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The gap between what HR should and could do

So far HR has rarely been close enough to the action to prevent debacles like Enron or WorldCom, says Richard Donkin

Have you ever picked up a newspaper and read a headline that stops you in your tracks? Up until a few weeks ago I could have forecast with some confidence that the chances of spotting any such story about human resources management were about as remote as the prospect of Osama bin Laden joining the Civil Service.

That was before I saw a headline that said, HR can prevent repeat of another WorldCom. My reaction was: What? You cant be serious. If it had said, First man on Mars HR chiefs raise diversity issues, or perhaps HR battles against management jargon, I would have blinked, yes, but I would not have tipped up my tea-cup and dribbled the contents into my lap.

Only a few days earlier I had been chewing over the Enron and WorldCom debacles, asking myself whether HR people could have done anything to prevent them. However I approached the problem, the answer kept repeating itself: no.

Well apparently I was wrong, because in the article with the eye-catching headline, John Philpott, chief economist at the Chartered Institute of Personnel and Development, was telling us that HR professionals must get involved with corporate social responsibility. Human resources, he said should be at the centre of such issues.

Then it dawned on me. The headline writers had got ahead of themselves not for the first time. They were mixing up those two concepts of could and should and suddenly what HR ought to do was being interpreted as something that HR can do.

This is a serious subject for HR professionals because, as Philpott has recognised, they are in a position to be more than simply the conscience of the company. They should note that word again be able to influence the moral direction of a business. But can they? This is the $3.8 billion question in the case of WorldCom.

Can you imagine Bernie Ebbers, the bull-castrating former chief executive of WorldCom, pulling Scott Sullivan, his chief financial officer, to one side to go over the next big takeover deal, and then reacting well to the HR director popping by to ask a few questions?

About our accounts, Bernie, the HR director might say, Are they all okay? How would Bernie respond? Pick one of the three following answers: (a) Im sure theyre all hunky-dory, safely in the hands of our wonderful auditors; (b) Hey, we pay you to hire and fire people. We have finance guys for those questions; or (c) I dunno, why not take a look at the books and see for yourself.

Unfortunately, where the HR professional is likely to have real trouble is if the answer to the question is (c). If and when HR people have the confidence and ability to look at the books, or the authority to direct their own audit, then they may be getting closer to a position where they can intervene on issues of financial mismanagement.

Up until now, however, HR people have rarely been close enough to the action. This would certainly appear to be the case at WorldCom. How else can we explain the behaviour of the board when Ebbers lost his job in April after shareholders complained about more than $400 million of personal loans granted to him by the company? None of the people who served on the compensation committee was criticised or asked to go, and these were the same people who approved his loans and who extended him a severance package, paying him $1.5 million a year for the rest of his life.

If internal HR professionals are going to have any power over such actions, their role will need to be redefined, giving them greater autonomy in law. In effect they would need to have dual responsibilities as corporate and public servants. Im not sure this would be possible to achieve.

One possibility might be to invest HR directors with statutory internal regulatory responsibilities, giving them protection as whistle-blowers or as guardians of other employee whistle-blowers. But imagine the hostility and distrust that would accompany such a role. Perhaps the best we can expect once again, to quote Philpott, is that The HR teams role is to step in where others have failed.


Richard Donkin is employment columnist at the Financial Times