A couple of weeks ago, I published a blog here discussing the revolutionary opportunities Human Resource professionals now have in reshaping their role in the organization. As a follow up to that blog, I’d like to share a study that was recently published by The Economist Intelligence Unit entitled, “CEO Perspectives ~ How HR Can Take On A Bigger Role In Driving Growth”. The study, co-sponsored by Oracle and IBM, surveyed 235 “C” level executives, of which 57% were CEOs.
The study points out two driving trends that are intersecting to fundamentally change the opportunities HR professionals have to elevate their strategic input in organizational success. First is the rise of knowledge workers, something I’ve been discussing since 2008 when I began writing my book, “The Transformational Entrepreneur”. This reflects the fundamental shift regarding the inputs of value creation in companies. Human beings, and their creativity, are now the raw material for the creation of commercially viable intellectual property and processes. This changes everything.
The second relates to the outsourcing of the transactional, historical, administrative functions of HR. Areas such as payroll, pensions and compliance have been and can be outsourced to third parties and two thirds of companies now outsource some portion of these administrative functions. This frees up HR to truly reinvent itself to focus on driving the strategic value of talent and ascend to a new level of critical functionality within the organization.
To quote directly from the study, “Unburdened by some of their former responsibilities, HR specialists have a chance to transform their role, exploiting their image as experts in people to place themselves at the heart of the debate on a company’s strategic direction.” This also has implications that cut both ways. If HR doesn’t take the necessary steps to impact both the strategic and financial trajectory of the organization they may find themselves marginalized to the point of irrelevance.
CEOs are pulling for HR executives to step up and contribute at a higher level. The study revealed 55% of CEOs report that HR is a key player in the strategic planning of the organization, yet 70% expressed their desire to see HR take a stronger leadership role in this process. The door is open.
The study goes on to identify two factors that are holding HR back in capturing this opportunity. The study states, “Perhaps heads of HR are not being included in strategic planning because doubts linger about whether they have the requisite breadth of business knowledge to participate productively”. Of the CEOs surveyed, 41% believe their HR executives are “too focused on process and rules” and 37% say they don’t “understand the business well enough”. This is a perception that I addressed in my previous blog regarding the opportunities to develop one’s own business acumen.
The second constraining factor relates to performance outside the traditional confines of the HR function. While two thirds of CEOs believe HR performs well in their traditional role, approximately half or fewer think HR is making the grade in talent development, succession planning, or creating a high performance culture. Another recent survey identified the fact that Board of Directors believe talent management is totally failing to make a positive impact on company performance. Why is this? There’s a misalignment in what many HR executives perceive to be the CEOs’ areas of primary concern. I’ve seen this firsthand in discussion groups of senior HR executives at various conferences…they don’t always understand and appreciate what’s keeping the CEO awake at night. They would be well served to understand this primary customer’s areas of concern.
What are these concerns? According to the study, CEOs are worried about (in order of significance):
- Insufficient talent within the organization as a whole (56%).
- Insufficient leadership talent (43%).
- Lack of alignment of individual and business objectives (41%).
- Low employee satisfaction (38%).
CEOs have also expressed a need to capture a 20% increase in productivity from existing resources in order to meet current financial and performance obligations (Corporate Executive Board, 2013). In fact, McKinsey & Co.® recently released a major study that indicates companies will need to achieve a 30% improvement in current productivity in order to maintain the same levels of growth and the standard of living we all enjoyed in the 1960s.
The study makes some suggestions as to how HR leaders can ascend to a more strategic role within the organization. It comes down to cultivating stronger relationships with the CEO and functional heads by demonstrating insight and competency, ensuring cohesion amongst the leadership team, and taking the initiative and being accountable in this new level of authority and impact on the organization. These recommendations are less specific than the recommendations I offered in my previous blog, but are very much in alignment.
© 2013, Terry Murray.