Why do so many companies under-value HR?

Firstly, I should say I am not an HR professional. I do not offer HR services, and have no agenda for writing an article promoting HR. I am a business coach, working with high growth Scale Up companies, helping them to grow their businesses.

It surprises me. When I start working with a company, and ask – ‘who runs HR?’ the answers always feel like it’s secondary consideration to the CEO. If there is anyone specifically responsible for the HR function, it is generally someone quite junior. Of all the dozens of companies I have worked with, I cannot think of a single one where there is one person in the top leadership team exclusively responsible for the HR function.

We are a relatively small business, fewer than 10 people in the team (and many of those are subcontractors or part-time), but we have an HR Manager. She only runs HR and Admin, and reports to me as the head of the company. 

When we were recruiting our HR manager, some of my team members asked me ‘Why are we spending money on an HR manager, when we are so small?’ At that time, we had 8 people in the team, of whom, 2 were under-performing. I replied – ‘In what other part of the business would we accept a problem rate of 25%?’ It’s as if you had a factory full of machines, but did not have an engineer to source, assess, and maintain those machines. No one would do that. Yet many small business have no HR function to speak of.

Many years ago, I was at an event and Howard Shultz, the CEO of Starbucks was presenting. He shared that the first person he hired in the business was an HR manager, even before he hired store staff. The reason behind it? “It’s all about the people.” He described that the success of the business fundamentally depended upon the quality of the people in it, and therefore he committed to himself that this would be the primary thing he would focus on, from the start.

Maybe it’s because I am not naturally a great ‘people person’. I’m not good at assessing, or ‘getting a sense’ of people, and lack the interest and patience to really work on relationships and development of people. But I recognise its great importance, and am willing to invest to get it right.

So why don’t more CEO’s opt for a senior HR person sooner? Well, I have asked, and the 2 most common types of answer I hear are: ‘We couldn’t get anyone we need for a reasonable amount of money’ i.e. cost / it’s not worth the money; and ‘We have an HR manager, they work in so-and-so’s team!’ i.e. HR is a functional department, responsible for procedures such as managing payroll and running recruitment.

I think that many business leaders are not clear on what a strong HR manager can do for them, what their true role is. Jim Collins has a famous saying that running a company is all about ‘getting the right people on the bus’. In his famous book ‘Scaling Up’, Verne 

Harnish shares that the #1 ‘KPI’ for the CEO of the business is making sure that each ‘seat’ on the bus is filled with the right person, and that they’re all clear on how their performance is measured.

So, if the key role of the CEO is all about making sure you have the right people deployed in the right way, why wouldn’t you give yourself the best chance of doing that right, and hire a professional to help?

Many of the CEO’s I work with, I see them struggling with issues related to people. Questions and concerns such as:

-       ‘Is this the right person for the job?’

-       ‘If only I had someone who could do xxx for me..’

-       ‘Should I keep this person, or move them on?’

The fact is that, as CEO / entrepreneurs, we don’t have to answer these questions alone! Every time I face a question such as this, I sit down with my HR manager. I share my thoughts, we talk it though, she shares her view. She collects data and information, such as staff surveys and assessments of team members. She goes to the market, to understand what talent is available, and helps to craft roles in the business based on that. And that’s for a team with fewer than 10 people. How could you run a company with dozens or hundreds of staff, without such a person by your side?

I need to have a renewed focus with the CEO’s I work with, and really encourage them to invest in this key function. I should set the objective for each of them that there is one person in the senior leadership who is solely responsible for this function. I think they’ll thank me for it.