Human capital

Following several decades of experience starting from the management trainee position to the office of being chief executive officer, it is my considered view, and almost an article of faith, that the two most important departments, that have to work closest with the numero uno position, in any type of organisation, are the human resources division and the finance division. The CFO (chief financial officer) and CHRO (chief human resources officer) must be seen and must also be the right and left hand of the Chief Executive Officer.

Both these positions of CFO and CHRO are most critical for the health and growth of any institution. A managing director or chief executive officer has to on a daily basis be aware of the financial situation of the organisation. This can relate to everyday issues of liquidity management, status of receivables, payables, sales, profitability to future equity requirements, share price, dividends policy, etc. The financials of an organisation are a sum total of the results of the efforts/work done by its people (human resources). It is hence no brainer, that an organisation that has the right quality of human resources will deliver the best financial results and vice versa. Hence it is an established fact that what precedes financial performance of an entity is the professional and otherwise quality of its Human Resources.

The HR factor, as I would like to term it, is the distinctive element between organisations. To cite, it’s criticality, let me illustrate; there are several organisations,say in the specific field of pharmaceuticals; all of them are operating in the given set of similar economic circumstances, with almost same type of challenges; with almost akin products for say, headaches and common flu, yet one shows greater sales/profitability, than the rest; therefore using the economic jargon, of all things remaining the same, the only element, that distinguishes organisations between performance or lack of it, is the level of professionalism of its HR factor. People make an organisation and not just the best products or services; without adequate HR factors, they too, die or decay.

As a matter of practice, during CEOship, I made sure to make myself available firstly, to my colleagues in the HR division, followed by the finance division and others. Sales and Marketing divisions ranked secondary on my chart of strategic thinking and plans. This attitude was evident to all colleagues, who then in their turn took interest in exercising care of the most important asset. The chief executive officer has to and must necessarily take a keen and deep interest in the well being of the organisation’s human resources. In doing so, the CHRO must have the privilege of approaching the CEO, without having to take formal prior appointments; especially when handling issues that call for immediate attention and action. The CEO’s office must never be 'closed' for CHRO and CFO, in particular and generally too, for all other staff members. Closed office usually has a resident, who has invariably, an even more “ securely closed mind ”.

We all have and continue to read in corporate literature, where all companies claim with pride (false though) that “human asset” is the “most valuable asset” … this gibberish and largely lip service. It is only a handful of organisations that live up to such assertions. The worst violators of this noble notion of being “valuable” are the family owned businesses and their companies. They usually design HR policies that have exceptions as a principle (rule); there is to every policy statement, a suffix, that reads, “at the sole discretion of the management”; by virtue of this, they tend to bestow upon the favourites, regardless of performance and withhold benefits from those who are entitled, but they are a sore for the owners, again with no relevance to performance. Such HR policies are doomed to fail the institution, over a period of time; the decline is never an avalanche but the sudden spurting of a simmering volcano.

I learnt from a fellow industry worker that the CEO after and upon seeking the stamp of approval from the board, on an exhaustive, well defined and comprehensive HR policy, called out the CHRO and remarked, while handing over a “copy”, (the original was retained by himself) “make sure that this policy remains confidential” ... What! That exactly was this scribe’s reaction; how and why in the world, and for what reason should board approved HR policies be kept “confidential” from their “most valuable asset”? Readers may now get a whiff of what “closed mind” means, a term I used earlier in this piece.

Many CEO’s behave like narrow minded owners, who despite being employees themselves want to personally “ration” the HR benefits and compensation, according to their whims that lie deeply inside them, based on personal likes and dislikes. Such managers are holier than the pope. A misery for staff, they are.

CHRO’s job is to associate closely with the CEO in the areas of strategic vision for the organisation. CHRO must have skills on using data analytics; be able to use technology platforms for developing human resources systems, covering areas of on-boarding, succession planning, training and development, etc. Sound knowledge of labour laws, coupled with regulatory requirements relating to HR is an absolute essential.

Amongst the many facets of soft skills, the need for being a good communicator must remain a predominant requirement. All the qualities and traits that go towards making a “leader” must be found in the CHRO. Being a people’s person, a heightened sense of empathy, modesty and humility should be a visible factor.

In consultation and with the direction provided by the board of directors, the CHRO must prepare and deliver policies that relate to now and the future of the organisation.

Typically, the CHRO must formulate policies and procedures relating to hiring, on-boarding, learning and development, rotations, compensations (emoluments, perks, privileges, increments, bonuses, etc) growth and succession, medical facilities, travel rules and regulations, succession policies, etc.

CHRO’s assignment includes inter alia, the design, institution and application of the structures of corporate culture; maintenance of employees relations; well designed policies relating to harassment at work place, terms of reference of disciplinary action committee; document and institute performance management systems; judicious use of bell curve while rating employees performance; ensure strict adherence to diversity standards relating to gender, linguistics, abilities, racial and social status and above all, follow an open door policy with colleagues.

The new terminology of chief people’s officer (CPO) is a mere change in the nomenclature of the same assignment, except that in United Kingdom and The Continent, the term is used more in the context of hunting for talent and designing ways and means to ensure long term retention of such talent. CPO, other than that, has neither enhanced nor reduced the role of what CHRO does; the responsibilities are essentially the same. The only aspect that possibly would appeal to staff, generally, is that, being people’s officer, indicates that the assigned individual is there to protect the rights, duties and obligations of all staff members. The CPO’s role is normally designed for retaining talent.

The CEO and CHRO must keep in focus while handling the most valuable asset that human nature is generally uniform, but it’s location and circumstance alters it. “By nature, men are nearly alike; by practice, they get to be wide apart”.

Those of the senior management who tend to take HR factor with lavish non-seriousness learn the hard way, the consequences of such an attitude. If the organisation in its own long term interest feels that HR factor is the distinguishing and distinctive factor, then is it best that they give necessary importance to the human resources division, by looking at it as part of strategic planning and not merely as a personnel division, which is meant for housekeeping only staff issues.

The writer is a senior banker and a freelance columnist