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Business Management Articles / General Management

THE STRATEGIC ROLE OF HR

by Rene T. Domingo (email comments to rtd@aim.edu)

As people become the key competitive advantage in any industry especially banking, the human resource (HR) development function will and should play a more strategic role. It should go beyond its mere administrative support function to operations and front line departments. Whether or not company views HR strategically may decide whether market share, sales, or profits would increase or not. An effective HR strategy becomes equally decisive as the company’s marketing strategy.

Technology too is changing HR roles. As industries, specifically the banking industry, and the way they compete become knowledge-based, HR performance indicators will shift from manpower and man-hours supplied to brainpower and brain hours delivered. The key result areas in people management will also shift from production and quantity to productivity and quality. Capability, measured in employee ideas generated and implemented, and productivity gained, will be more important than capacity, measured in man-hours available, man-hours lost, absenteeism, etc.

What is strategic HR? How different is it from the conventional administrative HR? The current HR function is very much configured like the company’s purchasing department. People, like parts and supplies, are requisitioned by user departments based on depletion and growth rates of their operations. Both resources are screened for quality control and cost or budget constraints. The only slight difference is that unlike purchased parts, people are trained or prepared before they are sent to the requisitioning parties which may train them further before actual deployment or usage. HR is also involved in the replacement, termination and retirement process of unusable people assets, much like the handling of depreciated equipment. In short, most HR systems exist only for replenishment and maintenance of a resource called people.

Strategic HR does not abandon these administrative responsibilities. Otherwise, no other department in the company will carry out these “operations-sustaining” activities. But its main task is to participate in corporate strategy rather than support administration. Strategic HR is more proactive rather than reactive in its relationships with the other functional areas. It is more concerned about what its internal customers need in the future to compete globally. Strategic HR managers do not wait for instructions, requisition or complaints. It does its homework, does research on the future, and offers proactive solutions and strategic advice.

Strategic HR is preventive rather than corrective or punitive. It is developmental in orientation. The conventional HR function is the dispenser or implementers of justice and protector of corporate assets. It views employees as resources not be wasted rather than strategic resources to be developed. Strategic HR aims to create a working environment conducive for employees to do things right the first time. It aims to prevent mistakes rather than punish them.

Strategic HR is output driven rather than input oriented. For instance, training results are measured not in terms of training hours or number of trainees per year, but in terms of improvement in the trainee performance attributable to the training. Performance improvement can be in terms of productivity, efficiency, quality of work (defects), customer satisfaction or conversely, number of customer complaints received. Strategic HR personnel are concerned with these results as much as the operating departments it serves. In spite of the fact that output results are more difficult to measure than input deployed, strategic HR aims to find ways and means to directly and indirectly measure these more accurate metrics of its success and effectiveness.

Strategic HR is mainly pre-occupied in molding the employees of the future today. For organizations to survive and excel in the future, its needs to develop or acquire employees who are multi-skilled, cross-functional, empowered, team players. In addition, they have to have high emotional intelligence (EQ) and capable of thinking “out of the box” about the future. They should be capable not only of improving their work, but reengineering or reinventing it if necessary. Front liners who are engaged in millions of “moments of truth” meeting customers, must have superior flexibility, resourcefulness, and excellent memories especially if their task requires greeting customers by their first or last names. Strategic HR keeps these employee attributes as its goals while conducting its basic processes of recruitment, training, job rotation, career pathing, and performance appraisal.

Strategic HR aligns performance criteria systems with corporate goals and strategies rather than traditional functional concerns. It includes in performance criteria of both rank and file employees and managers those that will enable them to contribute to corporate goals. Most traditional HR performance appraisal systems basically gauge how well a subordinate satisfied his boss or superior during the appraisal period. This degree of satisfaction may or may not be related to how well the employee contributed to corporate goals. Most of the time, it does not. For this reason, conventional performance appraisal has become a highly politicized, controversial, wasteful exercise that creates more disharmony than teamwork in the organization. Strategic HR appraises people on the more relevant output performance like quality, productivity, internal and external customer satisfaction. If negative criteria are used, these become defects or rework, wastes, and internal and external customer complaints or returns. In banking, performance appraisal may include lost calls, closed accounts, queuing time, and clerical errors, ATM downtime, improvement projects. Strategic HR aims to change employee behavior and attitude by directly connecting his appraisal (and eventually his pay) to what actually matters to corporate performance and customer satisfaction. It puts less weight on nebulous criteria like teamwork, attendance, boss satisfaction, and neatness.

HR is no longer a backroom or support function. It is in the forefront of corporate strategy, much like sales and marketing. It provides and determines competitiveness to an ever increasing degree. All other things being equal – financial, physical, and product assets – people will make the difference between two competing companies. Strategic HR can make this difference happen.


 

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