HR is underutilised

Johannesburg, 15 May 2007

A company's human resources department is one of its most underused assets, yet has the potential to become one of its most prized.

This is according to Dave Ulrich, known as the world's foremost strategic HR professor, who says today's service economy is founded around people.

Along with partner Wayne Brockbank, Ulrich is conducting the ongoing Human Resource Competency Study, covering trends in HR management. The project has assimilated data from more than 40 000 respondents over the past 20 years, and is the largest study of its kind.

Ulrich said: "Our findings show that the skills HR professionals have, explain about 20% of business performance. Competitors can quickly copy services and products, but it is harder to copy the quality of an organisation and its people."

The study revealed that HR should play a "major part" in implementing an organisation's culture.

Human capital

"We see HR creating a company's culture from the outside in," said Ulrich. "When a company talks about its culture, they usually talk about it from the inside out, but the strongest corporate cultures are linked to customer expectations. For instance, if Intel wants to be known for innovation, it needs to build innovation into its HR practices."

Today's HR professionals are expected to deliver well beyond hiring, firing, payroll and employee policy administration. Some companies now appoint HR directors to their board of directors, enabling them to "become an advocate for current and future human capital".

HR directors can become the "architect of a company's strategy", by answering whether a company has the human capital to fuel a company's growth.

However, the success of HR does not depend solely on the director in charge of the department, but on the department as a whole, Ulrich says. "Our study has found that an HR department is 20% to 25% more important to business results than the director alone."

Ulrich, a business professor at the University of Michigan's Ross School of Business, was ranked the number one management educator and guru by BusinessWeek magazine, and was listed as one of the world's top five business coaches by Forbes magazine. He has worked with more than half of the Fortune 200 companies. The full results of his research will be revealed on 8 August.