As
new technology drives the role of HR and external agencies exert greater
financial accountability, HR directors are facing a heavier workload than ever.
Jane Lewis offers advice on how HR must seize the chance to evolve and shape
the business agenda
HR
directors are always being told – or are always telling each other – to stop
complaining and get on with it. But even the most cursory look at the way the
profession is evolving seems to indicate that many of these complaints may,
after all, be justified.
In
the past five years the role has changed and broadened so much that some
pundits now claim it is "impossible" to carry it out with any degree
of comprehensibility. They liken it to asking a GP to run the entire NHS,
including all the different medical specialisms, while maintaining an efficient
day-to-day practice in the surgery. In a nutshell, they claim, the job has
grown too big for any individual to manage it effectively.
Before
we sanction an official day of hand-wringing, however, it’s worthwhile
considering how difficult it is to perform any senior management role in the
current climate, wedged as we are somewhere between what might be termed the
ancien regime and the beginnings of a new, yet largely uncharted, business age
whose sole defining feature is its unpredictability.
Even
the most celebrated management gurus admit that the way forward is so uncertain
that the only way to read the future, let alone the present, is to concede the
impossibility of it all. "If someone tells you they know the answer, they
don’t know the problem," concluded CK Prahalad at an HR conference last
year.
But
for the simplest exposition of the situation, we may as well turn to management
guru Tom Peters. "Nobody knows what’s going on any more", is his
informed opinion.
There
are two possible options open to companies confronted with this situation,
although the first – that of playing a game of wait and see – is widely
considered to be out of the question.
"Stability
is death: somehow the world has to adapt itself to a condition of perpetual
novelty, at the edge of chaos," claims yet another management thinker,
John Holland. But the second option – broadly summarised as covering all the
bases and never making a single bet – means a lot more hard work and insecurity
for everyone when translated into real life.
"The
challenge of the digital economy means it is much more complex to run
businesses, simply because timescales have been shortened and you get only one
chance to get it right," claims Colin Carmichael, a partner with the
Organisation Consulting Partnership (OCP), which specialises in designing and
implementing management change programmes.
What
sort of impact is this situation having on the lives of managers? Research to
date has concentrated on chief executives – and the results are alarming.
According to the Harvard Business Review, CEOs are three times more likely to
be sacked today than they were in 1985, and even if they survive this obstacle,
their average "life expectancy" in the job has declined dramatically.
In some sectors this is now as low as two years.
The
main reason for this shift is the rapid growth of influence exerted by external
agencies, most notably the financial markets. Increased activism on the part of
shareholders and the organisations representing them has dramatically altered
the role of the CEO in many organisations, and this in turn has had a knock-on
effect on other functions.
"We
know that the length of tenure of CEOs is declining, and also that CEOs spend
more time dealing with issues outside the firm and less time managing the
inside," says John Purcell, professor of HR management at the University
of Bath. And evidence would suggest that it is the HR function, above any
other, which is being called upon to fill the vacuum.
Add
to this the other major side effect of the information economy – the rise in
importance of "soft" assets such as human capital in determining the
value and long-term health of an organisation – and it is hard to escape the
conclusion that HR is in the ascendancy.
So
isn’t this the kind of role and recognition the profession has spent decades
campaigning for? Perhaps, but evidence suggests victory, if it is such, is
being dished up with a decidedly sour accompaniment.
It
is not just that the average HR director’s workload has increased, although
this is now beyond question. As Purcell points out, many HR directors are
expected to do at least two jobs. "They do their day job, usually managing
the function, but they are also responsible for any number of set projects and
assignments. And that is very demanding." Even the so-called day job has
evolved into a series of specialisms far too complex for one person to manage,
even with an effective team in place to help take the strain.
Take
an issue as seemingly straightforward as improving the calibre and knowledge
sets of people in the organisation. According to Linda Holbeche, director of
research at the UK’s Roffey Park Management Institute, that in itself requires
multiple skills sets, incorporating recruitment, building career tracks,
setting and working with appropriate performance targets, and developing
systems and processes to underpin the whole thing.
"For
me, that’s a big enough focus in itself. You could end up with 20 different
initiatives all springing off that one thing," she says. "People
expect a lot from HR, from getting the basic delivery right – including such
contentious things as directors’ pay – right through to instantly translating
decisions that are often political into organisational strategy, then
delivering it."
Kevin
Rubens, senior European vice-president of Aon Management Consulting, has no
sympathy for the "mission impossible" argument – "People find
ways of coping", he says – but nonetheless concedes that the job has
certainly got bigger and more difficult to manage.
"HR
now consists of a string of multiple disciplines that need to be co-ordinated.
In any typical [blue-chip firm], the HR department will have business analysts,
MBAs, occupational and organisational psychologists, IT people…" he says.
To
these we might add compensation and benefits specialists, employee relations
experts, staff relocation professionals, employment law gurus, change agents
and knowledge management wizards. In fact, you run out of synonyms for
"expert" before you even begin to complete the list.
As
Rubens points out, in well-run companies, technology is beginning to take up
much of the strain, certainly in terms of administration. And in some
organisations much of the day-to-day responsibility for staff management and
development has devolved to line managers. Moreover, the arrival of specialist
HR outsourcing companies such as Exult and e-people serve is a trend that most
people believe will accelerate.
But
none of these developments ultimately absolves the HR director from bearing
prime responsibility for the entire people function in all its different
guises, and this is particularly true when things go wrong. In fact, the job is
arguably made more difficult when hands-on control of the situation is placed
elsewhere.
The
whole point of outsourcing is to give the in-house function the time and space
to get on with more strategic objectives. But observers like Holbeche question
the reality of this. In too many cases, she argues, the outsourcing contract is
signed and then forgotten about, with predictably dire results. "You end
up spending more time doing damage limitation than anything else," she
says. Unsurprisingly, it is generally agreed that the most important new skill
HR directors need to take on board, apart perhaps from project management, is
the ability to manage third-party relationships.
So
HR directors have a much bigger workload, a wider set of responsibilities and a
pressing need to update their management skill-sets. But all these issues,
while tricky to get right, by no means make the role impossible to carry out.
Where, then, does the real difficulty lie?
The
answer is that HR, above any other corporate function, is being held
responsible for solving some of the most difficult and seemingly contradictory
problems posed by the transition into the information economy. Yet in most
organisations, the function continues to be deprived of the necessary power and
tools to accomplish the feat. In other words, HR directors have become
embroiled in a classic Catch-22 situation.
Nowhere
is this better illustrated than in the issue of people capital. Certainly the
argument for the development of people as "human resources" is won,
at least in theory, but practice continues to lag behind.
At
the heart of the problem is the unwillingness of many management boards –
themselves constricted by the greater influence being wielded by market
analysts and shareholder pressure groups – to commit the necessary funds to
people development without the promise of concrete evidence that the investment
has paid off. And HR directors, in their continued efforts to be taken
seriously as business partners, have in the main gone along with this.
But
the fact remains that after nearly 30 years of trying, no credible means of
measuring the financial value of people has emerged. In fact, there is a
growing school of thought that maintains the quest will remain forever
fruitless on the simple grounds that however much we may hope to the contrary,
it will always be impossible to evaluate "soft" assets in the same
precise terms as their "hard" equivalents.
"This
has been the Holy Grail since the 1970s, when it was called Human Asset
Accounting, and we are still no closer to finding a solution," says
Carmichael at OCP. "The concept behind it is certainly important but
attempts to measure it have always been thwarted. I have seen several studies
[that purported to have tackled the question successfully] which were clearly
wrong."
Unfortunately,
the people capital question is only one of several conundrums bedevilling the
HR function that will always be impossible to solve so long as companies
persist in their attempt to impose new-economy thinking on old-economy
structures and mind-sets. The question of mergers and acquisitions – indeed of
any sort of external deal making – is another case in point.
Although
most management boards will happily go along with the notion that HR has a
critical role to play in the success of any joint venture, they are still not
prepared to lend any real substance to the theory by insisting on change. Faced
with the choice of kow-towing to the continuing anti-HR prejudice of City deal
makers, or of supporting the long-term interests of their own organisations,
the evidence suggests that most continue to take the easy option. The result is
HR remains "downstream" of the decision making, and people issues are
still considered, at best, a nuisance in any negotiation. Yet no one needs to
be reminded which department will ultimately be responsible for driving through
the resulting changes.
But
perhaps the most pressing problem facing any HR director is still primarily
internal in nature and can be summarised as tackling what John Bank, lecturer
in HR management at Cranfield, calls "the new psychological contract"
between companies and employees. "Companies used to look after you like a
parent, but it’s tough love now," he says. "As long as your
competencies meet our requirements you can stay here and develop. If not,
you’re out."
But
many HR directors are still struggling to manage this new project-based
attitude to work, in which notions of loyalty and reward have shifted
dramatically in the context of often resolutely unchanging corporate models.
"Managers
are not changing as quickly as many would like because there are systems in
organisations and society that resist that change," concludes Martyn
Brown, a business director at Ashridge, in a recent paper. Yet the business
environment is evolving so quickly that companies do not have the luxury of
taking a conventionally planned long-term view.
Consequently,
he says, "The most challenging and scary implication [facing senior
management] is that of letting go – as in not having the same kind of
traditional control – of their role of planning, control and strategy
formation, and of not being able to predict outcomes."
What,
then, is the best means to go about dealing with this series of
"impossible" problems? For a start, the experts recommend, get your
own house in order.
"HR
directors need to start making some tough choices – choices about what the
department will and will not do, what it will outsource, and how it will manage
that outsourcing," says Holbeche. "You also need to look very closely
at your own team: has it got the skills you need? Again, this might be the time
for tough choices. Train people to work across boundaries and aim for a
three-to-five-year strategy, but be prepared to be flexible with it. Bolster
this with short-term projects."
Rubens,
meanwhile, recommends some inward gazing. "Know yourself. Understand your
peak times for learning and try to make sure you don’t give up this creative
time." He claims there are three strong core competencies in every
successful executive: "Time management, project management and strong
internal values, so you don’t spend too much time agonising over individual
decisions when they crop up."
But
the real conclusion to all this is clear. For too long, perhaps, HR has been
lambasting itself for a perceived failure in getting to grips with the business
needs of organisations. Yet the transition into the new economy has already
demonstrated the growing irrelevance of many of these structures and mindsets.
Instead
of always trying to comply with someone else’s business argument, therefore, it
is time HR seized the initiative and began dictating its own terms. If you
really believe the future of your organisation lies in the quality of your
people, then you must accept the challenge of reshaping business strategy to
fit that goal – and of summoning up the necessary influence to push it through.
Until
HR directors realise the necessity of setting the new business agenda
themselves, they will continue to play a central role in what seem to be
becoming an increasingly impossible job.
Difficult
sectors for HR
Every
sector poses its own HR challenges and difficulties. Here we list a few of the
more tricky ones
Telecommunications
The
current travails of BT demonstrate the speed at which this sector has shed its
comfortable high-value, high-tech past, evolving into a cut-throat, low-margin
business. In terms of remodelling business models to cope with this new
environment, it’s likely to be a case of pain, pain, pain.
High-tech
The
recent market decline of such new economy stalwarts as Intel, Cisco and Dell
demonstrates that the industry’s problems extend much further than a few
shakeouts in the dot-com sector. Many of these new-model pioneers have yet to
be tested by a significant economic downturn – will their structures be
resilient enough to cope? Will the previously heavy investment in training
prove its worth if hard times kick in?
Health
sector
Morale
is up from the depths following a much-needed government cash injection, but
recruitment is still the paramount problem, especially in much of Europe. For
example, in UK is short of some 40,000 nurses. Searching questions need to be
asked as to how this decline can be halted and how it was ever allowed to
happen in the first place.
Financial
sector
The
financial sector is never immune from the pressure of downsizing and observers
predict new waves in the months ahead as merger-and-acquisition activity
continues apace. Increased customer competition in the financial services arena
from sectors such as retail means the pressure to innovate is still high.
Manufacturing
Manufacturers
continue to be dogged by the twin pressures of exchange rate and continued
cost-cutting. Employee tension and insecurity is growing in many industry
sectors. Motivation becomes a real issue when, as happened recently at
steelmaker Corus, huge improvements in performance led to the chop.
Tourism,
Hotel & Catering
Although
the industry throughout the whole of Europe is experiencing a severe problem
with recruitment, this could be replaced by something a great deal worse. For
example, the wider ramifications of the foot and mouth epidemic in the UK.
Several weeks into the crisis, and there is already the prospect of mounting
international cancellations. The industry is facing very precarious days indeed.
Dot-coms
Maintaining
staff morale in the face of continuing financial losses and layoffs is proving
an uphill struggle for many in the sector. With even Amazon’s future considered
increasingly open to question, expect a rocky road to come.
Sign up to our weekly round-up of HR news and guidance
Receive the Personnel Today Direct e-newsletter every Wednesday
Pharmaceuticals
This
is another sector that is preoccupied with mergers and acquisitions. Companies
are either trying to rebuild employee morale and devise new post-merger
structures or they are contemplating an imminent buyout. Renewed international
political pressure on drug patents is another unwelcome hornets’ nest that this
sector is having to deal with.
