Evolution of the Hr Function: From a Business Function to a Strategy Partner

A few years back during a client interaction, while being quizzed on our capabilities, I was surprised by a question on security practices in our company. The reason cited was that the customer measured the maturity of their vendor on the basis of the security practices prevalent in the vendor's premises. After all they wanted to entrust their data with us!


Around 5 years later, we were asked a similar question where another customer evaluated our HR practices at a significant level of detail to gauge our competence.
In subsequent discussions, I have found that the question on HR maturity is being asked frequently by potential customers, investors and even prospective employees. The answers indicate maturity, stability, long term sustainability and delivery capabilities of your organization and hence are very important.
So what is HR function growth?
This post explores my discovery on this topic and should be helpful to both HR professionals and senior management to understand at what stage their HR function is and the steps they need to take to move to the next level.
You may also like to view a small questionnaire that will help you identify the Maturity and Effectiveness of the HR function in your organization.
HR Function Growth Path
As the organizations mature, HR practices also mature. The HR function is at three different states in its evolution cycle where it starts as a Business Function, becomes a Business Partner and then a Strategic Partner. Please refer to the following figure that shows the migration.
In each of these cases the role and impact of the HR department becomes progressively more strategic in nature. At higher levels of maturity, the HR function can add tremendous value to the leadership potential, top-line, bottom line and long-term sustainability of the organization.
At each stage the attributes & value add by the Human Resources function change and the tools required vary significantly.
HR as a Business Function
At the very least, when an HR function is available in an organization, it is responsible for managing employee data, takes care of payroll, time and attendance and the setting of company policies.
The tools that the HR requires are related to management of employee data and include a rudimentary HRMS, Payroll processing software, Time and Attendance systems (could include time-card readers, swipe systems and associated devices). I have found that in many cases organizations even use spreadsheets and shared directories to manage their employee data, policy documents and employee leave applications, contracts etc. In most cases, paper based employee files are the only source of employee data which are managed by the Personnel Administration department of the organization.
HR as a Business Partner
As a Business Partner, the role of HR is to meet the "existing business needs" of the organization so that the organization could grow at a measurable rate.
At this stage of evolution, the focus of the HR shifts to competency based Recruitment, Total Compensation, Employee Development, Communication and Organization Design.
The HR function helps in formalizing the organization structure (who does what and reports to whom). Once that is complete, the next role is that of identifying the skills necessary for different job roles. HR further helps in defining appropriate training programs that are necessary for developing these skills, recruitment techniques to evaluate the skill levels and benchmarking the skill database against industry standards and competitors.

Total compensation (payroll and benefits) also becomes a focus area where the HR helps the organization attract and retain skilled employees by becoming a leader in compensation management.
Using the skill database and the organization structure, the HR function iteratively evolves compensation practices, improves the training function and makes the recruitment function more attuned to the skills needed by the organization.
To facilitate the above functionality, HR uses tools such as Applicant Tracking software for recruitment, Employee Portal for communication, Self Services for employees empowerment, Learning Management Systems for training & development and an Employee Database for capturing employee skills & competency profiles. Organizations even have well defined Job Descriptions with details of qualifications, experience, special skills required for the job and job roles & deliverables for each job position.
We have found that at this stage most organizations prefer some degree of automation and are using tools either built internally or procured from vendors. Another characteristic of organizations at this level of maturity is the break-up of the HR function into sub-functions such as Training, Personnel Administration, Recruitment and Compensation & Benefits, each being partly dependent on the other.
HR as a Strategic Partner
Organizations that view their HR as a strategic business partner believe in full maturity of their HR function. Such organizations are focused on attaining leadership positions rather than an year-on-year growth. Bottom-line and top-line growth are expected to be achieved automatically.
At this level, HR becomes responsible for identifying core competencies necessary for their organization to attain leadership position. Further HR facilitates in
- Aligning employees to a common set of objectives derived from the mission and value statements,
- Mitigation of risk by devising appropriate Succession Planning Strategies,
- Identification of top-performers and non-performers,
- Continuous measurement of the effectiveness of leadership and employee satisfaction,
- Increasing employee engagement through appropriate measures,
- Aligning compensation to performance,
- Adjustment of recruitment and training to competency gaps,
- And specifying well-defined Job Descriptions, which map to the organization structure. These become the basis of Recruitment, Goal Setting, Training, Performance Evaluation and Career Development.
As a strategic partner HR uses a variety of automation tools for Learning Management, Employee Performance Management, Compensation Planning, Recruitment and On-boarding, Succession Planning, Alignment and Employee feedback.
The largest benefits accrue when employees are encouraged to use these tools as a routine practice at their work place. An integrated view of employee's life cycle in the organization is visible through appropriate dashboards which are available to the decision makers at all levels in the organization.

Can A Referral Program Run Without The Power Of Social Media?

The great promise of social media recruiting lies in leveraging the extensive professional and personal and relationships that people build over the years. Social media coupled with employee referral programs have emerged as the most efficient and cost effective means of hiring, mainly because most social networks are free which is also why almost everyone worth their salt is active on social platforms. 

Statistics from a survey by Survey.com revealed that respondents found that better quality of candidates was the most significant benefit of hiring through social media referrals. As the war for quality talent further intensifies, it is the organizations who seek to make themselves visible in social media that are likely to draw the best candidates replacing traditional sourcing methods that are no longer able to attract the best and brightest of the talent pool.

The basic principle that governs most referral programs is that good people know similar good people and job opportunities that come via a trusted connection are the greatest motivators for even non job seekers to act upon the opportunity. With social media the reach is further expanded with the possibility of trusted connections to pass along the job opportunity to their trusted connections and so on and so forth. The reach of an employee referral program coupled with social media is endless with no outer limit to the number of people who might possibly end up seeing and sharing your job opening with their connections.

It is not that employee referral programs cannot run without social media, there are in fact a great many referral programs that exist without being connected with social media in any way. It is just that without social media, the reach and scope of referral programs is limited to a very narrow group of people known personally to employees.

Apart from extending the scope and reach of the referral program, social media also makes the whole process of referring much easier and faster. With the power of social media, employees can share job postings with all their connections with just one simple click.  Social media combined with referral program also makes it possible to upload social profiles of prospective employees directly onto the referral platform eliminating the need for asking candidates to submit resumes.

The biggest benefit of social media however is the fact that it brings the organization in direct contact with the candidate; something which was hitherto not possible till the candidate was actually called in for an interview.

It would in no way be an exaggeration to say that social media empowers and enhances the speed and performance of employee referral programs to an extent that in today's recruiting scenario having one without the other is almost like handing over critical talent to your competition on a platter.