Why We Hate HR

By: Keith H. HammondsWed Dec 19, 2007 at 7:56 AM

In a knowledge economy, companies with the best talent win. And finding, nurturing, and developing that talent should be one of the most important tasks in a corporation. So why does human resources do such a bad job -- and how can we fix it?

More about Human Resources:

How To Do HR Right
Five ways to work well.

Stupid HR Tricks
Can your highly trained human-resources professional do this? Or has he already?

The Once & Future Consultant
In 2002, Dave Ulrich left his consulting firm to run a Mormon mission. Now he's heading back to business with some fresh ideas.

Putting the Human into Human Resources
Here's what Dave Ulrich learned working with both CEOs and fresh-faced young missionaries.

There's a contradiction here, of course: Making exceptions should be exactly what human resources does, all the time -- not because it's nice for employees, but because it drives the business. Employers keep their best people by acknowledging and rewarding their distinctive performance, not by treating them the same as everyone else. "If I'm running a business, I can tell you who's really helping to drive the business forward," says Dennis Ackley, an employee communication consultant. "HR should have the same view. We should send the message that we value our high-performing employees and we're focused on rewarding and retaining them."

Instead, human-resources departments benchmark salaries, function by function and job by job, against industry standards, keeping pay -- even that of the stars -- within a narrow band determined by competitors. They bounce performance appraisals back to managers who rate their employees too highly, unwilling to acknowledge accomplishments that would merit much more than the 4% companywide increase.

Human resources, in other words, forfeits long-term value for short-term cost efficiency. A simple test: Who does your company's vice president of human resources report to? If it's the CFO -- and chances are good it is -- then HR is headed in the wrong direction. "That's a model that cannot work," says one top HR exec who has been there. "A financial person is concerned with taking money out of the organization. HR should be concerned with putting investments in."

4. The corner office doesn't get HR (and vice versa). I'm at another rockin' party: a few dozen midlevel human-resources managers at a hotel restaurant in Mahwah, New Jersey. It is not glam in any way. (I've got to get a better travel agent.) But it is telling, in a hopeful way. Hunter Douglas, a $2.1 billion manufacturer of window coverings, has brought its HR staff here from across the United States to celebrate their accomplishments.

The company's top brass is on hand. Marvin B. Hopkins, president and CEO of North American operations, lays on the praise: "I feel fantastic about your achievements," he says. "Our business is about people. Hiring, training, and empathizing with employees is extremely important. When someone is fired or leaves, we've failed in some way. People have to feel they have a place at the company, a sense of ownership."

So, yeah, it's corporate-speak in a drab exurban office park. But you know what? The human-resources managers from Tupelo and Dallas are totally pumped up. They've been flown into headquarters, they've had their picture taken with the boss, and they're seeing Mamma Mia on Broadway that afternoon on the company's dime.

Can your HR department say it has the ear of top management? Probably not. "Sometimes," says Ulrich, "line managers just have this legacy of HR in their minds, and they can't get rid of it. I felt really badly for one HR guy. The chairman wanted someone to plan company picnics and manage the union, and every time this guy tried to be strategic, he got shot down."

Say what? Execs don't think HR matters? What about all that happy talk about employees being their most important asset? Well, that turns out to have been a small misunderstanding. In the 1990s, a group of British academics examined the relationship between what companies (among them, the UK units of Hewlett-Packard and Citibank) said about their human assets and how they actually behaved. The results were, perhaps, inevitable.

In their rhetoric, human-resources organizations embraced the language of a "soft" approach, speaking of training, development, and commitment. But "the underlying principle was invariably restricted to the improvements of bottom-line performance," the authors wrote in the resulting book, Strategic Human Resource Management (Oxford University Press, 1999). "Even if the rhetoric of HRM is soft, the reality is almost always 'hard,' with the interests of the organization prevailing over those of the individual."

In the best of worlds, says London Business School professor Lynda Gratton, one of the study's authors, "the reality should be some combination of hard and soft." That's what's going on at Hunter Douglas. Human resources can address the needs of employees because it has proven its business mettle -- and vice versa. Betty Lou Smith, the company's vice president of corporate HR, began investigating the connection between employee turnover and product quality. Divisions with the highest turnover rates, she found, were also those with damaged-goods rates of 5% or higher. And extraordinarily, 70% of employees were leaving the company within six months of being hired.