Elevating the HR Function - Part 2

Part I of this article addressed the issue of elevating the HR Function into a more strategic type function, as opposed to an administrative type function. Part 2 of this article will describe several strategic ideas for moving HR into the strategic function it must become.

In Part I, we mentioned the importance of HR as it relates to core competencies. Organization's need to maintain and build their core competencies since this is the source of competitive advantages in the marketplace. Core competencies have a lot to do with recruiting and retaining the best people. Obviously, HR should play a lead role in this mandate. However, we do not want to stop here since there are numerous other strategic issues related to HR.

“The evidence is unmistakable: HR's emerging strategic potential hinges on the increasingly central role of intangible assets and intellectual capital in today's economy. Sustained, superior business performance requires a firm to continually hone its competitive edge. Traditionally, this effort took the form of industry-level barrier to entry, patent protections, and governmental regulations. But technological change, rapid innovation, and deregulation have largely eliminated those barriers. Because enduring, superior performance now requires flexibility, innovation, and speed to market, competitive advantage today stems primarily from the internal resources and capabilities of individual organizations – including a firm's ability to develop and retain a capable and committed workforce.”
- The HR Scorecard: Linking People, Strategy, and Performance by Brian E. Becker, Mark A. Huselid, and Dave Ulrich

In his book, Strategic Planning for Human Resource Management, author Robert E. Sibson outlines several critical issues confronting the typical HR Manager:

- Productivity improvement
- Educational deficiency
- Delegative Management
- Fairness in the Workplace
- Managing Differences
- Fair Pay for Everyone
- Chronic Labor Shortage
- Impact of Technology
- Employee Owners (entrepreneurship in the workplace)
- Organizational Restructurings for Higher Performance

Each of these areas can represent a major strategic program for the HR Function. An absence of ideas is no excuse for making HR strategic. In his book The Human Equation: Building Profits by Putting People First, author Jeffrey Pfeffer describes seven dimensions that characterize how organizations produce profits through people:

1. Employment Security
2. Selective hiring of new personnel
3. Self-managed teams and decentralized decision making.
4. Comparatively high compensation contingent upon performance.
5. Extensive training
6. Reduced status distinctions and barriers (including dress codes, language, office arrangements, and wage differences).
7. Extensive sharing of information throughout the organization.

Once again, the sources for strategic initiatives are extremely significant. The obvious problem we will have is how do we address these issues within our typical HR Function. In order to elevate the HR Function so that it can meet these new demands, people within HR will require higher skill sets, including very strong technology type skills since many of the traditional HR services will be conducted through on-line service centers. Additionally, like most high quality functions, HR will need some “independence” from senior management, allowing the HR Function to pursue critical issues in an honest manner.

“The total transformation of Human Resources (HR) as a function has become both a business necessity and a strategic, value-adding opportunity. This transformation, which calls for a functionally fragmented, administrative cost center to a value-adding, integrated organization aligned with corporate business strategies, will not happen incrementally in most cases . . Instead, the true transformation of HR requires analysis and identification of opportunities for improvement in five interrelated areas that are the success drivers of effective HR, including the people in HR and their competencies; processes used to deliver HR products and services; the culture of the HR organization; its structure and the technology used.”
- Web-Based Human Resources: The Technologies and Trends that are Transforming HR Edited by Alfred J. Walker

All of these strategic issues can be overwhelming to any resource-strapped function. Consequently, HR will need to develop its own strategy for value-creation within the organization; otherwise HR will not adequately address many of these strategic issues and outside managers will continue to have their traditional bias view of HR. The HR Strategy will need to address the issue of how the organization will build its HR Capital (which expands the capabilities of the organization). This can cover a wide range of best practices – web based training, knowledge sharing, 360-degree evaluation processes, cross-functional teams, and so forth. As a minimum, the HR Function must have a strategy for protecting the core competencies of the organization. Next, the HR Function will need to develop strategies for building a knowledge-based workforce that can meet future challenges confronting the organization.

“If competitive success is achieved through people – if the workforce is, indeed, an increasingly important source of competitive advantage – then it is important to build a workforce that has the ability to achieve competitive success and that cannot be readily duplicated by others. Somewhat ironically, the recent trend toward using temporary help, part-time employees, and contract workers, particularly when such people are used in core activities, flies in the face of the changing basis of competitive success. This raises the questions of why these practices seem to be growing, what effects they have on the ability to achieve advantage through people, and what the implications are for organizations that might follow a different strategy.”
- Competitive Advantage through People: Unleashing the Power of the Workforce by Jeffrey Pfeffer

In order for HR to be successful with its new strategic mandate, it will need to “in-source” to execute its strategy since its resources are way too limited. For example, direct involvement by IT (Information Technology) will be required to launch new technologies in the HR area. Additionally, HR may have to outsource some of the day-to-day administrative activities so HR can begin to address strategic issues.

In conclusion, some of the most significant performance issues confronting any organization are rooted in human resources. This is why the HR Function needs to become much more strategic. Moving HR into a strategic partnership with management is now mission-critical. There are a multitude of strategic issues for HR to pursue, ranging from making the organization more fluid for the sharing of knowledge to making sure all employees have the tools to provide outstanding customer service.

“In the closing years of the twentieth century, management has come to accept that people, not cash, buildings or equipment, are the critical differentiators of a business enterprise. As we move into the new millennium and find ourselves in a knowledge economy, it is undeniable that people are the profit lever. All the assets of an organization, other than people, are inert. They are passive resources that require human application to generate value. The key to sustaining a profitable company or a healthy economy is the productivity of the workforce, our human capital. In the American economy, where over half of the gross national product is allocated to the information sector, it is obvious that knowledgeable people are the driving force.”
- The ROI of Human Capital by Jac Fitz-enz

matt evans photo Written by: Matt H. Evans, CPA, CMA, CFM | Email: matt@exinfm.com | Phone: 1-877-807-8756

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