Two months ago, I attended a conference
for HR professionals hosted by IMA. One of the speakers made a powerful
presentation on how HR tracks various performance parameters in their
Organisation and gave a snapshot of various tracking tools. The presentation
got a mixed response, with quite a few fellow professionals skeptical about the
use of such metrics and the difficulty to design, track and use them. These
opinions were not surprising.
Innumerable studies, both in the West
and in India have shown that CEO’s believe Human Resources Management is a
critical strategic aspect for Business success. Most of them would say that
people are their most important resource / asset. Over the past 22 years,
having worked both inside Corporations and as an external Consultant, I have
come to view these responses with some cynicism. I believe that quite a few
CEO’s make these assertions more because it is the desired and proper response.
While they may believe that this might be the case, they are not convinced
about the strategic role of HRM. As they say, the proof of the pudding is in
the eating. How many organisations have the HR function sit in on strategic
planning – not the periodic ops review or the ritualistic planning exercises –
but the real strategy sessions, where the Company’s medium and long-term
courses are chartered. The mix often consists of the CEO, the CFO, the
Marketing and the Sales Head and the Manufacturing / Product Development Head.
The HR head is rarely present as a regular member of such deliberations – in
most Organisations. (Some well run Companies are an exception).
I am not about to make out a case
against the CEO’s. If any one is at fault, for this sad state, it is we HR
professionals. While the Business processes have grown at a very fast pace,
other functions adapted themselves to the current reality and reinvented most
of their approaches, the HR function is still a few steps behind them in most
Organisations. We, as a breed, have not come to terms with the expectations of
the Top Management in playing our role as a strategic partner. We are still
limited by our desire to be seen as the Humane face of the Organisation, and
thereby the need to be seen as liking people. Result -Invitations from the CEO
is thus only for sessions where people related aspects are discussed –
Compensation Levels, Attrition rates, Employee Satisfaction etc. The CEO has
not practically experienced the HR value proposition as it were – How does the
HR Professional help me run my business better? What insights does he provide
me? Etc. Hence, the exclusion.
Let us return to the First Principles
of Management. And here I would like to quote one its original Gurus, Peter
Drucker, who has aptly stated
Profit is not the
explanation, cause, or rationale of business behavior and business decisions,
but rather the test of their validity. If archangels instead of businessmen sat
in directors' chairs, they would still have to be concerned with profitability,
despite their total lack of personal interest in making profits.
Hence it is self evident that the
fundamental concern of any CEO is to run the business profitably and the bottom
line is his prime driver. If we, as HR professionals accept that then we can
draw additional insights from the following quote by Dr. Jac Fitz-enz Founder,
Saratoga Institute
“If the language of
business is dollars, then the alphabet is numbers.”
Which brings us to the Fundamental
question – how much does HR speak in the language of the business and how much
of the alphabets do we use in our communication with the Top Management? My
submission - very little. This view definitely would raise howls of protest
from fellow HR professionals. But these are startling truths. We do measure
attrition rates, payroll cost per employee, absenteeism rates, employee
satisfaction etc. We have various metrics in place to track our performance.
But how many of these are really helpful to the CEO to run the business
profitably?
Let us accept one fundamental truth
about Metrics:
All
metrics are numbers, but not all numbers are metrics. Real metrics measure
outcomes associated with business strategy and customer driven objectives. They
are not an end in themselves, but in the end must be calculated, as metrics are
the ultimate arbitrator, the final judge of performance.
And
the standard metrics we use, sadly, do not fit the bill. That is why we still
do not find acceptability as a Strategic Business Partner. Many of you might
view these statements as a ‘Putting down the Function view’ - rantings of a
cynic. Well, this is not just my view. Take a look at what our own Professional
Body SHRM has to say
“A recent survey found that the HR Director is treated with as much respect as the CFO in only about 50 of 5,000 companies around the world.
Many business leaders do not understand HR
They UNDERSTAND that
The CFO is responsible for dollars in and dollars out, for short-term accounting and long-term financial leadership.
It is the job of
the CFO to keep the company fiscally
sound.
BUT they do not UNDERSTAND that
HR is responsible for talent in and talent
out, for
short-term accounting and long-term financial leadership. It is
the job of HR to
keep the company organizationally sound.
since
HR does not speak in the language of the business (appropriate metrics)”
Our
common refrain is - Why should we be concerned about Metrics? HR is a soft
unavoidable cost of doing a business. It is people related and we cannot
measure these aspects.
Well
we need to
Because
-
About
50 % (or even more) of any Company’s operating costs are people related. That
is what we are responsible for and that is what we need to account for – both
in terms of current efficiencies as well as strategies for the future.
Especially in these times of economic crisis!!
Because –
·
Metrics allow fact-based decision-making;
·
Metrics can change behaviour when communicated throughout a company.
·
Metrics clarify what is important.
·
CEO’s and Senior Executives care about the impact of HR on
performance… and they care about numbers and tangibles.
If we as practicing professionals need to
increase our acceptance as Strategic Business Partners within the Organisation
and improve our intrinsic professional worth we need to walk the talk. And this
we can do by
·
Expressing the desire to shape corporate strategy – not in words, but by action.
·
Understanding the business and “speaking the language”
·
Getting inside the CFOs head (Thinking like him)
·
Knowing the talent base that can drive corporate strategy – it
is not necessarily the preserve of Top Management alone.
·
Being prepared to provide the numbers! (Adapting a sound HR Metrics
Programme)
I categorize the above 5 steps as ‘call for
action points’.
AND aligning HR practices to meet / enhance
corporate strategy in the following 6 significant HR practice areas
·
Rewards & accountability
·
Collegial, flexible administration
·
Recruiting & retention excellence
·
Communications integrity
·
Dedicated HR service technologies
·
Prudent application of resources.
In a series of further posts on the blog, I
shall attempt to see how we as professionals can put the above call for action
points into practice in each of the 6 practice areas and what are the
frameworks and guidelines we can use to assist us.
