Leading US business gurus such as John Sullivan and Tom Peters argue that
the HR traditionalist faces extinction. How can white-collar professionals
convince organisations of their worth? One idea is to take on ‘hero status’
Dr John Sullivan, professor of human resources at San Francisco State
University and one of the best-known theorists on the US circuit, is blunt in
his assessment of the challenges facing HR today. Quoting a senior executive
from drugs and consumer products company Johnson & Johnson, he suggests
that 75 per cent of the current workload in HR could be taken care of by IT
systems. Even worse, the remaining 25 per cent could be outsourced. Unless HR
finds itself a new agenda to fill the void, it will find it is history.
Sullivan, who was speaking at a conference run by the International
Association for Human Resource Information Management in San Diego this month,
isn’t alone in his bleak assessment of the future. Tom Peters, one of the
world’s leading business gurus, argues convincingly that white-collar workers
in functions such as HR now face the same devastating role elimination that has
hit blue-collar industries.
Thanks to advances in technology and fundamental shifts in business
attitudes, the HR traditionalist faces extinction, and a new breed of
professional has to emerge. Now, experts such as Sullivan and Peters, along
with leading US practitioners, have begun to define a road map that takes HR
into a strategic role within a new, fluid business environment – something that
IHRIM defines as "heroic HR". The big question is: can individuals
and companies make the transition?
Sullivan’s analysis of the threats facing traditional HR makes sobering
reading. According to SFSU’s own research, all of the job content in today’s HR
function is set to change, some of it radically. Three-quarters of the workload
in compensation will disappear. HR generalists will be reduced by half, and HR
information systems will be cut by 75 per cent.
Recruiting, meanwhile, will be cut by one-third as line managers take on
responsibility themselves, much of it conducted over the Internet. And up to 90
per cent of training needs could be met online – and it’s so much cheaper.
Experts agree that these changes have been driven by the convergence of
several different factors, specifically technology advances and macro-economic
influences.
The core of the problem for HR is that a lot of its daily workload is
transaction and process-based – a workload that can be automated easily and
relatively cheaply.
From a CEO’s perspective, transactions add no value to the business – they
help it tick over, but they don’t in their own right generate revenue or
profit. Why, then, should an organisation hire a team of HR people to focus on
these kinds of activities when an IT system – in-house or provided by an
outsourcer – can do the job far more effectively?
This is not a problem confined to the HR department – finance, which has
also traditionally been transaction-oriented, has been facing the same pressures
for years. Once an activity can be automated – as so many accounting functions
can – then its perceived value disappears.
The emergence of the Internet as a credible business infrastructure has
accelerated these changes in board-level thinking, both from a departmental and
enterprise-wide perspective.
At the departmental level, developments such as web-based employee and
management self-service removes a whole chunk of HR’s transactional role,
giving faster access to information and providing step changes in efficiency.
Just as important, the Internet actually adds value to activities such as
recruitment.
As Sullivan points out, in labour markets where skills and knowledge are
scarce, companies have to sell themselves to potential candidates, and their
corporate website can be a powerful tool.
In many ways, the way companies use the Internet is in itself a sales tool,
as younger, dynamic and entrepreneurial job-seekers look to join organisations
that blaze a trail. It is significant that Cisco, the IT networking giant seen
as a leader ine-business, now conducts more than 80 per cent of its recruiting
online.
Although these departmental changes are important, the impact of the
Internet at enterprise level will ultimately be far more significant. By providing
easy access to corporate-wide information, the Internet breaks down internal
barriers and destroys localised power bases in areas such as HR and finance. No
department can retain a role as either custodian or provider of information.
Rather, individual managers across the organisation become empowered, armed
with data that helps them make more informed decisions.
This, in turn, leads to a major shift in corporate policy – if managers are
receiving all the information they need, why shouldn’t they make more of the
local decisions? In effect, more and more management is done remotely, and the
metrics and reward processes go with it.
Sullivan summarises these shifts with a four-part analysis of what HR does
today. It provides information – but that’s being taken over by the Net. It
carries out transactions – which self-service is starting to replace. It makes
decisions – which will increasingly be passed to line managers. And it makes
rules and policies – but managers are getting greater power to use their
discretion in a wide range of areas, including HR. So what is left?
The answer is for HR to assume a strategic role that provides measurable
value to the organisation – in other words, IHRIM’s concept of "heroic
HR".
Peters argues that every white-collar HR activity performed in an
organisation is also carried out in the outside world, for profit, by
professional services companies. HR departments need to start considering their
activities as a business service, delivering value to "clients"
within the enterprise. Heads of HR should remodel themselves as "managing
partners of HR Inc", he says. And they should realise that they have
extraordinary power because they – not the marketing department – own the
company’s brand. "I sincerely believe that talent is the brand," says
Peters.
The point about eHR, says Sullivan, is that it’s not a matter of using new
technologies to solve the same problems in the same way. It’s about making
better decisions, solving problems that couldn’t be solved before, allowing decisions
to be made closer to the customer, increasing productivity, and, in his words,
"taking the tedium out of HR jobs".
And in the Internet world, speed is the key. Pointing to a large
multinational company that was taking an average of 67 days to complete a
hiring cycle, Sullivan draws the analogy of a student attending a high school
prom and having to wait 67 days before they can approach someone to be their
date. "Just how ugly would your date be?" he asks.
In practical terms, the new model of HR shifts from a reactive,
retrospectively focused function to a forward-looking department that provides
analytics to help companies run their business.
Traditional HR departments focus on historical data, send out standard
reports that managers rarely read, respond to problems and report symptoms. The
new HR function needs to forecast trends and anticipate managers’ information
needs, providing tailored reports in whatever format recipients choose to use.
It has to be proactive in anticipating problems, and instead of reporting
symptoms, identify causes and effects.
Sullivan gives an example of exit interviews, normally conducted as an
employee leaves. At that stage, he says, the process has limited value because
individuals are often reluctant to give honest answers. SFSU conducted a
research study in which it spoke to former employees three months after they
left the company and found it received a far better insight – not least the
fact that 85 per cent of respondents quit because of bad managers.
In this new model, much HR activity is carried out close to customers by
line managers. The HR function shifts focus to become a driving force in
building a performance-conscious culture, where measurement is key and the
emphasis is on continuous improvement. It will need to develop new metrics that
link traditional HR analytics to overall business performance, and it will need
to provide tools that CEOs really want – particularly to improve employee
retention.
It will shift from being an "HR cop" to a consultant, offering
services to managers that are effectively paid for internally. And in the face
of budget cuts, it will be forced to prioritise, dropping low-value activities
in favour of high-return services.
This theme is developed further by Peter Marshall, a co-founder of Cipient
Networks and a former executive at Disney, KPMG and Cisco. He argues that
people are most effective when they are leveraging the skills of other
individuals in an organisation. HR should enable this process – although in
practice it is often the bottleneck. Typically, organisations are structured
hierarchically, but when people want information, they ignore the structural
lines of communication and simply contact the person who has the answer,
regardless of where they are positioned. It is critical that these high-quality
"connections" take place and HR has a significant role to play in
making it happen.
"All systems depend on good access to high-quality HR data to be
effective," says Marshall. "The ideal HR system will give everybody a
guardian angel. Somebody who knows the answers – if you could have access to
that person, you’d be incredibly effective." The mandate for HR at Cisco
is not effective HR, he says, it is effective employees.
Jay Stright, director of business solutions at AG Consulting, says the new
model for "heroic HR" is a journey, not a trip, and in many ways an
art, not a science. Outlining the beginnings of a scorecard for HR to measure
its progress, he identifies four key milestones – redirecting HR administration,
positioning HR as a business partner that actively seeks to help, managing
organisational performance, and managing intellectual capital.
Stright warns that HR professionals need to be realistic about how far their
organisations have evolved, ensuring the deliverables match the circumstances
and culture of the company. "If you try to be heroic and rush into this
great idea, you’ll be heroic – but you’ll also be unemployed."
Above all, he concludes that the challenges facing HR today are greater than
ever. "It’s a huge change. Nothing like this has happened in HR in the
past 150 to 200 years."
How technology has failed HR
Although technology provides the infrastructure for many of the changes now
confronting HR, research suggests that it has failed to deliver the benefits it
promised.
In a far-reaching analysis presented at the IHRIM conference, Hackett
Benchmarking and Research argued that technology has failed to cut costs,
self-service techniques are not being fully leveraged, and outsourcing hasn’t
delivered the returns it promised.
Hackett’s research demonstrates that despite technological advances, the
average cost of HR has increased by 17 per cent over the past year, with the
primary source of the increase being the cost of labour. Organisations show a
wide range of HR cost per employee, from $628 to $5,811 (£445 to £4,200), with
an average of about $1,800 (£1,275) – and, surprisingly, there is little
difference between small and large companies.
The research also found that while 84 per cent of companies have some kind
of enterprise resource-planning software application installed, only 26 per
cent had fully implemented all of the modules they bought – in some cases
because they didn’t have sufficient technology knowledge in-house, or because
they had failed to redesign the processes that the technology was intended to
enable and so stopped using it.
At the same time, however, it found that averagely performing companies tend
to under-invest in IT systems for HR, with technology accounting for 11 per
cent of total HR cost, against 16 per cent in the highest performing
organisations. Average performers also have a total of 24 HR applications –
ranging from full-blown ERP modules to spreadsheet and specialist software
packages – while top quartile performers have just four. Complexity in IT
clearly impacts performance.
Meanwhile, although the percentage of employees with self-service access has
increased by one-third over the past year, the level of utilisation among those
people is nowhere near where it should be. Hackett director Brian Lowenthal
says, "One of the biggest problems we found was in HR itself – individuals
don’t want to give up their hands-on approach, so they tend to hold that
technology back in HR. I think that’s a major issue we have to look at."
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Finally, while there is evidence of a shift towards outsourcing, the
promised efficiency gains have not materialised. Most of the increase in
outsourcing has been in benefits administration – such as pension and savings
plans – but Hackett’s research found that benefit administration costs have
actually risen.
Lowenthal puts the blame for some of this poor payback on the client
organisation itself, arguing that many failed either to understand or monitor
the service level agreements they had put in place.
