In my recent post I have spoken about a”value-adding, emancipated HR Function”, as well as how to reach this state and how to convince HR’s internal customers of this necessity.
From my perspective as well as from my recent client experience, the most successful way is “talking numbers”. Because regardless how many qualitative improvements a transformed HR organization might bring to the table (and as HR people we know how important those are!), in the end it is all about the bottom line – and of course the CFO that “has the money”. But how to get to those numbers?
The most important numbers are of course the bottom-line ones. So these are the ones that HR must influence! So far so easy…however, this means that each and every HR project, each operational decision of HR, the HR function as a whole must be targeting those numbers. These are the numbers which belong on an HR Balanced Scorecard. The first abstraction layer of those figures is still more a theoretical exercise than anything else, e.g. market share, revenue, customer satisfaction, etc. – but already the second abstraction is more difficult. Here it gets company and HR specific.
To reach this abstraction as well as to get the best reasoning for your CFO and CEO, the next abstraction layer needs to be very close to your company’s strategy. This also defines the first step: understand the company strategy in depth. From my experience, this is already where many HR colleagues start to struggle, for various reasons. One is that for years it was not necessary for HR to understand such things as HR was an administrative back-office. Another one plays into the general skill set of HR professionals: my recent empirical analysis in Germany showed that not many HR professionals do have a business background. Most of them have studied law or psychology or similar. So it is not really HR’s fault, however, we as a function need to work on this!
Next step is to derive workforce or human capital requirements out of this business strategy: what is the skill set in need? which are the regions and/ or markets the company is going to? is the current focus on quantity or on quality? etc. – it is essential to understand those needs. Always a good idea is to check the results with the business unit head or function head.
Step three is the classical SWOT – what are the workforce requirements, which can be fulfilled, which can’t? – to do this, of course you must understand your workforce which is not too often the case. Therefore, this might be already one of the spheres of activity. But if you have those, the SWOT will provide you with your Talent fields of action.
We are not done yet. This is just the so called Human Capital Strategy. From here we need to derive the HR Strategy. HR has to ensure that all identified Talent fields of action are responded to by the HR function. And for this, you need to have the “right” HR organization in place.
And this is where the circle closes: To enable the business strategy, HR needs funding for an HR transformation as well as for the projects to enable the workforce to deliver on the business strategy. The rationale behind this is backed up with financial numbers, influencing the bottom line. These are arguments, CEO and CFO will listen to, but more importantly: will understand!
The process described to get from business strategy to HR strategy and workforce outcomes is relatively easy – execution however, is more complex and I have seen HR departments struggle.
The first tricky step is the HR Balanced Scorecard which is why I will write about that in my next post.
Chief HR Officer 