7 Lessons Learned From The HR Business Partner Model
(Written with Wayne Brockbank of the Ross School of Business at the University of Michigan.)
We have observed, studied, and shaped the business partner model through rigorous empirical research and extensive work within specific organizations. We have done 7 rounds of the HR Competency study which study the competencies of HR professionals and the capabilities of HR departments. The most recent (2016) data collection was a collaboration with 22 HR associations around the world and 32,000 respondents (see forthcoming book Victory Through Organization). We have personally been involved in over 100 HR Transformations where we assess and advise how to be a better business partner. Based on these data, this essay reflects on what we have learned about the relevance of the business partner model.
Looking back: Seven lessons learned about business partner model
First, the business partner model is not unique to HR
All staff functions are trying to find ways to deliver more value to either top line growth and to bottom line profitability. Information systems, finance, legal, marketing, R&D, and HR are all under scrutiny and pressure to create greater value for their companies. This is especially true of transaction and administrative work that can be standardized, automated, re-engineered or outsourced.
Second, the intent of the business partner model is focus more on deliverables (what the business requires to win) than doables (what HR activities occur).
We have seen four phases of deliverables, moving from administrative efficiency to functional excellence to strategic HR to HR outside in (see book HR Outside In). Instead of measuring process (e.g. how many leaders received 40 hours of training), business partners move to measure results (e.g. the impact of the training on business performance), then move to how training build external value with customers and investors. For example, when HR builds better leadership capital, investors have more favorable images of the firm which shows up in market value (see Leadership Capital).
Third, being a business partner may be achieved in many HR job categories.
As business partners, corporate HR professionals define corporate wide initiatives, represent the company to external stakeholders, meet the unique demands of senior (and visible) leaders, leverage cross unit synergy, and govern the HR function. Embedded HR professionals work as HR generalists within organization units (business, function, or geographic). They collaborate with line leaders to help shape the business strategy, conduct organizational diagnoses to determine which capabilities are most critical, design and deliver HR practices to accomplish strategy. HR specialists work in centers of expertise where they provide insights on HR issues such as staffing, leadership development, rewards, communication, organization development, benefits, and so forth and they advise business leaders and HR professionals on how to turn insights into impact. HR professionals who work in service centers add value by building or managing technology-based e-HR systems, processing benefit claims and payrolls and answering employee queries. These individuals may work inside or outside the company.
Fourth, HR professionals as business partners have unique information, insights, and recommendations to deliver competitive advantage.
In formal and informal business discussions, each staff group brings unique insights to drive business results: finance talks about economic performance with information about revenues, costs, and financial returns; marketing discusses customers with recommendations on targeting key customers, customer response (e.g., net promoter score), and customer connection; operations makes recommendations and systems, quality, and supply chain. When HR partners in these strategy discussions, we propose that they provide insight, information, and recommendations on:
- Talent. HR professionals are centrally involved in providing the right people with the right skills in the right job at the right time. Talent insights capture future competence as well as commitment and contribution. Upgrading the employee experience has been a long term important part of being a business partner (see Why of Work)
- Leadership: HR professionals help prepare not just key individual leaders, but the collective leadership throughout the organization. They ensure that leaders have the knowledge, skills, and abilities to meet future demands and align with customer expectations (see Leadership Brand).
- Organization capabilities. HR professionals partner with line managers to identify and create organization capabilities such as speed/agility, innovation, , risk, collaboration, information leverage, culture/shared mindset, accountability, and efficiency. These capabilities become the identity and personality of the organization.
As business partners, HR professionals provide analytics, insights, and recommendations on talent, leadership, and capability to deliver business results and to serve all stakeholders.
Fifth, as talent, leadership, and capability issues increase in business relevance, HR professionals may help respond by being both architects and anthropologists.
As architects, HR professionals design, blueprint, and facilitate investments in talent, leadership, and capability. As architects, HR brings what is called structured information where the information is in a spread sheet which allows for traditional quantitative statistical analyses to find trends. As anthropologists , HR professionals increasingly look beyond the borders of the organization to identify what external stakeholders (customers, investors, communities, regulators) and what business trends (social, technological, economic, political, environmental, and demographic) will shape future business success. In this case, HR often sources unstructured data where they use qualitative insights to anticipate trends.
Sixth, as with almost any change, we have seen an inevitable 20-60-20 pattern for HR professionals to fully adopt the business partner opportunities.
Twenty percent of HR professionals get it, do it, and act as business partners. Twenty percent will unlikely ever get there for a host of reasons (e.g., personal inability, lack of desire or organizational lack of support) and 60% are learning and moving in the right direction. While we see the HR profession moving in the right direction, some may never make it. Sometimes, critics of HR like to focus on the lingering 20% laggards and claim that HR professionals have not improved. This is as inaccurate as focusing on the 20% innovators and claiming HR has fully arrived. The business partner model is empirically supported and more of the 60% are making positive progress. A decade ago there was a clamor to “get to the table” and to become part of the business. Today, most effective HR professionals are already at the table and they need to be clear about how their insights on talent, leadership, and capability will deliver business results.
Seventh, being a business partner requires HR professionals to have new knowledge and skills.
There are many efforts to determine the competencies for effective HR professionals. Through the University of Michigan, the RBL Group, and partners throughout the world, we have spent 30 years studying (theory, research and practice) how competencies for effective HR professionals drive personal effectiveness, stakeholder results, and business performance (which will be reported in books, articles, and posts).
HR professionals must evolve into being the best thinkers in the company about the human and organization side of the business. The nature of business is dramatically changing. Changes are occurring in virtually every element of the social, political, and economic environments that impact business. Under such conditions, the human side of the business emerges as a key source of competitive advantage. Therefore, HR specialists in the logic, research, and processes of human and organization optimization become central to business success.
Many HR professionals are doing exceptional HR work. From ING in Hong Kong, to ICICI and TATA in India, to ADIA in the United Arab Emirates, to MTN in South Africa, to DHL and BAE Systems in the UK, to Arcos Dorados and América Movil in Latin America, and to Walgreens, Intel, and GE in the United States and in thousands of other companies around the world, HR professionals are making enormous progress towards delivering value as business partners. In the next article post, we will look at the future of the HR business partner model.
PART 2: 5 FUTURE PROSPECTS FOR THE HR BUSINESS PARTNER MODEL
(Written with Wayne Brockbank of the Ross School of Business at the University of Michigan.)
The business partner model has been instrumental for creating value for many staff functions, including HR. In another article, we summarized some of the lessons learned; in this article, we offer future perspectives on where the ideas may evolve.
As we look forward, there are many excellent thinkers who continue to examine how HR professionals can deliver value to the business. With their input, the business partner model continues to evolve. Many of the critics of the model look at today’s problems through yesterday’s solutions and wonder why they don’t get solved. This is like trying to run today’s software on yesterday’s computers. Of course, it won’t work. The HR business partner model in the 1990’s has changed in recent years to adapt to today’s business challenges. We are comfortable projecting five trends that will continue to evolve the HR field and how it delivers value to business.
First, HR will deliver value to multiple stakeholders.
Over the last thirty years, we have both anecdotally and empirically seen steady progress in the HR field as it has moved toward greater strategic understanding and relevance. We anticipate that this progress will continue. HR professionals will continue to deliver value inside an organization by helping employees find meaning and well-being from work (sometimes called employee experience or re-humanizing HR) and organization results by being a central component of strategy formulation and implementation. HR insights make the right strategy happen.
But, moving beyond an internal focus, our recent research shows that when HR departments and professionals focus on external as well as internal stakeholders, business performance improves. We call this focusing HR from the outside/in, not looking at strategy as a mirror which reflects HR practices, but as a window to the outside world. Customer focused HR shifts from focusing on being the employer of choice, to becoming the employer of choice of employees our customers would choose. Likewise, customers can participate in the design, deliver, and participation in training, 360’s can become 720’s, standards can be set with customer involvement. Culture can be defined less as internal patterns of work (values, beliefs, behaviors, and norms) and more as an identity of the firm in the mind of key customers made real to employees.
Companies that are able to create credible leadership capital are more likely to enjoy price earning ratios above that of their competitors.
Investor focused HR accesses the requirements of capital markets. The recent burgeoning research in finance and economics on “intangible assets” is emphasizing the increasing importance of human capital assets and HR practices that create and sustain those assets. Empirical evidence has clearly shown the investment community is learning to account for practices such as succession planning, leadership development, setting and meeting performance targets, corporate culture, and executive compensation as considerations in buy or sell decisions. Companies that are able to create credible leadership capital are more likely to enjoy price earning ratios above that of their competitors. As business partners, effective HR professionals play a central role in defining, creating, and sustain leadership capital that is valued by investors.
Second, HR valued outcomes will move beyond talent to organization and leadership.
In our recent research, we found that the quality of an HR organization or department had 4 times the impact on business performance as the quality of the HR professionals. Generalizing from this research, talent matters and it is important to fight the war for talent. But organization matters much more and to win the war requires more capable organizations. Shifting the focus from individual competencies to organization capabilities broadens HR outcomes. In addition to delivering talent, HR work will deliver capabilities like speed/agility, information/analytics, collaboration, the right culture, innovation, and so forth. When HR delivers individual talent, organization capabilities, and leadership, internal and external stakeholders get more value from HR. This requires HR business partners with broader business skills.
Third, HR will become more technologically efficient.
The routine work of HR must still be done, and done well. Digitization of HR has arrived and newly emerging technologies will continue to be applied to improve the efficiency of HR administrative work such as payroll, benefits administration, entry level staffing and employee record keeping. But HR technology will move from efficiency, to innovation, to information, to connection (see my article on doing an HR technology audit).
Fourth, to be business partners, HR professionals will have to master the right competencies.
In the most recent round of our competency research with over 32,000 global respondents, we found nine competencies. Figure 1 (below) portrays the nine competencies we identified for HR professionals. Each of these HR competencies are important for the performance of HR professionals. To get invited to business discussions, HR professionals need to be credible activists who influence through relationships of trust. To serve customers and investors, HR professionals need to be strategic positioners who understand business context and can think and act from the outside-in. To deliver business value, HR professionals need to be paradox navigators who effectively manage the inherent tensions in the business.
 The authors have available statistics on these 9 competence domains by gender, geography, respondents, time in HR, and other demographics.
Figure 1: 2016 HR Competency Model: Round 7
Fifth, HR will be a source of both structured and unstructured information to improve business impact.
HR analytics is ultimately about providing information to improve the business. We have shown four levels of information: scorecards to insights to intervention to impact. As HR moves to analytics-driving business impact, they will need to source all kinds of information. Structured information occurs in spreadsheets with traditional statistics representing about 20% of information that can be used for business impact. Unstructured information that comes from observations, intuition, and other insights comes from HR professionals being anthropologists more than statisticians and represents about 80% of impactful information. As HR shifts information and analytics to deliver business impact (phase 4), HR professionals need to access both structured and unstructured information.
The Way Forward For HR Business Partner
In the future, HR business partners will continue to morph. The bar has been raised on HR and some HR professionals will make the grade and others will not. There are emerging business issues where HR can and will contribute value. The future for HR is filled with both challenges and opportunities. As we look to the future, HR professionals as business partners will continue to deliver value and help businesses manage the enormously difficult and exciting challenges ahead.