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Maybe you're proud of the sheer productivity of your HR department. Your ratio of HR pros to employees is lower than the industry average, most transactional HR activities are delivered via self-service, and you have a finely tuned shared-services center. Generally speaking, your HR function is a lean, mean efficiency machine.

Good for you. There's just one problem. By itself, it's not nearly enough.

This is one of the findings from the Future of HR study conducted by i4cp in partnership with the Center for Effective Organizations (CEO) at USC's Marshall School of Business. We found, for example, that having a low HR-to-employee ratio is not in itself a great predictor of market performance, though that story changes for very large, commercial entities. So, while it's smart to benchmark such ratios to gauge efficiency, they seem a lot less critical than some other HR characteristics, at least for organizations with 1,000 or more employees.

"Efficiency is a given in today's world," says Jay Jamrog, i4cp's Senior VP of Research. "Maybe it gets you a seat at the table, like table stakes in a poker game. But your HR department had better have some other qualities in addition to that if you want to become a real player at that table."

Like what? Think about what your organization needs most from its leaders. One of those critical competencies, as another recent i4cp study shows, is the ability to manage change well. Our new study suggests HR should be able to support leadership in this area.

Here's one piece of evidence: Respondents from high-market performing organizations were about 30% more likely than their counterparts from lower-performing companies to report that HR "drives change management" to a great or very great extent. We also found a significant positive correlation between corporate market performance and HR's role in this area.

But the ability to drive change is just part of the equation. HR must also provide the kind of HR data required to support change management.

"There's often a lot of attention to measurement in HR that's about getting the data, running the right analysis and producing the right reports. But if you want to effect strategic change, you also need to have the right logic and the right processes. Not only do we want to tell a well-analyzed and well-measured story, but it needs to be a story that matters and it needs to be logically connected to the mission of the organization. No matter how good you are at this measurement stuff, if there isn't a connection to moving the organization, you run the risk of nothing happening," said CEO's Prof. John Boudreau, who co-presented an i4cp webinar on the subject.

A third characteristic of HR functions in high-performance organizations is that they tend to formulate a human capital strategy that's well integrated with the larger business strategy. This may seem like a no-brainer but the study shows that only a quarter of all respondents said this is true to a great or very great extent in their organizations.

"You want to perform better in HR?" asks Jamrog. "You need to get integrated and aligned. When we look at respondents who say HR is full partner in strategy development and implement, over half say such integration is strong in their companies. They bring a lot to the table."

Actually setting up the table rather than merely being present should be the ultimate goal for HR, says CEO's Prof. Ed Lawler. He describes this as coming in with ideas and input that shape strategy rather than being the reactive implementer. This is particularly true of organizations with a management style that relies on human capital for competitive advantage, Lawler says.

HR metrics are another key to success. Jamrog notes that there aren't significant differences between high and low-market performers in terms of the financial efficiency of HR operations, but high performers are considerably more likely to measure the business impact of HR programs and processes.

"Maybe you're never going to have perfect information on the business impact," says Jamrog. "It's impossible to be certain of cause and effect in a dynamic business system. But I think just making a serious effort to make these connections is a best practice."

i4cp's 4-Part Recommendation:

1. Collect the kind of data needed to manage change well. Much of this data should be regularly collected as a normal part of workforce planning. Another recent i4cp analysis found that - for strategic workforce planning - companies need more than just data on headcount, budgets, hires, terminations, retirements, etc. They should conduct SWOT (strengths, weaknesses, opportunities, and threats) analyses, determine key roles, and make headcount growth assumptions. They should also create a profile of the agility and resilience of their employees, their teams and their organization as a whole. This means having gauges of characteristics such as openness to change, persistence, ability to function under pressure, optimism, and technological skills.
2. Then help manage change. Where the data shows deficits, help build strengths. Johnson & Johnson, for example, has a change-management framework that includes creating a compelling vision, building stakeholder and leadership alignment, delivering communication, establishing measures of success, aligning systems to reinforce change, and enabling employees to learning new skills that they can apply at work.
3. Integrate HR strategies with larger business strategies. HR needs to have a firm grasp of the organization's principle business strategies and ensure that HR strategies complement them. If, for example, a major business strategy is to move into more global markets, then HR should have a strategic initiative for helping leaders develop a set of competencies to operate successfully at a global level. Likewise, they have a clear understanding of best practices in the areas of global staffing, global training, and global information systems.
4. Measure the business impact of HR programs and processes. It's fine to track data such as the efficiency of your recruitment function, gaining an idea of how many interviews it takes to make a hire, etc. But, ultimately, this type of metric isn't establishing a strong linkage to business success. It's more important to measure factors such as the ability to retain the key personnel who add to the bottom line or the degree of alignment between key business strategies and key HR strategies.

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