Tuesday, 25 August 2015

Ram Charan / People Before Strategy / The Real New HR

Tomorrow I'm presenting on the New HR at AHRI's national convention in Melbourne.  I'm looking forward to seeing Dave Ulrich again (more on that shortly) and also, sort of, to seeing Ram Charan today.

You'll probably remember Charan from his intolerant swipe at HR in one of last year's Harvard Business Reviews.  This was my intolerant swipe back - http://strategic-hcm.blogspot.com.au/2014/07/finance-are-from-mars-hr-are-from-venus.html - for which I think I got told off by Dave Ulrich, probably deservedly, at last year's Art of HR conference.

Charan has also been back again, in another article in last months's HBR feature on Blowing Up HR, titled People Before Strategy.  He's a bit more tolerant in this article, arguing that instead of dividing HR into HR-A or HR-Admin (which stays as HR) and HR-LO / HR-Leadership and Organisation (which becomes part of Finance) HR should simply become part of a G3 (the Golden Triangle Anthony Hesketh has been talking about for at least a decade) working alongside the CFO and CEO.

But although I think the new article has a better tone, I still find I disagree with most of the suggestions,

I don't agree that the development of Accounting into Finance is any guide towards the future development of HR.  Finance and HR are very different functions and HR isn't on the same trajectory as Finance, just further behind - we're on a different trajectory to a different future.

I don't agree that it's down to the CEO to elevate HR.  This is our responsibility.  In addition, most board members, particularly the compensation committee, have no idea what's need or possible in an ideal CHRO.  Leaving it to the CEO is a sure fire way of developing HR as a pale imitation of Finance and opening the door to the future as HR-A.

I also don't believe there needs to be a particularly critical relationship with the Finance Director.  I actually think we can do much more with the other value creating functions particularly technology, property, marketing, procurement etc.

And I don't believe our future is about Charan's suggested activities: predicting outcomes, diagnosing problems or prescribing actions.  Planning for outcomes and actions, yes, absolutely.  But predicting exactly who is going to do what or diagnosing why is a fool's errand as business life is just far too complex for this.  That's why the performance of the CHRO can't easily be measured over each quarter too.  I also worry that some of his decisions would take responsibility away from line managers and other business leaders.  

Yes, OK, HR professionals should have a great people acumen, I do agree with that, but most of the examples provided by Charan would simply increase the amount of bias inherent in strategic decisions about people - something we need to get away from, not embrace even more closely.

However, the thing which has got me posting isn't any of the above points but the title of the article: people before strategy.  I'm a passionate proponent of putting people strategy before business strategy (creating value) and thought for a minute when I first came across the article that Charan had experienced a major shift in approach since last year.  But actually that's not what he had in mind at all.

For Charan, people before strategy means checking you've got the right people at the top before involving them in developing the strategy of the business.  That's very different to developing a strategy around all the people which will then enable the business to achieve better or different business results.

There's one more point I wanted to call out too.  This is that Charan refers to his CEO sponsored, Finance partnering, business judgment based HR as 'the New HR' which is the title of my presentation at AHRI's National Convention.  For me, the new HR is something very different.

Right at the beginning of the article Charan suggests that "Research consistently finds that CEOs worldwide see human capital as a top challenge, and they rank HR as only the eighth or ninth most important function in a company."

Totally.  But if human (and social) capital is so important then focus even more on it.  Don't lose that focus by mixing it up with a broader and financially oriented view onto the rest of the business, which is already the focus of all of our other business colleagues, Finance in particular.

Unless we take advantage of that opportunity I worry that we'll continue to operate in a very reduced capacity compared to Finance - a bit like the still too common case of the HRD reporting to the Finance Director rather than what I think Charan really wants to achieve from his G3.