During a recent fact-finding meeting with a prospective client, I learned much of what I needed to know in just the first few minutes. Warmly welcomed into the chief executive's suite, I was introduced to the finance director, a general manager of business development and a keen-looking executive assistant with a big notepad and the expertise to activate a PowerPoint presentation.
The broad topic we were there to discuss was how the company could enhance performance, as the economy recovered, with incentive programmes, customised training and possible outsourcing. To kick things off, the chief executive made a few well-honed comments about their key objectives and general philosophy.
The organisation, I was told, was looking to achieve aggressive targets for growth and profitability in the coming year. It not only "put people first", but also regarded them as the "greatest asset". For that reason, there were plans to invest in an in-house "academy" that would offer tailor-made training and continuous professional development, with a view to becoming a recognised employer of choice.
I have to admit it was all sounding quite impressive. That is until I glanced again at the name cards on the table in front of me and realised the obvious flaw. Big ideas and major changes regarding personnel were in the works, but no one with direct responsibility for human resources (HR) was there to comment, contribute, challenge or simply listen in.
It is a situation I've encountered many times before. Unfortunately, companies have traditionally regarded the HR function as essentially administrative. They require the team to organise recruitment, plan courses and conferences, monitor training, gauge compensation, supervise benefits, and provide counselling - among other tasks. But they regularly fail to appreciate that any department handling this range of responsibilities is also ideally placed to anticipate needs, detect moods and interpret changes across the organisation.
Consequently, the HR function has been and still is widely considered as a cost centre, an expense to be kept under control. And while the current chatter about the need for HR departments to assume the role of a "strategic business partner" may at times be a little overdone, the basic premise is entirely valid. As the economy shifts and the dependence on knowledge increases, the employer/employee relationship will keep changing and the role of HR must evolve.
It is reasonably safe to say that, in future, competitive advantage in any sector will largely be a question of how good your staff are. In the past, it might have been political systems or access to capital that gave an edge. More recently, production processes or technology allowed certain companies to forge ahead. Increasingly, though, with reliable information about markets and competitors so readily available, the thing that will really differentiate will be the ability to help staff understand their potential and get the very best out of each individual.
This comes down to having the right "human capital" and being able to maximise the value it can create. And that can be done only by making the HR department central to every strategy session, so it can ensure appropriate plans are in place for everything from recruitment and rewards to development and retraining.
Research has consistently shown that, when designing an approach to HR that is effective and far-sighted, there are six essential factors. These are:
People It might seem obvious, but the type and quality of the people working for an organisation should match the basic job requirements. For instance, companies simply don't need every member of staff to be a dynamic, self-motivated go-getter with exceptional communication skills. They probably need a few individuals like that, but far more with the attributes, technical knowledge and attitude to, say, work in an IT department, answer customer service enquiries or complete the month-end accounts on time.
A surprising number of employers still spend time and resources on hiring recruits who have all sorts of qualifications, but are just not right for the job. In effect, they mis-sell the role or the prospects.
Other companies still rely predominantly on face-to-face interviews when assessing job candidates. Clearly, this should be part of the process, but with so many reliable tools available to measure attributes and test potential, it seems almost perverse not to use some of them. While personal impressions are important, "science" can also add tremendous value in the search for human capital.
Managerial structure The way a company organises itself has a major bearing on whether it misuses, or even wastes, employee potential or maximises it to gain a competitive advantage. There are examples everywhere of department responsibilities overlapping, managers pulling in opposite directions and staff perpetually wondering what they should report and to whom. Organisations can be hierarchical or "flat", formal or friendly, but whatever the case, there must be clarity and consistency. The structure, methods and mode of operation should reflect the corporate philosophy and basic business strategy. The objective has to be that everyone understands not just their own role but where they fit into the bigger picture. This will allow them to perform more effectively, contribute more fully, spot opportunities and get greater personal satisfaction from what they do.
Work processes With the structure and roles defined, the next step is to specify the processes which departments and individuals should follow. For this, it helps to use RACI (responsible, accountable, consulted, informed) charts alongside job descriptions and to have in-house "protocols" on how divisions should function and interact. The key, though, is to base processes on what really happens, not some idealised model. In many organisations, certain jobs - let's say project manager in Xinjiang - specifically require autonomy, independence and initiative. The incumbent doesn't necessarily have to be a great team player or an expert in building consensus. The point is that results are what count. Therefore, work processes should be geared to achieving efficiency and productivity, not finding new reasons to convene meetings.
Information and knowledge In every company, there are both formal and informal systems for sharing information and spreading knowledge. To a large extent, these depend on the structure and processes, which will determine how open employees are towards each other and how actively they are encouraged to learn. Without doubt, in the "information age" employers have to see the importance of broader knowledge, diverse training and new skills. That means investing to ensure staff have the right information or knowledge in good time and understanding who else will need it.
Decision making Typically, corporate cultures lean in one of two directions. Either they value input, with employees given a vote or a voice, or they take the top-down approach, issuing directives and expecting action. The former can help to preserve cohesion and generate goodwill, allowing divergent viewpoints to be aired before arriving at a consensus. The latter can be critical when action is required or market conditions are rapidly changing. Neither method is right or wrong.
Rewards Monetary and non-monetary benefits can be tied to specific performance targets. However, companies are commonly quite inconsistent in the way they apply this principle. For instance, they may talk repeatedly about teamwork but then award large bonuses to the members of the board and none to the frontline sales team. To be effective, it is imperative to align incentives with desired business results for each level for the organisation, so that people know what reward they are working towards and feel they can achieve it. It is a fine balance to strike but getting it right is the key to improving performance and creating a competitive advantage.
Written by Stephane Michaud, Principal Consultant Human Capital, Hong Kong and Singapore, at Mercer, a global provider of consulting, outsourcing and investment services.