From "Professional Business Partner" To "Strategic Talent Leader": "What's Next" for Human Resource Management?

By John W. Boudreau, Pete M. Ramstad, Working Paper 02 - 10, CAHRS,

Cornell Schoool Of Industial & Labour Reations, 2002

----------------------------------------------------------------------

People, intellectual capital and talent are ever more critical to organizational strategic success. This observation is so common today, that it almost goes without saying. It appears

as the first slide in virtually every conference presentation on strategic HR, and is the first slide in most of the HR strategy documents in organizations. Digitization, labor shortages, growth through acquisitions, simultaneous downsizing and expansion, workforce demographic changes, and globalization are just a few of the trends that have made talent a top priority. A

deluge of articles, consulting products, future vision statements, and HR strategic planning documents attest to this.

Talent's critical role now transcends the HR profession. Our conversations with CEO's CFO's and other senior executives in leadership roles reveal this change vividly. In the past,

they may have patiently tolerated discussions about HR and talent, and offered their opinions about HR programs, but many did not see talent issues as their personal responsibility. While

the importance of people within organizations was at times acknowledged, it was not clear how many leaders really believed that talent had a tangible connection to business performance, share price or shareholder value.

Today, these executives are quick to point out that managing talent well is not only their personal concern, it is perhaps the most difficult issue preventing their organization's maximum success. Recognizing the pivotal role of talent, organization leaders are increasingly frustrated with traditional HR, even when it is executed well, even in the face of measurements that document best-in-class HR programs. One CFO (now the CEO of his organization) put it well, when he said to us, "I value the hard work of HR, but I worry that our organization may not know which talent issues are the important ones, versus which are mostly tactical. I know how toanswer that question in finance, marketing and operations. I'm not sure how to do it for talent. I wish HR had more to offer here."

In our work with business leaders and corporate strategists, key clients for HR, we encourage them to seamlessly connect their talent to their fundamental strategic decisions and goals. As they strive to do that, their frustration with the current state of traditional HR, and their hopes for something more, are reflected in questions like these:

• "Why is there so little logical connection between our core business management processes and talent? We have well-developed strategic planning, marketing, operations and budgeting processes that connect deeply and logically with our understanding of how to create competitive success and shareholder value. Yet, at best these core processes reflect only general talent goals like headcount, labor costs or generic HR programs. At worst, people issues don't even appear except as a headcount budget at the end of the plan."

• "We invest heavily in the latest HR measurement techniques- HR scorecards, HR financial reports, ROI on HR programs, and studies of how HR programs enhance attitudes, skills and abilities. Yet, these HR measures seldom drive key business decisions, such as acquisitions and entry into new markets. Moreover, our investors can't rely on these measures to show them the competitive value of our talent. Can talent measures truly drive business decisions and investments?"

• It's a basic principle of business that all investments have a different impact across divisions, markets, countries, or situations. Marketing would never get away with a strategy to "provide 40 hours of advertising for every product." Yet, our HR programs such as "40 hours of quality training" or "20-70-10 performance assessment" are usually applied to everyone. Shouldn't we be able to deploy our HR investments with greater precision and distinction, to have more effectiveness and less wasted effort?"

"HR spends a lot of time with our top leaders, describing the value of HR initiatives or the value of the HR function. Finance, Marketing and Operations spend very little time on their initiatives or their function. They focus on how strategic success

is accomplished through financial, customer and production resources, and on helping our leaders make better decisions about those resources. Their internal activities and

functional value are judged through their results. Why is HR different?" We also work with HR leaders in these same organizations, as they strive to link talent with strategy. As they strive to make the link, it is interesting to hear their own frustrations and

hopes, expressed in observations such as:

• "The strategic mandates for the organization are clear, and we use the best processes we know to connect to them. Yet, our HR strategy discussions typically focus on: (1) What HR programs will we offer; (2) Should HR be centralized or decentralized; (3) What IT and other infrastructure is needed to make it all work; and (4) Why it is to hard to justify the investment? What is missing in our the connection to the big-picture issues?"

• "HR professionals are personally well-respected, yet as a whole our HR profession lacks the respect, credibility and impact of other core professions like finance, marketing and operations. Why is respect for HR as a whole less than the respect for HR individual contributors?"

• "We always have a few HR professionals that are trusted business contributors - respected and effective in their perspective on how talent connects to strategic success. Yet, finance, marketing, and engineering routinely produce this kind of leader. In HR, they are a precious few, and each has their own unique approach. Why can't we more reliably create this kind of leadership excellence across our entire

group of HR professionals?"

Often a lack of powerful measures is blamed - HR cannot articulate its perspective with as much precision as finance, marketing or engineering. Other management professions have

better "facts and figures." Organizations often address this by building HR measurement systems "that show the value of what we do" or "apply scorecards or six-sigma initiatives to the

HR processes". Yet, a recent survey by the Corporate Leadership Council (2001) suggests that the top two most important goals for HR measurement are to enhance decisions about human

capital and to connect human resources to strategy. The same survey, however, found that these goals are only very rarely met, and that most HR measurement systems are good at

measuring the things that are perceived as least strategically valuable.

HR measurement cannot solve the problem alone, because today's measurement systems typically adapt measures designed for other resources and apply them to HR. For example, six-sigma initiatives often apply accounting-based cost-efficiency or operational measures that may miss the true impact of HR decisions. At best, the result is less costly and quicker HR processes, but not necessarily better talent. At worst, a six-sigma process focused on the wrong measures results in more efficiency (which is measured) and a reduction in the quality of talent (which is often unmeasured). The same pattern emerges if the measurement logic of finance, marketing or operations is applied indiscriminately to HR. Examples include "HR accounting," "HR quality," "HR branding," "HR balanced scorecards," etc. These can be useful systems if applied properly, but they often fail to address the symptoms described above.

To address these issues, many HR functions benchmark themselves against other "best in class" HR functions. We propose that the clues to the future lie much closer to home - within their own organizations. The key lessons can be found by more carefully considering some of the most powerful and respected business disciplines - such as Marketing and Finance. The development and logic of these disciplines provides a blueprint for what's next for HR, because these disciplines evolved from where HR is

today.

Download a copy of the full text of this document at: http://www.ilr.cornell.edu/depts/cahrs/downloads/pdfs/workingpapers/WP02-10.pdf