Looking back, the late 1980s were a high water mark—maybe the highest mark—when it came to the amount of energy invested in exploring the role of HR leaders and their functions in business.
It wasn’t a fun time to be a practitioner, as the endless rounds of restructuring-related layoffs were just getting started, but thinking about what HR could do was something exciting.
Why was that? Because of the new thinking about business strategy.
The idea that companies needed to be distinctive in order to compete effectively was new. Being distinctive meant having “core competencies” that were created based on our internal capabilities—largely human capital. GE was great at financial controls, Pepsi at product innovation, Procter & Gamble at product marketing and so forth.
That meant HR leaders had to transition their functions away from simply being the order-filler for business plans. They had to craft a workforce that would create and sustain distinctive capabilities. Beyond the skills brought in by employees through hiring, competencies were supported by training and development and by creating and sustaining different cultures. The Human Resource Planning Society, led then by Jim Walker, transitioned from planning headcount to thinking about the ties between HR practices and strategy.
Never heard this before? That reveals something about your age.
Unfortunately, within a decade or so, that whole approach began to sink, as researchers realized that companies did not, in fact, have clearly identifiable business strategies for competing in their markets, and it was difficult to see any after-the-fact relationships between the strategies they pursued and their business success. The only way to tell coherent stories was to look backward: “Here’s a successful company, and here’s our story about how we did it.” But that approach lacked credibility. Are we sure a conscious strategy drove the success, or did it just seem that way after the fact?
Now, it’s hard to describe what differentiates successful companies from less successful companies, despite the fact that there are thousands of consultants who claim they can do so. But there is a belief held strongly by top executives: To be competitive requires being ”agile.” Not the project management approach of agile but simply being able to adjust and respond quickly.
Survey after survey of CEOs and other business leaders finds agility as a top goal. What that means in practice is not so clear, but it certainly sounds like the need for constant restructuring. Unfortunately, the preferred way to do that is selling off businesses and buying new ones—but also layoffs and then hiring new people.
Back to the basics
My co-author, Ranya Nehmeh, and I thought about what this all means now in a recent post for SHRM: How can HR leaders support the business when what the business wants is this kind of constant restructuring?
The reason that is such a challenge is because employees hate restructuring. The uncertainty among employees about whether their job will still be there when leaders see the need to change things up is what drives the most stress at work. HR departments spend much of their time just trying to talk down employees who are worried sick about their future. As Cian O Morian and Peter Aykens found in a Harvard Business Review article, the willingness of employees to get behind new initiatives has, over time, been worn down.
So, how do we support a business where the goal is constant restructuring, something that creates enormous costs elsewhere and makes HR tasks harder and harder to carry out?
See also: Why HR leaders are struggling to retain their own team members
One important answer is recognizing that the “strategic stuff” that really supports the business today is what used to be seen as the basic stuff. Talent management—getting the right people in the right place at the right time—used to be pretty basic. It’s not easy now, with tight labor markets and constant cost squeezes—which, to please investors, disproportionately fall on labor costs.
Supporting the business also means articulating that trade-off: If you want constant restructuring, we’re going to pay a price for it in turnover and hiring. How much are we willing to lose through turnover, stress and disengagement with a constant restructuring approach?
One place where leaders ought to think differently is related to how restructuring is talked about. Do we have to announce bigger layoffs than we intend to carry out, or do we have to muse publicly about changes we might make? We don’t know our plans yet, so can we say that to employees rather than have employees speculate and imagine the worst?
Another way to manage the tradeoff is to protect employees by retraining them rather than laying them off and then trying to hire new ones. PwC has been one of the notable companies in the current context. The company is grappling with both the down market for consulting and the rise of gen AI by promising its employees that, as long as they are willing to be retrained and change positions, they will have a job. That policy is an enormous stress-reducer as well as a cost-saver when it comes to turnover.
HR leaders need to protect the business from decisions that will turn around to bite them on the employee side—just as general counsels have to tell them when leaders are contemplating actions that could create legal trouble. I recognize that telling leaders what they don’t want to hear is likely even less of a career-building move now than it ever was. Finding some clever, agreeable-sounding way to do that is what separates the great HR executives from the placeholders.
Credit: Source link
