What Is HR's Value Proposition?

Terms such as 'value adding' and 'value creating' are much used in organisations and have become by-words that articulate what HR transformation is seeking to achieve. 'We want to move from transactional to "value adding" HR' is a typical, and justifiable, aspiration for HR transformation. It suggests that even though HR professionals are currently delivering worthwhile work in organisations there is still something missing: a contribution to key business challenges that is not being made currently; contributions that will make colleagues sit up, pay attention and find valuable.

Ask a line manager or business leader what they value from HR and you are likely to get a divergence of opinion. Paying people on time is valued; accurate employee information is valued; support to managers who are handling difficult disciplinary, sickness or grievance cases is valued; slick people processes are valued; efficient restructuring is valued. We should not delude ourselves that these activities are somehow worthless. They are not. HR adds value through these activities.

But there is still something missing. What about the people issues we are not engaged in, but could be? What about working the data so that we bring real insights to business colleagues?

This kind of 'value add' is what an Economist Intelligence Unit/Deloitte report in 2007 (Aligned at the Top) called 'the big challenge' and their research drew an interesting distinction:'When senior business executives talk about HR, they focus on administrative activities such as rewards and benefits, performance evaluation and HR operating efficiency. When those same executives talk about people issues (our emphasis), they focus on talent management, workforce productivity and leadership development and, in many cases the HR function isn't even mentioned'.

A KPMG report — HR: Architect or Artisan? (2008) reported the following insight from the CEO of a major high street retailer: 'When the marketing director comes to the executive board meetings he presents data on our consumers, and we are given enormous insight about their buying habits, their aspirations, their concerns and their hopes. We have clear demographic data, and we can predict with real accuracy how patterns will evolve. But when HR presents information about our employees it is less precise, less concise, less insightful and less predictive'.

These CEO insights cannot be dismissed and they set out challenges of relevance and data insight the function must respond to.

We propose to unpick what is meant by value creation referring to recent research and then examine HR practitioner perspectives. We will outline how some HR functions are responding to this desire to extend the range of value adding contributions and finally highlight a number of challenges that remain if HR is to create value through people.