HR managers play big role successful business

HR managers play big role successful business

By Greg Doyle

JAKARTA (JP): In an article in the Sept. 25 edition of The
Jakarta Post, Budi Hanoto argued that effective human resource
(HR) management links business strategy and HR processes. This
idea, common currency in most management courses, is finding wide
application in the leading firms of the world. As Indonesian
business struggles to redefine its place in the global economy,
it therefore makes sense to look at how far people practices here
differ from this new world class standard.

It does seem we have a long way to go after looking at HR
management in multinational and local companies in Indonesia.
However, Indonesia is not alone in having problems with effective
people management. According to a recent global study conducted
by the Economist Intelligence Unit (EIU) and Hewitt Associates,
the problem of how to get better performance from employees in a
positive way prevents many from realizing the visions of senior
management. The difference for Indonesia, though is that we have
less time up our sleeves to get our companies running as
effectively as possible.

In Indonesia business managers do not often enough see HR
activities or people practices as an essential way to improve the
value of their offer to customers and clients. In an environment
where one had a monopoly, or where the market was very large, the
idea of needing to focus employees on delivering value to clients
did not figure highly in managers' minds. This is in stark
contrast to a place like the United States, where people are now
seen as the only way to secure a competitive advantage over
business rivals.

In a world where a competitor can quickly replicate your
technology and access capital at the same price the only way to
get a market edge is to leverage employees. The way to leverage
them depends on how you want to compete. An increasingly common
approach, based on the controversial approach of Treacy &
Wiersema in their 1995 work, The Discipline of Market Leaders, is
to compete through aligning business strategy with client need in
one of three ways: customer intimacy, product leadership or
operational efficiency.

Each of these approaches (or any other) makes different
demands on people and requires different types of people programs
in an organization. Some customers value low cost, some high
service. A company with a strategy of lowest cost production will
need different types of behavior from its employees than one that
seeks to offer tailor-made products specific to customers' unique
needs.

Whatever a company's strategic style, all businesses require
that the HR manager and his or her staff have a thorough
understanding of business strategy and business processes.

A HR manager who understands business processes can work with
line managers to determine the specific skills needed to drive
internal processes more effectively and efficiently. By knowing
how to cost HR activities, HR staff members can design cost-
effective systems to deliver the right kind of people to the line
and keep them there.

In practice, more and more leading companies are requiring
their HR managers to act like this. To make sure, they are
increasingly hiring HR professionals with line experience or from
MBA programs.

It is sometimes a different story in Indonesia where many
companies undervalue the potential contribution of HR managers.
This can be because neither business nor HR managers see their
work from the perspective customers and client needs. Also, the
HR professional itself in Indonesia has hardly asserted its role
as an architect of business success.

Of course, there are always exceptions -- there are individual
HR managers and HR Departments in the country that are world
class by any standard. It is unfortunate, however, to not see
more companies looking at how effective people practices can help
get them through the present crisis.

The opportunities for HR staff to make a difference are
enormous. Looking at the short term, where the objectives are
probably to reduce operational costs, increase performance and
protect employees from burden of high inflation there are several
immediate steps HR professionals should consider.

The first thing a business-focused HR manager would do in the
current environment is attempt to re-engineer the high-cost, low-
value practices and policies that built up in most Indonesian
organizations in the good years.

The first place to look at would be the employee benefits
programs, the pension plan, the medical plan and the car loan
scheme. The cost of these programs in Indonesia is far greater
than their value to either employees or the organization.
Provider premiums are too high and vendor service levels are
poor, especially in the area of medical insurance. For internally
managed systems, the bureaucratic costs and financial ambiguity
are likely greater than the cost of outsourcing programs. Of
course companies need, and should have, all these programs, but
only at a much more advantageous cost than they now pay.

The second step would be to audit all HR activities against
the functional requirements of line managers. HR managers should
clearly understand labor utilization costs, including the costs
of turnover, recruitment, training. By auditing these functions
HR managers can design programs to reduce costs, through better
service delivery.

In the longer term, revising the performance management system
and linking it more closely to employee reward would help HR
managers better support line managers. With new environmental and
economic pressures on companies and changing business strategies,
most companies have new performance requirements of employees.
Unfortunately none of the systems that support, motivate and
measure employees have caught up.

The real change for Indonesian management is likely to come
with a change in mind-set for both senior business managers and
HR staff. To achieve this a few things need to happen. First,
business managers and HR managers need to recognize the role
effective HR activities and people programs play in driving
business processes. Second, HR needs to see itself as an internal
business consultant, with clients whom they must help improve
business results. Third, as with all consultants, business
management must hold HR responsible for delivering measurable
results.

The writer is director of Hewitt Associate, Jakarta.