HR Insights, HR Management

Get Ready to Be Ready: Building a NEW HR Business Model

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HR must have the knowledge of the organization’s P&L, but more importantly, they should develop a people P&L.” This was a statement by Cynthia Trudell, Executive Vice President Human Resources & Chief Human Resources Officer of Pepsico.

Last week in New York there was an event called the HR Leadership Summit (built “by HR Execs, for HR Execs). Well to me that line is an understatement. I have attended a lot of conferences, but this one day event is at the top of my list.

What will you call your plan?

Presentations were given by the folks at the top of the HR food chain, from people like Mark James, SVP, Human Resources & Communications at Honeywell; Dimitra Manis, SVP, Global Head of People for Thomson Reuters; Susan Peters, VP, Executive Development & Chief Learning Officer at GE; Cara Capretta, VP, Human Capital Transformation for Oracle; and Randy McDonald, CHRO for IBM.

My thought upon leaving that night was back on the P&L relationship to HR. The P&L is a financial statement that summarizes the revenues, costs and expenses incurred during a specific period of time — usually a fiscal quarter or year. These records provide information that shows the ability of a company to generate profit by increasing revenue and reducing costs.

The concept of using or creating a sort of Human Capital metric dashboard which lays out dynamics of the workforce will be the new norm for HR. Imagine if a Human Capital P&L was presented and evaluated each time a business meeting was held, especially during quarterly and year end meetings.

Three quarters of CEO’s say that lack of key skills is the greatest threat to their business. Based on that, a process of this type should be a welcome addition to the executive agenda.

If that CEO statement about a lack of key skills was centered on marketing or a strategic dilemma, there is no doubt what they would do.

Alignment is here

There were so many CHRO’s at this New York event, each a super star in their own right, discussing the level of interactions they have in driving their respective business growth. I got the feeling that every one there came away with a sense of the future of HR. The bar has been raised to a totally new level.

We had been to the mountaintop and were given a chance to peak over and get a glimpse of the new model of HR importance. We were given this view by practioners who live it every day.

The implications of the economic recovery, a changing workforce, new regulation and legislation, changing social values and technological innovations are all redefining human resources.

During the recent recession, HR leadership has been faced with continued cuts and modifications to their human capital programs and policies which have forced most to revert to business as usual.

The question is, will HR carve out a new path going forward by developing a new model, or, will you find yourself unprepared for what lies ahead?

The alignment of a human capital strategy and programs with the organizational strategy is the new and sustainable model. That alignment will significantly impact the success of the organization.

Why we need a “new HR” business model

Developing a business case that invests resources in the people side of the business positively influences everyone — not only within the organization, but external factors as well, and ultimately, the bottom line.

One of the best ways to begin this transformation is to focus on the P&L, HR scorecard, or whatever name you call it that suits your fancy. This P&L will not only help calculate talent management metrics and benchmarks data extracted from your own organization, but it will help re-position HR strategically in your company.

Specifically, investing time in a more rigorous based metrics-driven model is going to be the key component in building and emerging a new business-oriented HR model with better alignment with the core corporate strategy.

As we face a new set of challenges in a rapidly changing marketplace, it underscores the imperative of continuous and visible engagement of HR to become fully aligned with the corporate strategy, and surmount the organizational silos to emerge as a “new HR” business model.

And, when the time comes to expand opportunities and optimize the deployment of the organization’s human capital assets, are you and your organization going to be ready?

More importantly, are you personally going to be ready?

Ron Thomas is a Chief Human Resource & Administrative Officer currently based in Riyadh, Saudi Arabia. He formerly was Director, Talent and Human Resources Solutions at Buck Consultants (a Xerox Company) and is certified by the Human Capital Institute as a Master Human Capital Strategist (MHCS) and Strategic Workforce Planner (SWP). He's also worked in senior HR roles with Martha Stewart Living and IBM. Ron serves on the Harvard Business Review Advisory Council, McKinsey Quarterly Executive Online Panel, and HCI's Expert Advisory Council on Talent Management Strategy. He also serves as a Faculty Partner and Executive Facilitator at the Human Capital Institute. He has received the Outstanding Leadership Award for Global HR Excellence by the World Human Resource Development Congress in Mumbai. Contact him at ronaldtthomas@gmail.com, or on Twitter at http://twitter.com/Ronald_thomas.
  • Ron1007

    DUH! Where have these CHRO;s been for the last 30 years. This subject has been hashed and rehased until everybody is sick of it. HR professionals know by now that unless you understand the business you are in, you ar able to read a balance sheet and have measurable outcomes for all HR programs, you are not going to be successful. Why has it taken all these years for the light bulb to go off. SHRM and others have been preaching this for decades and yet, the majority of HR professionals still don’t get it. I am not sure what it takes to get the message across. I have always maintained that a CEO gets the kind of HR department they deserve. If they are not demanding, not asking, that HR deliver, then they deserve the kind of department they will usually get – a risk adverse department that will play it safe and deliver only what it has to. Wake up CHRO’s, the time has come for action, not words. See my paper written in 2009 called “A New Paradigm for HR” for more on this subject.

  • http://twitter.com/JasonLauritsen Jason Lauritsen

    Ron, I have to admit that this your report of what these senior execs are espousing as the future of HR is both a bit surprising and disappointing. The fact that we are still talking about alignment and backwards looking metrics says to me that we are losing the battle in HR (and continuing our march to extinction). While other functions are thinking about predictive measurements and big data, are we seriously still trying to figure out alignment? This is depressing to me.

  • Jacque Vilet

    Hi Ron — Ditto what Ron below says. I personally think HR needs to stop talking to HR. What HR needs to hear is an all day procession of talks from about 15 CEOs and let them tell HR what they/top management needs from them. Talking to other HR people IMHO is like talking to your navel.
    Also I’m not big on “metrics”. HR can measure itself all day long. Metrics we have used for years measure HR activity —- it tells how busy we are. Like the SHRM universal set of proposed metrics — no one is asking for them. And they won’t. We have the cart before the horse. HR needs to hear what is needed from them THEN provide a benchmark tool to measure their performance.
    We get too focused on metrics — measuring what has already happened. We need to focus IMHO on analytics — looking forward. Otherwise we may as well be accountants.

  • susanp@reinventure

    Good comments, and I agree with the metrics point made by Jacque. In previous experience, metrics were always after the fact, rather than measuring interim steps towards achieving goals, adjusting along the way.. I would add to this that without active alignment and support of Executive Management, HR is not capable of implementing and influencing the selection of talent, leadership, next level initiatives and innovations, as I firmly believe that HR and OD folks can add to strategic conversations. When Execs hire their HR leader, they need to look for a partner who will have a voice in the business.

  • Peter Gruben

    Thank you Ron, I have to admit that to me this does not sound like a solution to the concerns raised by 3 quarters of CEO’s.

    How does a more ‘rigorous based metrics-driven model ‘help improve the skill gap and how would you expect that approach to attract and keep current talent?

    I believe that employers need to decide if they want to be part of business education and facilitate employee’s development progress internally or if they want to depend on what talents are ‘out there’ and try to attract those.

    There is a self interest in any good business to facilitate skill gaps and while businesses can raise awareness and blame Governments, the fact is that they have missed the opportunity to influence that skill gap internally. What do you think?

  • http://www.facebook.com/david.m.harrington1 David M Harrington

    Thank you, but sorry…nothing new here. It sound like more “I want a seat at the table…” whining.

  • SOI

    Adding an HR P&L report is one more change HR from a transactional department to a strategical department. To do this though, the transactional duties must first be outsourced. http://www.soi.com