Creating a Strategic Human Resources Organization: An Assessment of Trends and New Directions

Creating a Strategic Human Resources Organization: An Assessment of Trends and New Directions

Creating a Strategic Human Resources Organization: An Assessment of Trends and New Directions

Creating a Strategic Human Resources Organization: An Assessment of Trends and New Directions

Synopsis

Corporations are undergoing dramatic changes with significant implications for how human resources are best managed and organized. There is a growing consensus that human capital is critical to an organization's success. But is there a consensus about how the HR function itself should be organized? Or if change is in fact occurring? Creating a Strategic Human Resources Organization, the second study by the Center for Effective Organizations at the University of Southern California on the HR function in large corporations, measures how changes in the business environment affect human resources and, consequently, whether HR is becoming a strategic business partner. A follow-up to the 1995 report, this edition compares new data collected in 1998 with the original study to note changes and improvements in the selected corporations. This publication is part of the CEO report funded by the Human Resource Planning Society and the corporate sponsors of the Center for Effective Organizations.

Excerpt

Global competition, information technology (IT), new knowledge, the growth of knowledge workers, and a host of other business environment changes are forcing organizations to constantly evaluate how they operate. In many cases, organizations are embracing new strategic initiatives and fundamentally changing how they operate. They are using new technologies, changing their structures, and improving work processes to respond to an increasingly demanding and global customer base. These initiatives entail fundamental change that has significant implications for the human resources and the HR function of organizations.

It is obvious that HR management practices should be an important part of the strategy of any large corporation. The annual reports of many corporations argue that their human capital and intellectual property are their most important assets. In addition, in many organizations, compensation is one of the largest costs, if not the largest. In service organizations, compensation often represents 70 to 80 percent of the total cost of doing business. With training costs and other HR management costs added to compensation costs, the HR function often has responsibilities that affect a large portion of an organization's total expenditures.

But the cost of HR is not the only or even the most important consideration for many organizations. Even when HR accounts for very little of the cost of doing business, it can have a significant impact on the organization's performance. In essence, without effective human resources, organizations are likely to have little or no revenue. Even the most automated production facilities require skilled, motivated employees to operate. Knowledge work organizations depend on employees to develop, use, and manage their most important asset, knowledge. Thus, although a company's human capital does not appear on its balance sheet, it represents an increasingly large percent of many organizations' market valuation (Lev, 2001).

Present Role of the HR Organization

Despite compelling arguments supporting HR management as a key strategic issue in most organizations, HR executives often are not strategic partners (Lawler, 1995; Brockbank, 1999). Instead, the HR function is largely an administrative function headed by individuals whose roles are focused on cost control and administrative activities (Ulrich, 1997).

One study of large corporations and another study that focused on a cross section of firms found that the major focus of most HR functions is . . .

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