What 3 activities should HR focus on to maximise customer & shareholder value?

HR departments which focus on three HR activities will have a more significant impact on customer and shareholder value than HR departments that focus primarily on HR metrics themselves, writes Wayne Brockbank

A number of leadership and management thinkers and institutional economists have posited that the
“enemy of the great is the good”. This has been eloquently stated by Vilfredo Pareto, popularised by the 80/20 rule and formalised through Pareto Analysis. I suggest that an additional dimension might aid us in HR to focus our efforts to create greater value through three particular HR activities. The additional dimension is ease versus difficulty.

Might I suggest both logically and empirically that it is frequently the case that the 20 per cent of value is relatively easy to achieve; whereas the 80 per cent of the value is difficult to achieve albeit through 20 per cent of our efforts. Thus, the easy/good is the enemy of the difficult/best.

Before giving three examples, let me first state that the 20 per cent activities create good value but they are frequently justified because they do create some value. However, I suggest that we may focus on the 20 per cent activities not because they create greatest value but because they are easy to do.

On the other hand, the 80 per cent activities that create greatest value may be overlooked because they are more difficult the achieve. They frequently lie outside the HR comfort zone. The following is an initial checklist of three easy/good activities that may deter our focus from the difficulty/best activities.

First: internal customer focus versus external customer focus
HR has traditionally conceptualised internal leaders and employees as its “customer”. This focus strongly contradicts our other mantra which is to be business partners or partners in the business. Since the customer of the business is the external (i.e. buying customer) then if we are to be a partner in the business then the buying customer should dominate our line of sight as we design and develop our HR practices.

“In the past few years, the HR field has been swept along by the tsunami of the talent agenda”

Our ultimate goal is to create and sustain human and organisational capabilities that enable our firms to meet customer requirements better than the competition. We can only achieve this goal if we have a clear and complete understanding of and focus on the requirements of the eternal, money-paying customer.

Second: talent focus versus organisational focus
In the past few years, the HR field has been swept along by the tsunami of the talent agenda. Ensuring the availability of talent is clearly a good thing.

However, if we overemphasise the talent agenda, we may forget that focusing on individual talent may sub-optimise our contributions. A focus on individual talent will result in the human whole being equal to the sum of the parts. But competitive advantage is found in making the organisational whole greater than the sum of the talent parts. In addition, over time the leading competitors in the same industry will have approximately the same level of raw talent.

Therefore, you must have raw talent, or you lose. But competitive advantage is not found in the raw talent that you have but rather what you do with it after you have it. And that is primarily an organisation challenge. Plus, research at the University of Michigan strongly indicates that individual HR talent will have one-quarter the impact on business value when compared with the impact of the integrated HR organisation.

“A key organisational capability is the orchestration of the total flow of external information about customers, competitors and technology throughout the firm for competitive advantage”

Third: focus on HR information versus business information
Another hot HR topic is HR analytics, that is, the application of information logic to measure and drive HR-related issues. This is clearly a good thing to do. However, in the information age, a key organisational capability is the orchestration of the total flow of external information about customers, competitors and technology throughout the firm for competitive advantage. When the information agenda is appropriately framed as an organisational capability, HR shoulders heavy responsibility for this agenda.

However, conceptualising and implementing a comprehensive information strategy may be extraordinarily difficult. It is a difficult/best activity. Our research at the University of Michigan is clear. HR departments that focus on designing and implementing a comprehensive business information strategy will have twice the impact on customer and shareholder value than HR departments that focus primarily on HR metrics themselves.

What this means for HR
HR professionals should be vigilant in focusing thoughts and actions on the difficult/best activities while maintaining the easy/good activities. We should not allow the easy/good to displace the difficult/best.

3 action steps for HR

  • Identify what constitutes the difficult/best HR activities.
  • Develop the capabilities to design and deliver the difficult/best HR activities including emphasising line-of-sight to external customers, building organisation capabilities and orchestrating the flow of business information.
  • Continually rebalance HR’s focus from easy/good activities to difficult/best.

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