The HR Role in a Changing Economy

Presented by Wayne Perrett, the following is an excerpt from a conference presentation for the Society of Human Resource Professionals (SHRM – 2003)

Over the last three to five years we’ve witnessed significant change in terms of competition, relationships between companies, suppliers, customers, and employees. As companies begin to redefine themselves in the face of new competitive challenges, there is a growing realization among business leaders that the winners will be those companies that have mastered the “human element” of change. Thus, the need arises for an HR function within every company that can serve in a leadership role on a range of issues critical to the company’s success. For the HR function, being a ‘strategic partner’ will no longer suffice: the bar has been raised.

Many fundamental changes are at work in the world’s economy. Significant developments are affecting most, if not all, industries. As a result, business leaders no longer have the luxury of maintaining a ‘business as usual’ stance. In most cases, these developments are the result of the confluence of many fundamental changes that determine how companies serve their customers and how they compete against one another.

The phenomena at work here include:

• Rapid advance of information technology (probably the engine of change)
• E-engineering
• Deregulation
• Globalization
• The rise of the Internet and e-commerce

With these factors in the environment, many companies are now beginning to experience the most challenging aspect of the new economy: rapid and unprecedented change.

Over the past few years we’ve seen broad changes in the competitive arena, which are leading many businesses to define a new set of strategic priorities. As such, there are at least five imperatives or influencing factors that should be and probably are on the agenda of any company’s top team:

1. Redefining the Company’s Business Model. In order to adapt to a different business environment, many companies will have to completely rethink and redesign the way they do just about everything. For example: business units/value disciplines.
2. Reducing Cycle Time. As product and industry cycle times become shorter, companies must be able to move quickly to take advantage of emerging opportunities. The goal here should be faster decisions and faster time-to-market for new products and services.
3. Fostering Innovation. The challenge here is to create a culture that encourages risk and embraces (learning from) failure as a way to become a market leader. As technology continues to evolve rapidly, the winners will be the those companies that can quickly test numerous products and/or services and then learn from and build on each experience.
4. Securing Talent. As we saw in 1999-2001, while the competition for talent intensified, a new challenge for companies emerged: attracting and retaining those individuals required to lead new initiatives.
5. Strategic Partnering. As the pace of change accelerates, it becomes harder for individual companies to adapt to this change. So, a company that cannot build a critical new capability will instead have to buy – or partner with – a company that already posses that capability.

Consequently, these new imperatives have direct implications for the human resource function:

• As a part of the redefinition of a company’s business system, HR will need to play a prominent role in organizational design and in managing the effects of change. HR will also be tasked with communicating changes in strategy to the rest of the organization.
• As companies strive to seize first-mover advantage, HR needs to help prepare the organization to move faster and to shorten the time-to-market fir new products and services. In addition, the HR function must be prepared to adjust everything for which it is responsible to a fast-cycle business environment.
• Fostering innovation demands a culture that embraces risk, where failure can be learned from and built on. The questions of what that culture should look like and how the company transitions to it fall squarely within HR’s field of vision.
• In securing talent, HR must step up its efforts to understand what constitutes a compelling employment offer and then build an employment brand that stands out in the labor market.
• Strategic partnering demands integration strategies and skills. In addition, the potential exists for HR to play a prominent role in the identification of new strategic partners and business opportunities.

The competitive pressures formed by the new economy definitely call for a change in the role of the HR function. No longer is being a ‘strategic partner’ sufficient. In today’s business environment, HR must become a leader in identifying new business opportunities, defining business strategy and company priorities, and preparing the organization for change.

Two priorities must be paramount for any HR function aspiring to fulfill this leadership role. The HR function must:

1. Become focused on the company’s external environment, as is the rest of the company. HR managers can no longer afford to wait to have change interpreted for them.
2. Be prepared and positioned to play an integral role in strategic partnerships. The success of mergers, acquisitions, joint ventures and strategic alliances most often hinges on organizational and workforce-related issues assessment of core competencies and capabilities, and compatibility or fit.