By David C. Forman
In his new book, Fearless HR — Driving Business Results, David Forman asserts that HR must escape its past before seizing a future in which it becomes a primary driver of business results. Five specific historical perceptions of HR are examined in terms of the latest research and thought leadership.
One of those perceptions is that HR is siloed and too inwardly focused. His insights from examining the most recent evidence on this perception follows.
1. A different zeitgeist is coming
It takes time to escape the past, recognize the changing demands of the future, and develop a new world view. HR has, in fact, been too siloed and inwardly focused in the past, partially because the profession has been insecure and wanted to keep others out while finding its own way.
But the evidence is clear through credible HR stage models, clearer definition of what being strategic means, emphasis on cross-functional activities, and demonstrated practices of leading companies that HR is becoming more closely aligned with the business.
Part of the fuel for HR being accepted as a more integral part of the organization is a growing emphasis on collaboration across functions within companies. This lack of collaboration has long been the bane of CEOs.
Lew Platt, a former CEO of Hewlett Packard, once said, “If HP only knew what HP knows, it would be a very different company.”
There are now many examples of the positive impacts of breaking down barriers, getting people to work together, using social media to form new connections (crowdsourcing) and what GE calls a “boundaryless organization.”
These drivers and the momentum from the sheer weight of research, models and best practices is that HR is moving from its silo to “partner and player status.” It is becoming more business-focused, because that is what all groups and departments must do.
Now it is up to HR, just like any other function, to demonstrate its ability to move out of its own silo, use the language of the business and focus more on results than blind adherence to process.
2. Follow the money
Ram Charan is right: It’s all about the money.
There is no better way to enhance credibility among colleagues across the organization than to speak the language of the business — not just HR’s language. This is done best by understanding three key financial statements:
- Income Statement;
- Balance Sheet; and,
- Cash Flow Analysis.
These financial statements are usually way out of the comfort zone of HR professionals who are thought to be “good with words but not numbers.”
Perhaps the two most valuable financial literacy skills are:
- Review financial statements and recognize the story they tell; and,
- Ask the right questions to gain more insight.
For example, if an Income Statement is reviewed, it is relatively easy to determine if:
- Revenue is growing or declining over several years, including the percentage increase or decrease.
- Costs, both direct and overhead, are growing or declining and by what percentage.
- Gross and net profit are increasing or declining.
Once this information has been gathered, then it is important to discern the more complete picture (the story). For example, it could be that a company is profitable, but costs are growing faster than revenues over a several year period of time This situation should then lead to questions that can provide even more insight, including:
- Which costs are growing faster? COGS (cost of goods sold which is the direct cost of providing the product or service) or SG&A (sales, general and administrative which is the overhead line)
- How does the revenue increases compare with others in our industry?
- Are some products growing at a faster rate than others?
These types of questions lead to better, more informed findings and judgments. “Follow the money” so the right problem can be identified and fixed. These skills enable HR professionals to see the bigger picture and escape their own silo.
3. Mindsets matter
HR professionals must think that they are business people first.
This is not heresy. It is not abandoning the HR profession. It is a realization of how HR can add the most value to organizations and also what capabilities will enhance the careers of HR professionals.
This business-first mindset is partially about job and career security.
Some of HRs tendency toward isolation is on the profession itself. It is self-inflicted. HR is often satisfied to be in its comfort zone, but this zone doesn’t matter to the people that matter.
Seth Godin, the influential marketing leader, states that value in this new age is all about connections. The people with more connections, win; and the irony is that HR should not mildly resist leaving its own silo, it should actively demand it.
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HR should become the community-maker itself; it should be the glue that holds the organization together. But to do so, HR must believe in itself, have a strong point of view, and be willing to take risk.
4. The Cobbler’s Children
It has been established that HR needs to act differently.
Even when HR adds value, it does a poor job of articulating this value. KPMG (2014) research says that while 60 percent of leaders expect HR to grow in strategic significance, only 17 percent say that HR does a good job of demonstrating its value to the business.
For HR to become more business-driven and strategic, three things must happen.
- First, HR must be given the chance to escape its past and play this role. As we have seen, this opportunity, after years of anticipation, is increasingly open to HR professionals today.
- Second, HR professionals need new skills and capabilities to consistently perform at the strategic level. Whether these skills are business acumen, financial literacy, data analysis, consulting, influencing skill or others, HR must start to invest in itself to witness the type of return that can make a rapid impact.
- And third, HR must believe in itself and develop a strong point of view that is respected within the organization.
An investment is needed to upgrade both the skills and the mindset of HR professionals. The irony is that while HR is an advocate for professional development for others, we do a terrible job for ourselves.
Bersin states that less than 20 percent of organizations invest in the development of their HR professionals. This must change. It will damage the business if it does not.
Excerpted with permission from Fearless HR — Driving Business Results by David C. Forman. Copyright 2015 by David C. Forman.