Column by Dr YRK Reddy in HRD Newsletter

HR@HEART OF BUSINESS - THE TWIN CHALLENGES

It is brilliant that the National HRD Network has chosen the topic of HR@Heart of Business for its 2002 conference, as the HRM function is facing the emerging signs of self-doubt and the associated fatigue. The fact that HR is central to business has been recognized and well articulated during the last two decades. HR has come centre-stage both in the corporate world as well as in the socio-economic agenda of nations. The first has been fuelled by the growth of the services sector and the technology/knowledge content of all activity. The second by the works of eminent economists such as Amartya Sen, Late Mahbub ul Haq and the idea of measuring human development through metrices of the HDI variety.

HRM and Business Success:

The resource-based view of human resources has been a conceptual fuel to propel the function as a driver of business and its competitive advantage. The theoretical proposition, even if it appears speculative arising from the Institutional Economists, has been that human resources can actually become strategic assets contributing to the competitive advantage of a company. The idea of such a competitive advantage was more acceptable to firms in services and knowledge industries such as consultancies, R&D, software, banking and finance, retail, hospitality and entertainment. That Human resources give competitive advantage has been a romantic belief that is hard to refute. It appears logical and holds out great promise. Yet, the proof of HR having actually contributed to competitive advantage has been rather ambiguous in the developing markets. It is obviously not for the lack of such a relationship, as obviously HR does contribute to the competitive advantage. The issue has been more due to a lack of sufficient recording of such evidence in a sound manner, especially in India.

In the first wave of strategy-speak, (say 1980-1990) the logic of people as strategic assets (with characteristics of inimitability, un-substitutability, value-accretion and stability) has been accepted well. In the second wave, (say 1990-2000) there has been some good research in the West that has provided evidence of the connection between business performance and high performance HR practices. The report by the US Department of Labour (1993) titled “High Performance Work Practices and the Firm” was particularly helpful for the argument. Mark Huselid`s early statistical work set new trends in analyzing the impact of HRM practices on Turnover, Productivity and Financial Performance. The KPMG chipped in recently to suggest a possibility of 30-50% higher returns for companies with High Performance HR practices. The book “Human Equation” by Jeffrey Pfeiffer (1998) has offered examples and a powerful business case for high performance behaviors. Yet, there appears a slow creeping-in of disaffection with this belief in more recent times, as apparent from indirect comments in the media and research.

In the Irish context, a survey titled “National Human Resource Practitioners Survey-2001” has reportedly acknowledged the centrality and high profile of human resources particularly during the last five years. The survey identified “relevance to core business” and “understanding of key business issues” as presenting the greatest opportunities for the profession over the next five years while nearly two thirds cited the out sourcing of HR activities as the greatest threat. The surmise is that if the HR profession has to ward off the threat, it has to work hard on the opportunities of making HR relevant to the core business – may be faster than the companies will find the advantages of out-sourcing. Outsourcing may not be bad but for the lurking feeling that HR then might be treated as core to business but not so critical as to have it under the same roof.

There is a survey from the UK end as well of David Guest and Zella King titled State of the Profession Survey 2001. Connectedly there is a Board Room perspective of HR from the well-subscribed Voices from the Board Room. The bad news appears to be that HR profession has been rated poorly claiming that it appears “bureaucratic”, “steeped in jargon”, “isolated to the outside world”. John Philport Chartered Institute of Personnel Development’s Chief Economist had reportedly commented “HR’s failure to stress how people management affects the big picture means that the profession barely features on the radar screens of policy makers, and opinion formers. Ironically, this lack of engagement reduces HR’s influence in the Board Room”.

The UK survey has found that such a viewpoint of the Board is also shared by 85 per cent of the HR managers who believe that HR “struggles to get a voice at the highest levels in the organization and that it is often over looked by the executives”. Yet 85 per cent of them believed that HR would be vital to the organization and that 75 per cent of them believe that HR has a strategic business focus. The issue that became noteworthy in the survey is the perceptional gap between what HR managers believe that the profession is and how it contributes to the business versus the opinion of others like the Directors.

Additionally, the survey reportedly indicates a positive correlation between (a) the number of HR practices and the financial performance of a company and (b) the presence of a HR professional and the financial performance. This apparently nice sounding conclusion masks two implicit points that have contributed to critical remarks. The first is that the correlation is positive but fairly insignificant at 0.11 between progressive HR practices like training and development, performance appraisal, job design, etc, and profit for employee. Relatedly, the association between the presence of HR specialist and profit per employee is also statistically insignificant, even if positive, at 0.22.

The second is an argument which has remained unresolved over the years - the lack of sustained research on the cause and effect relationship between HR practices and business results. Though some excellent initiations into such exploration have begun in India, the results have been ambiguous and need more work with the Indian corporates. For instance, some observers have commented that HR managers were given the resources for progressive practices only when they found the company doing well and/or when the company wanted a reputation advantage in the market. Thus, an ex-post analysis of the companies, which have failed, is tending to give us a mixed result of good HR practices not having contributed to the survival and sustenance of the company.

The need obviously is not so much for our HR managers to convince themselves or make assertions based on desirable paradigms, but to convince other disciplines and the Board that HR truly contributes to the business success. Such conviction and confidence building should soar when there is thorough research and pains-taking evidence built up on (a) the process through which the HR practices actually contribute to business success (b) historical as well as sectoral analysis to establish stronger correlations than have been evident so far and (c) case studies from Indian Corporates. This evidence, particularly from the Indian Corporates, must be poured into the media on a sustained basis to fight back the creeping in doubts.

HRM as a Profession:

The other challenge, albeit a long-drawn one, before the HR managers is to transform the discipline into a true profession. HR managers obviously believe that they are part of a profession, which is growing in its importance as well as criticality. Yet, the movement of this discipline towards becoming a profession has been rather slow as indeed is the case of management science as a whole. It is another matter that despite Peter Drucker’s championship, management is still being considered as a plebian practice than science. Renowned academe, in countries other than the US, were reluctant to accept management as a course for several decades and had also initially suffered them as a sub-sect of economics than as an independent discipline by itself.

A profession must have an essential feature of relating itself to social good. It should be in a position to state how it is able to make a difference for the lives of people at large. How it contributes to net welfare. The statutory welfare officer as a concept, if not in practice, had the potential to becoming a profession because of the strong welfare orientation as also the barriers for entry and the threats of disqualification. Can the HR discipline encompass these foundations and become more inclusive? The personnel associations believe, on the basis of these welfare foundations, that they can demand a statute for the entire personnel function (The most recent letter from the NIPM’s National President refers to this effort).

To remind us of the challenge before HRM to be accepted as a profession, it is worthwhile to note the critical characteristics of a profession:

  • A commitment to a calling, which has a set of normative and behavioral expectations.
  • A specialized education and training of substantial duration.
  • Membership of an association comprising of similarly trained and practicing individuals for the purpose of protecting and enhancing the interest of the calling.
  • A service orientation keeping in view the requirements of the client and the society.
  • A relative degree of autonomy in the use of his/her knowledge and skills.

In the road to becoming a profession, I reckon that HRM must launch upon several actions by which we evolve a strong base of accumulated theory, practice, and a related code of ethics and conduct. The absence of a robust and inclusive body of knowledge has been particularly threatening the HR profession – HR profession is being looked upon from the viewpoint of a few fleeting tools and techniques. There have been strands of theories from the behaviourial sciences, industrial engineering, economics, and yet the historical connectivity as well as the horizontal integration has been a matter of increasing concern. The wide base has somehow been forsaken with the lunge for a few fashions, which on the rebound seem to constrict the scope of HRM. A strong syllabus needs to be developed, validated, and distributed as a true basis on which HR professionals can be trained, and certified. It is necessary thereafter to create entry barriers and a strong self-regulatory organization, which should be able to convince markets, the need for hiring only such qualified and certified people. Chartering for the HR professionals can be a next step by which the market for HR professionals will be controlled by the suppliers of the qualified and certified professionals.

I am conscious of the several arguments that have been advanced against professions and the call for de-professionalisation. But these arguments have been due to the chicanery of some professions at critical points - like that of the second world war and the more recent corporate frauds - when they have not acquitted themselves very well. At these times, professions have been seen as monopolistic to the detriment of social good and competition; the self-regulatory organizations have relied primarily on the rhetoric of good intentions, which is belied by patently self-serving activities.

Sociologists have looked upon development of professions and associated monopolistic conditions as “social closure” particularly evident amongst the early professions in the 19th and 20th centuries. Currently, professions indeed hold promise of good mechanisms to render ethical and qualitatively superior service to corporates and the countries, despite Adam Smith’s famous assertion that “people of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contravene to raise prices”. Contrary to this fear, it is abundantly clear that the sunk costs involved in high quality training would be so high that “they would need to be committed to the body of knowledge and skill, and wish to advance it and protect its integrity. They do so by forming social closures without which their knowledge and skills cannot become formalized. Their work is institutionalized by the drawing of jurisdictional boundaries so that it can be maintained and cultivated as a coherent or at least recognizable discipline”. (Eliot Friedson, 2001, Professionalism, the Third Logic)

It is apparent that the Conference 2002 will lay the foundations by which the critical steps towards the professionalisation of HRM practice would be taken after convincing the business leaders that HRM indeed has and can make the difference to “being and not being”.





Septembert, 2002 Issue

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