From being recognized as the “Father of modern HR” to being ranked as #1 educator & management Guru, Dave Ulrich is one of the world’s leading business thinkers who have made a significant impact on the HR industry. Dave has authored 30 books and over 200 articles that have helped organizations and the HR profession in particular. Dave’s research addresses the themes related to creating organizations that add value to customers and investors, and how organizations can build capabilities.
In our endeavor to highlight the challenges and opportunities of the Small and Medium Enterprises sector, we talked to Dave Ulrich about SMEs aspiring to scale-up. Below are some of the excerpts from the conversation.
What is the basic HR architecture and skills that leaders in SMEs or start-ups need to consider while scaling-up?
Start-up organizations that become SMEs often start with a unique idea that has to win in the marketplace. As the idea becomes a product or service, the entrepreneur leverages himself by hiring others. As such a firm’s founder is the first HR leader. And, the people who are hired become absolutely critical for sustainable success. Most SMEs can access financial capital through emerging venture capital funds and crowd funding. Fund raising is an event that gives opportunity for growth. But human capital is a pattern that determines growth. Founders who leverage and multiply themselves must be very thoughtful about whom to hire to bring in the right, complementary skills, and they must ensure that those early hires not only have the technical skills, but they are a cultural fit too. In brief, founders of SMEs are the primary HR leaders managing talent and culture until a firm reaches 80 to 100 people when a more professional HR person can be hired to partner with the founder.
What are the key HR deliverables that can be instrumental for a firm to be successful?
The success of HR should be measured by outcomes not activities. In our work, we have seen three types of outcomes HR should deliver — First is administrative efficiency. In fact, there are a number of administrative tasks in any organization: payroll, office space, role clarity, and so forth. HR should ensure that these administrative tasks are done efficiently, often through technology solutions. Second is functional excellence. HR comprises work around people (hiring, training, motivating), performance (standards, accountability, rewards), communication (sharing information), and work (defining roles, office space). HR should provide innovation and integration of these functional areas. Third is strategic alignment. Every organization has to have a strategy on where to play and how to win. HR professionals enable these strategies through talent, leadership, and organization. In talent, HR makes sure that the right people are in the right roles with the right skills at the right time. In organizations, HR makes sure that their organization has the right culture and work environment that enables capabilities required to win. In leadership, HR makes sure that current and future leaders think and act to deliver value.
Founders of small and medium enterprises are the primary HR leaders managing talent and culture
At what point during the growth of a small or medium enterprise do business issues become human issues? (Assuming that the enterprise started with sound calculations of return on investments etc. involving fiduciary and technical issues?)
Start-up firms begin with ideas for products or services, then source money to turn the idea into a commercial ventures. As people are then brought into the growing organization, the ideas shift from being guided by a single person to a collective organization. Generally at about 80 to 100 people, it is appropriate to have a fully dedicated HR professional who brings administrative efficiency, functional excellence, and strategic acumen.
Generally at about 80 to 100 people, it is appropriate to have a fully dedicated HR professional who brings administrative efficiency, functional excellence, and strategic acumen
How should we define and measure HR's effect on the SMEs bottom line?
HR’s success is measured by the outcomes it produces for the organization. These outcomes may be delineated for key stakeholders. For employees, HR ensures productivity (output per unit of input) and employee well-being (measured by engagement surveys, retention of good employees, and a sense of positive attitude within the organization). For the organization, HR helps make strategy happen. Goals or promises are realized on time and within budget through dedicated HR investments. For the customer, HR increases revenue from targeted customers by building HR practices that engage and serve customers. The customer net promoter score should match an employee net promoter score. For investors, either debt or equity, HR should build confidence about future earnings. We have prepared a leadership capital index (see book by same name) that lets investors monitor and measure the quality of individual leaders and collective human capital. For the community, HR can help build a positive reputation. HR is best measured by impact on these stakeholder outcomes.