9 Ways I Know Your HR Department Is Obsolete (infographic)

After a career working in management, leadership and as a consultant with hundreds of companies of all sizes, I’ve found a vast difference between those with cutting edge, next-generation human resources departments and those trapped in the past.

Do you know what differentiates highly successful companies like Zappos, Google and TraderJoe’s from their competitors?  They not only have great employees, but they know how to get them, keep them, and engage them.  That’s the differentiator.  The first thing Marissa Mayer did upon becoming CEO of Yahoo was get a new HR Director. She knew the biggest difference between Yahoo! and Google (her previous employer) was the quality of people, and great people begin with human resources.

Whether your company has 5,000 people or 25, I’ve observed 9 easy ways to know if you’re HR Department is obsolete. Here they are:

1.       The head of human resources reports to the CFO. Where do I begin? If human capital viewed has truly crucial to the success of a business, then the head of human capital needs to report to the CEO and not the CFO.  CFOs usually have no experience in human resources and have a tendency to judge success solely by metrics such as ROI. If the CFO does not see standard return on investment, they tend to dismiss, or even worse dissuade innovative human resources functions from taking place in the organization. Forty years ago, HR reported to the CFO.  Not today. 

2.       Your employee handbook is titled, “Personnel & Policy Manual”.  The term ‘personnel’ was dated in the 1980s when I entered the workforce, and now it's really, really dated. My company reviews and writes approximately 75 to 100 employee handbooks yearly, and when we see an handbook that’s called  personnel or policy manual, we know it either hasn't been revised in decades, or more likely the culture of the company treats employees not as talent but as widgets; it presents a management style and corporate culture rooted in the 1950s.

3.       Your employee handbook is longer than the United States Tax Code.  In the few years, we've seen employee handbooks as long as 175 pages long. If you need five pages to describe all of the items an employee can’t wear according to your dress code, you're probably doing it wrong, and you're definitely obsolete. I once had a CEO ask me to put a policy in his handbook prohibiting all former employees from ever re-applying for a job at his company. When I asked him why, he mentioned a former, fairly incompetent employee who wanted to come back. The CEO wanted to make sure there was a policy prohibiting that from happening. You don't need a policy for that, you need courageous management. What would happen if a terrific employee is forced to leave your company, due, for example, to a relocation of their spouse? Then after two years, the employee wanted to come back?  Now you have a policy prohibiting that great employee from ever coming back. Be courageous.  Make decisions.  Understand you can’t have a policy for every conceivable circumstance; that’s what managers and leaders are for.

4.       HR spends more than 50% of their time on compliance and benefits management. In many small and medium-size companies we work with, the “director of human resources” is little more than an administrator making sure that benefits paperwork is completed and that nobody breaks rules.  Not only is your HR department obsolete, you’re not getting enough ROI.  I can find you a terrific HR Management System that can perform most of the benefits management stuff that person does at a quarter of the cost.  Then, the focus needs to be on doing things you ought to do, in terms of talent development and management.  For if you do things you ought to, you’ll spend far less time doing things you have to do. If employees feel they’re treated well, fairly compensated, and that management has their back, they are far less likely to file grievances or lawsuits. And they are far more likely to stay with your company and perform at a highly engaged level, which is usually the differentiator between an average performance company and a great performance company. Ask yourself: does your HR department spend over half their time doing things they have to do?  And do they know the things they ought to do?

5.       None of your executives have heard of the term “talent management". Talent management, or workforce development, or a variation of the above is now the preferred sobriquet for human resources, a term which replaced personnel years ago. These new terms demonstrate a desire by CEOs and executives who visibly appreciate and support great employees, from acquiring, developing, mentoring to promoting and retaining that talent.  Human resources is no longer the “bad guy”, they're the force that can drive the company to greatness. Take a look at job postings online. I recently saw a job title for a hospital called “Director of Compliance and Personnel”.   Who would want to work for a company like that? More and more companies are going to terms like “Vice President of Talent Management” or “Director of People & Culture”.  It may be only a title, but they reflect a desire to create a workplace culture that values their biggest expense – employees .

6.       “That's the way we've always done it.” When my consultants or I go into a business for the first time and make observations or recommendations, we often hear a CEO or the HR person say, “Well, that's the way we've always done it”.  We then know the HR department is obsolete.  You can either embrace change or die resisting change.  There will be 1 billion people entering the global workforce in the next 7 years.   You can bet none of them want to hear “that’s the way we’ve always done it” from their executives.   Do you think highly successful companies get to where they are by saying that's the way we've always done it? In an era where businesses either reinvent themselves or not, “that's the way we've always done it” is a ticket to obsolescence or worse, extinction.

7.       HR is considered a cost center and not an asset. This often goes hand-in-hand with #1.  Today’s savvy CEOs know that cutting-edge human resources techniques save companies money and create higher productivity and not the opposite.  Millenials, for example insist upon training and development in a potential employer.  If they get that development, they stay with the company.  The staggering cost of employee turnover(which will become more problematic as the economy improves and more jobs are created) is one of the most obvious ways human resources can save the company money by recommending and implementing techniques to improve talent selection, retention and development. 

8.       It's been over three years since your executives taken leadership training. I promise, if you have a manager who is been their position for over 10 years, then the techniques and style they use to lead people are completely obsolete. The nature of leadership and management of people has undergone a sea change in the past decade and will continue to evolve as we become more even diverse and more global. We now have four generations in the workplace for the first time in our history. Do you really think that somebody who was leading people 15 years ago has the skill set today to take you to the next level tomorrow?

9.       Employees feel no one is listening to them. In every employee survey I've ever conducted or reviewed, the number one complaint of employees is “I don't get enough feedback from my boss” and “I don't have an opportunity to voice my concerns candidly”. We have a client who still uses suggestion boxes. The concept of the suggestion box is okay, but today’s leaders, managers, line supervisors, and even the CEO should be a Walking Talking Suggestion Box.  Corporate cultures that are cutting-edge understand leaders are proactively soliciting candid feedback, and that the days of a lonely suggestion box are over. When employees feel that their opinions are valued, that their voices are heard, and that their jobs have meaning, they become engaged, happy and successful.

In every business, the way of leadership has changed. Businesses will have to re-invent themselves over and over again to keep up with the speed of change.  Unfortunately, HR seems to be the group to be involved with that change. Whether it’s because executives feel that HR is a nuisance and not an asset or because of “that’s the way we've always done it”, it is essential that HR have a seat at the table – that they are valued at a level of the CFO, CTO, or COO.  

The next generation of human resources requires a relentless focus on talent development in a global workforce; the ability to identify, develop and promote next-generation leaders.  And, most importantly, it means doing what you ought to do, not what you have to do.