Opinion: Why HR is Part of the Problem, Not the Solution

People matter, but strategic business decisions need just as much of HR's attention.
By: | January 16, 2019 • 5 min read

HR and business live in two different spheres—and, for true organizational success—they need to start converging.

For instance, if one compares the “Most Admired in HR” list by HRE and Korn Ferry to the wider Fortune list of the “Most Admired Companies,” the discrepancy is an eye-opener. Facebook, a perennial leader on the HR list, for example, disappeared from Fortune’s overall top 10 list. Does that mean excelling in HR has little to do with overall admiration? Or conversely, can you have bad HR practices and still rank high on “most admired” lists?

The answer is: It depends. People matter but strategy—competing well—matters more. This is a rather provocative statement, and I expect HR executives to resent it. But as CFOs tell you outright in a piece in this publication, business leaders do not recognize HR’s effect on the bottom line. And yet, the entire space of HR discussions, trends, benchmarking and tips focuses on people and completely ignores business strategy. HR executives have concentrated exclusively on operations and little on the strategy-making process. It is as if they are resigned to play no role in strategy but they can’t admit it.

I run war games for the Fortune 500. These are strategy workshops that pressure-test ways to outsmart competitors. I hardly ever encounter HR executives in the room.

Current HR thinking focuses on the optimal execution of strategy. Flexible teams, design thinking, employee engagement, breaking silos and creating collaboration are hallmarks of good operational culture—but this has little to do with actually making strategy.


HR: The Problem, Not Solution

In a recent piece in HRE, three HR experts argued for building an agile organization. They claimed “organizational agility is a hallmark shared by the perennial leaders on Korn Ferry’s Most Admired for HR list.” They quoted research findings that the Most Admired companies self-reported a better ability to anticipate industry changes, innovate and capture the next market opportunity, empower people to take risks and, naturally, they are far better at attracting and managing talent across initiatives, positions and tasks.

As long as these companies are successful, all of these behaviors receive high accolades. Give it time. The minute the organizations start declining, the same characteristics will be rated as failure.

Agile is the new black. A few years from now, HR practitioners, advisors and coaches will move to another buzz word. If HR executives don’t change their mindset about strategy, though, business leaders will keep seeing HR as a marginal contributor to the enterprise’s success. The only way to get a seat at the table is to first find the table.

It’s Not People, It’s Strategy

Here’s a simple question: Is the HR culture at Huawei, a Chinese company run by an ex-military guy and backed by the Chinese government, more open than those in Western culture? More agile? Huawei’s competitor, Ericsson, has been the model of Sweden’s collaborative, open, non-hierarchical culture, focusing on employees’ welfare. Huawei has an extremely competitive culture that requires employees to work long hours with no work/life balance. Yet its strategy has been superior to Ericsson’s—driving successful competition that resulted in Ericsson laying off thousands of employees, while Huawei expands globally.

Why has Huawei been successful and Ericsson not?

It’s not because Huawei is more agile but rather because it has a superior strategy-making process. HR must learn this simple, powerful and very painful lesson: People come second to strategy. Talented employees do not matter much if the company’s strategy isn’t superior to that of competitors, which requires meeting two conditions:

  • ability to see signs of risks and opportunities earlier than competitors and
  • ability to take advantage of them.

These two mandates are not trite slogans. The first demands a superb strategic early-warning system feeding top management. The second calls for a strategy-making process that explicitly considers other players in the market. Both conditions are weak in many of the successful (for now) Most Admired companies that are living off of the superior strategic mindset of the founder. Consultants are not a substitute for a CEO with a vision or a deliberate process that aims to outsmart other parties.

This is where the Chinese are superb: Ren Zhengfei, Huawei’s founder, is known for avoiding quick decisions and cherishing time to reflect. His company follows this practice. Huawei also emphasizes what it calls “the power of thinking.” Compare that with strategy-making at a typical Fortune 500 firm where action reigns supreme, agility is the buzz word—meaning quick, tactical action, typically reactive—and thinking is considered an idle intellectual practice.

In our upcoming book, Mark Chussil and I detail 18 dysfunctional behaviors of large companies we have witnessed in our work that hinder effective strategy-making. HR can play a significant role in assessing an organization’s strategic-thinking capabilities and—if it helps the company shift its focus to reflection—its success.