The Future of Human Resources: Creating Value

To understand the future of human resources, one must first know its past. HR emerged during the industrial revolution when there was a need to manage employees and overcome organizational challenges such as high turnover and low productivity. As a result of these human capital issues, scientific management began as a way to address organizational inefficiencies and it introduced job analysis to management practices.

During the labor shortages in the early 1900s, businesses adopted centralized offices to oversee employees and improve business results. From the 1930 until the 1970s, HR entered a maintenance mode, focusing on the transactional and administrative tasks of organizations and neglecting more strategic business needs. Since the 1980s, HR has entered a transformation period, and is now viewed as a core business function. While HR has come a far way from its scientific management beginnings, Ulrich and Dulebohn (2015) argue that HR is not yet at its end destination. 

THE FUTURE OF HR

The authors propose that the future of HR involves adopting an “outside-inside” perspective in order to create value both externally with customers, investors, and the community, as well as inside the organization with its employees. Rather than the current approach to HR, which drives to address internal efficiencies (such as administrative effectiveness or aligning HR to the organization’s strategy), HR should also understand the business context. This includes using social, technological, economic, political, environmental, and demographic trends to help shape decision making and identify key stakeholders that HR can benefit. HR’s focus on external stakeholders should increase customer engagement, investor confidence, and the organization’s reputation within the community. Through this “outside-inside” approach, HR will add value and likely enhance organizational performance (e.g., higher customer satisfaction and positive reputation in the community). 

OUTCOMES OF HR

In addition to focusing on the external environment, HR should also reevaluate the outcomes of HR work. While the current targeted outcomes are to build talent and improve employee results, the future HR should increase employee productivity, improve organizational capabilities, and ensure leadership as a brand throughout the organization.

HR can make talent more productive by identifying and improving the competence (ability to do work), commitment (willingness to do work), and contribution (finding meaning and purpose in work) of current or future employees. Not only does HR need to attend to the competencies of individuals, but it should also build organizational capabilities, such as globalization, customer service, agility, risk management, simplicity, social responsibility, and innovation. An organization should not only be defined by its roles, rules, and routines, but also the emerging capabilities that add value to the company’s business performance.

Lastly, HR should build leadership throughout the organization. The authors suggest that by building a case for leadership, defining leadership effectiveness from both inside and outside the organization, establishing leadership assessment, investing in leadership development and training, and measuring leadership results, HR will build value. Therefore, the future HR will add value from an “outside-inside” perspective by refocusing HR’s relationship to business, external stakeholders, and outcomes of HR. 

HR INVESTMENTS

The third issue that the future HR will need to address is HR investments. In order for HR to create value, leaders need to appropriately allocate resources and investments. The authors argue that the four key domains for HR investments are: HR departments, HR people, HR practices, and HR analytics. HR can support organizational strategy and add value with business leaders investing in:

  • HR departments that are organized and aligned to fit the business structure (whether it is functional HR, shared service centers, or dedicated HR for holding companies)
  • HR practices around people, performance, innovation, and work that are aligned with strategy and external stakeholders (customers, investors, and the community), and are also integrated and innovative
  • HR professionals that have insight towards future challenges such as globalization, managing risk, helping employees find meaning in their work, and sustainable practices
  • HR analytics and having professionals that understand and appropriately use metrics to improve performance 

TIPS FOR USING HR METRICS

The use of metrics in the future HR should follow a few guidelines:

  1. Avoid descriptive analytics, focus on predictive analytics
  2. Prioritize measuring the right outcomes, not the easy ones
  3. Keep it simple—future HR should not be a data warehouse, but a science to inform decisions
  4. Build managerial buy-in by having them own and be accountable for the data
  5. Emphasize HR analytics and data analysis skills in HR professionals 

BOTTOM LINE ABOUT THE FUTURE OF HR

In conclusion, HR’s future is to create value for its organization. In order to create value, HR needs to:

  1. Understand the business context factors and build relationships with stakeholders (both internal and external)
  2. Consider changes to the outcomes of HR: individual ability (talent), organizational capability (culture or processes), and brand leadership throughout the organization
  3. Invest in the HR domain in order to restructure HR departments, reengineer HR practices, “upgrade” the HR professional, and track HR measures

 

Ulrich D. & Dulebohn, J. H. (2015). Are We There Yet? What’s Next for HR? Human Resource Management Review, 25(2), 188-204.