Views from the top: a variety of leader perspectives on HR’s business impact

Citation

Miller, J. (2013), "Views from the top: a variety of leader perspectives on HR’s business impact", Strategic HR Review, Vol. 12 No. 4. https://doi.org/10.1108/shr.2013.37212daa.007

Views from the top: a variety of leader perspectives on HR’s business impact

Article Type: HR at work From: Strategic HR Review, Volume 12, Issue 4

Short case studies and research papers that demonstrate best practice in HR

In the current economic climate, perhaps better referred to as “the new normal,” businesses are facing conflicting priorities, such as the need to reduce costs at the same time as trying to increase employee engagement. Such tensions have put people issues firmly at the heart of the business agenda, creating a time of real opportunity for the profession. To what extent is HR rising to the challenge? What more does the wider business think HR could do? Is HR demonstrating its business impact in the most effective way?

The CIPD’s 2012-2013 “HR Outlook” survey examined these overarching questions and, through drawing on a variety of leader perspectives, provides valuable insight about HR’s current strategic contribution as well as how it can further increase its impact. The survey compares the views of 107 HR leaders and 369 other business leaders.

Overall, the findings show that HR and wider business leaders are aligned about current and future business priorities, but there are also areas of disconnect where the two samples do not agree. For example, their views about HR’s role in strategy differ, as well as about how HR demonstrates its business impact. In terms of what these findings mean for practice, we draw out six insights that we believe HR needs to act on to address the challenges identified and demonstrate maximum impact to business performance.

Where we are connected: business leaders and HR are aligned on business priorities

HR and wider business leaders are clearly aligned about the business priorities for both today and over the next three years. Both samples reported that cost management remains the top business priority for organizations, both for today and over the next three years (see Figure 1), reflecting the uncertainty businesses are facing about future revenues and budgets and their caution about planning for recovery, suggesting the current economic climate is the “new normal.”

Figure 1

After cost management, the other top five business priorities (for both today and the next three years) are: agility/flexibility of the organization, growing the domestic market, productivity and increased customer focus. The close alignment of views here suggests that HR is in tune with the rest of the business and understands the current environment in which its organizations are operating. However the persisting focus on cost management raises a tension for HR in terms of how it balances the immediate issue of cost control with simultaneously needing to put in place what the organization needs for its long-term health.

Where we are connected: leaders are kept awake by the same things

The survey findings show that HR and other business leaders are kept awake at night by the same issues, although to different extents. Managing your cost base and how to deliver priorities on a limited budget are reported by similar proportions of both groups.

However, HR is putting more emphasis than other business leaders on the longer term issues of leadership capability and ensuring organizations have the skills and talent they need for the future. As well as reflecting HR’s core people agenda, ultimately these findings suggest that HR is looking ahead at what the organization needs to face future scenarios. A key challenge is how to keep these longer-term people issues firmly on the board’s radar.

The business leaders we interviewed talked about the fact that the workforce of the future will require different skill sets and capabilities. However, to gain most traction for investment in these areas it is clear that HR will still need to present a strong business case for action, as well as consider creative solutions that are clearly compatible with the immediate business focus on costs.

Where there can be a disconnect: perceptions of HR’s impact on business performance

The survey findings uncovered two main areas of disconnect between the views of HR and wider business leaders. These concern HR’s involvement in strategy and its use of metrics to demonstrate its contribution to achieving business objectives.

Figure 2

HR leaders report they are integral to setting the strategy as well as implementing it (see Figure 2). However, business leaders are less likely to perceive HR as integral, seeing it more involved in implementing and communicating the business strategy.

Perception or reality?

Why is there this disconnect? It is important to note that 18 percent of business leaders say they do not know the extent of HR’s involvement with the business strategy (Figure 2), signaling a need for HR to increase its visibility. And as already mentioned, we need to be mindful of the tension created for HR by the current context. It could be argued that with the current limited scope of the business strategy and the overwhelming focus on cost management, there is not currently the demand for HR to be more involved in devising and influencing strategy.

Furthermore, some of the current demands placed on the function can be perceived as being administrative and bureaucratic in nature (for example, aspects of employment law), which could influence leaders’ responses. If business leaders perceive this activity as HR’s dominant role, they may get the impression that HR is a slow, reactive part of the organization. In most cases this is likely to be an image issue rather than a reality and some of the HR leaders we interviewed recognized they have a challenge around changing business perceptions of the HR functions and the value they add to the business, and were actively addressing it.

HR needs to examine how and where its contribution can be best made and then how to most effectively demonstrate the value of its contribution to business sustainability. The nature of HR’s contribution is likely to change over time and require different skills and capabilities of the HR function. In sum, it is important that HR professionals play to their strengths, working out what approach best suits current business needs, as wider CIPD research has shown there is no one-size-fits-all recipe for success.

HR’s use of metrics

The other area of disconnect between HR and other business leaders is about HR’s use of metrics. Respondents were asked whether HR uses people measures that are aligned to the business’ strategic priority areas (see Figure 3). Only 30 percent of business leaders agreed compared to 62 percent of HR leaders. Furthermore, a third of business leaders said they had no opinion about HR’s use of metrics. Is this because HR is not using metrics enough, does it not have sufficient visibility throughout the business, or perhaps it is not communicating metrics in the language of the business? We will explore this further in the following section which summarizes the insights from HR practice that emerged from the survey findings.

Figure 3

Six key insights for practice emerged from the survey research, which HR needs to act on to further increase its contribution to business performance.

Increase visibility and impact

The survey findings signaled a mismatch between the perceptions of HR and other leaders about HR’s business contribution, including a noticeable number of business leaders who said they were unaware of HR’s impact on the business. HR therefore needs to find innovative ways to reach out to different stakeholders and educate them about its role.

Have the courage (and skills) to challenge and influence

It is important that HR is effectively combining commercial understanding with deep people management expertise to effectively challenge and influence business decisions and inappropriate behavior. Ensuring the HR team (at all levels) has a sound appreciation of the business and how it operates is therefore vital to increase its voice.

Use data based evidence to support the business agenda

Metrics are a vital tool in the HR armory to be leveraged, but they need to be translated and interpreted into what they mean for the business. Skillfully positioning HR-related issues within the context of the wider business agenda is essential. The survey found that other business leaders can be unaware of HR’s role, with only 21 percent of business leaders agreeing that HR effectively interprets and communicates people measures to relevant stakeholders. HR must use data to support its business cases and do so in the language of stakeholders. HR leaders themselves recognized the use of metrics as a capability development need.

Be curious. Be credible

Wider CIPD research has identified curiosity as a key attribute for HR professionals to have: curiosity about why and how the business operates, with the purpose of improvement. A total of 42 percent of business leaders said they do not think HR is curious to seek out innovative solutions to add value to the organization, suggesting this is another area for action. This fourth insight is closely linked to what has already been discussed about the need to increase visibility and impact, as credibility is a key ingredient that impacts on other functions’ perceptions of HR’s business contribution.

Keep an eye on the long-term

We have seen from the survey findings that HR is balancing immediate cost management pressures with maintaining a focus on the longer-term needs of the business. Talent and leadership development remain firmly on the agenda for them, but the challenge is to continually champion these areas, making a clear and convincing case to the rest of the business for investment. Linking back to insights 2 and 3, this will require HR skills around use of data and influencing skills, as well as perhaps looking at cost-effective solutions.

See the current economic climate as an opportunity to be creative and demonstrate the strategic contribution HR can make

This final insight is an overarching one which brings together the other insights. Business leaders in all functions are looking for creative solutions to organization issues, which creates an opportunity for HR to demonstrate what it can really do. This requires the other insights to be in place concerning the key behaviors needed, a good understanding of business operations and key stakeholder needs, and the importance of a robust business case to support necessary action on the people agenda.

For more information

The full report of the survey findings can be downloaded from the CIPD website at www.cipd.co.uk/hroutlook. There is also an additional survey report of the HR profession more widely, examining emerging trends and future priorities: “HR outlook: views of our profession”.

Jill MillerResearch adviser at the Chartered Institute for Personnel and Development.

About the author

Dr Jill Miller is research adviser at the Chartered Institute for Personnel and Development. She joined the CIPD in 2008 and her research covers a range of people management issues, having led on the CIPD’s 3-year research program, Shaping the Future, examining the drivers of sustainable organization performance. She is responsible for the CIPD’s 2012 HR Outlook survey, which provides insight and thought leadership about HR at a strategic level. Dr Miller is a psychology graduate with a postgraduate Master’s and PhD in Management, and previously lectured at Reading University on International Human Resource Management. Dr Jill Miller can be contacted at: j.miller@cipd.co.uk