Demonstrating value is not always easy for HR
If you can demonstrate HR value, not only will this increase your credibility (for both you and the HR community) it's also a great way for HR to both measure and communicate its successes (and shortcomings).
However, despite popular acceptance and much research of the need for HR to be more business savvy and ‘strategic’, what these actually mean in practice is little understood and more importantly rarely applied to a high enough and consistent standard.
Being strategic is a skill (based on knowledge), a competence and a process.
Be clear what you mean by strategy
While there are many definitions of strategy, a practical one is: “the pattern or plan that integrates an organisation’s major goals, policies and action sequences into a cohesive whole” (Quinn). A strategy can occur at different levels within an organisation e.g. corporate, business and function; as well as apply to different and often cross-level groupings e.g. geographical.
The purpose of a strategy is to:
- Provide a roadmap to the future
- Articulate an organisation’s direction
- Create a benchmark to assess alternatives and prioritise resources
- Provide a measure of success
- Create a psychological sense of purpose for employees
Measuring HR's business contribution
HR can make a positive and distinctive contribution to any organisation. What that contribution is and how it can be increased is a critical step in demonstrating the actual and potential value that HR can bring to an organisation.
In essence the HR strategy supports the people strategy which in turn is shaped by the business strategy. Where HR gets confused is believing it owns the people strategy when in fact this is the preserve of the business leaders with HR’s role being one of a strategic influencer. It is actually only the HR strategy which HR can be directly measured on as this relates to those projects, processes and activities which are owned and managed by HR in support of the people strategy.
However, we recognise that HR’s most significant organisational contribution occurs in the shaping of the business strategy and people strategy phases.
For us, HR is the function which best understands and represents the interests of all the people an organisation employs. Through developing an intimate partnership with the business, HR can ensure both the long-term viability of the organisation’s people proposition and health of the employee brand as well as shaping appropriate HR deliverables which reinforce, embed and support the organisations objectives, vision and values.
HR's contribution to business strategy
HR has an unenviable role in supporting leaders shape the business strategy because HR professionals have unique insights which they can apply at the planning, developing and implementing stages.
During the planning phase of a business strategy, HR has access to unique data in the form of competitor knowledge (based on recruitment, compensation analysis and sharing data with fellow HR professionals in the industry and third party recruiters); insight into the overall capability of the existing workforce (based on development and training plans); it has access to all parts of the organisation and so is able to perceive the inter-relationships, strengths and weaknesses.
When supporting the business during the development phase, HR can call on its technical knowledge of change management (very often HR professionals are seen as ‘change experts’. HR understands the importance of the foundations of strategy, values and culture, it has experience of how to use engagement ‘levers’ e.g. reward, recognition, group dynamics; finally, HR understand the regulatory, cultural and marketplace risks.
Supporting the business to implement its strategy should be where you excel most as HR is technically proficient in supporting the implementation process while as the same time differentiating between ‘people’ and ‘HR’ strategy. Without HR who would do the recruiting, developing and exiting appropriate employees?
HR's contribution to the People Strategy
Once business strategies are agreed, they need to be aligned with people activities through the people strategy. Once again, the HR community can play a key role at this stage even though it is not accountable for it. Fundamentally, HR’s contribution is twofold:
- Implementing its responsibilities within the people strategy (the HR strategy)
- In supporting the business build the people strategy
This could involve using its skills and knowledge to support the business through:
- High performance work processes
- Process mapping
- Cultural change
It is critical to recognise that HRs involvement in the people strategy is directly linked to its business value proposition.
HR strategy contribution & potential metrics
The HR strategy is where it all comes together for HR as it covers those measurable responsibilities that the HR community has within the people strategy.
These can be broken down into:
- HR fundamentals. Those activities that HR must undertake to ensure the smooth running of the organisation. Typical examples might include the payroll, the recruiting process and salary review process.)
- There are two broad types of measures – to either ensure the process runs efficiently (e.g. cost, quality, speed, customer (dis)satisfaction ) and to ensure the output meets agreed measures.
- The key is to ensure that the HR community is only measured on aspects of the employee life cycle that they control e.g. the quality of hire is the responsibility of line management but the quality of the short list might be an HR responsibility.
- HR value proposition. Measures will depend upon the unique value that an HR community brings to its business.
- Linked to the people strategy and measured through people metrics.
- Co-deliver the business strategy. Potential measures of this value might include: increase employee productivity; improve employee engagement; improve employee brand.
- Support the implementation of performance improvement through change.
- Work in partnership with the business to create synergies. Potential measures of this value might be:
- Involvement in the planning, designing and implementing of the business strategies
- Authority levels
- Involvement in general management decision making
- Ability to integrate the people agenda into the business agenda
- Proactively Challenges status quo
- Awareness of the contribution of all parts of the business to achieving the business goals
What measures should be set?
As an HR professional you should rise or fall depending upon your Results – what you deliver and how you deliver it. Research shows that for certain HR roles success is determined almost entirely to the quality of the individual role holder and only 3% is directly attributable to the HR structure. In other words looking to others for excuses for poor or low performance is no longer a good enough defence.
At CourageousHR we know the Challenges HR professionals sometimes face when trying to overcome internal HR and organisational obstacles to make the impact they want. However, consider what measures you could set yourself.
For example, in respect of your behaviours can you measure yourself?
- Against a defined HR competency model?
- Ability to say no?
- Ability to Challenge in a constructive way?
- Ability to talk about the business and organisational issues?
- Ability to link business strategy to people implications to HR deliverables?
- Ability to change your style to suit the audience and reflect the potential value added?
- Ability to inform and educate stakeholders on the importance of people e.g. coaching?
HR can demonstrate value
HR, like any other part of an organisation, can be measured and judged. However, unlike more established functions such as finance, sales and marketing, HR does not have a heritage or regulatory framework of established metrics to draw upon and therefore faces a further difficulty in gaining organisational agreement to potential metrics before they are implemented.
The answer for HR professionals is that it needs to build close relationships with the business in order to be involved with and influence each phase of the strategy process and then measure its output. The reward for HR will be its ability to clearly demonstrate its contribution which can be measured and then ultimately rewarded.
The prize for HR professionals who are willing to measure themselves is they will have the focus, clarity and organisational mandate to make the greatest impact and make a significant contribution to the business.