I know that I have not posted much lately. Since getting back from vacation, I have been in catch up mode. I am still not there (caught up that is), but I thought I would take a minute and do a quick post. I had three client inquiries today about compensation management solutions. That is unusual. Compensation management is certainly an important part of the talent management application suite, but it certainly has not been in as high demand as performance management solutions. Our "MarketScope for Employee Performance Management Software, 2007" (Gartner subscription required) research showed that four times as many customers had licensed performance management solutions as compensation management solutions.
So, to get three inquiries in one day, two of which were focused on pay-for-performance (looking for integrated performance and compensation management solutions) does not make a trend, but I thought it was interesting nonetheless (also that all of the clients were between 1,000 and 5,000 employees). It was also interesting to hear the clients talk about replacing their Microsoft Word performance forms and Excel compensation planning spreadsheets as the main impetus for selecting new technology. It was another confirmation point that we have a long way to go for strategic use of talent management applications and data.
On a side note, I had previously hinted that this blog may have a new home. I can tell you that progress has been made and it is a near certainty. I will provide more details when I have a firm date for the move.
Thomas Otter on the Vendorprisey blog throws down the challenge to a variety of bloggers and analysts to discuss the disconnect between survey data that shows most C-level executives believe people issues are strategic, yet do not see HR leaders as playing a crucial role in creating corporate strategy. I will take up the challenge. So, why is the HR organization not playing a crucial role in creating corporate strategy?
It may not be doing the basics well -- If HR cannot deliver basic services with high quality at competitive costs, then it does not have credibility with C-level executives. HR should also take the lead in, not be forced into, evaluating alternatives such as HRO. It is important that HR has the data (showing the facts to C-level executives will be a common theme here) that it can share with C-level executives that shows that it is doing the basics well compared to alternatives (or a plan to take advantage of an alternative if this is the best answer).
HR does not really understand the business strategy -- If HR does not understand the business strategy, it cannot proactively provide insight on how to leverage human capital to achieve that strategy. This is not a new concern and I think HR leaders are getting better at understanding the business strategy. However, I still see a lot of companies making HR technology investments without thinking through the ties to business strategy.
HR does not provide the information C-level executives need to make strategic decisions about human capital -- Even if an HR organization understands the business strategy, it needs to have something to meaningful to contribute to the strategy discussion. Too many HR leaders come to the table without the necessary facts to help make strategic decisions. Many HR leaders provide anecdotes, cite studies, or suggest the best practices of others to answer strategic questions about human capital. These can provide color around strategic decision making, but make a poor substitute for facts based on data that comes directly from the company.
This is the area I believe that HR needs to improve the most. I was at a conference earlier this week held by InfoHRM on Workforce Planning. One of the speakers was an EVP of Workforce Planning at Countrywide Financial. He was a CFO earlier in his career. So, he had a unique perspective of HR and its position as a strategic contributor. As a CFO, he was often put in the position of shooting down the ideas of HR, not because they were not good or necessary, but because they did not have the proper substantiation (i.e., business case). He pointed out, rightly, that investments in human capital are not made in a vacuum. Investments in human capital need to be weighed against alternative investments that the company may make to achieve its strategy. So, that was where HR fell down, in his mind. It did not make the case it needed.
If HR is going to be strategic, it needs to understand the business strategy and support managers and executives in executing that strategy. It needs to provide the necessary facts about the impact of human capital on business strategy and then provide the insight and experience to make the best decisions.
It sounds simple. It is not. HR needs to develop competencies in new disciplines to be successful. It is starting to happen. As more non-HR professionals (an HR professionals get more direct business experience) take leadership roles in HR organizations, we are starting to see new thinking emerge. To me, it is not a question of if, it is when, fact-based, strategic HCM decision-making becomes a mainstream concept. So, I look at much of the survey data as a "call to arms" for HR leaders. If they do not answer the call, they will be pushed aside by those who do.
First, let me start with a hat tip to the Knowledge Infusion blog. It had a post about an article published in the June 2007 issue of HR Magazine called "New Competencies for HR". It is a really good article about research that was done to identify the key competencies that embody high-performing HR professionals. It was an extensive study (pretty much like a 360 degree assessment) of HR professionals across more than 400 companies.
I would not quibble with the six competencies identified. HR professionals should use it as a useful aid in career development. I think it is a bit of a stretch though to say that this research provides a "framework for thinking about how HR drives organizational performance". Maybe it was not discussed in the article (and I am certainly interested in being corrected if it is part of the research), but I did not see any discussion of how the research makes the link between the competencies identified and high organizational performance.
I think it would be a great idea to take the assessment data and analyze it with business performance data (e.g., market value, profitability, etc.) to see if there is any correlation (or better yet causality) between high proficiency in the competencies identified and high business performance (similar to what Watson Wyatt does at a company level in its Human Capital Index studies).
To me, that is where the rubber meets the road. It is well and good to say that we assessed high performers and these were the key competencies that they shared. It is a whole other thing to say we that we assessed high performers and that these key competencies are the ones demonstrated by those high performers that differentiate high performing companies.
What do you think? Is it too much of a stretch to link the competencies of individuals in the HR organization to key overall business metrics? It may be. It may be impossible to establish any correlation (much less causality). However, even if we cannot find the link at an individual level, we may be able to find it at the organizational level (aggregating the information from the individual competencies) and draw some useful conclusions.
This is a great list of 10 questions you should know about your business. HR professionals who cannot answer most, if not all, of these questions will find it difficult to partner with business leaders.