HR's ROLE IN BUSINESS VALUE ADDITION
What's the big deal about 'value addition' asks many a professional. After all, unless an employee or a job is adding value why is he/she, or it, is there in the organization in the first place? It should only exist to contribute to some part of the value addition chain, it is argued quite justifiably.
Others simplistically feel that whilst the direct production and selling staff surely add value, the indirect employees or functions (including the Corporate Head Office) only contribute to the costs! Amongst them, HR, for years, was deemed to be very much a subsidiary service function, and was at best considered being a somewhat necessary cost!
However, the changing role of HR (from the earlier responsibility of mostly managing IR and administrative duties) by the last decade of the century saw the function emerge from the earlier shadows into a recognized essential contributor and a major part of the top team, for bringing excellence in organizational results. (Read an excellent Harvard Business Review article "Why HR Still Isn't a Strategic Partner" by clicking here)
With the paradigm shift in the business environment of today, in fact all employees have to justify their employment, and HR function is intricately involved in this process, right from the selection, recruitment, development, positioning, motivating, rewarding or structuring the organization to manage the changes necessary, directly in conjunction with all the functions, and not just as an advisor. This high degree of involvement in the overall policy making, planning and execution is a totally changed role to what was traditionally expected earlier. The accountability for the major resource - the employees - squarely rests on them, and their value addition is significant.
Without going into excessive debate, let us first highlight the contributing factors from HR that does/will add value to the results of an organization:
- It is the Human Capital investment that results in superior returns. As such, the selection process based on competency becomes vital, and thereafter the development inputs to bridge any identified gap between Capability & Performance, and for the regular updating of individual's competency - which may be defined as the abilities, skills, behaviours & traits that contribute to superior performance in the job.
- The orientation and work environment design to provide and emphasize the organization's vision and expectations that accentuate empowerment and removes barriers, has to be created, so that increasing "engagement" takes place by the entire employee groups, who become energized and enthusiastic for improved results.
- Team building and aligning people with the business strategies require considerable nurturing. There is no place for Go-It-Alone types. Dealing with the "soft" factors driving human performance also becomes important.
- Performance measurement system management that is seen as objective and fair, and rewards linked to performance, is essential for motivating the employees, and especially high performers - another vital role of the HR.
- Managing quality manpower shortage and retention of key employees has become an ongoing challenge for the HR Managers.
- Routine IR and environment management well continues to remain a major task, which cannot be ignored.
- Use of measuring tools and technologies, and regular reviews of modern concepts (including outsourcing) to attain value addition is necessary.
- Success belongs to those who are willing & able to advise organization at the highest and most important strategic level, which is expected from HR, and the ability to create the necessary transformation amongst all. HR innovations and strategic value added link to sustainable competitive advantage therefore becomes a major focus area - for which people who are aligned to the business strategies are the key.
It has to be realized that without a clear and deep understanding of external business realities, consistent value creation for the organization is unlikely, value being defined by the key stakeholders both inside and outside the company. It has to be clearly understood that value is perceived by the receiver, and not by the giver, and thus HR professionals first need is to be open to them before imposing their own beliefs, actions or strategies. HR professionals have to thereafter create HR practices, build organizational capabilities, design strategy and marshal resources that create value for not only the executives and employees, but also for the customers & investors. Speed in decisions give competitive advantage must be remembered. The HR Manager, therefore, has to become the:
Strategic Business Driver
Entrepreneurs and Business Partners
Knowledge Generators and Disseminators
Professors Dave Ulrich & Wayne Brockbank (both from University of Michigan, Ann Arbor, Michigan, U.S.), in their recent book The HR Value Proposition (Harvard Business Press), have highlighted six important implications for HR professionals on value proposition, as summarized below:
First, human resources work does not begin with HR - it begins with the business.
Second, the ultimate receivers of business reside in marketplaces that companies serve. These markets include customers who buy products and services and shareholders who provide capital. Since HR professionals desire to be business partners and since business begins by meeting market demands, HR must also begin with a line of sight to the marketplace. This places HR professionals in a complex situation. They must create a line of sight to the multiple and frequently conflicting demands of stakeholders ranging from internal clients such as managers and employees to external stakeholders such as customers and investors.
A third implication of the HR value premise is found in framing HR as a source of competitive advantage. Competitive advantage exists when a firm is able to do something unique that competitors cannot easily copy. And what it does better than its competitors must be highly valued by its customers, owners, employees, or managers.
A fourth implication of the HR value proposition is that HR professionals must align practices with the requirements of internal and external stakeholders. When this is successful, HR creates value as defined by those stakeholders.
The fifth implication of the HR value premise is that it directs HR professionals to acquire the personal knowledge and skills necessary to link HR activity to stakeholder value.
The sixth implication of the HR value premise is that it leads HR professionals to view a company's key stakeholders from a unique and powerful perspective. And the HR perspective must be both. Unique implies that other functions or members of the leadership team do not share this same perspective and do not realize they need it. Powerful implies that this perspective adds a substantial value in helping the organization succeed.
With a unique and powerful perspective of their own, HR professionals will see aspects of the business environment that go beyond what other business disciplines bring and that add substantially to business success. Thus when HR professionals view the market environment, they should address the following questions:
- What are the organizational capabilities that my company must have to create products and services that result in our customers' taking money out of their wallets and putting it into ours instead of giving it to our competitors?
- What employee abilities do our people need so that they can understand and respond to short-term and long-term market demands?
- How do we invest in HR practices that deliver business results?
- How do we organize HR activities to deliver maximum value?
- How do we create an HR strategy that sets an agenda for how HR will help our company succeed?
- How do we ensure that HR professionals will know what to do and have the skills to do it?
When HR professionals respond to these questions, they will know why others would benefit by listening to them because they will be delivering real value and they will know what that value is. When HR professionals begin with the receiver in mind, they can more quickly emerge as full strategic contributors; add greater value for key stakeholders (customers, investors, line managers, and employees); enhance business productivity; achieve measurable and valuable results; create sustainable competitive advantage; and have more fun in their careers.
HR Manager of today has to consequently become the business partner, researcher, strategist, system integrator & an OD specialist rolled into one!
Ashit K. Sarkar
Management Advisor and Consultant
Ph/Fax: (080) 2554-0393/4112-8153 E-Mail: email@example.com