A new study [PDF] by the Economist Intelligence Unit shows that HR functions at large companies are facing an interesting opportunity. For years, HR was seen as an administrative function, focused on policies and paperwork. But today, much of that administrative work is being outsourced – which leaves HR leaders with a lot more bandwidth.
At the same time, senior management executives are increasingly concerned about talent, worrying that they are missing out on opportunities because they don’t have the right people, or the right people aren’t trained properly.
The report, which was sponsored by IBM and Oracle, suggests that HR use that extra bandwidth to focus on business strategy.
Gretchen Alarcon, Vice President at Oracle HCM Strategy said, “With businesses competing in a fierce race for global talent and focused on optimizing limited resources, senior HR leaders are increasingly being tapped to offer strategic guidance and planning.”
She continued, “As technology helps automate processes and eases administration, HR can focus more time on aligning talent strategies with long-term business goals. This report provides a blueprint for HR leaders to enhance their relationships with CEOs and CFOs, which will help them play a more strategic role in business direction, growth and success.”
The desire to move HR into a more strategic position is there. CEOs say they want it, and so does HR. But at the same time, CEOs don’t seem willing to grant HR leaders that power. That presents a Catch-22 for HR leaders who desire a more strategic role.
According to the EIU study, which polled 235 C-level executives (57 percent CEOs), business leaders believe in the abilities of their heads of HR, but feel they lack the business experience to provide valuable insight into strategy. “This indicates that heads of HR have not completed their transition from administrator to strategic partner in the eyes of the CEO,” the report says.
That’s a problem for everyone involved, though. According to the study, the executive suite sorely needs insight into talent management. EIU found that CEOs are highly concerned about the people side of their business.
“For example, more than half of survey respondents say that “insufficient talent within the organisation as a whole” [56 percent] might harm their company financially within the next 12 months. Significant proportions also worry about “insufficient leadership talent” [43 percent], “lack of alignment of individual and business objectives” [41 percent] and “low employee satisfaction” [38 percent].”
Why then, have HR leaders yet to take on a more integral role in the C-suite? According to the study, CEOs and other C-Suite officers may not have faith in their strategic know-how. “Forty-one percent think their HR heads are “too focused on processes and rules” and 37% say that they don’t “understand the business well enough.”
The report suggests that HR leaders push to be included in strategic discussions and find ways to prove their business know how, to emphasize that they are not simply a CEO confidante, but a function leader who deserves to be at the table.
The EIU says HR leaders should push to get a seat on the board of the executive committee. “This is how the head of HR develops relationships and gains relevancy. At the very least, demand more time
together, in order to have the opportunity to explore higher-level issues.”
Finally, the report suggests that HR leaders ensure they are focusing on strategic topics in meetings with other C-level executives. After all, according to the study, in large companies (over US$10 billion) the primary subject of conversation with HR leaders is executive performance and development (72 percent) – rather than broad, strategic talent management issues.
“The head of HR needs to probe the issues that really matter to both the CEO and CFO—the ones they are concerned may harm the company financially. Demonstrating creative and proactive problem solving on these issues will demonstrate clearly the value of the head of HR.”
By proactively discussing business strategy and talent management solutions to business challenges, HR leaders can prove their value and their know-how to senior management, and earn their space at the table.