Thought leaders from a quintet of cutting-edge workforce departments recently sat down with the editors of HRO Today to share their views on the past decade in human resources. Their insights on the emergent culture of measurement and the state of the world’s economy are not to be missed.
By Dirk Olin
HRO TODAY: From your perspective, how has the practice of HR changed in the past 10 years?
Sharon Taylor: In the past, when HR proposed something, it was often suspect simply because it came from HR. Thankfully, those days are long gone. The imperative now is to build a business case for HR programs, frequently by computing a return-on-investment to see what makes sense. That means demonstrating both efficiency and optimization of system delivery—which is necessary whether you’re talking about solutions that are in-sourced, outsourced, or co-sourced.
Roger Gaston: Two big changes come to mind. One, HR has become a business partner, working with line managers to solve problems—learning what makes the business work, in terms of both people and profits. If you don’t understand the business itself, you’re not going to be a good HR professional. Second is the whole arena of talent. At the end of the day, that’s going to be what differentiates your business from competitors’. With the changes over the past few decades and the turmoil of recent years, you’ve got to have the right people. If you don’t, you’re not going to make it in bad times or good times. Today, talent is my number one focus. There’s nothing more important than making sure you have the right people in the right positions.
Beyond those redefinitions, HR’s relationship to the board has changed. And this touches on the talent push. A few years back, when resources weren’t as tight, and you were in a position to invest in talent and build, you had more opportunities to recruit by bringing in several candidates and then zeroing in on the best. Now, the world has flattened and moved resources offshore. The need to be right is much more acute. Globalization has broadened the spectrum of the talent picture. Productivity, performance, cultures, leadership philosophies—they can differ markedly. Learning how to navigate all that has become much bigger over the past several years.
At a personal level, I went from a public company to a private company. And I think that is best summarized in a few words: faster, smarter, more productive, fewer resources.
HRO TODAY: Some people might think exactly the opposite—that a privately held shop would have a longer term vision.
Gaston: I know it. And it might. But the thing is that big change is harder in public companies. Why? Shareholders are rarely receptive to the kinds of allocation of capital or severe downsizing, because of effects on share price. In a private company, you can have an active board that is not dispersed by inclusiveness. You can have two people to talk to, rather than someone who represents hundreds or thousands of shareholders. And that board cares most about talent, about the future skills that need to be planned for.
So the increments of change are much larger in a private company because they are typically compressed into a shorter period of time—you have an imperative to make a defined change quickly, as opposed to quarter-to-quarter small change.
And for that, you need leaders who have the capacity to manage change and transformation. Because the oversight accelerates everything you do exponentially, you need the right kind of people to handle that, and that leads to management changes along the way. You have to roll up your sleeves, get costs out, and make hard decisions about downsizing. Next comes the transformation, growth, new product, competitor analysis in each market, and development of programs and systemic responses.
I want to go back to the 10-year question for a minute. Because we can’t forget that globalization has been huge. And that’s combined with a realization by practitioners and company leaders of what HR can do, what it has to do, the significant role it plays because the management of the business and its people are inextricably linked.
John Murabito: I’ve seen a huge change in the relationship between HR and the lines of business, because the C-suite is asking HR to help it compete, to add value in places where traditionally they haven’t done it before—such as staffing through a truly robust talent pipeline that is better than the competition. And that, by the way, can mean both from campuses or experienced pools.
So 10 years ago, you wouldn’t hear that much about people strategy matching business strategy. Now the C-suite says you need to do that if you’re going to be valuable to me. No fluff, nothing fancy. The goal is a practical connection between particular business needs and the people solutions.
So that shift is big. Another is the greater focus on efficiency. You have more and better metrics today than 10 years ago when we might’ve just measured turnover, for example. Now, training, investment and sales numbers meet, you watch sales per employee, diversity numbers, metrics within the outsourced part of the function, and investment of HR dollars against generalist spend. We’ll look at how we spend our salary dollars, and the same with differentiation on bonus dollars. You look back 10 years ago, and there was hardly any of that.
Dennis Zeleny: HR has evolved a great deal during the past two decades. In the 1990s, there were only a handful of companies—PepsiCo and GE were among them—that understood the value of strategically leveraging talent or human capital. Most companies back then used the HR organization to execute tactical or transactional work, such as payroll, on-boarding and administration.
Today, many companies realize the strategic value of HR in helping run the business. Enlightened CEOs value an HR partner alongside their CFO. The expectations of HR are much higher. The technical and functional requirements of organization design and effectiveness, learning, succession planning, compensation, and culture are more sophisticated and rigorous. Senior HR leaders need to understand the business proposition and create an HR agenda that supports the business. Today, there is also a greater use of metrics to gauge the success of HR work.
From a career standpoint, years ago my boss called me on a Friday when I was working in Queens, NY, and said I needed to start working in Detroit the following week. And there were no questions. Today’s generation of workers is much less willing to accept that kind of commitment. For me, the experience this provided was helpful, because you’d move from role to role. From benefits manager to compensation manager to generalist—it didn’t matter whether one job was higher or lower. You’d do generalist work for a few years, then maybe campus recruiting or something else. You were partners with the company in building your skill set. That’s how I was groomed in the business, especially in the early years with PepsiCo.
Overall, HR has become much more sophisticated in terms of the expectations. HR must contribute in some way to the bottom line. People either make or break a business. That’s fundamental. But it has slowly dawned—and some CEOs are just now figuring it out—that you need to understand the science of human capital, which has made HR more focused on bottom line business results. Today, HR has a seat at the table at most high-performing organizations. And with that comes accountability—from talent to governance to compensation.
Of course it was accountable before. But soft accountability has now become hardened. What does your bench strength look like? Are you prepared if someone were to leave? How diverse is your global workforce—including women and minorities? How’s your overseas management? You have CEOs who are much more sophisticated in their greater expectations of HR functions now. At some companies you have the CEO’s office—to the right is the CFO and to the left is the CHRO. That’s financial capital on one side and human capital on the other.
HRO TODAY: And those two pools of capital are also more integrated than before, right?
Zeleny: HR leaders are the liaisons to the board of directors’ compensation committees, just as the CFO serves in that capacity to the audit committee. This means HR leaders must use analytics around governance, pay-for-performance, design of programs, conformity to new regulations, peer company performance analysis, and the proper use of equity. That’s just an example at the boardroom committee level. Plus, the compensation committee has a much broader look now, with much more focus on risk assessment. Are we fostering risky behavior with our compensation designs? We need to ensure that we have proper risk mitigation in place. It’s something we have to address due to the board’s responsibility to represent the shareholder.
HRO TODAY: Okay, now for a different perspective. Dick Whitford, you run an HR operation of enormous proportions and one that is circumscribed by an extensive web of federal regulations. How has this decade of HR transformation appeared from your vantage point?
Richard Whitford: The pace of work has accelerated at the same time that loss of professional and technical expertise has declined. There’s been big growth of customer-service orientation in HR offices. The traditional functions—position classification, staffing, employee relations, and so on—have been joined by organizational transformation and culture development, safety and health.
The ways of doing HR work increasingly rely on technology—with Blackberries, laptops, and whiteboards for sharing ideas. There’s a qualitative foundation of spreadsheets and graphic displays, heavy teamwork and collaboration with phoncons, focus groups, telework and long-distance commuting. And there’s been a great increase in outreach to achieve diversity by making the workforce “look like American society.” That’s also seen slowly growing involvement of Federal executives and managers in recruiting the future workforce at all levels—from apprentice to expert.
HRO TODAY: How have HR systems of measurement changed, improved, or
Taylor: I think that measurement has evolved to having a prominent seat at the HR table—and an important one. It really speaks to a rigor and discipline undergirding HR, in terms of both demand management and resource output.
Some systems are so overly complicated that they’re not as helpful as they might be. The devil is usually in the details, because cookie cutter approaches won’t work. The point is to find the key leading and lagging indicators that tell your story and resonate with your stakeholders. Operational metrics, financial metrics, and workforce metrics are all important, but the challenge is to narrow those to a few well understood benchmarks.
If you were to look at our operational metrics on staffing, for example, and you had the numbers on how quickly forms were filled, how many people came in, and the number of offers made and accepted, you still wouldn’t have the whole story. For example, you wouldn’t know how diverse the slate of candidates was. Nor would you know what happens to those we hire once they’re here. How is their performance assessed? What does their career look like? It’s important to measure throughout the entire employee life cycle.
You need the right plumbing to gather the appropriate data points and look at them in a holistic way. There’s no shortage of turnkey products. There are probably 101 dashboards out there. But you have to look at your organization’s culture and goals, hone your business model, and ferret out what’s important to you. At the end of the day, that may mean you’re focused on 15 data points, say, not hundreds.
Whitford: HR operations and strategies have become increasingly data-driven. Program management through process mapping has intensely looked at operations to make them more efficient and effective, facilitating far better customer service. On-time data is more available to assist decision-makers. With the CHRO at the table, the business purpose can be applied to the databases. The analyses are more sophisticated—no longer just “losses” but projected attrition. That said, the automated systems must keep up with increasing demand.
Murabito: It’s really evolved as a science. Technology has transformed the HR function from administrative and bureaucratic—someone just saying “go get this information”—to a function in which HR has become more of a strategic business partner.
HRO TODAY: We have heard from CFOs and other CHROs that some practitioners have resisted measurement in the past—have you seen such resistance to measurement? Where do you think measurement is going?
Whitford: We have seen just the opposite, a growing demand for measurement. That’s included measurement of operations, of contractor-partner performance, of customer satisfaction, of workplace culture. The use of quantitative analysis is already recognized as a significant tool of the HR specialist’s work. It allows HR organizations to be proactive in shaping or changing programs and provides “intel” about coming issues that need to be addressed. For example, at TSA that’s how we were able to make modifications to our health plan contributions, which helped us recruit and retain part-time workers. If it can be counted, it counts.
Taylor: The HR profession went through a period of time where measurement was the great divide between HR and the analytical people. But gradually, we came to a natural marrying of measurements of success, individual scorecards and report cards. We’ve seen an evolution of the partnership with our finance people, and our vendor governance is now heavily metric-oriented. We’ve survived the scrutiny of internal audits and risk assessments. Now we’re on to using more predictive analytical tools.
Zeleny: Measurement must be embraced. That’s how companies are judged. That’s how you calibrate performance. I look to finance to learn, because they’re measuring everything. I look at “days open” or “days it takes to fill a job.” I look at cost per hire, productivity, headcount—all kinds of metrics—to ensure efficiency or guard against grade-level creep inside the company. HR people need to use metrics as they assess their performance, as well as the effectiveness of the entire company. Span of control, headcount, payroll, succession depth, and diversity are some simple indicators of organizational health.
The bottom line: For HR departments that embrace it, measurement has made them more important strategically and operationally.
Murabito: Metrics are vitally important. But I don’t want to get overly “metricked.” Why? Because companies have to have some faith that certain investments will pay off, even without a direct financial connection. They flirt with common sense or they are common sense, and we can’t ignore that or encourage line management to ignore that.
Academics and some practitioners have been known to say, “if you can’t prove it, it’s not worth doing,” but I don’t think that’s always true. Business pushed appropriately, but HR is sometimes taking it to an extreme—an extreme that the line might not even be asking for. My line doesn’t ask me for an overly burdensome analysis.
Gaston: We haven’t always seen people eager to embrace measurement. Many want to pursue their way without the pressure of comparison. But it’s become a big differentiator in the HR community. It’s actually how some HR people have earned themselves that overused phrase, “a greater seat at the the table.” If other functions are going to be measured, so should the HR community. And, given that we all now have fewer resources, you’ve actually got no choice.
HRO TODAY: As HR departments rely on shared services centers, centers of excellence, multiple vendors, or major suppliers of either services or technology, this issue of HR operations and functionality has emerged. Is this a new HR subspecialty and, if so, what is the career path, and what other subspecialties do you see emerging?
Taylor: When we moved to more of a shared service, multi-pronged structure, we had to bring in people with operational, analytical, and project management skills. HR is certainly more “technical” than in the past. Regardless of one’s specialty, HR leaders of the future will be asked to provide both project and process management. They’ll need to have strong quantitative skills and be good communicators, because of the complexity and bandwidth of operations. They’ll have to know the business case and be able to read a balance sheet. They won’t be accountants or programmers, but they’ll need to understand technical solutions to everyday problems, and know how to get large, complicated things done.
Murabito: It’s been a real opportune time for the function to break out of “administrivia” and pure personnel and move into a shared services and outsourced environment. And the company now looks at HR and asks for talent pool development, strategy, succession—there’s just a higher level expected. We don’t have an excuse anymore that we’re spending all our time on personnel or human relations.
Whitford: The use of shared service centers, centers of excellence, and commercially sourced partnerships are still favored as a direct route to faster, more effective HR service delivery. The emphasis today in the federal government is to in-source HR (and other positions) that are considered inherently governmental. In one sense, it is a new specialty in an HR organization, that of Program Executive Officer, with a knowledge and experience base in human resources and business management. It has been my experience in recent years that a knowledge of program management is as important as traditional HR knowledge, because of the increasing reliance on shared services and contractor-provided services. It is very important to be able to analyze and understand the value received for the services and the options for obtaining services. We are training new employees both in traditional HR skills and in program analysis and program management. We also communicate continually with our leadership and component heads so that we understand the needs of the mission and the people who provide front-line services.
I would also say that operations research positions will find a home in a recast HR world too. And other subspecialties that I think are likely to emerge will be in organization transformation and cultural development and change.
Gaston: Centers may have established a new standard of worth. The drive now is to get the right balance, and pay for it, and drive the work to the place where pay and work align themselves. There are and will be more finite types of functions, and you’ll be able to get more for less by moving from generalist to specialist.
We have an HR program management office (PMO). For any programmatic work we’re doing, we have a staff of four or five people. So let’s say it’s compensation or leader development or performance management, the PMO works with that function. We have a governance model that goes from idea gate to HR implementation gate. How does an outsourced vendor fall into that? We have vendors in just about every functional discipline, but those vendors are managed within each of these functions, so we don’t have a single traffic controller, if you might.
HRO TODAY: The last 18 months have seen downward pressure on HR headcount and spend, putting even more pressure on economies of scale and productivity. Is this a blip or a long-term change? If it is long term, how will it fundamentally change the structure of the HR department? Will it lead to more shared services, more outsourcing, more use of low-cost economies, and, if so, how does this change the future of HR
Taylor: We went through the wilderness here, just as many financial companies did during the last few years. Business was dropping, while the regulatory environment was changing, prompting the question, “How do I respond to that?” Even as a corporate function, you need to manage your operations like a business. Here at Prudential, each business and functional leader did what they needed to do. In some cases, that was restructuring. We put some initiatives on hold, and even shut down a few plans that were not mission critical. But we used metrics to help our team adapt while meeting the strategic goals of the firm.
One thing we did not do was shut off our investment in talent. We continued our presence on campus, albeit in a smaller way.
Gaston: I think there is some permanency to what has happened, a fundamental shift in the way that businesses are run. There’s some dependency, of course, on what your industry is and what kind of hit you took. Telecomm generally took about a 20-percent hit in 12 months. All of a sudden, there were very significant decisions about how you keep the ratios right. That will keep some HR changes permanent. Some are thinking major pieces will be offshored for good. But more generally there’s been a refocus on the work that the HR team is doing. For the past year, it’s been head down, managing people on the way out, damage control, re-dividing workloads. How much of that will remain?
However, I will tell you that as the economy shows signs of strengthening, and consumer behavior strengthens, and unemployment drops, we will see rising expectations from both employees and businesses. Employees are going to be saying, “We gave, we took cuts, we gave at the office, so what’s in it for us now?” That’s a big level of expectation change that the HR team is going to be right in the middle of. And we’ll be doing that with fewer resources. On the business side, the expectations will rise for talent and HR service expertise—“We need this many salary surveys in this many countries.” So the recession has brought a re-leveling of expectations, and it’s long term, but it’s not like a tattoo that’s been burned into your arm.
Murabito: We’ve had a wholesale restructuring, and it accelerated with the downturn. Now, senior generalists are in meetings about business reviews, talent planning, diversity. And there’s far fewer generalists, period. If you’re a generalist at CIGNA today, you have to be pretty talented. Now there’s one HR generalist for every 800 employees, not one for every 225. The generalists at CIGNA have always been part of the business solution, but over the last several years, there have been higher expectations for them being involved in strategy. Which doesn’t mean you always need to be at the elbow of the business line leader. You don’t need to be the puppy who follows them around. You’re not just there when called on, you’re there to be providing solutions.
Unfortunately, that means there are not as many developmental jobs. Every job we have here is big. That’s a challenge for the function.
And another huge change will be the healthcare arena, which will be a real challenge for all of us over the next few years. How do the regulations get set? Down the road, is it the right thing for HR leaders to drive down healthcare costs through wellness programs, or will some say, “Gee, we’ll be better off sending our employees to the exchange and pay the government penalty?” Obviously, my opinion is that we should focus on wellness and work with our employees through employer-based health insurance. By the same token, there are new faces on the National Labor Relations Board, and the legal environment is going to become more challenging for us over the next few years. How permanent all this is, is hard to say. But it’s big.
Zeleny: Today, people in the U.S. are more particular about disruption to their personal lives and less willing to relocate to diversify their experiences. It’s a trade-off that should be made consciously and with care. People shouldn’t go with the knee-jerk reaction that pits quality of life against career.
The downturn in the economy and its effects on our politics and the psyche of work people shouldn’t be underestimated. People are more security-focused today. People who planned to retire at 60, now plan to work until they’re 70. Healthcare and access to it is a key driver. Taxes are on the rise, as are social entitlements. In the U.S., growth will be slower than in Asia and South America. That means slower job growth and domestic expansion. The fallout of the recession will be enduring. The U.S. economy is going through significant change. We will eventually return to growth, but it certainly will take a fair amount of time.
But there’s also an upside for savvy companies. The current labor market, unlike in years past, offers a plethora of talented people who are unemployed. Despite increased competition for talent globally, especially in emerging markets, it’s a wonderful time to be recruiting.
There are also still plenty of opportunities at most companies for productivity improvement. We’ve learned how to do things differently now. And that’s enduring. We’re not going back to the old ways. We’ll be more frugal in our practices, and that’s permanent.
Whitford: Devolution is the likely trend in response to headcount ceilings and rising costs of HR operations. Certainly it can happen without an erosion of services if technology picks up the pace and rationally consolidated service operations are driven to succeed by highest management. Highest management will have to end cost-ineffective turf battles by declaring winners, period. Extensions of the service centers and headquarters HR could be logically embedded in line operations, with fewer people, at lesser cost, and geographically dispersed as well. HR leadership in turn will become more strategic, responsible for issuing program policy and guidance, initiating new or changed programs for contemporary needs, and more nurturing and developing of the smaller workforce.
HRO TODAY: Growth of shared service centers and globalization has created a kind of work “placelessness”—how will that change HR during the next 10 years?
How are you planning for 2020 and leading the conversation about it within your
Taylor: We think about operating models a lot because we do have a presence in many parts of the world. We have scale in some parts, not in others. Centers of excellence, instead of shared services, can be used as an enabler. We see ourselves as trying to identify global centers that make sense for our firm going forward. We’re using “hotelling,” where you don’t have a permanent desk and chair and lamp. You come in to the office periodically and have a common space to work. That makes your prime work location your car or home office, which works well for certain types of jobs. We’re a long way away from placelessness, though, in part because of the cultures that we have and promote.
Whitford: My HR office in TSA has employees working in California, Michigan, and New York using telework arrangements. The key to using employees well is managing by project or performance goals, rather than hours or presence. I enter into performance agreements with my employees each year in which we agree on the projects or goals that will be accomplished. I manage this quarterly or more frequently if necessary. I am able to recruit more skilled individuals by providing for telework opportunities than I would if limited to a single geographic area. And we are developing guidance for the rest of the organization on appropriate and beneficial ways to manage telework.
HRO TODAY: If you were advising a recent MBA with an interest in HR, what area or areas would you advise them to explore and why?
Taylor: They might first take on a role in a business function—pick one, any one. Doing so will help them learn how the business makes money and what the culture is like. It’s important to understand an organization’s customers, climate, and governance structure. Knowing how to read a balance sheet, provide project management, make a strategic use of technology, and build a business case are all good skills to have. Then, it’s easier to take on an HR generalist role or a specific HR function, because you can leverage your degree or background with higher relevance.
I also advocate the importance of developing hard and soft skills, because you really do need both. For example, I have an ex-actuary in my benefits organization. He designs
learning tools for retirees and individuals who are looking to make retirement decisions.
So he has platform and communication skills, but he can do the math of it all in
his head. He comes alive in front of a group or in one-on-one settings. At the same
time, he’s very credible from a technical perspective.
Similarly, our labor and employment lawyer also has the ERISA attorneys reporting to him, so he has to understand how the numbers work and what the business looks like. Loving to be around people is great, but it won’t carry the day alone.
Gaston: I would submit that the best way to get into an HR career path today is find the best company you can to train you in the business. Get that training, and only after two or three years of understanding profit and growing revenue, only then move into HR, once you’ve gone through that. Today, you won’t be seeing a lot of entry-level HR hiring. But individuals with two or three years of good management training and business training can then build their story about why they want to get into HR, and they will be very attractive.
Murabito: They should get experience in HR operations and understand the fundamentals of how a modern company delivers payroll and compensation basics. They could get that through consulting or on the inside. Then they should learn talent and staffing expertise and/or compensation—compensation and benefits is the majority of a company’s people spend. If you can show the ROI in those areas, that’s the future. Then go have a couple of big generalist roles.
Whitford: I would advise them to look for work opportunities in several different areas. They could start in a federal HR operation that would give them as broad a view as possible of traditional HR work and then move to a shared service center or corporate environment that would give them a grounding on providing data-driven value-added services. They could then return to a federal HR office and work on providing excellent services relying in part on shared service providers or contractors. Or they could start in a shared service or corporate environment and move to a federal HR operation. The important point is that they should be open to a variety of experiences that will give them a wealth of options for learning how to solve problems. They should attend SHRM or Partnership programs that keep them current with developments in the HR profession. They should always be curious and focused on the mission needs of their organization and the people it supports.
Roger Gaston is Senior Vice President of Human Resources of Avaya. Before that, he was Corporate Vice President, Human Resources, for StorageTek and Senior Vice President of Human Resources for Toys "R" Us.
John Murabito is Executive Vice President, Human Resources and Services, at CIGNA. Before that, he served in the senior HR leadership posts at Monsanto and the Frito-Lay division of PepsiCo.
Sharon Taylor is Senior Vice President, Human Resources, at Prudential, where she also serves as chair of The Prudential Foundation and as a member of Prudential’s Senior Management Committee.
Richard Whitford is the Transportation Security Administration’s Assistant Administrator for Human Capital.
Dennis Zeleny is Senior Vice President and Chief Human Resources Officer at Sunoco after having led HR at E. I. du Pont de Nemours and Company, Inc., and Honeywell International, Inc.