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HR is not about HR: Eight ways HR can create more value for the business

Here’s a simple question. On a score of 0-10, how much value do you create? And how can you create more? Here are eight tips on how you can create more value for your business

HR as value creator
HR is not about HR. This is the first sentence of our latest book Victory Through Organization, and it captures in 12 words the focus of our last 20 years of work since Human Resource Champions was published in 1997.

In those 20 years, we have surveyed, observed, coached, facilitated, and consulted with 10s of thousands of HR professionals and thousands of organisations to discover how HR can deliver business success by creating more value. We have helped coin and define many terms that shape HR’s impact: business partner, organisation capability, HR transformation, strategic HR, HR strategy, HR governance (three-pillar model), HR deliverables, HR outside-in, leadership capital index, employee contribution, HR competencies, and so forth.

We continue to focus on business impact through value creation, and we seek to learn how to deliver business success through HR. Recently I had the privilege of speaking to the HR Congress, a gathering of over 600 HR professionals. I was challenged by Mihaly Nagy, the organiser, to deliver a closing keynote that would capture the themes of dozens of remarkable speakers and (hopefully) inspire attendees to reimagine their careers.

So, I organised my remarks around a simple question: “On a score of 0 to 10, how much value do I create?” This open-ended, intentionally vague question focused on the value of HR for the business more than the activities of HR. Then I asked: “How can I create more?” With a show of hands, the answer to the first question ranged from three to seven. The answers to the second question varied by person; in addition, I offered eight tips for how I believe HR professionals can create more value for the business.

1. Recognise that value is defined by the receiver more than the giver

A thoughtful participant in our HR Learning Partnership (HRLP, a consortium of six to eight companies sending five participants to an 11-day experience) returned home excited to implement the ideas we taught. He called a few weeks later discouraged and said that our programme had not worked. I was very worried and wanted to know what we had done wrong, so I asked him what he did as a result of his experience with us. He had surveyed his business leaders, asking which of about 20 HR innovations they felt were most relevant to their work. But they did not answer with verve and seemed disinterested. It hit me that he had taken the wrong directive away from the consortium, and that we had not delivered our message clearly enough. Business leaders generally do not care much about which of 20 HR practices matter most; they care about the business. His survey should have been about which of 10 business priorities (eg cost, innovation, customer share, quality, revenue growth, etc) mattered most to them. His HR job was then to make HR innovations and practices relevant to these business problems. HR is not about HR but the business!

2. Serve internal and external stakeholders

I like to ask HR professionals: “Who are your customers?” Inevitably a large percentage of any HR audience will say employees or line managers. Right and wrong. When HR focuses on the business more than on HR, its customers are the stakeholders of the business; this does include employees and managers inside the company, but it also encompasses customers, investors, and communities outside. The value of HR is not just what happens inside the company but outside as well.

3. Appreciate and anticipate the business context

The world of business is changing dramatically. For HR professionals to deliver value in the future to all stakeholders, they have to be aware of the context in which they operate. This requires examining the social, technological, economic, political, environmental, and demographic (STEPED) trends that shape a country or industry. HR professionals should do external sensing to bring this contextual information inside the firm, anticipate how those changes will affect the firm, and successfully navigate them.

4. Deliver key outcomes of individual talent and organisation capability

I like to use the following analogy. I have participants hold up their left hand with five fingers. These fingers represent ‘talent’ and the people in their organisations. Next, I have them hold up their right hand with a fist. The fist represents the ‘organisation’ or systems that comprise the organisation. I then ask the question: “To deliver business results, which matters most? Hold up either the right or left hand.” Generally, about 70 percent hold up the left hand with five fingers representing talent. Wrong. We have found in our work that having the right organisation (right hand in a fist—the systems within an organisation which create capabilities) has four times the impact on business results than that of talent (left hand open with five fingers). HR professionals deliver business impact through talent (competencies of people), organisation (capabilities of the organisation), and leadership (the bridge between the two). Capabilities represent what the organisation is known for and good at doing (eg innovation, collaboration, customer anticipation, change, information sensing). These capabilities are created and sustained by the systems around people and performance.  In each and any business dialogue, HR professionals can ask how and offer to improve talent, leadership, and organisation to deliver value to all stakeholders.

5. Use digital HR

I have been around HR for many years (ahem, decades). We are a field (as are others) enamoured with shiny new objects, which might include work on high-performing teams, analytics, demographics (eg millennials), service centres, etc. Now digital HR is the topic du jour. To deliver value, HR professionals have to understand that managing in a digital age will require both efficiency and innovation through technology, but it will also require the ability to choose the right digital solutions and to source information and build connection—the emerging steps of the digital age.

6. Design the right HR department

For HR to deliver business value, the HR department needs to be organised for both efficiency and effectiveness. To be so, HR departments should match the structure of the business where they work. If the business is centralised (about 20% of large businesses), HR should be centralised (eg a common set of HR policies and practices throughout the organisation). If the business is decentralised (about 10%), HR should be decentralised. If the business is a matrix (diversified/allied, multi-divisional firm—about 70%), HR should be organised to be simultaneously efficient and effective. We have also learned that to operate in a multi-divisions firm, HR has to focus less on roles (who does what) and more on relationships (how we work together).

7. Build the right HR competencies

Over the past 30 years, we have empirically studied the competencies that HR professionals must demonstrate. We have found that HR professionals overall have made enormous progress in their competencies. But we have also discovered that it is not just about having competencies that matters but the impact of those competencies on key outcomes, including personal effectiveness, stakeholder value, and business results. Different outcomes require different competencies (eg delivering business results requires the competency of navigating paradoxes).

8. Make line managers owners

Finally, if HR is not about HR but the business, then line managers are ultimately accountable and responsible for HR work around talent, leadership, and organisation. HR’s job is to be the architect and anthropologist to facilitate, coach, design, and deliver innovative solutions to business problems.

These are eight of my ideas for how HR can focus on the business and thus add more value. Rate yourself on a scale of 1–10 how well you feel you are doing in delivering value to your business. Can my suggestions help you? What are your experiences and insights that can aid you in your efforts to improve?

 

 

 

Dave Ulrich is Rensis Likert Professor of Business, University of Michigan, partner at The RBL Group and a contributor to ThePeopleSpace

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