Last week, few minutes into a presentation to a prospect, I was asked by the HR of a GSM operator if we could send them some of the more "interesting CV's" we have in our database. They would then pay us a fee if they would contact anyone in the CV's provided, within 6 to 9 months after submission.

It was clear the HR buyer assumed to go through another "been there done that" type of presentation, and decided to cut to the chase.

A question why an experienced HR is confused between Executive Search and Job Boards led to a pointed discussion as who we are and what value Executive Search delivers. In return they stressed several times that what occured was an unfortunate "misunderstanding".

By coincidence the same day, a senior and well known executive whom I met earlier that week, asked me if by any chance I had send her CV to that particular company. I told her we never send CV's to prospects or clients, and we only share candidate data with explicit approval from the individual in question. She was incensed to learn out her CV was submitted without her permission by a firm who  heard she was "in the market".

She was angry because rightfully she wanted to keep control of her privacy while evaluating and choosing opportunities herself.

The company chasing CV's missed an opportunity  because they lost out on a valuable senior talent,  the search firm that send out the CV will never be considered for future business by that executive.

Job boards hold hundreds of thousands of CV's, and offer againts a payment access to that repository. However, such a vault of CV's does not offer solutions to an employee churn and attrition rate that vastly exceeds that of the combined competition, negative cashflow, market share erosion and an unclear, confusing corporate image. Those problems are tackled by the right managers, usually brought in by Executive Search firms; and who are consulting partners into genuine, effective and lasting solutions.

This was the grist of my argument to the HR employee: We're not a meat market.

 

When one considers the total assets of a company, there is one that stands out by its inherent capacity to create and add value. All the other assets, such as cash, plants, warehouses, transportation, machines and equipment, energy are all inert, and they do provide not any value unless a human being comes into the picture and puts them into use.

This particular asset, human capital, is the economically most important, but also the one that is most difficult to measure. Beyond trite truisms and platitudes of how important people are, human capital essentially allows leverage of the assets one finds back on the balance-sheet. A very crude measurement of the leverage generated by human capital could be expressed by the difference between the market value and the book value of a company.

Although human capital is the economically most important asset, it almost never appears in any book on business ratio's. I have in front of me "key management ratio's: the 100+ ratios every manager needs to know", and there is none expressing economic value of employee performance; on the contrary the underlying accounting leading to those ratios would treat employee related metrics as a cost rather than as leverage. The reason is that accountings main role and focus is on the conservation of assets, moreover, its focus on the past; whereas human capital related metrics look to the other direction, the future.

Value-add starts with the definition of the goals of a company, goals which trickle down in an operational sense through the business units to the human capital, which is organized and invested accordingly with other resources. Value-add then comes through the creation of revenue, efficiency, the reduction of expense, leading to profitability and other goals of the company. A goal denotes a direction of desired action into the future, hence the inadequacy of traditional accounting into measuring employee performance.

One can already intuitively feel the importance of management in this picture: the leverage of human capital through goal definition, through its allocation in tasks and processes, themselves organized according to specific business units leading to required outputs in quality, productivity and service. Hence great management will take into account employee performance, and the only manner this can be realized is through adequate and effective metrics, which I will cover in a follow-up post.

A recent article in CFO magazine had Prof. John Beatty of Rutgers University made incendiary remarks about the HR profession, going as far to claim that typical HR activities have no relevance to the succes of an organization, or in his words, I quote: "there is no evidence that engaging employees [through HR] impacts financial returns". Oh yeah? As Executive Search Consultant I have come across the opposite case several times.

Let's look at the following quotes

"the language of organizations is numbers, HR isn't very good at data analytics"

and

"They don't think like business people. Many of them entered human resources because they wanted to help people, which I'm all for, but I'm also for building winning organizations."

Just like in sales, marketing or operations, one will find in the HR profession executives with varying skills and competence. In some firms, HR is regulated to an administrative role, overseeing labor regulation, its implementation, and various pay-roll issues. In others HR is an integral part of the company business. I have come across HR Professionals working for Microsoft, Cisco and GE who were actively involved in the business, to such extent that they volunteered or were offered to take up positions in sales, customer care, even operations.

A good HR professional knows and understands the business he works in, and he or she can point out exactly how HR adds value to the business. Those HR executives furthermore have a good grasp of analytics, and are aware of the importance of measuring the critical parameters related to employee performance. I know HR executives in very large organizations which retained consultants to implement EVA (Economic Value Add) performance measurement systems across the enterprise, which involved a significant participation of IT into setting up the system, in this particular case, across one of the largest banks in Turkey. Those HR executives have an understanding of business process analysis, change management and organizational effectiveness.

Are there, as Professor Beatty asserts, HR executives that have no clue about business analytics, or about the actual business of their company ? Yes there are such individuals, however, most of them lack that know-how because their company treats HR stepmotherly and see HR as a paper-pushing gatekeeper function between executive management and employees.

Good managers understand what HR can bring to their companies beyond pay-roll management and labor regulations. That is how I or collegues were retained, to find them great HR who understood a particular business, sector, region and culture; and who could put in place effective and efficient performance measurement and organizational development systems. A good read on measuring HR related matters can be found in "The ROI of Human Capital. Measuring the Economic Value of Employee Performance"

One advice for HR executives: mix with the business people in your company. Learn, understand and participate in the business; get what makes it tick, and how your responsabilities translate in effective added value for the company.