Get Ready to Be Ready: Building a NEW HR Business Model

“HR must have the knowledge of the organization’s P&L, but more importantly, they should develop a people P&L.” This was a statement by Cynthia Trudell, Executive Vice President Human Resources & Chief Human Resources Officer of Pepsico.

Last week in New York there was an event called the HR Leadership Summit (built “by HR Execs, for HR Execs). Well to me that line is an understatement. I have attended a lot of conferences, but this one day event is at the top of my list.

What will you call your plan?

Presentations were given by the folks at the top of the HR food chain, from people like Mark James, SVP, Human Resources & Communications at Honeywell; Dimitra Manis, SVP, Global Head of People for Thomson Reuters; Susan Peters, VP, Executive Development & Chief Learning Officer at GE; Cara Capretta, VP, Human Capital Transformation for Oracle; and Randy McDonald, CHRO for IBM.

My thought upon leaving that night was back on the P&L relationship to HR. The P&L is a financial statement that summarizes the revenues, costs and expenses incurred during a specific period of time — usually a fiscal quarter or year. These records provide information that shows the ability of a company to generate profit by increasing revenue and reducing costs.

The concept of using or creating a sort of Human Capital metric dashboard which lays out dynamics of the workforce will be the new norm for HR. Imagine if a Human Capital P&L was presented and evaluated each time a business meeting was held, especially during quarterly and year end meetings.

Three quarters of CEO’s say that lack of key skills is the greatest threat to their business. Based on that, a process of this type should be a welcome addition to the executive agenda.

If that CEO statement about a lack of key skills was centered on marketing or a strategic dilemma, there is no doubt what they would do.

Alignment is here

There were so many CHRO’s at this New York event, each a super star in their own right, discussing the level of interactions they have in driving their respective business growth. I got the feeling that every one there came away with a sense of the future of HR. The bar has been raised to a totally new level.

We had been to the mountaintop and were given a chance to peak over and get a glimpse of the new model of HR importance. We were given this view by practioners who live it every day.

The implications of the economic recovery, a changing workforce, new regulation and legislation, changing social values and technological innovations are all redefining human resources.

During the recent recession, HR leadership has been faced with continued cuts and modifications to their human capital programs and policies which have forced most to revert to business as usual.

The question is, will HR carve out a new path going forward by developing a new model, or, will you find yourself unprepared for what lies ahead?

The alignment of a human capital strategy and programs with the organizational strategy is the new and sustainable model. That alignment will significantly impact the success of the organization.

Why we need a “new HR” business model

Developing a business case that invests resources in the people side of the business positively influences everyone — not only within the organization, but external factors as well, and ultimately, the bottom line.

One of the best ways to begin this transformation is to focus on the P&L, HR scorecard, or whatever name you call it that suits your fancy. This P&L will not only help calculate talent management metrics and benchmarks data extracted from your own organization, but it will help re-position HR strategically in your company.

Specifically, investing time in a more rigorous based metrics-driven model is going to be the key component in building and emerging a new business-oriented HR model with better alignment with the core corporate strategy.

As we face a new set of challenges in a rapidly changing marketplace, it underscores the imperative of continuous and visible engagement of HR to become fully aligned with the corporate strategy, and surmount the organizational silos to emerge as a “new HR” business model.

And, when the time comes to expand opportunities and optimize the deployment of the organization’s human capital assets, are you and your organization going to be ready?

More importantly, are you personally going to be ready?