Human Resouces in the Recession
In mature markets, where growth is slow and costs are managed to the extreme, what differentiates one company from another? Many organisations and managers have actually become rather indistinguishable in that they uniformly pay attention to teamwork and quality, reduce costs where they can (often through outsourcing) and get rid of poorly performing executives—these activities make for good organisations. But then what give some companies a leading edge over others? It comes down two factors.
The first is brand—a strong brand reputation makes people believe that a Mercedes is better than a Ford, and can help a company even if this belief proves not to be true (e.g. if Mercedes outsourced some faulty components and their quality did decline below the perceived quality of Ford).
The other differentiating factor is people. Better led teams will be more motivated; when there’s a single company mentality, especially among middle and senior management, decisions can be made more quickly, and better products can make it to market more quickly and efficiently.
These two critical differentiators, brand and people, can have a huge impact on a company’s bottom line. Because an organisation’s personnel can be controlled more directly than its brand, human resources has become increasingly important in mature markets, particularly during our current recession. In fact I believe that HR has become the most important function in the corporate hierarchy.
There’s a tremendous need for the HR function to influence leadership and the board. They need to decide what sort of philosophy a corporation should have, and how to create a company strategy that solves problems and gets the most out of its people.
Thus it’s quite disappointing that many companies do not consider the HR function to be important, and the HR function’s contraction has accelerated during the recession. Why is HR not rising to the challenge? In many companies, HR became (or always was) too transactional. HR became too focused on getting HR systems (like payroll) and procedures (like training programmes) right, instead of getting involved in a company’s strategic debate and influencing that debate.
It wasn’t a lack of respect for the HR position that lead to its diminished standing, it was more that executives were questioning of real value that HR can provide. They didn’t understand how HR improves the way an organisation can function, and how much the right people are critical to a company’s success.
So what can be done? For one thing, HR professional bodies don’t understand markets well enough, and don’t have confidence to state to top executives that HR is important. The HR profession needs to take a step back and analyze itself, and make sure it fully understands the business it’s a part of, and then it’s up to HR directors to lead the HR function into a more prominent place in the corporation. This won’t be easy. HR people need to be trained as strategic analysts who hold the HR function as their job, not just personnel managers. This has to change.
