Quick Takes: HR’s Individualized Future?

Quick Takes: HR’s Individualized Future?

In a post at HRE Online debriefing from a meeting with IBM’s head of HR Diane Gherson last month, Peter Cappelli thinks through the implications of what IBM is doing to shift its HR practices toward a more personalized model that focuses on the experience of individual employees:

What does individualized mean in IBM’s context? It means setting up programs to forecast the flight risk of employees and respond especially to needed changes in wages in advance. It also means getting better at hiring by looking at what predicts good hires with their own data to weed out candidates before the expensive interview process begins. As with other companies now, IBM dumped the traditional performance-appraisal process and moved to a much simpler check-in approach that is driven by a phone-based app. The list goes on. …

One interpretation of this phenomenon is that companies are now going in quite different directions with respect to business models. Among big, global companies such as IBM, cost minimization is giving way to innovation; in others, CFO-driven cost minimization is still the guiding model. If this interpretation is correct, we will see one group of companies with increasingly sophisticated HR practices that innovate and borrow the latest discoveries from academic research, and a second that focuses on executing traditional practices cheaper. In terms of wellness, for instance, one set of companies will use biometric data to recommend a tailored diet and exercise program for employees, and the other will tell everyone to eat their carrots.

There is already an ocean of differences between what these two types of groups are doing. One implication, which may already be here, is that it becomes difficult to talk about “the HR function” anymore, and the notion that HR is a profession — with standard approaches that are common everywhere, rather than an executive function that crafts solutions unique to each company — becomes untenable.

Cappelli raises some very big questions here about the future of HR, and makes some interesting speculations. Here, two of our experts share their reactions to the distinction he’s positing between progressive and traditional HR practices:

Adam Brinegar
Research Leader at CEB

I agree with Cappelli that there is a large gap today between progressive and unprogressive organizations in HR (and it may be growing). I also agree with parts of his hypothesis: specifically that there may be a business model difference explaining the gap. However, I think the break from taking an equal approach to employees was made a long time ago and is shared by companies across the spectrum of progressive HR practice.

During the “War for Talent” in the late 1990s and into the 2000s, the notion of equality was firmly broken, with organizations putting more emphasis on high-potential talent and allocating scarce development resources to employees from whom they expected the highest return. That only intensified during the economic downturn, when organizations were focused on retaining and engaging their best talent. Most HR organizations (especially in large enterprises) take a differentiated approach now.

But progressive HR organizations are able to muster much greater resources in pursuit of individualization. Why? Two possible reasons:

  1. Business model: More talent-intensive businesses do indeed invest more in HR (though the CFO is always in the background, pushing down costs).
  2. Capability: Analytic and strategic capability is still low in HR and asymmetrically distributed to more talent-intensive businesses that spend more on talent.
Matt Dudek
Research Director at CEB

Cappelli seems to be dividing HR functions like you would organizations. Some companies compete on competitive differentiation and others compete on cost advantage. The same, he appears to be arguing, is true for HR functions.That assertion makes intuitive sense, but isn’t as interesting as his conclusion that the gap between these types of functional management approaches will create two distinct models of HR. I highly doubt they will fully break into two separate groups, however. Rather, I suspect the divergence will look like what we see in marketing, with B2B and B2C. That said, the cost of personalization is coming down, so I suspect personalization will trickle down to the cost-driven segment. But perhaps to Cappelli’s point, this might be in service of cost savings rather than value-added HR services.