It’s hard to see the point of HR when business is bad, Peter Cappelli writes for Harvard Business Review. We tend to appreciate what HR does only when business is booming, labour is scarce and retention rates are poor. During economic downturns, HR comes across as a nuisance and a nag.
HR departments make us do what we don’t want to do – like appropriately documenting staff issues, and stop us doing what we do want to do – like hiring and firing who we want, when we want.
HR’s fiercest critics complain that “HR managers focus too much on ‘administrivia’ and lack vision and strategic insight.” But things needn’t be this way. It’s time for HR to reinvent itself.
WHAT HAS CHANGED?
“Why should I train people when my competitors are willing to do it for me,” one CEO told Cappelli. Talent management is no longer at the top of every agenda. Today’s companies spend less time developing and promoting internal personnel and more on hiring pre-trained talent from the outside. Only a third of current hires are internal and one in four CEOs are recruited externally.
HR has lost control of many of its traditional responsibilities – like hiring, development and compensation, tasks that middle managers now routinely perform. “HR is now in the position of trying to get those beleaguered managers to follow procedures and practices without having any direct power over them”.
WHAT SHOULD HR DO?
If they are to reclaim their relevance HR departments need to:
1) Learn to make a strong business case. Too many HR departments don’t bother calculating return on investment (ROI) for any of their practices. “That just feeds into business leaders’ view of HR as a cost center where the goal is always to cut, cut, cut.”
Stop claiming you’re ill-equipped to estimate financial returns and start quantifying costs and benefits in order to turn “talent decisions into business decisions”.
If the exact ROI of your initiatives can’t be measured, then look at where you can make logical connections between HR initiatives and business goals: “Focus on what can be measured along that path, and extrapolate where you can’t measure precisely. That’s exactly what every other management discipline does,” John Boudreau and Steven Rice write, also for Harvard Business Review.
2) Start innovating again. Consulting and tech firms demonstrate the ‘new HR’. These industries rely on talent management and development for their success; they are “on the front lines of HR innovation”.
“Creative HR thinking” is helping Comcast retain and develop IT talent in its native Philadelphia – building a tech startup community and targeting local graduates for jobs.
HR was a great innovator in its heyday – introducing “revolutionary” practices such as coaching, succession plans and 360-degree feedback. But too many HR departments are still focusing on issues that don’t matter anymore: “For example, even though elaborate succession plans are rarely used, companies keep creating them.”
PwC and high-tech firm Juniper Networks have scrapped performance appraisals in favour of informal “ongoing conversations”, and Deloitte has replaced its former promotion ladder with a more flexible career-advancement framework. HR must implement only those practices that are right for organisations right now. Which parts of the old HR playbook could you ditch?
3) Control the analytics. Now is the time for HR departments to own and control their own analytics. If your HR department doesn’t have the capacity to do this, then recruit the talent you need or start collaborating across silos to handle the analysis. Otherwise “the answers to fundamental HR questions will come from elsewhere in the business, and HR might as well pack it in.”
Tech giants Microsoft, Google and IBM have already brought analytics into HR, mining their extensive employee data to create the most effective teams and hire recruits with the best potential.
4) Paint the bigger picture. HR plays the long-term game. Initiatives like talent development and improving corporate culture take time and are the first projects to be dropped when there are savings to be made.
Today’s business strategy is a “moving target”, a succession of projects and initiatives that respond to immediate business pressures.
HR can reconcile its long game with those immediate pressures if it stands back and considers the aggregate effect of short-term initiatives – providing “analytic counsel” to organisations.
That’s what Juniper Networks did when the HR team held one-to-one conversations with each of the company’s 150 senior leaders and 100 global managers, Boudreau and Rice write. They uncovered some uncomfortable truths: “Juniper had too many silos and too many priorities. It was top-heavy and conflict avoidant.” But the initiative painted the bigger picture and led to a more streamlined operating model and a common strategy.
People, not innovations make or break an organisation: “So the time is ripe for reimagining human capital much more broadly. Business leaders will see that – if HR makes a compelling, evidence-based case for what matters, and jettisons what doesn’t.”