Questions For CEOs:
Why does HR exist in my organization?
How does HR contribute to business success and/or risk mitigation?
Where does the CHRO fit in my organization?
How much do I spend on HR each year?
What are my expectations in terms of a return on this investment?
What are the measures I use to determine success or failure?
What would be the impact to business success and/or risk mitigation if HR wasn’t there?
What are the skills, knowledge, character, and experience I need from my CHRO?
How is HR perceived within the organization? e.g. Viewed as an enabler and contributor to business success, or other?
Some observations follow:
1. HR is likely mis-named at this juncture. What started as “Personnel” got re-named to “Human Resources” to reflect an increase in non-transaction focused activities on the part of the department. Thus, HR took on more of a leadership role in terms of talent attraction/utilization/retention strategy; total rewards & pay for performance design; organizational design; employee development; and workforce planning, amongst other initiatives with more of a longer-term strategic focus. This, while still handling compensation and benefits administration, hris, payroll, and training.
Going forward, HR has a much bigger role to play though. Perhaps “Organizational Effectiveness” is a better name for what the function will be about. For the focus is undoubtedly on Organizational Effectiveness going forward.
Examples include: Ramping up productivity in the face of greater demands on time; fewer resources to get the job done; and shorter work completion timelines. Enhancing cost-effective efficiencies through utilization of a greater percentage of the available workforce (e.g retirees who have different wage/benefits expectations than other workforce talent). Harnessing technology to improve effective communication and information sharing (through social networking Web 2.0 applications such as facebook; linkedin; and Twitter). Revisiting organizational design in terms of the structure and inter-dependencies between Board and Management, and Management throughout the organization, as well as between employees from different companies in the industry and/or broader market.
2. Where the CHRO reports in the organization remains key. Like the CFO who has accountability for physical capital (including financial), the CHRO has accountability for human capital and must report into the CEO. Where this is not the case (and the CHRO reports into a COO or CFO), the immediate observation is that you’ve just demonstrated organizationally that despite your perhaps stating that people are your most important asset, a stapler has more importance than do your people, since the one responsible for physical capital trumps the one for human capital.
Note: This is not to say that the CHRO automatically gets a seat at the table with the CEO. Like all other functional heads, he/she must be adding sufficient value and be minimizing risks of significant importance to the organization.
3. CEOs cannot abdicate leadership accountability. One of the more telling aspects of the CHRO comments at the off-site was that the HR issues identified by the CEOs in the study, were only issues where there was a lack of leadership on the part of the CEOs themselves. Where CEOs were visible to employees; walked the talk; communicated the vision, mission, and strategic goals of the organization openly; and shared progress of the organization and took honest and open feedback from employees, the issues were either non-issues, or well under control.
Too, the CEO and CHRO need to be joined at the hip, since these are the only two functional roles that are responsible to and for all employees of an organization. All other functional heads rightly focus on their functional employees. The CHRO cannot nurture and strengthen the cultural DNA of the organization, if the CEO is not, through his/her decisions, actions, and communications, reinforcing this day in and day out.
4. Not all organizations need a heavy investment in HR. In fact, the better the management team and its understanding and execution of people-related responsibilities from beginning to end of the Human Resources Employment Lifecycle, the less there is that needs to be invested in a distinct HR function. Many of the functions then traditionally handled by HR, such as On-Campus recruiting; Performance Management, Workforce Planning, and Pay For Performance can then be led by the organization’s employees themselves.
5. Conversely, the investment in HR should not be based on a percentage of Opex or a percentage of SG&A expenses; rather the investment should relate to the return to be realized that is aligned to the short and long term goals of the organization. Where there’s a bigger payback in the form of reduced talent attraction costs (e.g. through reduced regretted turnover; reduced severance; reduced hiring; reduced lost productivity due to loss of corporate memory), investment in HR that yields this return merits consideration.
6. It seems that in many instances, HR has not done a good job of credentializing itself. As a result, matters such as “whistle blower”, “harassment”, “employment-related risk mitigation”, and “stakeholder communications” have migrated to other places. HR has a huge role to play in contributing to business success and in minimizing people-related risks to business success (and all risks start with people).
While true, there is no one size fits all HR template. Each CEO needs to have a serious conversation with his/her CHRO about what the organization truly needs from its CHRO to contribute to organizational success long-term.
Only then will CEOs and organizations get closer to realizing the full value of Human Resources