HR’ s Value HR’ s Value Addition RoleAddition Role

A strategic View of HRA strategic View of HR

Sandeep K. Puthal

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Contents: at a glance

1. HR as a Business Partner

2. The Strategic View of Human Resources

3. Role Requirements

4. Essentials of SHRM

5. Conclusions

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HR as a business partner? - The human side of the business- Factors inhibiting HR' s ability to function as a business partner - Business standpoint, and not the HR standpoint

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At the strategy table…

At the strategy table, when the business partners say: "How do we make the customer happy?"

They are actually asking: "How do we take money out of the customer's wallet into our

wallet and make them happier with us than with our competitors?“

The 'Wallet Test‘ To create products and services that result in

customers taking out money out of their wallets.

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HR as a business partner

Erosion of Traditional sources of competitive advantage

eg. technological know-how

Focus: HR to be a true business partner how to create and engage the human side

of business – how to conceptualize and create the total

human organization

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A business to be successful has to ensure that its 2 key constituents are happy:

External customers Shareholders

HR to align with the externally-driven requirements & bring internal stakeholders

Management

Employees

in line with the external stakeholderIf HR is to be an essential part of the business,

it has to align with the external business realities.

the human side of the business

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The critical issue now is not what you know, but what you are able to create

HR to create an exact line of sight, between its activities and getting customers to take money out from their wallet and put it in your wallet, instead of the competitor's wallet,

If it doesn't contribute to the success of a business, it would be of no consequence.

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its logic and its language. HR likes to say it has internal customers. When it takes

that vocabulary and logic to the strategy table, it automatically condemns itself to a second tier status.

When HR walks into the room and says that it has internal customers, it is immediately removed from the basic logic and language of the business. The logic and language of the business is the external customer. This is also the logic and language of HR professionals in high performing firms.

Factors inhibiting HR's ability to function as a business partner:

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being internally focused - thinking in terms of internal customers and not focusing on the results that the marketplace requires.

personal credibility- do what they say they will do and; have good interpersonal & communication skills.

• Knowledge of HR does not distinguish HR professionals at high-performing firms from those in low-performing firms

Factors inhibiting HR's ability to function as a business partner:

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business standpoint, and not the HR standpoint

Key differentiator External knowledge, not internal knowledge of HR,

Most HR professionals have a low level of external business reality –

• customers, • competitors, • shareholders, • industry structures, • globalization & all the things that make business what it is two starting points for our thinking.

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business standpoint, and not the HR standpoint

HR aspires to be a business partner. Create the HR value proposition, which starts from

the outside and moves towards the inside. “ If HR were to add greater value.' then it needs

to start from the business standpoint, and not the HR standpoint. If HR is to contribute to business, it has to break out of that way of thinking; it has to fall in love with the business rather than human resource.

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business standpoint…

HR needs that line of sight to create the human side of the business

the culture, capabilities, technical knowledge and skills that enable people to create products and

services

better than the competitors.

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The head of staffing at Cisco stated:

"Our product life cycle is six to nine months. If we are not changing our HR practices as fast as the product life cycle, then we are not contributing to the competitive advantage of the company. If, we in HR, are doing the same things that we were doing nine months ago, then we are probably doing what everyone else is doing. That just isn't good enough, isn't just adequate."

The head of HR at Hutch stated:

“If we are not re-looking at the organizational charts every six months we are not working!”

Changing our HR practices as fast as the product life cycle

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The Strategic View of Human Resources - Sources of Employee Value - HR Professionals: capabilities & competencies

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Strategic Human ResourcesManagement

“SHRM is linking HR with Strategic Goals and Objectives in Order to Improve Business Performance and Developing Organizational Culture that Foster Innovation and Flexibility.”

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Strategic View of HRM

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Link HRM activities to the firm's business strategy. HR managers to assume a broader role in the overall

organizational strategy. HR function be "planned, organized, and evaluated

on the basis of its contribution to the business.“ SHRM is based on the recognition that HRM

activities are organizational in scope.

HRM as a competitive advantage involves Strategic HRM.

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Employees are human assets that increase in value to the organization and the marketplace when investments of appropriate policies and programs are applied.

Effective organizations recognize that their employees do have value, much as same as the organization’s physical and capital assets have value.

Employees : valuable source of sustainable competitive advantage.

The Strategic View of Human Resources

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Technical Knowledge Markets, Processes, Customers, Environment

Ability to Learn and Grow Openness to new ideas Acquisition of knowledge and skills

Decision Making Capabilities Motivation Commitment Teamwork

Interpersonal skills, Leadership ability

Sources of Employee Value

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HR Professionals: capabilities & competencies

HR need to make strategic contributions (43%);

Adding value through contributions to the strategy forums and

discussions in the company. have business knowledge;

Designing & creating the cultural infrastructure that creates

sustained competitive advantage. Culture management impacts all business practices.

Successful HR professionals align their HR practices to create the culture that drives business success

Managing rapid change. creating an organisation that is focused on responding to & being unified around external market needs.

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Deliver the basic HR practices of

staffing,

training,

developing & measuring performance; Proficiency in application of information

technology to HR.

Have personal credibility;

HR Pros…capabilities & competencies…

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Delivery of the HR basic practices accounts for 18% of differentiating variance between high performers & low performers. (includes the basic HR infrastructure practices). When done in a tactical and reactionary manner (without a definitive business focus), they account for 18 % of HR‘ s influence on business results. The same practices are designed and implemented in the context of HR‘ s strategic contribution that 18 % jumps to 43 %. That's about a 250% increase in HR's impact on business. Doing HR practices with a clearly targeted culture-based business agenda creates great results.

HR’ s strategic contribution

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Institutionalized creativity is a central cultural issue and is, therefore, an HR issue.

How well a company can execute self-standing platforms of technology, products and services is being replaced by the leveraging of common technologies, products and services across business units.

This business trend may also be called the culture of cooperation, synergy and convergence.

The HR department should be responsible for recruiting, promoting and developing high-quality leaders who will take the company to greater levels of success

central agendas of HR

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Role requirements - Deliverables - Role Requirements - Administrative Vs Strategic work

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Role requirements

Have a great sense of urgency about your own focus on business.

Think in terms of being more effective at their jobs than those in the US /Europe.

US and European companies have the competitive momentum to carry themselves to Indian markets; likewise, Indian companies must be good enough to carry themselves to these markets. Such is the nature of global competition.

Indian HR professionals cannot think about benchmarking Indian practices; they must be knowledgeable about best practices outside India. They must also think about next generation practices and be more powerfully competitive than their counterparts.

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AdminExpert

Strategic Partner

Change Manager

Innovator

Employee

Champion

Integrator

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Deliverables The roles we talked about in HR Champions

(HBS Press, 1997) were defined as deliverables.

The functional expert delivers efficient HR processes. Some of these efficiencies come through technology and some through service centers. Whatever the channel, HR must become more efficient and the HR personnel members need to be experts.

administrative expert role: efficiency employee champion role : employee commitment.

the employee advocate role must help employees feel cared for. not just to get people to work harder, but to have meaning, relationships and

hope in their professional lives. Change manager: human capital role focuses on helping employees prepare

for the future.central to productivity and improvement

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Roles

The strategic partner role is includes knowledge sharing, collaboration and strategy implementation. The strategic partner role also focuses on developing key capabilities that the company needs for success. making strategy happen

change agent role :making change happen leadership role, they serve as role models.

People need to have meaning and relationship in their personal and professional lives.

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Shift from Administrative to Strategic dimensions

Administrative transaction work - Half of HR work hiring, training, benefits, facilities management. That takes 80 per cent of its time and attention. That

will be reduced by outsourcing, technology and service centres.

transformation, innovative/ strategic work Other half HR professionals are coaches, architects, designers,

and facilitators who can really begin to transform business strategy into a set of capabilities and actions.

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Essentials of SHRM - The SHRM Cycle - HR Strategy: Context of HR System - Linking HR Practices to Business Strategy - Paradigm shift - Transforming the people

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Essentials of SHRM

• Internally transforming HR staff and structure• Enhancing administrative efficiency• Integrating HR into the strategic planning process• Linking HR practices to business strategy and one another.• Developing a partnership with line management• Focusing on the bottom-line impact of HR and measuring that impact.

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The SHRM Cycle

Create needed competenciesand behaviors

Realign the HR functions and keypeople practices

Realization of businessstrategies and results

Evaluate and refine

Clarify the businessstrategy

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HR Strategy: Context of HR System

Training Rewards

Corporate Strategy

Business Strategy

HR Strategy

HR System

(Performance Mgmt.)

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VERTICAL FIT

HORIZONTAL FIT

Linking HR Practices to Business Strategy Three Aspects of HR Fit

Concerns match between HR practices &Overall business strategy

Relates to the interrelationship among HRActivities ; extent to which they are consistent

Concerns how well HR activities match the demands of external environment .

EXTERNAL FIT

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Paradigm shift

Two Aspects of Transformation

Transforming The People

Transforming The Structure

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Transforming the peopleTRADITIONAL HRM SKILLS STRATEGIC HRM SKILLS

Specialist Generalist

Policy & Procedure Writer Good Communicator

Current Focus Current & Future Focus

Monolingual (Speaks HR-ess) Language of Business

Mgt- Hierarchy Focused Customer - Focused

Few Financial/ Mktg Skills Understanding of all Aspects

Stays “Within the Box” Thinks “Outside the Box”

Focus - Internal Organization Focus – Internal Org. & Broader Society

Factual Communicator Persuader

A Nationalist An Internationalist

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Conclusions

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Competitiveness is not building a strategy;

it is having an organization that will deliver the strategy better than your competitors.

Organization is not structure. It is a set of capabilities.

HR is not a practice, but an integrated set of practices that join together to create capabilities and allows strategies to happen.

Conclusions

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HR builds capabilities into the organisation when it has integrated HR practices. Which benefits not only the employees, who feel valued and engaged, but also customers and investors. And when we follow those three premises, HR benefits an entire network of stakeholders.

A Tata company may be very good at leveraging diversity, collaborating across businesses, or be very good at speed. But it is capabilities that make the Tatas good.

HR' s job is to do an organizational diagnosis that begins with the process of identifying and building key capabilities.

Conclusions

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Acknowledgements

The HR Value Proposition

By Wayne Brockbank & Dave Ulrich (HBS Press)2005

Strategic Human Resources Management

By Jeffrey A. Mello (South –western) 2002

Human Resources Management

By John Ivancevich (Prentice-hall) 2004

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42e-mail: sandeepputhal@rediffmail.com