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HR and the CEO...HR and Employees...HR and the Bottom Line...

PeopleStrong CEO and Founder Pankaj Bansal answers five critical questions regarding human resource function.

Pankaj Bansal        Print Edition: February 7, 2010

Often the HR of a company and its employees have different views on what constitutes a "good company to work for". What causes this divergence and how can it be addressed?

In general, what "makes a good company" is derived from two sources: A survey designed to evaluate the company and its HR, and the perception of the company's employees. A company, however, exists in an ecosystem. Employees leaving the company and those who will join it in future are as much a part of the ecosystem as existing employees. Seeking responses from only existing employees would make the findings skewed. A model that captures the total talent pool with the company— former, current and future employees— will probably give us an accurate picture.

Also, an employee is driven by perception whereas the company (and its HR) is driven by realities. The convergence will happen only if individual perception and company aspiration meet at a common point. We should look at perceptions in the light of aspirations and they together will give us the reality. We can, therefore, call it Perception-Aspiration-Reality (PAR). It's time to challenge the status quo and build new realties and, if I may say so, they should be at PAR! That said, this year's Best Companies to Work For study has challenged some conventional wisdom. One of the most interesting findings is how different groups of employees think. For instance:

  • While creative people in the professions like advertising/PR/media seem to give least importance to their company's brand value, the administrative staff seem to value it the most.
  • Finance professionals do not attach importance to the stress at work, but manufacturing sector employees value it a lot.
  • Similar differences are spotted across regions, salary brackets, education levels and other parameters.

Management guru C.K. Prahalad talks about serving customers by treating them uniquely through his famous n=1 strategy. Organisations should treat their employee groups with n=1 strategy, meaning treating every employee group as a unique entity. "One size does not fit all" is something that HR professionals must realise. The more we bring things at PAR, the better will be the convergence.

What are the thumb rules of good relationship between the CEO (or promoter) and the HR head of a company?

HR often gets caught in "what is the coolest programme" and "what is the most innovative practice". The question is not about "what" but about "how". Focussing on the basic rules of business would drive HR from backroom to boardroom. The key basics are:

PRODUCTIVITY: HR's focus on productivity is the key to driving an organisation's success. HR should help a company strike the right balance between its goals and people. The economic downturn has led companies to focus their HR on productivity.

BOTTOM LINE ORIENTATION: Tie everything to business objectives. So, turn performance management into productivity enhancement; turn training to capability building; compensation management to talent pool cost; hiring to quality of hiring; HR operations to shared services. Make every sub-function of HR measurable and driven through metrics which tie outcomes to business results.

UNDERSTAND THE BUSINESS: HR might be making everything measurable and building fantastic cost benefit analysis (CBA). But if the organisation's operational objectives are not aligned with what HR is presenting, then the proposals get knocked off in the first instance.

EMPLOYEE ADVOCACY: An understanding of the business is a must, but how HR relays the employee perspective to management is equally important. Whether HR can provide a fair and firm view without losing sight of business is the question which wins the trust and confidence of the management.

Finally, you have to be the best at your core function. All the above is achievable if you have built your credibility by delivering and over-achieving your objectives. After all, the business of business is business.

Does good HR get a premium in recruitment—either in terms of better talent or lower cost or both?

Employer brand is generally viewed as being synonymous with the HR practices of the company and the BT-Indicus-PeopleStrong study clearly indicates that work culture is amongst the top three factors. The study, however, also indicates that compensation is as important for the employees.

We believe that good HR does get a premium on attracting better talent but not in terms of lower cost of hiring. The cost per hire is impacted by HR processes, actions and programmes. Innovative ways of hiring like RPO (recruitment process outsourcing) will ensure effective and lower cost of hiring. Brand value along with the right processes will together get the right talent and will facilitate cost improvements in hiring.

This does not mean hiring people at lower salaries but at a more effective cost. Often companies with scant attention to HR seem to be doing rather well financially.

What then is the correlation between the quality of HR in a company and its sales and profit growth?

Indian companies have operated in an open economy for less than two decades. We have seen maturity of business processes and markets only since the late '90s. HR practices reflect this process of maturity. Historically, wherever market competition is hot, talent process maturity is high. Let's look at the IT industry where competition enhanced the talent processes maturity and HR was able to create a short-term and longterm impact on business.

HR in India is inching towards linking its processes with business outcomes. However, there is a long road ahead. The current situation might create the impression that HR is not able to create an impact, but this is not true. That said, HR will have to focus more on outcome-based practices than remaining a subjective function. Power of HR will not come from the number of people in HR department but from the say it has on organisational decision making and its impact on the bottom line.

Can HR be outsourced? If yes, what part of it and how?

HR and employees interface regularly. Eighty per cent of the times, these interactions are administrative and transactional in nature (see graphic on the left). However, from an organisation's point of view most important HR activities are strategic tasks-—the top 10 per cent of the pyramid. These strategic activities are the differentiators of an organisation and can make it a better place to work. In reality, most of the HR time is spent on employee life cycle transactions.

Most, if not all, of these processes can be standardised, centralised and automated through an outsourcing framework. This includes recruitment processes, training, administration, payroll, letter generation, full and final, exit interview and employee helpdesk. An outsourcing partner can perform these activities with higher reliability and accuracy, lower cost and a faster turnaround time. This frees up a company HR's time for higher level contributions.

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