In order to be personally effective and have business impact, HR managers must master six key competencies, according to a new book based on 25 years' worth of global research into the HR profession.
In HR from the Outside-In, authors Dave Ulrich, Mike Ulrich, Jon Younger and Wayne Brockbank describe the competencies required for HR professionals to be "full contributors" in their organisations.
One of the most important competencies an HR manager should master relates to knowing the business and contributing to strategic decisions.
The authors say that HR professionals who can't: read and interpret financial statements; contribute to strategy; recognise and serve external stakeholders; and anticipate and react to business trends, will be unable to offer a "full contribution" to business discussions.
"Without business knowledge, HR professionals cannot fully engage in business-related conversations," the authors say.
"It is not enough to just learn finance or strategy" - the HR professional must be a "strategic positioner".
The authors define Strategic Positioning as: "The ability to position your organisation to anticipate and match external implications", and say it requires flexibility and adaptation.
"Positioning is more than merely transforming your organisation; it is about transforming it to fit with and shape future opportunities as defined by your selected markets," they say.
This means placing the business in a position to maximise the effectiveness of its products, services and reputation, and includes recognising, anticipating, and taking advantage of emerging trends.
To act as a strategic positioner HR must:
know and react to external business trends and context;
understand and co-create with external stakeholders (such as customers, investors);
recognise and deliver strategy and sources of competitive advantage; and
master the language and flow of business (for example, finance).
"It is difficult to position an organisation for the future without fully understanding how the organisation operates," the authors note.
"Since finance is the universal language of business, any discussions of business literacy must be grounded in finance.
"HR professionals should be able to interpret an income statement, balance sheet, and financial analyst's report on their organisation. They should know how their company creates wealth and how to track wealth creation."
By acting as a strategic positioner and reacting to external trends, HR professionals will contribute to their organisations by not only being involved in key conversations, but by "proactively positioning their organisation to win in the future", the authors say.
Are you business-literate?
The book also contains a "business literacy test" for HR professionals.
Questions that high-ranking professionals should be able to answer include:
Who is our largest competitor and why do people buy from it?
Who is our largest customer and why does it buy from us?
What is our stock price and what is our profit-to-earnings ratio?
Who sits on the board of directors?
What is our market share and is it growing or shrinking?
What are the emerging technology trends facing our industry?
What are the top two or three priorities for our business leaders this year?
What social and political trends might be disruptive to our industry?
In addition to knowing the business and acting as a strategic positioner, the authors say an HR manager must be: