They’re often seen as the enforcers. The hirers and firers. The keepers of the company rule book. But besides policies and payroll, what is HR really for? Where exactly is its value – and why is it that so many successful companies place HR at the heart of their operations?

You’ve heard of the ‘rainmaker’ salesman, the ‘rockstar’ developer, the ‘growth hacker’ marketer and the ‘inspiring’ team leader. When you first got your company off the ground, there’s a good chance that finding these people was high on your priority list. But what about a HR manager? They tend not to come with amazing-sounding adjectives, and if they are hired at all, it tends to be way after the “important” roles are filled.

As your organisation grows, it’s almost as if setting up an HR department simply comes with the territory; rather like getting bigger data servers and more car-parking spaces. Useful on a practical level – but hardly a real game changer for your company.

If HR doesn’t matter – then why bother?

Could we get away with ditching HR departments altogether? A couple of years ago, an article in the Wall Street Journal made a case for it. On one level, it made perfect sense. Of course you need processes for managing “hiring, firing and benefits” – and you also need a way to deal with things like pay negotiations, internal disputes and the host of other bread-and-butter issues that can crop up from time to time.

What the author questioned was this whole idea of a traditional HR department “which claims dominion over everything.” This is the idea of the HR manager as the gatekeeper, in charge with a needlessly bureaucratic department that “stifles innovation and bogs down businesses with inefficient policies and processes.”

Payroll, perks and benefits can all be handled by computer. If you need to hire, external recruitment agencies can handle the whole process for you. And as for conflict resolution; who better to handle it than the managers on the ground?

All of this makes sense because of one simple reason: it doesn’t consider HR to be strategic, and certainly not as a must-have department within a business. Instead, it seems to view HR as a bunch of processes. It’s as if the whole of HR is a series of distinct problems to be fixed. So from this viewpoint, it’s perfectly natural for a business to attempt to resolve those problems in the most efficient way possible.

If you look at it this way, then it’s no wonder that HR has an identity problem.

Anyone can recruit. It takes something special to retain.

Daisy Group started from scratch in 2001. In 2009, this business communications specialist floated on the AIM and currently employs around 1,500 people. Interviewed by HR Magazine, its Finance Director Steven Smith spoke of how the HR department has evolved with the business – from one HR administrator to a team of twelve.

He speaks of how the company no longer sees HR as an administrative function. “Now, it’s a lot more strategic.” And that strategy is all about not just getting the right people on board, but on keeping them there: “We used to have to recruit senior people externally because we didn’t have them ready; now we want to grow them internally. Where we used to think about recruitment, now we think about retention.”

People often talk about the recruitment process. But when was the last time you heard someone mention the retention process? A process tends to be fixed; it has a beginning and an end; it’s the type of thing that can easily be outsourced or even automated.

It’s no accident that the first time many companies start to realise the benefit of HR is not when they want to find employees – but when they realise the value in keeping them.

“If your CFO is more important than your CHRO (Chief Human Resource Officer) you’re nuts!” – Jack Welch

Defining your core values, finding new hires who embody those values, building a culture that reflects those values and that people want to remain a part of: none of this is ‘easy’.

Businesses don’t want the endless cost and disruption of staff churn. They don’t want their company to be seen as a stepping stone for up and coming talent. And they want to develop a workforce that’s capable of meeting whatever challenges the business is faced with. This is where the value of HR rests. It’s why it exists. It goes far beyond simple processes such as payroll and disciplinary procedures. It requires thoughtful planning, careful implementation and constant review. In other words, it requires a strategy.

Is HR stifling or sustaining businesses?

A decade ago, Fast Company published an article setting out all that was wrong with HR. It was described as “at best, a necessary evil – and at worst, a dark bureaucratic force that blindly enforces nonsensical rules, resists creativity, and impedes constructive change”.

But then take a company such as Sainsbury’s. Far from being sidelined, HR is at the centre of their business team. To meet the challenges faced by the sector, it has invested heavily in personal development, with in-house ‘training academies’ designed to foster a workforce prepared for the very best standards of the day. And when the supermarket pioneered self-service shopping, it was actually the HR department who led the way.

Likewise with BT. A few years ago, when faced with the twin challenges of the credit crunch and greater competition, HR was at the centre of the company’s strategy for survival. The business had to be future-proofed, and a core part of BT’s strategy for this involved “retaining, retraining and redeploying” existing staff.

It’s nonsense to suggest that HR “impeded constructive change” in BT and Sainsbury’s. It was because of HR – and more specifically, because HR was at the heart of business strategy – that the companies were able to deal with the challenges they were faced with.

Enforcement officer or experience officer?

“Make your numbers, or else”. This was the culture that prevailed at Enron – and during the company’s glory years between 1995 and 2000, it seemed to work. Those who were willing to take risks were rewarded handsomely – provided that those risks paid off.

Yes, there was an ‘ethics book’ at Enron, but as Personnel Today highlighted after the company’s collapse, “they were rarely policed and frequently ignored it they stood in the way of the more ‘important’ business.” Instead, what had been created was “a collection of mercenaries”, with HR as the gatekeepers of the bonus system, helping to ensure the survival and promotion of the fittest with scant regard to propriety or prudence.

This is an example of the HR manager as the ‘enforcement officer’; the person who’s at hand with the carrot and the stick. But as Dan Ariely puts it: “Imagine you go to a dinner party and offer to pay your host $100 reward for cooking such a wonderful meal. He or she is likely to be insulted and may never invite you back again.”

Sure, driving superior performance is at the heart of HR – but if if it’s drilled down to this very simple idea of carrot and stick, there’s a problem. Quite simply, as Deloitte showed earlier this year, it doesn’t work. Simply handing out economic incentives (or holding them back) presupposes “that people work harder and produce more output in exchange for money and positional power”. If the carrot and stick is the be all and end all of your HR policy, then it’s based on some very misguided and outdated ideas on what human psychology as a whole – and how to motivate employees in particular.

“Human Resources isn’t a thing we do. It’s the thing that runs our business.” – Steve Wynn, Wynn Las Vegas

Laszlo Bock summed it up, thus: “You spend more time working than doing anything else in life. It’s not right that the experience of work, even at some of the best employers, should be so demotivating and dehumanising.”

It’s the experience that counts. Overseeing the bonus scheme, compiling the sales rankings list, issuing warnings for not meeting performance targets: if this is all your HR department does, then it’s little wonder that it’s undervalued. But if that team is central to ensuring a great working environment; if your HR officers are experience rather than enforcement officers, you start to see why HR has real value.

Airbnb appears to agree. The short-term rental company, has recently announced it has turned its Chief Human Resource Officer, into its Chief Employee Experience Officer.

So is your HR officer the doorman or the maitre d’?

Rolls Royce takes on over 180 apprentices each year – most of whom are still in their teens. The majority stay with the company for their entire career. Almost a third of the company’s current managers started out as trainees. None of this happens without:

  • Having absolute clarity on what the organisation stands for
  • Building and maintaining a culture based on non-negotiable core values
  • Recruiting new starters not just on ability, but also on organisational fit
  • Designing an employee experience that helps people reach their full potential

If you see your HR officer as little more than a doorman; the one who takes care of the hiring, firing and keeping you out of court, then he or she will always be an afterthought or “necessary evil”. But some point, you’re likely to realise a simple fact: how well your business is doing depends on how well your people are doing. The development and amplification of your organisational culture is key to strategic performance, and driving positive financial results. Therefore, it’s not a bouncer you need, but a maitre d’.