Connecting HR to Business Results Five Top Thinkers Weigh In Several months ago, Chequed launched the HR Thought Leader Interview Series. Since then we ve presented audio interviews on our website with experts like Paul Kearns, Dave Ulrich and Jac Fitz-Enz. So far, we ve asked several experts the same question: What are the three main trends, issues or challenges an HR executive really needs to be thinking about to position her organization for tomorrow? Several different experts, and you d expect several different answers, right? What s been remarkable though is how all the responses in one way or another have come back to a common theme: HR needs to do a better job of connecting their work to the company s business results. HR is responsible for the most important asset in the organization: the people who take up the charge and achieve the business results. HR is often seen as the payroll people, the ones who handle the hiring paperwork and employee complaints. As a corporate function, its stature and reputation are often lacking. This in spite of the fact that HR is responsible for the most important asset in the organization: the people who take up the charge and achieve the business results. This has been recognized as a problem for years, so why is it still such a big challenge to show how HR affects business growth and profitability? Taking what we ve learned from our HR thought leader interviews, we d like to pose some answers to that question.
The strategic side of our work So why does HR often seem disconnected from the larger goals of the business? Paul Kearns, Director at PWL, a strategic HR, measurement and evaluation consultancy, sees the transaction side of HR weighing down too many organizations. While we re dealing with the reactive stuff, while we re dealing with the transactional stuff, we're often taken off the ball of the strategic stuff, he says. He points to a kind of process myopia, where too much time and energy is put into the creation and fulfillment of process for review and appraisal, for talent management, and for creation of competency frameworks. Whilst all of these things hopefully bring some benefits to the organization, he says, I think it s time for senior HR execs to maybe stop looking at the process and refocus on the impact of these things, he says. HR may invest, for example, in the creation of competency frameworks, but if it doesn t look through its strategic lens and develop each element of the framework so it links to broader corporate goals, a big opportunity has been lost for HR, employees and the company. While we re dealing with the reactive stuff, while we re dealing with the transactional stuff, we're often taken off the ball of the strategic stuff. - Kearns Organizational connections Founder of the ROI Institute, Jack Phillips, believes HR hasn t established strong enough connections with or awareness of the organization. While noting tremendous strides in having the head of HR be very knowledgeable of the organization, he also points out that this same knowledge level often is not present in lower levels.
Lacking that awareness, HR can find itself out of the loop on other business units initiatives. Without that operational knowledge, it s not possible for HR to contribute to other departments creation of business value in any meaningful way. According to Phillips, we need to be so well-connected that we understand the operational issues [and ] the challenges ahead. Building bench strength This lack of connection and awareness shows up for Saratoga Institute founder Jac Fitz-Enz in succession planning processes that don t reflect today s business realities. As markets for products, services and talent become increasingly global, HR s approach to building bench strength in many cases hasn t evolved to meet the changing needs. Fitz-Enz explains, [Companies] can t just send expats out to other countries and expect to be competitive and expect to have engagement and commitment when we keep the top job for an American. Without operational knowledge, it s not possible for HR to contribute to other departments creation of business value in any meaningful way. Even for companies that don t operate in other countries, failure to consider the global aspect of the talent market can make you vulnerable. If you re a small organization, or relatively small, but big enough to worry about succession planning, you are competing with everybody else in the world, says Fitz-Enz. Another business reality succession planning models should address is the lack of continuity, according to Fitz-Enz. Continuity is simply not there, and the way we were able to build bench strength over the years prior to 1990. People came into an organization, worked there, got a series of assignments that they could grow in, and by the time they got to a senior management position, they were pretty strong. That s not true today. We have an awful lot of people in senior positions who are very thin frankly. And it s not their fault; it s the
circumstances. Fitz-Enz points to continuous change in the marketplace the introduction of technology, demographic changes, globalization, customer demands that contributes to workforce transience and creates uncertainty. And while most recognize the issue, few organizations have taken steps to reduce their vulnerability. If you look at the research, every research study that s ever been done says that well over 60% of the companies surveyed say they don t have a good succession planning program. So they know what the problem is; they just don t seem to be fixing it, says Fitz-Enz. Collecting the right data and using it more effectively Metrics are a hot topic in HR and they ve been touched on by most of our HR thought leader interviewees. Dr. Jack Phillips of the ROI Institute, points out that, Business alignment is so critical these days, on all of our projects, but the value HR contributes to the organization is hidden behind irrelevant reporting and metrics. HR execs don t have the data that says, Hey, we re investing here, and it s making a difference right here in this organization, on this particular project. The value HR contributes to the organization is hidden behind irrelevant reporting and metrics. Business outcomes are key and HR metrics need to tie more clearly and directly to those outcomes. Phillips continues: [HR] can t gain respect unless we show the value as other colleagues in the organization do. Paul Kearns sees metrics the right ones as the key to communicating HR value to the top of the organization. Every other function, every other discipline, management discipline, tends to know how to measure itself. What we need to get much better at is producing evidence not just measurement, but evidence. The only evidence that really matters to a chief exec or a CFO or whoever, is evidence of value: improvements in output, cost, revenue, quality.
Time to fill a position, for example, isn t a useful metric to a C-level executive. In his interview, professor of business at University of Michigan s Law School of Business Dave Ulrich also noted this issue around data. I think one of the biggest challenges of HR metrics is measuring what is easy and not what is right. Echoing Kearns earlier comments about too much focus on transactional activities, Ulrich points out how often HR measures transactions: how many people went to training, how satisfied they were when they were training but we don t measure the outcome of training. If instead, HR zeroes in on measuring training outcomes that support the larger goals of the business, they ll have metrics that communicate business value. Once we know what it is we re trying to measure, and we have a very clear picture of the desired outcome, we can generate the metrics. HR has to be a decision science. The question is: What is it we have analytics about? HR s sphere of power and influence In our interview with Jeff Pfeffer, Professor at the Graduate School of Business at Stanford, he discussed the impact of HR on the organization. Once we know what it is we re trying to measure, and we have a very clear picture of the desired outcome, we can generate the metrics. - Ulrich The potential of this impact is huge, but by not linking its activities more explicitly to corporate goals, HR continues to suffer diminished authority. HR needs more power and influence to actually change what organizations do with respect to managing people to produce competitive advantage, according to Pfeffer. The lack of HR power and influence is revealing itself in HR s inability to support employee satisfaction and engagement. Pfeffer refers to data from The Conference Board, Towers Wyatt and The Gallup Organization showing job satisfaction at an all-time low, with low levels of engagement and high levels of employee disengagement and active disengagement.
I look at the data that comes in including some recent surveys that show that the first thing most people are going to do when the recession ends is look for another job and you can see the condition of the workplace, particularly in America, is in pretty bad shape. Organizations without a strong HR function in place will be poorly positioned to emerge strongly from the current downturn. Employees will move on to greener pastures, and it will become increasingly difficult to get or keep the right people to best service customers and operations. The urgency is clear, but how does HR turn the tide and assert the power and influence it needs to affect the necessary changes? Stay tuned for part two, where we look at the tactics prescribed by these HR thought leaders for creating business value and communicating that value to the rest of the organization. Organizations without a strong HR function in place will be poorly positioned to emerge strongly from the current downturn. About Chequed.com References are a joke. Every company requests them, every candidate provides them, but no one checks them. Why? Because old-fashioned reference checks are phone-based, time-consuming and obsolete. Chequed.com makes reference checks relevant with an automated reference-checking solution built on assessmentbased logic. As an add-on for an even greater level in hiring accuracy, Chequed.com delivers the same assessment-based screening logic in ChequedFit, a high-volume early stage preemployment test to rapidly weed out low potential and identify high potential candidates. Chequed.com is headquartered in Saratoga Springs, NY with offices in San Diego and Boston. Further information can be found at http://www.chequed.com or 888-412-0699 or emailing info@chequed.com.