Value-based HR management

Value-based HR management - Seven Steps

                                      
The pressure on Human Resources to become strategic is not new. In 1997, David Ulrich initiated the debate by labeling HR "ineffective, incompetent, costly and value-sapping." With this statement he challenged HR professionals to create value and move beyond administration to business partnership. So how close has HR come to achieving this?

Defining what "value" means in HR terms is the clincher. Outsourcing solutions, Web-enabled processes and shared services have almost eliminated the need for HR as a purely administrative function. Today, HR can only truly add value if it helps the organization develop capabilities to compete and win business. This includes attracting and retaining talent, acting with speed and agility, instilling learning, crafting a shared identity, facilitating innovation, investing in the future of leadership, and providing strategic clarity to the entire organization.

The meaning of value itself has changed dramatically since the events of September 11, 2001. The economic downturn and fragile international relations have meant that cultural issues and change now take center stage for HR. Speaking at The London Business Forum in 2001, Gary Hamel said: "We now face relentless margin pressure; ever more powerful customers; diminishing returns on yesterday's sure-fire strategies; anemic growth; and enormous pressure to innovate." A daunting set of issues, to be sure.

How can Human Resources make a difference?

If the successful execution of business strategy is the ultimate goal of strategic HR then, like other functions in the organization, HR should be "market-driven." The extent of HR's influence is immense and the function needs to create a link between internal operations and external performance. On matters of business strategy, HR needs to take a fully-aligned and integrated approach. Steve Harvey, Director of People, Profit and Loyalty at Microsoft, made the journey from tactics to strategy by first taking a consultative approach to HR. Harvey says that the key to being strategic is to "worry about the same business issues that keep the CEO awake at night." He notes that with increased connectivity and device proliferation, HR cannot hide behind administrative "HR handcuffs" and must make the connection between employee loyalty and customer loyalty. He believes that if you create an environment where people can do their best work, then they will turnaround the company's performance.

Understanding the connection between HR and the business is imperative. Using Ulrich's set of capabilities as a framework, here are seven critical steps to help HR practitioners re-evaluate their work and provide value-based HR management: 1. attract and retain talent

2. Master technology

3. Foster a learning environment

4 4. Define employer brand

5. Drive innovation

6. Develop leadership

7. Communicate strategy

Step 1. Attract and retain talent

At a time of de-layering and downsizing, businesses are battling to secure a precious commodity that's in short supply – talent. Attracting the right people, convincing them to join and retaining their services in the long-term is now a business imperative for HR. meaningful competency frameworks help to define the appropriate recruitment attributes of talented managers. Competencies, capabilities or critical factors – whatever term is used to describe the organization's success criteria – are often produced for development purpose s, as standards that people can use to benchmark themselves. Organizations must identify these critical success factors – either through competency definitions or focus groups.

More than money----It's still true that the typical incentives laid out to lure recruits are salary and fringe benefits. Yet, studies by Roffey Park indicate that these enticements are losing their appeal. Career advancement has been replaced by work/life balance. Talented managers are no longer prepared to sacrifice their home life for work. So what does attract talent? In part, it's about creating the right work environment, with flexible work policies and the promise of personal development. If an organization puts money into individual development, it sends a very powerful message to potential recruits.

Of course, once they have joined the company people will only carry on doing the right things if you reward them in the right way. While providing the kind of support that people need to manage their lives requires investment, the results can be extraordinary. Financial services organization HSBC set up a "LifeWorks" center to provide advice on family issues such as education, healthcare, holidays and childcare. It proved so effective that the number of women returning after maternity leave has increased from 30% to 85%. Some results can have a more direct impact on your bottom line, as Xerox found when it gained improvements in productivity of up to 30% in areas where it conducted work/life experiments.

By linking recruitment, motivation and development initiatives into an overall strategic plan, HR can ensure that the organization has the right people with the right skills to take the business forward. In the process, they can help to lock in key talent by sending a message that they are valued and seen as an integral part of the organization's future and success.

Step 2. Mastering technology

To provide value, HR cannot afford to be cumbersome. In order to be responsive to business needs it must transform itself with the discerning use of technology. The Society for Human Resource Management's white paper, transforming the Human Resources Organization through Technology, states that: "HR professionals have to meet the increasing demands of employees as well as fulfill the business imperative of providing strategic direction within an organization. To excel in this expanded role, HR professionals need to reduce the time they spend on routine tasks so that they can focus their energy and knowledge on strategic initiatives and creative solutions to business problems." Technology does indeed provide great opportunities to reduce time and cost for HR, but many practitioners caution against the increasing tendency to "jump on the technology bandwagon" or fall for vendor hype. E-HR and enterprise resource planning tools may seem like a magic bullet, but they rarely live up to expectations.

Intranets are a tool that can enable HR practitioners to deliver on the promise of speed and agility. According to Melcrum Research's 2001 study, Managing and developing intranets for business value, many global organizations are now significantly investing in the redevelopment of intranet systems to meet business objectives. Companies are looking to tie the intranet into specific business procedures and processes. The following planning or redevelopment efforts for the intranet require HR involvement:

·         Establishing facilities to migrate workflow online.

·         Streamlining current process through e-enablement (reporting lines, HR facilities, two-way communication processes).

·         Improving the business through adoption of new working processes (customer relationship management, e-procurement, enterprise resource planning, e-learning, and knowledge management).

·         Altering the way the business works (new products, new team structures) through the intranet.

·         Attempting to create tools that can be used by all employees across an organization through an intranet (e.g. address books, directories).

·         Development of information-exchange forums and discussion groups.

Working with the intranet provides HR with the opportunity to collaborate with other parts of the business. The study found that most intranet steering committees (51.7%) have a representative from Human Resources sitting alongside members from IT, corporate communication, information services and corporate affairs. Typically, steering committees and intranet councils take responsibility for intranet development at a strategic level.

If HR processes and procedures are streamlined by the intranet and employee’s needs are met online, then this provides a visible demonstration to the whole organization that HR can move quickly and respond to business issues.

Step 3. Foster a learning environment

Learning has made a big comeback. It's the "e" that has made it hip again. But what can e-learning do that traditional training and distance learning has so far failed to achieve? Well, increasing numbers of HR practitioners will testify that it has helped to facilitate radical business transformation. E-learning has brought with it a shift in power – away from the control of instructors, to that of the learners. Learning now has to happen at the convenience of the employee – and if workers need new skills to do a job, they need to be able to get those skills today. The HR professional's role is to create rich, multi-dimensional learning environments in which employees can find the right resources – the rest is up to the individual.

A good example of this kind of "learning empowerment" can be found at logistics company Unipart, which has gained substantial benefit from "blended learning" that allows employees to solve their own problems, access best practice and share new ideas through facilities located on the factory floor. Promoting the intranet as a "Web of learning" has enabled Unipart to use its system as connecting tissue between its three major learning initiatives (the corporate university, Faculty on the Floor and Quality Circles).

Measures of Unipart's success include reductions in time spent away from the workplace, as individuals' learning moves from a "day-at-a-conference" model to 15-minute, "learn-at-your-desk" Modules delivered through the virtual university. Since employees can access learning on demand, it reduces the time training programs take. (See sidebar, for more on Unipart.)

At The St. Paul Companies, the insurance provider focuses heavily on learning and collaboration on the assumption that increased learning enables greater productivity. David Owens, chief knowledge officer and vice president of learning and development, states: "It's not just knowledge that's important – it's knowledge in time. Assimilating knowledge quickly is imperative, we have to get better at transferring best practices and lessons learned."
Accelerating the time it takes to learn new skills is important in every industry sector, and this is a key area where HR can make a demonstrable impact on productivity.

Step 4. Define the employer brand

Making the link between employee satisfaction and customer satisfaction has always been hard to prove. Sears Roebuck & Co. has made efforts to demonstrate the connection in real terms, but to most it remains an assumption. But assuming that by delivering employee satisfaction, an organization will pass it on to its customers, then it will be imperative that employees buy-in to a shared identity. It's not enough for them to be able to recount your brand values from a handout they received with their latest corporate video or conference, they need to truly experience brand values.

The rise in popularity of the concept of employer branding suggests that many people are realizing the importance of aligning HR practices with their brands. It encompasses recruitment, induction, coaching, feedback, measurement and team building. Managing this area successfully means finding and keeping employees whose values complement the brand, in addition to having the basic skills, experience and motivation to do the job.

HR practitioners also need to understand what's attractive about their organization and convey these things to recruits. Development is particularly attractive given the increasingly interim nature of employment. Following the collapse of the psychological contract – where employees felt they had a job for life – there's now a readiness among managers to pursue development that will enhance their future, wherever it lies.

Subtle changes in HR process contribute to successful employer branding. For example, British Airways now recruits through its Web site. As Tina Oakley, Head of Recruitment, explains: "This strategy says more about the employer's brand than an advertisement in the The Times could ever do."

Step 5. Drive innovation

In order for HR to make a difference to innovation it needs to be seen as contributing to the strategic direction of the business, as Cynthia A. Metzler, partner at law firm Pepper, Hamilton & Scheetz LLP, points out: "Many HR professionals have become successful by ensuring that proper policies and procedures exist and by advising managers on what they can and cannot do. HR is often perceived as being in the way of progress, kept out of business decisions and expected to respond to day-to-day crises. Viewing HR as a barrier, some companies are eliminating the function altogether, moving all "people' tasks to managers."

To facilitate innovation and make a mark on business performance, HR needs to connect internal working practices with external deliverables – keeping the customer in mind at all times. It's true to say that every company aims to do work with customers in mind, but under scrutiny, the internal pressures of the company (policies, procedures, turf wars, etc) often mitigate against good intentions. To avoid this cycle and foster innovation, HR strategists need to help people make this connection by:

• Assessing functions and processes for redundancy elimination.
• Focusing people on system and process as drivers of behavior (reward systems, recognition systems, communication processes, approval processes, Web access, and training access.)
• Connecting people with people of similar or complementary interests; fostering networks.
• Connecting basic concepts of corporate direction, talent acquisition, employee engagement, diversity, and information sharing, innovation and business outcomes.

Step 6. Develop leadership

Ulrich states that "Leaders embody the brand of the company in their behavior and results. Building leadership means making sure leaders at all levels have the right attributes and create the right outcomes." It is HR that must identify and coach those leaders in order to ensure the future successes of the company. Leaders in turn will define the organization's approach to human resource issues and set the tone for HR strategy.

Jim Shaffer, in his book, The Leadership Solution, offers this insight into top leaders taking the reins of "people" initiatives: "An organization can claim to believe in the value of people, but unless it’s CEO, the chairman, owner, or ultimate leader is passionate about linking people and what they do to business goals and strategy, the dots won't connect. The top dog can't will it or fob it off on a function or individual. The ultimate leader has got to passionately drive the effort. Otherwise, the effort isn’t sustainable over the long-term." Jack Welch, GE's legendary CEO, is famous for his passionate adoption of business improvement causes. While some of his initiatives have been perceived as harsh (once branding him "Neutron Jack") he has taken care to articulate the business reasons for decisions and encourage the buy-in of GE's staff.

HR must identify the leaders of the future and provide them with the tools they need to communicate business strategy and gain support from stakeholders. See sidebar, left for communication priorities.

Step 7. Communicate strategy

Human Resources must ensure that the whole organization knows where it's heading and how it will get there. To do this it needs to be close to leaders and involved in strategy-setting. HR can then create a picture of how the organization's capabilities will be integrated into a cohesive whole. Providing the organization with strategic clarity will help to guide investment in the required human, structural and technological resources and highlight the skills and the cultural change necessary to support business success. The realization of corporate goals must always be the aim of a HR strategy, and it's therefore wise to ensure that investments in HR are consistent with the pattern of decisions made for the corporate strategy.

Conclusion

It’s an exciting time to be an HR practitioner. In a time when people are proving to be the key differentiator in business, HR's influence over corporate strategy is more important than ever. Rising to the challenge will undoubtedly be difficult, and practitioners must go beyond professional accreditation and develop core competencies that reflect their particular business needs.

HR can no longer wait for the executive status to be delivered to them, it is not a rite of passage. Only by taking a proactive consultative approach and communicating HR results instead of activities, will HR prove its accountability for strategic wins. The age of excess in HR is over. It used to be that the more people you hired, the more HR professionals you would need. That's no longer the case. What is important now is delivering more for less – more efficiently and more cost-effectively.

Refrences:

Value-based Human Resource Strategy, Developing your consultancy role, 2003, Pages 367-368

Seven steps to value-based HR management, Rowan Wilson