On Monday (May 20th 2013) I attended an inaugural HR Conference at The London School of Economics. The first speaker was Professor David Guest from Kings College, London. Professor Guest opened his talk with research on how unpopular HR is and how weak the business impact of HR is. During Q&A, none of the 120+ HR professionals challenged his assertions. They just focused on what was needed to change the situation.
To give a flavour of what Prof Guest said:
- In a recent survey of the least most popular careers among UK Teenagers (n=11,000), “Working in Personnel” was in the bottom 9 alongside being a Glazier, Factory worker, Audiologist, Call-centre Worker, Miner, Speech therapist, Surveyor, or Welder. (It was 6th in this list, but I’m not sure if the order meant anything)
- The HR Function has been “Derided by Academics”, e.g. Hammonds (2005) “Why we hate HR”; Stewart (1986) “People need people – but do they need personnel? It’s time for human resource departments to put up or shut up” (Fortune).
- The Image Among Top Management in “Voices from the Boardroom” research (Guest and King, 2004) highlighted a range of strongly worded feelings, e.g. “In our organization we have an HR function which is steeped in process mindset to do with grading, competency frameworks, appraisal systems which have the design of a push me-pull you type animal which doesn’t achieve anything. Glorious in their construct but bloody useless in their implementation” (Operational director)
Professor Guest’s conclusions from the body of research were:
- Attempts to enhance the power and influence of the HR function have generally not been successful
- HR managers are too often reactive and reluctant to take initiatives. Any progress in HPWS in the UK cannot be attributed to the HR function.
- There is consistent evidence to show that HR managers usually lack the power and influence to introduce and implement policies in the face of opposition or apathy
- Despite problems with the HR function and its image, we know there are first class HR managers.
Fortunately, Professor Guest had 6 practical policy implications as highlighted directly from his slide below.
The last point relates to the need to have CEO and Organisational buy-in to the HR agenda and that HR professionals, to have a chance, need support. The first point is a double edged endorsement/warning of the Ulrich model. (A great deal of discussion and evidence was provided as to the prevalence of the Ulrich model).
What stands out from my perspective are in the 2nd and 3rd bullets: “Learn to love data”, “Compete on quality of hard information” and “promote evidenced based HRM”.
These views were built on by the CEO of the CIPD, Peter Cheese. Peter laid out the growing complexities that HR is faced with: the impact of demographics; globalisation; the impact of the recession; dealing with Generation Y… he talked through many drivers.
What is interesting is Peter’s conclusions (and that of the CIPD) are pretty consistent with Guest’s. Peter laid out the 8 HR professional areas (see below) and the need to “Lead through Insight” and “Thinking strategically and working collaboratively with the business”.
In this, he strongly preached the need to spend less time on Administration and far more on “Improving workforce and organisation performance” and “Strategy”. He talked at length about the importance of HR and Finance being on the same agenda. That they just need to get on and work together. Equally interesting was that HR as a function has a tiny budget as a percentage of overall labour cost. Between 0.5% and 2% of total cost were quoted. Orders of magnitude smaller than Finance. I know this to be true. I am constantly being told not to bother selling to HR, because they just don’t have the budget. HR teams are constantly under pressure to save their share during the down turn.
To me, these presentations from some of the strongest thought leaders in the field confirmed, if confirmation was needed, that we are totally right in providing software and methods to turn the capabilities from pyramid with a focus on admin to a diamond with a focus on improving workforce and organisation performance. That we can be a core enabler for HR to take its rightful place. To drive the Org Design, Workforce Planning and HR Analytics mantle.
After Peter’s presentation, I had the honour to spend a good 20 minutes chatting further with him. Pretty much immediately, after I told him what we are doing, he told me that one of his big questions was to define a set of HR Analytics “standard metrics”, probably in a maturity model. We agreed that HR teams should know the basics first (number and cost of FTEs; demographics of the workforce all by location, business unit, gender etc). But then they needed to move to more value adding metrics and NOT just simple cost driven ones such as the cost of recruiting. During his talk, Peter talk about the risks to benchmarking and the silliness of measuring the wrong thing. The “Cost of Recruiting” is a good example that he used. At the end of the day, it is the quality of the person you recruit and the length of time they stay with you that counts, not the recruitment cost. Here is a simple example which builds on that:
If your cost was 30% (say an average of £15k on an average salary of £50k) but the average tenure was 5 years instead of 2 years with a 15% cost, then this would actual be a 20% saving. The average cost per year being £3,000 vs £3,750, as can be seen in the table below. To build on this, if the “provider a” recruits were 30% more productive (clearly not always easy to measure. In this simple example, I have assumed a standard revenue pp of £100k, i.e. a 50% margin) vs 10% more productive, then “Provider a” is 37% better value even though 200% of the cost.
This type of analysis isn’t rocket science, but it can have significant bottom-line impact. HR Directors and the thought leaders within the field and a large proportion of business leaders all want more value from HR. Stronger analytics and more insightful, business focused analytics is a big part of the answer.
The academic view from Professor Guest is that HR is not getting the audience that it should. And the industry view from the CIPD is that there are key gaps in techniques and skills. We agree – and we stand ready to work with industry professionals to correct that gap
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