HR professional competencies vs HR department capabilities
HR should focus on building a capable HR department, according to Wayne Brockbank, who says this approach yields better financial performance and long-term stakeholder value
The 2016 results from the Human Resource Competency Study from the University of Michigan and the RBL Group provide important insights into how to enhance the effectiveness of HR. Among the most remarkable findings is that the impact of the integrated HR department practices has substantially greater impact on short-term business performance and stakeholder value creation than does the competencies of individual HR professionals. To be specific, when compared with the competencies of individual HR professionals, integrated HR department activities have four times more impact on short-term (3 years) business performance and value created for investors, line managers and employees and more than twice the impact on external customer value.
To a great degree, these findings are intuitive. When all HR activities integrate around a few but critical business issues, their impact on business performance and stakeholder value creation makes much sense. Integrating the core HR activities of staffing, performance management, rewards, training and development, communications, and organisation development around the firm’s required capabilities enhances both short-term financial performance and long-term stakeholder value.
“The impact of the integrated HR department practices has substantially greater impact on short-term business performance and stakeholder value creation”
Two obstacles stand in the way.
First, since the emergence of competency modelling three decades ago, HR departments and professional associations have focused considerable attention building HR competency frameworks and models. They have provided training programs and certification examinations that are designed to enhance the skills, knowledge and behaviours of individual HR professionals. Such has been the case for every major HR association around the world.
Given the importance of the growing the number of individual dues paying members, the focus on individual competence development is understandable. Plus individual HR professionals are motivated to enhance their individual competence so as to contribute to their respective HR functional areas and also to enhance their personal marketability.
Continually developing the competencies of individual HR professionals is an important agenda. However, the focus on individual competency certification and development might have a tendency to displace the substantially more important agenda of building and sustaining well-integrated HR departments.
“When all HR activities integrate around a few but critical business issues, their impact on business performance and stakeholder value creation makes much sense”
Second, it is clearly easier to develop skills, knowledge and behaviours for individuals than it is to integrate the disparate parts of HR into an effectively functioning department. Pulling the pieces of HR into a cohesive whole can indeed be a formidable challenge. Each functional area within HR tends to develop its unique logic and approach. They emphasise different time frames with some focusing on short-term business results and some focusing on long-term results. Some focus on output results; other focus on behavioural or ethical inputs. Some emphasise individual performance while others focus on institutional results.
It is, therefore, understandable for training and development, measurement and rewards, organisation development, hiring and promotions and communications might tend to go in somewhat different directions. This tendency is partially underscored by HR consulting firms whose practices frequently focus on functional specialisation rather than comprehensive integration across all HR functional areas.
Regardless of the challenges, the data is clear. The focus within HR should be on building capable HR departments. This is the agenda that should receive the intellectual and operation focus of HR leaders.
4 action items for HR
- Recognise that having HR department capability is significantly more important than having competent individual HR professionals.
- Have a clearly defined set of business outcomes and organisational capabilities on which each HR functional area can focus.
- Regularly examine the shared mission and focus of the HR department and its constituent parts.
- Ensure that operational points of each HR functional area are clearly identified, integrated and collectively leveraged.
The Truth About Digital HR Transformation
When surrounded by the energetic and inspiring talk of disruption and innovation at day one of UNLEASH London 2018, it would be easy to get overwhelmed and wonder how on earth your organisation is ever going to keep up. Jonas Kjellberg, a co-founder of Skype and disruptor extraordinaire, kicked us off with brilliant insights, hard-won from his failures as well as his successes.
Kjellberg talked about the need to re-imagine our organizations. Yes, some of the well-worn cliches were trotted out about Airbnb re-imagining hotels or Uber re-imagining taxis, but this is a guy who helped revolutionise how we communicate. He used some other examples, such as how Zara doesn’t see itself as a fashion retailer; it sees its business as a logistics operation — “first with the latest.” But he stressed that innovation can’t be achieved piecemeal, or by “three guys tapping away in your basement” while the rest of the organization carries on with business as usual. Innovation needs to become part of an organization’s DNA.
That’s easier said than done, right? In David Wilson’s session in the analysts track, he shared five truths about digital HR transformation. Based on data from Fosway Group’s joint research with UNLEASH, David talked about the realities of how HR is grappling with the changing world of work today.
Attending this event, you realise there is a very real gap between what gets discussed by speakers and the battles HR professionals are fighting back at their desks day to day. Obviously, I work for Fosway but I really believe it’s important to understand this gulf between where organisations are now and where they’re trying to get to in order to support the future of work.
Wilson’s points, summarised in this slide from the presentation, are key to helping HR move forward.
This isn’t about innovating technology for its own sake, but looking critically at how it can truly enable better business delivery. So video-based virtual recruiting might be cool (38 percent of organisations are already using it), but will it help achieve your talent-acquisition goals? Chatbots (45 percent are looking to adopt these in the next year) and AI are very much “flavor of the month” (although only 12 percent are currently using AI), but how can they support your functional HR shared services? So in plain English, don’t go buy shiny new things and call it innovating it if isn’t going to add anything for your people and how they work (or how you work in HR).
Vendors also have an important role to play here. They are (or should be) in the innovation business. They have R&D teams developing their solutions all the time. But Wilson stressed that they should not just talk about their own innovation. They need to help corporates innovate too in order to be in a position to take advantage of what’s available. And what’s innovative in one context might be business as usual in another, or pie in the sky somewhere else! Driving transformation in large organisations is like trying to turn the QE2 — it’s slower than most people would like. And vendors need to recognise that and support their clients in innovating within their context and constraints. When I tweeted this, a friend of mine who works for a large insurer tweeted back and said “This is so relevant for me right now. Don’t show me shiny stuff, help me solve my problems!”
So if organisations can be honest with themselves about where they are now and where they want to be tomorrow (and potentially re-imagine what they do as Kjellberg said in the keynote), and vendors can support them with solutions that tackle genuine business issues and innovate at a realistic pace, maybe we can close that gap after all.
How Your Hiring Process Could Predict Unethical Behavior
How do you really get to know another person? More specifically, how do you know what type of employee that person will be? To help answer this question, many firms have incorporated personality tests into their applicant screening or employee training and development processes over the last several decades. According to a 2015 analysis by the Society for Human Resource Management, such assessments — of which there are thousands — combine to create an industry with annual sales of US$500 million.
It’s Time for HR 3.0
Today we find ourselves in the middle of a turbo-charged version of Britain’s Industrial Revolution. Since the late 1970s in the U.S., GDP per worker has pretty much doubled, but average real wage is still exactly the same. All the signs are that this disruption is only just beginning. A recent report by the McKinsey Global Institute forecasts that by 2030 around 15 percent of today’s work activities may be automated and between 75 million and 375 million workers will need to shift occupational categories. My colleagues at MGI outline four priorities for policy makers and business leaders as they adapt to this disruption: Economic growth, skills upgrade, fluid labor market and transition support. The role of human resources is key in at least three of these priorities. But right now HR is nowhere near ready for such a massive change.
Don’t get me wrong — HR hasn’t been standing still. If we go back to the 1980s and before, HR could be described as a wholly administrative and industrial relations function — HR 1.0 so to speak. In the 1990s, an increasing awareness of the value of talent to organizations transformed the HR function into more of a business partner, with increasing professionalization of the field and greater use of analytics for reporting purposes — HR 2.0. But to navigate the increasingly complex world of talent, HR needs to grow more quickly into a strategic adviser. More companies will need CHROs, and they will need to have an equal voice alongside CEOs and CFOs in the most critical business decisions. In the coming decades of disruption, the management of talent will become the main differentiator of high performing organizations. This requires HR 3.0.
The CHRO of the future will need to preside over a function that is fundamentally better prepared in three ways. Firstly, HR 3.0 will be much more analytically sophisticated; people analytics and data driven decision-making will be at its core. Secondly, the HR 3.0 function will be more agile and more efficient, with fewer silos, swim lanes and specializations and a greater ability to deploy HR professionals flexibly across the human capital spectrum. Finally, to enable a more data-driven and agile operating environment, we will need the HR 3.0 professional, with skill sets more oriented around business acumen and problem-solving skills and less dominated by focused customer service and process management capabilities, both of which are themselves targets for future automation.
Practicing People Analytics
People analytics in particular has had a head start on the other elements of HR 3.0. The need for more sophisticated analytics around human capital first entered the business consciousness around 2010. Much excitement has been generated around the topic in recent years, often by data and technology that stand to benefit from a growing interest in this space. In the course of a decade or so, it’s fair to say that HR analytics has come out of the dark ages. Recent research by Bersin by Deloitte shows that over two thirds of organizations now believe they can generate solid reporting and have a consistent approach to the use of people data. While that’s certainly progress, it’s not very rapid progress. A recent study by the Corporate Research Forum concluded that more than half of organizations were very limited or worse in their ability to use talent data to predict and improve business outcomes.
For HR 3.0 to take hold, it is critical that people analytics can get to a point in organizations where it can help link talent to value. This will require much more than recordkeeping systems and dashboards. It will require a strong understanding of how talent dynamics can affect outcomes like recruiting, mobility and retention. It will require creative use of internal and external data. It will require a variety of domain expertise, such as statistics, organizational psychology and epidemiology. It will require integrated data across the employee life cycle and strong engineering of that data.
The Bersin report also concluded that more organizations now have a people analytics team than do not — an important watershed moment for the field. In reality, however, the majority of these teams have not moved past very basic reporting around simple measures like headcount, attrition and employee engagement. Examples of more advanced people analytics teams do exist and serve as good examples of how to enhance the impact of people analytics in organizations. At McKinsey, we have made substantial progress in understanding individual skills and better matching them to roles, as well as understanding how talent factors such as diversity, connectivity and engagement can influence attrition, retention and other outcomes. At Google, the people analytics team has built a sophisticated understanding of high-performing teams, concluding that the team environment is more important that the individual constituents of the team. At Microsoft, creative use of email and calendar data has revealed the daily behaviors of effective managers.
There are others, too, and these more developed people analytics groups have a few things in common. They were birthed in an environment where a data-driven approach is part of the prevailing culture. They are resourced well and are well positioned in the organization to drive impact. They include a broad mix of skills including data scientists, organizational psychologists and “translators,” who act as data-savvy “account managers” for critical projects and use cases. It would be wise for CHROs to look to these organizations for inspiration as they try to embed analytics in their functions.
The New HR Function
Efficiency and agility will be critical to HR functions operating in a more unpredictable and complex talent market. Traditionally, leaders have considered it a more or less binary choice to have either a stable, predictable, efficient and lean function or a more well-resourced, dynamic and nimble function. There is no longer a choice to be made here; there is an increasing expectation to deliver on both.
HR leaders, like those in many other functions, need to embrace automation and process efficiency to create a lean backbone of critical administrative and process management functions, while cultivating a dynamic, nimble team that can apply itself to varied talent-related problems across the organization. The HR 3.0 function will more or less be comprised of 50 percent fixed staff — back-office shared services enabled by advanced automation, senior account managers, subject matter experts — and 50 percent “pooled” HR professionals who have the skills and business acumen to be deployed broadly.
A new breed of HR professional is required in substantial numbers to make all this happen. The successful HR 3.0 professional will be data-driven, business savvy, comfortable with unpredictability and ambiguity, and capable of thinking and communicating strategically. Pay scales will need to adjust to attract this caliber of HR professional, MBA programs will need to invest more time in human capital subject matter, and more teachers, professors and practitioners will need to contribute to building this new class of professional.
HR 3.0 is an exciting and challenging prospect, but one which is critical for the future of work. It’s a big step to take for a function which until not long ago was mostly administrative and back-office oriented, but it is also the final step in bringing talent strategy to the top table in companies and organizations. The first to move to HR 3.0 will enjoy substantial advantages in the rapidly changing talent marketplace we find ourselves in.
Keith McNulty is head of people analytics and measurement at McKinsey & Co. in London. To comment, email firstname.lastname@example.org.