Unfortunately, most of the feedback we get from executives and business unit managers is that their HR team doesn’t understand the business. In effect, they just don’t see a direct line to how HR can help them drive performance (and hit KPIs). And it’s not necessarily their fault…
Depending on their work history, for most leaders, HR has always been positioned as a support function to them – ‘the people who take care of the HR and recruitment stuff that managers don’t like’. And because it’s seen as a cost centre, business owners, directors and CEOs often under-invest in HR resourcing (and get what they pay for).
And HR people often exacerbate the problem by either blindly doing what they are told to do, or not clearly explaining and connecting their initiatives to financial impacts for the business.
All this creates a vicious circle because inevitably business performance has everything to do with people – and that’s where the finger-pointing starts in the first place.
Financial KPIs form the ultimate scorecard for any business, so you have to connect your initiatives to the business numbers. Understanding P&L’s, balance sheets, budgets, financial modelling, funding alternatives, cash flow impacts and key ratios are all critical to HR professionals having more meaningful conversations with Managers and executive teams.
More than that, HR people need to be able to connect employees with key financial drivers to be able to focus and drive their performance in line with business objectives. Put simply, to be a valued business partner you have to learn, absorb and communicate in financial terms.
Don’t step over the importance of recruiting, onboarding and retaining great people. At the end of the day, your responsibility is to build teams of A-Grade people who can deliver high performance. Research shows that A-Grade people are 400%1 to 800%2 more productive than average performers. Work with your HR team or advisers to give them the chance to understand your business drivers to help you attract, develop and retain the people you need.
A business strategy will go nowhere fast if you don’t have a sound resourcing strategy to back it up. Nothing will make or break a business like A-grade people.
To quote Steve Jobs:
“The only viable strategy is to recruit good people, develop them, and retain as many of the stars as you can….”
Growth businesses need to outsmart their competition with better recruitment and HR strategies and identify the best people to help them do this (those that actually have the capability to understand the numbers). Investing in the wrong HR people will only frustrate your managers, which brings its own problems.
1Herman Aguinis and Ernest O’Boyle Jr., “The best and the rest: Revisiting the norm of normality in individual performance,” Personal Psychology, Volume 65, Issue 1, Spring 2012, pp. 79–119, onlinelibrary.wiley.com.
2McKinsey Global Survey: War for talent, refreshed 2012.