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Human Resources: Point of Contention or Opportunity in a New Environment

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People management, an essential function for companies, is now done in a VUCA environment. While there is no magical formula for improving the HR department, keeping an open mind and understanding how technology has transformed labor relations are two good starting points.

The latest global financial crisis began over a decade ago and has had direct consequences on labor relations, leading to what we know today as VUCA environments (characterized by Volatility, Uncertainty, Complexity and Ambiguity). Organizations are operating in situations where flexibility has replaced long-term planning as an organizational core competency and new social values are proliferating, which in turn presents new challenges for human resources departments.

Today, it is difficult to apply the traditional labor relations principles due to this transformation of values—particularly championed by the millennial generation—and the technological revolution. Employee value propositions can no longer be based on long-term experiences and vertical promotions. Young people, who tend to prefer immediacy, are looking for projects, new corporate values and labor experiences where they can learn and grow professionally. Clearly, this new reality is transforming the recruitment process and other elements of human resource management, specifically the often-contentious process of performance management and recent approach of people analytics.

Young people are, to some extent, lovers of immediacy and desire projects, corporate values or freedom of movement rather than staying in the same job for decades.

Performance management systems

The VUCA era is also changing performance management systems. We can no longer establish objectives with the same precision and stability as before, since they would not accurately reflect the realities of working in a company. Meanwhile, managers play a key role in this area: employees are increasingly demanding feedback on their daily work, which should primarily come from their direct managers. Thus, one of the main principles of performance management requires separating this process from the human resources department, which collects information for analytics and internal market decisions, but also makes the manager responsible for all the planning and organizational tasks involved with performance reporting.

Another major area of change is related to the frequency of this type of communication. Setbacks or unforeseen events can occur due to the volatility of the business environment: these must be addressed head-on. Thus, if expected performance is frequently adjusted, the employee feels more comfortable accepting the subsequent changes to their objectives. Here, we find extreme cases such as Deloitte, whose system includes a weekly performance conversation with each employee. But many organizations simply cannot afford to do this. It is important to strike a balance when it comes to the frequency of this type of communication; in fact, there is evidence that the traditional and formal annual meetings can be counterproductive for relations between managers and their teams rather than improving performance.

Annually established objectives lose credibility and give the impression of internal inflexibility. Try to be more dynamic and anticipate the flexibility necessary to adapt to a VUCA environment.

 Living with data analysts

With the big-data boom in full swing, companies have decided to add the data analyst role to their departments. In the case of human resources, incorporating the data available for various projects could be useful if they are used to improve decision making and review results from a perspective that goes beyond the experience and intuition of an expert in people management.

The fact remains that consolidating the practice of people analytics involves myriad challenges, most notably the need to collect all available data by looking beyond the specific project itself, i.e. opening and accessing other areas of the company. Having a data analyst (a position that can be easily subcontracted at specific points in the process) is certainly necessary but not enough. Human resources professionals must also develop skills for creating a strategic vision on how data can contribute to their practices, and also prepare relevant questions on which to base their analysis. This practice is still in its infancy, but it will undoubtedly be an important pillar for human resources in the future, bringing people management closer to the fundamental business parameters.

The new social, labor and technological realities open a host of opportunities to drive human resources departments to evolve and make those tasked with managing the valuable asset of human capital all the more relevant.

 

Cristina Simón, Professor of People Management at IE Business School.

© IE Insights.

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