Today’s HR organizational structure is misaligned with a Human Capital Strategy of sustained competitive advantage through people. There are two critical areas of misalignment:
- Strategic and administrative work remains tangled.
- HR is structured to produce HR products and processes rather than business results.
Strategic and Administrative Work Remains Tangled
Several decades ago, sales and marketing organizations were commonplace. Over the years, marketing was split off into its own organization. Although the purpose of both functions is business development, each requires a different approach and skill set. The same is true with accounting and finance. Accounting is an old profession, and finance recently emerged from accounting with the rise of capital markets. The purpose of both functions is to leverage financial capital, but each uses different methods to accomplish the task. Like sales and marketing and accounting and finance, administrative and strategic HR are both about people, but each requires a different approach and skill set.
Over the past decades, the HR profession has aspired to create fundamentally different outcomes, but it has attempted to do so inside the walls of traditional HR. As the model presented in Clayton Christensen’s The Innovator’s Dilemma (Harvard Business School Press, 1997) would predict, it is difficult to create a business that represents a discontinuous change inside an old organization: The old will strangle the new. When an organization needs new capabilities, it may need a new organizational space where those capabilities can be developed. Christensen suggests that a successful approach is to spin off an organization so that the new capabilities can be managed in a very different way than in the mainstream business. This has not happened in HR; the old is strangling the new.
The strategic HR seed was planted and nurtured in the traditional HR function, but it has failed to grow. It is time to press the reset button and start a new. Let’s begin by defining three ways in which HR adds business value:
- The HR Administrator: Handles employee records, benefits, compensation, payroll.
- The Fixer: Fixes difficult situations, such as labor unions, quarreling executives, legal issues.
- The Strategic Partner: Improves customer and shareholder satisfaction.
Each of the three roles is very important. Each role not only requires a different skill set but different talents. Skills can be developed over time, but talents cannot. Let’s examine these roles using the following screens:
- Who is the customer? Where must the person focus?
- What education/experience is required?
- What talents/personality traits are required?
Then ask yourself: “How many people do I know who can be best-in-class in each of the three roles?” Should these roles be structurally separate? Is there a compelling reason to put these roles under the same roof?
The HR Administrator. The theory behind administrative HR is that fairness and consistency improve employee satisfaction, and satisfaction creates performance improvements. Good administrative HR professionals strengthen the perception of fairness by developing and enforcing consistent policies and processes. HR administrators do not, and should not, see themselves as accountable for improvements in external customer satisfaction or revenue growth. Since there is no tangible financial return on the investment for administrative activities, cost reduction is the key financial measure.
Successful HR administrators are service-oriented and processoriented. They are comfortable with the stability and predictability. They are also good with detail, they value fairness and equity, and they enforce company policies. A 2006 Corporate Leadership Council Study found that “compliance expertise” is the HR profession’s most accomplished skill.
Taking on an administrative HR role does not require a specialist degree. Many non-HR members successfully transfer into HR administrative roles and can immediately perform standard duties such as managing the appraisal cycle or helping people with policy or benefit questions. Non-degreed HR professionals can learn HR policy and benefit programs as fast as degreed individuals.
The Fixer. The theory behind the fixer model is that improving employee relations is good for business. As David Newkirk, now CEO of executive education at the University of Virginia’s Darden School of Business, stated:
"Every organization needs an HR person who can get senior managers out of tangled situations. These can include harassment cases, labor issues, etc. After years of pulling thorns out of the boss’s paw, it is difficult to move the individual for not being a strategic contributor. Businesses need both individuals."
He’s right. Every executive needs a good fixer—someone to take care of the daily problems that distract an executive and place him/her in a role that is uncomfortable. Fixers provide advice and support to managers and executives and have strong negotiation skills.
General managers often become deeply committed to their fixer. However, fixers contribute little to the development of sustained competitive advantage. Stamping our fires puts us back where we were in the first place.
The Strategic Partner. The theory behind strategic HR is that a company can win in the marketplace when its people outperform competitors’ people. Strategic HR partners are accountable for driving business results through people and organizations—ensuring that the right people are in place, that jobs and organizations are properly aligned to the strategy, and that the work environment enables high performance. Successful strategic partners love change and hate bureaucracy.
These folks have no desire to be compliance experts; in fact, in many ways, they are the antithesis of the HR administrator. Strategic partners focus externally on customers and shareholders. They see line managers as business partners, not customers. Strategic partners push line managers into unfamiliar territory. They debate, challenge, and argue, and they never accept a manager’s diagnosis of people or organizational issues as “truth.” The investment model for strategic HR is ROI-based.
Edward E. Lawler and Susan A. Mohrman of USC wrote about strategic partnering skills:
"Business-partnering effectiveness requires knowledge and skills in such areas as change management, strategic planning, and organizational design. These are complex judgmental areas where HR professionals have traditionally had little experience. This expertise is both hard to acquire and in short supply. Becoming expert in business partnering demands the acquisition not only of explicit knowledge, but also of tacit knowledge that comes from experience."
Note that explicit knowledge comes from books and classes, while tacit knowledge is experiential.
Notice the differences in each of the three roles (HR administrator, fixer, and strategic partner). Each requires different skills, talents, and daily focus. Putting a single person in charge of all three ensures mediocrity. A 2005 McKinsey Quarterly article reported:
“An effort to accomplish these complementary goals [strategic valueadd and administrative cost reduction] with the same individuals, within the same career structures, and with the same HR leaders is almost bound to fail.”
Yet today’s model commonly deploys a career path from administrative to strategic roles. After a person proves his/her value as a good administrator, the person becomes a candidate for an HR business partner opportunity. Given the differences in roles, one wonders if the best administrators will make the worst strategic business partners. No wonder today’s business partner model has not worked. And neither accountability nor training will help.
Continued to Part 2
Source : Bradley W Hall, PhD. The new human capital strategy : improving the value of your most important investment—year after year.AMACOM. 2008
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