What HR Needs Today!
‘There are only two things in business; money and people.’ – Charles Tilley, CEO – CIMA.
While studying the MA HRC as a mature student, I began to understand the fact that talent is currently the number one issue for CEOs around the world. My concern however was how significant is HRs role in this process and what the HR fraternity is doing to up-skill itself in order to be able to communicate and persuade the board the importance of investing in talent. To my surprise, not much!
If anyone has ever had a chance to pick up the financial statements, you will soon begin to realise the fact that ‘people’ are represented as a cost rather than an investment. In this day and age, when we have realised the fact that the workforce is a capital resource, the funny thing is that ‘people’ are no where to be seen on the balance sheet. However, people are a cost sometimes termed as ‘employee investment’ tucked away in the cost of goods sold that can be found in the operating expenses. So, when it comes to reducing costs the first thing that comes into the minds of those running the show, i.e. CEO, CFO etc. is viewing people as the running cost of a business. It’s like accounting people as ‘petrol’ rather than the ‘engine’ of the vehicle which can be sourced as cheaply as possible. The biggest challenge CHROs face today is converting the value that human capital bring into the business into the language of the boardroom. The problem still remains as the language of the boardroom is strategy, which is conversed in finance.
In the spring of 2015, People and Strategy stressed the importance of setting standards around Human Capital Reporting, that can provide stakeholders important insights and information about the organisations value creation process. This report stressed the fact that the HR faces a threat as it is underprepared. Change is coming and it has serious implications for the future of the HR profession, whether we like it or not. This change is related to the introduction of ‘smarter financial reports’ that can enable shareholders to see beyond the narrow financials. I believe this is the right time for the HR profession to upgrade itself and start to speak in the language of the business. It is important for the CHRO and its team to participate in the creation of the business strategy to the point where HR becomes a signatory to endorse it. Why you might ask, it is imperative for the CHRO and his delegates to not only understand and own it but also to hone it in accordance to the people strategy. A recent CIPD report acknowledged the fact that most CHROs find it difficult to articulate strategy and the accompanying business models thus lowering the chance of them being able to convince the boardroom the value their talent brings into their organisation.
Remember, the organisations strategies and business models evolve, and therefore unless the HR has a good grip on both they may not be able to motive employees and clearly articulate the role played by talent in delivering the business strategy.
‘And those who were seen dancing were thought to be insane by those who could not hear the music.’
– Frederick Nietzsche
Food for Thought: Why don’t we often hear of CHROs becoming CEOs!?
PS: Feel free to share your thoughts.