Their survey of about 250 companies indicates the need for a radical rethink of HR, most notably putting hard financials around the fluffy feelings and making boards understand HR better.
The survey highlighted a clear over-reliance on engagement surveys when companies are making commercial culture decisions (49 per cent of respondents), given only one in three HR leaders can demonstrate a link between engagement and business performance.
“It’s a hard thing for HR to swallow, but for the last two decades everyone has believed if you chased engagement scores, profits and results would follow,” says We Are Unity CEO Ben Bars. “But companies are not seeing that.”
Natalie Jones, transformation director at Pernod Ricard Winemakers and a former long-time HR boss at Mars, acknowledges she was part of the pursuit for engagement scores.
“It was probably one of the only really tangible measures we had to offer as HR,” she says.
Jones faced a unique problem at Mars, where super high engagement scores weren’t necessarily translating to commercial outcomes.
The food manufacturer is regularly voted one of the country’s best places to work. Long-time workers are nicknamed “Marsians” and colleagues are treated as family and friends.
But a deep analytical dive showed managers were avoiding tough conversations and often working most closely with friends, which was affecting the pace and focus of the organisation’s performance.
The fix included multiple off-site sessions where managers were asked to stand with people they trusted most, then had to move to stand and engage with those they needed to work most closely with for the sake of the business.
“We gained the clarity needed to understand how some of our perceived strengths were equally holding back the organisation’s growth,” Jones says. “We were being relationship and feeling driven, but we needed to make more decisions based on facts. It made me think more broadly about the impact of culture.
“We need HR to start talking the language of business and lean into that challenge of driving business performance.”
The report’s authors also point to a dearth of directors with relevant HR experience, with people leaders reporting that only half of all boards are committed to the cultural change required to drive better business results.
Among the 1994 board seats on top 300 ASX companies, just 15 directors – or 0.8 per cent – have core HR skills (although that’s up from 0.4 per cent in 2016, according to the board diversity index from executive search firm Watermark).
ANZ’s Ilana Atlas and NAB’s Ann Sherry are among the few directors with HR experience on the big bank boards. Sam Mostyn (who sits on numerous boards including Mirvac, Transurban and Citibank), CSR CEO Julie Coates, Medibank director Peter Hodgett and Baby Bunting chairman Ian Cornell are also notable exceptions.
“There are not a lot of HR leaders on boards,” Bars says. “When you present your people and culture strategy, directors can review it through the lens of their experience from 20 years ago, but the world has changed.
“Having a HR person on your board shows how serious you are about getting culture right.”
In the survey, only 52 per cent of HR leaders reported that their function had a strong professional brand within their organisation, and only 32 per cent said they could directly relate the commercial impact of HR on business outcomes. Both findings underline the need for an overhaul.
Bars says the best HR leaders use employee engagement in combination with sophisticated analytics to ensure any investment will generate a tangible commercial outcome.
“If a company strategy says we need to grow by 6 per cent in the next 12 months, how can HR prove that its initiatives are linked to that 6 per cent growth?” he says.
Nick Tucker, culture and performance lead at We Are Unity and one of the report’s authors, agrees HR needs to link more closely to outcomes such as sharemarket performance, pace of innovation, customer experience and sustainability, rather than simply quoting percentage scores on employee engagement.
“The metrics you need to track as an HR team are the metrics your business tracks and cares about,” he says. “It is very difficult in a lot of situations for HR to quantify their contribution to the commercial impact of a business.”
Despite boards’ focus on culture, the survey also found only half of all boards are committed to the culture change required to drive business results. More than 70 per cent of HR leaders called out this tension as a concern. Even where boards are committed to change, directors may be pitted against executives, if executives only receive bonuses for growth and financial metrics.
The consultants say the future also requires breaking down cultural silos so that HR and risk departments can work alongside each other, to ensure companies are driving the right behaviours.
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March 4, 2020, We Are Unity