The Situation in 2005 | Key Issues for HR

In 2005, we summed up HR's journey in the following terms: 'HR has moved from a broadly administrative and transaction function to one that adds more tangible value to the wider business'. We gave the following reasons for making this statement:

The HR function is actively addressing the transactional aspects of its work. If the quality of HR information had been world-class in the past, then the case for change would have been difficult to argue. However, this has not been the case. HR administration is often deficient and HR information unreliable. Whilst not the glamour end of HR, good HR administration consistently features highly on manager lists of their expectations of HR. 

Transactional HR needs to be done well — but it is not the be-all and end-all of HR management. Fortunately, transactional HR is standardising and alternative options to the old, fragmented, labour-intensive, expensive in-house model now exist. Shared service centres (whether in-house or outsourced) are now present in many organisations, and there is increasing uptake of Web-based HR. The challenges for HR remain justifying organisational capex on Web-based HR and then delivering the full benefits of that capital investment. Ultimately, these solutions must deliver better service to managers so that HR professionals are truly freed to contribute to higher value issues.

There is greater appetite amongst HR professionals to move into the value-adding space. Whilst the horizons of many HR professionals are still focused on 'case work' around sickness management, grievance and disciplinary handling, the role of the HR professional as a 'business partner' has really caught the imagination of the profession. Although there have always been high value-adding HR professionals closely aligned to their line management colleagues, the years since the publication of Ulrich's HR Champions (1997) have given people a vocabulary and focus for the HR role. The challenges remain those of building the capability of HR professionals to move onto the ground of strategic business partnership, and changing the attitudes of line managers who still see HR as an administrative/ advisory function.

The business drivers that are pulling a stronger contribution from HR are still present and arguably stronger now than ever before. People costs remain one of the largest elements (if not the largest element) of organisational fixed costs, and we are hearing much more in recent years about the need to 'value' and 'leverage' human capital. There is now a high level of interest in finding ways of measuring the contribution of people other than as costs. Work undertaken by Lev (2001) and others around the measurement of intangibles is enabling HR to engage with the business more purposefully. Additionally, a growing body of research linking progressive HR to superior business performance is slowly beginning to register on the minds of senior business leaders.