Memo to CFOs: Don't Trust HR

26 March 2009:

Addressing a crowd of about 300 financial executives this morning, a professor of human resources soundly denounced the corporate HR profession for being mostly unable to provide analytics that are useful in making workforce decisions that build economic value.

Most companies today spend too little effort on attracting and retaining top strategic talent and too much on satisfying the rest of the employee base, asserted Rutgers University's Richard Beatty, who spoke at a general session during the CFO Rising conference in Orlando. In fact, he claimed that typical human resources activities have no relevance to an organization's success. "HR people try to perpetuate the idea that job satisfaction is critical," Beatty said. "But there is no evidence that engaging employees impacts financial returns."

Beatty based this conclusion on employee surveys done at IBM and other companies that found little relationship between job satisfaction and performance ratings. Not only is employee engagement very expensive, but "how do you know you're not satisfying a lot of people you really wish weren't there?"

To buttress his argument, Beatty presented data from a Gallup survey on the performance of about 4,500 customer service employees at an unnamed major financial firm. The survey results, which were based on customer feedback, showed that the employees who scored in the top quartile had a positive effect on 61 percent of the people they talked to. The next two quartiles registered 40 percent and 27 percent positive responses, respectively, but there were enough neutral responses that the employees' net performance was positive. The lowest quartile, however, scored a net 2 percent negative impact.