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Steve Foster Opinion Column - Part 1

Issue 1 - October 03

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In this section on transform-hr.com, Business Consultancy Manager Steve Foster discusses the role of HR in business transformation. In part one of the discussion, he looks at the current role and impact of HR.

How can HR be the catalyst for transforming business?

When the Financial Director of a blue chip organisation leaves, the share price will often dip in response, raising concerns among investors. However, when the HR director leaves, in general there is very little impact, as long as people still get paid. In part, this suggests that organisations under value the contribution of people to an organisation’s success; academic research and RebusHR practical experience indicates that:

• Most organisations don’t make the best use of their employees

• There is a considerable gap in workforce performance between the most and least successful organisations

• Initiatives to enhance workforce performance struggle to get boardroom priority, despite claims that people are an organisation’s most prized asset

• Before most organisations can claim to have a ‘world class workforce’, considerable work has to be done to bridge the gap

Benchmarking data suggests there is a large gap between the very best performing and the median companies. In some UK industry sectors, the very best organisations achieve 60-80% higher revenue per employee than those at the median level. In the engineering and manufacturing sector, there is a staggering 300% difference between the median and best performing organisations in terms of profit per employee, and a 150% difference in revenue per employeei .   Benchmarking data also reveals that high performing organisations have much lower absence rates and lower employee turnover than their poorer performing competitors. There is also some evidence that good people practices affect product quality, the level of customer complaints received and even market value and share price.

Academic research now strongly suggests that organisations with a clear people strategy, aligned to the overall business and employing good HR practices, will enjoy enhanced performance which directly impacts the bottom line.‘Softer’ issues such as employee satisfaction and quality of work life can lead to genuine ‘hard’ results in terms of customer satisfaction and employee retention. As more is learned about the relationship between people practices and business results, it is clear that developing and sustaining the conditions that create a high performance workforce must become a major strategic priority for organisations.

HR under pressure

HR has much on its plate these days – high levels of legislative change, the need to manage all types of diversity, work/life balance issues and demands from employees to provide more flexible approaches to reward and remuneration. Internally, there is pressure to improve the quality of service delivery and to meet the demand for timely, accurate and relevant management information. Clearly, traditional structures and strategies will not enable HR to meet these demands and some form of transformational programme is needed to:  

Streamline transaction and other HR processes, making them cost effective and efficient Provide relevant information to managers on all aspects of people and employee management, to support higher levels of performance Promote line manager and employee self sufficiency Shift the HR professional’s contribution to one of internal consultant and strategic business partner Improve the quality of HR service delivery Reduce the costs of providing HR services, thereby increasing value and profitability Ultimately, to support improve performance by the people in the organisation.

Transformation challenges

In the next few issues of transform-hr.com, we will be examining some of the major challenges facing the HR function:

• While some pioneering HR functions are becoming strategic partners within their client business, for many there are still difficulties in breaking away from highly manual, inefficient processes. As Dave Ulrich suggests, unless HR can demonstrate competence in providing basic administrative services in an efficient and cost-effective manner, there will be no opportunity for HR to demonstrate its strategic contribution. The use of technology to manage complex administration will be a theme that runs throughout this series.

• HR needs to define and fulfil a more strategic role for itself (a recurring HR conference message for 25 years!). Arguably, HR strategy definition is not the problem (for there are only so many variations), but rather, it is the ability to execute strategy given the market, economic, and cultural variations that exist. How can technology support this transition?

• HR’s biggest challenge is creating visible value to the organisation – this is in itself a problem, in that HR often deals with long term intangibles such as skills planning, performance and development that are not traditionally measured by formal accounting systems. We shall examine the use of performance measures for the HR function, including workforce analytics and the current interest in Human Capital Accounting.