The Keys to HR: It’s How People Perform, and the Bottom Line Impact

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Dec 2, 2014

Lately, Human Resources has become a very hot topic – for reasons both good and bad.

The good: There is sufficient research to show that executive leadership wants and needs a business partner that adds value to the organization and the bottom line.

The bad: HR is simply not delivering.

Still asking the same questions about HR

This tension is not new. Back in 1997, Harvard professor Michael Beer shared his thoughts about HR in The Transformation of the Human Resource Function. His premise then was that HR must shift from administrative work to strategic partnership. A year later, Dave Ulrich asked in the Harvard Business Review, “Should we do away with HR?”

Folks, that was over 15 years ago and we are still asking the same question.

As a 30-year Human Resources veteran, I find it exciting that business thought leaders — including Ram Charan, who wrote about fixing HR earlier this year in HBR (in It’s Time to Split HR— are taking interest in our profession. That means that there is a compelling need for our work. But the answer is not changing HR’s organizational structure or reporting relationship.

Some people advocate embedding HR in the business lines. Why would we turn such a critical role over to operational leaders who are neither trained to nor held accountable for effectively or systemically sourcing, hiring, engaging, measuring, and developing talent? Why would we allow the 30,000-foot view of the people part of the business to happen at the whims of operational leaders who have so many competing priorities?

I don’t take issue with the fact that HR is not filling the need for strategic leadership of the people part of the business. With few exceptions, we are not. But the HR body of knowledge is real and highly complex, and it requires practitioners to understand both quantitative and qualitative concepts that apply to the workforce.

Our global economy demands a holistic look at people, at talent, so that we can cultivate cultures of high performance. HR can do this. There are two things preventing it.

1. HR must add value

First, executive leadership has to demand, as with any leadership role in the organization, that their HR leader add value.

Study after study shows executive leaders are disappointed in HR. My question is this: Why would a CEO allow an HR leader to be less than effective? What would happen if CEOs asked HR leaders this crucial question: “How well is our workforce performing, and how do we improve performance?”

Isn’t that the crux of the issue? You can look at the components — talent acquisition, pay and benefits, learning and development — but each of those components must be connected in order to answer the question, “How well is our workforce performing?”

Simply having top talent isn’t good enough.

The HR leader’s answer will probably be something like this: ”Well, our performance management program shows that our people are all performing at the top two levels of performance.”

But let’s play this out. The CEO looks at the performance data provided by HR and sees that it is actually quite laughable — ratings are inflated, causing unaccounted-for salary growth, and the feedback that leaders provide to employees is weak, soft, and not developmental.

Aha. Now we have an opportunity. But I suspect the executive leadership team has allowed HR to administer a performance management program that wastes time and provides no value. If so, the executives are complicit in HR’s failure.

2. HR must get its act together

Second, HR doesn’t have its act together. It doesn’t ask good business questions, and it tells business leaders what they must do, which leads to business leaders doing work because they have to, not because they see the value.

All of the sub-disciplines of HR — recruiting, employee relations, performance management, compensation and benefits, and learning & development — have to work together to figure out what customers (the employees and leaders of the organization) need, educate them on risk, and engage them in the right solutions.

HR cannot afford to think in silos, offering “products and services” that simply add work to the already overburdened front-line manager.

Being strategic in HR means bringing together “all things people” in such a way that we can answer the question, “How are our people performing, and what impact does that have on the bottom line?

Until both HR and executive leadership jointly ask that simple question and begin the all-important dialogue to discover the answer, HR will be a disappointing overhead department.

This was originally published in the Harvard Business Review.

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