Value Adding HR

Moving from the world of academic research to the experience of HR professionals, we have identified an interesting dilemma that needs to be faced: if we accept that 'value add' is essentially what stakeholders consider to be of value to them (PULL) — how do we also influence stakeholders so that their needs change (PUSH)? Put more simply — if managers consider value adding HR to be excellent HR administration, slick HR processes and timely and helpful case management support, how do we also help managers to understand that HR professionals can add value not only through delivering the basics, but also through delivering business projects more successfully, managing change, or shaping the strategic agenda? Returning to the Economist Intelligence Unit/Deloitte report quoted earlier — how do we influence senior executives so that they see HR and people issues as one in the same?

In conversation with Frances Allcock (BBC), we were able to articulate this dilemma as shown in Figure 3.2. This figure captures well the challenges faced by HR professionals — how do we shift the conversations we hold with our business colleagues so that we not only hold the conversations we need to hold with colleagues but also engage in those areas they don't expect us to? As an illustration, Allcock has observed that one of things managers value from HR is excellent and slick reorganisation — the implementation piece. If HR does this well they get to the table. Yet HR is often unable to get to talk about the really challenging aspects of change because managers either do not have the time or they do not see it as an area where HR can contribute (sometimes with justification).

 

Figure 1: Shifting conversations.

Answering the question 'what do we actually talk to managers about?' will vary from organisation to organisation — you may want to reflect upon Figure 1 to review your own conversations with business colleagues. What is important is that we create value not just by meeting stakeholder needs, but in shaping their thinking and influencing their decisions. As Alison Grace (National Express Group) put it: 'it is about working in ways that make a positive difference to our businesses and that means bringing fresh thinking to the table, challenging assumptions and getting the business to grapple with tough issues from multiple perspectives'.

If changing the conversations we have with colleagues is one of the challenges we need to confront another is measurement. Many HR departments are involved in measuring their company's operational performance against key performance indicators (KPIs). Fewer have a role in measuring and providing hard evidence of the efficiency and value they are adding to delivery of their organisations' strategic objectives.

As Martin Moore (Royal Mail) put it: 'The problem with many HR measures is that we measure what is measurable not what we need to measure'. Sticking to traditional measures of HR effectiveness also induces a way of thinking and working leading to a heavy reliance on the latest fads and fashions of espoused 'best' practice and over-preoccupation with benchmarking.

One commentator, Gary Hamel, has suggested that this is the Achilles heel for HR. He has noted that 'unlike the Finance function, HR does not have an explicit and accepted theory about how it adds value to the business'.

The reason for this is addressed in the research led by Lepak et al. cited above: non-financial benefits of the sort offered by effective HR functions are very rarely based on a set configuration of cause-effect but rather, value is derived through a combination of connecting processes, information, strategy and service delivery aligned to the specific needs of each business. Whereas finance is largely based on a universal model of added value, HR is based on a situation-specific model of added value. In other words, we need to take excellence in people management practices and align these with the specific needs of our organisation.

But where to start?

In our conversations with senior practitioners there is a strong appetite for HR to develop ways of measuring the impact of core business issues. To frame this discussion, we have been able to identify four ways in which HR drives value (see Figure 2):

• Transactional value — running HR administration in ways that capture and provide accurate, timely and insightful information and advice. Measures of transactional value include: costs/value for money, data and information quality, reporting capability and flexibility, delivery against service levels, etc. A test of transactional value will be whether managers get high quality information and advice when they need it and whether this information tells them anything new.
• Process value — putting in place people processes that are efficient (speed, cost, quality), fit for purpose — relevant to the circumstances of your organisation, meaningful and engaging for users and aligned to organisational goals, etc. A test of process value is the experience people have of the process, for example, with regard to selection — does the selection process build commitment and engagement from the first point of contact through to decision?
• Strategic value — participating in shaping strategy so that people and organisational issues are surfaced from the outset and supporting the effective execution of strategy. Tests of value in this context include challenging thinking, aligning people and business strategies, executing strategy in a way that makes change stick, delivering projects and securing stakeholder commitment to change. It also means adding value through shaping organisational design and being confident in manipulating data so that the organisation is able to gain insights concerning the workforce profile and cost structure.
• Reputational value — doing things that help to deliver the strategy and which build a positive internal and external image of the organisation. Examples of this are ethical and sustainable practice, good governance and leadership, effective risk management, being seen as a good employer, etc. A test of reputational value may be that those people you need to attract really want to work for your organisation.
  
  

 

Figure 2: Value drivers.

Clearly, all value drivers are 'strategic' but the sense we have used strategic above is to focus particularly on the delivery of the business change agenda. Each of these ways of value creation also requires a multiple stakeholder approach and a deep understanding of external and business realities. This emphasis on relevance to stakeholders and to your organisation aligns with Lepak et al.'s research in the 'Value creation — what it means and how it is created' section and with the contingency approach to organisational development.