Pretty much every leading business writes on its website that their people are central to their strategy and success, often of course these days, backed up by technology. You will rarely find a company, even in the tech space, that doesn’t quote their people as one of their main assets, driving and innovating at every level of the organisation.
So, it seems a paradox that companies, especially service-based companies, don’t prioritise people decisions. Although people are the cornerstone of their product. They are the ones managing clients, producing and cross-checking statements and results, they are the ones liaising with regulators and clients, and finding out what clients actually want.
Where HR doesn’t sit
I heard a story of a fast-growing firm which moved its human resources department under the CFO. So, you know what happened next, right? Everything was trimmed down, I mean, very trim!
If you’re going to place the importance of finance above the importance of human resources, then your strategy is clear. And that’s not to say that I think HR should have free reign over budgets and so on, but the issue is that moving HR under Finance will disempower your people decisions.
And this will have a negative impact your people, and de-facto, PERFORMANCE, ENGAGEMENT, AND STAFF RETENTION at all levels in your company.
This will be very, very expensive in the long run.
‘Human resources’ is just the wrong title. It needs updating URGENTLY.
Why aren’t we calling our Human Resources departments what they really are?
Human Capital departments.
You’d look after capital if you had it, right?
- Like, for example, the type of capital that is probably the largest cost on your Balance sheet.
- The type of capital that can produce SERIOUSLY LARGE returns.
- The type of capital that can grow, with compound interest, over time?
YOUR PEOPLE ARE YOUR GREATEST ASSET, AND THEY ARE ALSO MOST LIKELY, YOUR LARGEST COST.
Let that sink in.
So if you’re not strategic about your people decisions, then not only are you missing out on the compound interest and potential returns in developing them, but you’re also not strategic about your largest cost, and therefore, your largest liability.
Who isn’t strategic about their largest liability?
CEOs know their people give them the edge, but imagine how much more of an edge you could get if you had someone looking at your people decisions more strategically?
That is not a job that finance can do. It’s not a job that business can do (and nor should they). Some would argue, it’s not a job that some HR departments can do either, but that’s not a reflection of your human resources department, that’s a reflection of the importance the leadership of the organization places on HR.
The Germans get this one right
It could be a coincidence, but of all the firms I have supported over the last almost 20 years, the only ones who had HR in the right place were in fact, the larger, German-originated firms I’d worked for. Very often, I’d meet the Head of HR, who was also the COO. They saw running HR as a central part of running the operations.
Decisions were effective, and quick. Decisions were made well because they were well-informed, by company strategy.
The CEO didn’t see HR as an obstacle, he saw them as the SOLUTION.
HR Teams have not grown in ratio with business
Companies in Luxembourg have grown at pace over the last 15 years. HR departments have not kept up with that growth, they are behind, hideously short-staffed, and mostly outdated, with most of the staff only doing ‘lights on’ work – they are just about able to keep the company going with issuing contracts, managing sickness and maternity leave, and recruitment. With all the ‘lights on’ work, there is little or no attention being paid to strategy. What an enormous loss.
If you have a staff retention issue, issues with salaries, issues with management, or people and politics issues of ANY kind, I invite you to look at the size and seniority of your Human Capital department, and you will find the answer you’re looking for.
Rana Hein-Hartmann is our Managing Director, she is a people specialist who has spent 17 years supporting CEOs and HRDs on a range of issues related to recruitment and retention of human capital, with a special focus on building profitable, stable, and successful Luxembourg-based fund businesses.
