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JULY 17, 2006
By Jack and Suzy Welch So Many CEOs Get This Wrong HR has to be about more than palace intrigue -- or company picnics If human resources is the most powerful part of an organization, as you always say, why is its impact felt in only a negative way? -- Fadi Rahal, Louisville, Ky. Because human resources, unfortunately, often operates as a cloak-and-dagger society or a health-and-happiness sideshow. Those are extremes, of course, but if there is anything we have learned over the past five years of traveling and talking to business groups, it is that HR rarely functions as it should. That's an outrage, made only more frustrating by the fact that most leaders aren't scrambling to fix it. Look, HR should be every company's "killer app." What could possibly be more important than who gets hired, developed, promoted, or moved out the door? Business is a game, and as with all games, the team that puts the best people on the field and gets them playing together wins. It's that simple. You would never know it, though, to look at the companies today where the CFO reigns supreme and HR is relegated to the background. It just doesn't make sense. If you owned the Boston Red Sox, for instance, would you hang around with the team accountant or the director of player personnel? Sure, the accountant can tell you the financials. But the director of player personnel knows what it takes to win: how good each player is and where to find strong recruits to fill talent gaps. Several years ago we spoke to 5,000 HR professionals in Mexico City. At one point we asked the audience: "How many of you work at companies where the CEO gives HR a seat at the table equal to that of the CFO?" After an awkward silence, fewer than 50 people raised their hands. Awful! Since then, we have tried to understand why HR has become so marginalized. As noted above, there are at least two extremes of bad behavior. The stealthy stuff occurs when HR managers become little kingmakers, making and breaking careers, sometimes not even at the CEO's behest. These HR departments can indeed be powerful, but often in a detrimental way, prompting the best people to leave just to get away from the palace intrigue. Almost as often, though, you get the other extreme: HR departments that plan picnics, put out the plant newsletter (complete with time-in-service anniversaries duly noted), and generally drive everyone crazy by enforcing rules and regulations that appear to have no purpose other than to bolster the bureaucracy. They derive the little power they have by being cloyingly benevolent on one hand and company scolds on the other. So how do leaders fix this mess? It all starts with the people they appoint to run HR -- not kingmakers or cops but big-leaguers, men and women with real stature and credibility. In fact, managers need to fill HR with a special kind of hybrid: people who are part pastor (hearing all sins and complaints without recrimination) and part parent (loving and nurturing, but giving it to you straight when you're off track). PASTOR-PARENT types can come up through the HR department, but more often than not, they have run something during their careers, such as a factory or a function. They get the business -- its inner workings, history, tensions, and the hidden hierarchies that exist in people's minds. They are known to be relentlessly candid, even when the message is hard, and they hold confidences tight. With their insight and integrity, pastor-parents earn the trust of the organization. But pastor-parents don't just sit around making people feel warm and fuzzy. They improve the company by overseeing a rigorous appraisal-and-evaluation system that lets every person know where he or she stands, and they monitor that system with the same intensity as a Sarbanes-Oxley compliance officer. Leaders must also make sure that human resources fulfills two other roles. It should create effective mechanisms, such as money, recognition, and training, to motivate and retain people. And it should force organizations to confront their most charged relationships, such as those with unions, individuals who are no longer delivering results, or stars who are becoming problematic by, for instance, swelling instead of growing. Now, considering your negative experience with human resources -- and you are hardly alone -- this kind of high-impact HR activity probably sounds like a pipe dream. But given the fact that most CEOs loudly proclaim that people are their "biggest asset," it shouldn't be. It can't be. Leaders need to put their money where their mouth is and get HR to do its real job: elevating employee management to the same level of professionalism and integrity as financial management. Since people are the whole game, what could be more important?  Jack and Suzy Welch look forward to answering your questions about business, company, or career challenges. Please e-mail them at thewelchway@BusinessWeek.com For their podcast discussion of this column, go to www.businessweek.com/search/podcasting.htm
BW MALL
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