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The HR Business-Partner Model: Past Learnings and Future Challenges

In Organizations on November 9, 2009 at 9:09 am

The informal business-partner model has existed for well more than 100 years, when effective support functions, including HR, have contributed to business results. Formalizing how HR professionals can create more value as business partners has been the focus for the last 10-15 years. Many HR professionals are doing exceptional work. One is continually amazed at the number of hard-working HR professionals and leaders who are serving and being recognized as business partners by their company executives. In thousands of companies around the world, HR professionals are making enormous progress toward delivering business value. In the future, the ways in which HR professionals will serve as business partners will continue to morph. The bar has been raised, and some HR professionals will — and others will not — make the grade. Those that do will help businesses manage the enormously difficult and exciting challenges of the 21st century.

ยป The informal business-partner model has existed for well more than 100 years, when effective support functions, including HR, have contributed to business results. Formalizing how HR professionals can create more value as business partners has been our focus for the last 10 to 15 years. Now we can reflect on what we have learned in the past decade about the relevance of the business-partner model and see clearly the challenges that lie ahead.

Looking Back: Nine Lessons Learned

First, the business-partner model is not unique to HR; all staff functions are trying to find ways to deliver more value to top-line growth and bottom-line profitability. If they are not delivering definitive and sustainable value, they have been given the mandate to change, or face elimination or outsourcing.

Second, the intent of the business-partner model is to help HR professionals integrate more thoroughly into business processes and align their day-to-day work with business outcomes. This means focusing more on deliverables and business results than HR activities.

Third, being a business partner may be achieved in many HR job categories, typically in one of four positions:

1. Corporate HR

2. Embedded HR, working as HR generalists with line leaders

3. HR Specialists, working in centers of expertise to provide technical expertise

4. Service Centers, building or managing technology-based e-HR systems

Fourth, business success is more dependent today than ever on softer organizational agendas, such as talent and organization capabilities.

Fifth, just as general managers turn to senior staff specialists in marketing, finance and IT to frame the intellectual agenda and processes for these activities, they also turn to competent and business-focused HR professionals to provide intellectual and process leadership for people and organizational issues.

Sixth, our research shows that the HR profession as a whole is quickly moving to add greater value through a more strategic focus. At the same time, some HR professionals are not able to live up to the new expectations. In any change effort, there is typically a 20-60-20 grouping. The top 20 percent of individuals asked to change already are doing the work that the change requires. The lower 20 percent will never get there. With training, coaching and support, the other 60 percent can make the move. And we see this majority moving toward, rather than away from, business relevance. They see customers as the real, external ones rather than the historical internal ones.

Seventh, being a business partner requires HR professionals to have new knowledge and skills that connect their work directly to the business. Traditionally, HR professionals have tended to focus on negotiating and managing terms and conditions of work and facilitating administrative transactions.

Eighth, the inevitable failures in the application of the business-partner model may stem from both personal and organizational factors:

1. Asking HR professionals who have focused on policies and transactions to do talent and organization audits and massive change efforts may be too great a shift for some.

2. Personal interests and abilities may deter some HR professionals from engaging in the business-partner role. Their focus on administrative detail may not allow them to embrace the larger and more complicated perspective of the business as a whole.

3. Some HR professionals simply may not know how to proceed. Substantial empirical evidence shows that HR professionals who are provided exposure to such information quickly can apply that information in adding greater value to the business.

4. HR’s impact on business may vary by business setting: A particular firm’s business conditions may not require talent and organization as keys to success. Under such conditions HR professionals who push for alignment, integration and innovation in talent and organization are less likely to contribute to business success.

5. Some line managers have trouble either accepting the importance of talent and organization or accepting HR professionals as significant contributors to these agendas. This may be because of their having a limited perspective on the changing nature of business or because of past bad experiences with a specific HR professional.

Ninth, there are really few other options. The reality is that the HR professionals must evolve into being the best thinkers in the company about the human and organization side of the business. The human side of the business is a key source of competitive advantage.

Looking Forward: Challenges Ahead

As we look forward, we need clear thinking, effective practices and insightful research. Many of the critics of the business-partner model look at today’s problems through yesterday’s solutions and wonder why they do not work. The HR business-partner model of the 1990s has changed in recent years to adapt to today’s business challenges.

Our firm, the RBL Group, in conjunction with the University of Michigan and a variety of HR professional associations from around the world, has studied the competencies and agendas of HR professionals as business partners for more than 20 years. We recently completed the fifth round of this ongoing global study of HR professionals and developed a clear picture of what business leaders expect from their HR business partners. We project five trends that will continue to evolve the HR field and how it delivers value.

1. There has been steady progress in the HR field as it has moved toward greater strategic understanding and relevance.

HR professionals will increase their knowledge of their companies’ wealth-creating activities, become more knowledgeable about internal operations and increase their knowledge of critical external realities such as customer requirements, supplier relations, competitive market structures, domestic and international regulatory issues, globalization and the requirements of capital markets.

With this foundation in business knowledge, they will bring to strategy discussions their personal visions for the future of the business. They will work with their management teams to formulate unique business strategies and develop the organizational capabilities to implement the business strategy and serve as the longterm sources of competitive advantage. They will continually innovate to develop HR practices, polices and processes that link directly into the business strategy and create measurable business results.

2. Companies will continue to require fewer HR professionals to do transactional administrative work.

Newly emerging information and communication technologies will continue to be applied to improve the efficiency of HR administrative work, directly facilitate greater transaction processing at lower costs and indirectly promote efficiencies by allowing the transfer of transactional work to internal service centers or to external outsourcing firms. Nice-to-have but strategically unnecessary HR activities will be eliminated.

3. As business partners, HR professionals will increase their focus on creating value for key external constituents: customers, capital markets, competitors and communities.

* They will do this by directly involving customers in the design of HR practices such as performance measurement, reward allocation, training recruitment and promotions. They also will provide linkages to external customers by continually conceptualizing and creating the organizational capabilities that influence the buying habits of external customers: this is what we have called "the HR wallet test."

* HR professionals likewise will become more attuned to the requirements of capital markets. The recent burgeoning research in finance and economics on intangible assets is emphasizing the increasing importance of human capital assets and HR practices that create and sustain those assets. The investment community has begun accounting for practices such as succession planning, leadership development, corporate culture and executive compensation as considerations in buy-or-sell decisions. Companies that are able to create a credible leadership brand are more likely to enjoy P/E ratios above those of their competitors. We have suggested that the new ROI for HR is return on intangibles.

* As HR professionals account for customer and owner requirements in the design and delivery of organizational capability and related HR practices, they will do so with greater awareness of competitors. They will recognize that forward-looking and innovative HR practices have relatively little value unless they create greater value than those of their dominant competitors. Internal measures of change must be viewed from the perspective of change relative to external competition.

* A final emerging trend in HR’s external focus is the role of HR in representing companies to their communities and in accounting for community requirements in their companies’ value proposition. The mandate for greater corporate social responsibility (CSR), which originated primarily in Europe, appears to be quickly taking root in North America, China, India and in many countries with emerging economies. Concerns about global warming, air and water pollution, local employment regulations, ethical treatment of indigenous populations, endangered species, and land utilization have moved up the list of corporate priorities. HR departments increasingly are given the mandate to work with local communities in addressing these complex and important issues.

4. As HR professionals become more effective as business partners, they will become more balanced in their approaches to their work.

In the most recent round of our competency research, we found that effective HR professionals function in the following six roles. If HR professionals fail to function in any of these roles, they significantly detract from their contributions as business partners.

* Credible activists build relationships of trust based on business knowledge and have a point of view not just about HR issues, but about business issues.

* Strategy architects contribute to the development, execution and communication of winning strategies.

* Culture and change stewards support the organization in identifying and facilitating important changes that improve the capabilities of the organization to compete and grow by turning what is known into what is done and linking external firm identity to internal employee actions.

* Talent managers and organizational designers provide important support and counsel in building both individual competencies and organization capability.

* Operational executors do the operational work of HR effectively and cost efficiently, using information systems and external vendors when appropriate to ensure better, faster and cheaper HR delivery.

* Business allies demonstrate a firm grasp on how the organization operates, makes money and competes.

5. HR business partners-as in other key functional areas-will be expected to base their activities on solid empirical research associated with business results.

Because the best HR practices are emerging from all parts of the world, HR research increasingly will be conducted on a global scale, and will focus on the practices and competencies that result in individual and company performance.

By Way of Summary

Many HR professionals are doing exceptional work. We are continually amazed at the number of hard-working HR professionals and leaders who are serving and being recognized as business partners by their company executives. In thousands of companies around the world, HR professionals are making enormous progress toward delivering business value.

In the future, the ways in which HR professionals will serve as business partners will continue to morph. The bar has been raised, and some HR professionals will-and others will not-make the grade. Those that do will help businesses manage the enormously difficult and exciting challenges of the 21st century.

[Sidebar]

The intent of the business-partner model is to help HR professionals integrate more thoroughly into business processes and align their day-to-day work with business outcomes.

[Sidebar]

The reality is that the HR professionals must evolve into being the best thinkers in the company about the human and organization side of the business. The human side of the business is a key source of competitive advantage.

[Author Affiliation]

Dave Ulrich and Wayne Brockbank, The RBL Group, Ross School of Business at the University of Michigan

[Author Affiliation]

Dave Ulrich and Wayne Brockbank are partners at The RBL Group and professors at the Ross School of Business at the University of Michigan.

Dave Ulrich, Wayne Brockbank. People and Strategy. New York: 2009. Vol. 32, Iss. 2; pg. 5, 3 pgs

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