Today, HR has become increasingly strategic

The HR function is going a through an evolution. What started off as Industrial Relations/Personnel some decades ago and came later to be called HR today goes under the name of Human Capital Management. It isn’t just a name change.

The focus has changed, too, in tandem. What earlier was a function limited to the process and administrative aspects of an organisation is today, assuming a critical strategic dimension as corporates, particularly in the West,  battle the effects of a prolonged economic downturn and find ways to cut costs and increase workforce productivity. With 60-70 per cent of organisational spending comprising people-related costs, sheer economics dictate that HR be an important force in the organization - and with a clear strategic focus

The strategic element translates to HR producing results that impact business objectives. It means HR taking responsibility for maximizing workforce or employee productivity across the organisation. It means developing initiatives that continuously increase the value - in monetary terms - of employee output while maintaining or reducing the average labour cost per unit. It means assuming the role of an “assets manager” with employees as the prized assets - and think like “owners” of the business.    

Is the strategic focus of HR coming to the fore in Indian corporates as well? Not quite. The nature of activities under HR would seem to depend upon the industry, or even the organisation. If you happen to head HR in a traditional manufacturing organisation, it’s possible that you are leading a function that’s still largely administrative in its focus, acting almost as a “policing” arm of the management. Even in relatively new-age companies, such as those in the IT/BPO sector, HR is predominantly focused on compensation and benefits, employee relations, and training.

True, there is regular interaction between functional department heads but it’s only to a degree and often leads to very little in practical terms. In a majority of firms, each department is seen to work - more often than not - in pursuit of its own goals and objectives, providing services independent of each other. In other words, a concerted approach is missing. Maximizing workforce productivity, on the other hand, requires closer co-ordination between functional departments - and sharing of the corporate goal and vision in letter and spirit; in thought as well as in execution. HR managers, for their part, need to have a wider understanding of the business in addition to the ability to align traditional HR functions to the corporate strategy of the organisation. Equally important, HR needs to introduce scientifically modeled metrics to assess employee productivity and provide top management with a clear view of employee performance. A sound HR metrics program - metrics typically are grouped under the categories of historical, real-time, and forward looking - can help make business decisions that are based on cold facts rather than “gut feel”.  

The increasing onus on HR to make a strategic contribution - a trend that might not be too long in coming to India given the globalised nature of the world economy - also means that HR can no longer be all internally focused. While HR’s services are targeted at internal customers, being strategic translates to a broader of appreciation of the customer as the end user of a firm’s products and services. And that means spending time with customers to understand their needs/ Contemporary thinking even suggests the need for HR’s involvement in areas such as product development, product/service quality, customer service and corporate position.   

Adding value calls for integrating people strategies with business strategies in a way that advances the organisation’s bottom line. Equally crucially, it means striking a fine balance between serving as the “employee advocate” and being a key business contributor/partner. This is, often, easier said than done for certain actions affecting employees that HR needs to take from a strategic perspective might run counter to HR’s employee advocacy role. For instance, HR might be involved in a management decision to weed out poor performers. But in executing this decision, HR managers might come to be perceived by employees as furthering business interests as distinct from employee interests. In such situations, HR professionals need to balance every intervention with what’s appropriate for the organisation at a given point in time. Advocating for employees, when it’s not clearly in the organisation’s strategic interests, would be a mistake.  

In sum, with the increasing sophistication of companies, HR is fast moving into a strategic role. From being perceived as a cost centre, HR is today seen as a valued-added partner with a say in many aspects of business.  In many progressive companies, the head of HR enjoys a status on par with other functional heads at the executive table.  And with this recognition has come pressure to make a tangible contribution to an organisation’s bottom line, a pressure accentuated by the current economic crisis.

In quite a few companies in the West, human resources is perforce regrouping to focus more on ways to improve productivity and - in the process - outsourcing tasks that have traditionally been HR’s domain. It may not be too long before HR managers in India are compelled to follow suit.

(The writer is a director (HR) of Arctern, the Indian subsidiary of the New York-based Volt Information Sciences, Inc)