Demonstrating Value in HR
5 May 2005
For many years, senior management teams in law firms have only used one performance indicator when gauging the health of their businesses - financial data. Now this is of course vital, for reasons that do not need rehearsing here.
However, if all the clients of a firm were to up sticks and move elsewhere tomorrow, or more particularly in the context of this piece, all employees were to do the same, the limits of financial reporting alone would be clearly revealed. This, the ‘management accounts’ model, has two key flaws. First, it relies on lagging data alone. Second, it treats everything that doesn’t instantly generate revenue as a cost. It should not take a rocket scientist to point out that, within law firms, the reality is much more sophisticated.
So other performance indicators are vital. This is doubly so in the case of HR. For as long as the ‘management accounts’ model is used, then HR will be seen as a cost centre rather than a strategic asset. And strategic asset it is, especially in law where firms have little else to offer other than their people.
So how does HR make this transition from cost centre to strategic asset?
It’s about measurement. The systems you have in place. If you can’t measure it, you can’t manage it. And if you can’t manage it, you can’t report progress or change. Bad for the firm, bad for employees, and therefore bad for you.
Measurement is NOT about creating more forms, more bureaucratic processes etc. Indeed those are the product of systems born out of the ‘management accounts’ model: the need to regulate, to control and report on ‘costs’ wherever they emerge. In any case, IT - when used effectively - these days offers us so many solutions to the bureaucracy that metrics can create.
Measurement in this case is about looking at what, on the one hand, you have and what, on the other, you want. Your job is to help your firm find the way there and - crucially - to chart and measure progress as you do.
This needs to be considered at three separate but ultimately inherently interconnected levels.
First, at a firm-wide level, helping to create strategy. All serious HR directors need to be involved in the creation of their firm’s overall strategic ambition, sitting alongside other senior management and bringing people strategy to the top table. But it can’t stop there. Too many firms have strategies in place but then fail to communicate them meaningfully to their employees. This was very much the approach of many firms in the 1990s who developed grandiose strategies without any clear idea as to how they were going to execute or deliver on them.
So the second step is to drill down beyond the macro strategy and into operational management. This requires assessing and analysing your HR systems and procedures and testing their efficacy and relevancy against firm-wide strategy. When appropriate systems and procedures are in place, you will have created an effective ‘road-map’ pointing out the ways in which overall strategic ambition is to be realised.
But again, you cannot measure yourself on operational management alone. Beyond this, the role of HR must then be to influence individuals: getting the best out of them by aligning their performance and their behaviours with, in the first instance, the operational road map and, ultimately, with the firm’s overall strategic ambition. It is pointless simply telling employees what each of these is unless they also understand how they are relevant. So overall strategic ambition, and then operational management, need to be individuated: made germane to each individual in your organisation. Certainly this involves more up-front work, but the dividends it pays in better productivity, retention, morale and overall engagement in firm direction make that initial time investment more than worthwhile.
This all forms part of a transaction with your staff - you help them to develop in the ways that they want to, they buy-into and consequently help you achieve your strategic ambition. In the law, we are all helped by the fact that, with few exceptions, we tend to deal with intelligent people who want to feel a sense of ‘belonging’, a sense that they are contributing toward a broader aim. Take advantage of this.
Of course, to understand exactly what your people want and need requires asking them. The method and content of such a process will work in different ways for different firms. What is certain is that you need to drill deep, well beyond benchmarking statistics and soundbites and get to the very heart of the psychological contract within your particular firm. When we undertake human capital audits for clients, they are often surprised that just working with us in articulating the appropriate audit questions gives them an insight into HR performance metrics which they never knew they had.
But getting these metrics right is not easy. It requires a lot of work at a whole host of different levels. We often find that, at the very least, it requires an overhauling of appraisal systems, tying in individual development objectives to the broader HR and strategic architecture. One easy way of helping to bring this about is by enabling everyone to see the individual development objectives of the person into whom they report. This might sound odd, particularly in the context of law firms, where the twin cultures of secrecy and ego all too often reign supreme, but how else might anyone understand what is motivating and driving their superiors? If such a cultural shift can be enabled within your firm, your employees are much more likely to work in sympathy with those motivators and drivers. This in turn should help their behaviour reflect broader firm-wide objectives and ambitions. This is how change and progress are brought about - the ‘road map’ referred to above.
Measuring HR’s performance is good for your firm, it is good for your people and therefore it is good for you. Accurate measurement of your impact is how you demonstrate that HR is much more than a mere ‘cost centre’: an ambition which we all share.
Nick Jefferson is a director with law firm people strategy experts, Couraud Consulting.
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