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Human resources and the technology revolution: Is HR up to the task?

The Human Resources functions can be neatly divided into two dominating spheres of activity:

  1. Transactional or administrative HR;
  2. Strategic HR

 

On the transactional side, in the United States, the current crop of HR practitioners  are very computer literate and welcome advances in technology that will help make their job easier and more productive.   Mostly Millennials, they quickly embrace innovations in technology and master many of its intricacies quickly. Yet technology in any discipline is only as good as its users and the users are now obligated to employ this technology to find solutions to business issues that enhance profitability and competitive advantages.

 

Most companies large enough to have a dedicated Human Resources department have some form of a Human Resources Information System (H.R.I.S.) or other H.R. - related technical application that helps to digitize data such as payroll, benefits, diversity, training, and so on.  These platforms focus mostly on transactional activities where speed, accuracy and consistency are essential.  At the click of a mouse button, the employee data base can be manipulated to provide information that is helpful to senior decision makers and fulfills the stated objectives of the Human Resources department. Those who cannot master the uses and opportunities of HRIS are quickly re-assigned.

 

Today's technology gives HR professionals access to the power of a massive amount of data (HR Analytics) via cloud computing and other related platforms.  Regrettably, too many HR people do not know how to use this data to predict future needs effectively, nor do their superiors in the executive suite.  It is this failure, not the mastery of technology that helps their company achieve and sustain above average results for their business.  One of the main reasons for this weakness within the HR discipline is because there is a lot of ignorance in how the company operates, how it makes money, and how money and assets are spent within the company. Without this knowledge, technology becomes and underutilized and expensive asset.

 

This opens up opportunities for Human Resources executive officers and their staff to develop their strategic capabilities.  These officers focus on bridging the gap between transactional HR and strategic HR by developing capabilities of themselves and their staff as a business ally to all disciplines within its organization.  In short, in order to master the intricacies of advanced technology and utilizing it to advance the objectives of the company, it require strong business acumen and a much higher degree of financial literacy than is customarily found in many HR departments.  Only by mastering at least those two concepts can HR's arguments be taken seriously, especially when proposing a high financial investment.

 

For example, the production department in one company was experiencing an 8% scrap rate.  The normal scrap rate for the industry was 2%. This meant that 8% of its production costs could not be recouped from their customers as accounts receivable.  Clearly, the production problem is owned by the production department.  However, multiple disciplines might have a voice in the solution, e.g.:

 

  • Engineering: overcoming design and implementation  flaws;
  • Finance: making available and allocating of necessary money to fix the problem;
  • Sourcing or purchasing:

Evaluating raw material that may not regularly meet specifications;

  • Personnel (HR): not adequately trained, compensated or managed;
  • Marketing: inappropriate or lacking information and guidance from customers

 

 

In a situation such as this, HR and other disciplines can build its reputation as a credible business ally - one who has a clear view of how to help enhance business performance across the board and help achieve the company's business plan.  That is one important way to help guarantee that your company and your job will be there on Monday when you show up to work.

 

This, then, is what is lacking within the Human Resource's discipline.  It is interesting to note that in many reputable professional and academic HR journals that claim to predict future trends for HR, very few of them acknowledge the business trends that companies and industries are facing.  Without understanding these business trends, how can HR credibly help the company stay in and grow the business?

 

This must change if HR hopes to become a credible business partner and take a seat at the decision-making table. To do this, HR professionals must develop additional skill sets that complement technology mastery and growth.

 

  1. Financial Literacy

HR must develop a much higher degree of financial literacy of their           company and the industry in which they compete.  Many companies          who practice "Open Book Management" teach their managers and            supervisors, and subordinate staff how to read and understand the   company's financial statements (Balance Sheet, Income Statement &            Cash Flow Statement) and trace their work output to the various and       selected line items on those statements.

 

From this knowledge, people begin to think differently about their job     and begin to solve problems on their own or within their small teams.

 

  1. Business Acumen

           In order to understand future business trends in business and HR's role    in addressing them, they must competently understand both the    business challenges facing the company. All officers and executives    should be able to understand several aspects of the business

 

  1. How does my company make money? g. Does Rolls-Royce sell automobiles? No! It makes money by selling prestige and status and competes with furs, yachts, jewelry, ski chalets in Switzerland, etc.  Yes it makes automobiles, but Rolls Royce customers want something more than just a car. It is critical to understand just what you are selling and why people are buying from you.
  1. How does my company compete in the marketplace? What is our competitive strategy? How does HR work impact competitive advantages?  While interest rates are rationally the domain of the finance department, understanding the impact can have a direct correlation with hiring more or laying off employees;
  1. What threats do my company and my industry face that can threaten our existence? Marketplace competition is brutal and many of our competitors do not always play by our rules. HR technology can be used to predict payroll, benefit and other labor factors across a wide variety of business development opportunities;
  1. How does HR help the company generate competitive advantages and sustain them over a long period of time? Predictive HR analytics technology can help immeasurably. But no finance executive will approve funding for such application without a very clear and concise analysis of HR's  return on investment (ROI)

 

 

For the Human Resources professionals, mastering technology is but one piece of the puzzle - and one that they have demonstrated that they can do well. Financial intelligence and business acumen are two additional but important pieces that help to see the big picture. Advanced technology is very important if one wants to analyze metrics such as:

  1. Availability and cost of skilled labor and personnel
  2. Employment laws and conditions for employment
  3. Availability of training programs
  4. Language capability of selected managers and staff
  5. Coordinating human resources with operational requirements

 

 

Recommendations

  1. Require financial intelligence as a pre-requisite for advancement to any mid to upper level HR position. Task a member of the senior finance staff to teach basic finance and accounting and provide follow-up programs that discuss finance and accounting issues that are pertinent to the company and its industry.  Local colleges and consultants will be happy to teach these skills if no one is available internally;
  1. Talk to finance and other senior leaders and ask them to help you develop your arguments for more technological advancements. Let them teach you how to get them to say YES.
  1. Teach all employees how the company makes money, what existential issues are facing the company and industry, and how decisions are made. Show them how to read the marketplace and ask them for their input.  Add to an individual's job description and performance appraisal the requirement to train his/her subordinates on business issues.
  1. Institute a vigorous program of education and self-improvement for everyone.  Every employee has a vested interest in the success of the company.  The more the employee knows about the business, the more control he or she will have over their professional careers.  MEASURE THEIR PROGRESS
  1. Teach HR people how to link their work with the performance success metrics that keep their company in business.
  1. Continually develop HR's technology capabilities that includes backward, present, and future applications of people analytics. The HR staff is more than capable of developing their technology skills if it advances the objectives of the company and enhances their strategic HR credentials.