Why HR?

Human resources or “HR” is a term that – for some – has come to mean everything and nothing. What “HR” is “supposed to do” can be vague, confusing or even contradictory.

While often represented as the “employees’ department”, its role is generally to administer management decisions such as enforce policy or carry out staffing decisions.

At its most basic, it refers to the people or activities related to employment of people – and here is where the problems begin.

In most organisational structures managers are responsible for employees and their performance. As the organisational structure rewards and penalises the line manager for performance, this leaves HR to take care of the administrative and processing side of personnel management, and the HR practitioners have little opportunity to add real value.

Additionally, HR management – like other management disciplines – has strategic, tactical and operational levels. Only the largest and/or most forward thinking companies support each of these levels. HR also enters an area of behaviour, culture, motivation and personality, all vastly different and their own specialist area in their own right. How, then, does one organisation find an HR practitioner who can provide support across such diverse fields?

There are also the organisations that have implemented well-planned and well-designed programs at great effort and expense only to find that after the hype of implementation, the program and its effects are gradually forgotten.

There is no doubt there are many talented, experienced and successful HR experts who effectively assist businesses to change manage, process re-engineer, culturally align, team build, performance review and profile employees and/or their work processes. To most managers struggling to meet customer demands, replace absent employees and generally deal with day-to-day problems, these benefits may be lost on them when the pressing need is to just have another pair of hands on deck.

One of the main reasons why some organisations find little benefit from their HR effort is that they implemented their HR system predominantly to take care of employee administrative functions, and even then not until the cracks in the existing processes started to show, such as inconsistent performance or low levels of employee commitment.

1. HR is a compliance tool
   
   For many businesses, the engagement of employees is about work overflow – the position becomes available when the work exceeds current capacity. In this case employees are merely used as a labour resource, somewhat similarly to equipment resources, and this can be easily done without the help of “HR”.
   
   Even at this most basic level – perhaps, especially at this most basic level – employers need to be knowledgeable about the laws that regulate the employment relationship. These include the Workplace Relations Act 1974 from whence is formed the Australian Industrial Relations Commission, which amongst other responsibilities, regulates the Awards that bind employers and employees in certain occupations and industries, as well as the conditions for fair and lawful terminations; tax compliance as regulated by the Australian Tax Office; the Superannuation Guarantee (Administration) Act 1992; and the Occupational Health and Safety laws from each State.
   
   Non-compliant employers may be seriously affected if required to back pay short-paid entitlements, may be fined or otherwise penalised for certain breaches, or may find themselves vicariously liable for the actions of their employees.
   
   A good HR administration system should protect compliance with all employment laws and regulations. We call this Transactional HR – it engages hands for the job.
   
   
2. HR as part of the business model
   
   On the presumption that most business founders base their business on at least one identified competitive strength (e.g. a business alliance) and at least one key purpose (e.g. to be better than existing services), subsequent decisions, such as site location, products sold, markets entered and business name and styling, should capture and promote these fundamentals. These should be articulated in a company statement whether it becomes the vision, mission, values or philosophy. Evidence has been documented that businesses that do this well experience success that is significantly better than that of their competitors that do not.¹
   
   Many businesses reject the idea (at least in principle) that employees are merely a resource and insist their employees are their “greatest asset”. This can only be realised if employees are engaged into the company vision (or whatever other form it may take): they should have experienced it for themselves from their first contact as job applicants. This experience then enables them to enact the standards when they come to be part of the company effort. Just as there are emotional reasons for buying decisions, there are emotional reasons for employment decisions.
   
   Many businesses we speak to are disheartened when their employees fail to perform their tasks with quite the same passion and commitment. While not the only reason (and leaving out individual anomalies), the engagement of these employees was a practical, business Transaction, and did not address the emotional level. We call this Transmissive HR – it engages heart for the job.
   
   To harness its benefits, a good HR system should have specifically formulated processes for employer-employee interaction. This should include goals and objectives, performance measures, reward and remuneration, incentives, team processes, communication forums and up-and-down feedback.
   
   
3. HR creates its own momentum
   
   A business is most successful when its intellectual assets are greater than its physical assets; in the highest performing companies, the ratio – around 10:1 in the late 1990’s – is now around 15:1. Note the factor of success is not just size. Intellectual assets include such things as brand equity and brand recognition, the value of systems and processes and knowledge base.
   
   A business that can reach this level is one that no longer controls its employees; it probably no longer even considers that it employs them: it partners them. A business at this level maintains its control through processes. Its competencies (loosely defined as its collective skills) have been identified and systems exist for how these are deployed. These can be as quantitative as speed of production and as qualitative as innovation. These systems network every part of the business both on an interactive and a work process level. And collectively, a positive workplace culture is created.
   
   This HR system is characterised by numerous points for input by employees to their work and even to the work of other areas, widespread sharing of information, particularly results, willingness – in fact, a mandate – to accept and implement change, and an expectation of accountability, accompanied by authority, at all levels.
   
   Employees of these types of workplaces become partners to the business, due largely to a clear link between successes of the business (and note, the operative word is “clear”, not a vague promise of potential opportunities) to personal success, however this may be defined by the employee. We call this Transformational HR – it engages minds for the job.

The lessons

The world of employment and employees is complex, because there are many roads to and reasons for great business results. An HR system is an invaluable way to using the best endeavours of your employees to meet your objectives because at its most basic regulatory compliance allows you to operate with minimum risk and interruption, and at its best, there is no limit to opportunities from continued investment.

Here are some key points to keep in mind when developing your HR system:

1. Congruence is essential
   
   This means the message you send your employees formally and non-verbally must be consistent. Similarly, identify and resolve perceived double standards. An unintended message can unwittingly be sent, such as treating different groups of employees differently, or asserting the value of people but only using financial measures, and while the effects may seem subtle, the long-term problems are difficult to eliminate.
   
   
2. Have the right degree of ‘informal’
   
   A good ‘informal’ HR program is better than a cumbersome ‘formal’ program. By formal, we mean one that is formally scheduled and documented. If this level and style of activity differs to ‘business-as-usual’ it can be seen as irrelevant and/or an interruption to work to be done. Ensure the program can be easily managed by those who are responsible for it and is easily accessible by those it means to serve.
   
   
3. Count the costs
   
   Businesses, particularly small-to-medium sized ones that have experienced a good degree of success, find that they have managed well enough without a program and it is considered a nice-to-have. What they lose sight of is the cost of what we call ‘leakage’, such as double-handling, under/over-management, under-utilisation of skills and knowledge, employee turnover, inefficient processes and so on. If you think about how much of your labour costs are non-revenue generating, how much would you like to improve this and what would you spend to do so?
   
   
4. Build a program
   
   A program that is gradually built up is not only cost-effective but more likely to have lasting effects. Think of building your HR program in the same way you might build your house. No matter how big or small your budget or grand your plans, you always start with the framework – soundness, safety, strength – before furnishing and decorating. Similarly, start with the plans and processes before the value-add programs such training and team building.
   
   
5. Use the right professionals
   
   HR is a diverse area that extends into specifics such as occupational health and safety and industrial relations. HR also contains a significant amount of records management. The right HR program will also see the need for different expertise as your programs progress. Consider how you will get the right professional at the right cost and at the right time.

_{Built to Last: Successful Habits of Visionary Companies by James C. Collins and Jerry L Porras (Harper Business, 1994) is a great read}

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