How HR can (and should) play a leading role delivering company results

Pretty much every leading business knows their people are central to their strategy and success, often of course lately, backed up by technology. You will rarely find a company, even in tech, that doesn’t quote their people among their main assets, driving and innovating at every level.

So, it seems a paradox that many firms, especially service-based firms, don’t prioritise people decisions within their structure. Although people are the cornerstone of their product. They are managing clients, producing and cross-checking statements and results, they are liaising with regulators and clients, and finding out what clients actually want.

Where HR doesn’t sit

I heard a story of a fast-growing tech firm which moved its HR department under the CFO. So, you know what happened next, right? Everything was trimmed down, very trim!

And that’s not to say that I think HR should have free reign over budgets and so on, but the issue is that moving HR under Finance will disempower your people decisions.

This will have a negative impact your performance, engagement, and staff retention at all levels in your company.

Having a CFO run HR will not save money.

It will be very, very expensive in the long run.

‘Human Resources’ is just the wrong title. It needs updating urgently.

Why aren’t we calling our Human Resources departments what they really are?

Human Capital departments.

You’d look after capital if you had it, right?

·      Like, for example, the type of capital that is probably the main cost on your Balance Sheet or P&L.

·      The type of capital that can produce SERIOUSLY LARGE returns.

·      The type of capital that can grow, with compound interest, over time?

Your people are your greatest asset, and they are also most likely, your largest cost.

So if you’re not strategic about your people decisions, then not only are you missing out on the compound interest and potential returns in developing them, but you’re also not strategic about your largest cost, and therefore, your largest LIABILITY.

Who isn’t strategic about their largest liability?

Most C-levels are unaware that Human Capital is in their blind spot.

They know their people give them the edge, but imagine how much more of an edge you could get if you had, [a person or a group of people] looking at your people decisions more strategically?

That is not a job that finance can do. It’s not a job that business can do (and nor should they). Some would argue, it’s not a job that some HR departments can do either, but that’s not a reflection of your HR department, that’s a reflection of the importance the leadership of the organisation places on HR.

The Germans get this one right

It could be a coincidence, but often in larger German businesses, I meet the Head of HR, who is also the COO. They see running HR as a central part of running operations.

Decisions are effective, and quick. Decisions are made well, because they were well-informed, by company strategy. There is no need to go through another person or group of people.

The CEO didn’t see HR as an obstacle, he saw them as the solution.

But many C-levels appreciate and respect their staff. And they know they are valuable.

So... how did we get here?

HR Teams have not grown in ratio with business growth

Companies in Luxembourg have grown exponentially over the last 15 years. Most of them have had years where they grew at numbers which are multiples of 100% of their original numbers year on year.

HR departments have not kept up with that growth, they are behind, either based overseas, or hideously short-staffed, and often outdated, with most of the staff only doing ‘lights on’ work. This type of work obviously doesn't attract the best and brightest HR leaders.. although there are some great ones around.

And who can blame them? Very few teams are run from inside Luxembourg itself, despite the Lux office becoming the largest of the group in many.

Few HR Teams are run locally, and even fewer, run EU-wide HR, although they probably should.

Many C-levels are still trying to run HR themselves, on top of client issues, technology decisions, and running strategy.

Almost all local HR teams are understaffed. They are just about able to keep the company going with issuing contracts, managing sickness and maternity leave, and recruitment. With all the ‘lights on’ work, there is little or no attention being paid to strategy, and revenue-producing areas. What an enormous opportunity.

On the other hand, almost everyone complains regularly about how hard it is to find and keep talent.

If you have a staff retention issue, issues with salaries, onboarding, client retention, management, or people and politics issues of ANY kind, I invite you to look at the size and seniority of your Human Capital Department, your Human Capital Budget, your Human Capital Suppliers, and there you will find the answer.

Rana Hein-Hartmann is a people specialist who has spent 17 years supporting CEOs and HRDs on a range of issues related to human capital; from recruitment to retention, with a special focus on building profitable, stable, and successful Luxembourg-based fund businesses.