Note:  This essay was originally written as a response to a newsletter item written by Kevin Herring of Ascent Management Consulting.  Click here to view Kevins' article, and here to visit his website.

Personality Traits and Values

Although I have an MBA and know a lot about business, I also know a lot about individual psychology.  Maybe that is why I explain the Human Resources strategic positioning debate in terms of values and personality traits.  It is not stereotypical to say that administrators generally have very different traits and values than heroes. 

People who value structure, predictability, and stability tend to become administrators.  These people are very happy in tightly controlled environments where process and procedure determine action.  They have respect for authority and are very good at applying laws, rules, and regulations to known situations.  However, people with these traits and values often become lost and anxious when they find themselves in situations that have no predetermined course of action and no authorities to make decisions and create structure and a framework for action.  These people are quite at home in a bureaucracy – if rules and procedures didn’t exist they would create them -- but would be lost in a software start up in which survival hinges on reacting to the constant whirling changes of the cutting edge high tech business environment.

Heroes, on the other hand, love that kind of thing.  They are energized just thinking about new unknown challenges that await them every morning.  They like the idea of prevailing in an unpredictable business environment that has a minimum of rules -- rules that tend to smother their creativity.  These are serial entrepreneurs, turn around artists and hedge fund arbitrageurs whose success with high risk projects is completely dependant on their ability to solve novel challenges quickly.

Heroes and administrators are not interchangeable.  Jack Welch might think that simply making a pronouncement for administrators to be more like business people will solve the problem, but he doesn’t understand that heroes and administrators are both business people, but at opposite ends of a genetically determined personality spectrum.  Heroes look to administrators to take care of the necessary but incomprehensible regulatory busywork of modern business, while administrators think of heroes as wild-eyed cowboys who somehow create revenue out of chaos. 

Future Trends

The thing that interests me about all this is not so much what is happening right now, but rather where what is happening right now will take us in the future.  For example, more and more people are earning business degrees, not because they are driven to be an “Organization Man” working in a huge multinational conglomerate, but because they want to start their own business, or be part of an emergent industry.

At the same time, emerging businesses are more likely to identify and maintain their competitive competencies to a far larger degree than in the past.  They “stick to the knitting,” to use Tom Petersons 20 year old description, because very narrow niches and vertical segmentation seem to be key survival tactics in our hyper-competitive business environment.

But this means something else as well, and I think it explains why we are seeing the outsourcing of departments like HR, and the transition of the Purchasing Department to the profession of Supply Chain Management.  Individuals are discovering that they must go to professions that match their traits and characteristics because natural competence in a particular field is a much better predictor of career success than complaint acquiescence.  This trend is creating more efficient business services, but at he cost of more sophistication and complexity.  This should not be a surprise.  People who have a passion for accounting, for example, will tend to create newer and better methods of accounting, but these methods will be harder for non-accountants to understand, even though everything is GAAP certified.

As business services become more “professionalized,” they also become more distant from the core competencies of the businesses they serve.  The CTO has a passion for technology, and tends to hire people with the same passion.  That’s a great thing for the IT department, but what happens when that passion obscures the intricacies of whatever sort of widget making comprises the core competency of its larger company.  This isn’t a problem when the business services are outsourced; in fact it’s that level of passion that makes a successful B2B vendor. 

These are some of the reasons we are seeing more HR functions outsourced to franchises and independent businesses – in-house HR has become so complex that the mission of the larger organization becomes irrelevant to it’s functional operations.  It might as well spin itself off into an independent business because that is essentially what it eventually becomes even when it is part of a larger organization.

Positioning for the Future

But HR isn’t the only business service going down this path.  The same thing has been quietly happening to finance and accounting for some years, and purchasing, (that is, Supply Chain Management), is well on it’s way as well.  Let’s not forget Marketing and IT services.  Even here in Tucson business start-ups are becoming more and more B2B oriented and specialized.

This is why I’m not so sure that this ongoing discussion about the strategic business value of HR will be relevant for much longer.  In another 10 or 15 years – a very short time in terms of business and social trends – I think we might see the business landscape dominated not by large corporations, but by specialized micro-businesses.

It’s already happening in Massachusetts where about one third of businesses either are sole proprietorships or employ less than four people.  (Check it out here.)

Very soon it may be normal for departments not directly related to core competencies or competitive advantage to be outsourced to specialty B2B service providers for less cost and more value than if they remain in the core business.  If that is correct, or even might be correct, we need to start thinking about where we want to be positioned when that time arrives.

So, what do you think?