Thursday, 9 August 2007

Which direction "Beyond HR"?

I've just viewed an HCI webinar 'Beyond HR Metrics' presented by John Boudreau from USC. Boudreau is the co-author of Beyond HR and will be presenting at the CIPD conference on HR as a Decision Science in September.

Boudreau outlines a strategic approach to people management he calls ‘Talentship’ that has a number of similarities to my perspective on Strategic HCM, and a framework ‘HC BRidge’ which has some similarities to the HCM Value Matrix.

The similarities include a belief that HR can evolve into an influential, strategic discipline focused on creating competitive advantage in an organisation by maximising the capability and engagement of its people and in particular its talent. Both perspectives see this strategic role extending past best practice through the development of a coherent and contingent framework that links organisational talent to strategic success.

Boudreau believes the development in HR’s role, linked to the increasing importance of human capital, is analogous to the historical development of accounting into finance, associated with the increasing importance of financial capital in the 1900s, and of sales into marketing, associated with increasing size and sophistication of customer and product markets. He concludes that like finance and marketing, Talentship has the greatest impact outside of the profession itself.

Although I am unconvinced by the analogies as Finance, Marketing and HCM all have very different purposes, I agree with Boudreau’s conclusions. Both perspectives agree that it is what happens across the organisation rather than within the HR function that counts – most strategic decisions about people management need to be taken by senior and line managers, and by employees. This means that the HR function should be evaluated not so much by the quality of its programmes, as by the quality of decisions about talent that are taken throughout the organisation.

Both approaches see the need to focus measurement on key enablers rather than build upon all the data that is available.

My approach to Strategic HCM provides a ValueMatrix that is a combination of the HCM Value Triangle and the HCM Value Chain:

This approach describes how planning, measurement, benchmarking, implementation and reporting have different requirements depending on where they are placed within the Matrix.

Boudreau's HC BRidge provides a value map connecting investments, activities and business success: ‘The purpose of the HC BRidge model is to provide a framework to articulate the logical connections between investments, changes in the nature or deployment of workforce talents, and sustainable strategic success’.

It involves three stages:

  • Impact (equivalent to the Impact step in the HCM Value Chain)
  • Effectiveness (equivalent to Output in the HCM Value Chain)
  • Efficiency (including Input and Process measures from the HCM Value Chain).

Boudreau also refers to the different ways that HC BRidge can be used – points that also relate to the use of the HCM Value Chain. These examples nicely illustrate very well the broad utility of the Value Chain approach. I do not believe the terminology of the HC Bridge is as clear as the HCM Value Chain (to me, efficiency and effectiveness relate more to levels in the Value Triangle than to stages in the Value Map) but at this level, it basically does the same thing.

However, Boudreau then drills down to a more detailed level of linking elements that include Human Capacity, Aligned Actions and Talent Pools and Structures. He illustrates these linkages using an example of an HR manager responding to a request to produce a headcount budget and recruitment needs for the coming year:

"Rather than simply focusing on headcount gaps, he asked “What do these employees do that makes the biggest difference to your business?” (“Aligned actions”), and then, “How does their activity blend with others in your organisation to create that value?” (“Talent Pools”), and then, “What are the key processes in your business where these activities have their biggest effect?” (“Business Processes”), and then, “How does doing these processes well contribute to our ability to build and sustain an advantage in the marketplace that is protectable?” (“Sustainable Strategic Success”). The HR manager reported that the line manager said, “This is certainly a different conversation than I usually have with someone from HR. It’s caused me to think about things I seldom consider, but I should do, to more strategically understand what’s driving my headcount and requisition budget."

Whilst I obviously support the broad linking of activities to their outputs and resulting impact, I think this is too deep a level of analysis for a conversation like this - in my experience, Directors would start to get frustrated rather than intrigued at the repetitive nature of these questions.

And although I believe talent management has a very natural connection to HCM, I think it is inappropriate to hard-wire talent pools into the Value Chain. Talent management is one good solution but is not the only one and may not be the right one in many situations.

Other differences in the approaches relate to two key issues. Firstly, Boudreau defines Talentship as a decision science. This is an agreed upon and rigorous set of methods that:

"Provides a logical, reliable and consistent – but flexible – framework that enhances decisions about a key resource, wherever those decisions are made. A decision science does not rigidly prescribe what to do, but rather provides a logical system to identify and analyse key decision issues."

Boudreau explains that the consequence of not having a decision science is that ‘talent decision will be made using non-logical decision frameworks’ for example by following politics, fads and fashions. Although I agree about the dangers inherent in following fashions in management theories, I disagree that logic is the sole basis for creating a new strategic role for HR. Given the degree of complexity in business, I believe ‘non-logical decision frameworks’ like creativity provide the key to HCM.

However, the greatest difference between the two perspectives relates to their strategic ambition for people management. The high-level HC BRidge is largely equivalent to the HCM Value Chain but Talentship has no equivalent perspective to the Value Triangle. Boudreau compares HR to finance professionals who, given the same business challenge, will ‘approach it with similar logic, and develop a reasonably similar analysis of the issue’. This standardisation in approach would certainly assist in moving from Personnel to HR, but would do nothing to advance to HCM / created value.

In my view, and despite Boudreau’s focus on informing strategic decisions, compared to Talentship, HCM is:

  • Less prescriptive and therefore more usable
  • Just as deep, innovative and robust
  • Easier to use
  • More strategic.