How can HR best create value for investors and external customers?

How can HR best create value for investors and external customers?

HR’s direct and indirect involvement in firm-wide information architecture has a significant impact on value for investors and external customers, writes Wayne Brockbank

In a recent Inside HR article, I cited research from the University of Michigan and the RBL Group in which we examined the statistical impact of different categories of HR department practices on the variety of HR’s internal and external stakeholders. The counterintuitive findings indicate that 68 per cent of HR’s impact on value for external customers and 56 per cent of HR’s impact on value for investors are a result of HR’s direct and indirect involvement in firm-wide information architecture.

We identified five stages in the flow of institutional information: (1) accessing key external customer information, (2) importing this competitive information into the firm, (3) applying both quantitative and qualitative analytical tools to information analysis, (4), disseminating the analysed information so that the information whole is greater than the sum of the parts, and (5) ensuring the full utilisation of information in decision making and action.

While HR departments are creating value at each of these stages in many companies, this practice area is done least well when compared to other HR practice areas. Claude Shannon was a major player in conceptualising the theory of information. His basic tenant is that the goal of information is to ensure that messages that are sent are exactly those that received. Simple enough.

“A fundamental challenge for companies is to ensure that information in the minds, hearts and motives of customers are accurately reflected in the minds and hearts of employees “

But let us examine this basic premise as it applies to HR’s role in facilitating the flow of institutional information. A fundamental challenge for companies is to ensure that information in the minds, hearts and motives of customers are accurately reflected in the minds and hearts of employees both now and in the future. The extent to which this happens is the essence of competitive advantage.

The Hindustan Unilever Limited approach
There are a multitude of mechanisms through which HR departments can add value to this informational agenda. For example, Hindustan Unilever Limited (HUL) hires some of the best and the brightest from the best Indian universities. Many of these new hires come from middle class or upper middle-class families. The HUL challenge is that many its customers are not at the top or middle of the “pyramid”; rather they represent “wealth at the bottom of the pyramid”.

How does HUL get the hearts and minds of the bottom of the pyramid into the hearts and minds of its middle and upper-class employees? New management trainees are sent to live in remote towns and villages throughout India. They spend eight weeks learning how the Indian masses use HUL’s products; they also learn the social and economic context within which these products are used.  They come to know the hearts, minds and motives of their customers.

“The HUL challenge is that many its customers are not at the top or middle of the ‘pyramid’; rather they represent ‘wealth at the bottom of the pyramid'”

This in-depth exposure at the country level is augmented and leveraged through the global Unilever organisation. In regular sector meetings at the country level, empirical data are shared along with the sector level qualitative assessments of market trends. These findings are shared horizontally across sectors where country-wide conclusions are reached and actions are planned. These findings and decision are then vertically cascaded to region level where additional analysis and decisions are made. Region level analyses are cascaded up to headquarters where the flow of upward information and decisions are analysed and amplified by world-class big data analytical processes and professionals.

HR plays a partner role in ensuring that Unilever’s talent, technical skills and culture support the comprehensive flow of information throughout the corporation. Similar information-rich agendas are found in other leading firms such as Apple, Tencent, Blackrock, McKinsey, Disney and Bridgewater.

5 action items for HR

  1. Understand the role information plays in your firm as a source of competitive advantage.
  2. Diagnose at which stages in the flow of organisational information your firm is most likely to create an information advantage.
  3. Build HR practices which can add greatest value at the most important stages of your organisation’s information flow.
  4. Work with line management to verify and support your conclusions.
  5. Take actions to implement the relevant HR practices areas that support information as competitive advantage.

Image source: iStock