Today, many researchers and leading practitioners believe that HR professionals are failing to integrate business and commercial issues into their work, as well as lacking the capability to understand key business numbers and performance drivers. And, in today’s complex, evolving and challenging business environment, having commercial and organisational awareness are considered to be critical capabilities across all sectors. As such, this year’s Chartered Institute of Personnel and Development (CIPD) conference and exhibition called all HR professionals to become “more business savvy” and to have a deeper understanding of their business and situation. CIPD president Gill Rider, who opened this year’s conference, argued that becoming more business savvy ensures that HR brings the “brightest and the best” new recruits into the profession, so that it “continues to respond to business challenges”. Rider urged all HR directors to make sure that they remain, as she put it, “business relevant”. In her speech, she stated: “The demands on us are growing. We are the only profession that has all the levers. When things work well together, they buzz and this brings extraordinary implications for us.”
“HR is, and we all are, an agent of change and the pace of change is amazing. The cycles of growth and downsizing in some organisations are faster than anyone has known and this day-to-day job for HR directors on top of the strategic [role of HR] has accelerated the need for us to take the challenge,” she said.
Today’s ambitious HR professionals “can’t rely any more on HR competencies as a comfort blanket” to get on in their careers, the CIPD’s adviser on learning and development, John McGurk, told conference delegates. In other words, HR professionals need to ensure that they have high levels of business acumen to be able to demonstrate how their efforts in human capital contribute to the overall business strategy. McGurk argued that:
“HR needs to have a heightened understanding of every section of the business, particularly the operational functions, which impact the bottom-line. This is the only way to ensure HR is consistently delivering real business impact and sustainable performance.”
Here, McGurk made reference to several recent appointments to HR director roles in top companies of people from other backgrounds – such as marketing, operations and commercial law – which demonstrate that ‘business savvy’ and personal credibility are at least as important as having HR expertise.
In a recent article by Chandler Harris entitled “Demand surging for HR professionals”, Kim Shanahan, senior client partner and managing director at the HR centre of expertise at Korn/Ferry in Reston, Virginia explained that she is seeing more searches for heads of HR than ever before. One of the reasons for this is because CEOs and boards are increasingly spending significant amounts of time looking into HR issues, such as executive compensation, succession planning, talent management and performance reviews.
“What’s happening is that HR is being pulled into the front-end in terms of decision-making and strategizing for the business, so the business acumen piece is very high in terms of what a CEO needs and that permeates throughout the business,” Shanahan said.
In the same article, Susan Meisinger, HREOnlineTM columnist, HR consultant and former CEO of the Society for Human Resource Management, commented: “Recruiters are looking for people that not only have human resources backgrounds, but have business savvy and business literacy. In this tough economy, having that business sense is critical.”
Businesses are increasingly looking for strategic HR professionals who can help them understand the intricacies of running a company, she maintained. They should be able to create and use company metrics to understand how to equalise compensation increases with cuts elsewhere, among other things.
Another speaker in the CIPD conference, John Kempton, HR director at the Institute of Cancer Research, provided insights into what ‘business savvy’ looks like. “Recently, I was invited to a first meeting with the new chief executive. I decided not to talk about HR, but to tell him what I thought were the challenges facing the business. Soon I found I was being invited to one-to-one meetings with the CEO, unlike some other senior managers, who had gone in (just) talking about what their departments do.”
However, OD consultant Ed Griffin, a member the CIPD’s Next Generation HR project team, which will issue a report on business savvy in January, said a common reaction that came out from this project from HR professionals is that of “My business awareness used to be really good – but now I’m just too busy because of the operational demands of my role.”
Having said that, Griffin recommends all HR managers to make an effort to get to understand who actually brings money into the organisation, who supports them, and where the value is created. Griffin added that today some HR people are “moving away from having an HR annual calendar organised around appraisals, reward and so on, and adopting one based on key business events such as financial results and contract renewals”.
“A good place to start,” said Tim Douglas, who works internationally as an interim HR director, is “to simply work out every sales division’s total employment costs compared to its turnover and profit, and focus on supporting line managers to improve these metrics.”
Finally, McGurk explained how anyone working in a plc could get a quick steer on the key business issues by looking at the investor relations section on the company’s website. “You’ll generally find a PowerPoint file setting out the issues that will be uppermost for the executive board,” he said.
There is no doubt that business savvy HRD has become a valued voice for senior management to hear in these times. HR practitioners need to be business people first and an HR person second because successful HR leaders are successful business leaders − they are one and the same thing. Even if HR is your bread and butter it pays to build on those skills that will allow you to get involved and participate fully in strategic business decisions. After all, as Dave Ulrich, professor at the Ross School of Business at the University of Michigan and a principal in The RBL Group, in Provo, Utah, said recently: “Those HR professionals who can bring rigorous business analytic skills to managing talent, changing culture and building leadership, will be in demand as the economy improves.”
Ms Camilleri is a researcher at the Foundation for Human Resources Development