Rebuilding HR to add value
The Transformation of HR is important to CEOs who want to turn strategy into sustained results. The transformation for is important to employees who realize that their competence or ability to do their job, as well as their commitment or ability to focus their attention, derives in part from how the HR practices affect them.
While these two internal groups — line managers and employees — recognize that HR must be transformed, the realization now goes outside the firm as well. Customers who want to maintain long-term and increasingly complex relationships with a supplier recognize that the supplier’s
HR practices help ensure a steady flow of products and services. Investors who realize that intangibles determine a large part of a company’s wealth look to HR as a source of firm’s market value. For each of these stakeholders — line managers, employees, customers, and investors — the transformation of HR revolves around a simple idea: value.
To create value, an architecture for their Value Proposition (see Figure 1) is proposed for HR transformation. The logic is to move through these five elements sequentially, following the solid lines in Figure 1, but sometimes it is useful to follow the dotted lines instead. For example, you might start your transformation of HR with a competency assessment of your staff (box 5), but to ensure that this competency assessment leads to an integrated transformation, it must be connected
To the other elements of the overall blueprint. Or, you might start by investing in e-HR (box 4), then move to the other four boxes to complete the transformation. Criteria for an
Effective HR functionThe five elements in the HR Value Proposition define 14 criteria for what makes an effective HR function, and should be discussed as a way to envision the future.(This logic can also be applied to other staff groups by changing ‘HR’ to IT, Marketing, Finance, Legal, and so on.) Each of the five elements can be used to create a template for transformation of any staff function.
1. External business realities
HR actions inside a firm must reflect and influence business realities outside that firm. HR professionals should be able to cogently discuss these external realities
- The technology, regulatory and economic factors, and demographics of the global business environment — and connect them to their day-to-day work. Knowing business realities makes it possible to put Practices in context, tie them to competitive challenges, and relate them to concerns facing line managers. These contextual factors offer the rationale forth transformation.
HR professionals recognize external business realities and adapt HR practices and allocate HR resources accordingly.
2 Stakeholders Value is defined by the receivers of Work — investors, customers, line managers, and employees — more than by the givers.HR is successful if and when its stakeholders perceive value from it. Delivering what matters most to stakeholders focuses on the deliverables, or HR outcomes, rather than on the do bales, or HR activities.
- HR creates market value for investors by increasing intangibles.
- HR increases customer share by connecting with target customers.
- HR helps line managers deliver strategy by building organization capabilities.
- HR clarifies and establishes an employee value proposition and enhances individual abilities.
HR practices make them real to all stakeholders. The way you hire, train, and pay people and the way you organize works ends messages to employees about what matters most. By creating practices around people, performance management, information, and workflows, you shape an organization’s identity and personality.
These HR practices deliver value to internal and external stakeholders when they are appropriately aligned with your organization goals.
- HR manages people processes and practices in ways that add value.
- HR manages performance management processes and practices in ways that add value.
- HR manages information processes and practices in ways that add value.
- HR manages workflow design and processes in ways that add value
4 HR resources Your HR function needs a strategy and structure to ensure that HR resources are deployed where they add the most value. The strategy will help you focus attention on key factors, respond appropriately to business realities, and organize Resources in ways that govern how Work is done.
- HR aligns its organization to the strategy of the business.
- HR has a clear strategic planning process for aligning HR investments with business goals.
5 HR professionalismEach HR professional in your organization must learn to play a role and master competencies to deliver value. Roles represent what people do; competencies define how they do it. Having clear roles and distinct competencies ensures that the HR professionals deliver the value they intend.
- HR professionals play clear and appropriate roles.
- HR professionals demonstrate Competencies.
- HR invests in training and development of its professionals.
TURNING DESIRE FORTRANSFORMATION INTO ACTIONLeaders and HR professionals can turn the desire for transformation into action by assessing their HR departments on the 14criteria and investing in ways to assure that HR professionals add value. When such a process is followed, leaders can rest assured that HR professionals, practices, and departments will be designed and delivered in a way that creates value for employees, line managers, customers, and investors.
IMPLICATIONS ACROSS THE BOARDThis picture of HR has implications across the board for general managers, HR executives, and professionals working in Harland for the profession of HR itself. Implications for general manager’s General Managers (GMs) set expectations for HR departments, practices, and professionals. When general managers demand value from HR investments, they set high standards that communicate aspirations and shape how HR professionals act.
GMs should continually monitor standards to ensure that HR measures up. This follow engages them in HR issues and holds professionals accountable for them. To have value-driven HR in your organization, the GM needs to recognize HR’s impact on investor, customer, business, and employee results. It means that HR issues should be part of every manager’s performance scorecard. For HR to have maximal effectiveness, GMs must base their reputation and identity on their ability to deliver value through people. Implications for senior HR executives Senior HR executives’ conversations with various stakeholders should focus on results.
- With investors, conversations focus on how intangibles become a determining factor in creating sustained market value.
- With customers, conversations focus on customer needs and how HR practices can be aligned with customer expectations, with a view to increasing customer share.
- With line managers, conversations centre on delivering business strategies through prioritizing and creating organization capabilities.
- With employees, conversations provide insight into an employee value proposition that assures that if and when employees deliver value, they will get value. Actions can then be specified to ensure that employees have both the ability and the attitude to do what is expected of them.
- With HR professionals, conversations capture both the roles and competencies they require to deliver value. This helps professionals realize their roles and demonstrate their competencies.HR strategy that offers a clear line of sight from business realities to HR practices is designed by HR and owned by line managers to complement an existing business strategy.
It is supported by an HR organization that delivers HR transactions with efficiency and HR transformation with effectiveness. Investments in people, performance management, information, and workflow processes deliver sustained value as guided by the strategy. With strategies, organizations, and practices in place, conversations turn into commitments and rhetoric into results. Implications for HR professionals Most HR professionals want to do good work. When roles are clear, HR professionals can describe what they do in ways that set expectations of themselves and others. When competencies are defined and demonstrated, HR professionals can ensure that they know how to deliver value. Implications for the HR profession
Good-to-great companies, leaders who accomplish, firms with reputations as best places to work, and leaders in management ‘shall of fame all exist because of the people and organization practices that are put in place.
Now more than ever, business success comes from HR. And the key to HR successes the value proposition. With this value proposition, the HR profession has a point of view about what can be, and should be, for all stakeholders; a set of standards about how HR investments in strategy, structure, and practices should be made; and a template for ensuring that each Professional contributes. The HR value proposition is the blueprint for the future. Excerpt reprinted with the permission of Dave Ulrich, Professor of Business Administration at the University of Michigan, and Wayne Brockbank, Clinical Professor of Business at theUniversity of Michigan Business School, authors of The Value Proposition.
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