By Elizabeth M. Rice, SPHR

For several years the role of the HR executive has been evolving. The HR functions that once defined the position, such as benefits administration and payroll, are slowly migrating out of the corporation as HR becomes more strategically focused to facilitate the growth of organizations and provide them with a competitive edge.

To gain insight into these changes, we interviewed Mike Foster, President of the Human Capital Institute, a membership organization, think tank and educational resource for professionals and executives in recruiting, HR and talent management. Mike has over 20 years of industry experience and provides some interesting insight into the drivers of this shift.

According to Foster, one of the main catalysts for this shift is the movement of our economy from industrial-based to a knowledge-based one. Over fifty years ago when the HR profession first emerged, the US economy was based on an industrial society where people/employees were viewed as resources. These resources were brought into a company to fulfill a specific task at the lowest price and as fast as possible. The skills needed for these tasks, like the people who possessed them, were interchangeable. At the time an HR executive’s success was defined by how quickly and cheaply they could bring employees to the company, with the least amount of risk. This strategy worked well for companies, which achieved competitive advantage through tangible assets and size. Today we are living in a different world, based on knowledge, where jobs that rely on interchangeable skill-sets are being moved out of the corporate environment and being outsourced. In the new economy, competitive advantages are achieved through innovation, agility and speed to market rather than tangible assets and size.

One of the main differences between the industrial and knowledge economies is the speed to market. Foster provides an example of this disparity by using the technological developments of the original Apple computer vs. that of the iPod. When the first Apple was introduced to the market it took competitors years to acquire the manufacturing capabilities and resources necessary to build a competing PC for the mass market. Fast-forward to modern days where the iPod is introduced and, through manufacturing capabilities overseas, competitors are in the market with offerings within a couple of months. This type of environment calls for the most talented, forward thinking innovators that can help and move the company forward, rather than fulfilling a set of pre-defined requirements. The idea of “thinking outside the box” is taken to a whole new level and HR executives need to be prepared to find superstar employees, recruit them and continue to motivate and grow their talents.

In response to the changing landscape, “human resources” is increasingly being referred to as “human capital.” The difference lies in the perception of the employees and how they are valued within an organization. According to Foster, traditional human resource models view employees as a cost that should be acquired at the lowest compensation and with the lowest risk for the company. In contrast, human capital professionals view employees as an investment that will grow and produce a greater ROI for the company over time. Foster continues to define human capital as the skills, talents and aptitudes that people own and bring to the organization. These employees may differ from traditional employees and may bring greater risk for the company. However, the human capitalist looks to diversify the employee risk and grow the portfolio, much like a stockbroker. Those employees must then be given the tools and resources whereby they will give the maximum amount of their capabilities towards production.

While the shift is logical, moving away from the traditional HR role has its challenges. Most institutions that teach HR have an established curriculum based on traditional HR principles, and do not provide insight on the new role HR should play in modern society. Additionally, while trade associations provide a great service to the HR executive, they too promote a lot of traditional HR practices. HR executives need to respond to this by educating themselves and adapting a strategic mindset for helping their company reach its business goals.

Foster suggested the following steps for developing a
strategic HR focus:

1. Recruit “stars” – Rather than recruit employees based on a pre-defined skill set, cost and risk aversion, look for talent that will change the business and help the company grow.
2. Develop and grow talent – Once you have great talent in place, give them the tools that they need to develop. Gone are the days where training includes the teaching of skills. To compete in a knowledge-based economy, employees need to learn how to think.
3. Retention programs – Creative individuals have different needs and HR executives need to learn how to motivate, empower and unleash their creativity.
4. Train senior executives – Senior management will need to learn how to manage the new type of talent. As employees change so does the way in which they need to be treated, giving them greater autonomy and room to grow, learn and contribute to the organization.
5. Develop programs globally – In global organizations your playing field is not limited to the United States. HR executives need to balance traditional systems with the new systems and incorporate them worldwide.
6. Outsource non-core HR activities – High-level executives should not be focused on non-core administrate tasks such as HR administration. By outsourcing this function to specialists, HR executives can be freed to focus on more strategic issues to help the company reach its goals.
7. Keep recruiting in-house – With your talent being one of your greatest assets, you should ensure that critical functions such as recruiting are kept by the HR executive. The HR role should be more strategic when recruiting and not limited to traditional job searches as they’re usually done through online job boards.

Human Resources is rapidly changing and becoming increasingly central to the success of the organization. According to Foster, as businesses realize the strategic importance of the HR role, HR leaders who can move and adapt to a Human Capital model will have infinite opportunities, while traditionalists may become obsolete.

About Michael Foster, Human Capital Institute

Mike is a founder of the Human Capital Institute (HCI) and currently serves as Chairman of the Executive Board. He is a serial entrepreneur, best known in the human capital industry as the founder and former CEO of AIRS, and author of the Amazon business best-seller “Recruiting on the Web”, published by McGraw Hill.

In addition to his duties with HCI, Mike also serves as Chairman of Hanover Capital Management, Inc. and is a director and advisor to firms in the financial services, software and information industries. A native of Los Angeles and San Francisco, Mike relocated with his family to the Connecticut River Valley of Vermont in 1997.

Inspirational Quote:

All successful employers are stalking men who will do the unusual, men who think, men who attract attention by performing more than is expected of them.
— Charles M. Schwab