HR’s role in business strategy: Still a lot of work to be done

But HR leaders see shift from transactional to strategic activity.
By David Brown
|Canadian HR Reporter|Last Updated: 09/04/2003

As much as HR professionals want full involvement in planning organization goals and achieving bottom-line organization results, most are still largely on the sidelines.

More than 83 per cent of HR leaders responding to

Canadian HR Reporter

’s wide-ranging new survey say people issues are “important” or “very important” to top management in developing the organization’s business strategy. Yet HR seems to be less than an equal partner when it comes to actually planning that strategy. Just 36 per cent of HR departments said they have “complete” or “a lot” of involvement in developing business strategy and more than 60 per cent said they only have “some” involvement or less.

Barely eight per cent of all HR departments claim to be “completely” involved in creating the company business plan.

The findings are part of a comprehensive new study of 539 Canadian organizations conducted by

Canadian HR Reporter

and consulting firm Watson Wyatt Canada. Respondents were the most senior HR officer in each organization.

The study —

HR’s Quest for Status: Fantasy or Emerging Reality?

— covers a wide range of important HR issues including departmental structure, responsibility and workloads, training and development and compensation. A primary goal of the study is to explore how far HR has come in its quest to participate on an equal footing with senior management in strategic business planning for the organization.

On the brighter side, HR leaders say they are more involved in strategic HR activities (consuming about 30 per cent of their time) and less involved in transactional activities (about 70 per cent) than they were a year ago.

As a group, they project that this trend will continue and that in three years they will be spending about 40 per cent of their time on strategic HR activities.

Asked how they felt HR is currently perceived in the rest of the organization, however, respondents said 71 per cent of senior executives, 74 per cent of line managers and 77 per cent of employees still view HR as highly transactional.

There still seems to be a gap between what HR wants to be doing and what it is being asked to do, said Jan Grude of Watson Wyatt. A number of the findings shed light on the extent to which that gap persists.

For example, while 71 per cent of respondents said their organization has a documented business strategy, just 37 per cent said HR had “complete” or “a lot” of involvement in developing that strategy. About 60 per cent of respondents say they have a documented HR strategy. Half said the HR strategy “completely” supports and another 38 per cent supports “a lot” the objectives of the business strategy.

The study also points to some of the mindsets and practices that experts say inhibit HR from playing a more strategic role.

HR professionals appear to have not yet fully embraced the importance of business acumen as an essential competency for HR staff.

Strategic HR experts contend that HR professionals have to understand the business outside of the HR department, and yet just 43 per cent of survey respondents said it was a very important competency for HR leaders to have, while close to 85 per cent said communication and interpersonal skills were very important. (For a more detailed look at HR competencies see Article No. ****, HR competencies: Getting them right.)

And perhaps most disconcerting, said Jane Petruniak of Watson Wyatt, is that on average HR allocates about $1,200 per HR staff member for professional development, but only half said that most of that was spent annually. More than 12 per cent said they spent very little. “That’s frightening given the challenges ahead,” she said.

Of course, HR professionals can rightly protest that it is difficult to find time or resources to add new strategic initiatives to already full schedules. While many respondents indicated they were involved in growth, restructuring, labour negotiations or downsizings in the last year, more than half said their resources have remained the same or been reduced. More than three-quarters reported workload increases, but HR budgets remained the same or were actually reduced in 60 per cent of responding organizations.

HR practitioners may justify the lack of spending on training by citing time shortages, said Petruniak.

It is tough, but the reality is that the speed of change and the intensity of the economic challenges ahead mean HR will need to keep on doing more, sometimes with fewer resources, and they will need new skills to serve clients.

While the results reveal just how far HR has to go to earn respect and credibility from its peers and co-workers, it isn’t all bad news either, said Grude. HR as a profession is still young and evolving. It just takes time to reach maturity. If the emphasis on strategic partnering seems low now, it was a lot lower 10 years ago.

There are signs of improvement and some cases, though still a minority, where HR is considered to be a vital player as important as finance or operations, which is the ultimate objective according to some ambitious HR champions.

Many respondents to the survey also expressed a great deal of frustration about the unwillingness of CEOs to include HR in the strategic process. And of those that are already playing a strategic role, several contacted by

Canadian HR Reporter

for follow-up interviews said they realize they are fortunate. It is true that having an understanding CEO is very helpful, but HR also has to stop complaining about this and actually do some of the things to prove they can add value, said Grude.

Helen Bozinovski, vice-president of HR at the Heart and Stroke Foundation of Ontario, plays an integral role in every part of the organization’s strategic planning. It wasn’t always that way, but soon after joining the organization, she volunteered to lead the team that would create the five-year strategic plan.

Other staff members were “amazed“ because they hadn’t even considered that somebody from HR would be able to do that.

“It was terrifying,” she said, admitting she wasn’t really even thinking about what she was doing when she put her hand up. But just by taking that leap, she established credibility with the rest of the organization and made it clear she wanted to be involved with all aspects of the business, not just HR.

Although Anne Boswall is a vice-president of human resources and one of the six members of the top management team at Imperial Tobacco in Montreal, she has only been in HR for a couple of years, entering the job straight out of the marketing department. The president and chair wanted someone with a strong business background even more than solid HR expertise, she explained.

Getting the CEO to call HR to the table is definitely one of the biggest challenges many people face, she agreed, but added, “I don’t want to imply there is nothing HR can do to influence that either.” HR professionals have to determine where they can add value and then do a better job of selling that to the CEO, she said. “But maybe that is just my marketing background talking.”

It is absolutely essential for HR to do a better job of learning about the business outside of their own department, said Boswall.

“I don’t think the only solution is like what we did here, but I think any HR leader should have it on their personal agenda to really get knowledge and exposure of the business, even if that means going out with a sales rep for a few weeks to get that exposure.”

Boswall sympathizes with HR professionals who struggle to find the time to launch new strategic initiatives, or take extra training to learn about the business world.

Every day HR has many issues to deal with and a lot of those issues are very human, she said. “It is not just people issues. It is people — standing in front of you.”

In other functions, decision-makers deal with paper and reports but “we are in HR because we care about people and it is not easy putting it off because they are there in front of you, so you want to take care of them.”

Just two years ago, Loewen Group Inc. was near bankruptcy and had filed for protection from creditors. At that time, there was no formal HR function. When the new chair was brought in to turn the company around, one of his first steps was to hire Gordon Orlikow as senior vice-president of people.

Since then HR has been very closely involved with all aspects of rebuilding the 11,000-employee company.

Loewen is in a service business (funeral home and cemetery operators) and everything depends on the performance of its people, explained Orlikow. Because of that, HR had to play an active role in business strategy or else the company wouldn’t have been able to right itself.

“It takes no prompting from me,” said Orlikow. He too, recognizes he is indeed in a fortunate position, having come from other organizations where much of his time was spent trying to convince everyone else just what HR could do.

Today the relatively small size of Orlikow’s team (about 15 HR professionals who act as consultants, all with a strong business orientation, as well as another group to handle transactional activities like payroll) requires them to stay at a very strategic level. In fact, they work almost exclusively to support senior managers staying away from the front line as much as possible.

“One thing we don’t do, is we don’t have as much of a day-to-day role as an employee advocate,” he said. They look at overall climate, for example but ultimately it falls to the line manager to ensure employees are happy. Rather than being expected to go in and save a line manager when something goes wrong they stay out of it altogether.

And when Robert Haynes joined the HR department at SaskEnergy Inc. in 1995, the department was still mostly focused on transactional activities.

Today, as vice-president of HR, his department has become much more of a strategic, value-added partner, he said. “I don’t want to give the impression that we are there yet. But we are very much moving in that direction.”

His department has a vital role to play in ensuring productivity remains high by being involved at the very beginning of the decision-making process. “If you are not at the front end, you end up having to pick up the pieces afterwards,” he said.

This is particularly true in a union environment where if the management team tries to role out something new without HR’s involvement, a host of problems typically ensue.

Haynes said his department of 25 dedicates about 60 per cent of its time to transactional activities and 40 per cent to strategic which is higher than what it is at most organizations.

On average respondents to the survey said they spend about 30 per cent of their time on strategic activities (an increase they said from last year when they were spending about 23 per cent of their time on strategic activities).

But Haynes would like eventually to move HR at the 1,000-employee SaskEnergy to a point where fully 65 per cent of its time would be spent on value added activities.

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