HR effectiveness – are we putting the cart before the horse?

Many in HR may recall ‘The Abilene paradox’. It’s a great parable about a family that, while comfortably enjoying an afternoon, decides to go on a four-hour trip that becomes difficult, exhausting and a thoroughly unhappy experience.

On return, one of the family dishonestly declares the trip to have been ‘great’, which sparks a heated inquest where it turns out that no-one wanted to go along in the first place – but did so, on the basis of agreeing with everybody else, ensuring that everybody was ‘happy’.

The moral of the story revolves around ‘groupthink’ and the dangers of not challenging the consensus or perceived wisdom. In this instance, everybody ended up worse off because nobody challenged the base assumption (that the trip was worthwhile). Nobody told the truth until after the event.

And the real-life equivalent of this fable? If the answer is ‘HR shared services’ or ‘HR outsourcing’ then the question is usually ‘How to reduce costs?’.

I have been involved in a number of big HR shared service/outsourcing projects over the past decade. What is perplexing is that I am still unable to find any clear evidence that over, say, a three-year period, there has actually been any reduction in cost. Clear evidence – irrefutable, undeniable, truthful? There is none.

However, one cannot deny the growing propensity for HR shared services or the emerging ‘monster’ HR outsourcing deals and the experience it provides.

Even if a reduction in costs remains elusive, outcomes invariably involve some improvement in operational excellence – whether through leaner processes, enhanced capability or simply a better handle on what HR is actually achieving.

But an organisation does not need to invoke HR shared services or outsourcing to achieve these outcomes.

If HR is looking for operational excellence then it should first work out its HR value proposition to the business/organisation [defined by David Ulrich as the “HR practices, departments and professionals (that) produce positive outcomes for key stakeholders – employees, line managers, customers and investors”]. Then it should work out the HR processes, function structure, capability and resource before executing its plan.

HR shared services/outsourcing is really a solution looking for a problem rather than a chosen option towards solving a problem. It’s a kind of ‘cart before the horse’. It starts with an assumed structure, then process, capability and resourcing before its part-execution. There is no defined overall HR value proposition.

The danger is that an HR shared service/outsourcing project is a ‘boxed’ solution that can be a costly and painful exercise, but is limited in exploiting opportunities where HR can really contribute or add value. In effect, the HR function, when it comes to people management, ends up knowing more and more about less and less. The reality is that, too often, HR shared services/outsourcing is merely an acceptance that the HR function has been operating sub-optimally.

Many in HR may currently see HR shared services/outsourcing as de rigeuer, and this may well be a bona-fide argument. I have often thought that a good entrepreneurial idea would be to print T-shirts with the words ‘HR does shared services/outsourcing’ on them. I’m sure demand would be strong.

But they are only ever part-solutions and they do not in themselves solve the overall problem of defining and achieving HR’s contribution to the organisation. After all, if the stated problem/objective is to reduce costs, it doesn’t say much about HR’s value proposition. People management is core to organisations whether or not you believe ‘people are the greatest assets’. Let’s not forget that.

So how about another great entrepreneurial idea: T-shirts with the words ‘HR – Remember Abilene’ on the front and ‘Show me the evidence’ on the back.

By Nicholas Higgins, chief executive, Valuentis

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