A 360-Degree View of HR

Ask the employees at your company what HR does and how well they do it, and be prepared
for a verbal assault. Collar a line manager. Interview a CEO. Inquire about HR’s
organizational role and its reputation. Be ready to hear things about your work that range
from the politely acceptable to the downright brutal.

"Bullying bureaucrats" is a term that one employee uses to describe HR. In a quest to
learn more about how employees, line managers, top executives, and professionals
themselves describe HR’s purpose and performance, Workforce interviewed dozens of
people in all kinds of organizations. When it came to employees, however, not one was
willing to talk on the record, itself a powerful statement. Many said they feared retribution,
and variously described HR people as incompetent, unsympathetic, and punitive.

Taken together, their comments contribute to a greater understanding of where HR is

today, and the future direction of the profession. The news isn’t, of course, all bad. In fact,
HR may be poised to play a far more pivotal leadership role in business in the years to come,
perhaps under a different name, perhaps with a different charge.

In recent years, there may have been a great deal of buzz about HR’s increased strategic
role, but there has been far less action. However, as more people in leadership positions
come to recognize HR’s role in adding value to business, experts say, HR will be viewed not
as a corporate stepchild but as a respected executive player.

Professionals in the field say a change in perception about HR is paramount to its

productivity and future success. HR must re-examine its priorities and its identity. It must
learn executive skills, and it must become far better skilled at selling itself.

Employees are customers, too

Employees are HR’s largest constituency, and HR sees its obligation to employees as
substantial and profound. Rich Podurgal, vice president of organization and people
development for Analytical Sciences, Inc., in Durham, North Carolina, says, "HR is about
making the company successful. We support the business through people."

One reason why employees see HR as

bureaucratic is that their first and
most common interactions with HR
are bureaucratic.

That happens in several ways. Paul Benson, who has spent more than 30 years as an HR
professional in organizations such as Kraft Foods, Frito-Lay, and Kaiser Permanente, likens
HR’s role to teaching the hungry to fish. Benson, who is now a leadership coach with his own
firm, New Directions Unlimited, in Placentia, California, means that helping employees
develop skills and allowing them to reach their full potential is tantamount to success.

But development isn’t enough. Alan Wolfson, an HR consultant with the Hay Group and a
veteran of IBM’s HR function, says that successful HR professionals must be focused on
internal customers, including employees. One of the ways that HR supports the business is
to ensure equity in several areas, including working conditions, rewards, and day-to-day
treatment.
"This doesn’t mean that all employees are treated as equals," he says. "But it does mean
that there needs to be a justifiable reason for differences."

But Podurgal cautions that HR should be careful not to advocate for employees. "We have to
advocate for the business," he says. "Advocating for employees pits us against senior
management, which is not strategic." Instead, he argues that HR should protect employee
interests through intelligent people policies.

Advocacy is, of course, precisely what most employees want. They say that inequity is
common. They want HR to be their advocate. An employee at a nonprofit firm, for example,
went to HR for help. His manager had assigned him more work than anyone else in the
department. When he asked for help in setting priorities, his manager told him that helping
him set priorities was not her job. She then stopped speaking to him. HR responded to his
plea for help by saying there was nothing they could do.

It is an oft-repeated story. But what employees mean by advocacy is surprising. They want
HR to fill jobs quickly and to hire people -- including managers -- who are qualified to do the
work. Employees say that nothing else HR does has as much impact on their day-to-day work
experience. Though they grudgingly admit that HR does fill jobs, they complain that the
process is too long and that HR often hires the wrong people. Asked why, they blame HR for
being distracted by its own agenda.

"HR is a very reactive group with both feet planted firmly in old-style, autocratic, top-down,
1950s-style policies," says a county government employee. "It’s based on old-style thinking
where the manager reigns supreme and employees are there to simply carry out policy and
perform tasks."

They see rules to follow and forms to complete, and their perception of HR is largely one of
bullying bureaucrats. "I received an ‘urgent’ fourth notice that I needed to get a TB test," a
university librarian says. "I was told the next notice would come from the college president! I
got the test right away, but I hadn’t received any notice before the ‘death threat.’ "

One reason why employees see HR as bureaucratic is that their first and most common
interactions with HR are bureaucratic: TB tests, employment applications, benefit enrollment
forms, I-9 forms, change-of-address forms. One HR executive observed, "Ask a typical four-
year-old what a mother’s job is. You’re likely to hear ‘baking cupcakes’ or ‘driving to school.’
People focus on what they see."

Yet even as employees deride the bureaucratic side of HR, they also depend on it. They
expect accurate paychecks and prompt processing of benefit claims. In that context,
employee perceptions of HR correlate precisely to whether their bureaucratic needs are
being met. If overtime is paid promptly and accurately, HR is great. If too much is withheld
for Social Security from paychecks, then HR is terrible. You would be highly unlikely to find
any employees who know or care whether government paperwork is filed on time, even if it
indirectly benefits them.

"One of the biggest challenges is that employees see HR as the reason for their problems,"
says Carrie Shearer, a consultant in Ithaca, New York, with more than 30 years of HR
experience. "If they don’t like their boss, it’s HR’s fault. If they suddenly have a serious
illness and realize that medical insurance is only supplemental and they must come up with
mucho cash from their own pockets, it’s HR’s fault. If they feel overworked and under-
appreciated, it’s HR’s fault, because even if there are recognition programs and all that other
good stuff, there is always someone less deserving than the unhappy employee who got
something. HR is the scapegoat."

The debate about whether employees and HR can ever really see eye-to-eye may never be
completely resolved. But it may be possible to narrow the gap. Paul Benson has done just
that. When he took over the HR function at Presbyterian Intercommunity Hospital in Whittier,
California, nurses were on strike over pay and benefits issues and staff morale was low.
Benson learned that nurses’ salaries were lower than average among area hospitals. The
benefits, however, were the best offered by any hospital in Southern California.

The trouble was, no one -- not even the hospital’s management group -- knew that. Benson
and his team began an aggressive communication plan to promote the benefits. Salaries
were raised to bring them into parity with those of other hospitals. The HR team also began
to address other issues in the work environment that were contributing to low morale, such
as scheduling and lack of career development. The strategy was so effective that over three
years, the hospital was able to reduce the benefit package by 30 percent without
jeopardizing morale.

"The line has been faster

than HR at realizing HR’s
impact. The line sees the
value of developing talent,
of focusing on recruitment
and retention."

In fact, not only did morale improve, but surveys conducted at the time of the strike also
showed that 54 percent of Presbyterian employees were satisfied with their jobs, versus a 56
percent national average. Within three years, satisfaction had jumped to 70 percent and was
continuing to rise at a time when the national average had stalled.

Benson credits improved communication for the turnaround. In surveys and focus groups,
employees acknowledged the benefit cuts, but said that other changes in the overall work
environment compensated for the reductions. And they said they understood what HR was
doing, and why the changes were necessary.

The line managers see HR’s value -- really

If employees give HR mixed reviews, do the line managers see HR more favorably? Again,
the news is mixed. In a recent landmark study, Cornell University professor Patrick Wright
and three colleagues studied how HR and managers each see HR’s effectiveness in its
service delivery, roles, and contributions to the firm.

The team investigated 14 companies. The process included hour-long interviews with 103
top HR personnel and line executives. Each participant also completed surveys. The
companies were all large and had a median employee population of 42,000. The industries
represented included banking, computers, pharmaceuticals, and food processing. On
average, the firms were in the top quartile of their industries in revenue, market share, and
profitability. Two of the firms were ranked among Fortune’s "100 Best Companies to Work
For" and five were in the top 100 of the magazine’s "Most Admired Companies" list.

The best news is that both HR and line managers recognize HR’s potential for making a
strategic contribution. "The line sees that HR is adding value to the business," says Wright,
chairman of the HR Studies Department and co-director of Cornell’s Executive Education
program. He says that line executives view several HR activities as "critical" to a company’s
success.

Surprisingly, when one group rated HR services higher in importance, it was inevitably the
line managers who gave the rating. "The line has been faster than HR at realizing HR’s
impact," Wright says. "The line sees the value of developing talent, of focusing on
recruitment and retention."

Although both groups recognize the potential, they also believe that HR is falling short. The
study shows a negative relationship between the importance of an HR function and how
effectively it is delivered. "If something isn’t very important, we excel," Wright says. "If it
adds value, we can’t deliver."

Specifically, HR is rated high on providing services such as equitable compensation systems

and effective staffing systems. Neither line managers nor HR professionals give HR a high
score on change consulting and other strategic functions.

While the news isn’t good, it should be considered in context. At the Hay Group, Wolfson has
worked with several organizations to conduct the Hay HR Audit, a tool intended to assess
HR’s effectiveness and bring people together to make necessary changes. He says that the
view of a company’s internal support group is always lower than external customer
satisfaction. This is partly because few organizations have a strong internal-customer focus.
He adds that these support groups are usually perceived as having their own goals and that
IT usually scores lowest in evaluations.

Wright points to other reasons why HR isn’t viewed more favorably. Three themes emerge
from the research:

1. HR isn’t doing a good job. Wright notes that he and his colleagues were allowed
into the organizations studied at least partly because the HR organizations were in
transition. They deliberately sought data because they believed they could be doing
better.
2. HR gets blamed when the line manager implements poorly. One HR executive
in Wright’s study said that HR was blamed for a poor compensation system, but that
managers were reluctant to make tough calls on individual raises or bonuses, and that
reluctance undermined the system.
3. HR is not good at marketing. When HR does great work, it often doesn’t take the
opportunity to let people know what it has accomplished. This problem is compounded
by the fact that many managers -- and CEOs -- don’t really understand HR.

Lawrence Pope, vice president of human resources for Halliburton Energy Services Group
in Houston, says that every one of these issues can be mitigated when HR has a close
relationship with managers, an association he terms "absolutely fundamental."

At Halliburton, line managers participate directly in shaping and implementing HR initiatives

through an oversight-committee structure. Top performers who have demonstrated a
passion for specific elements of HR management, such as employee development or
compensation and benefits, serve on the committees.

The performance-review board might, for example, focus on employee competencies. The
process begins with identifying jobs and mapping the required skills to perform the work.
Then the board looks at the people who are doing the jobs, identifies gaps between existing
and optimal competencies, and develops interventions such as stand-up, on-the-job, or self-
paced training.

Pope says the effectiveness of the interventions is measured in two ways: through an exam
to see if an employee grasps the content, and through a correlation to performance
improvement. Measuring performance improvement can be difficult, he says, but can be
achieved by looking at changes from year to year in a specific area such as improved safety
records.

"Many organizations abdicate management of people to HR," Pope says. "But HR can’t
implement. If HR throws a program over the wall to the line and asks them to implement it, it
isn’t likely to be well received. It’s better if you present the business case for a program and
explain how it adds value. The HR challenge then is to keep from losing control, which is a
better position to be in."

CEOs want strategic partners

Employees and managers need a better understanding of what HR is doing and why. So does
the CEO, says Don Holzworth, the top executive at Analytical Sciences, Inc. He says that
most CEOs don’t really understand what HR can do, and don’t know how to get what they
want. "They see HR as a necessary evil, as a cost center, like photocopy paper," he says.
"Most CEOs are uncomfortable with the topic of HR."

Podurgal, Holzworth’s senior HR executive, says that until recently, HR hasn’t had clearly
defined expectations or accountability. "Many CEOs just want HR to keep them out of jail."

Alan Schnur, a senior consultant and market leader in the San Francisco office of Watson
Wyatt, offers this appraisal. "Sometimes, CEOs and the line don’t really want HR to be
strategic. HR is given a double message: Get out of the box, stay in the box."

He tells a story about a CEO who challenged the executive team to figure out how the
company could triple revenue within five years. The HR team took the assignment seriously
and came back with an assessment that said the company didn’t have the right leadership
or structure to accomplish the desired growth, and proposed some changes. "The team was
told, ‘You took it too far,’ " Schnur relates.

But for every organization in which strategic HR is an oxymoron, there is another in which
HR is actively helping to run the company. Talk is turning to action, Schnur adds, and there’s
never been a better time for HR to play a strategic role.

It will take the right CEOs working with the right HR executives to make it happen. Holzworth
credits Podurgal, for example, with helping to boost the 450-employee organization to a new
level. "There are a lot of HR professionals out there who are not very effective," Holzworth
says. "Traditional HR people could not have accomplished what Rich has done. They are
focused on employment law, compensation, and dispute resolution. They don’t have the
skills to be strategic."
Despite impressive
successes, no one says HR’s
job is getting easier.
And it’s no wonder. HR has had few opportunities to learn strategic skills, because it hasn’t
been included as a participant in the decision-making process, and because many CEOs
themselves operate in a strategic-planning vacuum, Schnur says. What’s more, HR’s efforts
at strategy are often foiled because there is a disconnect between the espoused and the
actual culture of an organization, Wolfson notes. Examples of common company slogans that
often have nothing to do with reality: Employees are our most important asset. We pay for
performance. We advance people on merit.

Podurgal and Holzworth are in sync about the corporate culture at Analytical Sciences and
they work closely. "In the beginning, Don couldn’t define specific objectives for HR,"
Podurgal says. "He saw that turnover was too high, that the company was not recruiting the
top people, and wasn’t an employer of choice."

Holzworth says the first step in improving these critical areas was to define the company’s
broad initiatives and to confer with Podurgal about what HR should do. What they came up
with is so different from earlier notions of HR that Holzworth dropped the term in favor of
"organization development." The emphasis now is on performance development,
performance management, supervisor and manager training, and employee competencies.
Each element is tied to long-term business goals.

"I can’t think of a proposal I took to him where he didn’t listen," Podurgal says. "That doesn’t
mean he doesn’t push back, but he trusts us." Podurgal has been given the latitude to add
value to the business, and he has seized the opportunity.

Although he has been at the company for little more than a year, Podurgal has already
created a performance-management program that ties each employee’s goals to
organizational goals, and has implemented market-based merit pay, introduced succession
planning, and built a competency model that is linked to HR. Costs per hire have been
reduced, and turnover has been slashed from 38 to 10 percent.

Despite impressive successes, no one says HR’s job is getting easier. As Schnur points out,
the wobbly economy is forcing CEOs to put more pressure on every department to contribute
more, including HR. He says there is a shortage of qualified people for important jobs, and
that adds considerably to the pressure on HR to retain top performers and develop
employees.

In recent weeks, he’s met with a dozen CEOs who have expressed a wish that HR could
make a greater contribution to their companies. A lot of people are "rooting for HR" to step
up to the plate and redefine its charge, Schnur says. "Where are the models for brilliant HR
work? Where are the Jack Welches of HR? When is the last time that a CEO told shareholders,
‘Profits are up because we have the best performance-appraisal system anywhere’?"

Schnur concedes that becoming a pivotal player won’t be easy. He predicts that it will begin
with small steps. "HR can be the quiet kid in the back of the class who has been watching for
a long time and finally raises her hand to say, ‘How about these three ideas?’