Now hold on, before you think I am bashing HR, let me draw a distinction. There is Human Resource Management and Human Resource Development; HRM focuses on managing the resource (ie. the nuts and bolts of payroll, labor relations, benefits, etc), HRD is a much broader view of developing human capital. While the semantic difference may be subtle, the organizational ramifications are huge. They are both necessary but one gets a seat at the table, the other gets the minutes from the meeting to act on.
Human Resource Management is a crucial component, but not a strategic driver
Again, let me reiterate, Human Resource Management is a crucial component to your company and the expertise within your human resource management roles can most certainly help achieve your organizational goals. The experts within HRM are very skilled at HRM strategy within their realms of knowledge, but as most would admit, they act within a microcosm of the organization. They recruit, onboard, train, establish pay practices, etc. And rarely does recruiting talk to training, and training rarely informs compensations and benefits. From an organizational perspective they are still seen as the “personnel department.” They “execute” organizational strategy, they do not inform it.
There is also a mental paradigm that differentiates HRM from HRD as well. Traditional human resource management is tasked with managing employees as a liability, not an asset. This may not necessarily be the paradigm human resource managers wish to operate under, but it is the role the organization has bestowed upon them. They are given the tasks of controlling costs, making sure the talent resources are adequate for the need, and ensuring legal compliance in the event of employee termination. If you find yourself arguing my point, ask yourself two questions – how much does your business development department (i.e. marketing) spend on a average year? Now, how much does your company spend developing its employees each year? Are they equal? Even close? And I am not saying that marketing or business development is not important, I’m just saying that if your number one investment of capital is your employees (payroll is typically the top budget line item) doesn’t it make sense to see them as an investment rather than a liability.
Assets and Liabilities
Even if you think about it from an economist’s perspective employees are an asset, not a liability. Liabilities tend to be defined as a necessary cost that has no residual value or depreciates over time. Assets are items that have intrinsic value or can appreciate over time. While this is not major league sports and you cannot trade talent from one company to the next and get paid in return (begging the question, why not?) Employees can certainly appreciate over time, and as soon as you lose a good employee, it is clear that their intrinsic value was greater than the sum of their compensation. Often key employees are talked about in terms of “we can’t just let XXX go, they are too valuable.” Yet, when raise time comes around, the tables turn and we are trying to give them just enough to stay rather than paying what they are worth.
My contention is that Human Resource Management is a component of Human Resource Development. If you have employees, you need HRM. Sadly, this is how Human Resources has been regarded in many organizations…a necessary evil. It is also why many HRMs come from a legal background. Again this is not a negative, it just highlights my point that the focus is not how can we maximize our resource, instead the major concern is how do we limit our exposure to litigation.
Human Resource Development is a holistic approach to human capital strategy within organizations. It encompasses your traditional HRM functions, training, organizational design, organizational development, performance enhancement, recruiting, culture, environmental design, coaching, and even impacts the mission and vision of an organization. Another term used to describe this paradigm is Integrated Talent Management, something most companies have only heard of.
OD and training professionals can tell you that your typical performance review is an exercise in protection, not performance development. After all, when you review someone’s performance once a year, what chance did they have to improve their performance until then. Even worse is when that single event of giving them feedback on how they did will determine how well they will do financially in the coming year. Every year, managers dread giving performance reviews, and employees have their hopes dashed, motivation crippled, and cynicism bolstered at the same time. The central theme, using reviews as a CYA piece leads to a disengaged workforce instead of improved performance. And I don’t blame the managers (while they carry some of it), I blame the HR policy and training. I mean really, how much training and development do you give to your supervisors and managers to communicate expectations and give good, and I mean useful, feedback? If you gave them enough training, then honestly, you don’t need annual performance reviews…no really, you don’t. There is no law that says you need to have them…it is a simply a formal way to inject feedback into a system to legally protect you from a wrongful termination lawsuit.
I once worked for a company that would deny people promotions because they did not have experience working at a competitor. In essence, they were telling people “if you want to get a better position here, you’ll have to quit.” And oddly, most employees were required to sign a non-compete agreement when they were hired…which meant, the system was designed to keep you where you were hired into. There was nearly zero appreciation for internal knowledge capital. Not a very engaging place to work, if you ask me.
Talent Management…a vacuum
Talent Management (there is that word again) tends towards a isolationist operating model. How are we managing our talent? Are they in the right places, do we have enough staff, what training do they need for their current positions, etc.? It is all very “now” focused. Only recently have organizations heard the need for developing talent for the future. Some are acting on it, and some are waiting until they feel the sting of a leadership drain…and then it may be too late.
Talent Management is also treated in a vacuum. You can train someone all you want but if their performance or engagement gap is not due to lack of knowledge or expertise, than your training program is not to blame. This article titled “8 Critical Steps to Get You Talent Management Strategy Right” proves my point. There is a lot of great advice in there, but no mention of how people can move laterally, develop personally, or match compensation to value. From a trainers perspective I would say 75%-80% of performance issues have nothing to do with a lack of skill or knowledge.
A Holistic View
Integrated Talent Management is an employee lifecycle and organizational paradigm. A major tenant that effective talent management systems believe is that employees are an asset to be invested in, not managed. Managing leads towards control, development leads towards coaching and molding. It holds that employees empower a company and not the other way around. Some companies get it right, others miss the boat entirely.
Human Resource Development also looks at things from a systems view. An organization is an open system meaning any change you make over here, will have an effect on something over here. This is where the strategy comes in. Having the ability to see how the different parts of a company are related helps HRD anticipate, advise, and prepare different parts of the organization as necessary when a change is being considered. The so called “soft costs” can be anticipated an used as a strategic decision making tool.
There is Hope
The key to successful HRD is to look at your employees as investments. This has a trickle down effect on every other system within the human capital sphere and how things are handled. In recruitment, it enables you to look at things from a cost/potential ratio instead of simply immediate cost/return. This can allow you to get talent cheaper that has a higher payoff in the long run (thus stemming the need to “buy talent”). In performance management, it helps you look at employees that still need development and have potential versus a declining employee that is producing negative returns. In payroll decisions it allows for fair market price where employees feel valued and organizations in turn have engaged employees instead of negotiations that result in each side feeling like they both gave up an equal amount. From a talent development perspective you develop people in a way that benefits them, not just you, resulting in higher engagement, reduced turnover, and retained knowledge capital.
If you look at your employees as investments instead of expendable liabilities you increase the sustainability of your company, improve its ability to adapt to changing markets, and enhance what your company is capable of. Your people are your most expensive investment…how much are you really paying attention to them? Are you developing them, or just managing them?