HR PROFESSIONALS NEED TO TRANSLATE BUSINESS PLANS INTO ACTION

Transcription

1 HR PROFESSIONALS NEED TO TRANSLATE BUSINESS PLANS INTO ACTION Interview with Dave Ulrich, professor at the University of Michigan by ERNESTO USCHER, JOSÉ MANUEL ALCARAZ, JOSÉ RAMÓN PIN Interview with Dave Ulrich, professor at the University of Michigan

2 HR PROFESSIONALS NEED TO TRANSLATE BUSINESS PLANS INTO ACTION Dave Ulrich, one of the world s leading authorities on creating value through human resources, visited IESE on October 17 and 18. His latest book The HR Value Proposition was recently translated into Spanish and argues that the different areas of human resources can make significant progress if they boost the value of all of the organization s stakeholders. During the interview, conducted by IESE professor José Ramón Pin and RBL Spain consultants José Manuel Alcaraz and Ernesto Ulscher, the renowned University of Michigan professor proposed some formulas for getting stakeholders to participate. For instance, why not invite key customers to HR team meetings? If that seems like a bold move wait, there s more. NOTE: An expanded version of the interview was published in the magazine Capital Humano. Q.- You suggest that we should focus first on outside-in contexts and stakeholders, and then turn them into inside-out HR practices. Please explain. A.- Often, we look at HR practices (staffing, training and compensation) as things that affect employees inside the company. While this is true, it is not complete. We should also see these practices as investments that help the company connect with those outside. For example, being the employer of choice is good, but not enough. We want to be the employer of choice of employees our customers would choose. By adding the customer tag line, we focus on the ultimate user of HR services, which is the customer. Q.- To what extent do HR departments have enough business knowledge to support their corporate objectives? What are some tips for reducing the gap? A.- We like to think of the world as : 20 percent of HR departments and professionals have the business knowledge; 20 percent don t and probably won t; and 60 percent can attain it with development and training. HR professionals can gain business knowledge by studying (reading and taking courses in finance and business), observing (spending time with line managers and finance experts), and doing (being part of business teams). Q.- In Spain, the majority of businesses are small or midsize companies and HR departments focus more on transactional and administrative work and mainly on internal stakeholders, such as line managers and employees. Why should Spanish managers pay attention to external stakeholders, such as investors and customers? A.- The transaction work has to be done and it has to be done well. Hopefully, as technology becomes more accessible and cheaper, some of the transactional work can be done better, faster and cheaper and with fewer resources. This will free up HR professionals to spend more time on the more transformational work that the company

3 requires: that of building capabilities that execute strategies. Once we talk about adding value to the business, we have to consider the customers and investors who ultimately decide if a business will succeed or not. Q.- What could be a small wins approach for HR to start creating value for investors? A. First, identify your target customers. Find out who the 20 percent of the customers are who represent 80 percent of the value. Invite them to participate in your HR work. Here s how: 1. Invite them to be on committees (almost any task force could have a customer join it). 2. Invite them to participate in 360 reviews (we now call these 720 since they go outside the company). 3. Invite them to train as participants, presenters or designers. 4. Invite them to review staffing processes which might include setting criteria for candidates or even interviewing candidates. Q.- To what extent are we still focused more on activities than on outcomes, on doables instead of deliverables, and how should we start inverting this? A. - It is often easier to measure and track what we do (e.g., I worked 7.5 hours today) than to measure what we accomplished (e.g., I sold 3 units). And in HR, where the outcomes are more difficult to quantify, it is easier to focus on activities. We need to stop and ask Why am I doing this (training, policy, communication, etc.)? to see what the outcome of our work can and should be. We start the shift to outcomes by mentally thinking about them and by practically measuring and tracking them. Q.- Huselid, Becker & Ulrich showed that a 5 percent increase in employee commitment leads to a 1.8 percent increase in customer commitment and a 0.5 percent increase in financial results. What do we need to continue showing this type of relationship between HR and financial results? A.- This work was quoted in the Huselid, Becker and Ulrich book but comes from Sears. And yes, it is an excellent example of how what goes on inside a company affects what happens outside. It shows a value chain from people to financial results that helps justify investments in people. The work is continuing in many good companies. Q.- What should the relationship be between creating a clear corporate culture through things like branding and corporate social responsibility and HR practices? A.- We like to think of a company s culture as its identity in the mind of key customers, or its firm brand. This shifts the focus on culture a bit away from what we value to what the customer values and helps show the economic gains of culture. HR practices are the activities that shape and create this culture or mindset. We want employees to be directed to think and act as if they are a customer which builds an internal mindset consistent with the customer expectations.

4 Q. - Given the mid-sized companies and transaction-focused HR of Spain, what could be a road map to start implementing HR practices that add value? A.- Start by creating a contract with your business leader. What are the things that are important to him or her? Find out how HR work can deliver value to him. If he is interested in growing the business by gaining more revenue from targeted customers, show how HR can connect with those customers to gain revenue. If he is interested in cost, show how HR work can help drive efficiency in the business. Begin with a conversation with the business leader on what HR can and should do to help him meet his goals. Q.- To what extent can an HR department really work as a business unit? Where would you tell them to start? A.- Start with a strategy. What are the deliverables, outcomes, or results we in HR will deliver? Be clear about the outcomes of good HR work and make sure that these outcomes are consistent with business goals. Then, align HR work inside HR with the HR strategy that will deliver the business strategy. Q.- Where would you recommend starting when turning business realities into HR priorities? A.- The same as above. Start with clarity about the business priorities, then ask What are the organizational implications of these priorities? These organizational implications should focus on building the organizational capabilities that will make strategy happen over time. Q. - How should an HR department act in a crisis situation when the main priority is to reduce costs? A.- Work to reduce the costs. If cost pressures are rampant and critical, don t run from them, help find ways to reduce the costs. This might include headcount, but be more creative in looking at different ways to organize and do work, at compensation systems and redundancies, and at ways of growing revenue to cover existing costs. Q.- In the 90s you defined four HR roles: strategic partner, change agent, employee advocate and functional expert. Now, in 2006, are these roles the same? A. - We have modified the role of employee advocate by making it two roles. On the one hand, HR worries about employee s day-to-day issues, which we call employee advocacy. On the other hand, HR worries about preparing today s employees for tomorrow s business demands, which we call human capital development. HR must care for employees today and prepare employees for tomorrow. The administrative expert has morphed to functional expert because he or she is not just doing administrative things faster, but is applying deep, functional expertise to best practices. Strategic partner and change agent have merged into one role in order to make business happen. And we have added an HR leader at all levels of the organization to deliver appropriate results in the right way.

5 Q. - To what extent do employees perceive the HR department as an authentic speaker to the business leaders, in the way of a union? A.- Unions were organized to deal with terms and conditions of work. Today the employee contract with the firm is much more complex and deals not only with working conditions, but also with culture, competencies and commitment. Forward thinking unions work with companies as allies not as enemies to provide a competent and committed workforce. By working together, unions and management assure the success of both employees and the firm. Q.- Concerning the most critical HR competences, what are the main gaps you find in HR professionals? A.- Many HR professionals need to learn how to contribute strategically to the business, to read a business plan and translate it into HR actions. Some HR professionals lack the finance and business knowledge, others lack personal confidence, and others lack a deep understanding of HR. Q. - To what extent should HR departments work more closely and in collaboration with the rest of the departments? A.- Customers who look inside a firm often don t say, that was by manufacturing, that by sales, that by R&D, that by marketing. They look and see the whole. Likewise, HR professionals need to work seamlessly with other functions to deliver real value. Q.- What are the most important challenges ahead for our profession? A.- 1. Recognizing the value we create for employees, line managers, customers and investors. 2. Defining HR practices that will deliver this value and measuring the impact. 3. Organizing our HR resources to achieve that value. 4. Preparing HR professionals for future challenges, not trying to escape the past.