Herold Consulting's Hierarchy of HR Value ™
What can I get from a Human Resources function that will truly make a difference in my business? Is there anything beyond compliance and staffing that can be a differentiator?
Many organizations still look to their HR function to provide a base level of compliance and staffing. Getting people on board, trained and paid and allowing the company to operate by staying in regulatory compliance are critical functions, and may be the only functions of the “personnel department” that appear important to the company’s ultimate value creation.
Human Resources professionals appropriately bristle at such a conclusion. Business leaders who’ve operated in highly successful companies (including notable examples like GE and Pepsi) know that the value contribution from HR can be exponentially higher than simple administration and compliance activities. So what is the right answer? Well it’s “different strokes for different folks”. Business and HR leaders must set aside whatever bias they may have to make a decision about where they want to position their organizational investment on the hierarchy of HR value.
Human Behavior Context
In 1943 Abraham Maslow, an emerging psychologist and behavioralist, first proposed his Hierarchy of Human Needs:
Maslow's Hierarchy of Needs
Maslow proposed that humans have certain fundamental needs (breathing, food, security, health, etc.) that need to be met before they can begin focusing on higher level pursuits and goals. Once a level of needs is met, a person no longer need dwell on that level; he/she goes on meeting those needs in an “automatic” fashion and can concentrate on the next level. If a level of needs is not being met, however, it is impossible to concentrate on pursuits higher up the hierarchical ladder.
The Hierarchy of HR Value ™
A corollary exists between Maslow’s human needs ladder and the proposition of an HR function creating value in an organization:
Herold Consulting Group's Hierarchy of HR Value ™
The most basic survival needs of any organization (related to Human Resources) are compliance (meeting statutory thresholds in pay, benefits, employment law, etc.) and staffing (filling jobs, basic training, scheduling, etc.). If those needs aren’t met, the organization can’t survive, so leaders cannot begin to focus on value creation and growth opportunities. Once the needs at those levels are met, however, the organization can get comfortable exploring employee engagement, talent management and innovative organization designs and solutions that mark highly successful companies.
Value Creation
The school of human behavior creates a useful and highly appropriate context for exploring the challenges and possibilities for an HR organization, but a business is primarily about value creation. Human Resources professionals and their business partners, therefore, should base their dialogue and HR investment decisions on the value proposition.
Let’s start with a value proposition from the printing industry as a foundation:
Argent's Hierarchy of Product Value
A player in the printing industry starts with a simple strategic decision – am I going to compete on cost or quality? The margins are razor-thin if he chooses the commodity game, so he must be maniacal about cost control via the supply chain and his processes. He may choose, instead, to focus on end use capability, creating a unique and/or high quality solution for which customers will pay a premium.
Applying that strategic proposition to the HR function yields a model you can use to determine where you want to position yourself:
If your business has chosen a high volume/low margin strategy, you may choose to focus your HR function on compliance and staffing. Executing flawlessly at those levels allow the business to survive and execute, with minimal investment. With strong HR professionals, you may even get some focus on employee satisfaction, creating the ability to compete effectively.
You may choose, however, to begin exploring the premium solutions and benchmark returns that are achieved by companies who focus on climbing the value chain. The level of skills and expertise needed are much higher, and will require a higher investment in your HR function, but the levels of empowerment and performance that can be achieved are beyond the investment.
It’s “different strokes for different folks”. Choose the position on the Hierarchy of HR Value ™ that aligns with your overall business strategy and the realities of your organization’s needs to create the right value proposition.
For an assessment of your HR capabilities and movement to an optimal HR solution, please contact Joe Herold at The Herold Consulting Group. We’re standing by to develop and implement a solution tailored to your unique culture and business goals.