Recently I’ve seen a resurgence of commentary about HR “not being a strategic partner.” I’m getting tired and bored with the whining. We’ve heard this lament for more than two decades. There is a reason that HR has not been, and is not yet a strategic partner within most companies, and here it is:
HR DOES NOT HAVE A STRATEGIC VALUE PROPOSITION
Long ago HR cut its Faustian deal with management and now it’s living with the consequences.
I worked in HR consulting for over a decade and have a lot of good friends and clients who are still in the business. I’ve been watching from other perspectives for many years but find that at the end of this day HR still has not been able to turn the strategic corner.
Here’s some of what went wrong. Early in the 1990’s companies became more focused on profits and shareholder returns. When growth and pricing couldn’t provide the desired results, management then looked to reducing the companies cost structure. In many organizations PEOPLE were identified as the biggest variable in the cost structure that could offer up short-term returns.
Politically, however, in most companies it’s just not acceptable for executives to say they will convert people into profits. So, organizations came up with a euphemism by saying: “we have to become a performance culture and to do this we must break the entitlement mentality of employees.” And even this statement, as indirect as it was, could not be used outside the management committee meetings. The “cut heads” strategy became a covert operation mentioned only in vague terms in public statements and employee communications.
Despite the fact that execs were desperate for an action plan – any action plan – to improve results, they used the “entitlement mentality” to make aggressive headcount whacks while allowing them to sleep at night. The assumption was that employees don’t perform because they are comfortable. They know that every day they work improves their pension, benefits, and pay. Why should they perform when their welfare is secured? (Unfortunately no one tested the assumption.)
In the quest to become a business partner HR leadership took on the assignment of dismantling the entitlement mentality. Defined benefit pension plans became defined contribution plans; employer paid health insurance was downloaded to employees; and merit pay became performance pay. Brick by brick the employee entitlement mentality (and loyalty) was dismantled – and the compliant HR staff wielded the tools needed to “make it so”.
Did this make HR a strategic partner? Hardly! It made HR a servant responsible for the apathy we now see in the workforce. I recently learned that studies indicate that non-business “web surfing” and social media use at work has tripled in less than a year; and that 25% of a corporations internet bandwidth goes to video streaming. Is this our vision of a performance culture?
Well, HR might be able to save itself but it will take a huge transformation. It starts with, but goes well beyond the simple wisdom that HR must get to know the business. We’ve been looking under this rock for years. It hasn’t worked. We must look elsewhere.
First HR has to accept that its principal mission is to contribute to the business by providing a “high performing work force.” This is a long-term strategy that does not cater to the quarterly need to produce financial results. We need to take some specific actions:
- Reorganize HR: Take all of HR’s transactional business and put it under a Director reporting to the CFO, and give it a new (old) name: “Personnel”. Assign the strategic work of building the workforce to a VP HR who has the horsepower to sit at the executive table.
- Dump Performance Evaluations: Is there anything more bureaucratic and that adds less value to a business than performance management systems. Decouple them from pay and simplify them. Use them for development, not pay and promotion.
- Dismantle Performance Pay: It has never worked. It’s an escape for managers who want to be protected by an excel spreadsheet. Distribute discretionary pay from a profit pool. If you want to reward high achievers more than the pool allows, go ahead. Managers are paid to make tough decisions and stand by them.
- Hire the Best Talent in HR: Now lets be serious. Where is the last place we put our top performers? In HR, right. And when we see a top performer in HR what do we do with them? We raid them and put them in a meaningful business function, right? Does this sound like a formula to build strategic HR partners?
My hypothesis is that HR is one of the toughest roles in a company. Its job is often to get in the way of capricious line managers. In its quest to help managers build a high performing work force HR often must say “no.” When managers are faced with the trade-off between profits and people, they often make a sub-optimal decision that favors profit. HR should be called on to save the long-term strategic interest of the business. At the moment HR doesn’t have the vision, talent, or respect to do this.
It’s unlikely that HR will ever get an influential place at the table until it enunciates a value proposition that senior management recognizes and then delivers on the promise. There is a huge opportunity today for an HR professional to step up to this challenge and show the world how it can be done.
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