By Rajeev Peshawaria
Whether you are a senior manager or CEO, or at the beginning of your journey to leadership, it is important to understand the value of two vital and interrelated senior management responsibilities: leadership development and succession planning. The best leaders take both of these seriously, and with both there are best practices that will ensure the proper development of leadership talent and the future of strong leadership that will sustain, and continue to grow, a company’s value. For excellence in both these areas, leaders must be prepared to challenge some conventional wisdom.
The first way in which this must be done is in the choice of the HR leader and the understanding of the HR function. The big problem is this: Even though it is widely acknowledged today that strategically managing human capital, designing and maintaining a strong organizational culture, and better understanding how to capture the imagination of the Millennial workforce are critical to the success of any organization, key Human Resources positions are routinely filled without adequate thought. Even today, senior business leaders in many organizations use HR as a place to park loyal executives for whom there is no other place in the organization. They (the senior leaders) take the view that Human Resources is largely an administrative function, and all you need to run it well are good administrative, legal, and accounting skills.
But let me pose a question: How much of a company’s stock price is made up of intangibles such as the company’s brand value, its ability to innovate, its culture and reputation, and the quality of management? Arguably, all these intangible assets are the direct results of the company’s leaders’ actions over the years. According to analysts, the answer is more than 65 percent. In other words, when buying a stock, investors pay for expected future value, which is created by intangible assets—that part of a company’s worth made up by its staff (its human capital) and their skills, knowledge, and creativity.
A strategic HR partner can be instrumental in significantly enhancing growth, because he or she directly influences 65 percent of the value equation—the intangibles.
This insight was not lost on Harvey Golub, Neville Isdell, and many others who have used Human Resources as a strategic plank. More leaders need to do so, and the first step is to choose the right HR leader, someone who can help, as well as challenge, them. Instead of choosing a comfortable confidante, they should look for someone who understands both business and human capital trends, and is able to contribute intelligently to C-suite discussions about business strategy. Far too many HR heads still do not have a seat at the table, and among those who do, very few have a voice. The only time they speak up is when there is a personnel-related crisis or an administrative issue.
Both the HR profession and the business leaders who appoint HR leaders are to blame here. I already have explained the tendency on the part of business leaders to choose someone comfortable, or to park someone they don’t want to get rid of, in a senior HR position. HR executives, for their part, often don’t do enough to earn their seat and voice. Many tend to thrive on reacting efficiently to requests from senior leaders, and are not proactive enough to support business growth. In this sense, many HR leaders are “pleasers.” They feel honored and important when a senior leader asks them to solve a ticklish issue involving a senior person’s separation or a large layoff. They love it when senior leaders want them to draft policies for expense reduction. By doing these tasks loyally and reliably, HR leaders earn the trust of their leaders. What they don’t realize is that while they may have earned their leaders’ trust, they do not earn their respect, which can only come from a proactive strategic contribution rather than from a reactive administrative contribution.
Ask most senior business leaders what they think about their company’s HR function and you most likely will hear something like this: “I hate HR, but I love my HR person. He is extremely reliable. Whenever I have a problem, I can trust him.” Great, but is this all HR wants to aspire to? HR leaders should make a habit of staying on top of current and emerging business trends, and try to assess what might block the company’s progress and determine the human capital needs of the company. Armed with knowledge in these two areas, they must proactively engage with senior business leaders by asking them critical questions and challenging them. Using the 15 Brains-Bones-Nerves (BBN) statements can be helpful here. Each time I run a meeting for a senior management team to discuss data collected after conducting the 10-minute BBN survey, the feedback I receive tells me I’ve surfaced issues senior management should have been addressing all along but aren’t. This is a simple but powerful example of how HR can add strategic value. If HR leaders keep their eyes and ears wide open, they will discover things that are sometimes difficult for business leaders to perceive. For example, if a senior leadership team is divided on issues related to the overall strategy of their function, division, or company, the HR leader should be able to see it before anyone else, and should suggest to the head of the organization that he or she needs to do something about it. Better still, the HR leader should offer to run a strategic brainstorming session for the senior management team with a view to driving to agreement after all ideas have been heard.
Another case in which HR can add strategic value is when there is a disconnect between desired behaviors and the reward system. HR can study and suggest ways to bring better alignment between the two, thereby strengthening the organization’s culture. Helping leaders manage large-scale change is another area in which HR can be instrumental. Finally, by providing practical and usable (instead of theoretical and mechanical) training and development programs, HR can help improve and accelerate performance.
All of this means HR needs to make some strategic choices for itself. Does it want to be the best administrative function in the world, or does it want to significantly contribute toward business growth? If the latter, it must decide which functions within HR are more important than others, and find the right balance between outsourcing and building in-house capability. An HR division that makes the decision to outsource all training and talent management work while retaining full control of compensation and benefits sends a very different signal about itself than another HR division that outsources benefits and creates capacity for in-house consulting and leadership development. This might sound obvious, but I have heard far too many HR executives tell me that while training and other “soft” initiatives are nice to have, payroll, benefits, and other “hard” functions must go on regardless. Both HR leaders and business leaders must question themselves about the type of HR they want, and invest accordingly. In doing so, they should remember that in today’s knowledge economy, technology, finance, or any other functional expertise can be copied or acquired. Excellence in the way a company manages its human capital often can make the difference between long-lasting success and failure. Companies such as Goldman Sachs, Pepsico, Alibaba.com, Amazon.com, and Infosys—which are arguably some of the most commercially minded organizations in the world—agree. They all invest wisely in shaping their human capital strategies.
Excerpt From “Too Many Bosses, Too Few Leaders” by Rajeev Pershawaria. Copyright © 2011 by Rajeev Peshawaria. Excerpted with permission by Free Press, a Division of Simon & Schuster, Inc.
Rajeev Peshawaria is CEO of the Iclif Leadership & Governance Centre (http://www.iclif.org) based in Kuala Lumpur, Malaysia. He has been the Global Chief Learning Officer at Morgan Stanley and The Coca-Cola Company, and has held senior positions at American Express, HSBC, and Goldman Sachs. For more information, visit www.rajeevpeshawaria.com; for the book, visit http://www.amazon.com/Too-Many-Bosses-Leaders-Extraordinary/dp/1439197741/ref=sr_1_1?ie=UTF8&qid=1312575763&sr=8-1.