Indian HR coming of age; begins to think strategy

Indian HR coming of age; begins to think strategy

Till the 1980s, human resource or HR functions in India basically involved smoothening relations between the management and workers. But this management arm has more than kept pace with the dramatic changes in the country’s corporate culture—from administrative personnel management, it has grown to include performance management and resource planning. And, HR transformation has been a buzzword in India Inc. for a while now.

The rallying cry has been to align HR with business goals, and to focus less on basic functions and more on adding value. There has been a shift in focus globally, from enhancing internal operations to maximizing contribution to the corporation’s business.

Most companies in India are either in the midst of an HR transformation, or are jsut starting. Says P. Dwarakanath, director, group human capital, Max India Ltd: “Some organizations are clearly ahead, some are just in the nick of time, while some companies are still grappling."

A litmus test of whether transformation has set in is the role of the company’s HR manager in the management team. According to the 2006 Global HR Transformation Mercer study, only 32% of the 618 senior HR professionals in Asia thought they were seen as strategic and had decision-making power. The respondents represented 11 markets in the Asia region, covering more than 20 industries. India scored higher than countries such as China, Japan and Singapore.

There is no doubt, however, of the HR manager’s growing importance. In India, 51% of the respondents report directly to the CEO, up from 28% in 2003. “HR’s direct reporting to the CEO is a positive trend, showing HR has direct involvement with business and operational planning," says Dwarakanath. Incidentally, all the HR managers Mint spoke to were directly reporting to their CEOs.

Globalization and the resulting sea change in corporate culture in India have impacted HR. As has the tightening supply of skilled workers. Talent crunch had not been a critical factor in the 1980s.

“The role of HR, then, was limited to employee or industry relations. It was all about managing inherent conflicts between wealth creators (owners) and labour, represented by the union," says K. Ramkumar, group head, HR, ICICI Bank Ltd.

The role of HR personnel was to improve productivity and create an acceptance of technology. Things, however, changed in the 1990s, when there was a distinct shift in the economy from manufacturing to the services sector.

The double-digit growth in this sector has seen a shortage of skilled manpower. Since the education system is not equipped to keep pace with the more complex manpower needs, HR personnel have been busy managing the readiness index of employees.

“Since our education system could not gear up to the needs of the industry, the onus was on the HR managers to train graduates to make them industry ready," says Ramkumar.

Also, the loosening hold of trade unions has meant the ambit of conflict shifted from the union office to the workplace. The socialistic thinking of wealth sharing (read uniform hikes and bonuses) gave way to capitalistic thinking, where companies rewarded differentially according to performance. “The services sector brought in meritocracy in a big way," says Ramkumar.

Changing demands on HR have given rise to new challenges. The top challenges cited by HR leaders aroundthe world in the Mercer study are: Acquiring key talent (43%), driving cultural and behavioural change in the organization (40%) and building leadership capabilities (40%). These challenges directlycorrespond with the new version of transformation and shift from a focus on process and technology to human capital strategy.

In Asia, another major human capital problem is retaining key talent. “The challenge is to create and sustain an organization’s capability to meet business challenges in a faster, bigger, more complex and more global context," says Subash Rao, director, HR, Cisco Systems (India) Pvt. Ltd.

Also, business leaders need to understand the importance of a long-term perspective and investment in areas such as developing leadership capability and talent mangement, say HR managers.

“Managing change in the organization, as well as creating a talent pool and retaining people, is the biggest challenge for any human resource head," says Sanjay Bali, vice-president, HR, Samsung India Electronics Pvt. Ltd.

To manage talent, HR managers are placing more emphasis on learning and development. “The shelf-life of knowledge is less than two years and, therefore, continuous learning is key to succeeding in business today," says Ramkumar.

Experts say most progressive companies are spending more time in training and development and creating a talent pool. “Investing in education helps enhance the market, produce more employable workforce and build manpower," says Prabir Jha, global head, human resources, Dr Reddy’s Laboratories Ltd.

The Mercer 2006 study also clearly shows a growing trend towards companies wanting to develop skills of existing HR staff and supplementing shortcomings by working with external service providers. “The role of HR managers is not just HR, it’s managing the supply chain of human capital," says Ramkumar. “We need to succesfully manage external and internal factors contributing to human capital," he adds.

Organizations worldwide list the inadequate skills and competencies of HR staff as one of the most significant obstacles in enhancing the overall role of the HR function. The common thought is that despite strong professional skills, HR professionals lack competence in marrying HR strategy with financial, data management and technology. “At a broad level, that is the impression. However, we must remember that the younger HR professionals are engineers by base degree with an MBA added on," says Jha. “HR can actually improve their understanding of business and technology, just as line managers must evolve as more complete people managers," he adds.

To focus more on strategy, many companies have started outsourcing administrative and transactional HR functions. “Use of outsourcing agencies or automated self-service tools for all transactional HR activities is the key to creating time and capacity for the HR to provide strategic support," says Rao.

One way to examine the not-so-successful relationship between the business and HR is to look at the types of services HR delivers. These include strategic functions such as workforce and performance management, talent management and organization management, besides the basic HR operational processes such as employee support, compensation and benefits support, HR operations, and so on.

The Mercer findings show that HR departments spend almost three-fourths of their time on traditional HR activities, such as recordkeeping, compliance and delivering HR services. “In Asia, the gap between ‘current’ and ‘desired’ for transactional work is closing, while the gap between strategic partnering and designing programmes or systems is growing," says Adam Kassab, senior consultant, Mercer Human Resource Consulting Ltd.

This suggests that HR, after its recent exposure to the realities of the business, has a greater understanding of the actual challenges involved in playing a strategic role.

“HR is either growing into, or evolving into, a value-based intervention role in India," says Bali.

but the industry needs to deliver returns on human resources faster. “The ability to provide strategic and consulting support for the business is not developing quickly enough," says Kassab.