Why Hate HR?

For those following the hot debate over the value and contributions of HR, this article responds in detail to an equally lengthy one in a well-known, leading U.S. business magazine entitled “Why We Hate HR.”

Why They Love to Hate HR
Keith Hammonds, Deputy Editor of Fast Company magazine lit up HR managers with his long August 2005 article entitled, “Why We Hate HR.” He made a number of stinging accusations about HR people.

Inflammatory? Yes. We know many people believe such accusations are true for some in the profession, though as generalizations all are wrong. Should HR say nothing… or what exactly should we say instead?

In fact HR is making enormous leaps forward as we speak. Instead of bashing pet peeves in the profession (we all know someone who claims to have been shafted by a terminally idiotic HR person or policy, just as we hear stories about insane bosses in any function), we ought to look at what’s working, why we’re not making even faster progress and how we could.

Bashing rarely encourages improvement, though it gets lots of attention and predictable email – both from outraged HR people and those who love to taunt them. It’s time for an equally pointed response.

The Usual Barbs
Keith drags out most of the well-known, tired-but-not-yet-deceased accusations. He dredges up four in particular: that HR people are “not the sharpest tacks,” that we’re paper and policy mongers, that we err by treating everyone exactly equally in the mistaken belief this is fairness, and that we can’t see the larger picture.

The last is truly the key issue. Do we understand what is needed to make real, measurable contributions to bottom-line (read “concrete dollar”) results? The others, however, grow from this. If we miss the larger vision of creating value, we’re missing it not only for the companies we work for, but the individuals and their needs as well.

It’s interesting to compare HR to finance and other support operations. We make pretty much the same accusations about all of them. We kid about “green eyeshade” accountants who only focus on lockstep processes and can’t see the value of investing in innovative ventures. We needle corporate lawyers for never giving clear answers and letting technical requirements hinder entrepreneurship.

If you’re in HR you get your share of kidding. At the same time support divisions needle line executives for their tendency to brush off “technical” issues in their haste to take shortcuts to make their bonus numbers. Such barbs may be humorous, but none of this is constructive.

It’s normal to find rivalry and sometimes less than friendly jostling for position among managers, but it’s unusual to see such stereotypes splashed in print as truths, especially so broadly generalized. At least it provides us with a pause to evaluate the facts.

Not The Sharpest Tacks?
Let’s look at HR in perspective against Keith’s claim we’re generally dull, side-lined executives who couldn’t make it in other fields. Keith alludes to, but doesn’t spell out that HR is relatively new as a profession without the 400 year history that, for example, accounting has. It grew out of payroll administration to take on a muddle of work that line executives didn’t want to make time for such as hiring, orientation, training, succession tracking, terminations, HR legal issues, human rights, health and safety rules and literally dozens of other tasks loosely related to people.

It can be a dumping ground. Add to that few functions have to deal with the complexity and multiplicity of issues that HR does. Few require as much insight into human nature, arguably the trickiest subject of all. Nice clean accounting rules have become increasingly complex lately, but nothing to compare with the massive grey areas and conflicting legislation that HR executives routinely have to deal with – many of which offer few absolute, clear-cut answers to tell your CEO or staff.

Compare that with who’s in this profession that’s less than a generation old. Should it surprise us there are still a lot of people in HR who were put there years ago to manage paperwork and never took time off to get an MBA or proper training? HR professional societies are only ten or fifteen years into certification. The current generation of senior HR executives (I was one) didn’t have an option to take HR courses. They didn’t exist. Many of us ended up labeled experts, but the quality was uneven. Not everyone saw that HR was beginning to require more creativity and entrepreneurship.

Intelligence and training won’t be as big an issue going forward with more new, highly trained graduates emerging from programs every year. That still doesn’t guarantee they’ll have the practical experience to make the complex judgments more often required today, but better education will make a difference.

Today university professors routinely dig up measurable examples of where HR has dramatically improved corporate business results. Stanford business professor Jeffrey Pfeffer alone cites 60 such studies in one article. While some of this shows the influence of academics and brilliant CEO’s, a lot of the programs producing these results have to be the creation of smart, effective HR executives. If they didn’t create all of them directly, at least they haven’t stood in the way and have implemented them exceptionally well. These aren’t achievements by dull people. Today finding people at the top of HR with other experiences behind them is fairly common. Concrete results are now routinely expected and delivered.

Only Losers Get Stuck in HR?
Because many line managers still share Keith’s view, some still sideline weaker managers into the function and assign them primarily paper-pushing tasks, “party-planning” and police duty as he notes. Nevertheless those who may look like losers frequently aren’t.

HR is often asked to enforce rules, sometimes pretty dumb ones, mostly not thought up by HR at all, but by frustrated CEO’s demanding knee-jerk responses to routine organizational problems better handled in other ways.

In one situation HR was routinely blamed for a poorly designed bonus plan that repeatedly paid out top awards, including even south sea cruises, to some of the worst performing department heads. If a department goal was to reduce sales under a long-term plan to phase out the department, missing the reduction target each year would result in being over plan and winning “excellent achievement over sales target,” while better departments with significant sales increases still fell short of making the even greater increases in sales their stretch plans called for. It didn’t matter how often this was pointed out, the senior team approving the program was stuck on “sales over plan.”

Dumping weak executives into HR shows as much or more a failing of line managers than of the individuals who end up in the HR function. This will be fatal going forward and won’t be allowed to continue. A bigger issue is whether senior teams can learn to effectively absorb the input of their HR members as valuable.

Not everyone is great, but HR certainly isn’t the only area with some weaker players by any means. Every function holds its share of those who couldn’t make it elsewhere, but have hung on where they started, barely coping with the basics. It’s always been the case that top line executives need experience in a variety of functions if they have time to get it. As HR becomes more critical for effective results, this has become more the norm for top HR executives, too.

What Keith doesn’t seem to recognize is that most executives never reach the top jobs in any case, nor could they. Organizations thrive because they’re tough on people in every function and ideally only the best rise to the top. Every function needs solid journeymen. Not everyone can be a star, but those at senior levels should be, and increasingly in HR, they are.

Treating Everyone Equally… Or Fairly?
Keith makes a good point that equal treatment is not always fair treatment. On the other hand nothing annoys people more than finding out the person at the next desk is making 50% more for the same work or has other unique perks for no clear reason.

Keith condemns one HR function for trying to enforce salary scales and title consistency in a specialized company where everyone needs to be a VP and get paid for talent. Fair enough, but there are plenty of counter-examples where companies get unionized, face class action suits or immense turnover because schedules, pay and promotions are assigned with capricious favoritism. I can cite many examples where people hired relatives, sometimes for twice the salary of their co-workers, or played favorites in scheduling or promotions with catastrophic results.

Finding a balance – and that’s what it takes – is a challenge that ensures some people will inevitably be annoyed. HR becomes the easy target for both sides and gets little credit for having the courage to take flak while trying to find effective solutions.

People in organizations often get tangled in the complexities they face. They bend or avoid sensible processes because they don’t know them well enough to understand how to operate effectively within them or because they think they can beat the system.

One very senior department head had so much trouble giving constructive feedback that he gave every one of his managers massive raises even after being heard to complain bitterly about their performance all year long. Somehow at salary time they were better than everyone in other departments where people were being fairly evaluated. Then he’d blame HR for cutting his people’s increases.

In some cases managers think others will be too dumb or powerless to object. They believe it pays to disregard HR process. The victims by contrast expect HR to somehow prevent or remedy every imaginable abuse, even those they don’t want their manager to know they complained about or others that are never brought to light until years later. Is HR to blame for all these? No system can be perfect. Each is only as good as the people implementing it and that includes, but isn’t only a responsibility of HR.

Is HR Ethical?
Keith obviously enjoyed his example of a manager forced to work for a bad boss by an HR manager’s lie that no other promotions were available. That might save an HR manager time in filling an unpleasant job. My guess would be that it’s about equally probable the HR manager was ordered to pass on that lie.

Of course some will argue an HR manager should put his or her job on the line and threaten to quit rather than communicate such a basic lie. Unfortunately bending such truths is a daily fact of life in most organizations. You can’t quit every day. The goal is to find a better answer than either lying or quitting, but it’s impossible to avoid some gray among daily choices.

The times when I ultimately put my job on the line it was for considerably larger issues. Weighing the balance of organizational demands over individual interests can be distasteful at times, but comes with the territory. In fact it’s in this daily struggle to find the right solutions that HR develops better skills than many managers in such matters.

To truly police organizations, HR would have to be equipped with the full powers of law enforcement and the courts. That’s never been their purpose. It exists to recommend better policies and practices and to do what it can to promote them. Held to that standard it does well in many organizations.

By the way, how many HR executives have we seen going to jail recently? That seems more common among other functions. And it isn’t because HR deals in areas where ethics, honesty and lots of money are less of an issue. My guess is it’s because HR routinely deals with ethics and fairness. We’re not saints, but when the basis of your job requires trying to find balance and equity, it’s not surprising that HR stands out as a model in this respect. As a matter of fact I’ve heard this held against HR. Some would say they try to be too moral or at least they take stands on the wrong issues. Either way it takes courage and a solid attempt at judgment.

Fewer situations today are completely clear-cut. As HR is increasingly called on to split hairs, they get better at it. In my experience this is true well down the line in HR. Those who can’t learn to do this don’t last long in anything, but most basic administrative positions.

Measuring HR Is a Challenge
Measuring HR requires more than dollars and cents, but Return On Investment (ROI) definitely is needed. If we’re subtracting rather than adding value, organizations should look for some other way to get HR tasks done.

However, how we handle individuals’ needs isn’t just a matter of how HR handles them, but how line mangers do as well. There’s a truism that, “People don’t leave companies; they leave bosses.” Don’t look to HR to solve these problems entirely on its own.

The parallels with finance and other support functions are clear if we look. A CFO can’t run an effective finance operation without the cooperation of the CEO and line managers. He or she can recommend proper budgeting, but if no one else cares or adheres to the key principles, it won’t happen.

Where specialists in finance use 20 or 30 core measures or ratios to compare results consistently from company to company, most functions such as Sales or Marketing are judged by just a handful of measures including sales, expense and customer satisfaction. In HR we routinely see lists of several hundred measures suggested, some as sophisticated as the most complex financial calculations such as Internal Rate of Return, present value or even fuzzier projections.

While measuring results is admirable, it can’t make up for good judgment and clear vision. It’s a truism that some of the greatest business successes had no financial justification at the outset. Who foresaw the tremendous dollar value of Google or the Internet? The goal is to blend a few key measures and effective judgment.

When line executives refuse to accept reasonable advice from HR in the face of so many research studies showing intangibles have tremendous economic value, why lay all the blame on HR? If the numbers in those studies aren’t accepted as sufficient proof or line managers don’t want to believe them and find it easier to stick to poor pet practices, whose fault is it? Blame HR for lacking persuasiveness, but the buck stops with all those most responsible for increasing performance, whether at the top of HR or elsewhere. 

Measurements are valuable. Yet when I asked for a system to manage what was needed, I was told it would have to wait because it would be the biggest system in the company – approximately twice the size of the current biggest: financials. Not many companies are ready to make such an investment in spite of the fact that it’s proven that it will produce enormous proven payback in future.

Just how valuable is illustrated by another well-respected academic, Baruch Lev, who points out that big companies in the Standard and Poor’s 500 Index that have mastered effective HR culture have raised the average market value of all 500 companies in the index to more than four times book value. That means intangible value, largely the result of human resources in the organization, adds three to ten times the value of all other elements owned by the corporation.

Since focusing on HR measures and systems can quadruple or more the value of your company, would you make the investment? Can you understand why line executives don’t? Is that a flaw in HR? We surely have a lot of educating to do. But it’s line executives who seem to have the most to learn.

What About The Bottom Line?
Tangible results are not foreign to HR as many people make out. Some costs such as absenteeism, Workers’ Comp, benefits, safety violations, individual law suits and human rights gaffs can at least be estimated and some pinned down quite specifically. We can measure how much instituting proper programs saves over past practice. These impacts can generally be seen clearly.

On the positive contribution side as opposed to cost-saving, the story is clear as well. Pfeffer’s and Baruch’s research are striking indications, but they have been repeated hundreds of times. This ability to repeat findings is the hallmark of solid proof and reasonable predictability worthy of any science. Yet much of it remains unknown except to a relatively small group of people, mostly HR VP’s who’ve been looking for just such proof.

For what ever reason efforts to publicize such successes haven’t been welcomed with open arms and great interest by “business people” who presently believe otherwise. Could it be other functions aren’t eager to see major investments in HR that might detract from investments in their own areas? Everyone has to compete for funding, so there’s a vested interest in down-playing major results elsewhere. That’s shortsighted since the studies show investing in HR creates a bigger pie for everyone. However that’s long term in a climate where short-term focus is the norm.

Is Strategic HR a Laughable Conceit?
With costs in HR matters we often deal with relatively small, sometimes soft numbers on many individual HR items. Dollar values add up, but some issues get much more immediately impressive even when less tangible items are ignored. One would definitely call some of these “strategic” in importance, something Keith laughs at.
If we believe extensive research by Gallup and others nearly 60% to 80% of our workforces are “disengaged,” meaning and distressed, disenchanted and actively looking for something better. Only when the vast majority of bosses at every level are effective leaders will we see that changed substantially.

That makes leadership training essential, something that obviously falls within the capability and purview of HR if it is functioning effectively. Clearly it does in some companies as numerous case studies confirm. The cost of high turnover can be debated, but is clearly substantial. The value of retaining highly effective staff to enhance the bottom line is less quantifiable in detail, but is arguably even more valuable – but again over the long term.

Apart from the substantial academic proof that effective HR can quadruple the value or more of a company, which sounds pretty strategic, a dozen studies including recent ones by Mercer Delta show that about 80% of mergers are failures. Other studies show total stockholder value in a failed merger takes a huge hit, maybe 20% to 50% or more of total worth of both companies, a drop that rarely recovers even to former levels, if at all, for at least five or more years. Don’t these sound like strategic issues?

In a merger at least one party’s stock almost always jumps in value at the first announcement. People get excited by the financial prospects without stopping to weigh the likelihood of the inevitable. Some make short term gains, so who cares about the long term? Among them are canny insiders who can stay within trading rules, yet make substantial gains selling at the right times. I guess that’s strategic in some sense, but not for the majority of stock owners nor for the long-term health of the company and all its other stakeholders. HR programs offer the possibility of being more strategic for more people, but it takes longer term vision to see that – in other words leadership.

We’ve all read about some of the 80% that fail. People tried to merge companies with cultures so obviously incompatible that no one in their right mind would expect the merger to work without substantial investments in culture change. The measure of whether that investment occurred is the number of times – virtually all of that 80% – where we read the merger failed due to “culture issues.” Did anyone consult their in-house culture change experts? We rarely know. Speaking from personal experience HR was almost the last to be involved when mergers were considered. We were told to make it work rather than asked for an opinion about whether it could.

By implication, HR fails again in each of these situations. Having been there and done that I know how often HR predicts the possibility of failure, asks for support in avoiding it and receives no money and little cooperation. Planning for the “HR aspects” of the event most often revolve around calculating severance pay and pension costs. Even then that’s typically done after the decision and without involving HR. Those costs are large, real and most of all immediate. Requests for training money have “less tangible” benefits. Oh, really?

If this is an example of where HR can make an enormous difference in ROI, how would we go about measuring this? At year end, HR people are asked to tote up outstanding law suits and penalties against the company over HR issues (firings, human rights, safety penalties and so forth). The auditors require an estimate of our chances of losing each case and of the total cost we may be liable for if we do. It’s pretty much a shot in the dark. Our lawyers hate to estimate chances of losing, so we do it.

We can even more easily estimate our chances of a merger failing with potentially astronomical costs, but nevertheless ones that could be estimated. We’re never asked. Where are the auditors on this issue? They seem mute on it while they’re happy to order us to guesstimate value and risk measures for individual unpredictable law suits.

If auditors were going to report an HR estimate that a merger hand a high percentage probability of failure, with a potential impact of 20% or more of total company worth, what do you suppose HR would be approved to spend on training and culture change programs of moderate cost to raise the probability of success to a reasonable level? Would a few HR VP’s be fired for getting it wrong? Would most succeed? Today we have no way of knowing.

In reality, or at least in my personal experience, it isn’t all that hard to do mergers that work. I was lucky to have a CEO for most of the ones I was involved in who at least listened and authorized some of the actions I suggested to ensure success, if not all necessary expenditures. All those worked. A small sample perhaps, but when 80% fail, it means something. I still didn’t get to spend much money, but even the no-cost things we were able to implement made a difference. Of course when a merger works its rarely HR that gets the credit. I know it helps.

So Why Do They Hate HR?
Why do people hate anything? Most often it’s because they don’t understand it and as a result there’s fear.

Just as there were no courses for HR managers when the current crop of executives was in school, line managers received no training either. Most learned to handle people in the school of hard knocks. One thing that school teaches is to trust your gut. I notice McKinsey predicts as one of the top 10 trends for the future that gut feel will no longer suffice for management now that detailed research is available in so many areas that were once a matter of guesswork. HR tops the list.

It became clear in many conversations how little HR is understood by many line managers. They see it as a bottomless pit into which wads of money can disappear with no visible effect. That’s frightening. They see a lot of stuff that seems to get done somehow anyway, like training, coaching, disciplining, all in a course of everyday events without special expenditure. They simply see a greater need for other investments.

It’s common for HR to be asked to design a high-impact training program only to be told that a proposal for five days of training needs to be shortened to half a day. Then it’s criticized for being less effective than required. We understand as well as anyone that the funds involved can be used for more immediate effect in other parts of the business. It isn’t HR that’s not strategic, it’s the choice to severely limit any spending directed to long term health of the organization in favor of fire-fighting today. That’s why successful organizations get better and better while weaker ones continually spiral downward.

Strong companies have their daily operations under good control and are able to invest for the future. Weaker ones fail to make those investments and the lack causes further problems that destroy any hope of getting on track.

In one organization this became painfully clear when they canceled management training entirely for five years. For 10 years afterwards I heard about the lack of bench strength among that group. An entire cohort of what should have been up-and-coming managers was missing. By the time we got similar training back on track lots of good staff had left due to bad management and lack of development opportunities, programs had failed and replacements were lacking for higher-level positions. Again this sort of thing is clearly strategic.

Given this lack of understanding by some senior executives it’s often difficult for HR to put together a consistent program that impresses staff and delivers results. We are reduced to fire-fighting along with everyone else. Human concerns are not dealt with effectively in that environment. Who can blame staff for pointing the finger at HR when there are obvious shortfalls in how a company manages its people? That’s an easy bandwagon to join. But it shows an even greater lack of understanding of the real issues.

No one department, executive or strategy is to solely to blame for the fact most organizations today have not yet fully figured out how to deal with HR issues well. For a profession only a few years old in relative terms, there’s been substantial progress. The greatest challenge HR faces is that it requires total team effort throughout the organizations it serves. With command and control leadership finally dying as organizations of all sizes deal with increasing diversity and need to innovate constantly, the leaders who pursue that style take their old-line organizations down with them, piling up lay-offs, declining performance records and ending in bankruptcy or acquisition by others.

There is light at the end of the tunnel. New supportive, coaching-style leaders are growing who recognize the value of human contribution, including the efforts of those dedicated to managing the complexities of HR challenges. It won’t be a single individual who “solves” the puzzle, but concerted effort by senior management teams working together to improve understanding in all functions of how people can work most effectively together. I look forward to a lot more debate on these matters. It’s far easier now that there’s concrete proof and ever more clarity around the issues that need to be resolved.

With leadership careers in seven diverse industries Dave Crisp (www.CrispStrategies.com) excelled in demanding situations. He developed hundreds of leaders while heading human resources, communications, ethics programs and international Internet ventures for 70,000 people at Hudson’s Bay Company through dozens of reorganizations, achieving “best company to work for” three years running. He regularly speaks to groups about Powerful Learning Leadership – how you develop superior results with five everyday skills.