[ILLUSTRATION OMITTED]
As the role and impact of the HR profession continue to evolve, we
have reached a critical crossroad. Together and now, business leaders
and HR professionals have the opportunity to understand the history that
brings us to our current situation, to be informed by predictable
trends, and to make the transformation necessary to result in
organizational competitive advantage and HR functional viability. Over
the last hundred years, the HR profession evolved dramatically, usually
in response to external Unquestionably we are changing--the issue in
front of us is whether we will define that future or simply react to the
changes that continue to occur in the economy and in our business
models.
If we do not step forward with compelling HR leadership, the future
will be determined for us. When the June 2005 Business Week reports
"Why HR Gets No Respect," the August 2005 Fast Company
proclaims "Why We Hate HR," and the "evil personnel
director" in Dilbert continues to get knowing laughs, something is
going on that the HR profession needs to address. This set of issues
goes beyond the never-ending lamentations about lacking a seat at the
table for the top HR person--this is about the future of HR in total.
We present a historical review and conclude that HR's greatest
opportunity is to develop the organizational capability to be a relevant
and respected internal consulting organization focused on talent. The
good news is that the knowledge, skills, and abilities needed to do this
exist now and are teachable. A virtual army of HR professionals
"get this" and are ready, willing, and able to develop in this
way.
"No Respect"
It is laughably easy to characterize HR as the Rodney Dangerfield
of the C-Suite ("I don't get no respect"). HR is not,
however, a monolithic thing. Some individuals and companies still cling
to an old style of personnel administration and policy police, and some
leaders and companies more fully recognize the connection between talent
and results, and the function of HR is well integrated with the
implementation of business strategy. We know that HR professionals are
experiencing the negative views of the function directly. In a recent
study, Kahnweiler (2006) identified five key challenges faced by
successful HR professionals:
1. Lack of power;
2. Walking a tightrope;
3. Dealing with skeptical customers who view HR negatively;
4. Vulnerability; and
5. Being overwhelmed.
In addition, the Society for HR Management (SHRM) Global Forum
report on "The Maturing Profession of Human Resources
Worldwide" (2004) showed that over half (54.8%) of HR professionals
say the most frequently encountered obstacle to career advancement is
HR's not being held in high esteem by the organization.
One thing is certain, HR is evolving and the profession will either
be driven reactively by external changes or will more proactively define
its own future. The Bureau of National Affairs (2004) reports that 38
percent of HR professionals have had responsibilities added during the
preceding year (e.g., monitoring corporate ethics, managing external
partnerships, protecting intellectual capital or knowledge management).
The same report shows that HR staff per 100 employees has remained at
1.0, roughly the same average as for the last 10 years, regardless of
automation, efficiencies, scale, or outsourcing. The content of the
roles in HR continue to increase and shift, while resources are
constrained. In the face of these growing responsibilities, we have not
developed a way to describe adequately or consistently our value added
in terms of effectiveness, or even to show significant improvements in
efficiency--although it must be said that enterprise software systems
have greatly improved the ability to report on efficiency improvements.
Sadly, this is not a new lament. More than 25 years ago, a noted
Harvard Business School professor wrote an article entitled "Big
Hat, No Cattle: Managing Human Resources" (Wickham, 1981). You can
guess the point: Despite the external trappings, HR was not delivering
"the beef." Over 10 years ago, an article in Fortune magazine
(Stewart, 1996) began with an uncomplimentary view of HR as "the
last bureaucracy" wherein the author then proposes:
I am describing, of course, your human resources
department, and have a modest proposal: Why not
blow the sucker up? I don't mean improve HR.
Improvement's for wimps. I mean abolish it. Deep-six
it. Rub it out; eliminate, toss, obliterate, nuke it; give
it the old heave-ho, force it to walk the plank, turn it
into road kill.
The emotional content of this presentation reveals the gut-level
issues involved.
As HR leaders we are challenged to guide the many changes needed to
continue the HR evolution. It surely looks worth the effort: The Hackett
Group in Best Practices in HR (2004) showed that companies they defined
as having "world class HR" spent 27 percent less per employee
annually, spent 31 percent less on total labor, had 35 percent fewer HR
staff per 1,000 employees, and experienced 61 percent fewer voluntary
terminations (see Exhibit 1). So, it is possible to improve both the
effectiveness and the efficiency of HR.
Defining the Problem with HR
HR is at the crossroads we have described for many interrelated
reasons:
1. HR as a profession does not have the same "grounding"
in legally mandated processes and reporting as does Finance, so there
continues to be more "art" than "science" and much
greater variability in the quality and completeness of how the work is
defined and delivered. In addition, professions like Finance that have
their roots in Accounting (and are grounded in FASB and many other legal
requirements, most recently Sarbanes-Oxley) have mastered the
transactional arena and have continued to evolve into more of a
strategic decision science, for example, using ROI principles to allow
leaders to think about how they manipulate certain variables to get
desired business outcomes (Boudreau & Ramstad, 2006 and 2007).
Arguably, HR has improved in its ability to deliver efficient
transactional processing, but has not yet grown into a strategic
decision science even though variables like talent in certain positions
(right seat on the bus) or organizational capability and culture in
support of business strategies can have a direct impact on business
outcomes.
2. HR in the C-Suite has not been uniformly accepted. CFO Research
Services (2003) found that HR reports to the CEO in only about 52
percent of companies. HR reports to the COO in about 17 percent and to
the CFO in about 13 percent of the cases. In addition, boards of
directors have differed widely in the extent of their utilization of the
HR leader in the strategy of the organization.
3. The role of HR as a function within organizations might best be
described as a scattergram. There are huge variations by industry,
global geography, and CEO preferences on what HR is asked to do. One
cannot attend most HR conferences without smelling the inferiority
complex inherent in the "how do we get a seat at the table"
kinds of topics. When one hears of "outsourcing HR" and delves
into it, one finds that the HR elements that can be outsourced are
really the transactional and administrative part of HR, not the other
more strategic and value-added parts that relate to business partner and
change agent roles (the transformational business relevant part).
4. HR as a personal skill set must also continue to grow and
develop. The activities and skills to deliver the transactional parts of
HR are quite different than those required to deliver the
transformational parts of HR. "Letting go" of the
transactional part can be personally pretty scary when one's value
in the past was "how quickly I can go do what you asked me to
do." When either an outsourced agency or manager and employee
self-service systems handle those issues, then what is left for me to
do? The truth is, some HR people should migrate toward the delivery of
those outsourced transactional services because that fits better with
their skills and interests; others should develop the internal
consulting skill sets that enable the transformational part of HR. Many
organizations are struggling with this now, or will be in the near
future.
5. The role of HR as policy police has to be put on the table. In
mid-2005, Fast Company ran an article entitled "Why We Hate
HR" in which Keith Hammonds laid out some facts and drew some
journalistically sensational conclusions. He describes HR as a
"henchmen for the chief financial officer" and as a "dark
bureaucratic force that blindly enforces nonsensical rules, resists
creativity, and impedes constructive change." Wow, he must have had
a bad day. For many people the article simply rang true, and as the
success of the evil HR Director in Dilbert also attests, we cannot
afford to dismiss this caricature too quickly. Yes, HR must represent
defensible policies to keep the organization in compliance, but that is
not all they must do.
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Taken together, these observations present the HR profession with
some real challenges (summarized in Exhibit 2). At the heart of it, HR
must get relevant now or risk continued marginalization.
These are huge challenges and the fate of our profession rests in
the balance, but these challenges can be met and mastered. We have the
talent and the motivation. Now we need a roadmap, which the remainder of
this article attempts to provide through the following topics:
1. Evolution of HR Accountabilities--using the Ulrich model and
other research to show "where we have been" and where we need
to be headed.
2. HR as an Internal Consulting Organization--showing how this
future roadmap is consistent with where boards and CEOs expect HR to
make a contribution.
3. Outsourcing Transactions and Insourcing
Transformations--exploring more deeply what it means to be an internal
consulting organization.
4. Content Areas for Internal Consulting--internal consulting is a
process; this section addresses the right value-added content on which
to work.
5. First Steps--Strategy, Structure, and Skills--"how to"
transform HR in an organization.
Evolution of HR Accountabilities
HR has evolved over the last hundred years in reaction to
significant changes in the way organizations get their work done.
Putting the evolution of business and the evolution of the HR name
changes into one table (Exhibit 3) shows how reactive the profession has
been to changes in the social and economic realities of the time. The
challenge for HR today is to define our own future based on the trends
that are eminently predictable now and to step up to the challenge of
creating our own future.
One other key historical point: The boom and bust economic history
of the last 20+ years has formed in large part what HR was asked to
support. The HR function went from being challenged with creative
recruitment, retention, and compensation strategies during boom times to
being challenged with creative restructuring, downsizing, and
outplacement during bust times and in the latest wave of mergers and
acquisitions. The HR priorities during these "bust" times were
not conducive to discussions of talent and hot spots: They were more
about survival and cost-cutting efficiencies.
HR has reactively dealt with the evolving business issues but has
rarely independently implemented "game changing strategies"
for the function or for employees. HR too often reacts to a problem or
request, and has too rarely anticipated issues and proposed solutions.
We in HR did not strategically design the changing "deal"
between employers and employees, but we were the ones to alter the
pensions and benefits, and to execute downsizing and restructuring. It
is one thing to be service oriented (which HR must be); it is another to
be a simple order taker. The evolution we are undergoing requires not
only the intellectual and strategic capability to envision a different
role, but also the intestinal fortitude to step out, lead, and enact a
new role.
Just as the role of the HR professional has changed over the years
of this business evolution, so too has the role of the line manager.
There continues to be a shift in the activities and accountabilities we
expect managers to own based on their management role, what we expect
leaders to own in their leadership roles, and what we expect employees
to own as they take on greater responsibility for their own learning,
growth, and self-management. HR can be the professional HR process
designer and owner, and oversee implementation and rollup reporting, but
in most cases the "work" of the process is done by employees
and managers (e.g., recruiting, selection, performance appraisal, career
development, succession planning, merit increases, stock option
distributions). So, who is accountable: the leader, manager, employee,
or HR? All have a stake in the success of these processes but companies
vary greatly in the extent to which these performance expectations are
made explicit as part of a manager's job.
This evolution has one other common link. Throughout the
development of the HR profession, there has been a tension between the
roles of "employee advocate" and "business leader."
This is a razor's-edge predicament. HR must serve the needs of the
business (and, for example, must plan and enact downsizing and
outplacement) while serving the needs of employees (to be the fair and
impartial third-party advocate and ombudsman where needed). Sometimes
those two hats are hard to wear at the same time; yet, the recent
egregious failures and lapses by leaders of large companies in areas
like compensation and people management have shown that HR must be ready
to step up to the real issues of ethics in organizations and integrity
in leadership. To be a great business partner does not mean to be
co-opted; sometimes we are the ones who must blow the whistle.
The "Extended" Ulrich Model
The most well articulated and accepted model for modern HR was
presented by Dave Ulrich in his 1997 book Human Resource Champions. Ten
years later, the model still works well (and he extended it with his
2005 book, The HR Value Proposition). Ulrich presents a simple 2x2
model, in which the horizontal axis is a focus on either process or
people and the vertical axis is a day-to-day operational focus or a
future-strategic focus (see Exhibit 4). In the lower left quadrant
(process and operational focus) is the administrative expert role; in
the lower right quadrant (people and operational focus) is the employee
relations expert role; in the upper left (process and strategic focus)
is the strategic partner role; and in the upper right (people and
strategic focus) is the change agent role. This focus on changing roles
has provided a vocabulary to allow a deeper discussion of the evolution
that is occurring in HR. Nobody would argue that the day-to-day
operational focus is not important. When this is done well, nobody
notices; yet, if it is fouled up it leads to a lot of attention,
lawsuits, or even front-page headlines. This is also most often the
content for the "outsourcing of HR."
Let us take some license with Ulrich's model by adding more
detail. The four role definitions are fully described in the HR
Champions book, to which we have added the further detail of 16
accountabilities for which HR is typically held responsible. In Exhibit
4, we have sorted these 16 accountabilities into the four roles so we
can explore and differentiate the transactional parts of HR (ripe for
outsourcing in some way) and the transformational parts of HR (essential
for adding value to the organization, and key to the internal consulting
role).
[ILLUSTRATION OMITTED]
In addition, the 16 accountabilities can be placed on a graph in
which the horizontal axis is time (over the last 100 years) and the
vertical axis represents HR's impact on or contribution to the
business (from limiting liability and protecting against the downside of
usually legally mandated things, up to adding value and maximizing the
upside of a strategically differentiated employment proposition).
Exhibit 5 shows the result of this analysis; note that the author
published an earlier version of this summary (Vosburgh, 2004).
Some important caveats are relevant as we explore Exhibits 4 and 5:
1. Within any of the 16 accountabilities are elements of both the
strategic and transactional; as with most models, this is an
oversimplification (consider, for example, the 5 percent strategic work
in compensation that carries 95 percent of the impact versus the 95
percent of the volume work that is more administrative--administrative
work can be outsourced, but most organizations would internally hold
dear the design work);
2. All of the 16 are important and their placement in the exhibits
does not indicate relative importance;
3. The two-dimensional picture itself is too linear and cannot
adequately show the myriad inter-relationships and multidimensional
complexity that exist among these accountabilities; and
4. Key issues such as diversity, inclusion, and ethics weave
through all these topics in substantial ways.
Exhibit 5 shows that over time (100 years), the name of the
function has evolved in step with the kinds of accountabilities expected
of us. Today it is a world of AND: Having to do the lower-left legally
required transactional parts AND the upper-right value-added
transformational parts of HR. Note that the lower-left accountabilities
tend to be the "hygiene factors" that if done perfectly are
not noticed, but if messed up will attract a lot of attention. In
contrast, the upper-right accountabilities tend to be the ones that when
done well give the organization a great strategic advantage. When they
are not done well, many often do not notice, largely because
organizations vary so greatly in the ways they define HR and their
strategic expectations of it. This is, unfortunately, part of the
indictment of HR: Opportunities for impacting business results are not
always recognized or acted upon.
The "lower left" content represents important technical
expertise that often can be delivered in transactional kinds of ways.
The "upper right" content also requires technical expertise,
but can be delivered only if the HR professional has established a level
of internal consulting skills and personal credibility. An obvious
analogy can be drawn with the success profile of an externally focused
consultant within a professional services firm. The client expects the
technical knowledge but is only really "won over" when
consulting skills and personal credibility leads to trusted advisor
status. This important parallel is explored later in more detail.
Research Support from Others
Others have explored this HR evolution issue and drawn somewhat
similar conclusions, particularly as they regard business impact. Jay
Jamrog and Miles Overholt (2004) explored the "past, present, and
future" of HR in "Building a Strategic HR Function." They
concluded that for HR to continue to evolve, we need to put far more
emphasis on human capital as the differentiator. They argued that a key
competency we must develop is the ability to measure organizational
effectiveness. This requires HR professionals to think, act, and measure
in more of a systems way (how actions create outcomes that we care
about)--another way of saying we need to progress in our ability to be a
"decision science" by measuring the right things, and to be
more effective internal consultants.
Similarly, Ed Gubman (2004) explored "HR Strategy and
Planning: From Birth to Business Results," also concluding that HR
must start to measure its impact on business outcomes rather than HR
activities, with greater focus on customer and market growth rather than
on cost reductions and efficiency measures.
Even Wikipedia (2007) defines the objective of HR "to maximize
the return on investment from the organization's human
capital," yet few HR organizations have the kind of metrics that
can support that objective.
Perhaps the most complete and ongoing research and writing on this
HR evolution topic comes from John Boudreau and Pete Ramstad (2007). The
first chapter of their book (Beyond HR: The New Science of Human
Capital) is entitled "The Essential Evolution: Personnel, Human
Resources, Talentship." They call for a shift from a focus on the
services that HR provides to the decisions that HR informs and supports.
Specifically, they argue "the mission of the HR function is to
increase the success of the organization by improving decisions that
depend on or impact people" (p. 9). That is actually more complex
than it appears on first consideration, but they go on to give many
examples of how the HR profession can seize the opportunity to become
more of a decision science that is focused more squarely on talent.
[ILLUSTRATION OMITTED]
Research also shows a disconnect between how far we think we have
come as a profession and how far we have really come. Lawler, et al.
(2006), report an interesting finding in a longitudinal study that was
repeated in 1995, 2001, and 2004. In 2004, HR professionals reported
that compared to five to seven years earlier, they were spending much
more time as a strategic business partner (23.5% vs. 9.6%) and far less
time maintaining records (13.2% vs. 25.9%). This would be reason for
optimism if not for the fact that the actual percentage of time reported
when the study was done all three times shows almost no change in the
amount of time spent as a strategic business partner (21.9%, 23.2%, and
23.3%) or on maintaining records (15.4%, 14.9%, and 13.4%). We want to
believe we have advanced, but the facts state otherwise. This finding
provides a significant note of caution regarding declaring victory in
our HR evolution too quickly!
The Global Perspective on HR Evolution
The global picture of the development of HR over time is also
compelling. Recent McKinsey research (Lawson, et al., 2005) found that
"European companies appear to be struggling to find human resources
professionals with the right mix of skills to support business unit
managers" (p. 13). They found problems both with the
"inefficient and ineffective delivery of HR services" and with
the "service focused skills in order to become a true partner of
the business" (p. 14). They concluded that "To deliver on what
the business needs, HR must put its own house in order, starting with
the skills and capabilities of its staff" (p. 14). Similarly, Bear
(2005) concludes that "the stages of HR evolution differ
globally" (p. 9), with many structures still led by "personnel
administration" officials with a heavy focus on union relations.
In addition, some fast-growing Asian countries, such as China, do
not yet have one generation's experience with the free enterprise
system and HR beyond personnel administration. Before China opened up to
the West, "personnel" often acted as the Communist
Party's spies within the state-owned companies. Talk about
"policy police"! This leads to the current high reliance on
Mandarin-speaking Chinese-descent expatriates from Hong Kong, Singapore,
and elsewhere to handle HR duties while a new generation of Chinese
nationals gets their experience levels up.
[ILLUSTRATION OMITTED]
India's explosion as the "back office to the world"
of necessity led to quick development of broad-based selection and
training systems, benefiting from hundreds of years of history as a
British colony operating in a free enterprise system--so with more of an
infrastructure on which to build. If anything, the global picture of the
issues facing HR is an even more dramatic enactment of our conclusion
that HR must deliver both the basic operational services in an
efficient, scalable, low-cost way and deliver the internal consulting
role that provides business relevant HR solutions.
HR as an Internal Consulting Organization
Bottom line, for HR to address its most compelling challenges, the
one common hurdle is that HR must first ensure that the transactional
and legally mandated parts of the HR job are managed in some way, then
the "big leap" opportunity is to develop the strategy,
structure and skills to evolve into an effective internal consulting
organization that addresses talent and strategic, change-oriented
issues. The good news is that these are learnable skills, there is an
established body of knowledge and experience regarding external
consulting effectiveness that can be applied to the development of the
HR professional, and many HR professionals are poised as "ready,
willing, and able" to make this transformation. The bad news is
that few organizations are teaching their HR professionals these
necessary skills, or evolving their strategy and structure to take the
next step.
Our graduate programs in HR and related disciplines such as
industrial/organizational psychology also have not kept up with some key
content areas. When I went to graduate school (many years ago!), we
asked the faculty to give us a class on executive presentation skills,
because that seemed hugely missing and our ability to be successful in
the real world organizational setting pivoted fairly quickly on that
capability. Our graduate students today should be clamoring for
consulting skills training.
Professional services firms and consulting organizations of all
types have created and institutionalized programs to train their
externally facing consultants to develop the client relationships that
lead to "preferred partner" status in the eyes of the
customer. Our model (see Exhibit 6) shows that there is an easy
transition in adapting these programs to help our HR professionals reach
"trusted advisor" status with their internal clients.
The smaller pyramid on the left indicates additional steps that can
be taught to any consultant; the larger pyramid focuses on the HR
internal consultant specifically. Going up the larger pyramid, a person
must first master the HR functional accountabilities and do so with the
business knowledge that makes the actions relevant to the organization.
The lower sections of the pyramid are the "price of admission"
and are related to the concept of operational excellence: keeping the
trains running. Above that is what we term transformational excellence:
applied internal consulting. If HR delivers on all this, then the top of
the pyramid is the attainment of trusted advisor status within your
organization. As one example, a review of the SHRM certification content
shows that most of the current HR training available externally
addresses the HR functional knowledge part of the pyramid--this is a
necessary but not sufficient condition for success.
Internal Consulting Is Consistent with What Boards and CEOs Expect
of HR
What do boards and CEOs expect of HR? Surprisingly, not much
research has been done to answer this question. A recent study was
conducted by Ed Lawler and John Boudreau of the University of Southern
California's Center for Effective Organizations. The funding was
partly from the Human Resource Planning Society (www. hrps.org), and the
results are published in the Human Resource Planning journal (2006),
entitled "HR Support for Corporate Boards." Input from over
100 HR senior executives and over 75 non-HR executives provided the
data. One key conclusion was that boards and CEOs are limited by their
own experiences as to what they expect of HR, so they tend to ask for
input on areas in which they are more historically comfortable (e.g.,
executive compensation and succession planning). So, what boards expect
and what they should expect from HR are two separate things.
Areas of HR contribution that correlated most strongly with the
board's belief that "HR meets our needs" were in the
upper transformational section of our Exhibit 6 pyramid: HR drives
change management, has a human capital strategy that is integrated with
business strategy, partners with line management in developing business
strategy, and makes rigorous data-based decisions about human capital
management. Sounds like great internal consulting!
In the design of HR organizations, the features that correlated
most strongly with the board's belief that "HR meets our
needs" were:
1. HR service teams that represent centers of excellence as opposed
to decentralized HR--one key to the "structure" that can
support developing HR as an internal consulting organization; and
2. Information technology systems that provide relevant data for
decision making--essential in the lower transactional parts of the
pyramid, but also can provide important data for the strategic analysis
required in the upper transformational parts of the pyramid.
Within HR metrics and analytics, the capabilities that correlated
most strongly with the board's belief that "HR meets our
needs" were all about "upper quadrant" talent and
strategy:
1. Identifying where talent has the greatest potential for
strategic impact;
2. Making decisions and recommendations that reflect the
competitive situation;
3. Contributing to decisions about business strategy and human
capital management; and
4. Assessing the feasibility of new business strategies.
With all this attention on strategy, one must not lose sight of
basic execution. In reviewing HR skills ratings by non-HR executives,
the one skill that correlated most strongly with their belief that
"HR meets our needs" was "process execution and
analysis," the basic "keep the trains running" kind of
expectation.
The authors observed that HR is generally responsive to board
requests for information, but rarely proactive about
"marketing" the information they may have that would be
relevant to some of the areas described here. If the board has no
insight into the availability or relevance of these kinds of
information, it tends to ask for the traditional information only (e.g.,
executive compensation and succession planning). By the preceding lists,
the boards clearly value the strategic business partner and change agent
roles that reflect internal consulting but also expect execution of the
basic processes.
Outsourcing Transactions and Insourcing Transformations
The simplest roadmap feature of this HR evolution is the insight
that strength comes in outsourcing transactions and insourcing
transformations. That means we need to get better at a new set of
skills. On the transactions side, this often means managing outsourced
vendors to service level agreements, leaving HR with the client manager
role (AKA consultant). On the transformation side, the new skills are
the internal consulting skills that relate to the business partner and
change agent roles.
Outsourcing Transactions
Returning to the bottom part of the HR effectiveness pyramid
(Exhibit 6), the delivery of HR tools, processes, and systems accounts
for 18 percent of the impact of HR on business performance, and
effectively using HR technology accounts for 5 percent of the impact
(Ulrich & Brockbank, 2005). This is the lower area of the pyramid
that, if done perfectly, nobody notices, and it adds nothing to the
strategic advantage of the organization; however, when there are
problems in execution, this area can get ALL the attention and undermine
other efforts toward more strategic contributions. Some problems in
basic execution (pay, EEO, labor relations, safety) can land someone on
the front page of the headlines and create huge morale problems
internally. In the end, the operational and transactional aspects of HR
need to be handled well and completely. No matter what other strategic
and transformational work is being done, the trains still need to run on
time.
This area may offer opportunities for manager and employee
self-service web-based support, low-cost back office "contact
HR" support centers, or outsourcing of basic services. Whatever
approach is taken, the solution should be highly efficient and scalable
so the infrastructure costs can remain relatively constant as the
organization grows. The processes that managers need to spend time on
should be greatly simplified and automated; for example: goal setting,
performance planning and feedback, appraisals, and salary
administration. There are many current examples in the marketplace of
software solutions designed to simplify these processes.
To be effective in this "lower part of the pyramid," one
must be:
1. Seen as knowing the business--one's industry, one's
company--and possessing the financial acumen to understand the
"gives and takes" of business decision making;
2. Seen as a business person first (with a general manager
mindset), and as a functional expert second;
3. Aware of the analyst reports on one's company and what, in
their view, is creating shareholder value or holding the company back
from it;
4. Knowledgeable about both competitors and customers.
When HR is seen as operating from this point of view, HR is taken
much more seriously "at the table."
The alternative to doing it yourself internally is to outsource
many of these transactional HR services. Rather than needing skills in
direct delivery of services, the HR professional now needs a different
set of skills (and acronyms!):
1. Human resources outsourcing (HRO): Specifying which services to
outsource;
2. Business process outsourcing (BPO): Agreeing on exactly what
activities will be outsourced and what will be retained internally;
3. Request for proposal (RFP): Reviewing multiple providers and
deciding on a partner;
4. Statement of work (SOW): Clarity on exactly what services are
provided;
5. Service level agreements (SLA): Metrics to measure, report, and
hold accountable;
6. Recruiting process outsourcing (RPO): Sourcing, managing and
retaining talent;
7. Learning process outsourcing (LPO): For training and development
systems.
Transitioning to a new method of delivery means taking over a
"client manager" role with the internal clients that HR
supports. It is essential to involve key business partners in this
transition so they understand and support internal HR in its new role.
Insourcing Transformations via Internal Consulting Skills
Turn to the "upper part" of the HR effectiveness pyramid
(Exhibit 6). To be a strong internal consultant, business partner, or
change agent, one must first have personal credibility. Research shows
that personal credibility accounts for close to one quarter of HR's
impact on business performance (Ulrich & Brockbank, 2005). Note that
the following characteristics also represent the characteristics of
personal credibility inherent in a successful consultant:
1. Effective interpersonal relationships and skills (emotional
intelligence);
2. Understanding the issues and delivering the results;
3. Great communication skills: up, down, across, inside, and
outside; and
4. A reputation for meeting commitments (say what you mean and do
what you say).
Internal consulting involves selling services. "Selling"
HR interventions is unique and different from other types of selling,
yet the internal consulting role has many things in common with the
external selling of professional services. Both situations deal with the
art of agreeing on intangibles in ways in which both parties comprehend
the issues and possible solutions and are happy with the agreement. The
goal is to develop long-term client relationships, not just big one-hit
deals. This type of sale is accomplished by taking the role of an
advisor and becoming trusted in that role. In addition to the personal
chemistry and rapport that is needed, this work requires three things:
1. Creating solutions that work;
2. Educating clients on what is possible; and
3. Operating successfully in an ever-changing environment.
An analogy can be drawn to the business of professional services
organizations. For HR, becoming relevant may lay in fully understanding
and applying the things that professional services organizations already
know about creating strong and abiding relationships as externally
focused consultants, leading to trusted advisor status. Just as this is
the goal for externally focused revenue-generating businesses in
professional services, so this could also be the goal for internally
focused HR organizations that are committed to helping their internal
clients become more successful in the revenue and profit goals that they
must deliver.
The skills that support consulting effectiveness are known and well
tested. For example, one consulting organization has for years supported
those three capabilities through programs called Service Chains[TM],
Taking Ideas to Market[TM[, and Role Selling[TM] (McMann, 2007). HR has
not yet evolved into the "science" that even effective
management consulting has developed, yet these are the new skills
required of HR professionals in organizations. One can simply not be a
business partner and change agent without exhibiting these internal
consulting skills. These are knowable and teachable. They are the
"how" of the work; the "what" will vary with the
situation and rely on the technical knowledge of the HR professional.
So, the technical knowledge of the specialty areas in HR is a necessary
but not sufficient condition for success in the eyes of one's
internal clients.
To be an effective internal consultant, both content knowledge and
style are important. Regarding content knowledge, it helps to have had
experience with organizational change from a variety of perspectives
(strategy shifts, mergers, acquisitions, spinoffs), and to have a point
of view well beyond structure changes. It helps to have models that can
be shared with the organization to allow others to think about
organizational change and engage in supporting it. There are many such
models, with management gurus such as John Kotter (1996), Rosabeth Moss
Kanter (1983), William Bridges (2003), Warren Bennis (1995), W. Warner
Burke (2002), and Ed Schein (2004), providing excellent time-tested
guidance. Classic models such as the McKinsey 7-S Model (Peters &
Waterman, 1982), which take a dynamic systems view, have withstood the
test of time. Pick one that works for you and your business that
resonates with your current situation. A model gives managers a common
vocabulary to talk about the change and guides them in how to engage
employees to be part of the change, rather than feeling like something
scary is being imposed from above. Effective internal consultants and
change agents have a blend of political skills, system skills, analytic
skills, people skills, and business skills.
Internal consultant, business partner, change agent--All relate to
each other based on common skill sets and bodies of knowledge. Much is
known and teachable in this area that would allow HR professionals to
become more effective in the transformational area of their
accountabilities, yet, it is rarely part of their basic training in
either organizations or graduate university HR programs (Ramlall &
Sheppeck, 2006). That needs to change.
Content Areas for Internal Consulting
Both general internal consulting skills and specific technical
knowledge are needed for effectiveness. Six content areas in which HR
can make the greatest impact on organizational success include:
1. HR Strategy Aligned to Business Strategy;
2. Talent: Right Seat on the Bus;
3. Organizational Capability: Delivering Business Results;
4. Organizational Culture: Mirroring the Customer's Value
Proposition;
5. Renewal: Growth and Development;
6. Innovation: Creative, Continuous Improvement.
All of these require internal consulting skills to maximize the
success of the HR professional. The focus of this article is on the
development of HR as an internal consulting organization, so not all
these content areas are reviewed here. The first two areas are briefly
summarized to give an example of how the internal consulting skills
contribute to the content area. One thing is clear: These are not the
functional areas in which HR is traditionally structured.
HR Strategy Aligned to Business Strategy
Contribution to business strategy is HR's highest calling and
greatest opportunity for impact, accounting for 43 percent of HR's
impact on business performance, with business knowledge accounting for
another 11 percent (Ulrich & Brockbank, 2005). Taken together, these
form the area in which HR has the greatest opportunity to develop. This
requires stepping back from the day-to-day delivery of services and
reactionary fire-fighting to engage with business leaders in a different
way.
Most organizations have some formal way to develop business
strategies. The finance function almost always directly connects to the
strategy work because of the obvious budget implications. The HR
function has varied dramatically in the extent to which it provides an
equally compelling connection to the business strategy work--for
example, by exploring with the business leaders the HR implications of
the business strategy. As a positive example, one deceptively simple
part of the PepsiCo Human Resource Planning process in the 1980s was the
page with two columns: "Business Strategy" and "HR
Implications." By making this a required page for each function and
the company as a whole, it transformed and elevated the discussion into
one that propelled HR into a strategic internal consulting role. To
assist others in doing this, refer to Exhibit 7 as an example of the
kinds of questions internal HR consultants should explore with the
business leaders they support.
EXHIBIT 7
Aligning HR Strategies to Business Strategies
Leadership: Do we have the leadership in place that can deliver
this business strategy? If not, what needs to change? Is the
"leadership structure" right to deliver the strategy? Do employees
rate their senior leaders highly on be