The role of HR must Change

Date: 01-10-2007
Source: Employee Benefit News

HR/ benefits managers, long waiting to get that exalted chair at the corporate table with senior management, are still waiting - and likely will be for years to come, study results from Deloitte Touche Tohmatsu reveal.

Although the report, which surveyed more than 500 HR and non-HR executives in North America, Asia and Europe, found 88% believe people issues will become more important over the next three-to-five years, it appears HR is still viewed as little more than an administrator of employee benefits and paperwork.

Only 23% of the respondents believe HR currently plays a crucial role in strategy formulation and business operations.

Consequently, the majority of senior-level executives (63%) rarely or never consult their senior HR team on mergers or acquisitions.

"It's a stunning paradox that HR is not being looked to for leadership on the people agenda," says Jeff Schwartz, principal with Deloitte Consulting and a co-director of the study, "Aligned at the Top."

"Many top company executives believe the HR department lacks the business insight to drive strategic initiatives around top-priority issues, such as leadership, talent management, creating a high-performance culture, and training and development."

Further indicating the perception gap, 52% of respondents said they do not have a chief human resources officer (CHRO) or a chief people officer, yet a shockingly low 3.9% described their organization as world-class in both people management and HR, while nearly half (49%) said their capabilities are merely "adequate" and need to improve.

All is not lost

There are indications that both business executives and HR leaders expect the situation to improve and for HR's role to expand.

Of those respondents that said they didn't have a CHRO, the majority (68%) said they expect to add one within the next three-to-five years.

Respondents were asked to rate the most critical people management issues. They said:

* Leadership development and pipeline (76%).
* Talent management (72%).
* Creating a high-performance culture (72%).
* Training and/or development (65%).
* Compensation, benefits, and pension planning and management (42%).

"There is going to be a bridge between HR and executives," says Schwartz. "There was a very strong view that people issues are important and will become much more important.

"Most HR leaders we talked with are incredibly excited about what we call the broader opportunities in people management."

Outsourcing admin
Among other findings, companies are outsourcing selected HR activities at an increasing rate - an indication that more time is being freed up for HR/benefits managers to focus on strategic business issues.

On average, 29% of companies already outsource recruitment, training and payroll, while another 18% expect to outsource these and other HR activities in the next three-to-five-years, Deloitte finds.

There's a strong sentiment, however, that HR needs to understand the business first before it's considered useful to the company beyond a purely administrative sense.

"If HR wants to be a player, then they need to understand and have a clear and broad view of the organization, and figure out how they could contribute to the bottom line," remarks Judy Thorp, executive managing director of the compensation and benefits practice with SMART Business Advisory & Consulting.

"One of the issues I've found with some clients," she continues, "is that HR professionals struggle because they don't have a profit-and-loss focus."

In short, experts say, a successful CHRO needs to be a business person first and an HR executive second.

Schwartz feels HR leaders are up to the task.

"Our guess is that this is a challenge that most HR managers want," he says. "HR is like the dog that caught the car. They've been asking for a seat at the table to discuss people issues for as long as I can remember."