For Eng.Kelvin Only

Chapter 1: From Personnel Administration

to Business-Driven Human Capital

Management—The Transformation of the

Role of HR in the Digital Age

Overview

Patricia A. K. Fletcher

What an exciting time to be in HR! Over the past thirty-plus years, we have seen the

emergence of the personnel department and have participated in the transformation of this role

from that of an administrator to, more recently, a critical component in the competitive success

of the business. When HR (the Personnel Department) first began to surface as a function in

business, executives and other decision makers were focused on tangible goods and financial

resources. HR’s role was to support back-office functions, mainly legislation requirements,

payroll, and personnel data maintenance. Fast forward to today—now, every CEO speaks of the

people behind the corporation’s success. In fact, many corporations brand their workforce as part

of their marketing campaigns to attract not only the right talent, but also to attract business and

consumer buyers.

Savvy executives understand that, in a tighter, tougher, less predictable economic climate, they

have to take maximum advantage of the skills and expertise available in the existing employee

pool.

During these past few years, corporations have begun to embrace a “human capital approach,”

one that considers the money spent on fostering innovation in the workforce as an investment. As

with any asset, by nurturing, protecting, and growing this investment, organizations that align

workforce strategies with business goals and objectives will benefit from capturing and focusing

the attention of the workforce.

Just as HR’s role continues to change, technology has continued to evolve. If HR’s role has

always been to deliver the workforce support and management based on the needs of the

business, then technology’s role has been that of an enabler. Over the past years, HR processes

and procedures have been supported by everything from complicated file-folder systems to

automation, going from usage of multiple systems and databases to a single version of the truth

with comprehensive HRMS. Now companies are not only leveraging technology to support the

function of the HR department, but they are also leveraging human capital technologies for use

by everyone in the business. Human resources as a function has evolved into human capital

management (HCM). Where HR was the responsibility of a centralized, or sometimes

decentralized, department, HCM is the job of everyone in the business, from employees to

executives.

Using the Transformation of HR to HCM in Business graph (Figure 1.1) as a guide, in this

chapter I review the transformation of HR from the emergence of the personnel department to

the current HR and talent organizations as they stand today. This chapter also provides a review

of the evolution of HR processes from manual to complete automation. The transformation of

HR is broken down into three main categories that talk not just to the focus of the HR department,

but more important, to the value of HR total company value.

Figure 1.1: Transformation of HR to HCM in Business.

Efficiency and Control: Polite and Police Phase

Key Business Issues

For the many who lived through them, the 1970s were turbulent times at best. The collapse of

the gold standard and the oil crisis were just a few factors of the struggling economy. With a

mostly opposed and controversial war that resulted in dramatic social change and disillusionment

with government, the United States, as a nation, was in a state of chaos. As America struggled

internally with conflict and distrust, businesses surged forward with the emergence of new

industrial nations, while new legislature promised to ensure employment equality and worker

safety. With mostly manual processes in place to support compliance, the worry from the

corporate world was not necessarily the legislation itself, but the increased and new burden of

paperwork and processes and no internal group to support these new requirements. For many

companies, this is when the personnel department was born and employee rights and relations

began to take a more focused role in business and the press.

Despite new legislation to protect them, the 1970s and 1980s also marked the beginning of a

new feeling for employees: the lack of job security. With the promise of cheaper labor in

developing countries, manufacturers began to close down factories in the United States in favor

of cheaper facilities and labor in developing countries. This resulted in the same products for less

money to consumers, but a loss of jobs for Americans. At the same time, lower-cost items from

foreign companies, particularly Japanese car manufacturers, made a huge impact on the U.S.

GDP.

As Detroit was struggling with the unforeseen competition of smaller, more economic cars,

Americans worried about the impact of closing down factories combined with the increase in

foreign goods consumption. Economic forecasters began to assure the public that, with millions

of service jobs being created during this decade and into the next, the economy would not suffer

as long as there was a shift in skills and training among the workforce.

The continued shake-up in the corporate world added to budding workforce fears beyond the

1970s. Leveraged buy-outs, mergers and acquisitions, and hostile takeovers resulted in market

consolidation and, at times, confused business models. The effects of market consolidation on

business efficiency, insight, and effectiveness became even more critical as much of Eastern

Europe opened up when the Cold War ended and the Berlin Wall came down, giving new

opportunities for globalization. Western companies knew that they needed to act fast on the

emerging market opportunities and often did so, with little understanding of the impact on the

existing business. With so many changes to business dynamics, combined with a fluctuating

economy and increasing customer demands for better goods at lower prices, executives struggled

to maintain control and competitiveness in operational efficiency with little insight into business

operations and efficiency. The first step for these executives to compete in the rapidly changing

business environment was clear: efficiency in and control of business operations.

HR Transformation in the Digital Age

In the early part of the 20th century, tax and wage legislation was introduced to businesses, and

by 1943 federal tax was mandated. To comply with these new requirements, a new

function/profession was created—the payroll professional. This was a huge responsibility, with

significant consequences for miscalculation and noncompliance. Payroll clerks struggled

manually through hundreds and, at larger firms, thousands of payroll records, often with human

error, making auditing, efficiency, and control a virtual impossibility. For some companies,

technology could not come soon enough. Those who could afford it, like GE, pioneered the

automation of the complicated and cumbersome payroll process. GE implemented the first

homegrown mainframe payroll solution; they also had the first automated payroll system to

process the tens of thousands of employees across the United States.

At the end of the 20th century, social legislation such as Affirmative Action, Equal

Employment Opportunity, the Occupational Safety and Health Act, and the Employee

Retirement Income Securities Act created a demand for companies to collect, store, manage, and

report more personnel data than ever before. It had become very difficult to keep up with

legislation and to put it into a practice that did not cost significant time and money. At the same

time, employees were becoming more and more aware of their rights, evidenced by the

emergence of lawsuits and challenges to corporate policies. What had previously been accepted

was now under scrutiny. The consequences for noncompliance or discriminatory practices were

significant fines and monetary rewards for victims of wrongdoing.

Due to legislated corporate responsibility for compliance of workforce practices and worker

safety, a new function was created—the personnel department. Combined with the payroll

department in many businesses, the personnel department was primarily responsible for

managing personnel information, data, and processes, and ensuring that the business was

compliant with employment legislation. The HR function served as a police officer of sorts to

ensure that employment practices were adhered to throughout the business. But HR was also the

polite group in the business—often responsible for coordinating company picnics and other

outings, sending birthday notes to employees, and carefully treading in a business where little

value was placed on the business impact of HR.

As the century progressed, so did technology. As mentioned above, some companies, like GE,

forced the issue by creating their own technology before one was available on the market.

Payroll vendors began to emerge, offering not only technology, but in some cases, also services

to outsource this function.

With the onslaught of legislation, companies began to look seriously at technology to gain

control over workforce information without significantly increasing costs to the business. With

other companies, sophisticated, and often complicated color-coded filing systems were used to

store employee data, but reporting remained an issue. Vendors began to promote ERP solutions

that combined personnel data and payroll applications. Some vendors also integrated financial

controlling systems with the HR systems, so that companies could not only make more efficient

financial decisions, but also increase control over where corporate dollars were spent. Companies

could leverage the HR systems to generate reports that demonstrated compliance with legislation,

thereby protecting against costly fines, lawsuits, and bad publicity. With technology, businesses

were beginning to automate processes that, although important and critical to achieve, did not

contribute value. The payoff of technology was not just compliance, operational efficiency, and

control; it also helped to focus resources on other activities beyond keeping manual records.

As the 1980s came to a close, academics discussed the changing role of HR. They speculated

that many HR organizations would transform from a police and polite administrator role into a

more strategic role in the business. Many thought leaders were beginning to suggest practices

through which employees were actual resources, who, if taken care of, could improve their

contribution to the company. This, of course, required that the HR function move closer to the

business. This was also a time for legitimizing the HR function. Professional organizations such

as the International Association for Human Resource Information Management (IHRIM) were

founded as a place for HR professionals to meet, learn about, and share new practices and

technologies to help their businesses be more efficient.

Enable Insight: Partner Phase

Key Business Issues

As the 1990s approached, the pace of competition continued to quicken as customers became

more sophisticated in their demands and Internet technologies began to emerge and tear down

the barriers to entry for competition. Manufacturing and services organizations alike began to

decentralize functions, while trying to maintain centralized control through standardized

processes and information. Many manufacturing organizations, which had long embraced such

quality improvements as Total Quality Management (TQM), began to rely more heavily on

offshore facilities and companies that were spun off into separate businesses to bring products

and services to market. While TQM and other similar business methodologies may have

remained, manufacturers struggled with the human side of decentralized business, including

basic insight into the demographics of the extended global workforce. For example, until a few

years ago, Dow Corning maintained a decentralized organizational structure with a fragmented

IT architecture. Employees reported in to a region, a country, or a division, resulting in a lack of

insight, coordination, and best practices and processes. In addition to perceived enhancements of

operational excellence, Dow Corning wanted a change to the decentralized structure in order to

improve workforce performance. Dow Corning found both tangible benefits as well as intangible

gains from streamlining HR and other business processes through a global installation of an

HRMS. The benefits that Dow Corning realized included a reduction in global organization

barriers, a decrease in redundant activities, and a reduction in cycle time for key processes. [1]

In other markets that rely heavily on “knowledge workers,” such as services and high-tech

industries, companies were beginning to embrace telecommuting or virtual work as part of

everyday operations. With a much more diversified workforce in terms of location, gender, race,

talent/skills, career aspirations, and culture, companies not only required better, more dynamic

insight into personal data, but also tools through which employees could feel “empowered” and

connected to the corporation.

From the mid- to late 1990s, for the United States and many other Western countries, the dot-

com era was alive and well. Venture capital was being plugged into companies, promising new

technologies that would change the way we live and the way we do business. Many of these

companies were promoting fairy dust, with little or no technology having been developed,

compounded by the fact that many of these start-ups lacked solid business plans or business

models that clearly defined how the new products or services would or could make money. This

was a time when technology was being dreamed up and, in some cases, created for technology’s

sake, rather than for an actual market need. With sites like e-Bay and Amazon.com, online

commerce broke down competitive barriers and opened new opportunities for budding

businesses and a new breed of entrepreneurs. Established businesses such as bookstores,

particularly in the west, were feeling the pressure of the Internet push by consumers, business

partners, and even employees.

As the century came to a close, companies were not only focused on the Internet, but the entire

market was scrambling, waiting with bated breath to see what would happen when the new year

began. Consumers with the same fears of data loss were withdrawing savings from banks with

the worry that all of their savings would be lost if the bank systems failed when the clock turned

at midnight on New Year’s Eve 1999. The Y2K scare enabled many software vendors to sell

solutions at record rates with the promise of protection against data loss. Businesses needed to

ensure that valuable customer, employee, financial, inventory, and supply-chain information

would not be lost due to a feared glitch in many software solutions that would not recognize

“000” when the new decade began. For many, this meant a migration of core data from old,

legacy systems to new enterprise solutions that promised foolproof protection against the

potential hazards of Y2K data loss. Additionally, businesses were looking at vendors who could

not only promise data protection against loss during Y2K, but also data protection in the form of

privacy, particularly with the new Internet technologies and information exchange. In particular,

companies that operated in the European Union during this time were beginning to feel the heat

from privacy protection acts created by the EU to protect employees from information exchange

about them.

But what companies required most was control and insight into business operations. As

globalization continued, so did the rapid pace of competition. Continued downsizing and

offshoring meant there was a need for businesses to operate at much lower costs in order to be

competitive. Service organizations and pharmaceutical companies, who competed mostly based

on the talent of their people, required insight into the current skills and gap in talent. With the

war for talent a critical issue on many CEOs’ minds and a shortage of real talent available in the

market, more and more businesses began to focus on branding as a form of recruiting smart

MBAs and other key talent. Understanding where the talent was needed and how to quickly close

the talent gap was a core concern for every CEO, which resulted in a push for more strategic

technology and human resources practices that were linked to business strategies, which were

starting to be coined “human capital management.” In an ROI study conducted by Gartner

Consulting in 2003 of SAB Limited, the brewing giant from South Africa, researchers found that

HR and managers were once forced to make decisions about attracting and retraining talent

based on disparate information consolidated across multiple regions over the course of time,

often making decisions based on outdated information. Faced with the strategic focus of

innovation and efficiency and through the use of an HRMS, HR and managers alike now make

recruiting and workforce development decisions based on current needs, such as skills gaps and

up-skill requirements. Now at SAB Miller Limited, the data is real-time, so the right decisions

are made at the right time. [2]

HR Transformation in the Digital Age

In the 1980s and into the 1990s, the role of the personnel department continued to transform. In

fact, most of these had re-branded themselves as “human resources” in an effort to better align

the new needs of the business. And as quickly as the economy began to turn around, the pace of

competition also began to quicken. The HR department, which was viewed by most in the

business as an expense, was feeling pressure from executives across the business to provide

better data on even the most core information, such as total headcount. The running joke among

many CEOs and CFOs was that if they asked for a headcount report from five different people,

they would get five different numbers. As a result, HR knew that if it was going to change its

role in the business, it simply had to adopt a more suitable IT landscape, like what had been

implemented across the rest of the business. The hope was that, with better information, HR

would be able to deliver better insight into the workforce so that, together, executives and HR

could make better, more informed, workforce decisions.

At the same time, confidence in the HR department continued to go down. In most companies,

HR remained separate from the rest of the business, with no links to executives, their decisions,

or the workforce or managers. And those HR organizations that wanted to integrate with the

business struggled with how to do it.

Executives were used to making decisions based on tangible assets such as revenue and supply

chain. HR and its value of employee relations and development were not tangible and hard for

executives to understand—and even harder for HR to articulate in real, tangible business terms.

As a result, HR was very rarely consulted or included in business decisions, both at the board

level and day-to-day. Executives and managers alike rarely turned to HR for help with strategies,

programs, or people decisions beyond headcount reductions. Employees also held little trust for

HR. HR was no longer seen as the group that paid their employees and set up holiday parties, but

instead as an agent for executives.

Managers, like employees, had little interaction with HR. Hiring contingent or permanent staff

was not a seamless process. Managers wanted the right people to help them deliver and had little

confidence that HR understood the needs of the business in order to hire the right people. When

HR was involved, managers found the process too lengthy and often missed the opportunity to

hire the right candidate. As a result, managers often took matters into their own hands and

recruited on their own, bringing HR into the process during the search or hire phase, instead of

during the planning phase. This may have shortened the cycle time from recruit to hire, but many

times, it drove up the cost to hire.

The employee experience with HR was not that much better. Even the simplest transactions,

such as an address change, were often at least partially manual or required help from HR. This

resulted in processes that took multiple steps and lead times, which further resulted in errors that

aggravated the employee and created extra steps for both the employee and HR and cost the

business money, perhaps in the form of paycheck errors.

With such deep dissatisfaction by its stakeholders and a strong desire to be seen as a key

member of the business, HR knew it had to change its role in the business and it needed the right

tools and systems in order to do so. HR would have to prove its place in the business, and that

meant talking in a language the decision makers would understand—with as much tangible

information as possible. Using data from such companies as Saratoga, HR departments began to

collect employee metrics to compare themselves to others in their industry on such measures as

cost per hire, time to hire, and HR headcount per FTE (full-time-equivalent). Many of these

measurements were used as justification of the purchase and implementation of HRIS to

automate the more non-value-added transactions for which HR was responsible.

The hope for HR was that with the non-value-added processes automated, the HR workforce

could concentrate on providing key services to executives, managers, and employees. At

companies such as TransAlta Corporation, a major North American utilities player, reducing the

amount of time on transactional tasks meant the ability to focus on activities that would

positively impact its business. As shown in the ROI study conducted by Gartner Consulting of

TransAlta’s human resources system implementation, Shandra Russell, a director of HR at

TransAlta, sees the benefits of a new focus: “This cycle-time reduction allows for HR to spend

less time completing administrative tasks and more time focusing on strategic activities that are

core at TransAlta’s business.” [3]

Because employee empowerment was such a critical concern for the workforce and because

the war for talent included the need to retain staff, HR knew that it had to deliver better services

to the workforce. Many HR executives began to understand that the best way to be seen as a

valued member of the management team was to partner with key business executives and

managers. Depending on the business, this included line-of-business heads and sales managers,

among others, to deliver the right tools to the right users, enabling better access to information

and better decision making. HR was transforming its role from just a payroll and benefits

provider into a key business partner who could enable insight and deliver strategies on the

business’s most important and critical resource: its workforce. As the war for talent raged on in

both white-collar and blue-collar jobs, the timing was perfect.

By the mid-1990s, the Internet, or the Worldwide Web, was a common topic of both social and

business discussions. Many businesses had branded corporate intranets that provided information

for their employees, virtual bulletin boards for information ranging from internal job postings to

a calendar of events, even allowing employees to post “for sale” notices of private property.

More and more, companies were providing workers with home access to corporate systems via

an intranet. Companies were able to offer employees a way to manage their personal and

personnel information, working toward work/life balance, while employers were able to keep

employees connected to their own information, enabling a better, more accurate depiction. In a

time when the buzzword for employees was “empowerment,” corporations began to focus on

deploying applications that could give employees all the tools and information they needed to

perform their jobs and make better decisions.

In many businesses, HR positioned itself as a partner to the business. Forward-thinking HR

departments began to reorganize themselves to match the rest of the business. HR associates

were assigned to business groups and became part of the “team,” often joining meetings and

working with the management team to make the best workforce decisions on such topics as

succession and career planning, recruiting, development programs, compensation, and education.

As the HR team members became more visible and value-added programs began to be employed,

employees in many businesses began to have a better relationship with HR, often seeking them

out for career advice. Despite the turnaround in many businesses, there still were many other

companies where HR struggled to be seen as valuable.

In order to gain insight into even the most seemingly basic information about the workforce in

the 1990s, more and more companies were beginning to embrace a more comprehensive

approach to HR automation through which disparate systems and broken processes would be

replaced with a “Human Resources Information System” (HRIS). In fact, most large businesses

embraced an HRIS strategy that enabled them to replace antiquated, time-consuming personnel

processes with streamlined automation. With re-engineering being the technology-to-business

buzzword of these times, along with automation came painstaking reviews of antiquated systems

and procedures. Academics, business leaders, and vendors alike agreed that simply placing

applications on top of antiquated processes and systems would not result in enhanced efficiency,

let alone increase insight into business operations. Instead, with re-engineered processes, the

promise was that companies would replace most non-value-generating, highly labor-intensive

and expensive processes, such as payroll, benefits administration, and employee data capture,

with streamlined back-office solutions requiring little human interaction.

A critical component to HR’s success would be its ability to capture the right and most

accurate information while increasing its service level to executives and the workforce. As we

moved further into the decade, corporations expanded the automation of payroll and personnel

data and began to capture time worked, as well as intangible information that helped plan careers

and successions to key roles in the business. HR began to evaluate self-service applications to

help streamline business processes, capture better data, and—most importantly—put information

into the hands of those who most wanted and needed it: managers and employees. Additionally,

in order to keep control over the integrity of the data and how the systems were used, many

processes leveraged workflow to create “checks and balances.” With workflow, the corporation

maintained control over data, but the processes were streamlined, therefore minimizing the

amount of time to completion.

With better data, of course, came better information; and with better information came better

and more informed decisions. Businesses were beginning to rely on data warehousing and

analytic tools to gain valuable insight into the workforce through dynamic information gathered

from across the business. Not only were HRIS applications enabling operational efficiency, cost

reductions, and control, no matter where or how the company did business, but they were also

starting to enable the type of insight required for key business decisions. With technology

enabling the use and deployment of workforce information, human capital management systems

began to be pushed into the market and across the business.

Just as HR was at this stage, the business tools and services designed for employees, managers,

and executives to both maintain and leverage workforce and personal career information were

also being pushed into the market. These tools were designed to enable employees to input

personal data such as address changes or direct deposit bank information, as well as to give

direct access to corporate information. However, what began to happen—and still continues to

be a problem with many systems in use today—with the advent of the “information age” came

info-glut. Thus, many vendors began to market “portal” solutions to enable the user to have a

window into information he or she would need to perform on the job, manage career decisions,

as well as manage personal business more proficiently. Users across the business would gain

access to the information needed to make better, more informed decisions on anything from

career mobility and job performance to better training options and work/life decisions. As this

phase continues, human capital management has become the job of everyone in the business,

putting HR in the position of not only helping the business run better, but partnering with key

players to make the right business-focused workforce decisions at the right time.

[1] mySAP HCM at Dow Corning. This study was conducted by Gartner Consulting in 2003.

[2] mysSAP ERP HCM: ROI Analysis—SAB Limited. This study was conducted by Gartner

Consulting in 2003.

[3] A Business Value Assessment: mySAP ERP HCM at TransAlta. This study was conducted

by Gartner Consulting in 2003.

Create Strategic Value: Player Phase

Key Business Issues

From 2000 to the present, the world has seen tremendous change in a very short span of time.

Continued globalization, rising customer and shareholder expectations, a volatile social and

economic climate plagued by the fear of terrorism, corporate scandal and the resulting rise of

corporate governance issues, downsizing, off-shoring, and a “job-less economic recovery” in the

Western world have combined to create tremendous pressure on executives to create highly

flexible and innovative strategies to outperform the competition and increase profits and market

share while decreasing the cost of doing business.

Executives not only have to ensure that they are delivering shareholder value; they have to be

able to prove it. With Sarbanes Oxley, Basel II, and International Accounting Standards,

governments across the world are now holding executives personally accountable for what they

say about their business’s performance, with stricter guidelines and legislation than ever. No

longer will executives be able to hide behind the corporate curtain; if found and convicted of any

wrongdoing, executives will not only face penalties, but potentially also face prison. Originally

intended for public companies, these laws are now becoming business practices for privately

held and nonprofit organizations, especially those seeking additional funding. Investors and

lenders want to ensure honest dealings and clear insight into business operations and financials.

Not only are they looking for insight to prove and protect corporate statements about earnings

and performance, but executives must look for innovative ways to deliver value to customers

while outperforming the competition. The economy is slowly turning around, and executives

must be ready to take advantage of new opportunities as they arise.

More and more companies have realized that, in order to achieve business objectives, as many

resources as possible have to be focused on value-added activities, as well as on leveraging

existing assets into new market opportunities. Many corporations are beginning to outsource the

standardized back-office functions in order to focus resources on competitive activities.

With fewer people, less money, and the increasingly rapid rate of competition, CEOs cite

organizational innovation and the efficient and effective management of the workforce as key

competitive advantages, enhancing the importance of human capital management. The problem

becomes how to manage and measure the contribution of the business’s talent. Employees are

unlike other points of leverage, such as financial capital, patents, products, and state-of-the art

facilities and machinery. This makes the management of the workforce assets the most

challenging for the business.

Executives struggle with what to measure and how to clearly tie employee metrics to business

performance. With 30 to 60 percent of a company’s revenue spent on human capital management,

executives want a way to understand how this money is being spent and what the payback is in

terms of impact on business performance and shareholder value. Adding to the pressure to better

understand human capital strategies is the increasing number of financial analysts whose

valuations consist partly of measuring such intangible assets as the ability of the corporate

leadership’s team to execute on strategy or the ability of the business to attract and retain skilled

talent. Mostly, when it comes to people, executives are not sure what to report to analysts to

prove that their workforce delivers better and creates more value than that of the competition.

Most financial analysts hear revenue per employee as a gauge on how successful the workforce

is. Although an important measure, this metric does not tell the story. Indeed, financial analysts

struggle with the form through which they can receive data on the results from investments in

people and other intangible corporate assets.

With such a strong focus on finding ways to accurately report the results from human capital,

business executives, market researchers, and financial analysts alike continue to spend a lot of

time trying to identify standardized measurements that can be used. They need to take this

information one step further—to make critical strategic decisions on the right human capital

approach that will achieve business goals and objectives. This has resulted in the need for new

human capital technology that focuses on creating value for the business, but it also has created

the need for continued transformation of the HR department and its role in the business.

HR Transformation in the Digital Age

For most HR departments, the struggle to gain and maintain partnerships across the business

continues. Like any other line of business, HR has to prove itself and its value time and time

again. What has changed is how businesses are managing people. Unlike the traditional HR

approaches of the past, the practice of human capital management views employee and collective

workforce success as a responsibility of everyone in the business. No longer are corporate

“people issues” the exclusive province of the HR team—a group that was, and many times still is,

distant from strategic decision making and whose contribution to the bottom line often goes

unrecognized.

The organization that heartily embraces HCM understands that maximizing the workforce is

the job of CEOs, board members, business unit executives, departmental managers, and every

employee who wants the company to succeed. Every stakeholder has a role to play in the process

of maximizing the value and contribution of the company’s human capital. It is HR’s job to help

drive and steer the HCM strategies to align with corporate goals and objectives and to find a way

to measure the success of programs against these objectives. To be a player in this new corporate

world, HR must be a proven successful partner who understands the needs of the business and

can leverage this understanding to attract and retain a robust, competitive, engaged, and

impassioned customer-focused and competitively driven workforce. HR must also possess a

technology acumen like never before. They must recommend and provide the right tools that not

only give access to personal information, but also aid in workforce productivity and value

creation.

With this type of value creation, HR can no longer be viewed as a mere cost of doing business.

In today’s knowledge-based economy, how well a company leverages its human capital

determines its ability to develop or sustain competitive advantage. For some, this may mean a

shakeup in the HR department. Some believe that a new business unit that focuses solely on

talent acquisition and the value creation of this talent should be formed. In some businesses

where talent truly is the only competitive advantage, Chief Talent Officers (CTOs) have been

named and focus on attracting, growing, and retaining the right talent to meet current and future

business requirements.

As a player in this new business age, HR or the organization focusing on talent must be able to

translate business opportunity into strategies that will clearly impact the bottom line. In order to

be taken seriously as a player, this function, like any at the decision table, must be able to clearly

measure its impact. This requires not only the insight capabilities from data mining and analytics

tools created in the 1990s in and into today, but also the new ability to interpret and use this

information to make value-creating human capital decisions about investments and divestitures.

In order to meet the needs of the new HR department, many companies have begun to seek out

executives from the business to head HR or the “talent” organization. It is believed that these

executives, many of whom have led a line of business and have had P&L responsibility,

understand what it means to be accountable for delivering business results. Additionally, these

are the very executives who have either ignored HR in the past or have seen HR as an inhibitor,

or in some cases an enabler, for success in sales, development, or other line of business. It is this

experience and business acumen that the new HR requires.

For existing HR executives who remain in the game, many are turning to MBAs and other

trained businesspeople to help reshape HR. No one really believes that HR will ever be a profit

center, but it is believed that HR should ultimately be accountable for the performance of the

workforce, enabling the most profitable, engaged, loyal, and innovative workforce in the market.

That is how an HR player in the business can create value.

A key element for HR to create value at the decision-making level is for them to deploy the

right people to the appropriate strategic initiatives throughout the business. Executives must

quickly respond to changes in business by making workforce-related decisions based on real-

time information—decisions that align corporate strategies with team and individual goals,

supporting employees in all phases of the employee lifecycle.

A successful human capital strategy enables success because employees are truly engaged,

which means that their focus (this includes contractors, temporary staff, and full-time equivalents

or FTEs, as well as part-time workers) is aligned with the goals and objectives of the business. It

also means that workers are actively contributing to achieving individual and team goals that in

turn contribute to the success of the business. Engaged employees work productively and are

dedicated to achieving optimum business performance because they feel a sense of ownership in

the success of the business.

If HR can deliver tools and services that focus employees on activities that increase their

contribution to the bottom line, then HR is creating tremendous value to the business. By

minimizing administrative tasks, HR can focus on what is important to the company’s bottom

line. At TransAlta, for example, HR has achieved the ability to create value by automating

approximately two thousand employee data transactions yearly, thereby enabling the HR

department to refocus. Shandra Russell, director of human resources at TransAlta, stated in the

company’s business value assessment white paper: “This cycle time reduction [from

implementing an HRMS] allows for HR to spend less time completing administrative tasks and

more time focusing on strategic activities that are core to TransAlta’s business.”

As HR’s role transforms into a partner and player in the business, the focus has broadened and

now includes, in some cases, workforce productivity. Now when HR looks to technology to

enable business functions, it no longer looks to solutions to solely automate back-office functions,

both transactional and strategic; they also want solutions that enable a more productive and

focused workforce. As a result, many corporations have adopted a portal strategy that leverages

not only internal production systems, but also enables collaboration across and outside of the

business.

Considering that it is impossible for the competition to copy the talent of the workforce or the

relationships among the workforce, a new portal strategy with a strong focus on collaboration is

critical to competitive success. Now employees can collaborate with partners, customers, and

other employees, leveraging private and secure virtual chat rooms and private knowledge

management warehouses to share data across teams of internal and external players. These

warehouses also ensure that all IP (intellectual property), such as trade secrets or R&D (research

and development) works in progress, is kept with the business and does not leave when an

employee does. With a growing number of the workforce, particularly those in high-tech and

services industries, being virtually based, this type of collaboration enables better, more efficient

teamwork than ever before.

As the market is slowly turning around, many businesses are looking at and implementing e-

recruiting solutions to not only attract outside talent, but to manage talent internally. New e-

recruiting solutions enable employers to maintain a talent pool, with CRM-like capabilities to

maintain relationships with viable internal and external applicants, alumni, and partners, even if

employment is not offered immediately.

As the market struggles to recover, corporations continue to look for ways to maintain an

educated workforce that can meet customer demands and help bring products to market faster

without driving up the cost of doing business. Many companies have cut training costs, but still

need to get out new information in order to maintain competitiveness. HR and training

organizations alike are increasingly turning to e-learning solutions, many of which provide

simulated training so that employees are better prepared to perform their jobs. e-Learning

solutions that are integrated with performance management and development programs provide

automatic links to suggested training for employees, based on performance requirements, career

aspirations, and so forth. Online scoring enables employees and managers to identify areas of

strength and where more work is required. In many applications, e-learning is also integrated

with knowledge management so that employees can access training documents and other related

materials.

From an individual perspective, many HR organizations are turning to an automated balanced

scorecard approach to link employee and team goals to corporate objectives. Balanced

scorecards provide a series of predefined indicators built around metrics that measure the

effectiveness of the HR department, as well as ensuring that employee and department goals are

consistent with company strategies. With performance management solutions, employees can

view how individual performance impacts corporate success. Managers can monitor progress in

terms of employee-level and team-level objectives, so that opportunities or challenges can be

managed before problems occur.

As companies implement more value-added, strategic HCM applications, insight into learning

and talent strengths and gaps means better decisions around customer service, product go-to-

market, and so on. Executives can make better decisions on whom to ramp up and leverage the

workforce, regardless of economic conditions. As metrics and methodologies that help to define

how the investments in human capital programs and their impact in shareholder value become

available and automated as part of analytical decision support, executives and HR will be able to

move forward and make forward-thinking decisions with known impacts to business

performance.

Conclusion

Today, every HR department is in the midst of a seemingly endless transformation, one that not

only encompasses the function of the HR department, but also its role within the business, the

relationships it maintains, and the technology it uses and is responsible for deploying. It is clear

that transformation of HR is inevitable. More and more, businesses are realizing that people are

the only true differentiating factor in long-term competitive success. For so long, workforce

strategies have not been aligned with business objectives. HR technology was focused only on

automating back-office functions and was not necessarily leveraged throughout the business to

give employees, managers, and executives the tools they needed to make better personal

decisions, let alone better people management decisions.

Now that human capital management permeates the business, companies are committed to

deploying the right collaborative tools to employees so that they can not only make better

decisions about such personal options as healthcare or 401(k) investments, but also leverage

collaborative tools that enable better teamwork across and outside of the business. With this

teamwork comes innovation, access to better and more relevant information, and so forth. HR

can now contribute to the many capabilities that impact key performance drivers and ultimate

business performance, workforce productivity, and leadership developments. With a more

strategic role that extends beyond ensuring efficiency in back-office functions, HR is primed to

help businesses change the way they leverage their people to compete and deliver unmatched

customer satisfaction. HR will continue to create strategic value for the business.