Transcript HR AS A STRATEGIC PARTNER Becker, Huselid, & Ulrich The HR

HR AS A STRATEGIC PARTNER
Becker, Huselid, & Ulrich The HR Scorecard
Chapter 1
“People are our most important asset”
But do people understand how the HR function influences firm
performance?
Does HR really matter?
What’s the perception of the HR function? List adjectives you have
heard to describe the HR department.
Do HR people feel like they play an important role in implementing the
organization’s strategy?
HR as administrative function vs. HR as strategic partner
capable of enhancing the organization’s performance
Copyright 2004, Juan I. Sanchez,
Ph.D., All Rights Reserved
1
Measuring HR’s influence on the organization
Traditional HR Focus: the individual employee
•Select the best employee
•Find benefits that satisfy the employee
•Identify incentives that do motivate the employee
•Solve individual skill deficiencies through training
Improve individual employee performance
Automatically enhance organizational performance?
Copyright 2004, Juan I. Sanchez,
Ph.D., All Rights Reserved
2
HR as a strategic asset
New HR Focus: multiple levels of analysis:
individual, team, organization…
•Alignment of HR systems with the company’s strategy
•How can HR play a central role in implementing the
organization’s vision & strategy?
•How do people create value for the organization?
•Ho do we measure such value-creation process?
Example: making SEARS a compelling place to shop
required making SEARS a compelling place to work:
Developed a measurement system to manage this vision of
the company (focusing on competencies, climate, and
behaviors).
Copyright 2004, Juan I. Sanchez,
Ph.D., All Rights Reserved
3
HR as a source of competitive advantage
•Tangible vs. intangible assets
•Widening in the ratio of market value to book value (based
on intangible assets)
•HR is key to flexibility, innovation, and speed to market
•HR as competitive advantage: barriers of entry, difficult to
imitate
•HR managers can become NUMERATOR managers
(contributing to revenue & growth) rather than just
DENOMINATOR managers (cutting costs & reducing
overhead).
•Link performance measurement with strategy
implementation: facilitates
communication
with stakeholders.4
Copyright 2004,
Juan I. Sanchez,
Ph.D., All Rights Reserved
HR as an investment, not an expense
•Conventional accounting was created at a time when
tangible capital (financial & physical) was the primary
source of profits.
•Today: Human capital as the primary source of profits.
•Conventional accounting generates short-term thinking
regarding intangibles, because intangible-related
expenditures are treated as expenses vs. tangible-related
expenditures, which are treated as asset investments (and
therefore depreciated over their useful lives).
•Managers whose salaries are tied to earnings obviously
prefer expenditures that can be depreciated over time rather
than people-related expenditures than are expensed in their
entirety during the current
Copyright year.
2004, Juan I. Sanchez,
Ph.D., All Rights Reserved
5
HR architecture as a strategic asset
•Goal of corporate strategy: create sustained competitive
advantage.
•Goal of HR strategy: maximize the contribution of HR
towards that same goal.
HR ARCHITECTURE
HR FUNCTION
HR professionals with
strategic competencies
(delivery of HR
services in a way that
supports the
implementation of the
firm’s strategy
HR SYSTEM
EMPLOYEE BEHAVIORS
High-performance,
strategically aligned
HR policies &
practices
Strategically focused
competencies, motivations,
and associated behaviors
Copyright 2004, Juan I. Sanchez,
Ph.D., All Rights Reserved
6
Strategic HRM requires systems thinking…
•Systems thinking emphasizes the interrelationships of the
HR system components AND the link between HR and the
larger strategy implementation system.
•Interactions among components make a system more than
just the sum of its parts.
Copyright 2004, Juan I. Sanchez,
Ph.D., All Rights Reserved
7
Exercise: The laws of systems thinking
Consider the following “laws of systems thinking.” Describe
an example of an organization that failed to understand each
one of these laws, and the consequences that derived from
such a failure.
Law
Example
Today’s problems come from yesterday’s solutions
The easy way out usually leads back in
Cause and effect are not closely related in time &
space (HR effects are indirect)
Cutting an elephant in half doesn’t get you two
smaller elephants
Copyright 2004, Juan I. Sanchez,
Ph.D., All Rights Reserved
8
Best HR Practices help almost every business…
Bottom
10%
Top 10%
No. of training hrs. for new
employees
35
117
Percentage of employees
receiving a performance
appraisal
41%
95%
No. of employees per HR
professional
254
140
Percentage hired based on a
validated selection test
4%
30%
HR Practice
From Huselid et al., 2000, AMJ
Copyright 2004, Juan I. Sanchez,
Ph.D., All Rights Reserved
9
What does HR alignment take?
•It requires a clear understanding of the value chain: What kind of
value the organization generates and exactly how that value is
created.
•Be able to describe how ultimate financial goals are linked to key
success factors at the levels of customers, operations, people, and
IT systems.
•With this shared understanding of the value-creation process, the
organization can design a strategy implementation model that
specifies needed competencies and employee behaviors.
•The HR system can be geared toward the generation of these
competencies, which in turn generate the desired behaviors.
Copyright 2004, Juan I. Sanchez,
Ph.D., All Rights Reserved
10
Understanding the value chain
•Clear understanding of what kind of value the organization
generates and exactly how that value is created.
•Be able to describe how ultimate financial goals are linked to key
success factors at the levels of customers, operations, people, and
IT systems.
•With this shared understanding of the value-creation process, the
organization can design a strategy implementation model that
specifies needed competencies and employee behaviors.
•The HR system can be geared toward the generation of these
competencies and behaviors.
•Strategic behaviors are not directly affected; they are the end
result of the larger HR architecture.
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Ph.D., All Rights Reserved
11
Strategy
But strategic HR goes beyond “best practices”…
HR alignment
+
_
_
Behaviors
+
Copyright 2004, Juan I. Sanchez,
Ph.D., All Rights Reserved
12
Kaplan & Norton’s Balanced Scorecard:
Moving beyond mere financial measurements
•Measuring business performance from the perspective of strategy
implementation
•Too much attention to financial dimensions of performance, and
not enough attention to the forces that determine those results.
•Financial measures are backward-looking. Measurement should
focus on “performance drivers” that are under management’s
control now.
•Specify not only financial but also customer, business process,
and learning & growth elements of the organization’s value chain.
•By specifying and assessing the vital process measures of the
value chain, and regularly communicating the firm’s performance
on these criteria to employees, the balanced scorecard makes
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13
strategy everyone’s business.
Ph.D., All Rights Reserved