The problem with the traditional HR function is that even if programs are world-class, they might not translate into fundamental changes in the way that business is executed
HR views risk management as being still about making sure “bad” things do not happen; but HR also needs to capitalize on “good” risks, identify opportunities and provide inputs to business
As the noise about increasing the business impact of HR continues to grow, it is inevitable that the tools and intelligence that other business - impacting functions use have trickled into the HR function too. With a view towards growth and sustainability, the HR function is a key participant in enabling growth and profitability and CHROs in many companies have sizeable P&L accountability.
Ravin Jesuthasan, Managing Director and Global Practice Leader, Talent Management Practice, Towers Watson and co-Author of “Transformative HR: How Great Companies Use Evidence-Based Change for Sustainable Advantage” led a CHRO roundtable on how evidence-based change can help HR transform the way organizations make decisions about their people and lead to sustainable business results.
“Evidence-based change is not a new concept, it has its roots in the evidence-based medicine movement and what it essentially means is that instead of data driving decision-making, one uses the logic of the business and hypothesis to drive decision-making, and additionally, it incorporates change management principles to make sure that those changes are sustainable,” Jesuthasan said.
CHROs from across industries listened to his views on how HR leaders can increase their influence and impact on the business by using analytics and systems thinking in their HR decisions.
Starts with a change in mindset
In these unpredictable and uncertain times, organizations cannot afford to invest in efforts that do not show results. The problem arises when the HR function focuses only on the excellence of HR programs and not on its business effectiveness or its execution. Describing the HR function of transformative organizations as “truly business-minded functions”, Jesuthasan said, “It is not about having the best compensation strategy; it is about having the “right” one for the business that reflects both the demands of the business model of the organization and integrates with other HR and business processes.”
The problem with the traditional HR function is that even if “individual programs are world-class, they might not translate into fundamental changes in the way thebusiness model is executed and value is delivered”. This calls for a change in the way HR views its role and makes decisions. It will drive change in how it structures the function, in mindset, capabilities and skills and how it works with other functions in the organization.”
Evidence-based decision-making does not focus on changing or transforming HR itself, rather it is about how HR transforms the way organizations (or business leaders) make decisions about people. That requires courageous and business-minded HR leaders who operate beyond the traditional boundaries of the function.
Sanjay Singh, Senior General Manager and Head HR, Tata Motors, said, “Eventually the HR leader needs to find what works to influence change and get the business buy-in. Different business managers behave differently and HR leaders need to have the maturity to assess how to present the HR case. It is about how one looks at the situation considering various variables and actors involved and keeping business results as a priority.” Bijay Kumar Sahoo, President – HR & CPO, Reliance Retail, says, “The mindset of being successful in an organization with a customer-centric model is different than the one in an organization with an efficiency model.” Whatever the parameters of success, business-mindedness is about understanding how business can be successful by taking the right decisions about people.
The five principles
Here are the five HR principles from Jesuthasan’s research of transformative companies that deliver sustainable results. “HR leaders can continue to try hard educating business leaders about HR terminology, or they can just adopt operations, sales & marketing and finance frameworks to use in their HR conversations”. His take: Learn the language of the business instead of teaching your business colleagues the language of HR.
Logic-driven analytics: Starting with the logic of business to define the talent metrics and scorecards to measure impact of talent management investments on business results. For example, consider reframing talent management using the metaphor of the supply chain, which is familiar to business leaders, when looking at investment in succession planning, capability building etc.
Segmentation: Learning from marketing, work on a differentiated approach to different talent segments within the workforce. Use data to deeply understand how different roles impact the execution of your strategy and your talent segments, going beyond just generations, gender, level etc. Segmentation enables organizations to understand the real needs of different talent pools and focus talent management tactics and processes to deliver optimal results.
“In the past, elderly people would dabble in securities so we had relationship managers who could cater to them. Now, younger people want to invest in the securities market as well, hence we are targeting tech-friendly people. This is a clear example of how talent segments within organizations keep shifting to keep up pace with changes in the market segment that we are targeting,” said Vivek Jain, Senior Vice President – HR, Kotak Mahindra Bank.
Risk leverage: This principle enables HR departments to assess the human capital risks in a more nuanced way. Risk management for HR today is still about making sure “bad” things do not happen; this is of course important as human capital risks can be significant for an organization, However, HR leaders require a much more sophisticated approach to risk management, need to capitalize on “good” risks, identifying opportunities the company can leverage on and provide inputs to business.
Integration and synergy: In Jesuthasan’s words, “Integration and synergy mean understanding how different HR solutions mesh with each other and other organizational processes to deliver a unique and compelling proposition to the organization and the workforce.
Optimization: Optimization is a logical consequence of the other four principles and is about investing where it makes the biggest difference and eliminating investments that don’t.
These principles help HR breakdown its various objectives and focus on those efforts, that will produce maximum business impact. Analytics form the backbone of this approach. Ullhas Page, Head- Human Capital & Organization Development, ShareKhan Ltd, said, “Getting into advanced level analytics puts a lot of pressure on the competencies of HR professionals as they have to understand its multifunctional perspective and master the required competencies. The top management will also appreciate this approach of decision making. Insight building is an important competency without which it will become difficult to discern the data. It is essential to be able to influence a business decision.”