Placing HR on the agenda
on May 12, 2021

first_imgHow can HR directors best grab thelimelight as CEOs look for short-term profits? Keith Rodgers reports that often it is a matter of taking something tothe table that will grab the attention of the boardIf you’re strugglingto understand why human capital management tends to slip off your board meetingagenda with such depressing regularity, consider this simple equation putforward by the HR director of a large multinational. A serious attempt to raisethe value of human capital takes three to five years. The average incumbency ofa chief executive is between three to four years, and falling. What kind ofnewly appointed leader is going to commit to a project that in all likelihoodwill exceed their own tenure?The question, whilesomewhat cynical, is asked from the perspective of years of senior-levelexperience in the HR field. This is not someone who believes HR has anunwritten right to be represented on the board, nor one who argues that HRissues should be the top priority for every CEO. Rather, it’s raised in thecontext of boardroom reality.While every companytalks a good story about the value of their employees, the harsh truth for manycompanies is that their actions don’t back up their best intentions. In apecking order where the likes of finance, operations, sales, marketing and ITare all vying for position, getting HR issues onto the table can be a toughtask.HR is fighting backhard, however, and some of the largest companies can demonstrate in practicalterms that their boards, from the CEO down, have committed topeople-development principles. Organisations like BT, DHL, Boots, TRW andothers are undergoing major change – from distributing the HR function acrossthe enterprise to measuring leadership skills and shop-floor satisfaction –which reflect a fundamental acceptance of the importance of strong humancapital management throughout their organisation. The big question for theirpeers is how these groundbreaking initiatives can be driven through andsupported in their own boardrooms.Mark Geary, managingdirector of AsiaNet Consultants in Hong Kong, believes that the issues facingHR directors are both structural and philosophical. With over 20 yearsexperience on three continents, including senior executive positions at ICI,Ladbroke, Inchcape and InterContinental Hotels, Geary has witnessed thechallenges HR faces in a variety of organisations.He believes that whilehuman capital management is an increasingly high-profile issue, there are fewconcrete examples of companies practising it. Part of the problem is theendemic obsession with short-term strategy. Twenty years ago, companiesreported their results on an annual basis, today the emphasis is on hittingquarterly numbers. “It’s focused on the share price, they look at thecosts they can influence in the short term. For many companies, labour costsare a significant item,”  saysGeary.Many of HR’s problemslie with the accounting profession. “Machinery can be depreciated overseven to 10 years, computer software over five years. But human capital – it’snot on the balance sheet. There is no proper consideration given to the valueof a company’s human resources, no depreciation, no annual maintenance budget.If the same detailed financial management was given to people as it is tomachines I believe companies would be a lot healthier.”That obsession withnumbers is exaggerated in instances where the CEO and other senior managers aredriven by large share option packages. But there are also subtler factors atplay, linking back to the argument about a CEO’s tenure. The issue here,according to the HR director of the multinational mentioned above, is not justthe timescale – it’s also the conflict between corporate and personal needs. The first part of anew leader’s reign, he argues, is often occupied in clearing out part or evenall of the old guard, and bringing in trusted lieutenants – trust-ed, that is,in terms of their loyalty to the CEO. Non-executivedirectors, the people who backed the leader’s appointment, inevitably fall intoline and support the new team. Together, this band of senior executives spends timeassessing corporate strategy, refines the vision, sets out plans to execute onthe new direction and finally gets the operational machine moving.Through all of thistime, often a period of painful change, the CEO is looking to secure thesupport of his or her appointees, and ensure that power brokers emerging fromwithin the corporate ranks can also be brought onside. “Where doesmeasuring human capital come in with this sort of scenario?” he asks.”Not that high.”Faced with these kindsof political problems, senior HR executives argue HR has to take a pragmaticstance to get itself heard. If the driving force in the boardroom is numbers,then HR has to be armed with its own statistics to reinforce its business case.As Richard Townsend, adivisional HR director at DHL, argues, “In terms of what gets you listenedto in the boardroom, you need convincing data that says this will be the impacton productivity and profit. When a company leader is driven by doing deals, nomatter what metrics the HR director has, it doesn’t get listened to. But ifyou’re trying to talk in a boardroom and you don’t have metrics, you’re notgoing to get listened to anyway.” Townsend is keen todifferentiate between “rear-view mirror” metrics – particularlyexternal benchmarking data that tends to be historically focused – and datathat “drives the future”. He says, “In my experience, if youhave internal comparative benchmarks, you are more likely to excite themanagers into action. If their colleagues can produce excellence, they can doso too.”A team of businessmanagers and HR professionals at DHL is currently working on an initiative todevelop what it calls “HR productivity metrics with a purpose”, inthe course of which it’s asking hard questions about the practical value ofdifferent types of measurement. They range from “Is it real?” and”Is it a priority?” to pragmatic questions such as “What are wereally going to do about it?” and “What are the specific actionplans?””There’s no pointin having 101 metrics if you’re only looking at two or three of them,”says Townsend.Most HR professionalsagree that effective metrics are critical in allowing HR’s voice to be heard.Geary, for example, argues that the HR profession has not been as numerate asit should be, but believes that the core metrics, including links between staffattitude and customer satisfaction, are not too hard to produce. More importantly, theyneed to be fed back into operations for continual improvement. At Inchcape’sToyota business in Hong Kong, for example, Geary’s team carried out research tomeasure what customers saw as important when purchasing a car, and whatemployees believed the motivators were. The cross-match threw forward differingperspectives that helped define the forward-looking business plan. “Itwasn’t difficult to convince the CEO,” he says. “If you give him asimple survey about employees, he’s listening. It’s all about theapproach.” Ultimately, however,HR’s ability to influence board-level opinion can only be demonstrated by concreteresults, and it’s abundantly clear that those companies embarking onleading-edge human capital projects tend also to be the companies that enjoysupport from the top down. As such, the critical issue is not how HR persuadesthe board to support certain programmes as much as how closely HR’s visionmatches the overall business goals. This difference isevident at Boots in the UK, which is currently rolling out a leadershipdevelopment programme for its 200 top managers – one which, according to grouppersonnel director Andy Smith, was driven by the HR department and the CEO inconcert. Under the programme, conducted in association with Hay Group, Bootsinterviewed a range of employees with different performance records from thetop three tiers of management. That helped it define a leadership model,incorporating Hay Group’s competency assessments, which provides the frameworkto build individual development programmes. Additionally, it’s been able toaggregate  all the competency dataaround three leadership elements – thinking, pace and team – and assess the group’s overall skill levels. As a result, it hasidentified a need to boost its team leadership skills, and is incorporating theleadership model into its recruitment processes. Significantly, board membershave both driven the process and been interviewed as part of the leadershipskills research.John Steele, grouppersonnel director at BT, argues that rolling out any kind of advanced HRprogramme requires this kind of board level involvement. The heavily unionisedcompany has been through intense restructuring during Steele’s 11-year tenure,with staff numbers being halved from 250,000 to 125,000 over that period – andHR has been at the centre throughout. “There’s arealisation at chairman and CEO level that without people you’re not going tochange your strategy,” says Steele. He argues, however, that HR also hasits own responsibilities in driving its agenda. ‘You have to have an HRfunction that is appropriately skilled and has some strong players on it. Youneed a group of people who are business people first, HR professionals second,and who have the ability to work with and influence their colleagues.” Four years ago, Steeleseparated out BT’s transactional HR work into a shared services centre, whichis now run as a 50/50 joint venture with Accenture. At the same time, thevalue-added  HR consulting services weremoved into the line of business, with each divisional CEO now working with itsown HR director. Now, compared with a 10,000-strong HR function when Steelejoined, the total numbers across the group have dropped to 600.TRW, the internationalautomotive, aerospace and IT company, is going through a similar process toalign HR with the individual business functions. Previously, the UK divisionoperated nine facilities, each with their own management team and HRdepartment, and with a range of different HR procedures covering areas such assickness, absence and overtime. Now, the company is reorganising in preparationfor opening a shared services centre next year, either internal or outsourced,to handle transactional operations.Meanwhile, like BT,other key HR personnel have joined the management teams of the business unitsthemselves. According tovice-president of HR, Doug McIldowie, the whole restructuring programme – whichincludes the cost of installing a backbone HR IT system from Peoplesoft and ashop floor self-service HR system for its 3,500 UK staff – is expected to getpayback within less than a year. Board-level backinghas also allowed TRW to embark on more advanced retention and measurementprogrammes, based around an internal “assignment” culture. Here, theconcept of “jobs” is replaced by serial projects, offering employeesthe chance to continually develop new skills and, if they wish, to switchlocations both nationally and internationally.The company isbuilding individual assessments that log employee’s competencies and skills,developing an ongoing profile based on individual performance measurement ofeach assignment. However much thesekinds of initiatives reflect HR’s strategic importance. McIldowie believes thatHR directors will always have a specific position within the boardroomhierarchy. Even if human capital is a CEO imperative, HR’s own role is primarilyas an influencer. “We’re a supportservice – we’re not going to be like the operations vice-president or theengineering vice-president or the customer vice-president. Our role is to makethem successful in getting equipment out of the door or developing newbusiness. We never have power, but we have more influence.”Capturing the board’sattention As they battle topursue their agendas, HR directors across industry tend to come across abroadly similar range of issues – getting boardroom backing at a strategiclevel, getting the necessary funds for specific investments and then executinghuman capital management projects. According to RichardTownsend, a divisional HR director at DHL, the first, basic priority is for HRto express itself in terms that line of business managers understand, ratherthan being seen to drive its own agenda. Grabbing airtime, he adds, ultimatelycomes down to respect.”It does dependon the dynamics of the team. Sometimes the HR director will have already provedto be adding value, by finding great people, or giving the CEO insight into howto build the business,” he says. “Sometimes there’s almost a ‘proveyourself first’ feeling. I can think of two individuals in Top Twenty Corporationswho have gained credibility by helping recruit and then develop the top team.Other HR directors will have been thrown into the team and will have to provethemselves.” In terms ofinvestment, Andy Smith, group personnel director at Boots, says that provingthe business case is essential – but it doesn’t always require a financialreturn on investment. When pushing through Boots’ leadership developmentprogramme at board level, he says the process was eased by the fact there wasan underlying assumption it needed to be done. While the HRdepartment was required to put forward a business case for the total spend, thedecision to hire Hay Group and the investment in management  time, there was no insistence on provingthat a particular pound spend would deliver a specific increase in sales. That wasn’t the casein his previous position at Boots the Chemist, where the company underwent abehavioural change project within the stores for customer-facing staff. Theproject, designed to raise awareness of customer issues and get employees totake ownership of their business units, included the use of BalancedScorecard  methodologies  measuring finance, operations, people andcustomers. In this case, the project team had to commit to increasing sales at20-odd pilot stores by some 2 per cent in comparison to similar outlets. John Steele, grouppersonnel director at BT, agrees that the board’s financial  perspective of HR is as important as theCEO’s strategic commitment to human capital. “Some of these programmes doneed investment, so you have to start looking at people programmes as aninvestment, not a cost – although you have to keep challenging yourself aboutwhether you’re using the budget effectively.”Once human capital hasbeen placed on the agenda, most HR directors believe the functions’ prioritiesboil down to similar core issues. Alongside compensation, training anddevelopment activities and headcount overhead issues, Smith argues that the topissues at board level essentially boil down to two factors – “Have we gotthe right people in place and have the individuals got what it takes to take uswhere we need to be?” Comments are closed. Previous Article Next Article Placing HR on the agendaOn 23 Oct 2001 in Personnel Today Related posts:No related photos.last_img

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