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Human capital is at the top of the priority lists of organisations worldwide, but confusion as to how to leverage human resources effectively prevents many companies from reaching their full potential.
Human Capital is rated 10% higher than operational excellence as a major challenge for businesses – according to the latest Conference Board Challenge Survey of 729 global CEOs. Yet HR in the majority of originations continues to be treated as a peripheral function.

The 2013 Global Assessment Trends Report (GATR) found that less than half, 41%, of firms surveyed are confident that their human capital strategy is properly embedded in their organisational strategies, and that most senior business leaders are unclear on who should actually bear responsibility for these critical issues.

Erna Oldenboom, director of the HR as a Strategic Business Partner Programme at the UCT Graduate School of Business, says that there would be no confusion if organisations integrated their HR into their overall business strategy.

“HR is a strategic business partner that should be involved from the very beginning, in the vision, mission, and procedures of the organisation,” she says. “In this way all HR approaches and systems can better contribute to and support solutions for recruitment and retention, salary, reward, training, support, codes of conduct, client relations and so on.”

The GATR also identifies the top priorities for HR globally as: engagement and retention (55%), leadership development (52%), performance management (49%), workforce planning and talent analytics (43%), training (42%), succession planning (38%), and external hiring (38%). The report is based on a survey of 592 HR professionals from around the world – 13% of which are South African.

“These findings clearly illustrate that globalisation demands stronger HR capabilities. Demographic shifts across the world are dramatically affecting the availability of qualified personnel. HR needs to step up its game; to take the traditional roles of HR and look at how they are affecting the business – there is an urgent need for HR to integrate more fully into the strategic goals of the business,” says Oldenboom.

Oldenboom says that HR leaders are increasingly aware of this, but at the same time not enough is being done to put it into practice. She says that “those who want to remain relevant must focus on strategically supporting their organisations and the customers they serve.”

She believes that many HR leaders are more than willing to partner with the business, but given the unique situation of each individual company, amongst other factors, they have little in the way of concrete guidance as to how to fulfil that role.

The role of the HR manager, director, or executive must parallel the needs of his or her changing organisation. Successful organisations are becoming more adaptive, resilient, quick to change direction and customer-centred.

Within this context the HR professional who is considered necessary by managers and executives needs to be aware of the impact that strategic alignment of HR into their business’ goals can have.
However, for many HR practitioners strategy may not be something they have been taught to consider.

According to Brad McCaw, a principal at Mercer and co-author of the 2012 Mercer HR Transformation Survey report, the gap between perception and activities in the HR domain can be addressed by investing in the skills and training of HR staff, while also increasing awareness and people management skills among line management, to ensure their activities encompass not only the day-to-day work that needs to be done, but also support the strategic direction of the business. Measurement and analysis are also vital.

Oldenboom says that if the HR role in an organisation is not transforming itself to align with forward thinking practices, executive leadership must ask HR leaders some tough questions.

“Today’s organisations cannot afford to have an HR function that fails to contribute to and even lead modern thinking,” says Oldenboom.

For Oldenboom, this is the new function of HR, and instead of falling into confusion about who should take responsibility for human capital issues organisations should align their human capital agenda with overall goals by placing HR at the strategic centre of their businesses.

Erna Oldenboom is programme director of the course: HR as a Strategic Business Partner, which runs at the UCT GSB from 16 – 18 September (module one) and 14 – 15 October (module two) 2012.