Showing Value: How HR Needs to Rethink Itself for a Changing World

Here’s another example of how HR just can’t get any respect.

A new global survey of more than 400 senior executives from from audit, tax and advisory firm KPMG International, titled Rethinking Human Resources in a Changing World , seems to be yet another opportunity for business leadership to bash HR for what they’re not adding to the organization.

The survey found that “only 17 percent of respondents said HR does a good job of demonstrating its value to the business, and even fewer — 15 percent – viewed HR as providing insightful and predictive workforce analytics.”

Relegated to a “transaction-based organization”

In fact, the opening paragraph of the Executive Summary pretty much tells you where this survey is going:

The value of the Human Resources (HR) function elicits sharply contradictory views within organizations. On the one hand, in today’s competitive global markets, the “war for talent” is understood to be crucial to almost every business. On the other hand, the HR function is often dismissed as non-essential or ineffective. Respondents to the study commissioned by KPMG International, give similarly mixed messages. About eight in ten (81 percent) respondents say that putting in place the most effective talent management strategy will be key to competitive success. Some six in ten (59 percent) believe that HR will grow in strategic importance. But just 17 percent maintain that HR does a good job of demonstrating its value to the business.”

Yes, it’s getting to sound like a broken record hearing executives give a mixed message about the value of HR, but that’s what we keep hearing all too often these days. The difference with this survey is that it not only focuses on what HR is doing wrong, but more importantly, what it needs to change to get back on track.

“Human Resources is often relegated to a transaction-based organization lacking strategic insight and contribution,” said Claudia Saran, a KPMG principal and the U.S. leader of the firm’s People and Change business, in a press release about the survey. “HR executives must determine how to adapt their organization, including both its technology and people, to connect more explicitly with their respective companies’ business strategy.”

“HR is struggling” to manage a “global, flexible workforce”

The survey also found that 55 percent of survey respondents believe the metrics that define success in HR today will fundamentally change over the next three years, and Rethinking Human Resources in a Changing World examines the nature of the challenges facing the HR function and its future direction.

The report’s main findings include the following:

HR is struggling with the challenges of managing a global, flexible workforce. From the report: “The global workforce has become increasingly integrated across borders while simultaneously growing more virtual and flexible. These developments have made the retention of key talent and building workforces in new markets the top priorities of HR departments over the last three (3) years. Survey respondents expect little change in the next three (3) years. Yet only about one in four respondents say that HR at their company excels at core issues such as sourcing and retaining key talent globally; supporting a virtual and flexible workforce; and supporting the greater globalization of the business.”
Finding ways to engage with workers will help address the challenges of this global, flexible and remote workforce. From the report: “Insights from interviewees for this report point toward improved employee engagement as the way to address many of these problems. This will involve creative solutions, such as the development of HR policies and approaches that have global application but can be made relevant to local conditions. It will also require new ways to engage meaningfully with a workforce that is less committed to the organization.”
Technology has already transformed HR and the application of data analytics will foster even more profound change. From the report: “Sixty-nine percent of companies surveyed say it is more common for the HR function to provide web-based and/or mobile HR platforms (e.g. benefits, payroll) than it was three (3) years ago; only 3 percent of respondents have cut back on these technology enhancements. These have already enabled HR to do its basic, administrative work faster and more efficiently. They have also provided employees with more flexible and tailored training opportunities while creating a positive culture for communication.”

HR’s 3 core challenges

The report also identifies these three (3) “core challenges” that HR executives are focusing on:

Balancing the global and the local – managing, hiring and identifying talent globally while retaining important local insights
Managing a flexible and virtual workforce – but not at the cost of loyalty and career development;
Retaining the best talent – maintaining employee engagement in the face of a less committed, more flexible workforce.

Although “Balancing the global and the local” may not be high on your agenda if you are a smaller, U.S.-only organization, “managing a flexible and virtual workforce” and “retaining the best talent” sure jumped out at me as key challenges that HR and talent managers are facing (some would say struggling with) today.

When asked what their HR functions focused on most frequently over the past two years, the largest number of U.S. respondents, 29 percent, reported it was “retaining crucial skills and experience within the business.” An even larger 41 percent said this area would receive the most focus over the coming three years.

Increasing the proportion of virtual/flexible workers

In other survey findings from U.S. respondents:

Over the next two years, 69 percent said they believed their companies would increase their proportion of virtual/flexible workers.
Nearly half (49 percent) said they had outsourced core business activities to external vendors over the past two years.
Social networking sites had given their organizations access to significant new sources of talent, according to 37 percent, and 41 percent said the social networking sites made it easier for competitors to poach talent.
Over the next two years, 63 percent agreed that coming up with the best talent management practices would be a key tool in their ability to compete in a more competitive global marketplace.

Much of the focus of Rethinking Human Resources in a Changing World is about how technology and data will transform businesses and HR, and it is worth spending some time reading since it is likely this is an issue right now for you and your own organization.

But, the survey is also a road map for the steps HR professionals should be taking “to improve the function’s contribution and its image” given how, as the Executive Summary puts it, “It is practically a business truism that the HR function is not well respected at many organizations. Whether deserved or not, this stigma is clearly evident in our survey results.”

Steps that HR should be taking

Thankfully, the survey also lists a number of steps executives should take, “to improve the function’s contribution and its image.”

Make the value of HR more prominent and understood.
Think, understand and communicate in the language of business.
Move from administration to higher-value-added activities.
Transfer appropriate responsibilities to line managers.

Some may find KPMG’s Rethinking Human Resources in a Changing World just more of the same HR bashing that has been going around for years, but to my eye, this is a reasoned and thoughtful survey and analysis of where HR stands, and more importantly, what HR needs to do to get itself back on a meaningful and value-enhancing track within most organizations. The study’s Conclusion could not make this any more clearly:

Many of the challenges identified in this report are long standing. But they are no less urgent for that. Indeed, there is no escaping the prospect of a shrinking and weakened HR function in the coming years. Quite simply, HR has to break out of the trap it has been stuck in for far too long.

Unfortunately, there are no simple solutions, no generic approaches or best practices that will suddenly enable the HR function to become more effective and respected. HR needs to focus on delivering unique talent solutions tailored to each company’s circumstances and requirements.”