What is the value of HR?

As an HR practitioner with 15 years experience, I myself have frequently struggled to answer the question of ‘what value does HR bring to the organisation?’  I recall excitedly attending an HRINZ seminar entitled ‘How to measure the value of HR’, and it was standing room only.  So I can safely assume that I am not the only HR practitioner who struggles with this question.

It is a result of the need to answer this question that I came up with the following analogy about the value of HR.

Staff are like cars:

1. You need to pick the right model – the sports car looks very pretty, but isn’t much good if you need to tow the trailer
2. You need to steer them in the right direction otherwise they go off track, and ultimately are liable to crash
3. You need to service them regularly, or performance will deteriorate
4. A specialist mechanic (or HR Manager) will have much greater success at fixing issues properly than the enthusiastic DIY’er
5. Trade-ins can be very costly if you haven’t done steps one to four properly

The wage spend is the single biggest cost centre in virtually any business.  Therefore, as HR practitioners we can have a major impact on the bottom line of the company simply by ensuring that the right models are picked, the steering mechanisms are effective, and the servicing is done properly.

One of the most significant ways we can impact the bottom line is through focusing on productivity.  Productivity in New Zealand is appalling compared to the rest of the world.  This low productivity has a significant impact on New Zealand’s economy, and it is as a result of this that the Department of Labour has launched a major initiative to increase productivity.  If you haven’t already, visit the Department of Labour website and get a copy of the Productivity Starter Pack.

Based on international studies the DOL has listed seven key drivers of workplace productivity:

1. Building Leadership and Management
2. Creating Productive Workplace Cultures
3. Encouraging Innovation and the Use of Technology
4. Investing in People and Skills
5. Organising Work
6. Networking and Collaboration
7. Measuring What Matters

Well just in case you hadn’t spotted it, there is only one thing on that list, Encouraging Innovation and the Use of Technology, which is not under the direct influence of the HR team.

1.  Building Leadership and Management

HR has significant impact in this area by:

• Ensuring that you have correctly defined the competencies required for the leadership roles in your business
• Ensuring that the leaders have the tools necessary to do their jobs effectively.

Whenever you start recruiting for a position (or are looking at how to increase an incumbents effectiveness in a role), particularly a leadership position, HR should be working with the manager to help them identify, not only the task list for the job, but more importantly, the competencies required to do the job.

All too often I see a great operative being promoted into a management position.  As a manager it is very useful to have a good understanding of what your team do, but, ultimately, the role of a manager is to quite different.  They are required to monitor everyone’s progress, identify where the collective effort should be focused, steer everyone in the right direction etc.  Unfortunately, this is out with the comfort zone of many operatives, and as a result they may have been a great operative, but are often only an average manager.

By working with the recruiting manager up front you will help them ‘define the right model’.  This will then enable you to develop competency based interview frameworks for them to use, and give them a point of reference to check their final decision against.  As opposed to appointing ‘Sam’ because it was easy/they were there/they liked them in the interview/etc.

This will also enable you to identify ‘Sam’s’ development needs (we all have them) to turn them from a new manager into an excellent leader.

2. Creating Productive Workplace Cultures

Bonus schemes to drive the right behaviour and Performance Appraisal system that are user-friendly and add perceptible value are major tools in creating productive workplace cultures.

Unfortunately bonus schemes are often not actually encouraging the behaviour which will create the desired outcome.  For example, a bonus scheme that focus’s purely on turnover, but ignores profitability will result in lots of sales, but often at discounted rates.  You need to clearly understand what actually generates the desired results, and reward that.  For example, customer service is rarely seen in bonus schemes, but more often than not excellent customer service is the key to retaining existing clients and getting their referred business.

I often hear managers describing Performance Appraisal systems as an onerous paperwork task, which just wastes their time.  It is our job in HR to:

• Critically review any systems and eliminate any negative connotations
• Provide an easy to use, clearly value add, system
• Understand any underlying reasons behind why a system is not being used, and take action accordingly.

Frequently the ‘problem’ with the system has more to do with a manager’s reluctance to have a ‘courageous conversation’.  Remove the fear through training and support, and you will often see a significant change in the outcomes.

A robust tailor-able Bonus scheme, easy to use Appraisal documentation, and 1 to 5 definitions of 20 different competencies are available to download from www.hrtoolkit.co.nz .

3. Encouraging Innovation and the Use of Technology

Though this may not be under the direct remit of HR we can certainly influence this by recruiting the right people and putting in place systems to encourage the right behaviour.

4. Investing in People and Skills

Supporting your managers in doing this effectively is the basic fundamental function of any HR team.

5. Organising Work

The purpose of an organisation structure is to enable communication flow and minimise cross-over between roles.  Everyone within an organisation needs clearly defined roles, and clear delineation around when tasks pass from one person to the next.  It is the role of HR to provide this definition and structure in conjunction with the managers.

Duplication of work has a significant impact on productivity.  Therefore, if the delineation between roles if not clear, you end up with two people repeating the same task which wastes time and decreases productivity.

The actual cost of such duplication can very quickly add up:

5 minutes per day X 5 days X 52 weeks = 1,300 minutes per year (21.7 hours)

6. Networking and Collaboration

Providing opportunities to network is not just the responsibility of the Social club, or the sales team.  Training days can be a great opportunity to get representatives from different departments working together.

HR is one of the few departments that works directly with all of the other departments, we are therefore in a great position to identify potential cross-departmental opportunities for networking and collaboration.

The opportunities for external networking and collaboration can also be influenced by HR through:

• Encouraging it through the appraisal systems,
• Defining jobs that include a requirement to for networking, and not just for sales jobs,
• Creating a culture where you pay for staff to attend networking events, as opposed to criticising them for ‘skiving off early’ to attend the latest HRINZ seminar.

7. Measuring What Matters

See comments above under section 2.  This is absolutely critical to the success of any business.

Get in the Driving Seat

As HR professionals, we need to get ourselves into the driving seat to increase productivity.  Together we can change the way we manage our most valuable asset, our staff.

Guest post by Lisa Mackay. Lisa is the Managing Director of HRtoolkit Ltd

Website www.hrtoolkit.co.nz