Evolution of HR: is the profession on the verge of dramatic transformation – or extinction?
David Woods, May 01, 2012
The myth of the axolotl is one of nature’s most fascinating.
Genetically speaking, it is the larvae of the salamander. It has gills and lives in water where, if it remains, it will stay in a juvenile form until it dies. It can regenerate its damaged limbs, even eyes and brain.
A very few axolotls metamorphose naturally in the wild. But given the right environment and careful conditions, scientists have discovered if the water is gradually removed from the axolotl's tank, it can transform into a land-walking salamander and leave the life aquatic behind. If this process is not managed meticulously, the axolotl will die.
Never mind that metamorphosis shortens the ex-axolotl's life considerably and removes its regenerative capacity. The myth is that the creature has a choice: live underwater in a state less developed as what it is capable of and face extinction in its polluted natural habitat in the Gulf of Mexico; or risk death in a bid to walk on land as something transformed. And so the axolotl becomes a symbol of the challenges to humanity in general and HR in particular.
'HR' is a fascinating creature as well - it is less than 30 years old in its latest incarnation and has reached a junction in its own life span similar to that of the axolotl.
Given the term 'human resources' was unheard of in 1980, HR has already evolved at a meteoric rate from a personnel function to a strategic and influential department, and it has moved out of its silo into the business. But if this process is not managed meticulously, HR could be on the verge of extinction.
Both recession in the private sector and reductions to the funding of the public sector have meant issues such as talent management, strategic workforce planning and performance management have risen up the priority lists of executive boards.
As people strategy is vital to any canny CEO, the HR departments that do not transform themselves quickly enough to respond to this desire at the top could lose their influence on people strategy to other, more developed functions. Is it time for a more rapid metamorphosis?
Christian Horne, HR operations director Western Europe at drinks giant Diageo, thinks so. "Rather than creating a people strategy in isolation, or even a strategy that supports the business strategy, HR directors need to prove the value of HR, by stretching and provoking the business, as well as raising our game considerably in terms of demonstrating the ROI of our interventions," he says.
"Do the commercial skills and partnering skills need to evolve? Definitely. We are mid-way through an HR capability programme in Diageo to do just that.
"We, as HRDs, do often enact the strategy we have set, but we are not good enough at identifying what success looks like: we need to define 'business SMART' objectives for ourselves and thereby demonstrate the ROI. Causality is often a challenge - to prove the line of sight from a capability intervention, for example, to increased sales and profitability can be very tough, but we need to raise our game here.
"In the same way as we are great at holding others to account, we too need to be held to account."
But Nick Holley, director of the Centre for HR Excellence at Henley Business School, thinks HR departments concerned about transforming themselves are missing the point of focusing on people strategy.
"Where HR departments get it wrong is thinking about transforming their function. This is driven by the need of the HR department rather than the need of the organisation in which it is operating," he says.
"HR departments see themselves as partnering the business rather than part of the business and they focus on an HR strategy to change the function and its 'products', rather than on a people strategy that involves building the organisation's capability for growth and organisational structure.
"A common fault is thinking about an HR department as a 'function' and a 'set of activities'. HR directors need to ask themselves if they are coming at people strategy from a leadership perspective - are they looking at 'best practice models' or are they looking at their own business to find out where to adapt?"
He summarises: "The core duties of the HR director are simple: run the HR function; be an equal member of the management team and ask insightful questions, bringing emotional intelligence to the board; be a confidante to the CEO; and simplify business complexity. They are not there to represent a single function in the business."
Alex Swarbrick, senior consultant at Roffey Park, agrees. He explains: "HR professionals thinking too much about HR strategy are too internally focused. They are looking in a mirror, instead of looking through a window into their business."
It is almost 15 years since Dave Ulrich, professor of business at the Ross Business School at the University of Michigan, published his theories on HR business partnering. In a nutshell, Ulrich says HR business partners are HR pros working with line managers and departments to provide relevant HR delivery.
By working closely with line managers, Ulrich said, HR people are better able to understand their organisation and the challenges it faces and therefore can deliver people activities that enable the business rather than act as a support function to it. In response, HR directors appointed 'HR business partners' to report to them, but to operate in different functions of the business, to lead HR across the spectrum.
But Swarbrick explains: "Ulrich didn't talk about business partnering as a delivery mechanism - he was powerfully inviting HR to move away from the mirror. HRDs have been preoccupied with seeing this as an HR strategy."
Dave Millner, consulting director EMEA at Kenexa, agrees the preoccupation with a 'model' for business partnering is holding HR directors back on their evolutionary journey. "I hate the HR business partner model," he says. "It is not something to be cut and pasted. It was designed to challenge thinking. I hear HR directors telling me 'we have implemented Ulrich', but this has not been done well in their businesses. They are keeping it too nice, too soft and collaborative. HR directors need to be business leaders, not business partners."
And this misconception of how to translate Ulrich's thinking into an HR strategy has led to the evolution of definitions and HR jargon that have begun to hold HR directors back in business, as leaders misunderstand it. Finance departments work across the business, in every part of it - both operational and strategic - but have you ever heard of a finance business partner?
"The more I work in HR, the more I discover a distinct lack of common definitions," says Diageo's Horne. "People are the human resources of an organisation and thus synonymous. The mistake that is often made is to view the people/HR strategy in isolation, rather than the integrated people element of the overall strategy. "The idea of partnering is perfect, where the partnership involves sharing risks and benefits, challenging and supporting to drive the performance to the next level, rather than a buddy-buddy, walk-in-the-park relationship. 'Business leaders' is a great title, but again it is a question of definitions. A partnership can be a fabulous way to conceptualise a challenge and support collaboration between humans, more focused on outputs than hierarchy and process. If it helps us spin and sell our value better, I could definitely support the 'HR leader' label," says Horne.
The view is mirrored by Martin Rayson, HR and OD director at the London Boroughs of Dagenham and Barking. Rayson will, this month, take on the role of president of the Public Sector People Managers Association (PPMA), but previously he was its lead officer on HR transformation.
He says: "We are hung up on models and I am frustrated by this - but I agree the crux of this is to ensure HR functions remain close to business and that HR people understand every part of the organisation. It doesn't matter to me what you call this."
But, developing this idea further, Brett Walsh, UK HR transformation partner and EMEA human capital leader at auditors, Deloitte, believes the HR director, in developed HR departments, should be in a position to appoint another leader from within the business: "In transformed HR departments [that have a centralised operating model and a shared services department], the HRD should not be looking after the HR department, but should be strategic," he explains. "There could be an 'HR COO' or an 'HR chief of staff', who looks at how HR can improve its service to the business and would manage shared services and HR operations.
"They would be like a 'business partner plus' and would understand how the HR department should deliver value and support the business. This allows the HR director the space and bandwidth not to be operational - but to focus solely on people strategy."
But considering HR theorists spent years arguing about what HR departments should be called (human resources, human capital/ people management and personnel have now all become synonymous), the future of where HR is headed is just as debatable.
In 46% of UK organisations, according to a survey published in February by Roffey Park, the HR director has a seat at the board table. In some companies, the HR director manages marketing, in some he or she is responsible for facilities, in others customer service has fallen to HR, but in others the HRD has no say over core employee benefits issues such as pensions.
Following a restructure of senior management at Lloyds Banking Group (LBG) in February, group chief executive António Horta- Osório reduced his direct reporting lines from 14 to 10, meaning the heads of HR, legal, audit, Halifax and Lloyds TSB will no longer report directly to him. The company will create a new role of 'group corporate functions director', to whom HR director Angie Risley will report. She will continue to sit on the group executive committee.
At the time, LBG told HR that, rather than reducing the influence of people strategy in the business, the changes have been designed to strengthen it. Horta-Osório said: "By creating the position of group corporate functions director, we will be able to bring better focus on areas such as HR, legal and secretariat and group audit, which are essential to transforming the group."
This movement puts pressure on HR directors because, while business leaders are not disputing the value of people strategy and the need for it to exist, the individuals influencing people issues to the board could come from any function. In 20 years from now, will HR directors be a dying breed?
Paul Sparrow, director and professor of international HR management at the Centre for Performance-led HR, Lancaster University, smiles at this question.
"I don't think it's as much about the reporting lines as it is about the influence the HR director has. You can fight against change - but you can have a vote. If the function is woven together into other departments, that's not necessarily a bad thing, except for the individuals working in HR.
"But in saying that, 20 years ago, I said HR would have become embedded in other functions of the business and today there are more HR professionals than ever before. I just think a more traditional, functional view of HR will be less prevalent."
Horne agrees: "Ensuring all agendas are aligned and aimed at the same goals is vital. Both the people and HR strategies need to support the overall agenda. The people strategy is vital to drive sustainable growth - but the wise build their house upon rock rather than sand, so the foundations have to be in place too.
"Ensuring there's the correct ownership is also vital in this area - it is much more effective for all leaders to own the culture/engagement agenda, for instance, rather than it just being another 'HR thing'. To restructure an HR department to better serve the overall strategic agenda can also be a great value-add, so it is risky to generalise and dismiss all the elements of HR strategy as without value. The devil remains, as ever, in the detail."
Swarbrick believes the rapid evolution of HR, so far, has polarised thinking and practice in the sector, which could lead to a fragmented future for the profession.
"Some HR directors have always been focused on the business - others might as well pack up and go home now," he says. But then he adds: "Operations will always need to be done somewhere - finance professionals, for example, have to invoice suppliers and when this happens, the FD is not being accused of lacking a strategic vision. The HR director just as to make sure he or she has the ear of the CEO."
Millner disagrees. He explains: "If the CEO 'gets' people strategy, he or she doesn't need to hear the HRD banging on about this. But in saying that, if the HRD doesn't win hearts and minds - whether on or off the board - he or she won't be able to build a business case. The HR director and the finance director, working together can bring both the hard and soft arguments forward. This 'golden triangle' idea (HRD, FD and CEO) can give HR directors a strategic edge."
Responding to this challenge, Rayson says: "HR departments will evolve differently in various organisations - but HR directors need to keep doing what they are doing, just with a harder edge. A focus on staff and employee engagement is now seen as a precursor for organisational success, so to support this agenda, HR directors should ideally be on the board, but the evolution is more about their influence rather than their place on the table. I don't believe there is a difference between HR strategy and people strategy. As an HR director, your purpose is to contribute to the organisation you are working in."
Horne adds: "An HR COO is an idea to develop the profession, but there are others - the essential thing is to create enough space to be able to reflect on and determine strategy. We have got to be prepared to take risks and be innovative in our own function, in the same way we are when planning change in others.
"We need to be organised and without question have a seat at the top table in all cases. 'Chief people officer' isn't right, though, neither is CHRO. 'Chief talent officer in the war for talent' is the way forward.
"The role technology plays is growing in all of our lives, so maybe in conclusion a CTTO - chief talent and technology officer - is the future. Even the idea scares me, which I take to be a good sign. How should we act? We should be confident and proud of our proven ability to drive sustainable growth," Horne says. Why stay an axolotl when you can turn into a salamander?
Ulrich defends business partnering model
In 2008, writing exclusively for HR magazine and 10 years after its 1997 unveiling, Dave Ulrich, professor for business at Ross Business School, University of Michigan and his colleague Wayne Brockbank responded to critics who said the business partnering model did not work. Ulrich said: "The inevitable failures in the application of the business partner model may be due to several factors: 20% of HR professionals will probably never be able to adapt to the full business partner role. Asking HR professionals who have focused on policies and transactions to do talent and organisation audits and make major changes may be too great a shift for some.
"Some may not make the shift to business partners because of personal interests that deter them from engaging in the business partner role. Their interests and abilities may make them focus on administrative detail, rather than embrace the larger and more complicated perspective of the business as a whole.
"Some practitioners may want to be business partners, but do not know how to proceed. Such individuals need to understand the frameworks, logic, knowledge and skills necessary for them to grow into the business partner role. HR professionals who are provided with such information can quickly apply it in adding greater value to the business.
"HR's impact on business may vary, depending on the business setting. There are really few other options. When someone said to us that the business partner model was not working, we asked: 'What would you suggest?' The following are the two responses we received. First, 'Some HR professionals do not know the business well enough to function as business partners'. Second, 'Some are too enmeshed in transactional administrative work to function as business partners'.
"The solution to the first response is that HR professionals need to learn the business inside out. They must know it well enough, not only to do better HR work, but also to be able to contribute to the strategic decision-making processes of the senior management team. The solution to the second is that much of the admin work will need to be outsourced - or digitalised for electronic processing.
"HR professionals must evolve into being the best thinkers about the human and organisational side of the business. Business is dramatically changing. Changes are occurring in virtually every element of the social, political, and economic environments that affect business. They include technology, globalisation, communications, regulations, competitiveness, demographics, shareholder demands and a tight market for key talent.
"Under such conditions, the human side of the business emerges as a key source of competitive advantage. Therefore, specialists in the processes of human and organisation optimisation become central to business success. These specialists should reside in the HR department as business partners."
Blast from the past 1990s How HR evolved during my time as editor of HR
Morice Mendoza, editor of HR, 1999-2002
One of the first issues of HR I edited came out a year before the Enron scandal, when shareholders lost $11 billion.
The cover story in the November 1999 issue of the magazine was drawn from an interview with London Business School professor Sumantra Ghoshal (who died in 2004). One of his seminal articles, published posthumously, analysed the way in which business schools had taken ethics out of their teachings - with disastrous consequences.
In our interview, Ghoshal noted how Enron was a favoured destination for MBAs. And he told a story about the company's CEO Kenneth Lay, who "called in his head of HR to ask why the company was not more successful in attracting graduates from the best universities. The answer he gave - its lacklustre reputation - resulted in him being sacked on the spot."
In the same issue, we reported on the big succession question at GE. 'Neutron' Jack Welch, CEO for two decades, had presided over a 4,000% rise in the value of the company. But, following the 2008 crash, he had downgraded the goal of shareholder value maximisation to the "dumbest idea in the world".
HR was always close to these issues, but not always influential. But increasingly HR chiefs were beginning to get closer to strategy and performance issues.
That was all to the good.
Morice Mendoza is CEO of PR and communications firm, Mendozamedia
Blast from the past 2000s How HR evolved during my time as editor of HR
Trevor Merriden, editor, then editor-in-chief, of HR, 2002-2006
I am proud to have been editor of HR when HR professionals planted a foothold of respect in many organisations. It was during this period that the role of the HR editorial team began to move beyond the production of a standalone magazine. Whatever the emerging choice for media dissemination, the message remained clear: the need to focus relentlessly on how HR can prove its relevance in delivering organisational success. At the time, this was the principal distinguishing feature that put our magazine closely in touch with its readers.
The tide was moving heavily in favour of HR, with the recognition of great people practices as the key way to deliver organisational success spreading rapidly. The trouble was business leaders often didn't trust their HR department to deliver its full potential impact for performance.
As a notoriously inward-looking profession, HR needed to take on board some straight talking from those at the very top. Inspirational HR appeared in many forms; some best practices coming from organisations that didn't have an HR department.
Our remit was to never let our readers feel comforted within narrow functional thinking. The message from my time as editor was - and still is - stark: to advance the standing of their profession, HR directors need to act more and analyse less around great ideas, whatever their source. Ultimately, respect for the HR profession will only be won by delivering, not dithering.
Trevor Merriden is MD of Merriborn Media