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HR Isn't Meeting Global Business Demands

HR Isn't Meeting Global Business Demands

by Chris Groscurth and Bryant Ott

Story Highlights

  • Very few HR pros think their teams can meet business demands
  • The need for effective HR has never been greater
  • Companies must upgrade their HR capabilities

There's been much talk among political and business leaders lately about "upskilling" the U.S. workforce, with the goal of improving organizational effectiveness and fueling economic growth. But it's unclear exactly who's responsible for upskilling, as it could be schools, corporations or both.

Today's workforce and its leaders require continuous on-the-job learning and development to effectively respond to changing business demands and to help companies gain a competitive advantage. But there's confusion in corporate America about the role human resources (HR) can and should play in supporting business growth and performance.

No one is questioning whether companies need better human development strategies to improve leadership and drive business growth and performance. Instead, the issue is how to redefine the role HR plays in supporting business performance. Right now, most HR departments aren't up to the task of preparing tomorrow's leaders or fostering performance excellence.

Traditional HR Practices Are No Longer Sufficient

A 2014 Deloitte study of executives in companies with 10,000 or more employees showed that nearly one-half (48%) of respondents rated their HR department as "not ready" to reskill itself to meet the demands of global business. Even more alarming, less than 8% of HR leaders have confidence in their HR teams' skills and abilities to meet business demands.

Though businesses still need traditional HR practices, such as compensation, hiring and firing, they're no longer enough to meet a modern company's needs. Many HR departments still use a compliance-driven personnel model that is too tactical and ill-equipped to foster performance and organizational excellence. Global business trends require HR departments to adapt and change more quickly now than anyone could have imagined a decade ago.

Deloitte's findings are consistent with the talent management questions that HR executives worldwide routinely ask Gallup experts:

  • How can we prepare future leaders for the leadership demands and challenges our business faces?
  • How can we maximize our investments in learning and development?
  • How can we improve employee engagement and performance?
  • How do we build or evolve our organizational culture amid all this change?

How your company answers these questions may be the key to its future growth, performance and sustainability. Companies need mature and effective HR departments now more than ever to help grow and sustain their business. But before companies can upskill their workforces and leadership, they must upskill HR -- and that starts with clearly identifying HR's purpose and brand.

Redefining HR's Purpose and Brand

Why does HR exist, and what is it known for? There are many possible answers to these questions. HR could be the moral arbiter of organizational behavior or the people and organizational effectiveness team. Or, HR could conduct transactional functions that help companies fill empty positions. But HR also could be a strategic business partner -- or, better yet, a talent machine that fuels a company's performance.

Without a clear purpose, any HR overhaul will lack direction in service design and delivery. And if HR tries to be all things to everyone, it can't possibly do any of those things with excellence.

Once HR's purpose is clear, leaders must determine what they want HR to be known for in the company. A strong HR brand is clear and aligned with the company's business strategy. Rebranding HR as a strategic business partner and a center of expertise in talent, employee engagement, learning and development, and succession planning is no small task. Many companies overlook the power of HR's brand when planning for and implementing an HR transformation, which undermines the change and, ultimately, HR's impact on performance.

Executives can't transform their company's HR identity overnight, nor can they quickly erase HR's old reputation as a transactional personnel function. But four steps -- drawn from Gallup's observations of leaders across industries and sectors -- offer a solid approach to upskilling HR by focusing on improving talent and performance: 1) get better at leadership, 2) rethink training, 3) connect passion and purpose and 4) consider talent and culture when managing change.

Get Better at Leadership

To ensure a company's future success, HR professionals must support leadership development throughout the company and prepare future leaders faster. Upskilling leadership will require HR professionals to develop new skills themselves in the service areas they lead. HR professionals must learn how to use objective science rather than subjective opinion to help their business partners identify leadership talent early on.

The HR business partner of the future must advise company leaders about the talents and developmental experiences that are crucial to success at the highest levels of leadership today and forecast what will drive success in the future. Companies must also train HR to teach company leaders how to mentor and coach future leaders based on current leaders' talents and experience.

Ultimately, HR needs to get smarter about how it invests resources in leadership development -- and who it invests them in -- because too many leadership development programs are flawed. Gallup's research on some of the highest performing companies in the world has shown that talent-based, experience-driven development is the best way to improve organizational performance and profitability. Any other approach creates expensive and ineffective results.

Rethink Training

Despite decades of investments in training, HR and the learning and development industry have failed to prepare future leaders to take charge. This has happened because most training programs try to "fill leaders up" with what they lack -- with strategic thinking, accountability and interpersonal skills, for example. Attempting to turn incompetence into competence is a model that is flawed, but this is the only model that most HR professionals have learned.

Leaders and executives tasked with solving complex business problems require development, not training. Rethinking training will require HR to educate managers and leaders on how to foster learning and development through key experiences and real-time coaching, teaching and performance management. HR should ensure that all managers in the business have the talent to coach, and then HR's role is to teach the teachers and coach the coaches. This is the value that a true leadership center of expertise provides for a company.

HR and learning professionals should provide managers with resources, tools and continuous coaching so they can support the company's learning needs. More importantly, HR should use learning diagnostics and assessments to determine how to maximize investments in high-potential employees. HR must also demonstrate and actively promote the effect of formal learning interventions, using metrics and analytics to justify the return on investment by showing improvements in employee engagement and performance outcomes.

Connect Passion and Purpose

Actively disengaged employees continue to outnumber engaged employees worldwide by nearly 2-to-1. Gallup knows that leaders and managers play a crucial role in meeting employees' emotional needs, such as the need for respect, positive relationships, personal development and meaningful work. And these needs have serious financial implications. For example, organizations in Gallup's employee engagement client database with an average of 9.3 engaged employees for every actively disengaged employee in 2010-2011 experienced 147% higher earnings per share (EPS) than their competition in 2011-2012.

Through decades of research with hundreds of organizations and more than 25 million employees in 142 countries, Gallup has learned what the best leaders do differently to connect employee engagement with a company's purpose, culture and brand. HR functions play an important role in shaping the functional aspects of an organization's culture -- for example, in designing human capital processes to ensure that the company hires and evaluates managers based on their ability to engage their team.

Gallup has learned that fully maximizing employee engagement requires evolving HR's functions, capabilities and upskilling HR leaders. This involves helping HR business partners get more sophisticated about talent and engagement analytics and teaching them how to enhance organizational culture to support achieving the company's ultimate purpose and performance goals.

Consider Talent and Culture When Managing Change

Change happens constantly across all industries and sectors. While companies are becoming more adept and agile at changing systems and processes, many struggle with managing talent and culture during times of tumult. Few HR departments have clear techniques to use to engage employees during transformational changes that affect organizational culture and performance, such as a merger or reorganization, but these transformational changes offer great opportunities to upskill HR. By strengthening change management and improving organizational performance during these times, HR builds organizational capabilities more quickly and can effectively address the talent and cultural aspects of change while serving as a center of excellence for leaders and managers.

Companies and governments now operate in a world that is radically different from what it was when HR emerged as a profession. HR professionals have clamored for decades for a "seat at the table." Many HR leaders now find themselves in that seat, wondering which cards to play to add value to the business, demonstrate the impact of people on performance and advise senior leaders on workplace changes that are crucial for growing and sustaining the business. Upskilling HR leaders and strengthening HR capability is necessary to maximize a company's talent and leadership in today's competitive landscape.


Chris Groscurth, Ph.D., is a former Senior Practice Consultant at Gallup.
Bryant Ott is a writer and editor at Gallup.

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