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.
Talking real gender equality
My recent posts have been mainly about the HR Function itself. Today, I feel the need to talk about a broader topic which you could still see under the hat of Talent Management: Gender equality. For years and years we have talked about gender equality in most of our western economy. In Germany, for example we are also talking about women quota and other special “programs” to support gender equality. And the reasons to talk about this topic are today more evident than ever. McKinsey just recently has published a study on the “Power of Parity” which basically validates the economic profit of gender equality (Link). The findings of this study are very interesting, however, I believe that they need to go one level deeper. They list financial incentives and support,technology and infrastructure, creation of economic opportunity, capability building, advocacy and shaping attitudes, and laws, policies, and regulation as supportive measures to tackle gender inequality.
These measures are not wrong, however are mainly focussing on non-western countries (which is not wrong either as gender inequality is an even bigger issue there). But also in our western economy we do have inequality that we need to tackle. But the above mentioned special programs or the findings from the McKinsey report won’t help. It won’t help because it is not changing the fundamental reason of gender inequality, but are just alibi programs for all of “us” to say that “we are doing something”.
Look at the results of the special programs for example in Germany or what the quota discussion has caused. – some women were quickly promoted into board positions and as quickly removed again. The programs rarely had a long-lasting effect or enabled broad gender equality. Why is that? (a) because the main goal of these programs is to enable women to participate in today’s economic environment, play by today’s rules and (b) because fundamentally in society and economy nothing has changed. Just look at the so-called “Herd-Prämie” in Bavaria for example, which still promotes the role model of women staying home…
Our society is still dominated by middle-aged white males and so is the economic world. The middle-aged white male has shaped the business world as we know it today. It fits perfect to the needs and habits of this specific class. The rules, the regulations, the cultural and societal habits in this world were shaped over hundreds of years and institutionalized the middle-aged white male at the top of the pyramid. In biology one would say that this is an inhospitable environment for other species (like women). This is not going to change through special programs to promote women or in placing women in board positions. Of course, there are women that make it in this world, but most of these make it, because they play by these rules and behave like the middle-aged white male. Question is: Does that add any value? – No, it doesn’t.
Real gender equality can only be reached by changing the fundamental rules of how our society and the business world functions. Changing basic things like where and when to work, how to work, flexibility and availability, etc. – this does not mean compromising quality or outcome of work. As far as I am aware, there is no study that shows that physical presence or working long hours or working to a specific schedule will increase outcome quality or speed. I am sure that many middle-aged white males don’t like this and feel that things like availability, working long hours, etc. should be rewarded – and of course they are rewarded today. But, why?- Because these are all the things that women that do not want to play by the middle-aged male rules cannot deliver on. The fundamental understanding of how we work, what we work, where we work and that the outcome should be the only determiner for rewards needs to change before we can get even close to gender equality.
Now, does it even make sense to change all of this? – it seems rather revolutionary and expensive. And of course, around 50% of the society (and probably close to 80% of the working society) would not be happy with that, BUT: It is necessary and the only way to reach gender equality, to deliver on the calculations of the McKinsey study as well as to enable the real advantages of women at work: Having more highly qualified Talent available AND having a very different view on issues and a very different attitude and path on solution finding. All studies that say that mixed (gender) teams are more effective than non-mixed (gender) teams are based on men behaving like men and women behaving like women – and not women playing by the rules of middle-aged white males…
I believe that the starting point for such a revolution must come from within the economic world and then spreading into society. And within the economic world, my old friend the HR function must be the starting point for this revolution. HR needs to employ more women like this: Women that want to work part-time and still want a career, women that have children and still have ambitions, women that are highly capable but not 100% flexibly available. HR MUST start in implementing this, promoting this and then push this new attitude into the remaining organization. This revolution is necessary – there is no question around. I say stop all the special programs or quotas and start changing the fundamental basics of how we work.
SaaS and the commoditization of HR Processes
In one of my last posts on HR SaaS I was referencing the inability to customize SaaS solutions as one of the major advantages. I still hold this true, however, it also means that HR processes of companies running the same SaaS solution will be more and more similar, do no longer mean a competitive advantage. This is totally fine with the major administrative processes like payroll or employee data management. It actually is perfect for these processes, for example for companies that struggle with these today, as they will get an excellent, proven blueprint when implementing a SaaS solution that they can take to fix their own process. But what about the talent processes? – what about performance management, succession planning, competence management, etc.? These processes are absolutely critical and need to be a differentiation for the company. In times where employees, the talent is the most critical ingredient for a company to be successful and build competitive advantage, processes that are designed to keep such an advantage are critical and need to be differentiated from any other competitor, right?
Well, in principle this is correct, however, I still believe that HR SaaS solutions support this differentiation more than they hinder. Why? – there are four aspects that should not be underestimated:
(1) Process blueprint does not equal content – talent processes always consist of two important aspects, the process-flow or -map which shows step by step what needs to be done and the process content which tells you how it should be done. The HS SaaS solution only brings a blueprint for the what – tells step-by-step what needs to be done and brings it into a flow, into an order. What it does not bring is the how. How these steps should be executed and filled with life. Let’s take performance management as an example. The process blueprint will tell what the steps of the process are, like target cascade, target discussion, target agreement, etc. – but it lacks the how. And this is where the differentiation for competitive advantage comes into play. How are targets cascaded, how are targets split between company and individual goals, how is the conversation between employee and people manager set up, etc. These are the real value adding activities that no HR process blueprint provides.
(2) Process blueprint and SaaS provide time to focus on what is important – and with this part (see (1)) of the work in place, the process blueprint and step-by-step guide already done, the HR organization/ project can spend its time on what really matters and what really adds value. How is (if we stay with performance management) performance management utilized within the organization, what are the goals. How should it “feel” to be part of this process, how should the conversations be run? And how do we ensure that managers and employees are ready to embrace this process? With most of the talent processes it is very little about the actual process steps that should be done, but more with how these are executed.
(3) Execution does not equal blueprint – the real differentiation, and this is more true with the talent processes as with any other processes (where it is still true though), the major factor is execution. Performance management is not successful because it is executed and followed step-by-step, but because of how it is executed. Do employees understand their goals, their target achievement and how it relates to the rest of the team and company. Does it motivate employees to bring their best to the table every day? Does it offer real life and supporting improvement feedback and methods? This is where most of the project time should be spent, not on the steps in the system.
(4) IT does not equal 100% of the process – last but not least, not all process steps will be executed within the new HR SaaS system. There are many steps outside, left and right of the system. And defining these steps as well as the content of these steps can bring additional, major value. Let’s also stay for the last aspect with performance management. Performance management often is still a three-part process: target agreement, mid-year review, end-year review. And these are the steps tracked and supported by a system. However, the real value of performance management does not really lay in any of these processes. The real value is in between. Management of performance every day, supporting employees in improving their skills and abilities every day, promoting employees into “bigger” roles – this is what really supports performance improvement and what a people manager needs to do every day with his/ her employees. Supporting people managers in doing this, building the infrastructure and competence within a company to do this, improving these parts of the process every day. This should be the focus of HR, not a system – and the SaaS blueprint supports HR in doing so by bringing an “almost-ready-to-use” process blueprint to the table.
In essence, SaaS solutions enable HR organizations to focus on what really matters and enable differentiated HR solutions to build a competitive advanced workforce.
Performance Management – hoping for a revolution
Wow, since also Accenture chipped in and is doing away with Performance Management in the traditional way, the discussion got really big. Everywhere you look you see articles, comments, point of views on Performance Management. I am really, really happy about this as I believe that this topic is overdue for a revolution! When you then read these articles and comments as well as when you speak to clients, they say that they are doing away with it because it takes too much time from Line Managers and HR. Sometimes you even read that people involved in the process are starting to question if there is any value in this process at all – businesses are changing, organisations are changing, ways of working are changing, the pace is getting faster – and all of this should be supported by an annual process? Of course that cannot work – and these two reasons are two important reasons why Performance Management need to be rethought.
However, there are more important ones which are not too obvious. When you read on or talk more to clients, they all come to the same issues they see when thinking of doing away with Performance Management:
- But how do I decide who gets what bonus?
- But how do I decide whom to promote?
And these two questions really show me the need for a revolution here.
Let me explain. In most companies where I have seen Performance Management in the traditional way (and there are not yet many out there who are more futuristic), Performance Management actually is a process which serves three purposes:
- Ensure that Line Managers talk to their employees
- Plan and decide on bonus payments
- Plan and decide on promotions
- and sometimes a 4th one on communicating company targets and ensure understanding of it/ ensure that employees understand their importance for the overall company goals
The Performance Management process is perfect for these purposes, isn’t it? And on top, as it is an HR tool with numbers, objectives, target measurement, performance discussions and at the end a ranking of all employees (similar to the school report of your kids), it is 100% objective and ensures that only the best get promoted and that your effort you dedicated to work during the last year is valued monetarily. Fantastic … but wait… Let’s step back and have a look again what I wrote and make a reality check.
First of all: who has seen an objective Performance Management process? – this is nonexistent as at the core of this process humans assess humans, and therefore it is a mix up of many different subjective assessments. That does not make it objective. And how do you compare performance of different employees in different jobs? And how do you make sure that all Line Managers use the rating scale in the “correct” way? Truth is, the Performance Management process is used to mask the fact that it is a very subjective act in which the Line Managers with the most power distribute the money and future power (promotions) in a way that fits to their individual motives. In addition, I would even say that it is not used to motivate employees, but to “shut them up” and ensure that they act in conformity with a Line Managers thinking. Question: Is this what you want or need?
Second: It is called Performance Management – so at its core it is supposed to manage the performance of employees (aka motivate employees to bring their best every day). But when you read through the articles or listen to the discussions, it is all about bonus payments and promotions. And this is where the real revolution is necessary: Re-think how to motivate employees to bring their best every day. It was so easy in recent years to just “believe in” the bonus payment and promotion chances that many HR practitioners have forgotten about the core of Performance Management – and (most important) that a monetary reward does NOT necessarily lead to the performance and behaviour one might want or need.
We are all humans and have more than one (money) motive to go to work and bring your best performance every day. And not so new research shows that the traditional model of “better performance through more money” does only really work for manual work. But where do we really have pure manual work today anymore? Sure, it is still existent, but where we really need to manage performance, where it is really mission (and company) critical, we normally don’t have manual work, but mental work, brains. (interesting video here) And these need to be motivated in a very different manner.
What I am saying here is not new. Research in psychology, sociology, organisational science has proven this for years, but wasn’t listened to. I hope that now is the point to start listening again.
In essence, there are two paths you can go now:
- The easy path if you just need a process to distribute money (bonus), just call your process “Bonus Process” and all is fine:
- Tweak it a little to reduce the workload
- Slice it up into two or four pieces to reward performance closer to the actual behaviour that you want to support
- Give the money into Line Managers hands and let them decide how to allocate it as they can see performance and reward it more direct (which has proven to motivate better) – this also leads to Line Managers needing to speak more often to their employees (although it is sad that this is needed to motivate them to talk to their employees…)
- And be more honest and transparent about this as well as the career process; careers and promotions are not decided during the annual performance management process, but every day in a very subjective way – and this is not bad, it just shows that we are all humans.
- But if you really want to motivate your employees to bring their best everyday, you have to rethink what motivates people and how can you align this with the company strategy and business – and in the end you might do away with your annual bonus? – This is scary though, but necessary.
Let me know your thoughts.
NEW HR – what is our means of existence
Welcome back to Chief HR Office – in my last post I have started to talk about a concept named “New HR” and I have promised to further elaborate on that. And today I would like to do so. As laid out in my last post, HR is a total mixed bag of activities and before we can talk about New HR, we need to align and get clear on what HR is about today. In other words, what are the areas HR is busy with today?
So, let’s start with the basic things:
- HR is responsible for all employee related data and it’s administration
- HR is often responsible for time & attendance data
- HR is responsible for paying employees
- HR is responsible for setting up and managing the rules and policies about how employees will be treated and what employees are allowed and not allowed to do
- HR is responsible for all contractual data and documents with/ for employees
- HR is often the first point of contact for employee for any policy or unspecific work related question
So, this was the basic stuff, now let’s get to the next level:
- HR is responsible for training employees
- HR is responsible for paying employees right
- HR is responsible for retaining employees and attracting the right new ones
- HR is responsible for engaging employees and keep them engaged
- HR is also responsible to manage employees out of the organization
And from the other perspective:
- HR is responsible for understanding and meeting business’ workforce needs
- HR is responsible for building effective teams and, the bigger picture, an effective company (organization structure)
- HR is responsible to support or even manage any kind of company reorganization
Not to forget, HR is also responsible to manage two important stakeholders that ONLY HR is managing: works councils and unions.
The lists by no means want to be exhaustive, but they illustrate an important finding. What we can see and learn from this list (again) is that HR is a total mixed bag and that various responsibilities lay with HR. How is one department or even one Leadership team supposed to manage all of this? And this from different perspectives: type of work, necessary skill-set, stakeholder involved, etc.
I believe that this is a question which should be re-raised and where Ulrich is no longer the final solution, but we need to raise it to the next level. More about that in one of my next posts.
New HR: What is HR about
During my recent blog posts, I have talked about the different clients HR has and what these clients expect from HR. HR is exposed to a variety of clients and these clients tend to be also very different in their thinking, their ambitions, their needs and wants, etc. That doesn’t make it easy for HR to collaborate with all of these stakeholders and also fulfill all different expectations. But before discussing these different stakeholder expectations in more detail, let’s focus on “What is HR about”.
HR or Human Resources as it is called is a pretty new concept, but the origins of that function are to be found in the Personnel Department and before that in actually Administration. This tells us many things:
- a) HR’s history is very diverse
- b) HR is an evolution and I suggest that this evolution is not over yet
- c) very different meanings and abouts are part of HR today
Fact is, that the origins of HR are nothing more than administration and paying employees. It actually started in Finance for many bits and was really focused on that. From there it evolved into the Personnel Department and had to deal with more than just Payroll and basic administration. And then came HR and today Strategic HR – wow, what an evolution. What a fantastic function… well, or not?
Let’s have a closer look at this: With each evolution only new, additional work and responsibility came to HR – nothing was ever taken away, so HR has become a “Gemischtwarenladen” as we say in Germany or in English a mixed bag. I would not question that any of the tasks and responsibilities of HR are unimportant – in fact the opposite. All of them are important, but also all of them are very different. There is pure administration of employee data, there is specialized payroll, there is benefits, there is performance management, there is organization effectiveness, there is… a multitude of very different responsibilities. Who ever has seen the process trees of for example HR and any other function recognizes immediately this multitude and also sees that HR is in fact very different to that part than other functions that go into Shared Services. Finance or other functions are more homogeneous whereas HR is very heterogeneous.
Now, how can this work? We have very different stakeholders, very different responsibilities and they all scream for specialized skills. I am saying – that cannot work. Specialization and focus is what should happen here. This idea is not new. Dave Ulrich has in the mid-90ies already started to work on this and was very successful in terms of HR functions being split into three distinct, focused areas. But – they are still in the most part HR and also the specialization did not always work out. The idea was new to HR back then and has definitely started something – but today, 20 years after, I feel that the next evolution – if this time not revolution – is necessary: New HR.
Stay tuned for more around New HR on this blog.
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.
New HR: Understanding HR's customers – Employees (part 1)
Well, it has been some time since my last post. Sorry about that. But I also used the time to further reflect on the fourth customer: the employee.
When Dave Ulrich was designing his model, the employees, their values and expectations were very different from today. Many things have changed:
- The new Generations are very different than the one’s back when Ulrich wrote his piece
- The expectations from employees but also from employers to their employees have changed
- The talent landscape has changed dramatically – from a “buyer” to a “seller” market
I believe that employees are one of the customers that HR professionals are not surprised to see here. But before going into the details, let me pause and raise a different question: Is the employee really a customer of HR? – it seems odd to ask this question, but with my recent post about real Talent Management I have already touched this topic. I honestly believe that the people manager is the first point to go to for each and every employee. That is why it is called people manager. This is what leadership is about – but (and this is an important but) HR has to a) enable these managers and b) there are still a few other tasks that stay with HR and the Talent Function.
From my perspective employees have three general needs when working for and in a company:
a) They want to get paid
b) They want to have a great job and enjoy work
c) They want to get developed and succeed
So, for a) clearly the HR Admin function is responsible. This is a commodity and should be handled through self-services and a pure admin function.
b) is more complex. There is clearly a combination of people manager and HR necessary. The people manager is responsible for the day-to-day job and experience, but HR should have a look at the overall working environment with policies (yes, although this topic is “out” it still is necessary – in some countries and industries more than in others…), workplace design, organization design, etc.
c) is again a mixture of people manager and HR. The day-to-day development again should come through the people manager. But the strategic, cross-functional development needs to be not only enabled, but executed through HR. HR are the only ones that really understand the complete Talent landscape of the firm and can “follow” Talent inside and outside the company, but also blueprint potential career paths through the firm as development, experience and succession paths. The people manager of course should have this in mind as well, but is generally not in a position to grow Talent cross-functional or even across a current functional deployment.
Back in the days when Ulrich started his model, most of above mentioned (except the payment topic) were “nice-to-haves”. Today they are MUST HAVES – and if you cannot deliver on those, Talent will make its decision to leave. And this is what you don’t want in a market of scarce talent… – or at least you want to make sure that Talent comes back as well. And to enable this in a proper way, today’s HR function is not prepared. I haven’t seen many HR functions that really play well in the talent space. There are some that have a great start, but an integrated concept strategy and structure is so far missing and NEW HR has to step into this.
But, this is only part one of employees – there is a part two which is often not reflected in HR: future and past employees. I will further elaborate on this topic in my next post.
New HR: Understanding HR's customers – External customers
In my recent posts I have already covered Management as well as Shareholder as HR’s clients. Today I would like to talk about external customers of the company as HR’s clients. Again, one is probably asking “Why are external customers client’s of HR?” – well, probably all of us agree that those customers do not receive any direct HR services. They are not paid (payroll), they are not part of any works council negotiations nor are they part of any succession planning. But still, HR should pay close attention to customers. So, why is that?!
Well, a company can only be successful when its customer’s needs are met. These needs are met through a combination of a companies non-people (machines, for example) and people resources (skills, ideas, services, etc.). Depending on the product/ service a company is offering, people resources have a higher or lower influence on quality. For example in pure service companies, people resources are the only impact on quality of service. Having said that, who has the most possibilities to shape, motivate, train the people resources? – HR has! Of course that does not mean that HR is the one being responsible for the employees. This still stays with the leadership/ management. But all non administrative HR processes are designed to influence the performance of employees in certain ways. – best in ways that enable employees to better serve customer needs.
And in order to enable HR to do that, HR needs to understand what customers are looking for when they receive a service or a product from the company. Only if HR understands this, HR is able to shape HR tools and processes in a way that influence employees to better serve the customer. And this is where external customers are (indirect) clients of HR.
In my consulting career I have not seen many HR professionals that understand what customers expect from their employer/ company. Today’s HR is (although these thoughts are not new, but hovering through Human Resources since 1995 at least) still only inward focused. In the best case HR understand the products of a company, understand how the business runs. But I haven’t seen any HR department that has asked marketing or sales for a presentation to better understand the companies’ customers. This is something HR really needs to work on. And it is that easy – start in your own company, approach marketing or sales. These colleagues know what customers expect from your company/ employer. Additionally, just do some research on your own – go out to the point of sale and understand why customers are buying your companies’ product or service and not the competition. Take this knowledge and apply it to each and every Talent Management tool. Use it in business discussions and when shaping the strategic agenda. Start today!
New HR: Understanding HR’s Customers – Shareholder
In my last post I started introducing New HR with discussing HR’s customers: Management, Shareholder, Customers, Employees as well as Unions/ Works Councils to better understand the requirements and environment HR faces in today’s world. Having discussed Management last time, today I will discuss Shareholders.
Shareholder
Before Ulrich introduced Shareholder as an important customer for HR, no external group (or semi-external) was really considered a customer of HR. Ulrich has changed that – and this was an important step for HR. Why? – Well, of course one can have different opinions on the importance of satisfying Shareholder’s expectations, but no one can neglect that a company without Shareholders would go cease to exist.
However, during my visits to different HR functions of different german, european or global companies I have not found more than a small trace that these HR functions take shareholders serious and really understand their expectations and work accordingly. So there is still quite a room for improvement. But before going into this topic, let’s start with why Shareholders are important customers for HR.
The connection is a fairly easy one. Shareholders have in general one or two main targets why they invest in a company. The first and in most cases only goal is to generate a good ROI, may it be through dividends or a rising share price. Sometimes an additional, sustainability focused goal is added and also actively promoted by the company. (just listen in to Apples last analysts call…). And HR is one of the functions to have an impact on these goals. Not a direct one, but an indirect impact. How?
Well, when it comes to the company’s external representation, HR plays a big role – through Recruiting and how HR is representing the company in building an outside view of the EVP (Employee Value Proposition). In addition, as already discussed in one of my earlier posts, HR should not be a backoffice function, but a performance support for the business functions. And the business functions in turn should generate a good margin to satisfy the Shareholders.
Ok, but why does HR then need to treat Shareholders as customers? – because Shareholders do not just by chance invest in a company. They do this because the believe in this company and its ability to generate an ROI. And HR needs to understand this “believe” what is it the Shareholders believe in? Is it quality? innovation? size? – whatever it is, this is what the company needs to deliver on and what HR a) needs to support and enable through processes and products as well as b) also shape and emphasize in its external recruiting market approach.
Sharholder’s reasons to invest in companies have changed over the period of the last 15 or so years – meaning since Ulrich discussed them. But, their importantce and how to treat them in general did not change.
This discussion has hopefully shown why Shareholders are important for HR and why HR needs to treat them as customers. In my next post I will highlight external Customers as customers of HR. Another group which was neglected pre-Ulrich.
Chief HR Officer 