The acclaimed CEO of General Electric during the 1980s and 1990s remarked that human resources (HR) should have as high a profile as finance within an organization. He used the analogy of a sporting organization in which one of its most valued HR functions is player management and recruiting the right talent. If any company or sports team is to succeed, its people make up an important factor.
Morunda recently surveyed Japan’s pharmaceutical industry and asked how they perceive HR. We divided our survey into two groups: those who work in HR and those in other functions (commercial and development, and finance). Historically, Japan is a very sales-orientated market (as opposed to other markets that are more marketing focused), so it was not surprising to find that over 75% of responders gave sales a ranking of one or two out of five. HR received only 5% of the top choices as being of top importance.
The HR community ranked their functions as equally important as sales, marketing, and clinical development with around 47% of the top choices. The finance function only received 7% of the first two choices.
Why is HR seen as a lesser function? We asked our group of non-HR employees for their perceptions. Overwhelmingly, HR is seen as administrative; over 80% indicated that its primary function was to process information as opposed to determine strategy.
It appears that HR in Japan’s pharmaceutical industry hasn’t been able to define or at least communicate its value proposition. A value proposition is a promise of value to be delivered and a belief from the customer that the value will be experienced. A value proposition can apply to an entire organization or parts thereof, to customer accounts, or to products or services. A value proposition is based on a review and analysis of the benefits, costs, and value that an organization can deliver to its customers, prospective customers, and other constituent groups within and outside the organization. It’s also a positioning of value, where Value = Benefits – Cost (cost includes economic risk).
When evaluating the value that HR brings to an organization then, the long-term impact on an organization can be substantial. The right talent can ensure and smooth new drug applications or successful product launches. The right strategy can retain the company’s stars and plan for succession, impacting sales and reducing cost.
At least one pharma company we have observed has acknowledged the strong value proposition of HR by rewarding its recruiting director financially on an equal basis with its sales and marketing directors, including an incentive trip that was previously only available to its top salespeople. The company recognized that this director saved money by shortening the time to fill for recruiting positions and impacting the top line by recruiting the right candidates. In addition, the rejected offers were 20% less than the competition. In this case, the HR director has been able to source and land top talent for the company; these people have in turn been instrumental in growing sales and securing new drug applications.
Howard Schultz, chairman, president and CEO of Starbucks, explains:
The discipline I believe so strongly in is HR, and it’s the last discipline that gets funded. Marketing, manufacturing—all these things are important. But more often than not, the head of HR does not have a seat at the table. Big mistake. You are imprinting decisions, values and memories onto an organization. In a sense, you’re building a house, and you can’t add stories onto a house until you have built the kind of foundation that will support them.
Changing the mind-set of employees to acknowledge the important role HR plays requires the right message through internal communication and recognition. Communicating success stories and quantifying the performance of HR to the success of the company can help counter some misconceived perceptions.