From the Publisher

For all the theories and talk about making human resources a strategic component of business, in most organizations it's still viewed as a support function -- and a costly one at that. This book presents a nine-step roadmap to making HR a true strategic partner, drawn from the author's years of experience at major organizations. Christensen simplifies HR hierarchies by aligning myriad functions with five fundamental processes, and answers key questions including:

* How do we get line management engaged and build a partnership between managers and HR?
* How do we acknowledge, address, and overcome weaknesses in HR functions and processes?
* How do we resolve tensions between generalists and specialists so that they can join forces toward common goals?

The book includes a detailed account of how the roadmap was implemented at Hallmark. This case study shows how a real HR department reached an often-stated but rarely-achieved goal: that of becoming an indispensable partner and driver of company growth. Readers will find much food for both thought and action in this revelatory book.

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Roadmap to Strategic HR

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Chapter One

MOST OF US HAVE EXPERIENCED a personnel or HR department that seemed overwhelmed in paperwork or details. Some of these departments are almost comical displays of bureaucratic inefficiencies. Many of us have interacted with an HR representative who seemed absolutely inflexible and unable to consider any possibility that wasn't "by the book." Personnel/HR groups historically established a reputation that they still battle today.

The Evolution of HR

It might be helpful to put strategic human resources into a historical context that shows what it is and how the field has evolved over time. Strategic human resources work is relatively new in the history of personnel or HR groups. Like most fields, the function of HR has evolved through the decades, influenced by both internal learnings and external trends and theories. Through this evolution, HR has passed through a series of stages. Each of the stages listed in Figure 2-1 is descriptive of many organizations' current HR reality, regardless of what the function is currently called. In the beginnings of modern business, the staffing function was essentially one more line item on the list for Purchasing. It acquired and got rid of people. People were viewed andtreated much like one more commodity to be bought and sold at the best price. There was virtually no attention paid to sensitivity to people's needs or to their productivity. Productivity was left entirely to management.

The field of personnel had evolved by the 1950s and 1960s and even into the 1970s into a function that focused primarily on hiring, compensation/benefits administration, labor relations/union management, and employee relations. Many of the leaders in personnel came up through compensation/benefits or labor relations. While these were-and continue to be-very important areas of work to be accomplished, they were not viewed as integral components of managing the strategic elements of the business. They were administrative necessities with which management typically wanted little involvement. Personnel's job was primarily to make sure that employee problems and costs were kept to a minimum and that talent was available when and where it was needed.

With a growing awareness of individual employee needs and an assumption that a happy and engaged worker is a more productive worker, the personnel department in many companies strengthened its employee relations focus and renamed its group "Human Resources." Though the title suggests looking at people as a critical asset to be leveraged in the creation of value, most departments remained highly administrative, and, in most cases, there was more focus on protecting employees than on leveraging their skills to enable business strategy.

The Relationship Between Organization Development and HR

In the late 1960s and early 1970s, a new field emerged out of the social psychology arena. This new discipline became known as organizational behavior or organization development (OD). Initially, it tended to focus on the effectiveness of individuals and small teams. In its early years, this emerging field was distinct and separate from the personnel/HR functions of that time. Over time, OD became part of many personnel/HR groups, but the two fields had an odd, almost tense relationship. Those involved in classic human resources administration were often uncomfortable with many of the basic premises of the new field of organization development. They and their line management counterparts had a sense for its potential, but they were often suspicious and somewhat envious of the newfound interest that management evinced in OD groups.

Through the 1970s, it became clear to leaders in the field that focus on individuals and small team behavior/effectiveness, while interesting, was not enough. Through the mid-1970s, an increasing amount of attention was given to the implication of organizational processes and systems for the behavior of individuals and small groups. People in OD began looking much more closely at these elements:

Planning systems

Measurement systems

Organizational structure and corporate governance

Work flows as a system

Budgeting and economics as a system

They began to realize that all of these organizational systems had to work together if they were to have a significant impact on human behavior.

However, as the field of organization development evolved, it remained quite separate from the personnel groups of the day. Most people in OD wanted nothing to do with what they viewed as bureaucratic personnel departments or the emerging Human Resources function. While some OD groups were structured as part of HR, many were not. When the two functions were joined structurally, far too often they still remained distinct in terms of the work to be done.

OD often worked hard to establish an identity separate from HR. Some organizations literally created two separate structures-one for personnel/HR and another for OD. When OD and HR were structured separately, this seemed to ensure that HR remained administrative and bureaucratic. At the same time, most people in personnel or HR wanted little to do with the emerging field of organization development. Many saw it as "pie in the sky," as not being grounded in reality, as being far too risky a venture to propose to their line leadership.

Despite this gap between OD and HR, the discipline of organization development was key in the evolution of strategic human resources. From organization development came the approach of connecting daily work to the development and fulfillment of organizational strategy. The organization development discipline has strengthened and enhanced many other areas of human resources.

Let me be clear that strategic human resources is not a "takeover" of HR by the OD crowd. Some have made the mistake of viewing it as such. Organization development as a discipline is not the new criterion for HR leadership. Rather, the new HR leaders need to be strategic and systemic in their thinking and diagnostics. I would argue that, in the recent past, OD has proved to develop these strategic skills faster and better than most other groups in HR. By its nature, organization development is strategic. By its nature, it is about the design of systems that support the overall vision and purpose of the organization. These qualities give an HR leader the ability to approach her work in a much more strategic manner. HR leadership does not, however, require a formal organization development background. It absolutely does require a strategic/systemic background. Many current successful leaders of strategic HR groups have some organization development experience in their background.

The Evolution of the Way I Viewed HR

After finishing graduate school, I spent my first eight years as an internal OD consultant first at Digital Equipment Corporation and then at Martin Marietta. I will never forget the utter shock I felt when Peter Koch, a senior HR leader at Digital, asked me to come directly from graduate school into a personnel job. He argued that this was critical in transforming what was called personnel into a truly strategic force in the company. He also tried to convince me that it was in my long-term best interest and that this was surely the direction that the field was going.

I couldn't conceive any value in such a job selection. Why in the world would I waste a great academic background in organization development by moving into personnel? It would be many years before I realized how insightful Peter Koch had been. He was probably way ahead of his time with his vision of transforming the personnel or HR function by combining it with organization development theory and skills. But, because of my obstinacy, Peter patiently allowed me to move directly into an OD job that I truly loved.

After spending about eight years in internal OD consulting roles, I was once again invited to think seriously about a move into HR leadership. Frankly, I wanted no part of it. I still considered much of the work done by HR to be cumbersome, bureaucratic, and administrative. I did not see it as being strategic in nature, nor did I see it as being able to take advantage of the strategic and systems skills that I believed I had developed as an OD professional.

However, my systems thinking eventually got the best of me. I began to realize that if I was serious about organization effectiveness, I had to become serious about key human resource systems. For example, I had to become serious about the process of rewarding and acknowledging behavior. If I was serious about organization effectiveness, I had to become serious about the process of acquiring and retaining talent and planning for future talent. If I was serious about organizational effectiveness, I had to become serious abut the training and development processes of employees.

In essence, I began to realize that anyone who is serious about organization effectiveness has to be equally serious about all of the components of human resource management. The problem was not that human resource management was unimportant or irrelevant. The problem was that throughout the 1970s and 1980s it was not being managed in a very strategic manner. But most OD professionals wanted nothing to do with HR.

Conversely, my friends in HR who were thoughtful about their field had to realize that if they were serious about people-even if their primary interest was the treatment of people-they had to be serious about the design of organizations and the design of work. They had to be serious about the role that organization and work flow played in the experience of employees from day to day. They had to be serious about management processes and systems. These systems had as much influence upon the experience and feelings of the employee as anything else could. Yet most HR professionals wanted nothing to do with OD.

I realized that the serious OD person and the serious HR person had to understand that while there were aspects of each of these separate fields that needed to be fixed, these fields were conceptually joined at the hip. The field simply needed leadership that could begin to see the interdependence of the two fields and the points of overlap with the field of strategy. It needed leadership that could help meld the three into one common field that had the best interests of people and of organizations at heart. It needed more people like Peter Koch.

I was delighted some years later when colleagues in the Organizational Behavior Department of Brigham Young University developed a simple model (Figure 2-2) that legitimized the relationship between these three disciplines. This simple yet elegant depiction illustrates the emerging field I was facing and has come to guide my conceptual framework for strategic human resources. I made my first foray into human resources with a clear vision: to connect the strategic components of organizational behavior with the critical human resources components, which I still did not understand terribly well at that point. The first thing that I did as a budding HR practitioner in the mid-1980s was to seek out the experts in this emerging field of strategic human resources. Unfortunately, in those early days, I found too few HR practitioners who had developed the business sense, strategic perspective, and system thinking skills needed to add value to complex business issues. The majority of the HR leaders with whom I had associated had grown up in the administrative or labor relations sides of human resources and had not made the strategic connection to the business.

I did, however, find a group of academics and consultants who were beginning to bring the two fields of human resources and organization development together conceptually. (See the Appendix for recommended articles and books by some of the clearest theorists on strategic human resources.) They spoke eloquently of the need for HR leaders who contribute to business strategy development, who are agents of change and organizational productivity and also champions of the employee.

HR in Our Decade

Over the past decade, the field of HR has gone through unprecedented change. This change has been fueled by the creative thinking and writing of an emerging cadre of academics and consultants, including Ed Schein, Ed Lawler, Dave Ulrich, Norm Smallwood, Wayne Brockbank, Jac Fitz-enz, Michael Losey, and Gerry Lake. They have been incredibly helpful in expanding the way that HR professionals and line management think about HR. Their contributions have included:

Making a compelling case for a new human resources.

Providing clarity around the different roles that HR professionals might play. Ulrich describes these roles as:

* Strategic partner

* Administrative expert

* Employee champion

* Change agent

Identifying the competencies that are needed in each of these areas. As a result, a rapidly growing number of HR professionals have started the process of developing these competencies.

Offering new insights into the measurement of human resources results and suggesting how to know if HR is making any real difference.

Creating the concept of business partnership, the need to connect with the business and make a difference on bottom-line results.

All of these contributions have moved the human resources field forward significantly.

Another tremendous contribution is found in the book Why The Bottom Line ISN'T. In this volume, Ulrich and Smallwood summarize a landmark piece of research by Baruch Lev of New York University. Lev makes the case that, while historically there was a high correlation between hard assets and the stock price of a company, over recent years the hard assets of a company seem to account for significantly less of the stock price or value of the company. Lev explores what accounts for the rest of a company's valuation. He describes the other critical factors as "intangibles."

Ulrich and Smallwood explain, "Lev has defined the intangibles from a financial perspective as a claim to future benefits that does not have a physical or financial (stock or bond) embodiment. He further identified sources of intangibles as discovery, organization, and human resources ... human resource intangibles focus on training, culture, and leadership. Lev further suggests that the human resources domain of intangibles requires more work." It appears there is a direct connection between effective human resources work and organizational value. The quality of our attention to organization, leadership, and culture has a real connection to a company's value.

Ulrich and Smallwood quote Robert Eccles and his colleagues at PricewaterhouseCoopers, who indicated that "Only 19 percent of investors and 27 percent of analysts 'found financial reports very useful in communicating the true value of companies.' They found three clusters of performance indicators that mattered most:

1. Customers: Sales and marketing costs, distribution challenges, brand equity, and customer turnover rates

2. Employees: intellectual capital, employee retention, and revenue per employee

3. Innovation: revenues from new products, new product success rate, R&D expenditures, and product development cycle."

What a remarkable case for the need to focus on human resources work. The overall value of the entity is in significant measure created by the effective management of the human resources of the organization. This assessment isn't put forth from a big HR professional organization-it's coming from financial analysts. The business case is real. The human factor of an organization and how effectively it is managed make a significant difference to the financial success of the enterprise.

Such contributions have been invaluable. They have stretched the minds of those interested in human resources work and encouraged them to explore new ways to think about their field. However, many practitioners are still struggling to learn how to implement these new concepts. (Continues...)

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Excerpted from Roadmap to Strategic HR by Ralph Christensen Copyright © 2006 by Ralph Christensen. Excerpted by permission.
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