Yes, CEOs need HR but…
Do businesses really need HR, or has this function become obsolete? This has been one of the most deliberated topics in the corporate corridors recently. While half of the corporate world predicts that It’s time to split HR (Ram Charan, HBR, July 2014), the other half still advocates the importance of this function, citing the journey of evolution of HR as evidence. Well, both sides have points to support their argument, and at this point it seems difficult to pick sides. So what does the future hold for the HR function?
The urge to find an answer to this question took us to the Chief Executives’ den, to understand their views. After all they hold the reins of businesses in their hands. Multiple interactions with CEOs of conglomerates, FMCG giants, major infrastructure companies, large BPO outfits, electronics majors and some of India’s largest PSUs turned out to be eye-opening and revealed some unexpected perceptions.
When asked to share their experiences with the HR function and how far the function is from playing the role of “strategic consultant” (that it is expected to play), the CEOs surprisingly shared converging views. They shared two critical qualities that the HR function needs to develop if it wants to be a credible advisor to the CEO.
Courage and character. This was the area that CEOs were most concerned about. They felt that there has been a steady erosion of employee confidence in the HR functions of their respective organizations. The unanimous cause for this erosion of confidence was cited as “a lack of courage and character.” CEOs believe that HR managers need to have the ability to stand up for a cause versus just toeing the line. They also felt that the function needs to take more accountability for its actions and own its failures. This increasing lack of courage and character has resultantly led to a gradual diminishment in the level of innovation in the field of HR. CEOs want their HR leaders to display strength of character and be a fearless voice of reason within their companies, driving positive change in culture, talent and organizational capability. This transformation will reinstate the HR function to its rightful place, that of a credible business partner.
Strategic business perspective. CEOs believe that in order to effectively partner business, the HR function needs to have a strong business perspective. The ones we interviewed pointed out that many senior HR leaders today do not understand their businesses as well as they should. This has limited their strategic capability, a deficiency that has, in turn, spread more broadly through the function.
Chief executives need their HR leaders to better understand the metrics, cycles and markets of their business to be effective talent scouts and capability builders for the organization. In times of business challenge, a well-informed HR professional is able to contribute equally to a solution instead of defending transactions — a behavior that is often observed. CEOs also want HR professionals to be employee advocates and impress upon their peers the importance of considering the human angle in business decisions. To do this in a credible way, they need to first demonstrate a holistic understanding of the entire business equation. HR leaders need to better leverage technology and shared services for transactional HR work and spend an increasing amount of time getting their hands into the ‘business grease’.
HR leaders have often argued that over-emphasis on business partnership has a negative impact on employee advocacy. While a lack of employee focus is certainly not being proposed here, the HR function needs to realize that credible employee advocacy comes from a deep understanding of the business.
In summary, we challenge the notion of the diminishing role of HR. In a business world of great change, the need for the function has never been greater. There is, however, an urgent call for transformational leadership in the HR function. The HR leader of tomorrow will be even more an employee advocate, talent scout and champion of organizational change than her predecessors. While technology will continue to present new opportunities to simplify transactional HR work, an increasingly challenging business environment will demand a more business-grounded strategic HR function in the future.
It’s time for the HR function to reclaim its place as coach on the team. HR professionals – on your marks, get set, go!