HR transformation is not a single event — it’s a new pattern of thought and behavior. As discussed in Chapter 2, the rationale for the transformation comes from general business conditions and the ability to increase value to specific stakeholders. The traditional answer is that you can measure specific quantitative outcomes of HR practices. For example:
- How many people did we hire?
- What percentage of low performers was removed from the organization?
- How many employees completed the required 20 or 40 hours of training in the past year?
- How many information sessions were held?
It is important to measure the activity of human resources, but you also need to measure the outcome or value of these activities. Tracking activity is not the same as tracking fundamental transformation or increased value creation.
We believe HR transformation has mainly two types of outcomes.
- The stakeholder expectations, as identified in our previous chapter, should be realized. HR transformation should play a significant part in determining stakeholder results.
- HR transformation can be tracked by the capabilities an organization creates.
This stakeholder mapping helps you build the case for why HR transformation is important. It also provides the basis for measuring results. Having specified a line of sight between HR activities and value delivered to key stakeholders, you then need to come up with clear and simple measures to track the extent of the benefit positive changes provide key stakeholders.
|Employees||• Greater competence for present and future jobs|
• More engagement or commitment
• Higher productivity
• Increased retention of talented employees
• Willingness to refer company to other potential hires
|Leaders and Leadership||• Measure of backup talent (number of qualified people for key jobs) |
• Able to export talent to the rest of the company
• Able to do an organization diagnosis and identify key capabilities
• Shared focus on what the strategy is
• Help make strategy happen
• Seen by associates (for example in a 360-degree feedback exercise) as demonstrating competencies required for a leader
|Customers||• More customer share of targeted customers (share of wallet)|
• More loyalty and satisfaction with the firm on customer surveys
• Greater willingness to engage in long-term relationship with the firm
• Willingness to recommend firm to others
• Percentage of new projects won from competitive bidding
|Regulators||• Trust the firm to do the right things|
• Give the firm voice in defining regulations
• Perceive the firm as one that abides by laws and regulations
|Analysts / Investors||• Higher Price to Earnings (market to book) value|
• Belief in growth strategy
• Higher confidence in future earnings
• Trust quality of leadership to make the right decisions about strategy, people, customers, and operations
|Community||• Receives recognition as employer of choice|
• Manages environment responsibly (reduces carbon footprint)
• Gives back to the community (philanthropy) in terms of money and time
• Encourages safe and positive employee work practices
• Builds a positive reputation as a good place to work
If the HR transformation is successful, then a number of outcomes can and should occur for each stakeholder. The outcomes should be operationally defined, measured, and tracked over time to quantify the progress of your HR transformation.
Capabilities shape the way people think about organizations. More importantly, no one really cares if we do not admire an organization of its roles, rules, or routines.
Instead, we admire a company like GE because of its capacity to build leaders in diverse industries; we admire Apple because it seems to continually design easy-to-use products. In other words, organizations are known not for their structure but for their capabilities.
Capabilities represent what the organization is known for, what it is good at doing, and how it patterns activities to deliver value. The capabilities define many of the intangibles that investors pay attention to, the firm brand customers can relate to, and the culture that shapes employee behavior. Capabilities can and should be monitored by measuring and tracking them.
The following capabilities and their measures seem to be inherent in well-managed firms:
Employees must be both competent and committed. Competent employees have the skills for today’s and tomorrow’s business requirements. Leaders can assess the extent to which their organization regularly attracts and keeps top talent and the extent to which that talent is fully applied for optimal performance.
Gaining speed allows a company to turn a mediocre changeability into a fast, agile change capability. Speed means that the organization can quickly identify and move into new markets, develop and deliver new products or services, solidify new employee contracts, and operationalize new business processes.
Gaining a shared mindset, or firm brand identity can be a vital capability. a shared mindset is a unity of identity where the external image (brand, reputation) of your organization is consistent with your internal culture.
Performance accountability becomes a firm capability when employees realize that they must meet their performance expectations. Accountability comes when strategies translate into measurable standards of performance and when rewards are linked to these measurable standards of performance.
Some organizations would be more valuable if their parts were operationally and legally independent than they are while they remain together. Such organizations frequently do not understand collaboration as a capability. Collaboration can come when the combined organization gains efficiencies of operation through sharing services, technology, sales efforts, or economies of scale.
Learning consists of two separate but equally important steps: generating new ideas and generalizing (sharing) them across the organization. Sharing ideas across boundaries can be done through technology, creating communities of practice, or moving people. Leaders who encourage individual and team learning can also create organizational learning through these practices.
Some organizations produce leaders. These organizations generally have a leadership brand, or clear statement, of what leaders should know, be, and do. A leadership brand exists when the leaders from top to bottom of an organization have a unique identity connected to customer expectations.
Many firms have discovered through customer value analysis that 20 percent of customers account for 80 percent of business performance. These customers become absolutely critical for a firm to compete and win.
Innovation focuses on the share of opportunity by creating the future rather than relying on past successes. Innovation matters because it fosters growth. It excites employees by focusing on what can be, anticipates customer requests and delights customers with what they did not expect, and builds confidence with investors by creating intangible value.
Many leaders tend to be better at formulating strategies than at accomplishing them. Often this comes because there is not a unity of shared understanding of the desired strategy. Four agendas (intellectual, behavioral, process, measurement) go into creating strategic unity.
The simplification can occur in how customers buy (from purchasing to delivery to payment), in how products are designed, and in how administrative processes function (such as processing benefits or attending a training program).
Simplicity can be measured by time per unit of activity, by cost per unit, by reduction of redundant or unnecessary steps in work activities, and by moderating SKUs and complexity.
Social responsibility can be tracked by both activity and reputation. Activity means that you have designed and implemented sustainability, philanthropy, and employability policies that communicate your social responsibility values. For example, some firms commit a portion of earnings to charity and also report the amount of employee time donated each year to serving others.
Risk can be tracked by assessing the extent to which an organization’s demands have exceeded its resources in financial markets and human needs. The capacity to manage risk well can be essential to strategy implementation, especially in a volatile economy.
In competitive markets, managing costs efficiently increases the freedom that a firm has to invest in high-return activities. People improvements come from doing more with less through technology, teams, and more efficient processes. Tracking efficiency can be the easiest of all. Costs of goods sold, inventories, direct and indirect labor, and capital employed can all be measured from the balance sheet and income statement.
The capabilities in this chapter represent the outcomes of the HR transformation. They are the deliverables of human resources, and they lead to the outcomes for each stakeholder In focusing on capabilities as outcomes, the HR transformation team should do a capability audit where they identify which capabilities are most critical to their organization’s future success given business conditions and business strategy.
DAVE ULRICH, JUSTIN ALLEN, WAYNE BROCKBANK, JON YOUNGER MARK NYMAN
- Introduction to HR Transformation — Chapter 1
- Why do HR Transformation? – Chapter 2
- What are the Outcomes of HR Transformation? – Chapter 3