The Real Value

The central problem is that HR has not explained to its clients the true importance of its mandate. The conventional thinking about HR reflects the paradox facing line managers. If people are the ‘most important asset,’ why is the HR function often thought of as an administrative overhead? For the most part, this perspective has been justified by the role that HR has played in the past, emphasizing administrative efficiency and compliance. The term “HR police” is not an unjust characterization. The narrow-minded view of “climbing up the pyramid of value” strategy attends to the desire of HR professionals to work on something significant within their organizations, but it fails to address the critical need that companies have to improve the effectiveness of their workforce—a need that HR is uniquely qualified to address. A strategy that continues to focus on the details of administration aims in the wrong direction and will only continue to reinforce the belief that HR people in general just don’t understand, or have the capacity to address, the real business of the organization. This strategy of fixed/focusing on HR is doomed to fail because it addresses only a small part of a larger opportunity, and it attempts to deliver only a small portion of the solution.

Though HR owns most people-related functions, it is rarely true that HR is given real responsibility for the effectiveness of the company’s people and the company. HR typically has responsibility for people governance, but rarely for the performance of the workforce, and they are almost never an active driver in creating or improving the performance of people’s actual work. Instead it fulfills the role of passive provider of an infrastructure for the business to source, select, reward, and deploy its workforce.

To be competitive, most executives are desperately in need of better practices and tools to make their workforce more effective, yet organizational leaders separate HR functions and waste an abundance of data and skill within HR by assigning it the low-priority task of administering the policies and procedures. Look over the shoulder of most workers, and observe the percentage of work affected by the services that HR provides. To optimize that worker’s performance requires appropriate training, rewards, and organizational structures—all of which HR has compelling data to inform, and most of which it has the skills to address. Still, it’s a safe bet that one will conclude that HR is not a significant participant in the analysis, decision, or execution processes of the business, despite their claims to the contrary, because they simply are too busy performing transactions, or because they are not taken seriously by frontline workers, managers, and executives as business experts who will add value or as real businesspeople who can make a bottom line difference. It hurts to say it, but it’s true, and it will hurt even more to continue to be essentially useless. Instead, HR is seen as the corporate police, the rule-enforcers, the people who take the handbook seriously, and the people who will make you follow the standard process if you let them get involved.

That said, HR is the only function within a company that is reasonably positioned to improve the way people work. HR owns and manages all of the data about workers and work: their jobs, expertise, organizations, backgrounds, skills, requirements, and compensation structure. HR as a discipline—not the department—has a matchless understanding of the factors that govern worker productivity: competencies, management processes, relationships, rewards, collaboration, learning, job structures, partnership models, and more. Every action a worker takes can potentially be improved by the data HR has about them and their work, or by the expertise HR has about how to productively organize the workforce and the work. HR’s attention and influence are usually restricted to administrative duties; not improving the performance of the “real” work that should be a reflection of HR’s priorities. It should be obvious that, while HR’s strategy of improvement through self-service and competency analyses and historical turnover reporting may be marginally useful, it is usually the case that higher value work improvements need to be addressed first and should be HR’s focus. No other function within the organization is able to address this critical need. Information Technology (IT) often inherits this role simply because technology is everywhere, and is a key enabling resource in getting work done. However, IT typically does not have the skill set to improve the efficiency and effectiveness of work processes, implement consistent policies, or deliver a work environment that take full advantage of relevant knowledge, resources, and tools. IT is accountable for the efficiency of the architecture from a systems perspective, which is why so many promising initiatives have such surprisingly inefficient long-term results. Most fail to achieve what they promise because they are not effectively integrated to support work processes. Only HR is responsible for knowing and managing how the workforce should work.

Line management is also not well matched to define and manage overall worker effectiveness. Operations staff do not typically have the expertise in configuring organizations or work processes, managing and distributing knowledge, or the talent to manage or integrate the necessary enterprise-wide and external resources. HR has the data and the expertise about the workforce and the perspective about the overall work environment. Each facet of what a company does can be improved by this expertise. This improvement will lead directly and measurably to bottom-line business results as more and more financial studies confirm.

All of the preceding merely confirms what most of us have known intuitively for a long time: The results a company achieves are directly proportional to the efficacy of its people in developing and executing the company’s core business. Worker effectiveness is determined, broadly speaking, by the organization, available knowledge and tools.

HR outsourcing and metrics seem inexorably linked together. For HR to lead the development and implementation workforce strategies in support of organizational objectives, they must relinquish their transactional processing role. When combined with a strong HRO partner(s), HR can upgrade its service delivery and access to HR and workforce performance measures.