Today's human resources (HR) professionals do great work in running the daily life of a business, ensuring that company and employee transactions tick along like clockwork.

But soon that won't be enough. Routine transactional tasks such as payroll, benefits, and generic training are being outsourced, done by technology and cheaper labour, often overseas, says HR consultant Norm Smallwood.

Earlier this month, Smallwood made presentations in Vancouver, Calgary and Toronto, explaining how HR professionals can reposition themselves to their benefit and to their businesses.

And Smallwood says the results from a University of Michigan HR competency study show that businesses, too, should adjust their thinking.

Norm Smallwood

Empirical evidence demonstrates that high'-performing companies that shift HR's role from short-term transactional work to more long-term strategic tasks "unequivocally" benefit business, Smallwood says.

Born in Canada, Smallwood is co-founder of RBL (Results-Based Leadership) Inc., an international firm of management educators and HR consultants based in Provo, Utah. He also sits on the faculty at the Executive Education Center at the University of Michigan business school, which conducts the competency study every four years.

The study is the largest of its kind worldwide, and surgical in its approach. What is unique, it asks, about the contribution made by HR professionals who add "business value" to high'-performing companies?

Data from 2002 clearly shows that top-performing companies try to eliminate transactional work and include human resources at the table, he says. The HR professional's role is to develop the company's core capabilities: Traits such as the talent and competencies of employees; speed and agility to respond to challenges; the culture to collaborate; and skill to generate new ideas that have impact.

Smallwood says that although researchers expect that HR is the next outsourcing phenomenon to follow the IT sector, many professionals still don't get it. HR departments tend to resist outsourcing, he says, because it's what they know, and what they do best.

"Instead, they try and work harder to perfect what they do," rather than finding ways to improve value to customers, investors and employees.

But resistance is futile. If HR doesn't adapt, somebody else will outsource the work for them and soon they'll be out of the picture, he says.

During his presentations, and in an interview, Smallwood offered several examples of companies that recognize HR's potential as a strategic partner in the boardroom.

One case study involved one of Smallwood's colleagues, who took over leadership development at Citibank in Cleveland but then added a twist to leadership training.

Each time a leader goes through training, he or she is assigned an "action-learning project" that must have an impact (a cost reduction, revenue increase, etc.) based on the skills and framework taught in the course.

Leaders are measured on whether or not they achieve those goals.

But when National Citibank went through cutbacks two years ago, leadership training was on the cost-cutting table.

"What my colleague was able to say was that every time the course was run, they (Citibank) were getting $10 million in value," Smallwood says.

"It had been measured in a way that was extremely credible. So they decided to invest more in the leadership program at a time when they were reducing other things."

While outsourcing will close the door on transactional work, savvy HR professionals and company leaders see another door swinging open, Smallwood says.

The new opportunity hinges on a shift in factors that drive business value. Forty years ago, Smallwood explains, a company's share price was almost 100 per cent determined by its earnings.

But as of 2005, on average, the earnings of a publicly traded S&P company accounted for 50 per cent of market value, he notes.

While the 50-per-cent figure doesn't reflect all industries, the research shows investors aren't just looking at financial results anymore.

They are also looking at future earnings potential and company intangibles (employee talent, company brand, research and development, etc.) that help create investor confidence.

Leaders increase their market value, Smallwood says, by building on four intangibles: Keeping promises; setting clear strategies; aligning technical capabilities (i.e., investing in areas that are clearly consistent with the strategy); and enabling their organization's capabilities (talent, leadership, accountability) to flourish.

The latter category is where HR can make a major difference, he says. It's the intangible that consultants, academics, management gurus all say paves the way for sustainable growth by fostering strong leadership, talent, commitment and other desirable characteristics.

Leading companies that have identified HR's new role ensure that leadership, managers and HR professionals collaborate on an organization's needs and then follow through to meet them.

In companies that don't see the big picture, Smallwood suggests that the HR professional take the initiative, even if it's something small.

"Identify a problem and partner with somebody, preferably a line manager in the organization, and get something done," he says. "Find a way to create some value."

Otherwise, one day, that job may simply vanish overseas.

MAKING A STRATEGIC CONTRIBUTION
Here are a few suggestions RBL makes to HR professionals:
* Identify new ways your managers and employees need to behave in the future if they are to achieve their goals and
outperform their business competitors.
* Develop and implement guidelines that will help meetings reach decisions more quickly, with greater commitment, better follow-through, and consistently measure results.
* Prior to facilitating a decision-making process, develop your own recommendations for each issue likely to be raised.
* Develop an internal communication plan that disseminates
customer and shareholder information in a high-impact manner.
* Visit external customers to get direct feedback about company performance.
* Build a more effective culture by sharing information,
experience and knowledge across organizational boundaries.
Web Watch:
www.rbl.net

(Mike Dempster can be reached at miked@businessedge.ca)