Keys to unlocking HR’s competitive advantage

ALP

HR activities that in the past have been met with scepticism are now a source of potential competitive advantage for HR departments, writes Wayne Brockbank

Every five years since 1987 the University of Michigan and the RBL Group have conducted the Human Resource Competency Study. It is the longest ongoing study of global trends in the human resource field. Every five years we have identified the competencies that have greatest impact on business performance and are done least effectively. This intersection of high impact and low effectiveness is the sweet-spot of potential opportunity and emerging competitive advantage.  

In our research over the past 25 years, two interesting dynamics have occurred. First, every five years, our findings are initially met with deep scepticism. The initial and frequent response is, “This is not what we do in HR in our company. This is not what HR does.” Second, within the subsequent five years or so, scepticism is generally replaced with commonplace acceptance.

The evolution of HR
In 1987, we identified that HR professionals around the world did not have high levels of business knowledge; however, companies whose HR professionals did have a high level of business knowledge outperformed those that did not. Over the next five years, the assertion that HR professionals should have business knowledge became commonplace. But in 1987, the response to this assertion was frequently disbelief or outright rejection.

In 1992, we identified that HR professionals did not generally have high levels of change management skills; however, we also found that HR professionals in high performing companies did have the skills of change management. Again, our data were frequently met with strong scepticism: “OD folks are responsible for change management, not HR professionals”. However, within a few years, it became generally accepted that HR departments play a central role in change management initiatives.

“Over the years, the Human Resource Competency data has been a predictor of agendas and competencies that have become commonplace in the future but were anything but commonplace at the time they were initially identified”

In 1997, our data identified that HR professionals did not function well as business partners except in the highest performing firms. Following a few years of scepticism, HR as a business partner has been strongly accepted as a HR mantra.

In 2002, our research found that linking culture management to the business strategy was not generally done well, but it was done well in a small pocket of high performing firms. The frequent response was, “Your findings are wrong. We create cultures that focus on employees. Corporate cultures should be internally not externally focused.”  Today, with the exception of a few monopolistic or oligopolistic firms, it is generally accepted that corporate cultures need to focus on the logic and behavioural patterns that are required by the competitive market place.

In 2007, the data revealed that HR professionals did not generally contribute to the formulation of business strategies but that such was the case in high performing firms. Today we are seeing a substantial increase of senior HR professionals in the C-suit and more HR professionals coming from the business into HR.

Thus, over the years, the Human Resource Competency data has been a predictor of agendas and competencies that have become commonplace in the future but were anything but commonplace at the time they were initially identified.

In the 2012 version of our research, over 20,000 individuals from around the world responded to the survey. The 2012 findings were among the most dramatic of the past 25 years. As in past versions, we sought to identify the HR competencies and agendas that sit at the intersection of being among the worst that HR professionals do but that have the greatest business impact.

High performance HR
The 2012 emergent scarce but important competency is the ability of HR professionals to help architect the flow of business information – not just HR information but business information. The items that statistically formed the sub-factor of “designing information flow” are as follows.

In high performing firms, HR professionals identify important external information and import it into the firm. Examples include the Timken Corporation in which HR has helped arrange for satisfied and less satisfied customers to speak at annual officer meetings. Through such meetings, senior executives have been given the opportunity to hear and discuss customer reality in a real-time manner. The Disney Corporation frequently uses their front line employees to conduct market research. This process is facilitated by training, job expectations, communications and empowerment practices that are provided by HR.

“In high performing firms, HR professionals recognise that organisations have limited mental space”

In high performing firms, HR professional design practices encourage and facilitate the electronic and social sharing of information. For example, at Blackrock, the communication forums at the Blackrock Institute provide settings in which individuals meet to share important global economic and investment trends with other individuals with whom they would not normally have much contact.

In high performing firms, HR professionals ensure that their collective HR practices are aligned with external customer requirements. The do so with discipline and focus. For example, as a central aspect of its management trainee program, new trainees of Hindustan Unilever Limited in India spend up to six months living in remote villages among the poor. In those locations they internalise the lifestyle of the company’s present and future customers.

Finally, in high performing firms, HR professionals recognise that organisations have limited mental space. If they are to increase the organisation’s processing of important external information, they must concurrently reduce processing of less important internal information. This is the intended outcome of GE’s well-documented WorkOut. Designed and facilitated by HR professionals, GE’s WorkOut enables teams to reduce the low value-adding internal information that exists in the form of meetings, reports, approvals, paperwork and processes.

HR’s competitive advantage
Currently, HR’s activities relative to architecting the flow of business information are not done well around the world, but in the small pockets where they are done well, they create substantial value. Thus, these activities represent potential competitive advantage. If history repeats itself, most HR departments do not currently focus on these activities, but in the next five to seven years, these practices will be more commonplace. In the meantime, it is a source of potential competitive advantage for HR departments who create the future instead of simply responding to the future that others create.