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Article: HR Departments Have A Substantial Impact On Business Results Related Resources

Human Resource Departments Have A Substantial Impact
On Bottom-Line Business Results
Involving All Stakeholders Is Important In The Development Of HR Policies
...from the RBL Group

The skills and competencies of an organization's human resource professionals have a measurable effect on its business performance. Companies with better HR professionals do a better job of managing change, gaining talent, and meeting financial goals. But, the human resource departments in which they work have an even greater impact on bottom-line results, according to a global human resource competency study [HRCS] by The RBL Group and the Ross School of Business at the University of Michigan.

A company's human resource department has a 25 percent greater impact on the performance of a business than the skills of its individual human resource professionals, according to the HRCS study.

The study was done in cooperation with the Society for Human Resource Management, IAE Universidad Austral in Argentina, Irish Management Institute, Tsinghua University in China, the Australian Human Resource Institute, and the National HRD Network in India.

"Too often we may like our attorneys, our members of Congress, or our teachers, but we may not like lawyers, Congress, or educators in general," said Dave Ulrich, partner and co-founder of The RBL Group (, and a professor of business at the Ross School of Business. "Likewise, managers may like their organizations' human resource professionals, but not feel the same about their HR departments. However, it's the HR department that adds more value to business performance."

The 2007 round of the Human Resource Competency Study found that, for the best operating results, HR departments should pay equal attention to all stakeholders, including customers, communities, and investors outside their organizations. "Traditionally, HR departments have focused inside their organizations, and haven't involved line managers or external customers in the process. When HR involves external customers and line managers in creating HR policies, more value is created," said Wayne Brockbank, a partner of The RBL Group and Director of the Center for Strategic HR Leadership at the Ross School of Business.

"While building the skills of human resource professionals remains important, the HR department needs to begin to think of itself as a business within a business, and build a strategy around adding value to the business," said Ulrich. "When the human resource department is aligned with external customers and investors, HR helps both shape and execute the business strategy, and therefore, deliver better business results."

Among the other findings of the study are:

-- HR professionals have a measurable effect on overall business results. The skills of a company's human resource professionals are more critical than ever, accounting for 20 percent of its business results, and are increasingly becoming part of an organization's competitive advantage, according to the study.

-- Businesses need to involve line managers and external customers more in the design of their human resource policies and practices. "Being more focused on external stakeholders positively impacts business results," Ulrich said. Companies can benefit substantially by involving their line managers in their human resource policies and practices. "Some human resource professionals get too focused on what they do, and not as much on what they deliver, and don't see how their HR work will affect customers and investors outside their organizations," Ulrich said.

-- Many HR professionals are still defining their "customers" as the organization's employees, and not as the external customers of the firm. "HR professionals need to pay more attention to the real external customers, and find ways of bringing them into the organization," according to Brockbank.

-- Line managers want to work with human resource professionals who can link HR processes to customers of the business. "Line managers also see the connection more clearly between a company's compensation and reward systems for employees, and the effect of these on relationships on customers," said Ulrich.

-- HR departments should focus both on talent (getting better people) and organization (building stronger capabilities). "If the focus is only on talent, the organization may be a disconnected group of all-stars who don't play well together and don't win over time. Line managers need to find great people, but then create great organizations for the people to work in. The strongest HR departments help secure talent and shape organizations," said Ulrich.

"This study helps executives learn what they can do to better compete through their organizations and people," added Brockbank. "It raises the bar on HR, and sets clear standards for how line managers should demand excellence from those in HR."

CEOs are increasingly finding the roles of human resource professionals to be critical to the operation of the business. "CEOs are looking to HR departments for knowledge about issues such as moving quickly into new markets, changing the organization's culture, and developing talent. Human resource departments need to give a higher priority to these areas so they can bring added value to the organization," Ulrich said.

The Human Resource Competency Study has been conducted five times over the past 20 years, and is the most comprehensive global empirical review of the HR profession. More than 40,000 HR professionals and line management employees have participated in the studies since 1988.

The 2007 round of the Human Resource Competency Study involved more than 10,000 HR professionals and line management employees in the U.S., Canada, Latin America, Europe, China, Australia/Asia Pacific, and India.

For more information on the 2007 Human Resource Competency Study, or to participate in an HR Competency 360 Survey, e-mail or call (801) 373-4328.

About The RBL Group

The RBL Group specializes in helping clients deliver the strategic HR agenda. The firm's partners - including Dave Ulrich, Wayne Brockbank, and Norm Smallwood - are particularly well-respected thought leaders whose books and research have helped companies drive more business-focused HR practices, particularly in the areas of strategic HR and leadership development.

The RBL Group delivers results-oriented, quality solutions through engaging people and processes that help HR executives integrate the latest thinking into their organizations through practical tools and approaches.


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