The Big HR challenge: Demonstrating Its Value to Senior Management

We sometimes lose sight of the fact that the HR department's role is there to help the organization increase productivity and profitability. How does one properly demonstrate that to the leadership team?

For years, HR was purely an administrative function: staffing, payroll services, benefits administration, and so on.

Nowadays, this industry is expected to also contribute to the financial profitability of the company. Demonstrating its role in this matter would even become its main challenge, claim many advisers.

This paradigm shift is nothing new. “The concept was introduced around 1980 to 1985 by a professor from the University of Michigan,” says Romain Charbonneau, CHRP and President of Horizons RH.

Indeed, Dave Ulrich and his colleagues have sought to demonstrate how the HR role could bring both operational and strategic value to a company.

The challenge is as follows, explains Charbonneau. “HR must be able to establish the causal link between the actions it wishes to put forward and the effect they will have on the increase in business value.”

Only once this link is established can someone speak of HR’s added value, from a strategic point of view, at least.

To make that connection, HR managers must examine their consciences and almost completely change their way of thinking. “We’re good at creating forms,” says Charbonneau, jokingly. “Too often perceived as an administrative burden, HR should appear as a solutions provider on strategic issues.”

“HR leaders need to stop thinking in terms of ‘HR’ and start thinking ‘business’,” he continues. “A dialogue should be established with management, so that they understand how the company increases its value. HR must sit down with the various department heads to understand their eminent business issues.”

In construction, we want to reduce the cost of concrete per square foot. In banking, we want to increase the number of mortgage loans being granted. In telecommunications, we seek to increase the number of subscribers.

We share these objectives and identify measures that can be carried out concerning human capital and that are likely to help the company perform better.

“For a particular issue, we can offer four to eight HR solutions describing the expected impacts. For each, we set a target with conservative, medium and optimistic gains. The most conservative estimate must justify the initial investment,” states the adviser.

After careful analysis, the company may decide to focus on a job category over another.

Romain Charbonneau gives the example of the banking sector. “We realized that financial advisors have a crucial role in increasing the number of mortgage loans. A good HR measure would be to implement actions that help with the acquisition, retention and development of talent in this job category.”

This is where the HR toolbox becomes useful, with its dashboards and performance indicators of all kinds: measures of retention, motivation, development, performance, and others.

“The idea is not to measure for the sake of measuring! The aim will be to measure the impact of each of the policies in place,” states Romain Charbonneau. Thus, human resources will be useful for the workplace.

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