People power

The good old days of taking a purely administrative approach to human resource (HR) management are gone, with companies now needing to pay attention to their "people" in all sorts of innovative ways.

Issues such as leadership development, talent management and training are now at the top of the strategic agenda as a key driver of competitive advantage for companies, according to a global survey by Deloitte and the Economist Intelligence Unit. And this requires a more strategic approach to human resource management.

"It is no longer good enough for a business to have a HR function that is administrative only," says Mark O'Donnell, senior manager with Deloitte in Dublin. "It needs to be an integrated part of the business, as important as finance, marketing or sales.

"HR is a relatively new field and it traditionally is seen as something that just looks after the administrative elements of people, the hiring and firing of people, and compliance. It hasn't always been looked at as something that is really involved in developing people and shaping strategy. So it's more of a legacy thing than anything else."

Many HR sections already recognise the challenge facing them and are trying to move away from purely administrative roles to more strategic ones, according to Deloitte.

In some cases, they are doing so by moving their non-strategic activities to a shared services centre or by outsourcing.

"Effectively you have a hub for all the processing and administrative work, and then you create centres of excellence around that," says O'Donnell.

"So, for example, you could have a centre of excellence around leadership and development, and people who are experts in that field are released from the day-to-day shackles of administration and are concentrating on leadership development."

This trend is expected to continue. On average, 29 per cent of organisations have already outsourced recruitment, training and payroll, while another 18 per cent expect to outsource these and other HR activities in the next three to five years.

Centralising and/or outsourcing the administrative tasks represent a key step in enabling HR management to focus more attention on strategic business issues.

But transforming HR into a strategic function starts at the top, where there needs to be adequate sponsorship of the area at management-board level, according to Deloitte. However, more than half of organisations surveyed by Deloitte still do not have a manager or director of HR dedicated to people issues at senior level.

"Everyone that was polled in the survey said it is absolutely vital, but there is a disconnect between what they are saying and what is actually happening in these organisations," says O'Donnell. "Most say it's vital, but only 50 per cent of them have a HR seat at the top table and are able to influence at that level."

While 68 per cent of organisations expect that they would have a HR manager dedicated to people issues at senior level within the next three to five years, O'Donnell says this may be an insufficient timeframe given the challenges that exist today - in particular, creating more value with the people you already have.

"Leadership development is a number-one priority and challenge," says O'Donnell. "The war for talent has moved on. Ten years ago, the war for talent was fought using money, compensation, share options, but that is no longer good enough. It is now about retaining your staff by developing them within your organisations."

To achieve this, O'Donnell believes HR centres of excellence are essential. "It's no longer good enough to have generalist HR people trying to dip into [ staff development] while also doing employment law and compliance."

However, people-related strategic issues require business as well as HR insight, according to Deloitte. If a real difference is to be made, HR staff at every level need to understand the business and develop new HR capabilities.

"From an Irish point of view, HR functions need to increase their momentum to successfully create value and play their part in delivering towards the strategic agenda," says O'Donnell.

"To gain credibility as a true business partner, HR leaders need to become increasingly proactive in response to an ever-changing business environment to ensure HR continues to operate efficiently and is positioned to address the important people issues business leaders have."