The Role of Human Resources in Decision Support

As with the third example in the previous section, in most organizations, especially with the growth of the service economy, there are few decisions that do not involve the employees, and therefore some aspect of human capital, in one way or another. Critical aspects of these decisions hinge upon an understanding of the value of employees and how specific decisions may enhance or reduce that value. Where does the responsibility for providing the tools and expertise to support human capital related decision making rest?

Boudreau and Ramstad have long espoused the position that the framework for valuing human capital and supporting critical decision making involves investment in it. The application of it should be provided by Human Resources, which meshes well with the current call in Human Resources for new and better metrics. However, much of the current hype around metrics and Human Resources focuses on metrics related to the staffing process itself, such as time to hire, cost of hire, and so on. These efforts are intended to show the efficiency of one of the central processes in Human Resources. It makes sense that early efforts to develop important metrics are focused inward. The decisions being supported are those internal to Human Resources (sourcing choices, process improvements), and the approach often seems to be an ongoing effort to justify Human Resources. All of these efforts generally have little visibility to the rest of the organization. This is in sharp contrast to what one sees in other disciplines that have created effective decision science frameworks. The decision support tools and frameworks provided by Finance are of most interest in their use outside of Finance. The Director of Finance spends much less time measuring the efficiency of Finance operations and much more time supporting the decision making of others in the organization. This is not to say that we should not develop and use metrics in an effort to optimize the staffing process. However, when taken as a percentage component of the overall cost realized by a typical organization, staffing is a small portion. There are many human capital related investment decisions outside of the staffing process that have a much larger impact on the firm’s financial well being. Felix Barber and Rainer Strack point out in their Harvard Business Review article, “The Surprising Economics of a People Business,” that:

The distinct but generally unappreciated economics of people-intensive businesses call not only for different metrics but also for different management practices. For instance, because even slight changes in employee productivity have a significant impact on shareholder returns, “human resource management” is no longer a support function but a core process for line managers. (Barber and Strack 2005, 81)

This clearly articulates the concept that management of human capital is up to the managers closest to the point where these assets are applied, the line managers. Under such a scenario, the role of the Human Resources department is to support the line managers in carrying out their individual roles as Human Resources managers.