Recently I was approached by an HR Manager, to assist her with some coaching and mentoring. It is typical as part of the coaching process to define some clear coaching goals.
One of her top three goals was to make HR more strategic in the business. Over a number of weeks we worked through the various issues, constraints and opportunities.
The Value of HR
As we covered the other two goals, we eventually focused on how she could demonstrate the value of HR to the business. Despite the fact that she was reporting to the CEO, she was not seen as part of the management group. In fact, she had no budget, was not completing even an HR report.
It is important for HR Managers to be successful in the basics, before trying to leap tall buildings in a single bound. Mastering the functions of any line manager such as a budget and a monthly report is critical for HR to be seen as part of the business.
HR Budget
We agreed that a basic HR Budget should be developed, as well as developing a process with the financial accountant to identify all HR related expenses. The accountant was very supportive of the need to establish a specific HR Budget.
The reality is that line managers are not good at budgeting for people related expenses. The worst example I have seen was a single line item for people costs, where managers would simply apply a standard percentage, e.g. CPI, for their next year’s budget. This included all costs, one big bucket, including employment costs, training, and salaries.
HR Report
I still have to find a single human being that loves their monthly report. A few years ago I was consulting to a marketing team, only to discover that they would spend a whole week every single month to complete their monthly reports. Yes, the reports were very aligned with their strategic plan, with a number of initiatives supporting each strategy, with clear milestones and accountabilities.
What I learned from that experience, after succeeding in reducing the reporting time, but still providing good management information, was the need for marketing the HR function. HR needs to be highly visible in the business. What is not needed is a long, boring report with lots of HR speak and non-business related information.
There is a missed opportunity by not having HR as an integral part of the overall business report that is submitted to the board.
An effective HR report could be as brief as a one pager. In addition, picking a specific theme each month provides the HR manager with the opportunity to put the spotlight on a relevant topic, such as:
o Feedback from new staff after the on-boarding program
o Analysis of distribution of ratings after annual performance review
o Diversity report and gender information for promotions and training
By combining quantitative information, such as tracking against KPI’s is an excellent opportunity for HR to demonstrate their real understanding of their business function.
Financial Intelligence
Most HR managers are not good at understanding and managing key HR numbers, compared to the Finance function that can quote outstanding debtors in days and dollars by heart.
Good HR managers understand how they can impact on and improve the bottom line. You can be financially intelligent, but still not helping to improve profitability. The real challenge is not just in reducing costs. Most managers are good at that.
For example: using your OD knowledge to ensure that your new sales division have resilient staff – having reduced staff turnover (cost) and achieving better sales (profit). One of the companies I worked with used dieticians to sell a new product. They were technically good, but couldn’t sell. By putting the right sales staff in these roles all sales targets were achieved within the next year!
Any opportunity to spend real time in the trenches are invaluable. It is only once you have to worry about 500 customers and achieving all your business targets, that you realise that the latest HR program is not the highest priority, even if HR think it is.
By understanding how you in HR can show and explain the benefit for the manager, you will realize that telling a manager it is good for the business is not enough! Trying that approach with an external customer will be incredibly shortsighted, but I am always surprised how HR people struggle to explain the real financial benefits.
Another example: Recently I consulted to a company that decided due to high petrol costs to change company cars. By using a positive change strategy, field service operators were given 4 cylinder 4WD’s more suited to their needs, rather big 6 cylinder station wagons. This resulted in real direct saving of $20K per vehicle per annum. Both benefits and cost savings were achieved!
Moving to Strategic HR
A few years ago I was part of a benchmarking team looking at strategic planning. One of our global competitors was agreeable to meet with us, and shared a number of their strategies with us. When we discussed the various strategies, they concluded that the real challenge is not about developing smart strategies, but it is all about implementation and execution.
Before we can make HR a more strategic function, and become a strategic architect, HR managers need to be good operational executors.
