Don't leave the implementation up to the HR department.

I wrote this article in for the 16th October 2006 edition of Real Business.  I have spoken a bit about music as my ultimate hobby.  Every now and then I incorporate certain musicians into my stories - it keeps them interesting for me.  There are a few characters in this story that are real people, I've hyperlinked their names to sites that tell you more about them. 

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Black economic empowerment (BEE) is not purely the responsibility of human resources (HR), says Faritec deputy CEO Hasmukh Gajjar, recognising the trend to lump the implementation of BEE with the myriad other duties HR managers have. He says, correctly, that a successful broad-based BEE implementation and strategy cannot be HR’s sole responsibility.  Let us create a fictitious (and somewhat ridiculous) broad-based BEE implementation.

Webb’s Chicken is a large agricultural company with about 200 employees. It supplies chickens to a wide range of customers from small retailers to government. Some customers are cutting back on orders because they are able to source chickens from other broad-based BEE suppliers. 
Founder and CEO Stan Webb decides it is time to start working on the company’s BEE profile. He tasks group HR manager Christine Perfect with this implementation. “Come back to me when it is done,” Stan tells Christine.

Christine starts off looking at the equity aspect of the scorecard. The first step is to find a suitable investor.  Pablo Ntuli is the only person who seems to have an interest in the chicken industry and the money to do the deal. Christine negotiates the deal, appoints Pablo as a director. and plans to introduce the two shareholders to each other. She hopes Stan and Pablo will get on.
Her next step is to increase the number of black people within the various management levels within the organisation. There is a lot of black talent in the market place, but she has to offer competitive salaries and sign-on bonuses to bring them across.  Christine manages to employ an extra 20 managers. They have come at great expense but the company’s scorecard is starting to take great shape. She will introduce the new managers to Stan at the same time that she introduces Pablo.

Christine is not too concerned about earning the points for skills development, because her training schedule is well documented. She then heads off to work on preferential procurement. Her problem is that she is not that familiar with Webb’s suppliers, nor does she understand the concept of supplier-customer relationships. Nevertheless she dives in head first, sending threatening letters to all suppliers, telling them that they have a short time to generate a level-one score (100 points plus) or they will lose the Webb contract. She also manages to replace a few existing suppliers with black ones. The black suppliers’ prices are competitive but they are on the other side of the country; this shoots the unit price up.

There is no shortage of enterprise development and corporate social investment causes and Christine does not hesitate to randomly select a few to support. She chooses causes that have no relevance to the Webb’s Chickens business — in fact they have nothing to do with agriculture at all. She requisitions two hefty cheques and posts them off. 

It has been a productive two weeks. Webb’s Chickens now has a very impressive scorecard. She presents the new shareholder, staff members and latest financials to Stan on a Friday afternoon. Stan is dumbfounded. He and Pablo have met in the past in a bar fight, the staff have shot his overheads through the roof, his company is being sued by 10 very angry suppliers for breach of contract and Webb’s has donated a huge sum of money to causes that make no sense to him.  The only way to solve this problem is to get rid of Pablo at great expense and raise the price of chickens to cover his losses.

I apologise for making this example so ridiculous but there is a strong element of truth that resonates through it. The executives in an organisation cannot simply outsource the BEE implementation to the HR department. Admittedly 40 points on the scorecard has a direct bearing on HR (management, employment equity and skills development), but proper implementation has huge business implications and the correct executives in the firm must be involved in the process.