Fast Company Came Close . . . Tom Stewart Came Closer
In a 1996 article for Fortune, “Taking on the Last Bureaucracy,” Tom Stewart suggested companies should, in a phrase, “blow the sucker up,” referring to HR departments. Given the way HR was conducting its business at that time, Stewart thought the HR function of people management might be better served by non-HR departments in an organization. But in fact, Stewart was slightly off base. It’s not the HR departments that need to be blown up. It’s the wall that HR has erected between itself and the rest of a company’s business that needs to be obliterated.
Glancing through the HR and business press, you’ll find a proliferation of articles extolling the value of human capital and human capital management. In the past several years, both the frequency and fervor of these messages have grown and with good reason. The intuitive sense executives at some of the world’s most successful organizations have had for years—the same sense that has driven them to create the “good place to work” status widely coveted by organizations and widely covered in list upon list in the business press—now is supported by overwhelming quantitative evidence, that is, that the right alignment of human resource practices to business strategy can add shareholder value. There are numerous studies, such as those done by PA Consulting, Watson Wyatt, along with Huselid and Becker, on human capital effectiveness that argue successfully that:
Business congruent human-capital practices are leading indicators of financial performance. Quantitative data indicates that effective human-capital practices drive positive business outcomes more than positive business outcomes lead to good HR practices. Human capital initiatives implemented now will help companies convalesce faster and emerge stronger when the economy eventually rebounds.
Shareholder returns at companies with business congruent human-capital practices are at least three times those at companies with disconnected practices. During the economic expansion of the 90s, that performance was significant, but not nearly as large. The lesson learned is that it’s even more important to focus on human-capital superiority in tough times.
Human-capital practices are not created equally. There are those that create substantial value and others that actually diminish it. Companies must examine their HR initiatives to ensure they are adding to shareholder value.
Still, very few individuals outside the field of HR seem to be buying this message outright, leaving HR in the awkward position of justifying a place for themselves on the leadership team. In part, this is because an artificial wall has been erected between HR and “operations,” a wall that continues to exist in large part because of the attitudes and practices of HR professionals themselves. HR professionals, in their headlong dash from the despair of the duties comprising their current responsibility, have rushed past their most powerful trump card: the people. All organizations—private, public, nonprofit, service, manufacturing—are composed of people. Everything that any company produces, all of the value created, is achieved through the actions of those people. Simply put, the effectiveness of a company is inextricably dependent on the effectiveness of its people.