The
Work Foundation has come up with a groundbreaking report that demonstrates how
HR contributes to the strategic goals of the organisation. Michael Millar
reports
HR
has long argued that it should take a strategic role in business and now The
Work Foundation claims to have the statistics to prove it.
From
an exhaustive study, including independent research of 1,000 UK chief
executives, The Work Foundation has identified five key areas of business,
which have to be managed if companies hope to enjoy high-productivity.
The
researchers claim this gives HR the opportunity to go beyond the role of
internal regulator and will enable it to use this hard evidence to become a
transforming force in business.
The
study comes in the wake of the recommendations of the DTI-sponsored Accounting
for People report, which looks set to take effect in the next two years. It
will require the boards of larger companies to demonstrate that they understand
the factors that are material to a company’s performance.
According
to the findings of The Work Foundation report – The Missing Link: From
Productivity to Performance – businesses must manage their staff to make them
aware of customers and markets, shareholders, stakeholders, innovation and HR
practices.
The
report stresses that each area must be given the same weighting and that an
‘Atkins-diet approach’, of putting more emphasis on one factor than the others,
would be counter-productive.
By
answering 14 questions across the five core areas, companies can find out where
they lie on a new productivity model, the High Performance Index (HPI), and
then take steps to fill any gaps.
The
report shows companies who fare well on the HPI can be up to 42 per cent more
productive than those at the bottom.
The
Work Foundation claims companies which use the HPI can expect to gain 2.5 per
cent extra growth, 2.5 per cent more sales per employees, 1 per cent more
profitability and 17.5 per cent in terms of exports as a percentage of sales.
Rebecca
Harding, chief economist at The Work Foundation, said HR could now pinpoint
where there was a shortfall in the key HPI areas and take recommendations for
improvements right to the top of the business.
"Everyone
has always known HR has the potential change agent – what we have done is put
some numbers behind it," she said.
"That
gives HR a tremendous set of weapons to go and become involved in board
decisions."
John
Philpott, chief economist at the Chartered Institute of Personnel and
Development, welcomed the report. He said there were lots of people making
recommendations about strategic HR, but not enough coming up with practical
proposals for doing it.
"We
have enough think-tank analyses," he said. "What we need is do-tanks."
Businesses
also backed the report. Norman Mitchinson, HR director at Lloyds TSB said:
"This is a really powerful set of arguments that support a comprehensive
and integrated approach to improving business performance."
Andy
Scott, director of international competitiveness at the CBI, said the HPI was
important as it created figures for individual companies, rather than relying
on national figures, which might not match a single business.
However,
he warned that the real challenge would be to convince institutional
shareholders that the balance between objectives should be achieved. He doubted
that there was sufficient recognition of the need for this equilibrium.
"We
have to get institutional shareholders to understand what the softer services
bring if we want to give sustainability to business," Scott said.
Chris
Brown, strategy consultant for group HR at Abbey National, welcomed the work.
But he said the investment community had been working in the same way for 300
years, and a sustained effort would be needed to convince them of the
importance of working across all these areas.
Transforming
HR
Work
Foundation case studies show leading companies are moving the HR function from
a transactional base to a transformational role using these techniques:
–
Leadership and clarity around the central values of the company and its
organisational vocation.
–
Published material explaining corporate vision helping with embedding
organisational values.
–
Increased profile of customer focus stimulating innovation and creativity
–
Flexibility and autonomous working creating greater motivation and performance.
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–
Encouraging diverse thinking and creativity, whether service or science based.
–
Effectively using ICT to enable the people function through internal communication
