Written by Sylvia Vorhauser-Smith, PageUp Senior Vice President, Research.
This article was originally published on Forbes.
No surprise – Human Resources is at a distinct crossroads. Despite the critical role that human capital plays in business outcomes, the function has struggled to gain and retain its seat at the executive table. Some industry pundits have even gone so far as to predict HR’s demise altogether.
For quite some time now, HR has been under fire, especially when it comes to how it can more closely align with driving business results. Although many HR leaders acknowledge this misalignment, the function still fails to demonstrate its relevance and importance to business leaders. In fact, business leaders give their HR teams no more than a D+ for their ability to keep up with business needs. And, HR leaders barely grade themselves any higher – 61% believe that their HR programs are either adequate or falling behind.
This is no time for HR to flounder – CEOs identified talent supply and retention as their number one “hot button” issue in 2016, and talent shortages are cited as one of the primary constraints on corporate growth. Coupled with the pricey tab that employees’ salaries represent – salaries can account for up to 80% of operating costs – HR cannot afford to cling to its compliance and administrative heritage instead of shifting to a more strategic contribution. Most organizations concur – 85% of global companies believe that HR must undergo a transformation in order to adequately address emerging business priorities.
It’s true that HR has the potential to follow in the footsteps of its Finance counterparts, who witnessed the evolution of the CFO role from primarily back-office accounting and administration to a strategic leader and successor to the CEO. But a few questions remain for HR, including the role HR should play in setting and executing organizational strategy, as well as which business outcomes HR should take responsibility for and how HR can better align itself with business strategies.
We Must, We Must, We Must Increase Our Business Capabilities
At the risk of accusations of hyperbole, I do predict that HR’s traditional role will become extinct as technology enables new ways for HR to drive business impact. We see this already, for example, in talent acquisition, where HR uses technology that enables talent pipelining, shifting the execution of day-to-day recruitment activities to front-line managers that take advantage of these pipelines.
By letting go of transactional tasks, HR can reinvent itself as a more strategic, analytical function that can move the needle on organizational performance and drive competitive advantage. In order to do so, HR has to start asking the right business questions to define priorities based on their strategic and financial merit. The ball is in HR’s court, and it is essential that HR professionals retain their passion for people while finding ways to become more business savvy and analytical. The good news is, most HR professionals have the potential to learn and grow with the right motivation, according to business advisor and academic Dave Ulrich. The unknown factor is whether the needed change and growth will come fast enough or if someone else (the CFO who already has an established seat at the table, perhaps?) will assume responsibility for workforce strategy.
So, what can HR do to guard against this potential usurpation? In a nutshell, HR should take advantage of new technologies and apply proven practices from other areas of the business to human capital strategies. Specifically, HR leaders can take the following steps:
• Demonstrate agility. Provide timely, high-quality service to build credibility with business leaders. Conduct an HR skills audit, determine where gaps exist and fill them – fast.
• Scrutinize current practices. Were they purpose-built for the industrial era? Avoid the temptation to just give your old HR practices a facelift. We’re in a digital revolution, not evolution, and fresh thinking and approaches are called for. Ensure that your HR practices are in sync with today’s business needs.
• Gather business intelligence. Ensure that HR is in tune with the market by gathering competitive intelligence and using it to inform business strategy and tactics. Which companies are aggressively recruiting talent right now – and why?
• Measure impact, not activity. It’s not about the internal mechanics of HR, it’s about the business drivers. Evaluate the impact HR has on enhancing performance and removing constraints.
• Use people intelligence. HR has access to concrete people analytics that can inform workforce strategy. Use that data to guide organizational decisions and growth strategies.
• Take in constructive criticism. Executive peers should be encouraged to provide feedback to HR and share their expectations of the function. Ongoing feedback from the broader organization also should be used to increase HR’s effectiveness.
HR can and should take control of its own destiny – before it’s too late. A rapid response from HR is possible through recent advances in technology and analytics, and HR must seize the opportunity that lies before it. The time is right for the function to emerge as the hero of its own story by shaping its future and setting a strategic HR agenda in partnership with the CEO.