At HCL Technologies, business priorities have changed and the customer is no longer first; and the company is doing extremely well despite this policy of apparent self-destruction. It has placed the employee above all and become one of the first companies to walk the talk and recognise the crucial role that its people will play in its business. But such organisations are still far and few. Many chief executive officers and companies speak of it and almost all annual reports thank their employees “without whom none of this success would have been possible.” But its managers, the human resources (HR) function, is yet to see a redefinition in its role. Data shows that this function is largely still a support function that is yet to take on a strategic role. And for this to happen, there has to be a redefinition in the relationship shared by those at the top – head of HR and the CEO. At a broad level, this relationship must be characterised by honesty, close and open communication and manned by strong individuals on both sides. Each must understand the realities of the other’s domain – just as HR must learn and believe the business and financial realities that govern the CEO’s world, the CEO must understand and believe the HR relationships and perspectives that underpin HR’s existence.

There is a burning need to redefine the relationship shared by those at the top – head of HR and the CEO. At a broad level, this relationship must be characterised by honesty, close and open communication and manned by strong individuals on both sides.

This is different from anything we have seen so far in organisational history – HR has always been expected to be a “support” function, which supports the vision of the firm as decided by the CEO and board. Along with the change in the relationship between the workforce and companies – equal partners instead of the earlier dependent relationship – the dynamics of managing these internally has changed.

Equality, not servility

HR is supposed to be a “people job” and for most organisations and practitioners, that translates as soft, non-confrontational and unable to make the tough calls. The CEO essentially oversees the management of all resources, towards an integrated goal. With money, raw material and systems having been tamed through processes, standards and excessive study and analysis, HR is the only differentiator left to organisations. And this resource is different from the others, because it has turned the supply-demand equation on its head and is dictating terms in many markets.

Thus, the HR manager must realise that he is actually managing a resource that is more complex, more dynamic and more powerful in terms of potential than any other resource. This must come through an equal relationship where HR stands up for employees, is able to demonstrate success, unhesitatingly pushes for budget and resources and so on. Jack Welch, the former CEO of GE, has repeatedly argued that the head of HR has to be equal to the level of a CFO. India’s largest companies have probably realised this already. In 2006, when Infosys’ CFO Mohandas Pai took over as the Head of HR, everyone clearly saw that as a step, which reaffirmed the fact that Infosys was focused on elevating its human resource department.

Data driven, business focused

The reality of the global business environment now is that margins are razor thin and advantages of geography, timing and accessibility are easily eroded. In this scenario, organisations are relentless in their focus on cost and unforgiving in their scrutiny for return on investments. The HR function must join in this crusade to make good, better and better, best. The function must learn finance, marketing and business and speak the language of business, revenue and client. For many practitioners of HR, this implies a return to the classroom to acquire the basics of these disciplines. For, without that, the CEO and HR will be speaking different languages and cannot see eye-to-eye.

HR issues are business issues – not issues in the way of business, but, issues that can propel business when solved appropriately. A language of metrics, supported by data and explained through results will bring the function on levels similar to those in other functions.

A Mckinsey Quarterly article published in January 2008 came up with a workforce pyramid to help HR professionals understand, segment and strategise differently for different categories in the workforce. The different layers of talent included top, middle and frontline management, employees in different segments (top 10%, middle 80% and bottom 10%), high potentials, specialists and the indirect workforce. For each of these categories, talent management strategies have to be put in place, keeping the overall plan for the business in mind.

Honest approach

With the first two aspects of the relationship in place, it is easier to make honesty the best policy. Both HR and the CEO need to insist on honesty in their relationship. The issues seen in daily work are around senior level performance issues, selection and promotion decisions and resource development and allocation. In all these, the HR head must be able to see the business and the people side of the issue and speak to the CEO openly and firmly. Similarly, honesty on the part of the CEO means treating HR the way the business demands.

The fabric of the organisation

The relationship between the CEO and HR will be as performance governed as anything else in business; this is as it should be and accountability within the HR function to clear deliverables will go a long way in building the relationships. The two participants need to have shared goals – increased productivity, balanced cost-control, engaged and happy workforce, culture consistent with organsation goals and so on. It is critical that these are discussed threadbare and not just assumed to be so.

It helps to realise that the fabric of the organization is nebulous and often experienced after creation rather than deliberately created. The HR and the CEO have joint responsibility to mould this through culture, corporate ethics, perceptions within the firm that belie stated relationships and so on.

In the years ahead, as the workforce becomes more differentiated, it will also find it has the power to hold an organisation to ransom and that is where the CEO and the HR function will see their greatest challenge. A relationship based on data, common goals and language and trust above all will strengthen their hand to meet this challenge. All organisations, young or old, new age or old school are advised to build this relationship without delay.