Making HR Strategic
HR continues to evolve. Helping business leaders understand the strategic impact HR could and should have is always on the agenda. However, being effective is about being a credible activist. I talked to Dave Ulrich and Laurence Smith, about creating value, evolving and HR’s biggest failings.
There are many instances of people using the word strategic without really understanding its true meaning. Consequently, over-use has resulted in diminished effect. What, in your opinion, is the essence of strategic HR management?
Aspiration: strategy focuses on the future;
Behavioural: strategy has to tie to specific behaviours or actions;
Customer: strategy links to customer value outside of the firm;
Disciplines: strategy turns into disciplines or processes in the firm;
Energy: strategy gives emotional energy towards the end;
Focus: strategy focuses on a few priorities.
Strategic HR Management addresses these questions relative to “HR” issues in an organisation. We have concluded that HR issues are generally in three areas: talent, culture and leadership.
We’ve read articles and commentary recently that suggest that HR should never talk about strategic HR. They should never talk or complain about getting a seat at the table because no one cares about that – they care about HR filling jobs or dealing with turnover and retention. Do you agree?
Laurence Smith : I have certainly heard a few business leaders express this more traditional attitude towards HR and have found it to be most common in faster developing emerging markets where HR does not have such a long history as a profession.
In fact, one of the primary findings from the HRCS was that being a ‘Credible Activist’ was the single most importance capability HR professionals need to develop.
Partly it is correct, the primary role of HR must be delivering fundamental HR services, through strong functional HR capabilities. We see this as the second phase of HR’s evolution, and a focus on just this phase is more common in emerging markets.
The Evolution of HR
When we look at the evolution of HR over time, we see four distinct phases.
- The first, starting in the early 20th Century, was purely administrative HR;
- The second, from the 1970/80’s onwards, was the development of strong functional expertise, in Recruiting, Compensation and Benefits and Learning & Development;
- The third, which most firms are grappling with at the moment, is making HR more strategic and adding value through developing HR Business Partner capabilities; and
- The fourth phase, where our latest global HR Competency study (HRCS) indicates the world’s leading firms and HR Practitioners are developing capabilities, is where HR begins to not just add value, but to create it – we call this ‘HR from the Outside-In’ and it reflects the importance of HR not just having a seat at the table but co-crafting the strategic agenda with the leaders of the organisation.
So HR continues to evolve and helping business leaders understand the strategic impact HR could and should have on the business is an ongoing imperative for HR leaders. In fact, one of the primary findings from the HRCS was that being a ‘Credible Activist’ was the single most importance capability HR professionals need to develop. This finding was common across every region of the world.
HR’s most valuable contribution is in recruiting, retaining and growing the type of people our customers want to do business with.
The Credible Activist
Business leaders build personal relationships with HR professionals. Effective HR professionals are credible activists. Credibility comes when HR professionals do what they promise, build personal relationships of trust, and can be relied on. Being a trusted advisor helps HR professionals have positive personal relationships.
As an activist, HR professionals have a point of view, not only about HR activities, but about business demands. As activists, HR professionals learn how to influence others in a positive way. Some have called this HR with an attitude.
HR professionals who are credible but not activists are admired, but do not have much impact. Those who are activists but not credible may have good ideas, but not much attention will be given to them. To be credible activists, HR professionals need to be self-aware and committed to building their profession.
As people are one of the biggest competitive advantages an enterprise has, how we recruit, retain and grow people has one of the single biggest influences on our success. What do you believe to be HR’s most valuable contribution in this regard?
Laurence Smith : HR’s most valuable contribution is in recruiting, retaining and growing the type of people our customers want to do business with. The HRCS research and our recently completed ‘Top Companies for Leaders’ research identified the same key differentiator of top performing companies, leaders and HR professionals – operating with a mindset of ‘outside-in.’
This means understanding what types of people and leaders our customers want to do business with. Having customers and other external stakeholders (community, regulators and investors) actually involved in defining how we develop leaders and what type of culture we need to build to deliver on the organisation’s promises to its stakeholders is absolutely vital.
Literally inviting customers and other stakeholders to be involved in defining competency models, building and even delivering leadership programmes and shaping the culture of the firm, is what the world’s Top Companies do best. We call this developing a ‘Leadership Brand’ and making sure that there is consistency and alignment between the promises the firm makes to its external stakeholders – its Corporate Brand – and the promises it makes to its internal stakeholders – its employees and managers.
To quote Dave Ulrich, “Leadership is not just for employees anymore. Good leaders need to behave consistently with the expectations they create for the customers, investors and communities. When customer expectations drive leadership behaviours, a sustainable leadership brand occurs.”
So, developing a powerful Leadership Brand and aligning all HR processes and leadership behaviours to make this come alive at every point of the organisation is one of the most powerful contributions HR can make to an organisation.
For organisations which are very tightly managed, with a top-down style or a singularly guarded management approach, how best can HR drive a closer relationship with the powers that be and find ways to exhibit true value?
Laurence Smith : In this situation, HR will find it difficult to demonstrate strategic impact unless it can talk the same language as the business leaders and show that it really understands the business and the environment in which it operates. This requires a combination of capabilities. HR must be a ‘Credible Activist’ as we discussed above, but firstly, HR must also develop the capability to be a ‘Strategic Positioner’.
The Strategic Positioner
HR professionals who think and act from the outside/in. They are aware of and able to translate external business trends into internal organisation actions. They understand the general business conditions (e.g., social, technological, economic, political, environmental, and demographic trends) that affect their industry and geography. They target and serve key customers of their organisation by segmenting customers, knowing customer expectations and aligning organisation actions to meet customer needs. They also co-create their organisation’s strategic response to business conditions and customer expectations by helping frame and make strategic and organisation choices.
So, unless HR really understands the context in which the organisation competes, and plays an active role in helping the organisation interpret that environment, align the systems and build the capabilities, culture and leadership to win, it will not have the credibility to work alongside those leaders of traditional mindset.
A tool we have found useful for HR Leaders to deploy, in this situation, is the STEPED model which is a systematic approach to considering the external opportunities and threats which may impact the organisation. If an HR team pro-actively uses STEPED and are regarded as Credible Activists, they will be better equipped to not just get a seat at the table but be informed, capable of adding value and co-crafting the strategic agenda with the business leaders.
Two examples of where HR either did not use a STEPED approach, were not engaged with the leadership as ‘Strategic Positioners’ or lacked the capability to be ‘Credible Activists’ are below.
Example 1 | An American high tech firm
This firm needed to develop additional manufacturing capacity in China, and due to the high cost of the coastal cities, decided to locate the new factory in a second tier city inland. Unfortunately, once the plant was completed they found that the city could not provide the skilled labour and talent they required.In the end, they had to import experienced (and expensive) labour from the very coastal cities they had decided against in the first place.
This was a multi-million dollar mistake.
HR had either not been involved in co-crafting the strategic agenda with the business leaders, had not understood the environment in which they were going to be operating in, or had lacked the voice and credibility to influence those decisions.
First, as a profession, HR needs to talk less about how important they are and actually deliver value around talent, culture and leadership.
Example 2 | A global Life Insurance firm
Seeing the large young population in Vietnam, this firm decided that it was an attractive market to enter. However, upon establishing their office, they discovered that there were only seven qualified Vietnamese Actuaries – a role critical to their ability to operate.
Being the first foreign competitor to enter the market they were able to hire several of them. However, the next few entrants simply stole them away by offering even higher packages. The ultimate solution was to import a number of expensive expatriates and also invest in funding a college of Actuarial Science. Again, a very expensive mistake where HR could and should have played a more informed, strategic and impactful role.
What do you believe to be three of HR’s biggest failings and what can we do to address this?
Dave Ulrich : First, as a profession, HR needs to talk less about how important they are and actually deliver value around talent, culture and leadership. Sometimes, HR has too much navel gazing where HR people argue among themselves more than serving clients. HR sometimes is too internally focused vs externally driven.
Third, HR needs to NOT become a field only focused on talent (or human capital). HR is about talent PLUS culture and leadership.
We have just written a book about HR from the outside-in where HR begins to connect their work to external stakeholders, like customers and investors.
Second, sometimes HR gets judged by those who don’t do a good job vs those who do. In any profession, 20 percent of the people are excellent, 20 percent are laggards and 60 percent are in the middle. Sometimes, HR allows the bottom 20 percent laggards to define the entire profession rather than focusing on the top 80 percent.
Third, HR needs to NOT become a field only focused on talent (or human capital). HR is about talent PLUS culture and leadership. Very talented people … or workforce, individual ability, skill sets, etc only go so far in sustaining business success. HR should include an equal discussion of talent, culture and leadership.
Dave Ulrich is a Professor of Business at the University of Michigan and a partner at the RBL Group, a consulting firm focused on helping organisations and leaders deliver value. He studies how organisations build capabilities of speed, learning, collaboration, accountability, talent, and leadership through leveraging human resources. He has helped generate award winning data bases that assess alignment between strategies, human resource practices and HR competencies. Sitting on the Board of Directors for Herman Miller, Ulrich is a Fellow in the National Academy of Human Resources. He was named the #1 Wall Street Journal Business Bestselling author for The Why of Work in 2010 and was ranked the #1 most influential person in HR by HR Magazine three times.
At the time this article was initially written in April 2012, Laurence Smith was the Managing Director of RBL Asia. He was most recently one of the very few foreigners to ever hold an Executive HR Leadership position in a major Korean conglomerate, and be specifically charged by the CEO with a transformational agenda. As the Global Head of Learning & Development for LG Electronics in Seoul, he was part of the senior HR Leadership team driving the global HR Transformation. As part of this strategy, he developed a new Global Leadership Framework, drove cross-boundary collaboration & innovation with new Social Media approaches & completely re-structured the learning organisation to support the CEO’s vision of transformation & globalisation. He holds an MSc in Organisational Learning from the US and a BA Hons. in Organisation Studies from the UK. He has spent 13 of his 22 year Human Resources career, based in Asia. Laurence is currently Managing Director HR, Group Head of Learning & Talent Development at DBS Bank and is based in Singapore.
This article was first published in the April 2012 issue of HR Matters Magazine.
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