Elevating the HR Function - Part 2 of 2

Part I of this article addressed the issue of elevating the HR Function into a more strategic type function, as opposed to an administrative type function. Part 2 of this article will describe several strategic ideas for moving HR into the strategic function it must become.

In Part I, we mentioned the importance of HR as it relates to core competencies. Organization's need to maintain and build their core competencies since this is the source of competitive advantages in the marketplace. Core competencies have a lot to do with recruiting and retaining the best people. Obviously, HR should play a lead role in this mandate. However, we do not want to stop here since there are numerous other strategic issues related to HR.

Elevating the HR Function - Part 1 of 2

Organizational capabilities are developed primarily through the development of human resources. Despite the enormous importance of human resources, many organizations treat the HR (Human Resource) Function as just another administrative function with high overhead costs. As a result, the HR Function is often targeted for outsourcing and downsizing; crippling it from its real potential for value-creation within the organization.

Do You Know Your Vital Few?

Assessing business health is no different than assessing your own personal health. It resides in a set of key metrics or vital few. For example, if you want to size up your personal health, you look at vital indicators such as blood pressure, glucose number, cholesterol, and pulse rate. You continue to monitor theses on a regular basis and if something goes outside the normal range, you take corrective action. So the question is why aren’t you doing this for your business?

Keep on Bootstrapping

Regardless of where your company stands in the growth life cycle, you should always consider some form of bootstrapping. Bootstrapping is the use of little or no money by leveraging available resources. Bootstrapping enables you to control cost by getting things done without committing cash. This approach is viewed favorably by current and potential investors since you are setting priorities around maximizing value.   

Leveraging Knowledge Management

It is ironic that so many companies have an abundance of knowledge, but fail to use it for managing the business. Knowledge is a critical resource that warrants much more attention. If we are serious about managing knowledge, then we need to embrace the concepts associated with knowledge management.

“Businesses, especially large ones, have little choice but to become information-based. To remain competitive, maybe even to survive, businesses will have to convert themselves into organizations of knowledge specialist.” – The Coming of the New Organization by Peter F. Drucker

Find Your Aggregation Points

The world is full of aggregators who can bring enormous value to your business. For example, you may hire great designers in Italy, enlist programmers from India, manufacture your product in China, and manage the business from the United States. Aggregation is the bringing together of different parts to meet important business objectives.  Aggregation often involves broad and global participation. And the use of aggregation results in higher value as opposed to doing everything in-house.

Start Measuring Intellectual Capital

Increasingly, businesses need to pay attention to growing the intellectual capital of the business. Hard assets (facilities, vehicles, equipment) lose value over time and may not provide the highest returns for the business. The soft stuff (talent, leadership, patents, innovation, etc.) creates the most value and return.

A good way to frame this challenge is to think in three’s. Start with the three main types of intellectual capital and the corresponding metrics:

Managing Complexity

You Must Understand Crowds to Manage Complexity

With so much change and uncertainty before us, one way to throw out the noise and traditional viewpoints is to aggressively manage complexity. When you start to manage complexity, you immediately gain some control over the change and uncertainty that you feel you have no control over. For example, “complexity theory” recognizes that crowds are a big factor related to complexity. Knowing something about the psychology of the crowd can be important to how you manage complexity.

Value through Motivation

Motivation is Critically Important to Business Success

So much of what drives value and greatness in any organization resides in how the people are managed. Jim Collins, author of Good to Great , has repeatedly emphasized the importance of attracting and retaining the best people. However, a big part of this has to do with motivating your people. When you focus on this single element of value, namely motivation, you can really unleash so much value and performance within any type of organization.

Why More Companies Should Consider OpEx over CapEx

The OpEx Approach Provides More Flexibility

Increasingly, businesses need to improve their focus by doing a few things exceptionally well as opposed to owning each and every long term investment. The level of in-house expertise required to support major investments simply does not exist within most companies. Couple this with the fact that we now live in a world driven by intellectual assets and not hard assets.