29 Jun. 2012 | Comments (0)

A variety of magazine and newspaper articles over the last several decades have pointed out that HR is often an administrative unit that 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.

What does the HR function of an organization have to do to be a high performer? My research center has surveyed senior HR executives and other executives for 15 years.[1] Based on the results of our latest survey, it is possible to identify some key HR functions and capabilities that corporations need to have in order to be effective. All of these are capabilities that HR functions can develop, but they often require a major change in how HR operates.

1)    Attract Top Talent

HR needs to recruit and develop individuals with the same level of business competence as those in other functions, e.g. marketing and finance. To do this, salaries for HR jobs must be comparable to those in finance and marketing -- often HR salaries are significantly lower than in other areas.  

HR needs talent who understands the business. Unfortunately, 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, as a result, they often lack business understanding.  

2) Reconsider 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 this is time consuming, 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 that makes use of metrics and analytics to focus on talent and organizational performance.

HR should be divided into two groups: one that handles administrative and support services, while a second group 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 and should be a key function for any business organization – but can only be so if the structure of a company positions the HR department to take on business strategy issues. The approach to HR that worked several decades ago is no longer effective.

 
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[1] For a complete report of the study findings, see Edward Lawler and John Boudreau, Effective Human Resource Management: A Global Assessment, from Stanford University Press, 2012.

  • About the Author: Edward E. Lawler III

    Edward E. Lawler III

    Edward E. Lawler III is Distinguished Professor of Business and Director of the Center for Effective Organizations in the Marshall School of Business at the University of Southern California. He …

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