There is an argument – sometimes called the ‘law of requisite variety’ – that if the technological changes going on outside organisations are relatively complex, then the internal environments of those organisations need to be equally complex to keep up, matching and engaging the outside with the proper degree of internal sophistication.
In short, external technological change invites corresponding internal organisational change.
Another way of thinking about this is through the concept of ‘absorptive capacity’ – the idea that an organisation is evolving well enough strategically to be able to absorb new knowledge from its external environment, assimilating and applying it internally to create further value.
In strategy terms, this seeking and building of internal and external competencies in the face of change describes an organisation that has ‘dynamic capabilities’.
What HR must do to make the most of people analytics
If HR is to be capable of engaging technological trends like big data analytics, cloud computing, and gamification, therefore, it needs to reach out and embrace variety, while also changing its internal structure to become more diverse and internally differentiated.
This is a question of boundaries, of insides and outsides, of the capacity to absorb change and dynamically shift capabilities to match it.
Indeed, HR as a function has done its fair share of soul-searching, but perhaps at times it has been too inward looking (think Ulrich’s roles), upward looking (think business partner/seat at the board) or too narrow looking (think engagement, business case).
Dave Ulrich has highlighted this more recently, by arguing that HR needs to move beyond ‘inside-outside’ or ‘inside-only’ approaches that simply support existing business performance, towards more ‘outside-inside’ approaches to HR strategy. ‘Outside-inside’ approaches start by engaging the external environment of the organisation and its stakeholders’ expectations.
In my opinion, what we hear much less about is the content of these cross-functional designs of working together.
The ‘outside-inside’ approach is bold and ambitious, and it is hard to argue with the idea that primarily, HR needs to be more in touch with stakeholders and the full scope of an external business environment.
However, I would argue that Ulrich’s account largely misses out an intermediate ‘outside-inside’ step – concerning how HR reaches out to other functions across the organization.
Cross-functional organising: form and content
Cross-functional links across an organisation are hardly a new idea, but remain fundamental to organisation design – whether we are talking about the pros and cons of arranging the workforce into a ‘matrix organisation’, or the use of diverse cross-functional teams and task forces to develop products, innovate and solve problems.
The same idea is also often implicit in popular models of effective, adaptive organisation, such as ‘ambidextrous organisation’ or ‘learning organisation’.
What these concepts and discussions seem to celebrate is the cross-functional form – the general idea that bringing people together from different parts of the organisation is important so the pieces can understand more of the whole.
In my opinion, what we hear much less about is the content of these cross-functional designs of working together – exactly which functions do what, and how they will come together to work on something of substance.
The content is just as important as the form of a cross-functional partnership, if not more so, as it indicates exactly what the two or more functions will be working on, not just how they will work.
This requires imagination and opportunism in coming up with important topics, platforms and change agendas that get people out of their functional silos, rendering them ready and willing to reorganise themselves as a new cross-functional coalition.
This is still a tension or paradox for organisations – the much discussed ‘silo working’ where departmental functions work rigidly to their own goals in relative isolation.
It has also been recast more recently as ‘functional stupidity’ that allows organisations and employees to achieve harmony and smooth performance in the short-term, but becomes harmful in the longer-term due to a lack of questioning, challenge and nuanced understanding.
Big data: the need for HR to think cross-functionally?
To think as a ‘functionalist’ is useful for breaking things down into ordered pieces with specific purposes, provided those purposes are stable. However, functionalist thinking is more limited when it comes to addressing change, conflict, freedom and flexibility.
One proposition here then is that if HR is to engage big data and technological trends most effectively, it might benefit from thinking and acting more like a ‘cross-functionalist’, as opposed to merely a functionalist.
In organisations, many types of function are possible, but four of the most enduring ones that HR might work with cross-functionally are IT, finance and accounting, marketing and operations.
HR and IT
HR and IT are two functions that might be able to make obvious gains in the area of big data analytics if they can manage to work together cross-functionally in spite of, or because of, their differences.
On their own, they are functions that can be quite vulnerable to outsourcing, automation, and competition from consultancy.
Both have been and continue to be subject to quite negative stigma and stereotypes at times, in terms of their status, integrity and strategic contributions to organisations.
As a function IT is perhaps starting to be eclipsed by the nerd chic of Silicon Valley and the glitz of new roles like ‘data scientist’, although arguably these developments have yet to take hold in many organisations overall.
It might be tempting to keep HR and IT separate – after all, technology and people can seem very different domains from some perspectives.
Yet as trends like virtual working, social media, apps and gamification have spread, technology and people issues have become harder and harder to keep apart.
If organisations are to keep pace, they should pool their IT and HR functions to reflect on and engage with these developments.
Without the personal AND the technical, the employees AND the devices, the software, hardware AND the ‘wetware’ – any big data strategy seems unlikely to be truly effective.
HR and Finance/Accounting
HR and finance (or accounting) have perhaps had a troubled cross-functional relationship since the Global Financial Crisis of 2008.
Some HR commentators have even argued that HR often seems ‘in the pocket of’ financial interests, ‘disconnected’ from employee interests and labour markets as a result.
As businesses grow, their finance and HR functions may grow apart, as well as the finance and accounting function increasing its power over the HR function.
Like all complex relationships, HR and finance have history. One key part of this history, sometimes forgotten or talked about using different language today, is Human Resource Accounting (HRA).
HRA research dates back to the 1970s and dedicated itself as a field to bridging HR and accounting, by extending accounting principles to cover investments in human resources.
In short, to put HR’s money where its mouth is – valuing employees on the balance sheet as a company asset.
Some HR commentators have even argued that HR often seems ‘in the pocket of’ financial interests, ‘disconnected’ from employee interests and labour markets as a result.
Today the topic survives, but more often going by the name of ‘human capital’ or ‘human capital valuation’.
However, the cross-functional issue remains – the accounting regulations in many countries prohibit firms from valuing their employees as a financial asset on their balance sheets.
Progress has stalled because of conservative accounting definitions of an ‘asset’ – its value should be subject to reliable measurement over time and under the control of the firm. Unlike money or equipment, however, employees can walk out the door any time.
Various movements and initiatives to change this situation continue to appear, but there needs to be more momentum if we are to see significant political and regulatory change.
Professional HR associations like the CIPD are working cross-functionally with accounting bodies like the CIMA on projects like ‘Valuing Your Talent’ to remedy the issue, but what is also necessary is forming more cross-functional ‘human capital reporting’ groups within organisations.
Big data provides an opportunity for forming these HR-finance-accounting coalitions because it revitalises discussions of human capital metrics and analytics around the now even greater available data and software that can demonstrate the investment value of employees.
HR and Marketing
Perhaps the most obvious cross-functional association or link between HR and marketing lies in terms of ‘employer branding’.
Employer branding takes marketing wisdom about how to appeal to consumers and applies it across to how to appeal to employees, to attract and retain them. In many cases, employees ARE customers, helping both produce and consume their organisations’ products and services.
Furthermore, their families, friends and communities might be potential customers and employees too, through loyalty programs, referrals and other promotional mechanisms.
In the UK, the Recruitment Marketing Awards show off the best of HR and marketing collaborations, and the 2016 winners reflect an array of vivid creative experiences, publicity stunts, and highly resonant ad campaigns.
Typically, cross-functional task forces lead on these projects, and if IT and other groups are included alongside HR and marketing, then the cross-functional collaborations may of course include even more than two functions at a time.
In terms of big data, marketing has a more influential history with analytics and metrics which HR can learn from and draw inspiration from by analogy with its own function’s concerns.
For example, marketing has long justified itself strategically using the long-term, quantitatively rigorous metric of ‘customer lifetime value’ (CLV) – concerned with the segmentation, monetization and retention of different customers in relation to the profitability of a firm.
Although not without its flaws and evolutions as a calculation, swap customer for employee, and why is HR not having more discussions about how to calculate ‘employee career value’ (ECV), or some sort of equivalent?
HR and Operations
Finally, we can reflect on the operations function in relation to HR – a world of supply chains, logistics, risks, errors/defects, inventories, scheduling and distribution.
Perhaps HR finds it impersonal to think about humans as operational units or ‘stocks’, but in terms of getting tasks done, that’s what they are – and although there is much talk of talent ‘pipelines’, there is more scope to actually equate these pipelines to ‘supply chains’ and draw on operations management wisdom that goes with that.
The best example of this I am aware of is Peter Cappelli’s work, which discusses applying supply chain management to talent management.
This enables a more dynamic approach to workforce planning and forecasting by considering how to have the right talent ‘on demand’, and to share/spread risk across employer, employee, and other Labour Market Intermediaries (LMIs – jobs websites, recruiters, professional associations, universities).
Often the implications are huge savings – avoiding over-investing in too many employees, or the wrong types of employee or skill. It also means having a portfolio of employee contracts for different scenarios, recruiting more judiciously to avoid bottlenecks, and sharing development costs with employees in case they leave the organisation, taking that investment with them.
Similarly, Karen Becker and Michelle Smidt have recently argued that HR needs to think more about risk management – namely the risks presented by inappropriate or missing aspects of HR practices.
In sum, global talent management or the ‘talent universe’ is to some extent like a global supply chain of labour, which in turn has many stakeholders and producers and consumers of big data.
HR can therefore work with operations management on the continuous improvement of workforce planning, trying to use big data analytics to optimise the movement of talent through their organisations – not unlike receiving, modifying and shipping components on time to their destinations.
HR Coalitions and Big Data Strategy
In conclusion, we can recognise that big data will change the design of organisations – their competencies, roles, hierarchies etc. Like brains, companies as holistic entities need to learn, reorganise and shift their complexity in response to technological changes such as big data analytics.
I have argued that HR needs to pool its resources with other functions to work on common or analogous problems and build strategic capabilities, taking four other common functions in organisations and considering where this might take place, or already be taking place to an extent.
I am not saying that building cross-functional relationships is easy – it clearly can be very difficult due to a range of barriers concerning the different identities, priorities, histories, demographics and languages of different functions.
That said, there is a lot of writing on related organisational topics that can provide inspiration here – bringing two functions together has similarities with practices like strategic alliance formation, mergers and acquisitions, boundary spanning, change management, and the formation of political coalitions and social movements.
All these share with cross-functional work the difficulty of building some unity and mutual collaboration across difference.
Global talent management or the ‘talent universe’ is to some extent like a global supply chain of labour, which in turn has many stakeholders and producers and consumers of big data.
In several places, I have also shown how the language of operations, finance, marketing, and IT often contains many analogies and metaphorical resemblances to HR and its big data analytic potential.
However, we do need to be willing to change our frame of reference and think differently about employees from other functional perspectives, substituting and reading across what words like ‘asset’, ‘brand’, and ‘risk’ might mean as applied to employees and employment.
If HR practitioners and academics don’t engage more with this line of reasoning, I fear we may see many more articles on people analytics containing phrases like ‘not there yet’, ‘set to fail’, ‘low adoption’ and ‘limited evidence’.
Finally, as a researcher, I am very interested in readers’ experiences of the HR function’s relationship with other functions – if you have any thoughts or experiences relating to this – please comment or get in touch!
