HR Should Own Organizational Effectiveness
What should the role of HR be in a corporation? It many respects, the answer is obvious and simple. It should take primary responsibility for providing input, advice, direction, and execution with respect to organization effectiveness. Increasingly, what makes organizations effectiveness is how they organize staff and manage their human capital. Modern organizations are dependent on complex systems and the knowledge of their employees. Yes, it’s important for organizations to have the right amount of financial capital and hard assets, but it is the soft assets that are progressively the difference makers between successful and unsuccessful firms.
Historically, many critics of the HR function (formerly known as personnel) have pointed out that HR is more of an administrative unit than a strategic player. Recently, more and more articles and books have claimed that HR has changed and become much more of a player when it comes to organizational effectiveness and business strategy. In a book I recently published with John Boudreau entitled, Effective Human Resource Management: A Global Analysis, we present data from 1995 to 2010, which shows little to no change in how HR spends its time. It also shows that HR spends less than 15% of its time as a strategic business partner. Where does it spend most of its time? It spends it dealing with the implementation and administration of HR policies and practices. This is true in 1995, and data I recently collected show that it is true in 2013.
When HR executives were asked in my survey to report if they have recently increased the amount of time they spend on being a strategic business partner, their answer is, “Yes.” Many report that it has increased significantly since 1995, despite the fact that our data say it has not.
What should HR do and what can it do in order to become a more strategic business partner and greater contributor to organizational effectiveness. Before answering this question, it is important to note that my research clearly shows that spending more time as a strategic business partner leads to better company performance. It is clearly the right place for organizations to position their HR function.
There are many ways that HR can contribute to business strategy. It ranges from helping to identify and design strategic options, through to picking the best options, including facilitating the implementation of the strategic options the company chooses to pursue. Usually new strategies require different behavior and different performance from many individuals and parts of the organization. This type of change should be a real sweet spot for HR.
Unfortunately, my data suggest that HR rarely plays a major role in the development and implementation of business strategies. They are most active in helping design the organization for change, and least active when it comes to working with the corporate board. When I look at whether their role has changed in the recent years, the answer is, “No.” HR seems to be about as involved in business strategy today as it was a decade ago. This is despite the fact that my data clearly show that when it is involved, organizations function better and are much more successful in implementing strategic change. Incidentally, my data covers the U.S., Canada, Australia, India, Europe, China, and the U.K. I get virtually identical results from large corporations in all of those countries. The failure of HR to be the player it should be, with respect to business strategy, raises the question of how it can become more of a player in corporate strategy design, implementation, and change.
Clearly, HR should be eager and ready to take on assignments having to do with organization design and effectiveness, but that may not be the best route to being a major player in business strategy. The best route may be through a focus on talent and its procurement, development, retention, and motivation. It’s not a matter of just being a provider of good talent; it is a matter of identifying the critical talent that makes a difference between the organization being effective and not so effective. If HR can identify key talent areas and provide coherent, well-developed plans for obtaining, developing, and managing critical talent, it has opened the door to being a major strategic player, with respect to organizational effectiveness.
Talent is clearly an area where CEOs and senior executives need help, recognize they need help, and often look to HR for advice and counsel. HR can establish its credibility by performing well in this area, and this can open the door to being a true strategic partner. Talent is a key issue among senior management and at the board level, so expertise in talent has the potential to make HR executives major players not just at the mid-level in organizations, but also at the board and senior executive levels. A major advantage of establishing credibility in the talent area is that it naturally leads to discussions about organizational design, rewards systems, strategy and change management. All of these additional areas need to be dealt with in order to create an effective organization, and should be natural parts of any discussion about talent development, procurement and identifying the critical positions in an organization.
Talent can be the way to open the door to a broader role for HR that includes organizational effectiveness. Indeed, it may be the key to changing the very name of the HR function so that it becomes the organizational effectiveness function, but that is a topic for a future piece. It is clear that most organizations are not prepared to create an organizational effectiveness function at the senior corporate level that includes talent, organization design, change management, and information technology. But they ought to be, and in most cases, are ready to be helped in talent management by the HR function, and they know that in order to do talent management well, a broad assessment of the organization’s work, jobs, rewards, etc., is necessary and needs to fit the organization’s business strategy.