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Excerpt--Business Literacy Survival Guide for HR Professionals

    

Business Literacy Survival Guide for HR Professionals

By Regan W. Garey
2011, Paperback, 193 pages
ISBN: 978-1-586-44205-7
SHRMStore Item #: 61.15015

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SAMPLE CHAPTER

Chapter 2. The Seven Competencies

In recent years there has been a renewed enthusiasm within the HR profession. Open-minded, visionary members of the HR community are developing and promoting their profession. Several authors’ and researchers’ findings have gained so much popular support that they have changed the paradigm in the HR community.

What is all the excitement about?

HR competencies are in the forefront of numerous discussions, conferences, and Society for Human Resource Management (SHRM) meetings. For example, in the well-received book, HR Competencies: Mastery at the Intersection of People and Business, the authors illustrate the evolved “HR Competency Model” (see figure 2.1). In this chapter we will explore the application of these HR competencies to financial concepts.

[figure 2.1 excluded]

CORE HR COMPETENCIES

We start with discussion of the widely accepted six HR competencies (see figure 2.2), add our business literacy competency, and build from there.

[figure 2.2 excluded]

Your goal is to read and understand the key financial concepts related to your career and organization. That is where this survival guide will come in handy over and over again. Use this book as a resource throughout your career. Refer to it before management meetings or before you deal with your peers, subordinates, suppliers, or customers. Show them you can “talk the talk” and know the language of business: accounting.

Credible Activist

This key competency is the cornerstone of the other competencies, according to Dave Ulrich. Basically, without this first competency the other competencies are less meaningful. It can be summed up as being accountable, taking initiative, and doing the right things the right way.

The Credible Activist focuses primarily on relationships and relationship building.

Cultural and Change Steward

Human resources has always been an integral part of promoting corporate culture. Since passage of the Sarbanes-Oxley Act of 2002 (SOX), the focus on ethical cultures has become even more important. According to Ulrich, of all the competencies, Cultural Steward is the second highest predictor of performance of human resources on both an individual and departmental level. In addition, change management is a key aspect of human resources.

Talent Manager/Organizational Designer

Talent management focuses on how employees get hired, get promoted, and make lateral moves, as well as how employees move out of the organization. Ulrich believes that human resources focuses too much on talent acquisition instead of organizational design. Ultimately, the talent of the employees must be aligned with the organizational structure.

Strategy Architect

This competency involves being able to recognize business trends and their impact on the business, while also identifying potential roadblocks and opportunities. This may be described as a SWOT (strengths, weaknesses, opportunities, and threats) analysis.

Business Ally

Human resources can and should be actively involved in the business decision making within the organization by understanding how the business makes money, who the customers are, and why customers buy the company’s products or services. Having business intelligence is a critical steppingstone to having a “seat at the table.”

Operational Executor

Some may argue that transactional duties such as drafting, adapting and implementing policies are the drudgery aspect of human resources. But Ulrich argues that these nuts-and-bolts activities are also critical to the financial success of the organization.

Business Literacy

Financially literate individuals understand the interconnectedness of business decisions. They know how to interpret the financial statements; financial ratios; internal controls; red flags for financial waste, fraud, and abuse; and the new legislative acts that can have a tremendous impact on the accounting framework of their organization.

CREDIBLE ACTIVIST ALIGNED WITH BUSINESS LITERACY

Integrity, self-confidence, and knowledge. Harnessing these strengths simultaneously can lead to tremendous potential for an HR professional to become a strong voice within his or her organization. The Credible Activist must capitalize on both interpersonal and technical skills since these are the two cornerstones of this competency.

Per Ulrich’s research, the four characteristics of Credible Activist include:

  • Delivering results with integrity
  • Sharing information
  • Building relationships of trust
  • A certain level of assertiveness

One of the fastest ways anyone can lose credibility is to be a loud voice in the organization without knowledge of the business or to be a wallflower with immense technical and business knowledge but no voice.

This author proposes that there is a correlation between the characteristics of the Credible Activist and having business acumen. Specifically, understanding the concepts and terminology of business will allow the HR professional more opportunities to share accurate information with colleagues within the organization.

Relationships that are built on trust include the essentials of honesty and open communication. The Credible Activist understands the goals of the organization and can communicate those goals in an effective, professional manner.

People at all levels of an organization usually have know-how that can be of use to decision makers. Human resources should ask to what extent information is widely shared in their organization so that those who make decisions have access to such knowledge.

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CULTURAL AND CHANGE STEWARD ALIGNMENT WITH BUSINESS INTELLIGENCE

Ethics and accounting and finance are strongly interwoven. If the HR department is not a strong advocate and promoter of an ethical corporate culture, a feeling of laissez faire (do as you want to) can permeate the entire organization.

As will be discussed in chapter 10, instituting and continually communicating to all employees about the whistle-blower option is the responsibility of human resources. This author maintains that the whistle-blower provision of the SOX is a back-up mechanism for organization-wide promotion of an ethical culture. Some smaller or non-publicly traded companies have not been required to institute an anonymous whistle-blower provision as part of the passage of SOX. However, many organizations have set up some sort of procedure in which employees can anonymously report unethical or fraudulent activities.

Human resources needs to be keenly aware that the culture drives the way employees view their role within the organization. For example, if there is a careless way of analyzing revenue recognition and the accounting department is not continually vigilant in its recording of revenue only when it is actually earned, other employees may sense that “anything goes” in that organization.

Unethical or erroneous transactions are often recorded and go undetected until they end up in the financial statements or until the auditors conduct their annual audit. Having management rather than auditors find errors or fraud is paramount to the viability of the organization, the sense of employee accountability, and investors’ perceptions of the organization.

Think about Enron and the role that human resources could have played if they were more aware of what can go wrong in an organization’s financial reporting procedures and techniques. The ensuing implosion of Enron speaks volumes about the disaster that can occur when corporate culture is not implicitly and explicitly ethical. The HR professional plays a pivotal role in promoting an ethical culture.

One way to verify that key management practices such as budgeting are accurately aligned with the culture is to conduct a culture audit. This author has created a corporate culture audit for this scenario. See the textbox for a small sampling of the questions.

[textbox excluded]

Change Steward

The other aspect of this HR competency is change steward. It would be difficult to find any organization, large or small, that is not continually instituting some sort of change. Human resources must be diligent in supporting and promoting change that is occurring. The change can be something as small as a new target market for the organization to something as widespread and monumental as an acquisition or a merger.

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STRATEGY ARCHITECT ALIGNED WITH BUSINESS LITERACY

For many years human resources has been a tactical rather than a strategic partner in most organizations. Strategic decisions are made, and human resources is tasked with the tactical or “make things happen” part of the process. When that aspect is the only part human resources sees, it is easy to lose sight of the vision or mission of the organization—especially during times of change.

Opportunity costs exist for every business decision made. Simply stated, if one course of action is undertaken, others cannot be taken simultaneously. It is one key mechanism or mindset to help an organization realize that there are always financial and time constraints and not all opportunities can materialize at the same time.

There are costs and benefits associated with every decision made. The goal is to maximize benefits and minimize costs. But what are those specific costs? If human resources is aware of the numerous costs involved in any decision or project, they are more likely to become part of the solution rather than be an afterthought for top management. For example, understanding fixed overhead costs and variable costs may help human resources be a partner in the decision making process.

Most importantly, if HR professionals understand the financial constraints and opportunities for new strategic directions, there will be more synergies between management of all departments within the organization. Human resources will be on the inside of these key management decision-making processes.

In this hypothetical example, CEO Gerry Smith had asked to meet with all of his top management. Along with other members of management, the HR director, Meggan, was invited to offer her input into the decision of how a potential merger would have an enormous impact on the organization. Trend analysis was one of the many financial tools used during these meetings (more on this topic later). Management assessed the profitability trends and analyzed cost savings that could occur from a merger with another organization. From a strategic architect perspective, Meggan understood the many financial ramifications of this key decision. For example, she realized the importance of reviewing the statement of cash flows to see the sources and uses of cash in recent years, the level of retained earnings to see how much of recent earnings were retained in the organization, etc. Meggan’s understanding of the financial strength of her organization gave her more credibility.

BUSINESS ALLY ALIGNED WITH BUSINESS LITERACY

This competency is the foundation for this book, so it will be approached and discussed in a slightly different manner. Becoming business literate is the most critical aspect of being a member of the decision making team of any organization. A comprehensive understanding of how the organization makes money, expands its market reach, and is financially sound all work in concert to help human resources ask and answer financially based questions in a convincing fashion.

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