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Is the contribution of HR to business strategy off the rails?

Recent reports in the media have rung alarm bells for me about the standing of ‘HR’ especially in relation to its strategic input to the productivity agenda. Union muscle appears to be rearing its head again. Article by Dr Hugh Billot, Business Consultant

Recent reports in the media have rung alarm bells for me about the standing of ‘HR’ especially in relation to its strategic input to the productivity agenda. Union muscle appears to be rearing its head again. Article by Dr Hugh Billot, Business Consultant.

The Maritime and Transport Union and the Transport Salaried Staffs Association planned strike action for rail staff who enjoy average gross earnings of in excess of £50,000 per annum and one signaller earning £111,066 when rail companies have regularly increased charges well above the rate of inflation and rail user satisfaction is low. And now we learn that inflation busting pay rises have been offered to prevent strike action. The Chairman of the Police Federation just a week ago stated its categorical resistance to economies and reform. The Chairman of the British Medical Association dismissed the government’s plan to get GPs back to working weekends as surreal. The teachers unions continue to reject traditional teaching methods, differential salaries based on merit and the idea that incompetent teachers should be sacked. On the other ‘side of the fence’ many bankers still remain a law unto themselves as evidenced by the continuing fines imposed on them. Many businesses and in many sectors of the economy have been able, due to free movement of labour in the European Union, to pay many staff at the National Minimum Wage saving millions in employment costs as a great proportion of those workers are able to enhance their take home pay by the tax credit system (i.e. the tax payer is supporting profits in those businesses).

All these examples are in effect modern day restrictive practices designed to hinder productivity and that is (or should be) the big issue facing HR professionals today and every day. The Conservative Party rhetoric about the ‘economy is everything’ indicated that productivity has to improve as the UK has fallen way behind key competitor countries and of course without the expected corporation tax take the government cannot meet its plans.According to the Office of National Statistics output per hour worked in the UK is 21% lower than the average for the US, Germany, France, Italy, Japan and Canada and this is the worst position for the UK for 20 years. And the position may deteriorate further as wage growth starts to outstrip inflation. With zero inflation and wage increases running in the order of 2%, if productivity does not increase markedly unit labour costs will rise and business competitiveness will decline.

Many businesses have circumvented rises in unit labour costs by hiring staff from the European Union or further afield and generally at national minimum rates of pay (with tax payers supplementing pay through the tax credit system) but plans to curb immigration put together by the government could drastically reduce the supply of cheap labour so damaging business prospects unless productivity rises at least in line with wage inflation but of necessity by much more.

So if productivity gains have not materialised over the last few years why should that change in the next few years? Well it won’t unless HR professionals are prepared to lead the change and they have done it in some sectors. For example twenty years ago the automotive industry was bottom of the world league for productivity but today automotive component companies and car manufacturers lead the global league. Here are some thoughts on what HR professionals might do to improve productivity. Make sure all decisions actually improve productivity and company competitiveness, all employees understand what is required, what they will get and what the business will get and measure and communicate results daily, weekly, monthly. Engagement and communications are vital ingredients in the HR professionals strategic input.

Let the HR professional take a small cross mix team of employees abroad to benchmark in countries with known high levels of productivity and return with many ideas to improve productivity and then use all team members to ‘sell’ and help implement change. Seriously consider the concept of incentivising employees with performance pay as opposed to straight increases to fixed pay including sharing profit. Enhance employee capability through effective employee development including on and off the job training, job rotation, deputising for supervisors to gain new perspectives and fully participating in job enrichment programmes and with measures to determine that gains are made. Improve management capability and performance by making them central to continuous improvement programmes.

In short the HR professional should re-visit the company strategic plan and re-write the HR contribution to strategic change, how it would be managed and what results would be expected in terms of enhancing company productivity and profitability and in doing so must remember that failure to change is a recipe for falling backwards in comparison to competitors hooked on making change. The new HR motto needs to be delivering more by spending less.

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