HR business relevance redux and an interesting economist

Last week I kicked off a discussion on the Deloitte-Economist study. I received several comments back from the folks I tagged- thanks.

The Evil HR lady nailed it.

For HR to add value we need to speak the language and be able to state our case. We often get in scuffles with finance because training, development and benefits all cost money. When we give in because the CFO says, “that’s too expensive” we have cooked our own goose. Before we propose we need to have the figures that will show how it will save money in the long run–lower turnover, higher productivity, etc. If we can’t show that, we have no business making the proposal in the first place.

We need to not sit by quietly while the “big boys” make the decisions and then carry them out. Are we conducting layoffs? Why? Before we sign on the dotted line we better be showing that his layoff will truly help the company financially. What is the cost of turnover? How come we don’t know this off the top of our heads? (Or at least how to calculate it?) Are we increasing the employee portion of medical expenses? What will be the result of this in terms of turnover? We better be able to build models.
What are models? Crud people, hire yourself some statisticians.

Spot on. 

Jim from Gartner also picked up on the need for more rigorous analytics, referring to Peter Howes. Peter is the best guy on HR analytics I’ve ever met. (I’m planning to be at the IHROM conference in london in December). 

It was also a discussion point at the Chief HR Officer roundtable that we ran in Heidelberg last week, but I’ll post more about that in the next couple of days.

I was also in Amsterdam last week at the IHRIM conference. The night before it was good to see Karen from Jeitosa (it has been too long). I met Luk from Cisco, Tim from Equaterra , caught up with Gary from Cadbury-Schweppes and met another member of the South Africa HR mafia, John from Tetrapak.   

At the conference, we also heard a UK based academic, Anthony Hesketh, present a very well researched model linking people investment to organisational performance. Anthony is an economist, but despite that handicap, he was a very entertaining speaker. For good measure he even discussed Aristotle. Amongst other things, Anthony is arguing for  greater theoretical rigour in HR research. (see this paper) At a practical level, he is crunching some serious numbers on the performance of companies and their people investment and I look forward to reading the research in detail when it is published. He has some insights into outsourcing and BPO, and I especially like the collaboration with industry he and his colleagues at the Centre for Performance-led HR are driving.

If marketing can build a business case for sticking a logo on a formula One car, then it is high time that HR got over their analytical aversions and start to use work like that of Hesketh, Cascio, Reilly, Fitz-Enz and Howes to argue coherently for effective HR investment.

I quoted this last year, but I’ll use it again.

Though your balance-sheet’s a model of what balance-sheet should be,
Typed and ruled with great precision in a type that all can see;
Though the grouping of the assets is commendable and clear,
And the details which are given more than usually appear;
Though investments have been valued at the sale price of the day,
And the auditor’s certificate shows everything O.K.;
One asset is omitted – and its worth I want to know,
The asset is the value of the men people who run the show.

Bowman, Archibald 1938. “Reporting on the Corporate Investment”
Journal of Accountancy, May 1938 p. 399.

The challenge to both HR and Finance remains unsolved.  But I think us HR types can make a start by getting stuck into the world of analytics. This book is a great start.

On a related topic, we will be exploring shared services and BPO in detail at the next HR best practice meeting in Edinburgh. Driving cost out of, and efficiency into HR processes is no longer an option. Perhaps I can talk Anthony into coming along. Peter Reilly from the IES will be there too, as will about 30 HR types.



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4 thoughts on “HR business relevance redux and an interesting economist”

  1. Whilst I agree that HR should be at the top table – I am not sure that we need to become slaves to the numbers. In fact, in many HR departments this is an expensive distraction.

    Is there any correlation between those HR departments who have the numbers and those who have not? Not to my knowledge – good PHd in that I suspect.

    I am worried that we forget why were are in the business in the first place – people!

    I posted on this subject recently on my blog – with the help of a strategic artic friend of mine. Time for a debate on this important topic.

  2. Scott.
    I’m not suggesting slavery, merely literacy.
    I’m yet to meet an overly analytical HR person. When I do, I’ll warn them.

    Numbers are a tool, I’d argue an essential one. HR needs to compete with other investments for the funding to do what it needs to do, so it needs to articulate this investment in an analytical way. Otherwise, marketing and others get the dosh.

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