In the business world there are certain politically correct clichés and debates, which all too often do not go beyond amiable words. Some are fleeting and quickly become outmoded; others are timeless and shamelessly repeated again and again.
One cliché that strikes me the most is, “the greatest asset of our companies is the people”. Undoubtedly this matches reality at times, and whoever says so really sees it that way. But often this sounds like organizational cosmetics, just make-up to look more attractive to society.
If this were really true, the HR role in charge of managing people would be represented on the management board and considered as strategic. Something that rarely happens and which makes me think that either top management does not believe that the people are its greatest asset, or they do not believe that HR departments are strategic.
Perhaps there are historical reasons behind the fact that the HR department does not have the specific power that others do. We should not forget that the companies as we know them today were designed to function in conditions of low uncertainty. The logic is based on the principle of traditional management which emerged to meet the challenges the industrial revolution raised.
In this context, the focus is on production and efficiency as well as financial planning, and it is also at this moment when personnel departments emerged. Their functions were not in any way strategic. People were thought of as a basic resource and easily replaceable.
Years later, as the offer outstripped the demand, marketing gained traction and became a key department. In the meanwhile, personnel departments continued to be far from strategic and were still waiting for their opportunity.
However, today’s much more uncertain and changing environment needs new formulas to create competitive advantages. This situation has given rise to the knowledge and creativity economy, where talent, i.e. people, becomes essential. Some sectors are already battling for talent. In the future this will increase as talent will become the basis for competition in many industries.
This fact will become even more apparent as the millennials join the working world. This is the best prepared generation ever in history and one dominated by a set of values so radically different from those of previous generations. Millennials have the skills and attitudes required for starting up on their own, and the best will only be willing to work for certain companies.
According to the “Deloitte Millennial Survey”, the companies chosen by these millennials will be the ones that favour innovation, that are ambitious, and allow them to develop their skills offering them autonomy, while having a positive impact in society.
This new scenario makes it compulsory for HR departments to gain strategic power in their companies, especially in those that are within dynamic and highly competitive sectors and which are also global, wanting to incorporate innovation in the day to day. Although to a greater or lesser degree, this effect will be generalized.
Evidently this change will not happen overnight or at the same speed in all companies. In one way or another, HR departments themselves must be proactive and make the most of this great opportunity to achieve the worth they have craved for so long.
There are a series of challenges that HR must address to start and accelerate this process.
Be proactive: even though this has already been mentioned, proactivity is vital. If the HR department wants to be strategic, the members must take the first step and raise their arm to make the rest of the organization aware that HR has important things to say. Rarely do we achieve something, unless we pursue it.
Understand the business: many HR managers complain they are not understood by the rest of the managers in their company, or even by top management itself. Perhaps it would be handy if it were the HR managers who made an effort to understand the business and to speak the language that other departments use, that is to say, in terms of numbers and value.
Upon understanding the business model the company is currently using, as well as the corporate strategy for the next few years, it will be much easier for the HR department to respond to the present and future needs of the organization and bring value to the board of directors.
Internal marketing: using marketing concepts internally is a practice that can help add value. Basically this is about developing an internal brand, the employer brand, which collaborates to secure talent loyalty. For this, it is important to have a clear idea of the desired positioning together with the segments of the targeted internal clients.
Once the different profiles are clear, it will be much simpler to identify their needs and offer them a robust value proposition as well as communicate it through the most suitable channels for each case (face-to face sessions, intranet, email, newsletter, among others).
Internal business model: if the required resources and activities to be done are added with the main partners of the department to the factors commented in the previous point, there will be a much clearer picture of how to create and add value from HR.
A simple way to do this exercise is to apply the business model canvas to the HR department. Aside from the elements mentioned, the description of the business model must include costs and earnings.
Technology: many of the tasks undertaken today in the HR departments are administrative and it is desirable that these be outsourced or automated, if possible, through the existing technologies.
In my experience, HR departments are the last places where technology reaches in a company. Often the profile itself of the people within does not facilitate technology uptake, nor is advantage taken of all the benefits this brings.
Connect with people: as already indicated, today’s companies emerged from the industrial revolution and it is common knowledge that one of the principles of management in those times was the differentiation of work. This led to the division of companies into departments, each with their roles.
This organizational structure means that often departments act like silos, with hardly any communication, when in reality all are pursuing the same goal, the company’s success.
That is why it is important to ensure that the people within a company connect with one another, engaging in conversation between themselves and exchanging knowledge. In the case of innovation, these connections are fundamental, but they also bring great benefits for exploiting the existing business.
The digitalization of the company, as well as other actions lead by HR may be a way to generate value for the company while also gaining strategic power.
Build innovation cultures: according to a recent study by PwC, 97% of the CEOs interviewed confirm that innovation is among their key priorities for the next few years.
Even though innovation translates into new products and consequently competitiveness and growth, without some specific internal practices that are deeply focused on people, it is not possible to innovate in a sustainable way over time.
So the creation of cultures that favour creativity and innovation, with everything that this involves, is one of the challenges HR departments must address. Given that there is more talk of innovation than there is action, HR departments would do well to anticipate and lead this internal transformation.
In a nutshell, there are a series of trends that position HR departments at the brink of a big opportunity to gain specific power and become strategic. However achieving this off is not so easy and involves handling various challenges firmly and urgently.