HPS Leadership Best Practices Journal™

Human Resources at the Crossroads

Human Performance Strategies' work with CEOs, presidents, and other key company leaders is foremost a process of discovery. It involves a process of assessing organizational effectiveness by examining the strengths, threats and opportunities faced by the company as a whole.

However, it also includes a comprehensive and candid assessment of the effectiveness of each functional area of the company, such as operations, finance, customer service, marketing, sales, and human resources.

With respect to the human resources function, we hear a remarkably similar set of concerns from senior leaders, regardless of industry or of company size. These concerns tend to fall into four distinct categories:

1. The HR organization does not understand "the business of the business" (i.e., "what we do here").
2. The HR organization does not understand or know how to use financial statements.
3. The HR organization is more concerned about processes than with business results.
4. The HR organization does not set objectives or quantify its results using standard business metrics (unlike every other business/resource unit in the company).

In a recent workshop with senior human resources professionals from throughout Texas, we presented these executive-level concerns about HR's role and its effectiveness. We also shared our insights about the sources of these concerns, the future of the human resources profession in light of these concerns, and strategies that HR can employ in order to become an integral partner, advisor, and consultant to the business.

Human resources is at a critical crossroads. If, in the last five years, we did not use our strategic binoculars to see the crossroads ahead, it is surely upon us now. One path leads toward the complete outsourcing of all traditional human resources functions and the dissolution of the human resources "department." For those who doubt that this is feasible or believe it is too outrageous an undertaking, let us pause for a moment to remind ourselves that most organizations began some years ago to outsource one or more of the traditional HR functions, including benefits administration, recruiting/hiring, employment, etc. However unlikely complete outsourcing may seem at first, it is a very real and viable option for companies, CEOs, shareholders, and boards of directors whose first priority is to hold the line on or reduce fixed operational costs, eliminate redundancies, and purge the company of any and all functions that do not add some tangible (read "dollars") value to the business.

The "less traveled" path, on the other hand, leads human resources in the direction of complete immersion and involvement in all of the major operational, financial, sales, and product/service decisions of the company. It places human resources for the first time on a genuine peer level with the other functions of the business and requires HR's input into the company's mission, strategic plans, tactical plans, and objectives.

While the latter path is decidedly preferable for most HR professionals, the future of human resources is not merely a matter of choosing one path or the other. To take the less-traveled path, HR must first accomplish and demonstrate its mastery of the following:

• Recognize that its function in the organization is the same as that of every other function (finance, sales, marketing, etc.). That function is to assist the company in reaching its business and financial objectives. Period. Only the means by which each function achieves those objectives differ.
• Learn and understand "the business of the business." This includes becoming fluent in:
  • what the organization produces or provides;
  • how the organization produces/provides its products/services;
  • for whom the organization's goods or services are produced;
  • how the organization's success is measured and how it measures up to its competitors; and
  • what the organization's value proposition is.
• Learn and understand financial statements. HR professionals must understand the company's financial reports, sales reports, and other relevant operations reports. More importantly, HR professionals must know how to use them as business tools.
• Establish short-term and long-term business objectives for the HR organization, using quantifiable, value-added metrics, then regularly measure and report HR's results against those objectives.

Human resources has long appealed for recognition, respect, and a seat at the leadership table. Senior executives have perennially responded by asking, "Why should we?" and "What value would that add?" It is the unspoken—yet enduring—standoff between human resources and company executives.

In considering this conflict, I am always reminded of the words of the late John F. Kennedy, Jr., who remarked on the unique duality of his role as heir to a financial, historical, and political legacy by saying, "To whom much privilege is given, much responsibility is required."

Serving as a vital member of the leadership team of any organization requires human resources to earn that privilege, and to continue earning it by making tangible contributions to the business every single day. It is this prerequisite that stands at the crossroads with HR, ultimately determining whether HR meets its complete demise or its achievement as a full business partner.