High Value, Low Investment: HR as Organizational Value Accelerator

Accelerating change in organizations can be dizzying. The myriad of shifts in strategies and structures, re-positioning to gain market share, managing floods of data and analytics, growing digitalization, regulatory changes and political uncertainty, pushing for faster innovation and speed to market, tightening labor markets, increasing salaries and benefits costs as well as ensuring highly engaging work environments to attract and retain a talented workforce… to name a few. Organizations remain under mounting pressure to find high impact, low-cost solutions to sustain, develop and innovate in their organizations while resources remain tight and shareholders seek increasing value and market share. Today’s successful business and HR leaders require constant strategic and operational vigilance and positioning, meaningful metrics, clear lines of sight from strategy to execution by department and role, collaboration, highly effective communication and coalition building skills, courage and resilience.

Regan Traub During the past decade, operations leaders have been focused on finding process and resource efficiencies to improve EBITA and bottom lines. How much cost efficiency is left? With the economic rebuild of the past few years, there has been a deep breath of momentum while the pandemic is signaling heightened needs for scenario planning while we await fallout.

Recent “startling and compelling” research results by David Ulrich Ph.D. (globally considered the Father of Modern HR) and his team, have proven a significant opportunity for organizations to achieve exceptional value through Human Resources. For decades, the HR function has been seen as a cost center. This research proves that conversely, HR can deliver significant value.

With data from over 32,000 leaders across 1,200 organizations, the findings proved that integrated HR & OD functions deliver significantly higher value to an organization¹:

4X greater impact to business performance
4X the value to line managers
Over 3X greater value to investors and owners and
More than 2X the value to external customers.

Since 1995, The Human Resource Consortium is one of the few consultancies in the U.S. that has been leading the work on designing and implementing integrated systems in HR and OD. In fact, we were the first on the eastern seaboard to do so.

¹ “Victory Through Organization” by Ulrich, Kryscynski, Ulrich and Brockbank, McGraw-Hill, 2017.

Issues Facing 21st Century HR Organizations

The HR competence that worked well during the start up or growth stage in the 20th century no longer addresses the complexities of the 21st century. Needs for rapid innovation, growth and market share including scaling for rapid growth, business process redesign, AI implementation and creating organizational agility are at the top of many leaders’ lists.

HR functions established at an earlier stage of business growth required essential services of supporting employee records management and payroll, compliance, staffing, compensation and benefits administration, performance management and employee/labor relations. We see these as the ‘engine’ for HR.

Organizations that have focused on organization development (e.g. organization design, performance development, succession planning, culture management, etc.), may still have yet to align the various ‘people systems’ to the organizational strategy, integrate their HR practices or successfully develop the organizational culture. Some have the expertise to do this work yet may lack the time or focus to tackle these types of significant initiatives.

Is HR valued on par with other key functions?
Is HR & OD effective, efficient and scaled for organizational growth, change as well as advancing the function and organization?

Additional considerations:

Many business leaders have not experienced value-driving impacts that strategic HR leadership and consulting can bring to their leadership teams and organizations. Many HR leaders are still developing this expertise.
Significant numbers of HR practitioners have experienced burnout as a result of continued change, regulatory challenges and reorganizations. We hear time and again about the pressures of increasing work levels, decreasing resources, increasing technology implementations and data, mounting staffing needs and employee relations issues. This has impacted HR’s ability to engage, innovate, and remain focused on longer-term goals.
Inundated by higher demand, information overload and how to drive strategy, many HR leaders and professionals are struggling to stay on top of their workloads not to mention, advance their own capability. The majority report they grapple with finding time to connect with peers and stay on top of emerging best practices… potential keys to future success.
In some organizations, HR may operate well at a transactional level. It may be seen as under-performing, having inadequate initiative, and/or lacking the business knowledge and skills to provide the right support to leaders at critical junctures of strategic and operational change.

The HR Profession: A Historical Perspective

Few outside the HR profession know much of its evolutionary history. The profession had its real beginnings in the 1950’s. Largely, it was transactional… focused on compliance, compensation and benefits administration, recruitment, and employee / labor relations. Largely, individuals who chose the profession did so because they were drawn to it by their interest in organizational and individual behavior, desire to interact with people, perform detailed transactions, and be relied upon to maintain high levels of confidentiality.

In the mid 1990’s, the University of Michigan (led by Drs. David Ulrich and Wayne Brockbank) began re-defining the profession to be that of a Business Partner, with four equally important dimensions (only two reminiscent of its historical role): HR Delivery, Employee Champion, Change Agent, and Strategic Partner.

Key reasons for the emergence of this significant change in role included:

initialization of multi-nationalism and globalism requiring the ability to work in more complex and increasingly competitive environments including different regulations, processes, structures, cultures, and leadership styles;
significant workforce demographic shifts (including the presence of four, distinctly different generations in the workplace) requiring new organizational abilities to attract, engage, develop, and retain increasingly diverse talent; and
a keener focus on shareholder value and profit – requiring HR functions to relate their products and services to the bottom-line.
Core Drivers: Strategic Positioner, Paradox Navigator and Credible Activist

In 1999, Watson Wyatt commenced its Human Capital Index® studies2 with four hundred, publicly traded companies with a minimum of $100 million in revenue or market value in North America. In Watson Wyatt’s first study, the results were eye-opening. They proved that HR had the ability to increase shareholder value by over thirty percent (30%). In its 2005 report, Watson Wyatt reported on a global expanse (over 2,000 companies’ data) where a forty-seven (47%) gain was cited.

Then, in 2007, Ulrich and Brockbank’s research identified another new trend in high performing HR functions – where HR was seen as meaningfully contributing to, or driving, shareholder value. In fact, their research deduced that 50% of HR’s potential value to a high-performance business was strategic in nature and only 25% attributable to HR service delivery. The HR profession’s new strategic mandate included Culture Management, Fast Change, Strategic Decision-Making, and Market-Driven Connectivity… a profound and quantum leap from where HR had been in the early 1990’s.

Fast forward to 2017…Ulrich’s team defined the newest competency model with nine (9) competencies for high performing HR based on 32,000 survey participants in 1,200 high performance, global organizations.3

Foundational: Compliance Manager, Analytics Designer and Interpreter, Technology and Media Integrator

² CTI calculates the degree to which HR practices and competence contribute to “Total Return to Shareholders” (TRS) utilizing Tobin’s Q (an economist’s ratio that measures an organization’s ability to create value beyond its physical assets). Responses were matched to objective financial measures, including market value, three- and five-year total returns to shareholders (TRS), and publicly available data from Standard and Poor’s Compustat.”

³ Victory Through Organization: Why the War for Talent is Failing Your Company and What You Can Do About It by Ulrich, Kryscynski, Ulrich & Brockbank, McGraw-Hill. 2017.

Most HR organizations have been working to shift to “strategic business partner” models and roles. Many larger organizations have been successful. However, for those HR organizations which have yet to effect this transition, some significant challenges remain.

Educating and developing non-HR executives’ appreciation for, and implementation of, higher capabilities of the HR profession. Many executives in organizations have yet to witness, interact with, or benefit from HR operating at this level. And, in many cases, when first introduced to this level of competence find it difficult to accept unless the introduction is well-positioned and presented.
Engaging HR staff who are confident in their current roles to want to change the way they work with clients and operate as business-minded consultants. This includes a heightened understanding of and involvement in the business needs, strategy and profit drivers as well as how to translate insights of the organization’s customers and suppliers into increased market share through shifts in organizational behavior and rewards.
Creating the right structures and efficient processes to support a strategic consulting focus for the HR function. This includes defining meaningful and effective roles for HR staff who may be more suited for operational rather than a strategic focus and possess valued relationships, systems capability and historical organization knowledge.
Shifting how HR staff are selected, developed, measured, rewarded, and recognized. In addition to effective HR leadership to nurture an organizational work environment that supports learning, best practices, collaboration, innovation and agility.
Supporting HR leaders to re-energize HR staff to develop effective levels of personal competence as well as confidence, ultimately providing higher value to leaders.
Building the visionary and strategic, analytical, creative, and advanced interpersonal relationship skills needed by HR staff to operate as effective consultants (design, coach and influence) to effect behavioral changes in the organization.

The question we faced was…

To what degree, how, and how rapidly could we develop and re-engage the talent of existing HR professionals to deliver a higher level of contribution to the organization?

Our Approach to Creating Higher Value in Human Resource Organizations

With the proprietary methodology we have developed and implemented in numerous organizations, we have consistently been successful in helping transactional HR functions to reinvent themselves to become value-creating business partners and HR leaders. As a result, our HR clients become more focused and attentive, engaged with and effectively supportive of leaders and employees at all levels of the organization, valued internal consultants and compelling communicators. The business partners now view the organization, its future and their role with an entirely different lens and operate to a much higher level. In so doing, they produce the stakeholder value that HR contributes to what researchers² define as high-performance organizations.

We call our approach and methodology HR as Business Accelerator.^SM</sup> Its successful methodologies, tools and practices reposition HR and OD organizations as effective internal strategists, consultants, business partners and business leaders. Partnering with us, the HR leaders have been more highly effective in assessing needs and opportunities for intervention, building collaborative efforts with leaders and accelerating the achievement of organizational goals, including D&I culture shifting.

We utilize a combination of an organic and model-based approach; that is, we borrow what works from the experts in our field and we craft our own approaches, drawing on our vast experience and expertise, to work for the specific environment of each client (what works for one organization does not tend to work the same, or as well, in another… even among different divisions or sites within the same organization³).

To effect sustainable change, we focus on each of three organizational levels to ensure systemic results:

The Organization – What does it need now and in the short-term future, to achieve its strategy?
Utilizing anthropological methodology, we gather insight about the organization – its history, strategy, culture, performance metrics, competitive and external stakeholder environment, the extent to which employees are ‘engaged’ and performing and organizational strengths and challenges. We also assess the needs and readiness of non-HR leaders to successfully implement new roles and capability for HR – a critical step in this type of initiative where decision-making is influenced.
The Function – What is HR’s current capability? What does it need to operate as a partner/leader with the business? What challenges or resistance might it face? How will its success be measured?
We carefully assess the HR organization’s baseline against strategic needs of the organization. This assessment considers the level of competence at which HR practitioners currently practice, the challenges HR sees for the organization and its function, HR’s strategy to elevate organizational capacity to meet anticipated challenges and its readiness to develop. This involves reviewing the mission, structure, and roles of the existing HR organization and shaping these to fit the strategic and operational requirements of the organization.
Once we have a clear understanding of the organizational and functional baselines, we’re then ready to work with the chief HR officer and key business leader(s) to shape the desired level of HR capability for the next three to five years.
The Individual – What are the strengths and engagement levels of each HR leader/manager and practitioner in context of the mission and goals of the function and organization?

Time spent with each HR practitioner to understand their personal career goals and the extent to which they feel engaged in their work and in the organization informs our highly customized approaches to assure understanding, acceptance and engagement to the utmost degree possible. We also help individuals assess their personal competence against the needs of the function and organization as well as the degree to which they are interested in operating more strategically.

“The process you took my team through began to develop a different skill set.… I see them being much more proactive in raising issues and identifying trends. I’ve been able to back out of meetings with many clients who are now comfortable in interacting with my staff. Our Corporate CEO (who I support) shared that what he values from the business partners is the ‘alternate view of the current reality.’ I was pleased with that because what he was expressing was his great appreciation for us keeping everyone out of group-think. I think one of the other great outcomes was that it helped develop my people to become stronger in the work they do. They are now invited to VP, Director, Manager and Supervisor meetings and the meetings won’t go anywhere without HR. The work you did with us helped them to become data rational as well as to learn how to work in a consultative manner, how to be a participant (in business meetings) and advance the conversation…and how to use questions to provide perspective without driving direction down.”

– HR Leader, Fortune 500
Manufacturing & Distribution

Actively partnering with the HR leader and team, we shape an HR development plan that is tailored for this organization and its strategy and culture. The curricula is designed and developed, utilizing a high degree of interactive and action-learning development practices to create competence in:

building stakeholder relationships
developing strategic vision
gathering and analyzing data
assessing client organizations and issues
designing and developing solutions in partnership with the internal client
validating and measuring effectiveness
communicating effectively
improving performance of individuals and organizations and
creating and implementing timely and effective mid-course change.

These outcomes serve to elevate the general practices of HR and OD while building the foundation to accelerate diversity and inclusion.

² See sidebar “The HR Profession: Historical Perspective”
For additional reference, see People & Strategy, The Journal of the Human Resource Planning Society, Volume 32/Issue 1 2009, pp 15-22.
³ as reported in numerous issues of Harvard Business Review, among others.

Case Study One

The HRC was brought into a Fortune 500 organization to transform the performance of two dozen business line-supportive HR professionals and managers, most of whom were operating as transactional service providers to their business clients. Our work was based upon understanding the organization’s needs gained through the HR leader and non-HR executives.

Partnering with the HR leader, we designed a multi-phased project that combined expert design, five (5) days of interactive and action-learning work sessions over a span of six (6) months with the group, including interim assignments and coaching the HR leader to:

Analyze business and industry climate and needs as well as the priorities of top business leaders;
Assess the current capability of the function to support leaders’ priorities as well as against HR best practice competencies;
Create the right charter, vision, and customized business partner competencies with this group for this culture;
Design and facilitate a series of action-learning workshops on the topics of HR consulting skills, unit level business planning, individual goal-setting and unit-level development planning;
Create “Individual Career Guides” for the function – based on their new competencies, to be used with their leader to set development goals, assess progress and build targeted competencies;
Facilitate a mutually agreed upon set of next steps by the HR leader and his team; and
Coach the HR leader to position these changes in the broader HR organization and with organizational leaders.

Our work enabled changes in mindset, behavior, and competence to take hold with the effective partnership of the HR leader who was instrumental in the success of this project. His compassion for each individual on the team, standards of excellence, willingness to take risks in a risk-averse environment and solid leadership skills laid the groundwork for success. The higher level of performance that this HR group developed through the HR as Business AcceleratorSM approach:

Earned HR greater appreciation by, and involvement with, business leaders and their staff;
Built greater insight and skills within HR to more successfully achieve organizational and functional goals and contribute to the development of organizational value;
Sent a clear signal to HR and non-HR managers that the organization was committed to the HR function and believed greater value by HR, the engine of the organization’s talent management, would ensue to contribute to greater employee loyalty and engagement;
Minimized external consulting expense;
Saved significant organizational resources (expense and time) which alternatively could have been spent in search fees and higher salaries in an HR re-staffing initiative;
Enabled business leaders to make different kinds of decisions based on the data, alternate viewpoint, and informed judgment of business partners; and
Escalated the value / cost factor for HR in the organization.

Case Study Two

The HRC was initially brought into an award winning, 2,000 employee, privately-held, East Coast retail organization to design, develop and implement a diversity and inclusion initiative that would support its rapid geographic expansion into diverse markets within five (5) years… 50% of the typical time to successfully complete such a shift. Within two years, we saw that the awareness of the organization’s leaders and employees had reached an appropriate level where we could then develop HR staff with the knowledge and tools to become effective, internal D&I consultants to accelerate the organization’s culture shift and save significant consulting expense that would be advantageous for their expansion.

The HR staff was eager and capable of achieving more. They had completed our one day D&I development program for managers as grounding D&I concepts. To take them to the next level where they would be able to lead this work internally, we developed and facilitated four (4) days of educational workshops over a period of six months. These workshops included two days of specialized consulting skills development, followed by advanced D&I knowledge and skills to create the infrastructure and capability to propel and support the organization’s cultural transformation. Additionally, they learned to facilitate D&I education at the employee level. The result? The organization built the internal capacity to fly on its own within 3.5 years (vs. than the originally planned 5 years) and built higher levels of internal competence and engagement while saving significant consulting expense…supporting what we see as the ‘healthier choice’ – building internal competence while mitigating consultant dependency and expense, one of The HR Consortium’s core Operating Principles.

Conclusion

The HR as Business Accelerator^SM approach, with only four (4) to six (6) days of workshop time along with participant learning assignments and coaching over a period of ninety (90) to one hundred-eighty (180) days delivers significant, increased value.

Is the value within your HR function at the level your organization needs?
What could your organizational value be if your HR function operated with strong, strategic and true consulting capability?

By Regan MacBain Traub, CPC, SPHR