The rise of HR
In my recent interview with Professor Nick Bloom, economist at Stanford University, I took the opportunity to ask him about emerging economic trends.
One of the key trends he talked about was the rising importance of HR.
As an HR professional myself, I was excited to hear what he had to say. I was delighted by the unexpected turn in our conversation, so I needed to keep my ego in check. This wasn’t about basking in the reflected glory of seeing my profession on the rise. What really mattered was to listen and learn about what was driving this emerging trend and what it means for leaders and our profession more broadly.
You’ll hear for yourself in the clip what Nick has to say.
He had taken his curiosity from a conversation and decided to dive into the data, checking out what was really happening. He found exponential growth in the number of large US firms reporting the Head of HR as one of their top five executives. Back in 1992, virtually none reported HR as one of their top five, yet by 2022 that percentage had risen to 13%. Nick sees that this growth trend is set to continue.
What does the rise in the importance of HR tell us?
An organisation’s strategy, delivery and success increasingly depends on understanding their people, what they need to be able to perform and how HR can support that in practice. There is a lot more expected from the HR team with increasing complexity. In the clip, Nick cites critical challenges in recent years such as #metoo, diversity, equity and inclusion, the pandemic response, flexible work post-pandemic and decisions about office space and real estate.
How do CEOs need to respond?
With this trend and its trajectory, it’s time for every chief executive, if they haven’t already, to think about whether their organisation is equipped with the HR leadership it needs to succeed, in position and practice. Acknowledging that many of today’s business issues are people issues and business opportunities are people opportunities is a good place to begin. If CEOs set the expectation for the bigger role that HR needs to play, they also create some necessary, although not sufficient, conditions for HR to rise to the challenge. They simultaneously signal to other leaders in the business, who might not yet see this trend, that HR needs to be deeply involved and integrated in key business decisions. Almost certainly more than they have been historically. For example, Nick Bloom describes why real estate decisions are now significant HR decisions, not simply financial. CEOs will need to ensure that HR is involved in designing the space required for the way people need to work that will drive business success.
How does HR need to respond?
Nick McKissack, Chief Executive of HRNZ says, “I agree with Nick Bloom that there is increasing complexity around the people space and this is elevating the role of HR professionals. I can see that in future, as a greater urgency develops around all aspects of organisational sustainability the role of HR will become even more important. The challenge for HR people is to stay ahead of the curve in terms of their own knowledge and capability so that they are up for the challenges that this will present.”
This brings us to why a CEO’s response to this trend is necessary but not sufficient. Nick McKissack rightly puts the challenge to us, within HR, to keep growing our own capability. We need to be ready to rise to the challenge that comes with elevated status and responsibility. Beyond looking back at the trend line, we also need to look ahead at what is coming next. Our organisations have yet to adapt and lead through more unchartered territory. Some issues we know about and others we can’t possibly predict. To name a couple we have climate risk facing our organisations as well as the proliferation of artificial intelligence and how that interfaces with people, customers and communities. These issues all require people to change their behaviour, skills and understanding. Inevitably, there will be far reaching impacts for the way we work, for our leaders, people and culture.
The rising tide lifts all boats
With the rise in importance of HR, let’s not use it to inflate our egos, however tempting it might be! Instead we can use this trend as a means to put people at the heart of our organisation’s success. To do that we need to integrate more deliberately across the organisation, keep learning and get involved in making the best decisions, with the CEO’s support and understanding, grounded in why HR matters more than ever before.