Category: HR Basics

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The anachronism of digitalizing your workforce

After a long summer break, this is my first post again. But I wasn’t all lazy – was reading and contemplating a lot, so you can expect a few more regular posts. I have also upgraded the backend of my blog and you can enjoy all posts now with full encryption and better performance.

Today, I would like to focus on a topic I haven’t spent much time on in recent posts but which I am thinking through in quiet times a lot. It is a bit of an anachronism of the digital age I have to say, but it is a real issue I see. It is about enabling your manufacturing and field sales workforce with (individual) digital services. Of course, different companies are on different waypoints at this time, but it is a topic that many of you, I am sure, can relate to.

Enabling your non-office based workforce with digital capabilities is not new, but when you want to scale it in the same way and fashion you do with your knowledge workers, it runs into a few difficulties that need to be resolved. The work set up of these employees is in most cases still fundamentally different from knowledge workers.

Digitalizing knowledge workers

Knowledge workers of today are in many of their work aspects already digital. All of them have a digital device to help them get their work done. This might be a desktop PC, a laptop or a tablet and a smartphone. There are many ways that modern technology has provided to enable them to work digitally. From an HR perspective we can easily build on these to deliver digital HR services – mainly self services for regular employees and managers. These workers also have almost everywhere easy access to print a document or to digitize a document (aka scanning). It is a ready made infrastructure for us to deliver our services. The only thing we have to think of is how to get our services delivered with a superior experience (ok, that is of course not easy but let’s continue the thought process). In addition to this basic infrastructure to utilize, we can rely on two major aspects that make it easier to digitize HR services for knowledge workers – (a) all knowledge workers have a foundational digital understanding and don’t have any barriers to using such technology as well as (b) if anything happens to the infrastructure, your IT department is on the rescue. And this is not because your self services are so important, but because knowledge workers have an almost zero productivity w/o their digital devices. All is set up in a way to minimize downtime.

Digitalizing non-office-based workers

If you now take this and apply it to your non-office-based workers, the story writes very different. In many aspects the work environment of these workers is often not digital. Of course, there are modern factories that are fully digital – but does that make every employee digital-enabled? The fundamental differences that need to be taken into account are (a) the foundational knowledge to build on, (b) the available infrastructure, and (c) the available support.

Non-office-based workers have a very different starting point into their digital journeys. They often don’t utilize “regular” computers in their every day work-life. Maybe they operate highly sophisticated machines, maybe not – in many cases, the only digital device they use is in their private life: smartphones. They don’t operate on a regular basis with PCs at work or at home and many haven’t seen a Windows screen or have utilized a physical mouse or keyboard to interact with their digital devices. So if you want to move them to digital you have to decide if you prefer to teach them (on an ongoing basis) how to interact with mouse and keyboard and PC or you meet them where they are which are touch-based smartphone interfaces with Apps. For me it is an easy decision – you always want to go the path of least friction if you want someone to do something “for you” – and let’s face it, as much as we communicate that self services empower employees and managers, this is not too true for non-office-based workers in their environments.

But once you solved that one topic, the infrastructure comes in the way. Factories were not build with self-services in mind. So having WiFi across each area, having sufficient internet speeds and places where devices for self service can be served is difficult. This is a fundamental topic that requires enablement – and in many cases HR is one of the first ones to require this, and so it is on us to get this going. – especially with the additional privacy and security requirements. You cannot just place devices in spaces that are exposed and don’t provide any privacy.

And once you solve that, the next two topics come into play: For full digital enablement you need to provide scanning and printing facilities. Both is again nothing that by default is enabled or present in a manufacturing environment. And both is again nothing that a regular non-knowledge worker uses on a regular basis. Enablement requires targeted solutioning. Printers by now are easier to enable thanks to being smart enough – a “follow-you” printing capability, enabled with the regular clocking/ entry badge is easily explained and works magic. Scanning on the other hand is not so easy. Where would the scanner be? Where would the scanner scan to? How do you enable simple & private scanning and saving/ filing of the scanned image? – this is a really difficult question. Scanning a document, then finding it, uploading it and deleting it so that the next in line doesn’t’ find it by chance is too difficult and risky. You need to enable webcam/ photo-based scanning, immediately into the App of usage/ the App that requires the upload. That is the only privacy-save way to make it happen. And let’s not forget: What are non-office-based workers used to? – phone-cameras. So this kind of approach is much easier and friction-less than teaching them utilising regular scanners.

And last but not least, the support needs to be in place. IT support needs to be reachable, on site and ready to come to the rescue when something goes wrong. – but where do you have this today still? I guess most IT helpdesks are outsourced and require you to make the effort. Just imagine this situation for a worker in a manufacturing environment. How to reach out to IT services? This is not easy to solve. Your IT helpdesk usually is focused on least human interaction as well as off-shore phone support. Your manufacturing workforce doesn’t have the time to get in touch with them (they only have small breaks before they need to return to their work – and their work is not where the digital device is, and it is not really in their interest to make it work). So either you convince your IT to have a higher on-site presence or you need to find an alternative.

Now, these are all issues and complications that can be solved – but they are not simple to be solved. I am sure many of you have faced those and hopefully solved them to enable your non-office-based workers. If not, I will provide my view on how to enable this digital journey end-to-end in my next post. Have a great week ahead!

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Why the HR structure is industry agnostic but not time agnostic

Every company’s HR Function needs to look different, needs to be composed of different building blocks – and this is even more true when you have different industries: An HR Function for a major Retailer should be based on different building blocks than the one for a Financial Services company. This is what Consulting firms tell us and this is what we see out there – therefore, it is right.
Is that so? I see that different. The general concept of the HR Organization can always be the same. Every company needs the same foundational building blocks:

  • Talent Management
  • HR related Business Consulting
  • HR Specialists
  • HR Admin

And any company that does not see the need for any of these is definitely missing something. Now, don’t get me wrong – I don’t say that every HR Function should look the same. I am just saying that actually the differences needed are not based on industry or country or workforce – but based on firm and HR maturity.
To get the basics out-of-the-way: The way how you fulfill these 4 foundational building blocks can be very different – you can outsource, you can consolidate them into unified roles if size does not allow for separate roles, you can have contractors supporting you, etc. – but you will always have all four foundational building blocks. If not, than you miss out or… and this is where my point is coming…or you are at a different state of maturity. What does that mean? The HR function is evolving since its beginning and there is still no end to see to it – where HR will be in 10 years from now or even in 5 years from now is a very interesting question. Only thing sure is that it will look very different from today. HR is still no stable function, no commodity, but still finding its purpose and its direction, defining where it should play and where it shouldn’t. This is all influenced by many different topics like workforce expectations, regulations, management needs, etc.
HR does not stand still and won’t – and any differences that there are between HR Functions of different firms are not based on industry or size, but on maturity of both the HR Function and the firm itself. HR is 100% a support function and needs to support whatever the firm needs to be successful, and only the firm itself knows what it needs – there is no personalized model per industry or country or workforce, but there is a basic model which needs to be adjusted to the needs and maturity of a company. What is right and fitting perfect today, is wrong and too tight or too loose tomorrow. Don’t go into the trap of “if my competitor is doing it way A, I need to do it way A” – look inside your company only and listen what is needed, what is wanted – and use this to shape your HR organization, every day.

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The 5 generational workforce – the next big challenge for HR

A few years back we talked about the Generation Y and how it affects companies and their the workforces back then a big hype was created around a 4 generational workforce and that Generation Y is the first truly global generation with similar expectations, behaviours and skills. Actual studies of the Generation Y (once in they were in the workforce) have found out that this what not 100% true or right. They were not the same around the world. There was still a big difference between Generation Y in the US and Europe for example or between Europe and Asia for example. But one thing was true: They were very different from the generations before with very demanding habits and very different needs and expectations. This was something HR functions had to deal with in many ways: preparing the leaders of the company for this new generation, preparing policies, compensation packages, but most importantly, becoming better in communicating the reasoning of the company. Why does the company exist, why is the product or service good, what is it good for – and what does the company give back to society? Tough times for HR and leaders – and tougher times are coming!
The reasons for this big difference between the generations before and Generation Y are manifold and can be found in education, society, politics, etc. – and for a big part in technology. Generation Y was growing up with technology, with the internet. They were the first ones to be connected – and to expect this in professional life. Times are changing and a new generation is on the horizon: Generation Z – today’s teens will make up 36 percent of the global workforce in 2020. And this generation did not only grow up with technology as part of their lives – this generation spent their entire life “living” technology and social media. And they cannot imagine life without using technology and social media for everything everyday. This again raises the bar for HR functions and their workplace policies. But more importantly, it raises the bar for leadership and organization design.
We are at the beginning of the age of the 5 generational workforce: Generation Z, Generation Y or Millenials, Generation X, Baby Boomers and Traditionalists. And the differences between these generations can’t be any bigger. And this will also surface in the workforce and daily company life. An organization has to find answers to these differences: How do you lead and develop these different generations? How do you build multi-generational teams? How do you build effect organizations that are based on the strength of all of these generations? How do you ensure that every generation understands the others and also respect the other generations? How do you enable Line Managers to lead multi-generational teams? How do you upgrade ways of working to the age of Generation Z and still ensure that Traditionalists (most probably there won’t be too many of them anymore in the organization) and Baby Boomers can follow and be successful and productive in this new way of working? and more…
These are all questions that each and everyone responsible for people and for an organization should ask themselves – every day. And of you look at the questions in more detail, it should be HR to help answer these questions, to enable Line Managers. This is the new challenge for HR, starting yesterday. Is your HR ready for this? Many HR Organizations I have seen are not. To get ready for this as well as start answering the questions, start thinking about NEW HR and what really matters for HR from a task, responsibility and capability perspective. To learn more about NEW HR, check out this white paper.

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HR going SaaS

We are in the midst of a new HR Technology Wave. Many of my current client discussions are around new HR Technology – mainly about SaaS and the differences between SaaS and traditional on premise solutions.
First of all I am delighted to see that so many companies are actually considering an upgrade of their HR Tech infrastructure. It is really necessary as most of their systems are between 6 and 10 years old – and everything but state-of-the-art. But what should you do today? Which way should you choose? Renew your on-premise solution or go into SaaS? Before I answer that, let’s have a look into the two to understand the differences.
On-premise
On-premise solutions are the traditional HR technology. Basically your SAP HCM or your PeopleSoft. It is those big ERP solutions where you have everything in-house and you own the solution. Most of the time these solutions are heavily customized to fit the company’s HR processes and organization.
Advantage of these solutions is that you “own” it and that they are proven and reliable. Dis-advantage however is that basically all really relevant on-premise solutions will be obsolete in the new future. Both, Oracle and SAP have decided that the future of HR Technology is in the cloud and that on-premise solutions will be discontinued sooner rather than later. And even if they are still supported, they are not actively developed anymore. No new functionality.
HR SaaS
SaaS stands for Software as a Service – and that actually tells it already: You do no longer own the software and run it on your own servers, but you have a license to use the cloud based software, managed by the provider. Best known HR SaaS systems are Success Factors and Workday. Both were complete new players in the market when they started out. Today, only Workday is still independent. Success Factors was bought by SAP.
There are several factors that make these solutions superior to the on-premise solutions. But before I dive into that, the main disadvantage: A big part of these solutions is still developed on the go. These solutions are not yet final, ready. For example, none of these support european payroll. You need to have a separate payroll system to pay your employees. For Success Factors, SAP at least offers its on-premise solution for payroll as a quasi-cloud-software. Also, not all existing modules can be used in all countries. Both solutions come from the US and are designed with US regulations in mind, so when coming to non-US countries, you might face some difficulties with local labor law or data privacy. However, both companies work on that very heavily and for most countries, there are no issues anymore.
The major advantage of SaaS solutions is however, that they were designed with a different mindset. Where the on-premise solutions were designed with HR Admin in mind, SaaS solutions were designed with Talent Management and the employee and manager experience in mind. They are much more focussed around the current (and future) issues and questions HR is facing than the on-premise solutions: Analytics? – built-in! Easy to use, mobile self-services? – built-in!
Another advantage – and I am strong about that being an advantage – is that you cannot customize SaaS solutions. You can only configure them. This means that companies and their HR Organizations can no longer keep their old, antiquated, “we have always done it this way” HR processes – but they have to buy into the way that the cloud providers envision the processes. Of course, you can still configure them to be closer to what you as a company and specific HR Organization needs, but within limits. This is really great, as it enables global processes and focusses the discussion during HR transformations on the things that really matter.
In essence…
For me, there is no question what do to. SaaS is not the next revolution in HR technology, but it is already the norm. A recent Towers Watson study has shown that HR SaaS solutions are the dominant solution. Companies that either start with HR technology or are upgrading from a current system, choose HR SaaS systems: Workday in the US and Success Factors in Europe. In addition, if you want to prepare your HR function for the future, you can only do that with a SaaS solution. I do not see any reason to not go SaaS.

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HR Customer Satisfaction – making HR customer centric

I recently had some interesting client discussions about HR Customer Satisfaction and measurement of it. First of all, I find it really, really good that HR organisations are interested in this topic. However, I haven’t seen many of these. Sure, almost every HR organisation’s Shared Service Center has the typical questionnaire or telephone interview for every 10th customer or so – but real end-to-end all-inclusive HR custom satisfaction is something I haven’t seen often, but believe it is important. HR is a supporting function and a service function that needs to do what is best for the business and the overall company’s success. But how do you know if you do this if you don’t measure or assess it? – sure, there are HR and HC metrics that you can measure and that provide some insights – but HC metrics are about the workforce as a whole and therefore more than just HR work influences them. HR metrics on the other hand are mainly process driven and give you an idea how single processes perform – but don’t tell you anything about their contribution towards the company’s success.
So let’s measure HR Customer Satisfaction, let’s ask HR’s clients how happy they are with the HR services they receive. What looks easy from the distance gets a bit more complicated when you look in detail. You cannot just ask about satisfaction as satisfaction might be influenced by many different variables and alone it does still not tell you if “what HR is doing is the right thing”. Also, the best way to drive up satisfaction is to give everyone what they want – but this would not be in line of what I believe HR should be about. From my perspective, you have to dig a bit deeper and get a 360° picture of HR to understand its performance and (more importantly) improve its performance and customer satisfaction.
So how do you do that? – Well, it is a bit more complex, but still doable. The major questions I believe should get answered by such an effort are:

  • Is HR doing the right things
  • in the right quality
  • at the right time
  • to the right customers
  • at the right costs

And therefore, you should design your assessment tool around that.
The most important question is if HR is doing the right things – you can be excellent in your work, but if you are not doing what is needed, than you are not supporting the overall company’s success. So I suggest, starting with senior leadership interviews. Be open and honest with your most senior stakeholders. Perform qualitative interviews to assess if your HR organization is doing the right things: today AND tomorrow. Listen to what they say and how they rate different aspects of HR service (and by service I include the Business Partners as well as the CoEs – because in the end, HR is a service function). This forms the basis of everything else.
Next, go broad and survey your complete workforce – but segmented: Segment different workforce types to be more precise and get more insightful results. For example separate blue-collar from white-collar, separate management from non-management, etc. – and survey for two things mainly: how is the perceived quality of the services they receive, and let them assess the most important services they receive – not everything. And the importance depends on the job each responder has to perform every day. Like this you will have a good overview of quality, time and customer centricity.
This leaves us with costs. You cannot assess quality and satisfaction without costs. Of course the more money you “throw in”, the higher the possibility of good satisfaction results. But, who can afford this? Who should afford this? – I suggest complementing the satisfaction survey with a high-level benchmarking to understand in comparison how much money is spent to reach the level of satisfaction and quality. This does not have to be a big effort – just compare people and non-people costs against your competition and similar size/ organized organizations. This will give you a good understanding on where you stay.
In addition to these two efforts, there are two analyzing tools that are close to my heart. Number one is about the HR employee as a human at work. As I have found out in my recent research study and what is supported by years and years of academic and popular research is that the perceived service quality of HR services (and again, this includes business partnering and centers of expertise) is dependent mostly on the individual HR employee and his/ her:

  • will to perform
  • ability to perform
  • possibility to perform

and therefore, to find out not only about perceived satisfaction, but also be able to tie it back to specific objective insights and be able to increase satisfaction, survey all of your HR employees on these three categories. I guarantee you that the results will be very interesting and will help you with improving perceived satisfaction.
Last but not least, analyse and understand from a strategic point where you are good at and where you need to improve. Take all the results and insights you gained from the surveys and from the benchmarking and run a series fo HR SWOT workshops. With the different insights from leadership, management, 3rd party comparisons and deep understanding of how your HR team is ticking, you are able to really assess and improve your HR department starting at the strategic end.
Now, again, once you go through the steps, it seems actually not so difficult – but what is really difficult for most HR organizations is the feeling of being exposed to all employees and management. From a change perspective this is really tough and needs to be managed so that no harm is caused, but everyone within HR understands and accepts this as a fantastic opportunity to improve quality.
Whenever I have run similar efforts at my clients, the success was overwhelming. If you approach HR customer satisfaction in this all-inclusive, 360° way, you get more than just an idea how satisfied your clients are with your services. You get:

  • a differentiated view from all important customer groups on satisfaction
  • not only a satisfaction score, but sufficient insights to improve satisfaction
  • senior leadership attention and buy-in which will help you not only in improving satisfaction, but across your whole portfolio of HR initiatives

I suggest you start today and ask your customers at all levels on all services about their satisfaction and  what they are missing. I know that this is not an easy undergoing, but it is definitely worth it!

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Facing reality

In my recent posts, I started to elaborate and outline NEW HR – a new understanding, definition and approach to HR. It is meant as the after-Ulrich idea on what comes next for HR. While I still believe that this is needed and true for many companies out there, during the recent weeks I had the chance to talk to different clients – varying in size, home-country, industry, etc. But they all had one thing in common: Their HR organizations were in a pre-Ulrich stage. – and I believe that there are many more companies out there in a pre-Ulrich HR stage. 
At first I have to admit, I was surprised, but after speaking to them, the picture got clearer:

  • Some of these companies are size-wise at the border where the full Ulrich model makes sense 
  • Some of these companies had major (non-HR) transformations in the recent years and HR did just not have a chance to get their own house in order 
  • Some companies have failed HR outsourcing deals in their history that needed to be rolled back in 
  • Some companies don’t think that this “Ulrich-model” is applicable for them 
  • Some companies have heard stories of failed implementations at competitors 
  • Some companies were not able to show the Business Case for a transformed HR to get the business sign off (and funding) 

And I am sure that there are many more reasons why companies did not yet transform their HR Organization. But what should these companies now do? – should they stay as they are? – should they leapfrog? – should they just start the transformation road with step 1?
The answer is again not one-size-fits-all. As there are different reasons why firms did not transform yet, there are different approaches that fit best. Each case should be looked at individually to find the best suitable solution. For example the “failed Business Case” issue is one that can easily be tackled. The Business Case for an HR Transformation in most cases is valid – of course, payback is not as fast as for example in Finance Transformations, but it is a positive ROI. And it is not only about the direct costs and savings, but also about business enablement. The indirect value of an HR Transformation is the real Business Case! – reduced time-to-hire, impactful training, etc.
But what to do once you have proven the value? – which route should you take? Answering this question, many consulting firms leave clients alone – their thought leadership is focused around HR of the future, the newest, latest and greatest, often not considering the whole industry, but just the spearhead.
Of course, there are companies out there with state-of-the art HR Organizations and Services and these want to and need know the way forward – and also, from the marketing perspective, it seems more relevant to sketch the colorful, imaginative future rather than the grey reality of today. So no one to blame.
However, for the companies out there in the pre-Ulrich state the question “what to do” is open – and I will try to answer this in a general fashion in my next posts. Again, there is no one-size-fits-all – but there are clear tendencies that can be identified and provide you with the general direction depending on your situation.

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New HR: Understanding HR's customers – Employees (part 2)

Future and past employees… this is how I finished my last blog post about employees as customers and this is how I want to start part 2.
So far HR has only (and if at all) been taking care of current employees (except some pension payments to retirees). And with this task, HR was fully booked. And back when Ulrich has designed his model this was sufficient. But the Talent landscape has changed.
Today, Talent has a different view on work and career than just a few years back. Career is no longer defined as “within a company” or even “moving up the ladder”. Career means many different things to today’s employees. Talent moves in and out of companies how they feel – and they can do that as they turned out to be a scarce resource.
Companies and HR departments that I have seen are not prepared for that. As soon as an employee leaves the company, it is off the radar. This is a luxury no longer acceptable. NEW HR has to have an internal and external Talent map and succession planning.
Some companies already today have something like an external Talent pool. This is absolutely fantastic and necessary, but often this Talent pool is not properly structured or managed. What is necessary is an integrated view on Talent – as well as management of Talent. The Talent function should have a clear understanding of the Talent within the company as well as externally – may it be Talent, which was approached for an open position or has applied for a job – but likewise Talent that has decided to leave the company.
Employees leaving a company do no longer do this for good. They just do that to follow a different career path at this point in time, because they feel a need to do something different. And guess what? – through doing this, they normally become even more valuable because they acquire new skills.
In today’s world, once this Talent is out of the company door it is lost. This is unacceptable tomorrow! A Talent function should keep in contact with this Talent, follow his/ her career moves and make sure that he/ she knows that the company is still interested and is supporting this out of company experience. – and at some point this should lead to Talent returning to fill open positions – best through integrating this Talent into the Talent pipeline.
Of course, this is nothing easy to do and requires a big change of focus and definition of Talent. But this will be more and more important, the more Talent becomes scarce. Individual Managers are already doing this and keep an eye on good Talent that leaves their company. – this is a fantastic first step, but needs to be more structured and scalable.
Today’s HR department structures are more often than not, not ready for this. NEW HR is stepping into this with a specific Talent set-up. But before going into this topic, let’s finish the assessment of HR’s customers in the next post with the final customer of HR: unions/ works council.
Until then all the best.

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The HR Balanced Scorecard

Today I would like to talk about HR metrics – what is, I honestly believe, one of the most important but underdeveloped HR skills. Only very few companies, I have been consulting for in the recent years for example had an HR Balanced Scorcard. Fact is that most companies are not even in a position to measure basic HR reporting figures. Even some of the DAX companies only have a rough idea on how many people they employ. Topics like employee skills, job-profiles or similar are far off. Problem though is that if I don’t know the figure, I don’t know my performance, meaning I cannot improve it.

When having HR metrics discussions, it often leads into an IT discussion. For a long time this meant big fat ugly ERP – expensive, hard to implement and not very flexible… With today’s SaaS solutions the picture paints itself already very different. Especially solutions like SuccessFactors or Workday are a gold standard. Of course, also these SaaS solutions have their issues and difficulties when to implement, especially in Germany – but more about that later.

Ok, so why is an HR Balanced Scorecard so important? – To be a really strategic HR Function with having a consequent focus towards company goals an HR Balanced Scorecard is key. A Balanced Scorecard always has to be company and (HR) strategy specific. There is not “one-size-fits-all”, however the basics can be applied to any HR function. And this Balanced Scorecard help with two things: a) measuring the “right” things and b) making sure that HR improves these things.

Like every Balanced Scorecard, the HR Balanced Scorecard has to represent the performance of the entire HR function on company level. To achieve this, four quadrants should be covered:

  • Financials
  • Customer
  • Innovation/ Learning
  • Process

These represent the four views on HR.

Financials – first the most obvious. All companies are finance-triggered, and only when assessing HR against financial performance indicators, a real bottom-line impact of HR can be measured. Potential indicators are “HR expense ratio” or “staffing efficiency ratio”.

Customer – HR has always been and will always be a service function. HR should never just by itself decide which projects should be prioritized and which shouldn’t. This always has to be executed in close cooperation with HR’s customers and customer needs. Customer is the second most critical indicator! Example indicators are “new hire quality” or “% of critical workforce with workforce and succession planning in place”.

Innovation/ learning – closely aligned with customer, the topic of learning and innovation mainly focusses on workforce effectiveness and how to improve it. And how can HR best influence it? – through targeted training measures as well as targeted performance management. Example figures here are „% of critical capabilities in place/ increased“ or very important not only by itself, but also for innovation “diversity“

Process – last but not least. Process brings the inside-out perspective for HR. How does my HR function perform? Is it efficient? How do my processes run, where do I need to get better at, etc. This category plays the basis for all other three. If this one delivers poorly, the other three cannot be good either. Example figures are “time to fill”, “new hire pipeline”, etc.

HR should measure itself and its performance according to these four quadrants. On top-level and of course broken down to each HR employee. Each and every activity or project HR does should be visible in at least one of these quadrants.

However, all performance figures cumulate in the finance quadrant: Each and every figure has a financial impact. Lets take „time to fill“ as an example. This is a classic process figure. How long does it take from identification of an open position to get it filled? – expressed as financial figure: How much does it cost me to recruit someone into this position? And, which alternative costs occur because of having an open position? – an improvement of „time to fill“ has not only an impact on HR internal financial figures, but more importantly on business figures. Positive: A manager has to interview less candidates when the candidate quality improves; negative: a new recruiting system needs to get implemented. However, if I measure both, I can easily calculate a business case for my CFO to get the new recruiting system!

However, and this is something every salesman knows: Every employee that did not quit his/ her job is more valuable and less costly as every new employee – but more about that next time.

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How to tell my CEO that HR needs funding

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.

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The "emancipated" HR organization

The discussion about “understanding” and “wanting” a modern HR Organization which I have laid out in my last post is not a new one. Since Ulrich has first published his work on transformed HR (check out here) the discussions about what HR should be and do are going off into various directions. The extreme positions are “HR as administrative back-office” on the one end and “HR as strategic value generator” on the other. As laid out in my last post,  a transformed HR Organization based on the Ulrich model is only under specific circumstances the right thing to do. However, if those circumstances fit to your company, there is not much which speaks against such a transformation. – however, objective criteria alone are not sufficient to lead the discussion!

In my meetings on Top-Management Level in German and European  companies, the knowledge and insecurity about Ulrich’s HR Model is high – although the model is around for more than 10 years. This does not differ whether my meetings are within or outside HR. From my perspective, there is more than one reason for this. The most common are a) lack of knowledge b) knowing, but not understanding the model c) not “wanting” an emancipated HR Function. Interesting is that all of those reasons are spread similar across HR and non-HR Managers.

Many HR colleagues are actually quite happy in their back-office and making-employees-happy role. This is based on my experience neither surprising nor condemnable. But in today’s competitive environment a transformed, value-adding HR function is no longer a nice-to-have, but a must! HR has to support workforce effectiveness through targeted, strategy supporting projects and processes like Performance Management, Strategic Workforce Planning, HR Analytics, etc. As Ulrich said, the workforce is the remaining differentiating competitive advantage – and HR is in the pole position to further foster this advantage. However, to do so, the HR function needs to emancipates itself.

At HR’s customers, the picture differs a bit. The majority did not yet understand the critical factor Human Resource/ Workforce. Although today’s recruiting web-pages of each an every  company highlight the criticality of skilled and motivated employees, reality looks different. And… who really wants another player on the “big” strategy table, someone with an opinion? Someone who tells me “how I have to organize my team to be more effective?”, “how I motivate my people best?”, “isn’t all of this common sense?” – and this is where the real issue is: HR is not yet seen as a real function! But this is just normal human behavior – nothing surprising.

However, it is the priority of us HR folks, to actively promote HR as a real, differentiating function! As soon as the HR Management has identified the advantages and calculated the business case of an HR Transformation, they have to start a marketing campaign – and this not only for Shared Services, but for a “bottom-line value-adding, emancipated HR Function!”

There are sufficient reasons for it! More in my next post.