The next step in the evolution of HR is ‘market alignment’
HR needs to get better at aligning itself outside of the organisation, Dave Ulrich, professor at the Ross School of Business, University of Michigan told delegates at the HR Directors Business Summit.
HR has grown as a function, he said, from one that was first seen as administrative, to functional, to strategic and now the professor is urging HR departments to shift their focus to external market demands.
“Don’t look at what your business is struggling with, ask what your market is struggling with,” Ulrich said. “Instead of strategy being a mirror, make it a window. Look through your strategy to the outside world.”
In his latest book, Ulrich urges HR professionals to turn their insight on external demands and expectations and then use that knowledge to create innovative aligned HR practices. This will drive organisational capability and development, he said.
The first step to achieving this is to let customers define an organisation’s culture, he added.
“Who are the customers of HR – and the answers is not employees,” he said. “Are we connecting what we do to the key stakeholders of the company?” he asked.
Ulrich said practices should be driven by customer desires, and HR should work closely with marketing and other service departments to ask customers directly what they want from the business: “Are we hiring people to meet customer needs? Does your culture reflect what customers are promised?” he asked.
Ultimately an organisation’s “value is defined by the receiver, not the giver”, he said, and customers will invest more in a company with a well-defined and well-established corporate identity.
The professor said the debate over the role of HR inside an organisation has moved on. Now it has established a firm seat at the table, HR has a duty to bring information about three things.
He explained: “When HR comes to the table, we bring details on people, skills, workforce planning, but that’s not all. We bring information on culture and values and the next question is how do we bring talent and culture together? The answer is leadership.”
HR’s value to an organisation is also slowly being recognised when it comes to external market demand, Ulrich said, as research suggests investors are looking to companies with strong direction at the helm. Developing this would be key to aligning HR value to business strategy.
“Leadership is between 30 and 40 per cent of what investors look for in a company,” he said. “Investors care about leadership, but they don't know how to measure or track it.
“The market value of leadership is HR's newest and most effective play thing,” he added.