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Oct. 22 --Human resources departments that are able to demonstrate the value they bring to the company and their impact on business growth have a greater chance of becoming a strategic partner in their organization, a consultant said Oct. 18 at an event sponsored by the Washington, D.C., chapter of the National Association of African Americans in Human Resources.
“The problem in most companies is that HR is not speaking the 'C-suite's language' and is not effectively communicating how they deliver value to the business,” Glenn Dalton, managing partner at RKD Group, a consulting firm in Chesterfield, Mo., said during the presentation, Leveraging HR Analytics to Execute Strategy.
HR should have a much stronger relationship with the C-suite because HR is in a unique position in that, along with the CEO and CFO, its focus is on the entire organization, Dalton said. The CEO, CFO and HR are sitting in positions that have a responsibility organization-wide, he said. “Therefore, when HR departments disproportionately focus on issues like turnover, engagement, training and recruitment and don't discuss profits, it stymies their efforts to become a more strategic business partner,” he said. “CEO's don't care about these topics, they care about earnings,” Dalton said.
If HR can more effectively demonstrate, for example, how engagement impacts earnings, then it will have a place at the table and become a real influence in discussions about how the workforce strategy influences the business strategy, he said.
“Because companies haven't demanded qualitative rigor from HR, the C-suite doesn't know the return on investment or the full impact of the people process on the business,” Dalton explained. HR must become more quantitative in its approach to data, he said. “Get out of the HR talk and learn to talk the numbers that have the greatest impact on the business,” he advised.
On the qualitative side, what HR is good at, Dalton explained, is knowing when things are broken. “Sometimes HR is good at identifying what needs to be done to fix it but almost never is HR good at explaining to the C-suite why it needs to be done,” he said.
CEOs are focused on driving the value of the company and moving numbers, Dalton explained. Inherently companies don't want to invest in anything unless it moves the profit side of the business, he said. “When HR comes to the table and says employees are not happy or there is too much turnover, the CEO cares but doesn't understand how much he should really care,” Dalton said. “Most HR departments don't know how to explain these functions in terms that drive value in a business, or they can't prove it--it's all theory,” he said.
Dalton recommends that HR departments begin to work more closely with the finance department. “Every organization runs on numbers, so HR has to get through the 'noise of the numbers' in order to have greater influence,” he said.
Finance, sales and operations all have their data and speak in terms that move numbers and drive profits; that is how they get resources, Dalton commented.
Dalton also advises that HR departments begin reviewing monthly reports and start communicating how what they're doing is influencing those numbers.
Most organizations are generally aware of the areas that HR can influence, Dalton said. “What I don't think they understand is the extent that the people side of the business influences revenue, production, profitability, costs and customer retention,” he said.
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