HR strategy needs to ‘get real’

Strategy is based on predictions, and I made an erroneous one when I wrote my book HR Strategy back in 2002. It wasn’t anything I said about HR, or about it earning its place in the boardroom – it was my stupid assumption that the other board members actually knew what they were doing.

Fortunately, I now have a second chance to put this right by writing a second edition of the book, which has made me reflect on how the whole landscape of general management, never mind HR, has changed in the past seven years.

General Motor’s (GM) demise, for example, is not just another failure of a once illustrious corporation.

The long-term effects of GM’s poor industrial relations strategy can now be seen in all their inglorious detail. GM cannot make cars at a profit in the US because it bought industrial ‘peace’ with pay rates, healthcare and pension benefits that the firm could never strategically afford. The firm’s death throes signal the end of the ‘western’ management model as we know it.

But don’t think this is just a US management problem, because public sector HR directors in the UK, for example, have a similar disaster brewing, but on a much greater scale: unfunded pensions. Issues this big can only be resolved through a well-conceived HR strategy that completely overhauls the fundamental basis on which public servants are employed. Of course this requires boards with guts, as well as brains.

As one door closes, another opens, and the most exciting development since 2002 – human capital management (HCM) – is likely to be back on the government’s ‘to do’ list. HCM is about reporting on the whole organisation, not just the financials. These ‘intangibles’ matter, and there is none more important than trust. It is on trust that confidence is built – look what happens to a global financial system when trust is lost.

HCM also highlights how management that does not invite honest feedback from their employees will not get the best value out of them. What civil servant, for example, will dare speak out when they fear losing such an attractive pension? Ill-conceived HR ‘strategies’ always produce perverse consequences.

While times were good there was much gushing about employer branding, talent management and employee engagement, which is all starting to sound slightly anomalous now redundancies are widespread.

Perhaps the balance in the whole employer/employee relationship has been wrong. Will we now see a return to HR strategy predicated on a more honest notion that the world doesn’t owe any of us a living, that we have to earn our rewards and perhaps expect less in the way of entitlements? Having equal rights to a job does not create one.

Of course the other big question posed when large manufacturers, banks, regulators et al get things horribly wrong is: what does this tell us about all of the management development and leadership programmes we have been plying them with for so long? Who is going to dare break that model and offer something in its place? Will the new NHS leadership council – launched last month – actually produce any better leadership?

It might succeed if it sticks to the principle of evidence-based leadership. This is in keeping with the advent of evidence-based management, where the most interest, ironically enough, hails from the US. This will hold business leaders much more to account for results rather than strategic intentions and declarations. It is also particularly relevant in HR because the data normally collected (absence, recruitment, engagement) are mere trivia in ‘evidence’ terms when the name of the game is survival.

Similarly, growth in outsourcing, shared services and e-HR has offered little if any value in the wider scheme of things. HR directors who kidded themselves that efficient administration was strategic now have bigger fish to fry, such as renegotiating the whole employment proposition.

The best HR strategists are realists, so let’s get real. Rumours of the death of capitalism might be greatly exaggerated, but predictions about the fundamental changes required in HR management philosophy and practice are probably much nearer the mark.

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