Is business acumen critical for HR professionals as well as the HR functions they lead?

Article By
James Cumming
James Cumming
Posted On16th November 2020
Posted On16th November 2020
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Our featured blog this week is from Ian Williams – Founder & Director InFocus HR Consulting. Ian has held senior HR positions in retail, financial services and 3rd sector organisations and has had the opportunity to live and work overseas.  His passion has been on improving operational delivery of HR through Shared Services, Technology, Analytics and Business Mgt. In this article we discuss – is business acumen critical for HR?

 

How often have we – as a function – talked about HR needing to be more business savvy? It’s certainly a conversation I’ve heard a lot over the last 10 to 15 years, as we’ve made the transition from traditional HR roles into the Ulrich model i.e. HR Business Partners, Centres of Excellence and HR Shared Services. The fact that the CIPD’s professional map has an entire (and new) knowledge area on Business acumen – which covers topics such as financial literacy, business planning and supplier management – would suggest that we are finally taking this seriously.  The view of the CIPD is that as HR professionals we should understand our organisation’s purpose, future direction, priorities and performance, as well as understanding the external influences and trends that will impact the organisation[1].

 

I would fully agree that as a professional HR person, understanding what my organisation is trying to achieve and its performance against goals is critical, as it supports my engagement with stakeholders and therefore the successful delivery of my role.  As an HR function, the question we need to ask is whether we run ourselves in the way that we expect our organisational managers to operate?

 

A report from Deloitte[2] as long ago as 2010, argued that there was a gap in the newly emerging HR structures, one that could be filled by a distinct role, that of HR Chief Operating Officer.  Their rationale was that chief executives wanted more from HR than they were currently providing – within an on-going climate of organisations needing to be ‘better, faster, cheaper and more agile’ – HR teams were not keeping pace and being able to deliver ‘better, faster and more compliant HR services at a lower cost’, so needed someone with greater business acumen to bridge the gap.

 

The Deloitte research argued that HR would often struggle to deliver value when a wider need was identified, for example, an acquisition or organisational wide efficiency programme and that it was HR’s inability to coordinate across the function or across multiple units outside the function like Finance and Procurement that often led to failure.

 

So, is an HR COO the answer?

 

Before we look at the title, it’s worth considering what’s actually required.  As highlighted in paragraph two, an HRBP would rightly support an organisational head, who challenged their managers on their ability to manage budgets, plans, suppliers and risk. Therefore, my challenge to heads of HR departments is that we (as an HR function) also have budgets – for HR resource and expenses – people plans, suppliers and potential areas of risk (payroll and service delivery).

 

Research commissioned in 2015 by Bersin by Deloitte[3] highlighted the following stats from HR leaders:

  • 90% felt they had a handle on their budgets
  • 20% felt they were adequately planning for their company’s future need

 

The Bersin-Deloitte data would suggest that when it comes to budgeting, HR generally believes it is doing a good job, but when it comes to planning, our own function is not in the same place we expect our organisational managers to be.

 

So, is this about business management within and for the function?

 

I’ve had the privilege of working with some talented HR heads in organisations of all sizes, who have all seen the benefits of creating a role (and appointing me into it) to take a cross HR perspective on areas such as budgets, measuring and improving operational HR delivery and planning for the future.  The scope and remit have varied significantly depending on location, organisational need, the maturity of the HR function, the focus of the HR lead (i.e. having to focus upwards to board and needing a role to ‘run’ the function) however they have all generally had a need for a role to focus on:

 

  • Budgets – working across the function to determine budgets, working with finance to secure any uplift and then working with the HR leadership team to track progress against budget. This building of financial credibility with finance teams is critical if HR wants to invest in areas such as technology or new services, as it shows we can control and manage finances.

 

  • Planning – working with the organisations planning process to ensure an aligned HR/People plan, that is realistic, joins up across the parts of HR, is delivered, monitored and reviewed on an on-going basis.

 

  • Risk – working with internal risk, supporting the wider HR team on risk identification and management. When done well, risk management can support requests for investment in technology and services.

 

  • Supplier Management – ensuring that HR suppliers are managed to contract, to ensure service delivery and cost control and/or reduction.

 

An HR Business Management / HR COO / HR Operations role (see, the title isn’t important) can also provide the focus for a range of additional areas that are important to our organisations and HR, but don’t easily fit within the Ulrich model – HR Process Management & Continuous Improvement, HR Technology (if not in HR Shared Services), HR Analytics/Metrics, HR Key Performance Indicators, Project Management.

 

In summary, the research and my personal experience would suggest that every HR function would benefit from taking a business management perspective. Whether that’s having someone focused on people planning and having the budget in place to deliver the agreed plan, through to a full suite role that acts as the ‘number two’ to the HR head and effectively runs the function.  The options are endless and may only be limited by organisational constraints around HR budget, headcount and appetite. However, solutions can still be defined for any organisation taking those limiting factors into account.

 

So, to answer the question, yes business acumen is critical for HR – both us as professionals but also the HR functions we lead – and, as the old adage goes, we really should practice what we preach…

 

You can find more about what Ian’s company does on his website here.

 

James Cumming is our MD, Interim and Transformation Search specialist. Please get in contact with him directly to discuss any of these topics further.

 

[1] CIPD web site (profession of the future)

[2] Deloitte – The emerging role of the HR COO

[3] Bersin by Deloitte, High-Impact HR


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