulate the best practices you’ve identified throughout the firm.

Workforce Management, November 20, 2006, p. 50 -- Subscribe Now!