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Dave Ulrich: Does HR add strategic value?

HR Business Network has partnered with Director to bring you exclusive news and features you won’t read in any other magazine.

And to launch the partnership, this week we bring you an interview with world-renowned US management consultant Dave Ulrich, who explains why HR hasn’t embraced the business partner model in the way he’d hoped.

Few directors make the journey from HR boss to chief executive despite a rising demand for leaders with strong people skills. But boardroom scepticism may be waning as the two roles move closer together.

It’s 14 years since American management consultant Dave Ulrich attempted to redefine the role of human resources. Central to Ulrich’s model was a realignment of HR activities to fit the strategic goals of the business. In practice, that meant HR departments spending less time on traditional, administrative duties and more time on contributing to the future direction of the organisation.

Ulrich called his theory the business partner model. Its ultimate goal was more significant than a simple outsourcing of menial clerical functions. It was to centralise HR’s contribution, making it essential to the sustainability of the organisation. It was time, said Ulrich, for human resources to add real value.

At least that was the idea. The subsequent failure of HR to move up the organisational chain brings into question the viability of Ulrich’s model. In January, a report by consultancy Mercer found that while 65 per cent of HR professionals across Europe, the Middle East and Africa perceived themselves as strategic partners to the business, just 15 per cent of the activities they carried out related directly to strategy. Despite claiming otherwise, HR professionals were spending most of their time on compliance and auditing, HR services and record-keeping-tasks just about as far from the centre of the organisation as it’s possible to imagine.

Ulrich is well aware of HR’s struggle to increase its influence in the boardroom. He says, among other things, HR directors haven’t been quick enough to grasp the essentials of business management. Often, he adds, “their eyes glaze over when you mention the numbers”. Not exactly a ringing endorsement, either of the profession’s capacity to increase its profile, or of HR directors’ ability to step up to the chief executive role.

But while the supply might not be up to scratch, the demand for chief executives with HR skills is growing. “The judgement skills that are called upon are changing,” says Paul Sparrow, professor of international human resource management at Lancaster University Management School. Finance- and sales-trained chief executives aren’t necessarily capable of comprehending “the increasingly complex organisational realities of strategy. A good CEO now has to be very people-savvy. So having responsibility, not just oversight, for major transformation processes and organisation development is a core requirement.”