During the 1980s and 1990s, the acclaimed Chief Executive Officer (CEO) of General Electric remarked that Human Resources (HR) should have as high a profile as Finance within an organization. He used the analogy of a sporting organization having player management and recruitment of the right talent as its most valued functions. People are an essential component for any company or sports team to succeed.
Morunda KK recently surveyed Japan’s pharmaceutical industry to find out how HR is perceived. The survey was divided into two groups: those that work in HR and those in other functions (Commercial, Development and Finance). Historically, Japan is a very sales-orientated market (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. Only 5% of responders ranked HR in the top two choices. The HR community ranked their functions equally as important as Sales, Marketing and Clinical Development with the top choices being selected by around 47% of responders. The Finance function only received 7% of the first two choices.
Based on these statistics, why is HR seen as a lesser function? We asked our group of non-HR employees for their perspective. Overwhelmingly, it was viewed as an administrative function, with over 80% of responders indicating that its primary function was to process information, as opposed to determine strategy.
It appears that HR in Japan’s pharmaceutical industry has not been able to define, or at least communicate, its value proposition. According to Wikipedia, a value proposition is a promise of value to be delivered and a belief from the customer that value will be experienced. A value proposition can apply to an entire organization (or parts thereof), customer accounts, 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 is also a positioning of value, where Value = Benefits – Cost (cost includes economic risk).
When assessing the value that an HR department brings to an organization, the long-term impact on an organization can be seen as substantial. The right talent can ensure smooth new drug applications or successful product launches. The right strategy can retain the company’s top talent and be able to plan for succession, impacting sales and reducing cost.
At least one Pharma company we observed has acknowledged the strong value proposition of HR by financially rewarding its Recruiting Director equal to Sales and Marketing Directors, and providing an incentive trip that was previously only available to its top sales people. It was recognized that this Director saved the company money by shortening the time to fill positions, impacting the frontline by recruiting the right candidates, and reducing the percentage of rejected offers by twenty percent 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 H.R., and it’s the last discipline that gets funded. Marketing, manufacturing — all these things are important. But more often than not, the head of H.R. 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 mindset 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 in relation to the success of the company can help counter some misconceived perceptions.