Human Resources – It’s Time for a Reset

According to a recent Harvard Business Review article, the road to top jobs in major corporations is shifting. The article, which details research findings relative to “The New Path to the C-Suite,” discusses how the functions of marketing, finance and human resources (HR) are evolving. But perhaps the most crucial finding points to the struggles HR executives face when it comes to gaining clout in the C-Suite.

This is not the first time the effectiveness and influence of the HR function has been called into question.  A variety of magazine and newspaper articles over the last several decades have pointed out that HR is often an administrative unit, which adds little strategic value. Some have taken this a step further, saying that the HR executives frequently clash with others in the organization due to a lack of business understanding.  In fact, I interviewed a CEO a few years ago who called HR the “BPU or Business Prevention Unit.” He complained that his HR executives were good at identifying what not to do but were poor at identifying what should be done to make the company more profitable.

The Human Resources Reset

A number of forces in the business environment have created new opportunities for HR to become a truly significant contributor to the performance of organizations.  To be competitive, organizations increasingly depend on their ability to be agile, and be creative in the way they manage and organize their people. These are areas where HR can and should be a source of expertise.  There is a great need for talented HR professionals who understand business strategy and are able to use data about talent management to impact organizational effectiveness. But in order for this to happen, there must be a reset in the way the HR function is managed and structured.

Attracting Top Talent

HR needs to recruit and develop individuals with the same level of business competence as those in other functions, e.g. marketing, finance.  To do this, salaries must be comparable to those in finance and marketing (not the lower ones that are currently offered).

HR tends to have siloed career tracks; that is, individuals simply move up the hierarchy within HR departments, often specializing in one of its areas: benefits, compensation or training and development. Talented HR individuals don’t tend to rotate out of HR into other functions and they very rarely become general managers or CEOs.

Reconsidering the Corporate Structure

In the typical corporation today, HR spends a great deal of time on administrative activities, assisting managers throughout the organization with their personnel management activities.  Because it is demanding, this type of work almost always takes precedence over work concerning strategy development and analyzing how talent affects organizational performance.

While the growing use of information technology has helped slightly in reducing the time it takes for HR administration, it has not had a significant impact on HR’s role with respect to business strategy; an organizational structure change is needed in order for HR to play a more strategic role.

HR should be divided into two groups: one that handles administrative and support services, while a second handles strategic talent management, organization design and sustainable organization effectiveness.  The second should be headed by a chief organizational effectiveness officer, who reports directly to the CEO.

HR can be a key function – but only if the structure of a company positions it to take on business strategy issues.  The approach to HR that worked several decades ago is no longer relevant today. Major changes must be made.

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