Management

Personnel has long been the Cinderella department of business. Often regarded as little more than administrative, looked down on as women’s work and not taken seriously, it has – not just figuratively speaking – been consigned to the office broom cupboard. Even renaming it “human resources” has not done a lot for its image.

Yet there are definite signs that this much put-upon activity is on the up. Like finance and information technology before it, human resources is edging closer to the centre of things.

This is partly a predictable reaction to the growing tendency for company executives to talk about the “human factor”. Even if they are not really committed to “investing in people” or putting them first, they often feel they have to give the impression they are by giving greater prominence to the department that deals with that sort of thing.

But a few organisations are realising that there are benefits to be had from taking a genuine approach. This is not just a question of adopting what one practitioner calls a “humanistic” tack and being nice to people in the hope that they will pay back such kindness through working harder and more effectively. After all, such a policy is the sort of thing that is indulged in the good times, but falls away just when it is needed most – when the going gets tougher.

Instead, they are starting to understand that some of the strategic issues with which they have to deal are all about people. An obvious example is service quality. Organisations such as British Airways have made great strides in this area in recent years. But they have not done it by devising a new IT programme or coming up with a new financial plan. They have only improved through enlisting the support of their people.

Other organisations have seen human resources directors sitting alongside chief executives helping them tackle not just one problem, but a whole range. For example, at Mercantile & General Reinsurance human resources director Stuart McAdam worked closely with chief executive John Engestrom to achieve the turnaround that enabled Prudential Insurance to sell it a few months ago. Likewise, when, about three years ago, Martin Read became managing director and chief executive of the troubled UK computer company Logica, he took with him from GEC-Marconi group personnel director Jim McKenna.

Given GEC’s reputation for budgetary discipline, most onlookers would have expected a good dose of financial rectitude to have been Read’s chief weapon against the company’s slowing growth and declining profitability.

But though keeping a close eye on costs had undoubtedly played a part, McKenna has explained that there was more to it than that. “You look at the cost structures,” he says. “But you also look at how to expand the company and at the behaviours that affect it. You’ve got to look at all three at the same time to push it forward.”

Similarly, Engestrom and McAdam said recently they believed the aim of developing innovative ideas, such as advanced risk assessment models in certain fields, went hand in hand with the intention of devising projects designed to make a formerly hierarchical organisation responsive and open.

“Critical to the success of the newly restructured group are the right skills and behaviours at all levels in the organisation,” McAdam wrote in a recent annual report.

These are only two organisations. But Jonathan Smilansky, senior vice president for human resources at the entertainment group PolyGram, believes the sort of approach they have taken will become increasingly commonplace in boardrooms, especially in Britain.

Part of the increasing sophistication in the UK business environment is connected with an awareness that what is strategically important is tied up with things that “only people will deliver”, he says. A few years ago, people thought IT had all the answers, and before that it was the finance department.

Now, having a good IT director can enable a company to be innovative about how it does business and even take it into fresh pastures, while the financial director, increasingly being thrust into a more strategic role, is very powerful because he or she can interpret the numbers.

Smilansky, a former academic who worked as a consultant before becoming human resources director with Visa International and Meridien Hotels, points to the example of payroll costs within his present position. On the face of it, this is strictly a finance matter, with some IT for the administration. But he claims finance people are baulking at it because they do not have the expertise human resources specialists do to devise a method of creating a flexible workforce that includes fewer or cheaper people. “In many service organisations about two-thirds of the costs are payroll. So you need to control it without killing the workforce,” he says.

In much the same way, a lot of the work going on in the financial services field – establishing separate administration centres to support groups of bank tellers and product sales people in bank branches, for instance – has a strong human resources element to it.

However, it is not every specialist in the field who will rise to take advantage of the opportunity. Just as many finance and IT chiefs can run their departments efficiently enough but not display the vision and breadth of experience required to be an effective director, so a lot of human resources experts fail to measure up.

In Britain especially, there is a whole generation of human resources specialists of the age at which they would be considered for the board, but who are not equipped to do the job because they trained when the key skills were related to industrial relations. Though being able to prevent or end strikes was important in the 70s, it is not so relevant now. It is no coincidence that many of the new-look human resources directors are people who, like Smilansky and McAdam, have worked as consultants and gained experience of advising senior executives before going to work for clients or other organisations.

The advantage of this is that the business has more than one person on the board thinking about the business’s long-term future. Ideally, the chief executive will be complemented by a well-rounded human resources director thinking strategically about how best to make use of the workforces and a finance director considering in the same sort of terms how to exploit any financial advantages.

Roger Trapp is management editor of the Independent and Independent on Sunday.