With organisations just waking up to the value of their people, the time is
right for HR to prove that employees are much more than simply ‘intangible’
assets on a balance sheet
Is HR strategy an illusion? Ask any HR director whether they have an HR
strategy and they will usually say ‘yes’. This means supporting the business
strategy with a series of HR policies, such as competence frameworks,
diversity, leadership and worklife balance. However, because these policies do
not vary from one organisation to another they are a clear indication that the
‘HR strategy’ is really just a figment of the imagination.
All business strategies, including HR strategy, have one ultimate goal – to
enable the business to gain a competitive advantage over its rivals. The very
essence of strategy is differentiation, not emulation. This makes HR strategy
an inherently risky business. Worse still, after all these years of thinking
that ‘being professional’ was about following ‘best practice’ (whatever that
means) we now have to acknowledge that somebody else’s HR policies are the last
thing we need.
So HR directors, who want to be truly strategic, have some serious thinking
to do.
First, they have to tell their chief executives that they have to change
their HR policies if they want to compete. This will mean shaking the board
members out of their comfort zone by articulating how a new HR strategy will
add value to the bottom line.
Fortunately the timing is just right. Organisations are just starting to
wake up to the idea that their ‘human capital’ is the one, major area of
potential value still to be tapped.
It has not been managed well in the past because city analysts and
accountants have had to admit that their valuations of companies cannot measure
the contribution from people. They know the market value of the best businesses
is much higher than the sum of their parts yet struggle to explain why.
Toyota, for example, has a market value nearly four times that of Ford, yet
it has a smaller market share. How do the accountants explain that? Their only
answer is ‘intangibles’; intellect, knowledge, motivation, innovation,
creativity. In a word, the ‘human’ side of the organisation.
Ironically, the starting point for a true HR strategist is to prove the city
analysts and accountants wrong. People and their talents are not intangible
assets, they produce very tangible, highly valuable outputs and the resulting
pound signs show up clearly on the bottom line. The big challenge for HR
strategists is to learn how to demonstrate this.
Now, after more than 25 years of working in HR, I can honestly say that
there has never been a more exciting time for anyone who really wants to show
what HR can do. We will only realise our own potential when we finally start to
turn HR ‘strategy’ from an illusion into reality.
Paul Kearns’ new book HR Strategy: Business Focused, Individually
Centred. is published by Butterworth Heinemann
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