Developing HR's business skills
It’s almost a mantra for the profession: If HR professionals want to be strategic partners, rather than simply supporting players, they must develop a greater understanding of how their business — and the business world around it — operates. Canadian HR Reporter spoke with several HR Leaders to get their thoughts on how far the profession has progressed down this road and what they, and their HR teams, need to know about the business to earn the respect so many in HR still covet.
Janice Thomson
Senior Vice-president of Human Resources
Direct Energy
One of North America’s leading energy and energy services suppliers, Direct Energy serves more than 2.7 million Canadian households and employs 2,900 people, 2,600 in Canada.
At a time when most organizations have countless HR consulting and outsourcing options, Janice Thomson warns her HR staff at energy supplier, Direct Energy, they absolutely must understand the business or risk becoming irrelevant.
“One thing I always tell my team is that everything we do can be bought externally,” says the senior vice-president of HR. There are too many vendors out there that can provide generic HR services. “What we have to do better than them is know the business and know the people.”
HR will only be viewed as a business partner and a valuable contributor to the organization when the HR team-members have an understanding of how things get done in an organization and an appreciation of the how the underlying business concerns shape HR issues and challenges of front-line managers.
“The biggest advantage that we have is understanding the business, and knowing the people well and understanding the organizational dynamics. Somebody from the outside won’t know that. It’s only time and working with people (that) gives you an understanding,” she says.
“Every place you go it is going to be different. If you have a really strong business partnership between HR and the functional groups and the line, it is very tough (for vendors) to compete with that,” she says.
“I think HR, the function, has made tremendous strides in the last 10 years and is getting a better understanding of what it means to be a business partner. But you still find organizations (that haven’t) come as far.”
One of the more common faults is to assume that what HR wants to do is what the business needs, she says.
“Often you get HR folks who get all excited about doing something for themselves, rather than for the business,” she says.
It may be a great HR program but it may not correct any fundamental business problem.
“HR departments can go down a path on something and have (a program) practically designed, developed and ready for rollout and they haven’t involved anybody from the business. They sort of set themselves up for criticism. I have seen that with training programs: ‘Here is what we think that you need and we designed something.’ They’re all set to roll it out but they haven’t got feedback from the business.”
She cites as an example the massive HR interest in work-life balance programs and policies. But too many HR professionals get ahead of themselves, she says. They introduce a program without ever consulting with anyone else in the business, or better yet, first piloting the program with one part of the organization.
“You run the risk of spending a lot of time and energy designing something that isn’t really addressing the root cause or what the issue is,” she says. “I am not against those programs; I think they are great. I am just always cognizant of… what are the root causes and is this really going to fix the problem.”
Work-life balance problems, like a lot of extra overtime, are almost always an indication of some basic problem in the workplace itself, she says. Things like flexible work arrangements are important and should be offered. “But it isn’t for everybody and it doesn’t necessarily solve all your problems,” she says.
“You could still have issues of overtime or lower employee engagement and it may have nothing to do with the program. It could be how (employees) are treated by their managers. It is just so key to really get to the nub of it all. And work with the business and not sort of spring stuff on them.”
Thomson says her goal is to have an HR department staffed with change agents who are business savvy and can communicate on the same level and speak the same language as other front-line and operational managers.
Aside from regular seminars and lunch-and-learns for the HR group with internal business experts, development plans for her HR team often include goals of improved business understanding. A good way to do this is put HR people on cross-functional projects and initiatives, she says. “Everyone of my senior folks has a North American responsibility.”
Her director of HR western Canada also has responsibility for labour relations across North America, and the director of HR for eastern Canada oversees the employee survey. “That way they have to understand the various components of the business,” she says. The need for understanding the business is so important that Thomson hired her two vice-presidents from the business rather than HR, though they have surrounded themselves with people who have very strong HR functional knowledge.
Thomson herself started her working life outside HR, in sales. That experience infused her work ethic with a sense of urgency and customer focus which wasn’t always the case with HR back when it was still called personnel. What’s more, jobs in a number of different sectors showed her that HR skills and abilities, while naturally important and in some way universal, are most effective when supplemented with an understanding of the unique context of each sector.
But Thomson also knows that just being business savvy doesn’t necessarily mean HR will be viewed as a business partner. Many front-line managers retain the “old-school mentality” that HR simply exists to clean up manager’s human resources-related messes, often caused by the manager himself. “You have to train (managers) and you have to work with them. You have to have HR people who are strong enough to push back and not be trodden over.” There are some HR people who feel valued by solving problems that arise when the manager isn’t doing his job properly.
“It is just so contrary to how I like to operate and how my teams operate. But it happens,” she says.
“For a long time, HR was looked at as the people that fix the problem. You will not get to the table that way. You will have a roster of things to do, but what you need to do is teach the managers to do those things for themselves.”
Janice Wismer
Vice-president of Human Resources
Canadian Tire
The Canadian retailing icon was founded in 1922 and now operates more than 1,000 stores and gas bars across the country, employing 45,000 people.
Back in 1989, Janice Wismer left her HR job to take a position running car wash operations for Suncor in the Toronto-to-Windsor corridor. She did that for about 18 months before a taking a different job running dealer operations out of London, Ont.
Looking back she realizes the experience helped her immensely in her current job as vice-president of HR for Canadian Tire.
It is one thing as an HR person to sit around the table and draft a vision statement, it is another thing entirely to actually go out and do the work required to make the vision statement a reality, she says.
“Getting line experience is such exceptional thing to do,” she says. “It really helped me understand the challenges of driving the work that we had always proposed. It gave me a better sense of that fine balance between driving growth, gaining market share, making sure you are servicing your customers well, while taking out costs and keeping a healthy culture. I think that is what it taught me most.”
And while it may not take a career sidetrack outside of HR working on the front line, an appreciation for the business is today the most important thing for HR professionals, she says.
“I think fundamental to our success as a profession is a knowledge and passion for the business in all of its forms — internally as well as in the external environment in which it operates,” she says. “I think we have to be a business manager first and an HR manager second. It is the only way our work will have a real sustainable impact on the business.”
This philosophy, shaped over 20 working years, dictates what she now looks for when it comes time to add someone new to her HR team.
“The three things I look for in order of priority are: To know the business and have a passion for the business and someone who acts as a business manager first. The second is to have technical competence in all areas of human resources with emphasis depending on the position I am recruiting for. And the third is being an exceptional performance coach which includes having an appreciative mindset and being an expert facilitator,” she says.
At one time, that order would have been different. HR competence was the top priority. But today, business savvy is the top of her list.
Her HR consultants are the experts in organization effectiveness and design, as well as performance coaching and facilitation, she explains. That, combined with a deep understanding of the business and the ability to ask the right questions shaped by that knowledge, produces an effective HR business partner, she says.
Wismer is a big believer in the concept of appreciative inquiry most closely associated with organization effectiveness academic David Cooperrider. “He says that 70 per cent of the art of change, healthy change, is the act of creating the right questions,” she says. “So sometimes people will come and say, ‘I think I need a team building program.’ Well why do you think you need a team building program? What is it that is happening to you that makes you think that is going to help? So it is a matter of developing questions to get to root problems,” she says.
“Or if someone suggests a new performance management program, the question is always why. Why do you want that? Why do you think that is going to drive the business? I think that as consultants we have to understand what are you really trying to do and how will we know when we get there. What is the specific outcome we are looking for and then how does that relate to customers and how does that relate to the bottom line?”
Everything HR works on should be evaluated by its impact on the business, she says. “Are we learning something that is going to benefit us tomorrow or are we helping the business perform? And if we are not doing one of those two things we should stop doing it,” she says.
“In a manufacturing setting people talk about where is the bottleneck (that slows down production). But in any organization I would say there are pain points. We are always looking for those points in the organization where the greatest opportunity exists to drive value to the next level, the greatest amount of value. It is an art not a science,” she says.
Wismer recalls an example of the HR team helping to solve a business problem not long after she joined Canadian Tire. “We had a 35-per-cent call transfer rate in our call centres,” she says. “That is a huge business issue, one of the most important things for a customer service company. Customers don’t like being transferred. So it was a matter of, ‘How can we help that?’ We ended up doing a whole host of things over four and five years.” Rather than just a reactive band-aid response of hiring more people to handle more calls, the HR team was determined to develop a more fundamental solution. Part of the problem was that there were more than 20 call centres, so people didn’t know how other people were handling similar problems.
“It started with identifying what are the key competencies that we wanted people to have. We started by saying we want people who are flexible who can take calls from customers of various nature and answer customer questions.” A new learning curriculum and knowledge-based pay program were introduced. The performance management program was changed and new P.E.P. (Performance Effectiveness Program) talks were given monthly. The more than 20 centres were consolidated to five. “As a result, our call transfer rate plummeted.”
Carolyn Clark
Vice-president of Human Resources
Fairmont Hotels and Resorts
One of the largest luxury hotel companies in the world was formed in 1999 after Canadian Pacific Hotels and Resorts acquired Fairmont Hotels. Headquartered in Toronto, the chain now has 43 hotels and employs about 23,500 people.
All 43 HR directors at Fairmont Hotels understand they have an important role to play in maximizing revpar. That’s Rev. P.A.R. — revenue per available room.
Far more than just another example of number-cruncher jargon, revpar is one of the most important financial metrics in the hotel industry, says Carolyn Clark, vice-president of HR for Fairmont.
The company has four pillars which underpin every major strategic decision made, she says. Aside from revpar, one of the pillars is employee satisfaction. “If you were to ask any one of our senior executives in our company what is your operating philosophy, independently they would say, ‘We believe if we take really good care of our employees, they will take really good of our guests, who will in turn be those loyal customers we need.’”
The third pillar is guest satisfaction and the last is EBITDA (earnings before interest, taxation, depreciation and amortization).
Ultimately, becoming a business partner requires HR to be able to speak the language of the business, clearly communicate and, if needed, illustrate where HR is making a difference to the bottom line.
HR has to know exactly how they can have an impact on revpar and be able to demonstrate that to the rest of the organization, Clark says. “We don’t talk about employee satisfaction in isolation from guest satisfaction, revpar and EBITDA.” These are the four factors of success for Fairmont, and the HR leaders need to know how they are connected. “Our HR directors are part of the hotel executive committees, which is the top six leaders at every hotel. So they have a seat at the table when we go through our annual strategic planning process,” she says.
“In our organization, the investment in our human capital is the largest variable expense in the company,” says Clark. “HR’s role is really to oversee and be accountable for that investment. The return on human capital is realized once HR maximizes the contributions that people can make to the direction of the company. It is not just knowing what the human capital investment is, but it is then translating that into, ‘Here is how I (HR) can improve our return on investment in that area.”
For example, HR is ultimately responsible for ensuring employees are happy in their work. And Fairmont surveys have shown a correlation between guest and employee satisfaction. Top quartile employers have higher guest satisfaction, she says. “We know guest satisfaction translates into repeat business which improves revpar and overall profitability.”
The need for HR to have a better understanding of these concepts led the company to create a special conference for its HR directors a few years back at its hotel in Whistler, B.C. “The theme of the conference was, ‘People, performance, profitability.’ Part of the conference included a development component where we invited the University of Guelph to come and conduct finance and accounting programs for non-financial managers. All of the HR directors received a certificate at the end of the conference. At the same time we had some of our senior finance people deliver a seminar on flowthrough and some other key financial measures.”
And while Clark has spent her entire professional career in HR, she says that in no way prevented her from learning about what is happening beyond the walls of the HR office. So long as people are committed to lifelong learning, they can gain that knowledge through networking with colleagues, staying on top of business trends and reading, she says. One of her favourite authors is David Ulrich. “He is a thought leader in HR and the HR transformation (from administrator to business partner).”
People need to be networking both internally and externally, and not just with other HR people but with professionals in other areas and other functions, she says. “It’s getting out of your own internal HR bubble and finding out what are the best practices out there. What are other companies doing when mergers and acquisitions happen — a driving force for us over the last five years. It is finding out what are best practices in that area.”
Clark says she is surprised so many people are still calling for HR professionals to assert themselves at the executive table. People have been talking about this for years, but most progressive companies are already there, she says, though she admits “progressive” is the key word.
Which is why choosing the right place to work is so important, she says.
“One piece of advice I always give to HR people when they are conducting job searches is make sure you understand how the role of HR is perceived within the organization. You will find that out by who the position reports to, by interviewing the president and CEO. What is the budget? What is the turnover? Turnover in an organization is always a good indicator of how people are being treated. Do they pay lip service to it or are they committed to investing in an employee opinion survey every year, or in the bad times is that the first thing they cut?”
It is awfully difficult for an HR person to be appreciated as a business partner if the CEO isn’t ready to commit to the notion that effective human capital management is a critical component of achieving organizational success, she says. “Without that I think some HR people can be very progressive but get stalled,” she says.
Richard Dixon
Vice-president of Human Resources
Nav Canada
A non-share capital private corporation that owns and operates Canada’s civil air navigation service, Nav Canada employs 5,500 people, 5,000 of whom are unionized.
The call for human resources professionals to develop their business acumen may seem to some like a growing refrain, but in a unionized environment, that imperative has always been present, says Richard Dixon, vice-president of human resources at Nav Canada.
Understanding the business and having good labour relations have always gone hand in hand, he says.
“In any unionized environment, if you’re at the collective bargaining table, you’re sitting across from individuals who understand the business very well,” says Dixon. When trying to introduce a new business process or negotiate a more streamlined way of doing things, the HR professionals who don’t know the business as well as the people on the other side of the table “could have (their) pockets picked,” says Dixon.
“The test is real there. The outcomes are real. If you’ve done something that adds to your processes or adds to your cost structure needlessly without getting something in return for your organization — and again you only understand that if you understand the business — then the results of that are pretty clear.”
At Nav Canada, says Dixon, an HR professional wouldn’t be able to serve the organization without understanding its unique non-profit cost-structure. Nor would they get by without understanding the organization’s mandate to operate essential services under the law.
“(You) could not do HR without understanding those issues. You wouldn’t be successful and you’d find yourself working into major problems on a daily basis. It’s just so basically fundamental,” says Dixon.
To take as an example, Dixon points to the subject of incentive compensation.
“Not understanding how your organizational cost structures work, or not understanding the financial measures to a relatively sophisticated degree, you could be rewarding performance that really doesn’t drive the outcomes that your customers or stakeholders are looking for,” says Dixon.
“And as we all know, in incentive compensation, anybody can design a program. The trick is designing the measures that make it effective in driving the direction that an organization wants to go.”
And by “knowing the business,” Dixon says he refers to both the macro knowledge — industry trends, customer needs, global pressures on the horizon — as well as the micro knowledge of “how planes take off and how planes land.” That’s because, apart from having to draw on this micro knowledge for the bargaining and grievance processes, “one of the biggest challenges we’re faced with now is managing the transition of institutional memory and knowledge,” says Dixon.
“And unless you know what is valuable and what is not valuable, you’re never going to hit the key elements of what’s really important.”
When Dixon first started out his career at Abitibi, he spent 18 months learning about forestry and paper products. At Nav Canada, says Dixon, HR professionals learn the business at one of the seven area control centres throughout Canada, where they support the work of the several hundred air traffic controllers, support staff, technical support staff and electronic technologists at each centre. The company is now putting in place a formal program to move HR people through these centres to the head office in Ottawa as part of its professional development program.
In today’s environment, HR professionals are challenged to have a game plan to take the company forward. Whether it’s to see through an employer of choice strategy or a cost-restructuring process, “we’re now being asked to put together a strategic game plan of how we get there, a longer-term vision, not something where you just simply react.”
John Cardella
Vice-president of Human Resources
Ceridian Canada
With head offices in Winnipeg, human resources service provider and software vendor Ceridian Canada employs 1,300 people.
At Ceridian Canada, where the business is providing HR services, business units have to understand HR and HR professionals have to view themselves as business partners.
“We are an HR organization, so we believe that our people need to have a very good grounding in HR business knowledge, as well as the business at large,” says John Cardella, vice-president of human resources.
“It’s close to us. We believe that the best way to ground our people in business is to have them work very closely with the businesses. I believe that the best way to develop HR professionals is to coach them on how they’re interacting with the business leaders, and the best coaching happens with business leaders themselves.”
Within the organization, HR professionals serving internal staff are deployed like HR consultants serving external clients. They’re business partners, assigned to specific functions.
“They are part of that business’ management team. They’re very much involved in developing and implementing whatever strategy that is needed in that specific business unit,” says Cardella.
If an HR business partner to the IT department finds the department has a difficult time attracting people, for example, “then the HR professional in that unit would have an opportunity to review the underlying dynamics of that business, and together with the business head, work to address the issue.”
It’s not everyone at the HR department who must possess this business savvy, however. The company’s HR team is configured so that HR professionals work in one of three levels of function. The HR business partner is immersed in the strategic decisions of specific business units. The practice champion specializes in particular areas of practice, such as learning and development, organizational development or recruitment.
“The HR business partner’s job is to understand what that business needs. If a business unit needs a particular program, the (HR business partner) will take it to the practice champions. The practice champions will look at what the HR business partner and the business are looking for, and they’ll pull a program together,” says Cardella.
“And then you’ll have a third group of people who are purely transactional, who take advantage of a technology.” The company has a self service intranet portal where employees first go to with questions and inquiries. And if they have questions after that, they’ll call a 1-800 number and they’ll have an HR analyst or an HR person to answer the questions.
In keeping with his belief that the best way to develop business acumen among HR professionals is to have them work closely with the businesses, Cardella is himself in charge of a discrete business unit on top of his duties in the HR function.
“I am heavily involved in the governance of LifeWorks, which is our employee assistance division. I am also involved in launching various business practices within this company as well, for example our recruitment and staffing practice. And I’m also helping develop opportunities for our organizations.”
While acknowledging that his role is unique in that he works in an HR organization, Cardella says, “HR leaders should become involved in promoting the services of the organization. That’s something I value very much.”
In hiring HR professionals, Cardella doesn’t look for specific skill sets. Rather, he hires for conceptual abilities, for a strategic bent and for influencing skills. “Certainly, an ability to influence senior executives is a must.”
He may even hire people who have no HR experience, who come from line management. “As long as they have exceptional management skills, a good knowledge base so that they can appreciate the business problems at hand, that’s more important to me than having someone with experience in translating policies and programs during their career.”
Janice Thomson
Senior Vice-president of Human Resources
Direct Energy
One of North America’s leading energy and energy services suppliers, Direct Energy serves more than 2.7 million Canadian households and employs 2,900 people, 2,600 in Canada.
At a time when most organizations have countless HR consulting and outsourcing options, Janice Thomson warns her HR staff at energy supplier, Direct Energy, they absolutely must understand the business or risk becoming irrelevant.
“One thing I always tell my team is that everything we do can be bought externally,” says the senior vice-president of HR. There are too many vendors out there that can provide generic HR services. “What we have to do better than them is know the business and know the people.”
HR will only be viewed as a business partner and a valuable contributor to the organization when the HR team-members have an understanding of how things get done in an organization and an appreciation of the how the underlying business concerns shape HR issues and challenges of front-line managers.
“The biggest advantage that we have is understanding the business, and knowing the people well and understanding the organizational dynamics. Somebody from the outside won’t know that. It’s only time and working with people (that) gives you an understanding,” she says.
“Every place you go it is going to be different. If you have a really strong business partnership between HR and the functional groups and the line, it is very tough (for vendors) to compete with that,” she says.
“I think HR, the function, has made tremendous strides in the last 10 years and is getting a better understanding of what it means to be a business partner. But you still find organizations (that haven’t) come as far.”
One of the more common faults is to assume that what HR wants to do is what the business needs, she says.
“Often you get HR folks who get all excited about doing something for themselves, rather than for the business,” she says.
It may be a great HR program but it may not correct any fundamental business problem.
“HR departments can go down a path on something and have (a program) practically designed, developed and ready for rollout and they haven’t involved anybody from the business. They sort of set themselves up for criticism. I have seen that with training programs: ‘Here is what we think that you need and we designed something.’ They’re all set to roll it out but they haven’t got feedback from the business.”
She cites as an example the massive HR interest in work-life balance programs and policies. But too many HR professionals get ahead of themselves, she says. They introduce a program without ever consulting with anyone else in the business, or better yet, first piloting the program with one part of the organization.
“You run the risk of spending a lot of time and energy designing something that isn’t really addressing the root cause or what the issue is,” she says. “I am not against those programs; I think they are great. I am just always cognizant of… what are the root causes and is this really going to fix the problem.”
Work-life balance problems, like a lot of extra overtime, are almost always an indication of some basic problem in the workplace itself, she says. Things like flexible work arrangements are important and should be offered. “But it isn’t for everybody and it doesn’t necessarily solve all your problems,” she says.
“You could still have issues of overtime or lower employee engagement and it may have nothing to do with the program. It could be how (employees) are treated by their managers. It is just so key to really get to the nub of it all. And work with the business and not sort of spring stuff on them.”
Thomson says her goal is to have an HR department staffed with change agents who are business savvy and can communicate on the same level and speak the same language as other front-line and operational managers.
Aside from regular seminars and lunch-and-learns for the HR group with internal business experts, development plans for her HR team often include goals of improved business understanding. A good way to do this is put HR people on cross-functional projects and initiatives, she says. “Everyone of my senior folks has a North American responsibility.”
Her director of HR western Canada also has responsibility for labour relations across North America, and the director of HR for eastern Canada oversees the employee survey. “That way they have to understand the various components of the business,” she says. The need for understanding the business is so important that Thomson hired her two vice-presidents from the business rather than HR, though they have surrounded themselves with people who have very strong HR functional knowledge.
Thomson herself started her working life outside HR, in sales. That experience infused her work ethic with a sense of urgency and customer focus which wasn’t always the case with HR back when it was still called personnel. What’s more, jobs in a number of different sectors showed her that HR skills and abilities, while naturally important and in some way universal, are most effective when supplemented with an understanding of the unique context of each sector.
But Thomson also knows that just being business savvy doesn’t necessarily mean HR will be viewed as a business partner. Many front-line managers retain the “old-school mentality” that HR simply exists to clean up manager’s human resources-related messes, often caused by the manager himself. “You have to train (managers) and you have to work with them. You have to have HR people who are strong enough to push back and not be trodden over.” There are some HR people who feel valued by solving problems that arise when the manager isn’t doing his job properly.
“It is just so contrary to how I like to operate and how my teams operate. But it happens,” she says.
“For a long time, HR was looked at as the people that fix the problem. You will not get to the table that way. You will have a roster of things to do, but what you need to do is teach the managers to do those things for themselves.”
Janice Wismer
Vice-president of Human Resources
Canadian Tire
The Canadian retailing icon was founded in 1922 and now operates more than 1,000 stores and gas bars across the country, employing 45,000 people.
Back in 1989, Janice Wismer left her HR job to take a position running car wash operations for Suncor in the Toronto-to-Windsor corridor. She did that for about 18 months before a taking a different job running dealer operations out of London, Ont.
Looking back she realizes the experience helped her immensely in her current job as vice-president of HR for Canadian Tire.
It is one thing as an HR person to sit around the table and draft a vision statement, it is another thing entirely to actually go out and do the work required to make the vision statement a reality, she says.
“Getting line experience is such exceptional thing to do,” she says. “It really helped me understand the challenges of driving the work that we had always proposed. It gave me a better sense of that fine balance between driving growth, gaining market share, making sure you are servicing your customers well, while taking out costs and keeping a healthy culture. I think that is what it taught me most.”
And while it may not take a career sidetrack outside of HR working on the front line, an appreciation for the business is today the most important thing for HR professionals, she says.
“I think fundamental to our success as a profession is a knowledge and passion for the business in all of its forms — internally as well as in the external environment in which it operates,” she says. “I think we have to be a business manager first and an HR manager second. It is the only way our work will have a real sustainable impact on the business.”
This philosophy, shaped over 20 working years, dictates what she now looks for when it comes time to add someone new to her HR team.
“The three things I look for in order of priority are: To know the business and have a passion for the business and someone who acts as a business manager first. The second is to have technical competence in all areas of human resources with emphasis depending on the position I am recruiting for. And the third is being an exceptional performance coach which includes having an appreciative mindset and being an expert facilitator,” she says.
At one time, that order would have been different. HR competence was the top priority. But today, business savvy is the top of her list.
Her HR consultants are the experts in organization effectiveness and design, as well as performance coaching and facilitation, she explains. That, combined with a deep understanding of the business and the ability to ask the right questions shaped by that knowledge, produces an effective HR business partner, she says.
Wismer is a big believer in the concept of appreciative inquiry most closely associated with organization effectiveness academic David Cooperrider. “He says that 70 per cent of the art of change, healthy change, is the act of creating the right questions,” she says. “So sometimes people will come and say, ‘I think I need a team building program.’ Well why do you think you need a team building program? What is it that is happening to you that makes you think that is going to help? So it is a matter of developing questions to get to root problems,” she says.
“Or if someone suggests a new performance management program, the question is always why. Why do you want that? Why do you think that is going to drive the business? I think that as consultants we have to understand what are you really trying to do and how will we know when we get there. What is the specific outcome we are looking for and then how does that relate to customers and how does that relate to the bottom line?”
Everything HR works on should be evaluated by its impact on the business, she says. “Are we learning something that is going to benefit us tomorrow or are we helping the business perform? And if we are not doing one of those two things we should stop doing it,” she says.
“In a manufacturing setting people talk about where is the bottleneck (that slows down production). But in any organization I would say there are pain points. We are always looking for those points in the organization where the greatest opportunity exists to drive value to the next level, the greatest amount of value. It is an art not a science,” she says.
Wismer recalls an example of the HR team helping to solve a business problem not long after she joined Canadian Tire. “We had a 35-per-cent call transfer rate in our call centres,” she says. “That is a huge business issue, one of the most important things for a customer service company. Customers don’t like being transferred. So it was a matter of, ‘How can we help that?’ We ended up doing a whole host of things over four and five years.” Rather than just a reactive band-aid response of hiring more people to handle more calls, the HR team was determined to develop a more fundamental solution. Part of the problem was that there were more than 20 call centres, so people didn’t know how other people were handling similar problems.
“It started with identifying what are the key competencies that we wanted people to have. We started by saying we want people who are flexible who can take calls from customers of various nature and answer customer questions.” A new learning curriculum and knowledge-based pay program were introduced. The performance management program was changed and new P.E.P. (Performance Effectiveness Program) talks were given monthly. The more than 20 centres were consolidated to five. “As a result, our call transfer rate plummeted.”
Carolyn Clark
Vice-president of Human Resources
Fairmont Hotels and Resorts
One of the largest luxury hotel companies in the world was formed in 1999 after Canadian Pacific Hotels and Resorts acquired Fairmont Hotels. Headquartered in Toronto, the chain now has 43 hotels and employs about 23,500 people.
All 43 HR directors at Fairmont Hotels understand they have an important role to play in maximizing revpar. That’s Rev. P.A.R. — revenue per available room.
Far more than just another example of number-cruncher jargon, revpar is one of the most important financial metrics in the hotel industry, says Carolyn Clark, vice-president of HR for Fairmont.
The company has four pillars which underpin every major strategic decision made, she says. Aside from revpar, one of the pillars is employee satisfaction. “If you were to ask any one of our senior executives in our company what is your operating philosophy, independently they would say, ‘We believe if we take really good care of our employees, they will take really good of our guests, who will in turn be those loyal customers we need.’”
The third pillar is guest satisfaction and the last is EBITDA (earnings before interest, taxation, depreciation and amortization).
Ultimately, becoming a business partner requires HR to be able to speak the language of the business, clearly communicate and, if needed, illustrate where HR is making a difference to the bottom line.
HR has to know exactly how they can have an impact on revpar and be able to demonstrate that to the rest of the organization, Clark says. “We don’t talk about employee satisfaction in isolation from guest satisfaction, revpar and EBITDA.” These are the four factors of success for Fairmont, and the HR leaders need to know how they are connected. “Our HR directors are part of the hotel executive committees, which is the top six leaders at every hotel. So they have a seat at the table when we go through our annual strategic planning process,” she says.
“In our organization, the investment in our human capital is the largest variable expense in the company,” says Clark. “HR’s role is really to oversee and be accountable for that investment. The return on human capital is realized once HR maximizes the contributions that people can make to the direction of the company. It is not just knowing what the human capital investment is, but it is then translating that into, ‘Here is how I (HR) can improve our return on investment in that area.”
For example, HR is ultimately responsible for ensuring employees are happy in their work. And Fairmont surveys have shown a correlation between guest and employee satisfaction. Top quartile employers have higher guest satisfaction, she says. “We know guest satisfaction translates into repeat business which improves revpar and overall profitability.”
The need for HR to have a better understanding of these concepts led the company to create a special conference for its HR directors a few years back at its hotel in Whistler, B.C. “The theme of the conference was, ‘People, performance, profitability.’ Part of the conference included a development component where we invited the University of Guelph to come and conduct finance and accounting programs for non-financial managers. All of the HR directors received a certificate at the end of the conference. At the same time we had some of our senior finance people deliver a seminar on flowthrough and some other key financial measures.”
And while Clark has spent her entire professional career in HR, she says that in no way prevented her from learning about what is happening beyond the walls of the HR office. So long as people are committed to lifelong learning, they can gain that knowledge through networking with colleagues, staying on top of business trends and reading, she says. One of her favourite authors is David Ulrich. “He is a thought leader in HR and the HR transformation (from administrator to business partner).”
People need to be networking both internally and externally, and not just with other HR people but with professionals in other areas and other functions, she says. “It’s getting out of your own internal HR bubble and finding out what are the best practices out there. What are other companies doing when mergers and acquisitions happen — a driving force for us over the last five years. It is finding out what are best practices in that area.”
Clark says she is surprised so many people are still calling for HR professionals to assert themselves at the executive table. People have been talking about this for years, but most progressive companies are already there, she says, though she admits “progressive” is the key word.
Which is why choosing the right place to work is so important, she says.
“One piece of advice I always give to HR people when they are conducting job searches is make sure you understand how the role of HR is perceived within the organization. You will find that out by who the position reports to, by interviewing the president and CEO. What is the budget? What is the turnover? Turnover in an organization is always a good indicator of how people are being treated. Do they pay lip service to it or are they committed to investing in an employee opinion survey every year, or in the bad times is that the first thing they cut?”
It is awfully difficult for an HR person to be appreciated as a business partner if the CEO isn’t ready to commit to the notion that effective human capital management is a critical component of achieving organizational success, she says. “Without that I think some HR people can be very progressive but get stalled,” she says.
Richard Dixon
Vice-president of Human Resources
Nav Canada
A non-share capital private corporation that owns and operates Canada’s civil air navigation service, Nav Canada employs 5,500 people, 5,000 of whom are unionized.
The call for human resources professionals to develop their business acumen may seem to some like a growing refrain, but in a unionized environment, that imperative has always been present, says Richard Dixon, vice-president of human resources at Nav Canada.
Understanding the business and having good labour relations have always gone hand in hand, he says.
“In any unionized environment, if you’re at the collective bargaining table, you’re sitting across from individuals who understand the business very well,” says Dixon. When trying to introduce a new business process or negotiate a more streamlined way of doing things, the HR professionals who don’t know the business as well as the people on the other side of the table “could have (their) pockets picked,” says Dixon.
“The test is real there. The outcomes are real. If you’ve done something that adds to your processes or adds to your cost structure needlessly without getting something in return for your organization — and again you only understand that if you understand the business — then the results of that are pretty clear.”
At Nav Canada, says Dixon, an HR professional wouldn’t be able to serve the organization without understanding its unique non-profit cost-structure. Nor would they get by without understanding the organization’s mandate to operate essential services under the law.
“(You) could not do HR without understanding those issues. You wouldn’t be successful and you’d find yourself working into major problems on a daily basis. It’s just so basically fundamental,” says Dixon.
To take as an example, Dixon points to the subject of incentive compensation.
“Not understanding how your organizational cost structures work, or not understanding the financial measures to a relatively sophisticated degree, you could be rewarding performance that really doesn’t drive the outcomes that your customers or stakeholders are looking for,” says Dixon.
“And as we all know, in incentive compensation, anybody can design a program. The trick is designing the measures that make it effective in driving the direction that an organization wants to go.”
And by “knowing the business,” Dixon says he refers to both the macro knowledge — industry trends, customer needs, global pressures on the horizon — as well as the micro knowledge of “how planes take off and how planes land.” That’s because, apart from having to draw on this micro knowledge for the bargaining and grievance processes, “one of the biggest challenges we’re faced with now is managing the transition of institutional memory and knowledge,” says Dixon.
“And unless you know what is valuable and what is not valuable, you’re never going to hit the key elements of what’s really important.”
When Dixon first started out his career at Abitibi, he spent 18 months learning about forestry and paper products. At Nav Canada, says Dixon, HR professionals learn the business at one of the seven area control centres throughout Canada, where they support the work of the several hundred air traffic controllers, support staff, technical support staff and electronic technologists at each centre. The company is now putting in place a formal program to move HR people through these centres to the head office in Ottawa as part of its professional development program.
In today’s environment, HR professionals are challenged to have a game plan to take the company forward. Whether it’s to see through an employer of choice strategy or a cost-restructuring process, “we’re now being asked to put together a strategic game plan of how we get there, a longer-term vision, not something where you just simply react.”
John Cardella
Vice-president of Human Resources
Ceridian Canada
With head offices in Winnipeg, human resources service provider and software vendor Ceridian Canada employs 1,300 people.
At Ceridian Canada, where the business is providing HR services, business units have to understand HR and HR professionals have to view themselves as business partners.
“We are an HR organization, so we believe that our people need to have a very good grounding in HR business knowledge, as well as the business at large,” says John Cardella, vice-president of human resources.
“It’s close to us. We believe that the best way to ground our people in business is to have them work very closely with the businesses. I believe that the best way to develop HR professionals is to coach them on how they’re interacting with the business leaders, and the best coaching happens with business leaders themselves.”
Within the organization, HR professionals serving internal staff are deployed like HR consultants serving external clients. They’re business partners, assigned to specific functions.
“They are part of that business’ management team. They’re very much involved in developing and implementing whatever strategy that is needed in that specific business unit,” says Cardella.
If an HR business partner to the IT department finds the department has a difficult time attracting people, for example, “then the HR professional in that unit would have an opportunity to review the underlying dynamics of that business, and together with the business head, work to address the issue.”
It’s not everyone at the HR department who must possess this business savvy, however. The company’s HR team is configured so that HR professionals work in one of three levels of function. The HR business partner is immersed in the strategic decisions of specific business units. The practice champion specializes in particular areas of practice, such as learning and development, organizational development or recruitment.
“The HR business partner’s job is to understand what that business needs. If a business unit needs a particular program, the (HR business partner) will take it to the practice champions. The practice champions will look at what the HR business partner and the business are looking for, and they’ll pull a program together,” says Cardella.
“And then you’ll have a third group of people who are purely transactional, who take advantage of a technology.” The company has a self service intranet portal where employees first go to with questions and inquiries. And if they have questions after that, they’ll call a 1-800 number and they’ll have an HR analyst or an HR person to answer the questions.
In keeping with his belief that the best way to develop business acumen among HR professionals is to have them work closely with the businesses, Cardella is himself in charge of a discrete business unit on top of his duties in the HR function.
“I am heavily involved in the governance of LifeWorks, which is our employee assistance division. I am also involved in launching various business practices within this company as well, for example our recruitment and staffing practice. And I’m also helping develop opportunities for our organizations.”
While acknowledging that his role is unique in that he works in an HR organization, Cardella says, “HR leaders should become involved in promoting the services of the organization. That’s something I value very much.”
In hiring HR professionals, Cardella doesn’t look for specific skill sets. Rather, he hires for conceptual abilities, for a strategic bent and for influencing skills. “Certainly, an ability to influence senior executives is a must.”
He may even hire people who have no HR experience, who come from line management. “As long as they have exceptional management skills, a good knowledge base so that they can appreciate the business problems at hand, that’s more important to me than having someone with experience in translating policies and programs during their career.”
