‘HR is not about HR’

“HR is not about HR. HR begins and ends with the business.”

So begins Dave Ulrich’s latest book, which says the culture of an organization can have four times the impact on business performance compared to individual talent.

A renowned human resources strategist and business professor at the University of Michigan’s Ross School of Business, Ulrich presented his findings at the 2017 CHRO Conference in Toronto in May, hosted by the Human Resources Professionals Association (HRPA).

It was important to cut directly to the chase with the first sentence of his book, he said.

“If I focus from the first question on business issues, and then HR enables those issues, I think we’ve got the focus right,” said Ulrich. “That’s my new view of HR.”

Changing world

Going forward, the focus of HR professionals should not be self-serving, but rather focused on what the department can do for others — how it can create value and help the business win, he said.

“The world is changing fast, faster than we’ve ever seen,” said Ulrich, author of Victory Through Organization: Why the War for Talent is Failing Your Company and What You Can Do About It. The book features data collected from 32,000 respondents at 1,200 businesses around the world.

The resulting workplace shifts include changes to HR-driving forces, such as social and economic change, stakeholder expectations, a volatile world and personalities. Diversity, technology, politics and demographics are also playing a role, he said.

The effect of these forces on business is startling, said Ulrich. For example, only 60 of the original Fortune 500 companies still exist. Tech-enabled companies such as Amazon and Airbnb have become the new major players, forever altering the way the retail and hotel sectors operate.

In a VUCA (volatile, uncertain, complex and ambiguous) world, companies are required to be small, fast and agile, he said. An appropriate cultural mix between mobility and innovation needs to be struck in order to keep pace. Customer experience and net promoter scores are more important than ever.

Additionally, employee wants are changing, with many looking for meaning and purpose above all else.

“Does your boss give you a sense of well-being? Does your pay system give you a sense of purpose?” said Ulrich.

Perspective matters

To be the most effective, HR needs to understand its focus is more along the lines of an architect than chief of operations, he said. Ultimately, the line manager remains responsible for decision-making.

HR also needs to walk the talk with policies, said Ulrich. For example, if promoting diversity throughout a specific organization, the HR department should model that. The profession has gone from 30 per cent female workers to 80 per cent over the past 30 years, he said — suggesting the scale has perhaps tipped a little too far.

“The maddest I’ve ever been at people in our field is when I see senior HR people not living what we ask others to live,” said Ulrich. “HR hypocrisy is just horrible. We should be modelling in our function the values we encourage for others.”

Additionally, all HR initiatives should begin with overall business success top-of-mind, he said. Leaders need to frame their business risks with winning outcomes, not theories.

“HR is not about our programming and processes,” said Ulrich. “It’s about the outcome it has with someone else. Leadership is not about who I am and what I think; it’s about how I help someone else.”

Understanding what business requires through a HR lens requires a perspective change, followed by effective outcomes and transformation, he said.

In terms of perspective, HR challenges come in the following waves: efficiency, functional expertise, strategy and response to external conditions, said Ulrich.

All stakeholders rely on HR — not just employees and line managers. Customers, investors, regulators and partners are all beginning to turn to HR for leadership.

When administering internal responses to issues, HR managers should add the phrase “so that” to goals to shift perspective from inside to outside thinking, he said. The profession needs to actively turn its focus from solely HR issues to larger attempts to win the marketplace.

Ulrich cited inspirational HR attempts — by companies such as Amazon, McDonald’s and Walmart — in terms of pivoting and shifting overall focus, as well as innovating within their respective business cores.

For example, Walmart recently invested more than $1 billion (10 per cent of its profits) into its employees. HR successfully presented that strategy to its senior executive team by leading with business outcomes, rather than HR-focused ones. Data was presented revealing stores with higher employee sentiment enjoyed richer profit margins — music to the board’s ears, he said.

Managing outcomes

As the business world shifts rapidly, what value does the HR department bring to the board table? In terms of talent versus organization, which better predicts business performance?

Research shows 80 per cent of business performance is predicted by the organization, compared to 20 per cent of talent, said Ulrich.

“You need good talent, but teamwork matters even more... I find that finding fascinating.”

Comparing organizations to teams can be helpful, said Ulrich. He pointed out that in almost every sport, the team with the top scorer only wins the championship about 20 per cent of the time. In the vast majority of cases, solid teamwork easily trumps individual star performance.

That comparison results in three questions for organizations: “Do we have the right talent? Do we have the right organization? Do we have the right leadership?”

The example demonstrated by leadership is critical, with behaviour often proving more powerful than rhetoric, said Ulrich.

HR should strive to be a well-serving architect of talent, leadership and culture, with a side role in anthropology — looking to the future in an attempt to determine what’s next. HR professionals should be encouraged to get out of the office and simply observe, he said.

“Twenty per cent of the data in the world is called structured data,” said Ulrich. “Eighty per cent is unstructured — it’s what you observe, it’s what you see.”

In terms of talent, HR should manage confidence, commitment and contribution — getting the right people into their company, then ensuring they are engaged and finding meaning, he said.

Finally, culture should be shaped in terms of what a company wants to be known for by its best customers, said Ulrich.

“Culture is not an event. It’s not even a pattern. It’s an identity.”

Transforming HR

Business context needs to have an outside-in focus and outcomes in areas such as talent, leadership and capability need to be appropriate, according to Ulrich.

HR design is also critical, he said. “It should reflect your business organization.”

Additionally, HR requires accountability in its relationships.

“The key to a relationship is not the formal contract — it’s the relationship,” said Ulrich. “Our challenge as CHROs is not getting the structure perfect, it’s getting the relationships much better.”