HR PROFESSIONALS NEED TO TRANSLATE BUSINESS

PLANS INTO ACTION

Interview with Dave Ulrich, professor at the University of Michigan

by
ERNESTO USCHER, JOS MANUEL ALCARAZ, JOS RAMN PIN

Interview with Dave Ulrich, professor at the University of Michigan

HR PROFESSIONALS NEED TO TRANSLATE BUSINESS PLANS INTO ACTION

Dave Ulrich, one of the worlds leading authorities on creating value through human
resources, visited IESE on October 17 and 18. His latest book The HR Value Proposition
was recently translated into Spanish and argues that the different areas of human
resources can make significant progress if they boost the value of all of the organizations
stakeholders. During the interview, conducted by IESE professor Jos Ramn Pin and RBL
Spain consultants Jos Manuel Alcaraz and Ernesto Ulscher, the renowned University of
Michigan professor proposed some formulas for getting stakeholders to participate. For
instance, why not invite key customers to HR team meetings? If that seems like a bold
move wait, theres more.
NOTE: An expanded version of the interview was published in the magazine Capital
Humano.
Q.- You suggest that we should focus first on outside-in contexts and stakeholders,
and then turn them into inside-out HR practices. Please explain.
A.- Often, we look at HR practices (staffing, training and compensation) as things that
affect employees inside the company. While this is true, it is not complete. We should also
see these practices as investments that help the company connect with those outside. For
example, being the employer of choice is good, but not enough. We want to be the
employer of choice of employees our customers would choose. By adding the customer
tag line, we focus on the ultimate user of HR services, which is the customer.
Q.- To what extent do HR departments have enough business knowledge to support
their corporate objectives? What are some tips for reducing the gap?
A.- We like to think of the world as 20-60-20: 20 percent of HR departments and
professionals have the business knowledge; 20 percent dont and probably wont; and 60
percent can attain it with development and training. HR professionals can gain business
knowledge by studying (reading and taking courses in finance and business), observing
(spending time with line managers and finance experts), and doing (being part of business
teams).
Q.- In Spain, the majority of businesses are small or midsize companies and HR
departments focus more on transactional and administrative work and mainly on
internal stakeholders, such as line managers and employees. Why should Spanish
managers pay attention to external stakeholders, such as investors and customers?
A.- The transaction work has to be done and it has to be done well. Hopefully, as
technology becomes more accessible and cheaper, some of the transactional work can be
done better, faster and cheaper and with fewer resources. This will free up HR
professionals to spend more time on the more transformational work that the company

requires: that of building capabilities that execute strategies. Once we talk about adding
value to the business, we have to consider the customers and investors who ultimately
decide if a business will succeed or not.
Q.- What could be a small wins approach for HR to start creating value for investors?
A. First, identify your target customers. Find out who the 20 percent of the customers
are who represent 80 percent of the value. Invite them to participate in your HR work.
Heres how:
1. Invite them to be on committees (almost any task force could have a customer
join it).
2. Invite them to participate in 360 reviews (we now call these 720 since they go
outside the company).
3. Invite them to train as participants, presenters or designers.
4. Invite them to review staffing processes which might include setting criteria for
candidates or even interviewing candidates.
Q.- To what extent are we still focused more on activities than on outcomes, on
doables instead of deliverables, and how should we start inverting this?
A. - It is often easier to measure and track what we do (e.g., I worked 7.5 hours today)
than to measure what we accomplished (e.g., I sold 3 units). And in HR, where the
outcomes are more difficult to quantify, it is easier to focus on activities. We need to stop
and ask Why am I doing this (training, policy, communication, etc.)? to see what the
outcome of our work can and should be. We start the shift to outcomes by mentally
thinking about them and by practically measuring and tracking them.
Q.- Huselid, Becker & Ulrich showed that a 5 percent increase in employee
commitment leads to a 1.8 percent increase in customer commitment and a 0.5
percent increase in financial results. What do we need to continue showing this type
of relationship between HR and financial results?
A.- This work was quoted in the Huselid, Becker and Ulrich book but comes from Sears.
And yes, it is an excellent example of how what goes on inside a company affects what
happens outside. It shows a value chain from people to financial results that helps justify
investments in people. The work is continuing in many good companies.
Q.- What should the relationship be between creating a clear corporate culture
through things like branding and corporate social responsibility and HR practices?
A.- We like to think of a companys culture as its identity in the mind of key customers,
or its firm brand. This shifts the focus on culture a bit away from what we value to
what the customer values and helps show the economic gains of culture. HR practices
are the activities that shape and create this culture or mindset. We want employees to be
directed to think and act as if they are a customer which builds an internal mindset
consistent with the customer expectations.

Q. - Given the mid-sized companies and transaction-focused HR of Spain, what could

be a road map to start implementing HR practices that add value?
A.- Start by creating a contract with your business leader. What are the things that are
important to him or her? Find out how HR work can deliver value to him. If he is
interested in growing the business by gaining more revenue from targeted customers,
show how HR can connect with those customers to gain revenue. If he is interested in
cost, show how HR work can help drive efficiency in the business. Begin with a
conversation with the business leader on what HR can and should do to help him meet his
goals.
Q.- To what extent can an HR department really work as a business unit? Where
would you tell them to start?
A.- Start with a strategy. What are the deliverables, outcomes, or results we in HR will
deliver? Be clear about the outcomes of good HR work and make sure that these
outcomes are consistent with business goals. Then, align HR work inside HR with the HR
strategy that will deliver the business strategy.
Q.- Where would you recommend starting when turning business realities into HR
priorities?
A.- The same as above. Start with clarity about the business priorities, then ask What are
the organizational implications of these priorities? These organizational implications
should focus on building the organizational capabilities that will make strategy happen
over time.

Q. - How should an HR department act in a crisis situation when the main priority is
to reduce costs?
A.- Work to reduce the costs. If cost pressures are rampant and critical, dont run from
them, help find ways to reduce the costs. This might include headcount, but be more
creative in looking at different ways to organize and do work, at compensation systems
and redundancies, and at ways of growing revenue to cover existing costs.
Q.- In the 90s you defined four HR roles: strategic partner, change agent, employee
advocate and functional expert. Now, in 2006, are these roles the same?
A. - We have modified the role of employee advocate by making it two roles. On the one
hand, HR worries about employees day-to-day issues, which we call employee advocacy.
On the other hand, HR worries about preparing todays employees for tomorrows
business demands, which we call human capital development. HR must care for employees
today and prepare employees for tomorrow. The administrative expert has morphed to
functional expert because he or she is not just doing administrative things faster, but is
applying deep, functional expertise to best practices. Strategic partner and change agent
have merged into one role in order to make business happen. And we have added an HR
leader at all levels of the organization to deliver appropriate results in the right way.

Q. - To what extent do employees perceive the HR department as an authentic speaker

to the business leaders, in the way of a union?
A.- Unions were organized to deal with terms and conditions of work. Today the
employee contract with the firm is much more complex and deals not only with working
conditions, but also with culture, competencies and commitment. Forward thinking
unions work with companies as allies not as enemies to provide a competent and
committed workforce. By working together, unions and management assure the success
of both employees and the firm.
Q.- Concerning the most critical HR competences, what are the main gaps you find in
HR professionals?
A.- Many HR professionals need to learn how to contribute strategically to the business,
to read a business plan and translate it into HR actions. Some HR professionals lack the
finance and business knowledge, others lack personal confidence, and others lack a deep
understanding of HR.
Q. - To what extent should HR departments work more closely and in collaboration
with the rest of the departments?
A.- Customers who look inside a firm often dont say, that was by manufacturing, that
by sales, that by R&D, that by marketing. They look and see the whole. Likewise, HR
professionals need to work seamlessly with other functions to deliver real value.
Q.- What are the most important challenges ahead for our profession?
A.- 1. Recognizing the value we create for employees, line managers, customers and
investors.
2. Defining HR practices that will deliver this value and measuring the impact.
3. Organizing our HR resources to achieve that value.
4. Preparing HR professionals for future challenges, not trying to escape the past.