Good Human Resources During Bad Times

If organizations are living things, then the human beings who work there are the cells of the body. If the health of the body (i.e. the culture) is ignored, being focused instead on immediate gratification (quarterly profits) instead of long-term health (vision, culture, etc.), then the cells will not be able to adapt and fight the infection, and the body will die. If, however, long-term health is maintained (i.e. having a culture that can change), then the body will fight the infection and get stronger.

This metaphor coincides with my predictions for this new year:

1. No matter how much money the government throws into failing businesses, the businesses will continue to fail unless they adapt and change. In the meantime, we will all be out of billions of dollars and continue to enshrine management that refuses to change.
2. The organizations that succeed will be the ones where human resources are strategic rather than just functional. In fact, it is my prediction that you will even start to see the death of functional human resources. As organizations look for areas to cut, they are going to decide to make hiring up the managers, firing up to legal and payroll and benefits the job of accounting.
3. There will be more millionaires made during this period than at any other time in history and many businesses in a large number of sectors will spring up and dominate their industry in a few short years.

Why Organizations Succeed

In the book The Living Company (Harvard Press, 2002), Arie De Geus looks at organizations throughout history. He asks, why is it, for example, that out of the 12 companies that founded the Dow Jones Industrial Index in 1876, only one of them (General Electric) is still in existence today? Companies such as Kodak, DuPont and the Bay (not to be confused with e-Bay, which took its name from the Canadian retail giant) have been around for hundreds of years, yet one third of the companies listed as Fortune 500 from 1970 had completely disappeared by 1983—only 13 years later!

What De Geus found was that the companies that survived over the long term had four things in common. The organizations had the ability to:

1. Learn and adapt
2. Build a community and persona for itself
3. Build constructive relationships with other entities both inside and outside itself
4. Govern its own growth and evolution effectively by being fiscally conservative

What De Geus also said is that what was not listed was shareholder dividend and next quarter profit. Although profitability was a symptom of corporate health, it was not a predictor of long-term health of the organization. These organizations, according to De Geus, seem to understand that important profit statements indicate the past and that there was a need to be creative and focus on the future.

Why Human Resources are the Key

Look at the list above. How many of these have to do with the strategic use of people in the "body" of the organization? The answer is the first three. Strategic human resources can serve the role of the doctor, giving the cells the medicine they need to fight the infection. It is our role to tie into the business by helping to build the cells, focus them together to fight the infection and plan for the future. Creativity, change, diversity, engagement, attraction and retention, etc. are all just components to ensure that the living organization can stay healthy, even when times are bad. Helping to build a culture that can adapt and grow means that the organization will last not in terms of years but in terms of centuries.