A 360-Degree View of HR

Ask the employees at your company what HR does and how well they do it, and be prepared for a verbal assault. Collar a line manager. Interview a CEO. Inquire about HR’s organizational role and its reputation. Be ready to hear things about your work that range from the politely acceptable to the downright brutal.

"Bullying bureaucrats" is a term that one employee uses to describe HR. In a quest to learn more about how employees, line managers, top executives, and professionals themselves describe HR’s purpose and performance, Workforce interviewed dozens of people in all kinds of organizations. When it came to employees, however, not one was willing to talk on the record, itself a powerful statement. Many said they feared retribution, and variously described HR people as incompetent, unsympathetic, and punitive.

Taken together, their comments contribute to a greater understanding of where HR is today, and the future direction of the profession. The news isn’t, of course, all bad. In fact, HR may be poised to play a far more pivotal leadership role in business in the years to come, perhaps under a different name, perhaps with a different charge.

In recent years, there may have been a great deal of buzz about HR’s increased strategic role, but there has been far less action. However, as more people in leadership positions come to recognize HR’s role in adding value to business, experts say, HR will be viewed not as a corporate stepchild but as a respected executive player.

Professionals in the field say a change in perception about HR is paramount to its productivity and future success. HR must re-examine its priorities and its identity. It must learn executive skills, and it must become far better skilled at selling itself.

That happens in several ways. Paul Benson, who has spent more than 30 years as an HR professional in organizations such as Kraft Foods, Frito-Lay, and Kaiser Permanente, likens HR’s role to teaching the hungry to fish. Benson, who is now a leadership coach with his own firm, New Directions Unlimited, in Placentia, California, means that helping employees develop skills and allowing them to reach their full potential is tantamount to success.

But development isn’t enough. Alan Wolfson, an HR consultant with the Hay Group and a veteran of IBM’s HR function, says that successful HR professionals must be focused on internal customers, including employees. One of the ways that HR supports the business is to ensure equity in several areas, including working conditions, rewards, and day-to-day treatment.

"This doesn’t mean that all employees are treated as equals," he says. "But it does mean that there needs to be a justifiable reason for differences."

But Podurgal cautions that HR should be careful not to advocate for employees. "We have to advocate for the business," he says. "Advocating for employees pits us against senior management, which is not strategic." Instead, he argues that HR should protect employee interests through intelligent people policies.

Advocacy is, of course, precisely what most employees want. They say that inequity is common. They want HR to be their advocate. An employee at a nonprofit firm, for example, went to HR for help. His manager had assigned him more work than anyone else in the department. When he asked for help in setting priorities, his manager told him that helping him set priorities was not her job. She then stopped speaking to him. HR responded to his plea for help by saying there was nothing they could do.

It is an oft-repeated story. But what employees mean by advocacy is surprising. They want HR to fill jobs quickly and to hire people -- including managers -- who are qualified to do the work. Employees say that nothing else HR does has as much impact on their day-to-day work experience. Though they grudgingly admit that HR does fill jobs, they complain that the process is too long and that HR often hires the wrong people. Asked why, they blame HR for being distracted by its own agenda.

"HR is a very reactive group with both feet planted firmly in old-style, autocratic, top-down, 1950s-style policies," says a county government employee. "It’s based on old-style thinking where the manager reigns supreme and employees are there to simply carry out policy and perform tasks."

They see rules to follow and forms to complete, and their perception of HR is largely one of bullying bureaucrats. "I received an ‘urgent’ fourth notice that I needed to get a TB test," a university librarian says. "I was told the next notice would come from the college president! I got the test right away, but I hadn’t received any notice before the ‘death threat.’ "

One reason why employees see HR as bureaucratic is that their first and most common interactions with HR are bureaucratic: TB tests, employment applications, benefit enrollment forms, I-9 forms, change-of-address forms. One HR executive observed, "Ask a typical four-year-old what a mother’s job is. You’re likely to hear ‘baking cupcakes’ or ‘driving to school.’ People focus on what they see."

Yet even as employees deride the bureaucratic side of HR, they also depend on it. They expect accurate paychecks and prompt processing of benefit claims. In that context, employee perceptions of HR correlate precisely to whether their bureaucratic needs are being met. If overtime is paid promptly and accurately, HR is great. If too much is withheld for Social Security from paychecks, then HR is terrible. You would be highly unlikely to find any employees who know or care whether government paperwork is filed on time, even if it indirectly benefits them.

"One of the biggest challenges is that employees see HR as the reason for their problems," says Carrie Shearer, a consultant in Ithaca, New York, with more than 30 years of HR experience. "If they don’t like their boss, it’s HR’s fault. If they suddenly have a serious illness and realize that medical insurance is only supplemental and they must come up with mucho cash from their own pockets, it’s HR’s fault. If they feel overworked and under-appreciated, it’s HR’s fault, because even if there are recognition programs and all that other good stuff, there is always someone less deserving than the unhappy employee who got something. HR is the scapegoat."

The debate about whether employees and HR can ever really see eye-to-eye may never be completely resolved. But it may be possible to narrow the gap. Paul Benson has done just that. When he took over the HR function at Presbyterian Intercommunity Hospital in Whittier, California, nurses were on strike over pay and benefits issues and staff morale was low. Benson learned that nurses’ salaries were lower than average among area hospitals. The benefits, however, were the best offered by any hospital in Southern California.

The trouble was, no one -- not even the hospital’s management group -- knew that. Benson and his team began an aggressive communication plan to promote the benefits. Salaries were raised to bring them into parity with those of other hospitals. The HR team also began to address other issues in the work environment that were contributing to low morale, such as scheduling and lack of career development. The strategy was so effective that over three years, the hospital was able to reduce the benefit package by 30 percent without jeopardizing morale.

In fact, not only did morale improve, but surveys conducted at the time of the strike also showed that 54 percent of Presbyterian employees were satisfied with their jobs, versus a 56 percent national average. Within three years, satisfaction had jumped to 70 percent and was continuing to rise at a time when the national average had stalled.

Benson credits improved communication for the turnaround. In surveys and focus groups, employees acknowledged the benefit cuts, but said that other changes in the overall work environment compensated for the reductions. And they said they understood what HR was doing, and why the changes were necessary.

The line managers see HR’s value -- really
If employees give HR mixed reviews, do the line managers see HR more favorably? Again, the news is mixed. In a recent landmark study, Cornell University professor Patrick Wright and three colleagues studied how HR and managers each see HR’s effectiveness in its service delivery, roles, and contributions to the firm.

The team investigated 14 companies. The process included hour-long interviews with 103 top HR personnel and line executives. Each participant also completed surveys. The companies were all large and had a median employee population of 42,000. The industries represented included banking, computers, pharmaceuticals, and food processing. On average, the firms were in the top quartile of their industries in revenue, market share, and profitability. Two of the firms were ranked among Fortune’s "100 Best Companies to Work For" and five were in the top 100 of the magazine’s "Most Admired Companies" list.

The best news is that both HR and line managers recognize HR’s potential for making a strategic contribution. "The line sees that HR is adding value to the business," says Wright, chairman of the HR Studies Department and co-director of Cornell’s Executive Education program. He says that line executives view several HR activities as "critical" to a company’s success.

Surprisingly, when one group rated HR services higher in importance, it was inevitably the line managers who gave the rating. "The line has been faster than HR at realizing HR’s impact," Wright says. "The line sees the value of developing talent, of focusing on recruitment and retention."

Although both groups recognize the potential, they also believe that HR is falling short. The study shows a negative relationship between the importance of an HR function and how effectively it is delivered. "If something isn’t very important, we excel," Wright says. "If it adds value, we can’t deliver."

Specifically, HR is rated high on providing services such as equitable compensation systems and effective staffing systems. Neither line managers nor HR professionals give HR a high score on change consulting and other strategic functions.

While the news isn’t good, it should be considered in context. At the Hay Group, Wolfson has worked with several organizations to conduct the Hay HR Audit, a tool intended to assess HR’s effectiveness and bring people together to make necessary changes. He says that the view of a company’s internal support group is always lower than external customer satisfaction. This is partly because few organizations have a strong internal-customer focus. He adds that these support groups are usually perceived as having their own goals and that IT usually scores lowest in evaluations.

Wright points to other reasons why HR isn’t viewed more favorably. Three themes emerge from the research:

1. HR isn’t doing a good job. Wright notes that he and his colleagues were allowed into the organizations studied at least partly because the HR organizations were in transition. They deliberately sought data because they believed they could be doing better.

2. HR gets blamed when the line manager implements poorly. One HR executive in Wright’s study said that HR was blamed for a poor compensation system, but that managers were reluctant to make tough calls on individual raises or bonuses, and that reluctance undermined the system.

3. HR is not good at marketing. When HR does great work, it often doesn’t take the opportunity to let people know what it has accomplished. This problem is compounded by the fact that many managers -- and CEOs -- don’t really understand HR.

Lawrence Pope, vice president of human resources for Halliburton Energy Services Group in Houston, says that every one of these issues can be mitigated when HR has a close relationship with managers, an association he terms "absolutely fundamental."

At Halliburton, line managers participate directly in shaping and implementing HR initiatives through an oversight-committee structure. Top performers who have demonstrated a passion for specific elements of HR management, such as employee development or compensation and benefits, serve on the committees.

The performance-review board might, for example, focus on employee competencies. The process begins with identifying jobs and mapping the required skills to perform the work. Then the board looks at the people who are doing the jobs, identifies gaps between existing and optimal competencies, and develops interventions such as stand-up, on-the-job, or self-paced training.

Pope says the effectiveness of the interventions is measured in two ways: through an exam to see if an employee grasps the content, and through a correlation to performance improvement. Measuring performance improvement can be difficult, he says, but can be achieved by looking at changes from year to year in a specific area such as improved safety records.

"Many organizations abdicate management of people to HR," Pope says. "But HR can’t implement. If HR throws a program over the wall to the line and asks them to implement it, it isn’t likely to be well received. It’s better if you present the business case for a program and explain how it adds value. The HR challenge then is to keep from losing control, which is a better position to be in."

CEOs want strategic partners

Employees and managers need a better understanding of what HR is doing and why. So does the CEO, says Don Holzworth, the top executive at Analytical Sciences, Inc. He says that most CEOs don’t really understand what HR can do, and don’t know how to get what they want. "They see HR as a necessary evil, as a cost center, like photocopy paper," he says. "Most CEOs are uncomfortable with the topic of HR."

Podurgal, Holzworth’s senior HR executive, says that until recently, HR hasn’t had clearly defined expectations or accountability. "Many CEOs just want HR to keep them out of jail."

Alan Schnur, a senior consultant and market leader in the San Francisco office of Watson Wyatt, offers this appraisal. "Sometimes, CEOs and the line don’t really want HR to be strategic. HR is given a double message: Get out of the box, stay in the box."

He tells a story about a CEO who challenged the executive team to figure out how the company could triple revenue within five years. The HR team took the assignment seriously and came back with an assessment that said the company didn’t have the right leadership or structure to accomplish the desired growth, and proposed some changes. "The team was told, ‘You took it too far,’ " Schnur relates.

But for every organization in which strategic HR is an oxymoron, there is another in which HR is actively helping to run the company. Talk is turning to action, Schnur adds, and there’s never been a better time for HR to play a strategic role.

It will take the right CEOs working with the right HR executives to make it happen. Holzworth credits Podurgal, for example, with helping to boost the 450-employee organization to a new level. "There are a lot of HR professionals out there who are not very effective," Holzworth says. "Traditional HR people could not have accomplished what Rich has done. They are focused on employment law, compensation, and dispute resolution. They don’t have the skills to be strategic."

And it’s no wonder. HR has had few opportunities to learn strategic skills, because it hasn’t been included as a participant in the decision-making process, and because many CEOs themselves operate in a strategic-planning vacuum, Schnur says. What’s more, HR’s efforts at strategy are often foiled because there is a disconnect between the espoused and the actual culture of an organization, Wolfson notes. Examples of common company slogans that often have nothing to do with reality: Employees are our most important asset. We pay for performance. We advance people on merit.

Podurgal and Holzworth are in sync about the corporate culture at Analytical Sciences and they work closely. "In the beginning, Don couldn’t define specific objectives for HR," Podurgal says. "He saw that turnover was too high, that the company was not recruiting the top people, and wasn’t an employer of choice."

Holzworth says the first step in improving these critical areas was to define the company’s broad initiatives and to confer with Podurgal about what HR should do. What they came up with is so different from earlier notions of HR that Holzworth dropped the term in favor of "organization development." The emphasis now is on performance development, performance management, supervisor and manager training, and employee competencies. Each element is tied to long-term business goals.

"I can’t think of a proposal I took to him where he didn’t listen," Podurgal says. "That doesn’t mean he doesn’t push back, but he trusts us." Podurgal has been given the latitude to add value to the business, and he has seized the opportunity.

Although he has been at the company for little more than a year, Podurgal has already created a performance-management program that ties each employee’s goals to organizational goals, and has implemented market-based merit pay, introduced succession planning, and built a competency model that is linked to HR. Costs per hire have been reduced, and turnover has been slashed from 38 to 10 percent.

Despite impressive successes, no one says HR’s job is getting easier. As Schnur points out, the wobbly economy is forcing CEOs to put more pressure on every department to contribute more, including HR. He says there is a shortage of qualified people for important jobs, and that adds considerably to the pressure on HR to retain top performers and develop employees.

In recent weeks, he’s met with a dozen CEOs who have expressed a wish that HR could make a greater contribution to their companies. A lot of people are "rooting for HR" to step up to the plate and redefine its charge, Schnur says. "Where are the models for brilliant HR work? Where are the Jack Welches of HR? When is the last time that a CEO told shareholders, ‘Profits are up because we have the best performance-appraisal system anywhere’?"

Schnur concedes that becoming a pivotal player won’t be easy. He predicts that it will begin with small steps. "HR can be the quiet kid in the back of the class who has been watching for a long time and finally raises her hand to say, ‘How about these three ideas?’