Gone With the Wind: The Road to Advanced HR

Some HR leaders such as David Pace at Starbucks under Howard Schultz, or William Conaty at GE under Jack Welch, or Randall MacDonald at IBM under Sam Palmisano and Lou Gerstner, have achieved iconic stature regarding their strategic roles, advanced HR functions and personal HR contributions.

The CEOs of these organizations are almost as famous for their deep commitment and willingness to spend time and energy developing human capital as they are for their financial and strategic achievements. When such HR leaders discuss their contributions, they often give credit to their CEO and leadership team.

Did leaders such as Schultz, Welch, Gerstner and Palmisano reach enlightenment because their HR leaders convinced them of the value of investments in human capital and an advanced HR organization? Or are HR leaders such as Pace, Conaty and MacDonald fortunate or skilled enough to have chosen organizations where HR had a strong supportive tailwind? Some HR leaders have said it’s easier to do strategic human capital when leaders already believe in its value than to try to teach leaders who don’t get it.

CEOs such as Schultz, Welch, Gerstner and Palmisano were shaped by formative events. Welch advanced through GE when deep commitments to leadership development were ubiquitous. Palmisano spent a career at IBM, where respect for the individual and fair employee treatment had long been a tradition. Schultz grew up in the Bayview housing project in Brooklyn, N.Y. He was the son of a receptionist mother and a father who held odd jobs until, when Schultz was 7 years old, his father suffered a minor accident and lost his job. Schultz has often said these events led to his commitment to build a company with soul, with employment policies such as extending health care to part-time employees.

Yet, HR spends much time on things like improving human metrics, human capital ROI calculations, enhancing HR leaders’ business skills and advancing the strategic partner role. Much of this is justified as convincing skeptical non-HR leaders about the value of human capital. HR is working hard to change skeptical leaders’ headwind, but is it more promising to find a tailwind with organizations and leaders that already get it?

In our latest book, Achieving Excellence in the HR Function, Edward Lawler and I found that how organizations operate produces powerful headwinds and tailwinds. We asked HR leaders in more than 100 organizations to rate how much their organizations operate in the following ways — the percentages reflect how many said “to a great extent” or “to a very great extent.”

Bureaucratic: Hierarchical structure, tight job descriptions, top-down decision making — 32.6 percent.

Low-cost operator: Low wages, minimum benefits, focus on cost reduction and controls — 9.2 percent.

High involvement: Flat structure, participative decisions, commitment to employee development and careers — 39 percent.

Global competitor: Complex, interesting work, hire the best talent, low commitment to employee development and careers — 28 percent.

Sustainable: Agile design, focus on financial performance and sustainability — 49.2 percent.

Throughout our survey, we see the same pattern: The more HR leaders described their organization as bureaucratic or low-cost operators, the less they reported that HR had necessary skills, used advanced human capital approaches, served an active strategic role and added value. In contrast, the more HR leaders described their organizations as high involvement and sustainable, the more they reported strong HR skills, advanced HR practices, high HR functional effectiveness and a strong HR strategic role.

The road to advanced HR seems to depend on an organization’s context. Some HR leaders react to these results by telling me they relish the challenge of convincing skeptical leaders and organizations to embrace advanced HR, and I commend them for their commitment. Others say picking one’s spots is essential to advancing HR.

Undoubtedly the profession will need both, but it may be useful to consider one’s own organizational environment and whether one is tacking against or with the wind.

John Boudreau is professor and research director at the University of Southern California’s Marshall School of Business and Center for Effective Organizations, and author of Retooling HR: Using Proven Business Tools to Make Better Decisions about Talent. He can be reached at editor@talentmgt.com.