In the second of our two-part feature looking at the relevance of the business partner model, HR's Most Influential thinker 2008 Dave Ulrich and fellow Ross School of Business professor Wayne Brockbank look at the challenges ahead.
As we look forward, we need clear thinking, effective practices and insightful research. There are many excellent thinkers who continue to examine how HR professionals can deliver value to the business. Even within the past decade, the business partner model has evolved. Many of the critics of the model look at today's problems through yesterday's solutions and wonder why they don't work. Of course, it won't work. This is like trying to run today's software on yesterday's computers. The HR business partner model of the 1990s has changed in recent years to adapt to today's business challenges.
Our company, the RBL Group, in conjunction with the University of Michigan and a variety of HR professional associations from around the world, has studied the competencies and agendas of HR professionals as business partners for more than 20 years. We have gathered data from in excess of 45,000 participants.
We recently completed the fifth round of this ongoing global study of HR professionals. From this exercise with more than 10,000 participants we have been able to see a clear picture of what business leaders expect from their HR business partners. Our analysis of the data has focused on the three following questions:
- What are the competencies of HR professionals?
- Which HR competencies are most closely associated with individual performance?
- Which competencies differentiate HR professionals in high-performing firms from those in low-performing organisations?
Based on this work and our in-depth experience with hundreds of companies, we are comfortable projecting five trends that will continue the evolution of the HR field and how it delivers value:
1. Improved strategic understanding
Over the past 20 years, we have both anecdotally and empirically seen steady progress in the HR field as it has moved toward greater strategic understanding and relevance. We anticipate this progress will continue. HR professionals will increase their knowledge of their companies' wealth creating activities and of external realities such as customer requirements, supplier relations, competitive market structures, domestic and international regulatory issues, globalisation, and the requirements of capital markets. With this foundation in business knowledge, they will bring to strategy discussions their visions for the future of the business.
2. Less transactional and administrative work
Companies will continue to require fewer HR professionals to do transactional administrative work. Newly emerging information and communication technologies will continue to be applied to improve the efficiency of HR administrative work such as payroll, benefits administration, entry-level staffing and employee record-keeping. Some HR activities will be centralised to reduce redundancies, to optimise natural synergies, and to leverage economies of scale. As companies continually grapple with the challenges of focusing on the most important wealth-creating activities of the firm, it will undoubtedly be the case some nice-to-have but strategically unnecessary HR activities will be eliminated.
3. Greater external focus
As business partners, HR professionals will increase the trend of being more focused on key external constituents. Our recent research shows that HR departments that focus on external as well as internal stakeholders are more significantly associated with business performance. HR professionals will increasingly focus their work on creating value for external customers.
HR professionals will likewise become more attuned to the requirements of capital markets. The recent burgeoning research in finance and economics on intangible assets is emphasising the increasing importance of human capital and HR practices that create and sustain those assets. Empirical evidence has clearly shown the investment community is accounting for practices such as succession planning, leadership development, corporate culture and executive compensation as considerations in buy or sell decisions. Companies that are able to create a credible leadership brand are more likely to enjoy P/E ratios above that of their competitors. As business partners, effective HR professionals play a central role in defining, creating and sustaining the leadership brand that is valued by the capital markets.
As HR professionals account for customer and owner requirements in the design and delivery of organisational capability and related HR practices, they will do so with greater awareness of competitors. They will recognise that forward-looking and innovative HR practices have relatively little value unless they create greater value than do their dominant competitors.
A final emerging trend in the function's external focus is their role in representing companies to their communities. For the first time in our 20 years of empirical research in HR practices, we have found a substantial increase in HR's role relative to social and political stakeholders from local communities. Concerns over global warming, air and water pollution, local employment regulations, ethical treatment of indigenous populations, endangered species and land use have moved up the list of corporate priorities. HR departments will increasingly be given the mandate to work with local communities in addressing these complex, difficult and important issues.
4. Six effective HR roles
As HR professionals become more effective as business partners, they will become more balanced in their approaches to their work. In the most recent round of our competency research, we found that effective HR professionals function in six roles. These are as follows:
- Credible activists earn a reputation for business value through their consistent delivery and proactive stance on business and human resources issues
- Strategy architects contribute to the development and execution of business strategies and design and delivery of HR practices and structure
- Culture and change stewards identify and facilitate important culture and other changes that improve organisations' ability to compete and grow
- Talent managers and organisational designers understand, diagnose, audit, and improve both talent and organisations
- Operational executors do the operational work of HR both effectively and cost-efficiently through information systems and through standardised HR policies
- Business allies demonstrate a firm grasp of business knowledge of how the organisation functions internally and externally to make money
Our analyses show that credible activists have primary impact on personal and business results and that the next three above roles have roughly equal impact on business performance. Therefore, HR professionals must ensure they have a balanced approach to their business contributions.
5. Need for solid empirical research
As business partners, HR professionals - as in other functional areas - will be expected as far as possible to base their activities on solid empirical research. The same applies to the finance, marketing, R&D and manufacturing functions. The challenge is that some research can be misinterpreted, as has been the case for a recent well-publicised set of findings by Roffey Park Institute. This research has been used to support the conjecture that the business partner model has failed when this is not the finding nor the claim of the research, as clarified by authors of this report in a recent letter to the publication in question.
The research is based on a survey of 479 predominately UK managers from private sector, public sector, not-for-profit organisations and consultancies. Some 161 people answered a specific open ended question about the effectiveness of the business partner model. Of these, an encouraging 46% reported HR business partnering was proving successful in their organisations and 27% either did not know or felt it was too early to tell. This leaves just 42 people (26% of the 161 people and 8% of the 479 people) who said the model was not working well - mostly attributed to the implementation rather than the fault of the model per se. Consequently, headlines suggesting HR business partnering is failing based on these findings is inaccurate and does the HR field no great service.
In the future, the HR profession will conduct research that focuses on HR issues that are associated with business results. Research will continue to be done in rigorous and relevant ways. Since best HR practices are emerging from all parts of the world, HR research will increasingly be done on a global scale. Information will be gathered from large numbers of participants from companies of various sizes and industries. Research will focus on the practices and competencies that result in individual and company performance. The reported conclusions will stick close to the empirical data on which they are based. The research will also report what we still have yet to learn as well as what we have learned.
Many HR professionals are doing exceptional work. In thousands of companies around the world. They are making enormous progress towards delivering value as business partners. In the future, the ways in which HR professionals serve as business partners will continue to morph. The bar has been raised on HR and some HR professionals will not make the grade. There are emerging business issues where HR can, and will, contribute value. The future is filled with both challenges and opportunities. As we look to the future, HR professionals as business partners will continue to deliver value and help businesses manage the enormously and exciting challenges of the 21st century.
The first part of this article was published in HR magazine, December 2008.