Why HR is Undervalued

Now, more than ever, Human Resource and Compensation professionals have good reason to feel undervalued. 

HR keeps the organization alive by the care and feeding of their most vital assets, their employees.  Compensation maintains the proper competitive position, preventing most employees from being pirated while picking off their share of talent from rival entities.  Total Rewards professionals assure that your human talents are truly resources rather than dead weight, expense items or liabilities.  We deal with costs and expenses that remain largely outside our control and we display loyalty to our employer by remaining faithful to management interests when wearing the management hat (versus the employee-advocate hat we wear at other times). 

As if the pressure of dealing with our own unique underlying schizophrenia (from switching wearing both black and white hats) were not enough, now we are being assaulted by a continual stream of new regulations and rules.  Federal proposals like the FLSA exemption recordkeeping change, the Paycheck Transparency Act, the Heath Care Reform Act and the Employee Misclassification Act and more all promise to add more stress. 

All this occurs while senior executive management considers whether HR, Compensation and related Talent Management and Total Rewards functions should be outsourced. 

That suggests that we are not doing a good job of justifying our value.

Although I hate to admit it, I am not optimistic about HR getting a seat at the big table with the senior adults.  We frequently appear to them to be off in the corner playpen, engrossed with non-essentials.

All too many in our field don’t even speak the same language as senior management.  For example, a recent extremely distressing discussion string in a global HR network featured a long list of posts claiming that HR is a profit center rather than a cost center. 

Even after clear warnings, no one bothered to even research the meaning of the words cost center or profit center in accounting terms.  Obviously, few of the HR posters understood management accounting, basic economic principles or executive-suite language terminology.  If you have ever served as a corporate CEO or even spent much time dealing with board compensation committees, you would understand my horror at the adamantly wrong-headedness of the participants. 

Rather than turn it into a mutually productive positive affirmation of the tremendous value of the HR function in transforming humans into resources, the majority of the posts failed to demonstrate any understanding of basic management economic terms.  Refusing to research the precise meaning of the concepts they so carelessly misused made an already bad situation even worse.  If you thought the image of HR had been denigrated before, wait until you see what the key decision-makers of global enterprises will think of us if they read such prattle!  We are properly judged by our actions.

If HR people cannot understand the language of management, how can they advise them?  If self-proclaimed compensation experts cannot demonstrate the simplest research capabilities to remedy their shortfalls in comprehension, how can they hope to offer enterprises useful services? 

There is a good reason that experienced enterprise managers and sophisticated executives look down on HR.  All too often, we have acted in ways that deserved their dismissive opinions.

Even as I write this, Keystone Award Winning PhDs Jay Schuster and Pat Zingheim are preparing to publish a study on the failure of HR departments to play any notably useful role in either preventing or correcting the economic disasters of the last few years.

We can only rehabilitate our image by improving the practical utility of our outputs.  Unless everyone in the Total Rewards profession steps up to operate at a higher level, the growing minority of members who don’t know what they are doing will destroy our credibility forever. 

How else can we improve this lamentable situation?

E. James (Jim) Brennan is Senior Associate of ERI Economic Research Institute, the premier publisher of interactive pay and living-cost surveys. Semi-retired after over 40 years in HR corporate and consulting roles throughout the U.S. and Canada, he’s pretty much been there done that  (articles, books, speeches, seminars, radio/TV, advisory posts, in-trial expert witness stuff, etc.) and will express his opinion on almost anything.

Comments

[wayne]

I didn't see many facts in this post or cited research to support the claims about HR. Just a lot of opinions about HR. Sounds like a trumpted up issue to publicize some research by Schuster.

[E. James (Jim) Brennan]

Agree with your first two points, because this is an opinion piece commenting about other opinions, including opinions I oppose as lacking factual foundation. But I had to ask Schuster for permission to even mention their otherwise secret research. With their reputations, they blow a mean horn and certainly don't require my kazoo to get attention.

[Dan Walter]

Thanks for the post Jim.

While there are many HR pros who are great business people and do have a seat at the table, I tend to agree that, as a whole, the HR industry needs to do more to earn a seat at the table.

I have been doing a presentation on this recently. During the presentation I ask how many people have read their companies ENTIRE Proxy each year. I also ask how many have read any of their peers proxies. The response to both questions is usually below 10% of the room.

I ask how many understand the top 5 things that must be done in the next quarter and in the next year for their companies business to reach its goals. Again responses are below 10%.

These and many other issues are representative of busy HR professionals who are working like mad to get their job done. Unfortunately, getting your job done well is not enough to earn a seat at the table. You must understand how others get their jobs done well and you must understand the financial foundation of your company.

I hope that HR and Comp pros read you posting and take it to heart, rather than being offended. People in HR and Comp have the tools to have a seat at the table. They just need to use those tools to get the right information.

[E. James (Jim) Brennan]

Dan: Great analogy. If your only tool is a hammer, every problem looks like a nail. No master mechanic has just one tool. We can learn from that.

[Michael Haberman SPHR]

Jim:
Can you give some examples of how people were miss using cost center vs. profit center? Illustrations may help others who misuse the terms.

[E. James (Jim) Brennan]

While declining to give publicity to a site sponsoring such toxic babble, I'll just observe that the typical poster thought that the terms were subjective, determined by the attitude of the speaker. Not realizing that "profit center" means a discrete business enterprise with sales and profits measured in specific accounting entries, they made broad claims like, "of course, HR is a profit center because it is important for making money"; or, "HR helps you make money, so it must be a profit centre."