„People Company instead of HR Business Partner"
At the annual Kienbaum People Convention, you are always analyzing the state of HR in enterprises. You’ve said that HR has not reached the standing it deserves given its responsibilities. As a new model, you are proposing that we should view HR as a People Company. Do you mean to refer back to the old idea that HR should be seen as centers of profit?
No. For me, it’s not a matter of assessing how HR performance is being calculated and balanced in organizations. Whether an act of recruiting costs 15,000 or 12,000 Euro says little about the effectiveness of HR. I’m more concerned how HR departments see themselves and exercise control. For example, do I have entrepreneurial expectations as a leader in HR or do I see myself as an expert in my field? Currently, HR is structured more like an organization of experts and not as business unit.
That’s not going to sit well with some heads of HR. Most of them are convinced that they’re carrying out an essential entrepreneurial task.
That may be true for some, but most HR departments aren’t structured according to entrepreneurial principles. After all, to run a business means you have to be judged by your output. It’s a matter of producing any number of items in a given time frame that you are able to sell. A product should not be exclusively quality-optimized but that is exactly what HR departments tend to do. Instead, it’s a matter of finding the right blend of costs and quality and the time-to-market. But that kind of thinking is mostly missing in HR departments when it comes to their production.
Currently, HR is structured more like an organization of experts and not as business unit.
Seeing HR as a People Company may be radical thinking that goes way beyond Ulrich’s HR business model. What do you see at the heart of a People Company?
Operating within an academic environment, Dave Ulrich defined four roles for modern HR, i.e., Strategy Partner, Change Agent, Employee Champion, and Administration Expert. The HR Business Partner model was quickly adopted by organizations and, when applied, served as the foundation for the three pillar model in HR organizations. The model sparked a lot of development but has, as we have seen for some time now, reached its limits. It is no longer able to raise the standing of HR company-wide to a level it deserves.
Dave Ulrich's HR Business Partner model sparked a lot of development but has, as we have seen for some time now, reached its limits.
I’d therefore suggest that HR stops regarding itself as a business partner, and instead views itself as an enabler of business. To that end, HR has to restructure itself into a People Company as that is the only way in which the entrepreneurial spirit can become a given fact in HR.
What do you think that should look like in detail?
A People Company would need the necessary committees and control units. HR could implement a stakeholder board that operates like a supervisory board for HR functionality. Two or three customers and, if needed, the head of the works council should be on the board which meets every two or three months to discuss the key indicators for business activity as well as strategies and staff issues. It wouldn’t cost any money but introduces a new way of thinking into its own role. I only know of a few enterprises and medium-sized companies that use such a board.
Doesn’t that mean that the power brokers continue to meet in the board session who are interested in securing their position and are less interested in innovation, digital transformation or sustainability?
Who gets to be a board member has yet to be decided. You could invite a young professional or, as long as the chairman agrees, a representative of the supervisory board. What matters to me is that the board acts like a partner with an agenda that focuses on business planning, direction and control – i.e., a true added value. Dashboards with key indicators as a way of monitoring regular business are rarely seen in HR departments. Such a system is, however, frequently being used when preparing large-scale transformative projects.
HR could implement a stakeholder board. What matters to me is that the board acts like a partner with an agenda that focuses on business planning, direction and control.
HR departments gather any number of indicators, for instance, in reports about sick days, staffing numbers, professional development and even a women’s quota. In your opinion, which indicators belong to the dashboard of a People Company?
That’s true. Some indicators are indeed already available to us but others are yet to be developed. There are however only a very limited number of companies that control their HR business systematically with these numbers. In this instance, it’s all too rare for anyone to draw a connection to revenue and the bottom line of a company as a whole.
So HR is becoming a company within a company. Entrepreneurial spirit is defined by competition. But an internal People Company shouldn’t have to compete or does it have to?
Yes and no. When it comes to transformational projects, there is competition at play. IT, company development, digitization or other new transformation units (internal consultants) are competing with HR to lead these projects. In administrative areas, platform solutions or third parties are being implemented or employed to take over aspects of HR. Aspects of HR are competing in various fields.
When it comes to transformational projects, there is competition at play. IT, company development, digitization or other new transformation units (internal consultants) are competing with HR to lead these projects.
Another key indicator of entrepreneurial engagement is customer targeted. Unhappy customers tend to leave. How can an internal People Company operate in terms of customer relations?
HR departments should apply the Net Promotor Score, captured semi-annually or annually, at the essential touchpoints with the internal customer. The NPS is an established marketing tool that provides insight early on into the status of customer satisfaction. The entrepreneurial focus should, however, also be reflected in who gets to be on the team and on their respective competency profiles. HR departments need 20 percent profiles with digital IT competency, they require start-up representatives that introduce the entrepreneurial spirit in the organization. And it should also be a matter of necessity that heads of HR have had experience running a business or working outside of HR.
It’s a well-known fact that a vertical career ought to be the exception rather than the rule. Perhaps the reason it persists is that few changing career paths switch to HR.
At the People Convention, Sylvie Nicol, CHRO at Henkel, stated that she intends to turn HR into an "exciting place to be" at a company. That’s the right approach. Employees in HR can work on social topics that are trending, and if paired with modern technology, HR becomes an environment that is attractive to talent from Marketing, IT, or Production. We can also see that effect when we look at what’s happening on the vibrant start-up scene.
How do the roles change as a result of HR becoming a People Company? Will HR Business Partner, who serve the leadership level, move into the field at the People Company?
In his model, Dave Ulrich intended for the Business Partners not to look after leadership, but to act as their consultants instead. In real life, we see far more often that, as you put it, Business Partners also take on service or support functions in 50 percent of the cases. In a People Company, a Business Partner would be the Key Account Manager who advises his or her clients comprehensively and organizes feasible solutions in cooperation with other HR roles.
HR departments need 20 percent profiles with digital IT competency, they require start-up representatives that introduce the entrepreneurial spirit in the organization.
What will happen to the Shared Service Centers that handle administrative tasks?
Jochmann: I have trouble with the name and would advocate that we stop using it. They are Excellence Centers that take pride in designing digital products dealing with all aspects of administration. Their task is to develop processes that are customer-oriented and new attractive products, and that has to happen in much closer cooperation with the customer and the Key Account Manager.
How does that impact Dave Ulrich’s third role, i.e., that of the Change Agent?
That role was never properly energized. There are small change units in HR at some Dax companies, but we frequently find it based in other environments. The role will have to be firmly positioned inside a new HR business definition and business model and be assessed based on its added value.
Do you expect key indicators to be useful in that context? Isn’t it rather the case when it comes to transformational themes, such as cultural shifts, that they cannot be captured or measured?
Key indicators can illustrate much more than is commonly deemed possible. We can show the motivation of employees, unplanned job changes, absenteeism etc. with key indicators. You can also measure leadership qualities with surveys. A transformational unit belongs to the dashboard precisely because it creates value for the company as a whole. When a company is up for sale, the investor will be interested to know about the change potential of that company. An HR department that can control transformation increases the value of the company. That’s a major asset.
What should be visible in the dashboard?
Three business models should be available. First of all, we need indicators for people operations, i.e., administrative processes. Second, we need a people supply chain, which refers to finding, developing, and binding employees at the company. Most companies don’t have a central collective responsibility, but we need to establish that. We need a 'product owner people supply chain.' And third, it’s a matter of enabling transformation, which means the consulting business of HR. That factor is probably the hardest to compute.
An HR department that can control transformation increases the value of the company. That’s a major asset.
Has your model of HR as a People Company as you have outlined it already been put in place anywhere or is it an entirely new concept?
Proposals for change in HR have been ongoing – see, for example, the design as a consulting company. In addition, we have seen an increase in the many contributions on social media regarding agility, a customer-centric focus and the entrepreneurial value proposition of the role of HR. What’s been missing, in my view, is an intregation model that clearly goes beyond a new organizational design.
What are the next steps? Do you intend to continue fine-tuning the model of a People Company with the goal of potentially creating a Jochmann or Kienbaum model?
We’re working with investors and start-ups to discuss and develop our ideas. It is important to us to talk with the CEOs and other decision-makers who are closely aligned with HR about their expectations. But it’s equally important to us that we’re starting a conversation about these ideas with CHROs.
The interview was first published in German at haufe.de/personal.