Human Resources Leadership in Difficult Economic Times

The economic challenges that we are facing are creating a difficult environment for human resources leaders. Many companies are simultaneously experiencing surplus and scarcity of talent and are struggling to find the right human resources delivery models, the right labor and organizational structure and solutions for attracting and retaining key talent. In recent years, a distinct trend has emerged. More companies are selecting human resources leaders who do not come from traditional human resources backgrounds. An unscientific look at recent changes in human resources leadership shows that nearly two in five human resources leaders have come from outside the human resources function in the past five years versus pervious trends of one in 10. Reasons cited by corporations are many, including:
  • An increasing need to get the people part of the business right
  • Concern over the ability of traditional human resources leaders to understand the company and deliver business-oriented solutions
  • "Human Resources Transformation" initiatives that are too slow to deliver results
  • An inability of human resources to get costs under control
  • A lack of robust people analytics
The emerging model is to place a strong operations leader in the top human resources spot and surround him or her with the appropriate experts who have deep functional knowledge. Operations leaders tend to have demonstrated strong people management skills in their roles and are seen as strong people managers. The expectation is that these leaders can model the behaviors of good managers and better balance business needs with more traditional human resources concerns. In addition, there is a strong focus on operational leaders who have led business transformation efforts and have a strong grasp of metrics and cost-cutting. Their mandate is often to simultaneously make human resources more efficient and effective with a strong focus on improving business results.

This trend has been enabled by a number of changes in the vendor marketplace, including the evolution of both the human resources outsourcing and human resources systems markets. Companies have more and more options for getting core human resources services and technology delivered and can find others to do many of the transactional activities. This allows these operational leaders to leverage their external relationships while focusing on the most strategic human resources priorities for the business. In addition, having the right staff with the appropriate expertise is critical to making these leaders successful.

That is not to say that this trend is universal. In many organizations, human resources leaders from traditional backgrounds have forged strong partnerships with the business and are seen as key to delivering results and driving business transformation. These leaders understand the business and are able to deliver results. They are vital parts of the leadership team, and many organizations wouldn’t think of making significant business decisions without their involvement.

As markets and the economy become more unstable, the question is whether this trend should continue and whether a particular background is better for leading the human resources function through these challenging times. Usually, it is much more about the skills of the individual rather than a particular background. During these turbulent times, human resources leaders must have:
  • A depth of business expertise and the ability to understand at a deep level the operational impacts of human resources decisions
  • The ability to implement human resources strategies that deliver business results
  • A proven track record of driving transformation and change
  • An understanding of metrics and how to measure effectiveness in business terms
  • The knowledge of how to drive cost reduction and efficient delivery models
Consequently, leaders from either an human resources background or an operational background can be successful human resources leaders in these tough times. However, both will likely need to focus on closing gaps against these critical skills. In the case of human resources, the gap to be closed is often the business perspective. Unfortunately, this can be very difficult. In most cases, it is not sufficient for human resources leaders to simply learn the basic business drivers of their company. They need to understand the "real life" implications of human resources policies and processes from an operator’s perspective. Often the only way to get this perspective is to actually take on an operator’s role for some period of time. Some human resources leaders can get this perspective by working as the human resources person for a key business unit, working closely with customers or key business initiatives, etc., but this is not always the case. Those who want to be the head of human resources should look for this type of experience as part of their career development. For operators, their knowledge of human resources strategies, compliance, etc., is the key gap to be filled. The advantage that operators have is that this lack of knowledge can often be supplemented by having the right staff around them.

Organizations must choose leaders who bring all of the critical perspectives to address these challenges. Finding the right person who can deliver true business knowledge and an operator’s viewpoint, along with the right human resources solutions, is critical to success.

Originally published on Human Resources IQ.