How savvy HR boosts profits

There's work to do to ensure CEOs embrace the value HR functions can deliver.

by Jackie Orme, chief executive at the Chartered Institute of Personnel and Development
Last Updated: 31 Aug 2010

We pursued growth over the speed at which we were able to develop our people and organisation - the words of Akio Toyoda, chief executive of Toyota, apologising to US lawmakers after fatal safety flaws in his company's cars emerged this year.

I can't help but wonder what Toyoda's expectations of his HR team were.

Good HR teams see HR as an applied business discipline. They understand their line of business, its activities and goals. Their efficiency and effectiveness are evident in how they design core HR processes and plans. Lastly, they have a robust understanding of their employees' strengths, capabilities and attitudes.

But, most importantly, any organisation worth its salt wants sustainable performance. Short-term pursuit of profit has got us into trouble - be that through sticky accelerator pedals or in the risk-addicted trading rooms of our banks. In this world, HR has to keep business alert to what's going on internally and to the demands of the external world.

This means HR stepping away from its service roots to see itself as an insight-driven business-shaper focused on contributing to sustainable performance. We've explored this insight-driven approach in the CIPD's Next Generation HR research, which looks at cutting-edge examples of HR and the seeds in them of a more value- adding and business-focused HR profession of the future. We see insight-driven HR being built on three distinct but linked types of 'savvy'.

The first, business savvy, requires HR to act as an applied discipline, showing a deep understanding of what makes the business successful.

The second is contextual savvy, which is about HR understanding the market trends and forces affecting the business and how they interact with macroeconomic and societal factors.

Finally, there is organisational savvy. Here, we're talking about HR with a rich appreciation of the interplay of the 'hard' and 'soft' factors and a deep understanding of the people, culture and leadership within the organisation, combined with an understanding of the challenges the organisation faces.

But there is work to do to ensure CEOs embrace the value that HR functions can deliver. If HR needs to be an applied business discipline, CEOs also need to see their roles, at least in part, as being an applied HR discipline. Toyota might well have saved itself a lot of trouble if it had adopted this approach.

This month in HR: Richard Branson on the cult of leadership, why he's never read a book on HR and what it's like to be 60.

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