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ImageMuch has been written about the concept of HR Business Partnering since Dave Ulrich first proposed the idea in his “Human Resource Champions” published in 1997. In this article, Vincent Owen asks whether this transition was inevitable for the HR function to survive.

The 10 years that have elapsed since Ulrich first proposed the concept of Human Resources as business partner has seen significant change in the Human Resources (HR) arena, both in terms of the way in which the HR function is structured and in the overall strategic impact it has achieved as a result.

In essence, particularly in larger companies, HR has moved on from the traditional and largely reactive administrative support approach to a significantly more strategic and value-added proactive way of doing business. It has achieved this largely by identifying its customers, establishing their wants and needs and restructuring itself.

Many companies today operate on a Shared Services Centre model – management by HR, but empowering employees to manage their own records on-line via the company’s intranet, and also to look after the basics of resourcing, payroll, leave arrangements etc. In addition, there are likely to be Centres of Excellence with highly experienced specialist people concentrating on the company’s strategic direction in reward, learning and development, organisational design, employee engagement and identifying and managing talent. The third arm of this model is that of Strategic Partners or HR Business Partners who will work closely with executives right up to the highest level in the company, advising on Human Capital strategy to ensure that the company makes the best possible use of its people..

Our Most Valuable Asset

Significantly, if an analysis of roles at Board level 20 years ago were carried out, it would reveal that very few companies had a Human Resources Director (or, more likely for those days, a Personnel Director). The person in charge of HR would probably have reported to someone on the Board, rather than to sit on the Board. Ironically, a review of Chairmen’s statements in annual reports invariably describes staff as “our most valuable asset”.  However, for the most part, companies did not “put their money where their mouth was” and endorse the statement by having HR represented at the Board level where the strategic direction of a company is often determined.

Interestingly, if we look at the Finance function in a similar way, going back in time there were relatively few Finance Directors. Rather, the Finance function did the number crunching, almost as a statutory requirement under the leadership of a Chief Accountant, but added little in the way of strategic direction to the company as a whole. Nowadays, we see Finance Directors on every Board and Finance is seen as a key strategic player, essential to the development of any successful company. So how did the finance function achieve this change?

In its simplest form, a company needs relatively little to be successful – it needs people, money, products or services, premises (though with the rise of the internet, this is not always necessary) and, most important of all, CUSTOMERS. The concept of managing your customer, forging strong relationships with them and retaining them for future sales opportunities is fundamental. It is a sine qua non that without a strong and loyal customer base, the business will be on the rocky road to disaster. After all, at the end of the day, the customers pay the wages!

Adding Value

Any element of a company that is not perceived to add value deserves to suffer cutbacks or to be outsourced. The primary area of any company that directly generates revenue is the areas responsible for the sale of the company’s products or services. The other areas of the company, be they Finance, HR, Production, Marketing, Strategy or IT, are essentially only there as enablers for the sales function to keep the revenues flowing. This is not, however, to suggest in any way that they are second-class citizens. Far from it, and indeed they all have a critical role to play. No finance department – operating strategically and in tune with the overall direction of the company – means no budgets can be allocated towards product development…no production department means no new products for sales to sell…no HR department means no people, no salaries paid, and so on.. 

So was it the realisation of the need to add more value that transformed the Finance function from purely managing numbers to playing a strategic role at Board level?  Through a process of self-examination, did the finance function take a hard look at itself and say, “Who are our customers?” “What services do we offer them?” “Do we actually provide what they need?” “Are we in danger of being outsourced if we do not change our approach?” Irrespective of what drove the change, the fact remains that the Finance function today is a significantly different animal to what it was in the 70s.

Evolution or Revolution?

As previously noted, the HR function has gone through massive change in the past few years.

My question – hypothetical though it is – is whether, in fact, if Dave Ulrich had not proposed the revolutionary concept of the HR Business Partner; the HR function would not in any case have evolved in this way. We cannot rewrite history but, as happened with the Finance function, would the HR function not have gone through the process of self-examination and identified ways in which it could serve its customers better and more strategically?

Vincent Owen is a Senior Consultant with Interims for Development (www.interimsfd.com)

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