The HR Lament

When will Human Resources (HR) leadership stand up for themselves and their team and demand a seat at the table?

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:

1. 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.
2. 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.
3. 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.
4. 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. 

70% of CHANGES FAIL!

Why do change agents keep saying this?  

Isn't that like your financial advisor telling you that you will lose money in 70% of the investments they put you in!  How long would you stay with them?  

I know what we're trying to do, we're trying to create the "sense of urgency" to compel change.  But, isn't it about time we took more pride and professionalism in what we do?  Isn't it time we stopped saying this and got to the bottom of why most changes fail?

You can beat the odds

You want the answer?  Well here it is: most change fails because it's the wrong change!  The fact is that most large scale changes (particularly if there is a large cultural element) never have a chance.  As change agents we're often called in on some ego driven, aspirational change that won't work.

I know, I know - we go on to cover up our failures with the worn out excuses about: lack of leadership from the top, lack of resources, poor communication, and the catch-all of "employee resistance."  Is that true?  Likely not.  The truth is likely closer to the fact that we didn't accept the fundamental barrier to change so we didn't advise our client properly.  

What is the fundamental barrier?  It's the core DNA of a business that drives its implicit strategy.  It's the core values of the company.  These may be stated or unstated; good or bad; right or wrong.  They may have driven the business to success on the highest ground; they may have prevented the business from getting off the ground; or they may be driving the business into the ground.  They cause people to make decisions everyday without thinking.  In aggregate, they're "the way we do things around here" and they are the immune system designed to preserve the organization and defeat change that doesn't respect them.

So what are these DNA values?  There are three and in great companies one of the three will dominate.  Here they are:

• Service to Customers.  This is embodied in Disney-World and Starbucks.  It drives a strategy of customer centricity.
• Quality of Work.  We can think of Southwest Airlines and its strategy of operational efficiency which draws in its loyal customers.
• Respect for Innovation.  These are organizations that are open to ideas - can we all say, Apple.

Of course these values can be thrown out of balance not by another value, but by something we value: profitable growth.  When profitable growth is the dominant strategy then values become distorted.  Chase Bank gives us a recent example of this.

So, you better understand this if you want to get out of the 70% club.  If you're working against the grain then people don't resist, they just go on doing what they've been programed to do.  

That's not to say that there isn't room for change to work against the grain.  It's quite logical to think that Starbucks might want to get a little more efficient (better quality of work) at order taking; however, it can't be at the expense of the relationship experience that customers expect.  Similarly, you don't want Starbucks baristas working the phones at the call center of your mobile service provider (well, you may want it, but you don't want to pay for it.)

The biggest problem is when financial growth (cost cutting and employee cutting) is the driver of change.  If this is the case then openly recognize it.  No amount of vision, executive commitment, and "what's in it for me" communication will ameliorate resistance.  This is Nike change, "just do it!"  Removing a band aid has a finite amount of pain - my advice is to rip it off rather than prolonging the pain.

I consulted to a company whose innovations made it an overnight success.  They wanted to scale up their manufacturing and after sales service to meet a growing demand.  After a week of consulting I advised them to outsource their manufacturing, sales, and service; and take on an "adjacent possible" strategy by using their cash to buy horizontal businesses that were driven by innovation.  

Ego and aspiration defeated my advice.  For years the company lost profit as it struggled to drive quality into its products and service into its relationships.  It was recently bought by its biggest competitor.

Hmmm.  Does that count in the 70%?