Since the start of the Baby Boomer era, the human resource (HR) function has been an essential part of business operations – taking care of the hiring, firing, and calculating the balance of an employee pay packet.
Fast forward 50 years to today, and HR has greatly evolved in scope and sophistication. While still managing the headcount and remuneration related to employment, HR practitioners now have many tools to get the best out of their people; including systems for compensation, performance management tools, and talent development strategies.
As businesses are pressured to create more value from less input, the most progressive business leaders have elevated the value of the HR function, which has led to the integration of HR and business strategy.
HR insights and strategy are now an invaluable part of business operations. Best HR practices are no longer a response from ‘management’ to recruit, develop, or retain, but rather a key influence and partner in business decisions to maximise growth by matching HR activities with future market trends, setting the direction for a growth culture in varied context, and proactive preparation an allocation of HR.
What is HR transformation?
A company that goes through a HR transformation reframes how their HR team interacts with business divisions to drive business strategy. This new philosophy refocuses HR to become accountable for business objectives, instead of a reactive and isolated function of a business.
HR must understand how the market’s competitive environment affects the business as a whole. HR transformations expose the HR function in all business activity of an organisation, because at the root of all challenges and progress, is people.
There is a heightened accountability that forces HR to move out of their natural silo and frequently enter into business dialogue, in areas that affect process and bottom line. A spirit of HR transformation also leads to re-evaluating the measurements of success.
Transformation aspirations lead to seeking metrics from different data correlation. Previously, we looked at cost vs benefit of a resource in a specific department.
Now we should look outside of the box to locate the best resources company wide, that when grouped together, provide the greatest benefit to the company – when preparing for a boom or recession period.
For example, this strategy could include succession plan readiness, incentive compensation for high and low performers, and to prepare for drastic business market changes.
Market dynamics – the need for HR transformation
It’s safe to say that markets all around the world go through evolutions, changes and transformations. We live in a time where companies, financial markets, and social connectivity link us together in a global business market.
When a country is in recession, there is a domino effect around the world.
This phrase exemplifies how we are all linked, where mild and volatile reasons call for the need for strategies like HR transformation.
In the last 10 years, there has been a big expansion of western companies into developing countries. Slowing markets in western nations have forced growth-seeking companies to set up operations in rapidly developing countries.
The reverse is also true for leading Asian companies, as big players from the Asian region have also expanded into western countries.
These companies’ low cost philosophy and operations create opportunistic growth opportunities in western countries, where potential customers affected by slowing economies seek less expensive products.
According to a survey conducted by PwC and HfS Research, there are key global factors driving the need for HR transformation:
- Economic hardships have left companies with buffer
Recessions and tighter markets over the last decade have forced companies to decrease their recruitment rate, and to keep their labour force as efficient and lean as possible.The ‘leaner companies’ have survived through sheer persistence and efficient practice. This has created a new paradigm in optimisation.
- Increasingly complex regulatory environments
With shifts in international business, cross cultural operations, and attempts to rationalise changes, there has been an increase in regulations and compliance.Financial, environmental, consumer rights and privacy standards have advanced in both western and eastern economies.Employees must be knowledgeable of local market requirements and overseas markets. Adaptation in multiple contexts has ensured success.
- The pace of business has accelerated
Customers have a higher expectation for a delivery experience. At the same time, business competition is quick to capitalise on gaps in the market, and to reduce the share of the pie.As a result, more companies rapidly launch multiple products into many countries at one time to drive revenue objectives.They must react quickly to competitive products and remain connected with customers – whose business environments are also changing quickly.
A transformative leader: Getting us there
A transformative leader has a noble vision, is business-minded and in this regard, committed to creating an impact with the HR transformation methodology.
An individual can champion a programme, but rallying others to do the same, or at least foster the same spirit can truly transform an average company into a profitable ‘Employer of Choice’. It starts with leading by example.
In addition to this, a transformative leader is focused on building a case to make a company’s situation better today and tomorrow.
This vision translates through their presence and becomes the driving force to integrate HR and business conversations and translate this to operations and activity.
Transformative leadership behaviour includes:
Create a noble vision to work towards that inspires others.
Authentic in their commitment to their vision, and not just for their personal gain. Their integrity inspires others to take action.
They are transfixed on making this change happen.
Cultivate their team’s professional and personal development. They invest time and energy knowing their efforts will bear fruit.
They recognise their teams individual effort as well as personal performance.
Encourage team leader to develop their ideas, work with flair and embrace originality.
- Risk taking
They allow measured risks to foster innovation.
- Change agent
Focused on taking the change initiative from concept to implementation.
Looking at things functionally, a transformative leader must be business-minded. The future transformative leader has a holistic perspective of his or her company and perhaps has tertiary qualifications from a business school and has studied HR management.
This kind of leader will look for indicators to see where the market is going, and will adjust internal capabilities and seek integration opportunities to optimise his or her operations.
It’s important to quickly realise they need a set of skills and capabilities within the organisations to move to the next level of success.
A transformative leader must make the vital connection between a strategic business plan, talent management plan and the programmes, processes and culture to enable all plans are sustainable.
For a moment, if we looked at developing a nation in the same context as developing a business, HR transformation practice is not only applicable, but also makes it possible to appreciate what a nation would look like if people (human resource) are developed and optimised, when a culture is fostered (with diversity and alignment) to reach a common result, and with measured results (that refine strategy and growth) in a local and international economy.
If more transformative HR leaders are practising in business and community groups, the effect of this methodology and philosophy could impact the way we live and grow as a nation.
Applying transformative HR for the nation:
- Logic driven analytics using census data can be processed to map critical opportunities and gaps in our national workforce.
- Segmentation can provide a tool to look at industries and markets to assess when it is a good time to focus on one group over another.
- Risk leverage can be used to identify the truly bad risks in markets and industries, but also capitalise on the risks that are manageable and worthwhile for sustainability.
- Integration and synergy would help a nation of transformative leaders to realise the benefit of optimising and leveraging current resources and strengths that are unique to their nation, instead of perhaps looking for ‘the answer’ to a problem from a new project or by importing capability.
- Optimisation enables a nation to get maximum value from all resources by efficiently allocating unique industry cultural strengths to create the best national result.
For five principles of transformative HR, click here.
Shahran is a regional strategic manager with the Learning and Acceleration division at Leaderonomics. To engage with him, write to email@example.com. You can read more articles on www.leaderonomics.com
First published in English daily The Star, Malaysia, 29 November 2014
Lay Hsuan was part of the content curation team for Leaderonomics.com, playing the role of a content gatekeeper as well as ensuring the integrity of stories that came in. She was an occasional writer for the team and was previously the caretaker for Leaderonomics social media channels. She is still happiest when you leave comments on the website, or subscribe to Leader’s Digest, or share Leaderonomics content on social media.