Nevertheless it is hard to say what has lead to such thinking of senior managers. Haven’t they put trust in the work of HR from the beginning or is it just a reaction to poor contribution of the human resource department regarding strategic business goals? However it is not justified to put the shame just on the human resource department as they can’t invite themselves to a “seat at the table” as Hammonds described it.
Further, Hammonds presents us reasons what had lead to such a non-strategic output of HR.
At first he points out that HR people have a lack of sufficient business knowledge to be able to be strategic business partners. It is right that human resource managers must have a wide knowledge of all the aspects of business like financing, change management and strategic management, production, sales and marketing (Stone 2006, p.9). They should also be aware of the external factors like globalization or advancements in technology in order to make sure that they can create competitive advantage (Brockbank & Ullrich 2005, p. 489).
Boselie and Paauwe (2004 p. 555) pointed out that according to the human resource competence study in 2002, business knowledge has the fourth highest impact on the company performance and is therefore (if HR don’t have business acumen) one of the main barriers for strategic HRM. Hammonds assumption is right as the reality is quite the same in many companies. A field study in which senior HR, finance and line managers of 13 Australian Best Practice companies have been interviewed to explain the main problems of strategic HRM integration showed that in most cases HR managers are not involved in the business and the decision making process because of their poor business knowledge (Sheehan 2005, p. 198). So, it is clear that business knowledge is one of the problems HR has and if they want to be involved in the decision making process HR people must be able to “know the business inside out, identify the hot business issues and align objectives with the business” ( Goodge 2006, p.5).
It is very interesting to look at HR managers from Japan in this case as they show a much wider knowledge of a company’s business than the managers of other counties do. The reason is because they have worked in the sales, accounting, finance, strategic planning and production department before the changed to do the job of HR (Buchanan 2005, p15). This doesn’t mean that all HR people should spent time of their career in these areas but they have to assure that they have the same amount of knowledge. Only such HR managers can add value to the bottom line because they know what is required from the employees and they are aware of the key business drivers.
The second reason Hammonds gives us for poor strategic HR output is that HR “pursues efficiency in lieu of value”. He wants to say that the work of HR isn’t delivering value to the company in the sense of a better performance for example.
Moreover Hammonds points out that HR can’t fulfill its duty as the key driver for business. This is absolutely right because in most cases HR departments aren’t measured by looking at the productivity and the profit of other companies. In many cases HR people think they aren’t responsible for sales for example. But the point is that their duty is to assure that the right workers do the jobs and thereby they are responsible for sales. (Kaufman 2006, p.30)
Lawler analyzed the problem by thinking of HR as a business who has to offer products to its clients. He mentioned 3 as the key goods HR has to deliver. The first is administrative work like hiring and staffing which is the origin of HR. The other two are HR as a business partner & strategic partner (Lawler 2005, p. 166). That’s the point where the criticism of Hammonds regarding the work of human resource managers is justified as often HR focuses on delivering the first product, administrative work.
Furthermore most of the HR metrics have no relationship to organizational performance. Measuring turnover rates or the amount of training hours is no indication about the performance in the future (Bassi & McMurrer 2007 p.116).
According to Jamrog and Overholt (2006) it is very important that HR thinks about what it delivers and how do they add value to the bottom line. Like any accountant or marketing specialist knows how their job contributes to a higher performance HR people must know the effect of their work too. Hammonds assumption regarding the value of HR is true as it has no great impact on the company performance. Measuring training hours is neither a way to link HR output to strategic business nor is it crucial for the performance of the company (Jamrog & Overholt 2006).
“HR must look beyond measuring the efficiency and effectiveness of programs and look outside the function to measure how well HR helps the organization execute strategy.” (Jamrog & Overholt 2006).
Furthermore Hammonds says that “HR isn’t working for you”. He explains his argument by saying that in most performance appraisals HR people treat all employees equally. This means that talented workers aren’t rewarded adequately. According to Hammonds this is because it is more cost efficient and easier to acknowledge. In actual fact it is true that many companies do not have expressive individual performance scores (Kearnes 2003, p. 167). Kearnes takes the view that many organizations and especially in this case many HR departments don’t want to be held accountable for the individual work of employees and therefore the just do skin-deep performance test. Hammonds also arguments that another reason for this behavior is that HR people are not willing to acknowledge a high performance of individuals. Of course it is easier for them to use a one-size fits all approach (Risher 2005, p.22), but it isn’t completely right how Hammonds describes HR. The fact that HR managers have to measure performance is strongly related to their business knowledge. How can they be able to acknowledge effective work if they have not a deep knowledge of business? A manager would receive two different lists if he would ask a financial manager and a marketing manager to name the main competencies that increase their performance. So it is clear that “one size does not fit all” (Risher 2005, p.22).
Theory suggests that performance appraisals for example should be a way to recognize the achievements of your employees and to show that the company is rewarding the effort of its workers (Linn 2006). It is difficult for HR to show employees that the company invests in human capital and tries to motivate them to improve the performance if the company doesn’t invest enough to improve the work of HR. In reality you will always get what you pay for so that a company that is willing to have meaningful performance appraisals will invest in HR. The consequence is that a strategic oriented HR department won’t use a one size fits all approach but rather reward every employee according to his job.
Finally, Hammonds says that HR people do not claim for a seat at the table. They just sit in the corner and hope that the management will offer them a more respectable position in the company. According to Bolton & Storr (2006) this is not quite correct, as many HR people try to be a strategic business partner but the senior management is not willing to involve them. So it is not right to say that HR people wait to be invited in the decision making process. They “feel disenfranchised” (Bolton & Storr 2006) because of the fact that they try to be a part of the core business but without success.
Many CEO’s either do not know of the benefits of a strategic HR department or they just do not think HR people are capable of driving the business. In many cases they are right and the HR managers do not meet the requirements of a strategic business partner. It is right that HR has to take over responsibility and grind out a seat at the table but only if they have fulfilled their promises to be a strategic force. According to Bolton & Storr (2006) HR needs main capabilities to live up to expectations.
The first one is business knowledge which is a prerequisite for any strategic action. Secondly they will have to establish authority through this knowledge and their experience. Thirdly it requires them to show that they have leadership qualities. Only if HR adapts these attitudes they will be in the position to add value and thereby they will be able get a seat at the table.
3) Given your findings on points 1 & 2 what role would you recommend for HR in the bank or should the function be abolished?
It is sure that the HR function can’t be abolished in the bank as it is so important for many of the processes in the bank. As long as people do the job in the bank HR must be an essential part as it has to hire and to retain the best employees so that the strategic goals can be accomplished. It is reasonable that HR even it has such a bad reputation now in the bank must be the strategic force which links the human capital to strategy. Therefore the CEO of the bank should first investigate if any of the assertations apply for the HR department of the bank too. If not the bank should start to bring home the message that HR is one of the key drivers of business and that everybody in the bank would be affected negatively if it is abolished. It needs to be clear that HR activities like career planning and development, cash rewards, benefits and health and safety programs benefit employees too. It would be imaginable that HR makes a presentation about their job on the basis of examples. Succession planning for example would be a clear example for the importance of HR.
However this can only be successful if the bank has the right HR people.
So if some assertations made by Hammonds turn out to be true for the bank, the development of the “right” HR staff would be the priority. After this process HR managers as well as branch managers should try to identify the weaknesses of the former HR job to be able to improve these points. As a result HR should then play a much more important role in the decision making process.
Although banks traditionally haven’t concentrated much on human resource it will become increasingly useful for them in the future especially for document management (Fest 2006, p. 12).
To summarize, most of the assertations made by Hammonds turn out to be true as many companies today have not realized the important change from personnel to human resource management. HR people still struggle to be a strategic partner because of the fact that they have not sufficient business acumen. Unfortunately the theory of HR as the key driver for business seems not to be present and many HR departments still continue to do administrative work rather than to measure their output to company performance.
This essay shows that senior managers as well haven’t understood how essential the work of HR can be for the long term success of a company. It is not justified to put just the shame on HR because the corporate management also plays an important role for the future of HR in every organization.
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Word Count: 2608
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