I have a confession. Like Mintzberg, I love organisational challenges and finding ways for them to do whatever they are supposed to do better. I always believed it was HR or the Human Capital Management (roles) that owned this subject. They rarely do. Sofar. If you search for innovative HR you find very few, if any, exciting role models or individuals. You often see the CEOs facing the stockmarkets explaining the do’s and do not’s in turnaround situations, but seldom the HR leaders behind them. Why is that? For us who have survived major transformations or have driven them in larger than SME sized companies knows success comes down to having some profound capabilities and raw data in the HR domain. HR still remain invisible in the shadows why its reputation could be improved.

“Innovation drives economic growth”– Schumpeter

Can HR drive economic growth from only being being legal? Not really, if you ask me.  HR transactions such as payroll, compliance reporting, time management, reconciliation will never be a core capability, unless payroll and compliance reporting is how you make money as a company and live and die by it, like Zalaris, where I work, where it is part of our unique multi-country payroll based value proposition. Together we can bridge or enable HR to move its current overall reputation from legal compliance to drive business value and innovation.

For everyone else, just being legal will “never” be a core skill in itself. Critical? Yes. Hygiene? Yes. Nice to retain inhouse? Yes. Complex as hell? Yes. It will never really be a core activity, unless you are a lawyer.

My intention is not to be arrogant but to make a provocative point. Transactional HR  is an undervalued piece of art that simply must work, yes, but it is not a core process unless this is the way you make money.

What should HR do then if transactional HR is not core?

The answer is painfully simple. HR should focus on non-transactional HR. It all comes down to driving innovation; to enable business innovation; to continually build an agile business culture;  to drive organisation transformation and change projects, non stop, to stay competitive. To do that you need professionals who understand HR dynamics; who have access to the data enabling the right decision making; who understands the business; who also have the trust and respect from the business folks and who can drive change.  If you are in the process of driving ESS / MSS via a high responsive internal portal covering everything in the employment relationship life cycle to whatever you include in your  concept of talent management. You will need to change the behavior, roles and responsibilities of the staff and leaders, the HR related policies in the organisation supported by a culture that buys into this new behavior. If you lack this change mentality or skills, which is a critical skill, you  need to find an external ally. Many HR organisation lack this capability today. Driving change, in my world, should be more critical to retain in house than say payroll.

I recently shared an article the other day on HR innovation:

 “Despite great recognition for human resources (HR) as a source of value addition within firms, HR innovation remains poorly understood.” – by  Amarakoon, Weerawardena and Verreynne.

Why is it that HR still remain in the shadows? It should shift focus from legal to innovation and demonstrate business value. There are many HR roles and stakes in the processes of business innovation, business modeling and business transformation.

What is innovation? How does it link to HR?

“An ‘innovation’ is the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organisational method in business practices, workplace organisation or external relations.” – Oslo Manual

I  am unclear on the original source of this definition as it appears all over the place. Nevertheless, you can be very successful from innovating on something that already exists rather than inventing something entirely new, by introducing a new way of working,  a new method of production; a new way of sourcing skills & resources and new ways of making money. I my world it’s called business modeling. Every start-up work with this approach. HR should embrace it. It should be a mandatory skill by all the leaders in an organisation. How to fill logical holes in processes or fill unsatisfied needs in a disruptive and or pro-active way?

“Sustained competitive advantage comes from innovating how we innovate.  That’s the essence of real innovation.” – Sören Kaplan

If we had something like disruptive HR that would be innovating how HR actually innovate, what would it take and what would it look like?

Innovation is mostly the result of a painful process triggered by an idea

“Innovation comes from hunger…You can’t innovate for the sake of innovation. It has to be genuine, not phony or insincere. It has to come from a good place with higher purpose. The most innovative ideas come from hiring really smart people and challenging them, not coddling them. If you do the opposite of everything you’ve heard, you will be innovative. If you don’t inovate you might become irrelevant” – Vivek Ranadivé

The view on innovation should at least be commented by most of companies in their value statements where HR has a key role to build its supporting culture with some success criteria for how this process should look like these days:

1. Co-create with your customers
2. Create a superior experience
3. Master the service design
4. Seek profit with a purpose
5. Build an innovation network

The innovation is a process result from an idea that via an unclear path takes you to there and the organisation needs to allow people to live and prosper in that process and create the context for it:

1. To analyse the market environment, your customers wants and needs and competitors. Be open to new ideas and adaptive to change. Given your business model, what’s the problem or opportunity at stake? What are the exposures or window opportunities? How can you be agile enough?
2. To develop a strategic responsive plan which includes innovation as a key business process across the entire business.
3. To show leadership in innovation. Train and empower employees to think innovatively from the top down. Inspirational leadership and motivation is what drives innovation in business.
4. To connect with customers and employees to generate ideas for improving processes, products and services both internally and externally.
5. Seek advice. Utilise available resources, business advisors, grants and assistance to drive innovation in your business. This may include seeking Intellectual Property (IP) protection for commercialisation of ideas.

HR has an imperative role in business modeling

The best toolbox or approach to this I have seen is the crowdsourced content and design of the book “Business Model Generation” by Alexander Osterwalded. If HR ever was keen to drive innovation in the organisation with the business folks, this should be a mandatory reading and a tool box for everyone. I was not paid to say this, but using the business model generation canvas is a very easy way to discuss and find out how and why and where you make money and with whom and what’s core and what’s not. If you don’t iteratively understand how you do and will make money you will be lost. Once you have done this mapping you will soon understand that transactional HR is not really the place to be or critically retain unless it is your core business as well. It’s still a piece of art, but it is not core.

HR must create a culture that encourages, recognizes and rewards skills on a regular basis – skills needed for organizations wanting to innovate, by cultivating them  and building the value network as outlined in the busines modeling . HR must  understand this to allocate the learning fundings on what matters in a more structured way. Ask yourself how much learning funding is tied to building key capabilities, supported by key facts and informed decision making. HR needs to understand what skills & capabilities to build, update, divest and/or strenghten. HR needs to cultivate aspired relevant skills and relevant behavior in the company and be in control of what is becoming obsolete around the corner, to tactically do what if sessions as well as strategic workforce (risk) planning instead of facing fait accomplit.

Below a typical list of behaviors needed in the innovative enterprise from @HRBartender. There are many lists available so make sure you create one that is relevant for your business model and your challenges, at least discuss it and document your point of view.

1. Self-management: people need to know how they enjoy learning. Part of self-management is understanding the best way to learn a new skill
2. Curation: being able to sift through mountains of data and information. It’s easy to become overwhelmed, shutting down the innovation process. Curation helps us find the right information to enhance the process.
3. Decision making: Good decisions using information gathered. Difference between individual and group
4. Empathy: Innovation is about change. Successful innovation means understanding the change being created. Demonstrating empathy and putting yourself in the shoes of the people affected is crucial.
5. Leadership: The ability to influence others. Innovation is all about leadership. Influencing others to believe in the new idea or concept. Influencing others to support the new idea. And influencing others to adopt the new concept.
6. Problem solving: Ability to work through challenges. Good problem solving > good decisions
7. Project management: Make sure an idea or concept is brought to reality on time, within budget, and to quality specifications. Every innovation needs that.
8. Systems thinking: Innovation cannot be accomplished in a silo. It enables understanding how things are connected and related. Know how that new idea fits into – or disrupts – the system.
9. Verbal communication: Being able to articulate new ideas. Creating buy-in for new concepts. Leading a group through the innovation process takes excellent verbal communication skills.
10. Written communication: This aligns with project management. Any team focused on innovation will want to keep notes about how a new idea started, took shape, and was ultimately implemented.

Let’s look at an employee life cycle that defines how HR can spend their time

This is my personal illustration what happens in a year or until an individual change jobs. You enter from the left in a new role or as newly recruited. You exit with same role, promoted, leave at your own will or sacked.

There are many HR discplines involved to enable an innovative culture. Being legal and fixing the basics are not any of them – critical yes, hygiene yes, nice to have in the house, yes – but never really a core activity, again, unless it’s how you make money.

Now, the dirty secret to all these fancy but core capabilities above are based on having access to some very basic people data, not only HR master data, that is generated and in the transactional HR data domain, including organisational structure data with profiles, capabilities, aptitudes, performance track record, ambitions,  compensation track record, employee survey trends, relevant updated and confirmed skills assessment, relevant time stamps on everything but also a record of dashboards related to the state of the organisation to be able to analyse and understand what these data means in a business context and being able to communicate it in a trusted relationship with the business and  having the guts to have informed opinion from an HR point of view fo what is best for the business and explaining how to drive change to realize the expected benefits and take ownership of these recommendations. Wow ! That’s a lot of stuff to do here!

HR data will advance the ability to analyze and predict with even greater assurance and insight – in addition to supporting implementation of corrective measures. Portal-based dashboards provide relevant HR-focused metrics to all designated stakeholders in your organization, giving your management team a comprehensive perspective at all times.

Said that, paying the correct salaries in a timely manner, reporting on compliance needs, and making sure people get the right reimbursement, have sick leave compensation etcetera are all very critical and important activities that should be performed in a high qualitive way with  high responsiveness according to best practise, with the highest integrity and quality. It will prevent the company from having legal situations and conflicts with the union but it will never create business value, from HR. Being legal will not be enough to drive innovation and sustain a competitive edge to survive as a company or attract future employees.

HR should drive employee engagement

You will never have an innovative environment with disengaged employees. There is a common fact that only 30 % of all employees are engaged at work. How can we make sure HR drive that figure above average, best in industry, get the best rewards, best customer service, most innovative xx….? You don’t drive engagement by fixing the basics. You sell a dream of doing something motivating and provide the space to perform this without micro management. Salary is not a motivator. Passion is. Salary is a demotivator if you don’t get enough compensation. You drive and understand passion in the non-transactional domain.

My view, it’s never been as exciting to be in HR as now. It is time for HR to step up. This is why I joined Zalaris as in Zalaris all those basic but extremely difficult transactional activities are core and performed with operational excellency complemented with the ability to create the information foundation upon which HR and business together can drive innovation and drive continuous change within HR.

Key points

• Transactional HR is not core but still very critical for success in non-transactional HR
• Build real transformation skills and business modeling insights in the HR population
• Don’t underestimate the challenge with disengaged employees. Everything above is based on the assumption someone wants to work with  you in the first place. Try understand what gamification can do for your workforce. Don’t say “Oh no, here we go with another buzzword … ” if so, check up “behavioral economics in HR”
• Timing is great for disruptive HR to  step out of the shadows and demonstrate business value in business innovation. Show thyself or run the risk of becoming irrelevant!

Just a strictly personal reflection. Comments?

Sven Hultin

Zalaris is a leading Nordic provider of innovative and cost effective HR Outsourcing (HRO), HR Technology and HR Consulting services to large Nordic and international customers. Our smartHR solution powered by SAP HR includes a full service range of comprehensive personnel administrative processes including payroll, employee help desk, talent management and analytics.

As SAP BPO Partner, Zalaris implement best practice SAP HR web supported cross border business processes that result in tangible business results for our customers, including reduced and variable costs and the ability to focus on strategic HR.

Zalaris delivers services from local language service centers in Sweden, Denmark, Finland, Norway, Latvia, Lithuania, Poland and India.

Our mission is to mission is to help our clients maximize the value of their human capital through excellence in HR processes. We focus on large organizations with headquarter in Northern Europe. We are the leading expertise supporting the HR function and implementing SAP HCM SuccessFactors based solutions.