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A Revolution in Human Resources
David Creelman

The good news for human-resource departments is that top management, at least in the U.S. and the EU, recognize the importance of people. CEOs talk about human capital and invest time in communication, coaching, succession planning, training and development. The bad news is that top management is gradually coming to understand that great people management isn't driven by HR programs; it's driven by the actions of line management. Gallup's research, made famous in Marcus Buckingham's First, Break all the Rules, shows employee engagement depends more on the individual manager than on HR programs. Bob Gandossy's Leading the Way shows that great leadership-development programs look much the same as mediocre programs. The difference is the time, energy and sincerity top managers apply to developing people.

It's not that good HR programs don't matter. HR has to do a good job of recruiting employees, designing training, creating compensation structures and building an HR technology infrastructure. However, HR programs are not going to make the difference between great people management and good people management. HR needs to revolutionize their conception of how they have impact on the firm.

The people who have best articulated what must happen are USC professor John Boudreau, and Pete Ramstad, a VP at PDI. The single most important question they ask is, "Where will an investment in talent have the biggest impact on the execution of strategy?" Wrapped in this single question are three important ideas:

• The question assumes we are making a focused investment on a particular area, not in a company-wide HR program or on improved HR services.
• It assumes line managers will be making these decisions, not HR.
• It directs attention to specific business objectives in executing strategy, not general HR objectives like creating a strong talent pool.

So what is the role of HR in this? Boudreau and Ramstad argue that HR has to support managers in making good decisions about talent. The way to do this is by providing managers with robust frameworks for thinking through talent issues. Pete Ramstad looks to the history of finance for insights on what we should expect from HR. For several hundred years accounting tracked assets, but it was only in the twentieth century that finance evolved. Accounting did not go away, nor will traditional HR. However, just as finance created an approach for making decisions about investments, HR has to create an approach for making decisions about talent.

As you absorb these ideas, it revolutionizes how you think about HR. In their book Deep Smarts, Dr. Dorothy Leonard and Dr. Walter Swap talk about those people who, through years and years of experience, have developed deep technical or managerial expertise. Organizations should be concerned about developing and retaining “deep smarts.” HR will naturally get excited about it—but how can HR help? Dr. Leonard points out that deep smarts, almost by definition, cannot be created in a classroom. Experts develop their wisdom through challenging projects and a chance to work with other really bright people. Assigning people to projects is done by line managers. It's managers who need to make the right decisions about talent, not HR.

What HR can do is provide managers with frameworks for making these decisions. The place to start is to help line managers answer Boudreau and Ramstad's key question, "Where will deep smarts have the greatest impact on the execution of strategy?" Secondly, HR must develop tools to help managers staff projects in a way that aids in developing deep expertise. And HR will be available, as internal consultants, for managers to provide advice on specific projects—just as finance does.

Great people management will be found in organizations where line managers make great decisions about talent. A new and quite different role for HR will be to create the tools for managers to make the right decisions. The work of Boudreau and Ramstad will be worth following—and not just for HR managers.

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David Creelman is CEO of Creelman Research providing writing, research, analysis and commentary on human capital. He is best known for his popular thought leader interviews. His clients include Japan's leading HR think-tank, The Works Institute, Towers Perrin, Women in Technology International, Barbara Annis and Associates and the Boudreau-Ramstad partnership. He is also on the research advisory board for the Human Capital Institute (HCI). Finally, he is collaborating with HCI and Crisp Strategies to help improve reporting on human capital intangibles for the financial markets.


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