Thursday, 18 December 2008

HCM and business success


   I also wanted to pick up on Richard Donkin's comments linking success in human capital management systems and business results. Writing about the Royal Bank of Scotland, Richard asked:

"So were we all wrong? I think the answer is 'no'. The HR team headed by Neil Roden at RBS has done some pioneering work in performance management. The bank's recent decline in fortunes tells us not that HR is ineffective, but that HR's value may be less than is sometimes claimed. It couldn't halt a slide in investor confidence as the bank was engaged in consolidating an expensive purchase of Dutch bank ABN Amro."


This is something I come across a lot.  For example, I often use Yahoo! as an example of personalised employer branding.  But I know some people will feel that the fact that Yahoo's business is still in casualty detracts from this case study. And I was even expecting a bit of a back lash against road-kill Woolworth's recruitment team winning a Personnel Today award recently ("if they had been recruiting the right people, they wouldn't have got into this mess would they...").

I don't think these criticisms hold.  HR doesn't have to be operating in a successful business to be good.  And poor HR still can be found in many profitable businesses.


Human capital as a bridging concept in the HCM value chain

I've previously posted about the HCM value chain and how this can be used to show that HR can take accountability for human capital, but I think this also shows that HR can't be accountable for business results.

The CIPD talk about human capital being a 'bridging concept' and I think this is absolutely right.  Human capital bridges between two systems - a people management system, and a business system.

The output of the people management system is human capital (creating value), or the human resources required to meet business goals (adding value).  And these are the inputs to the business system as well.

HR can be accountable for the outputs from the people management system.  Ie we can ensure that the business has the capability, levels of engagement etc it needs to be successful.  But what it does with this human capital is largely down to others outside of HR.


OK, you might expect some links between good HR and good business, and if poor management or poor behaviours are the fault of poor business results (as I've previously suggested has been the problem in the City) then you'd want to see HR challenging these.

But good HR / HCM can't guarantee business success.  The best it can do is to stack the odds on your side.



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  1. I think company success is a function of all the pieces working well - individually and wholistically. I've been in companies that failed in spite of functional excellence. Great HCM cannot guarantee company success but neither can great R&D, or Marketing, Finance, Operations, Logistics, even Sales. Successful companies are good at everything, and the best at the things that matter most. For the truly great companies HCM is on the short list of things they want to be best at.

  2. What people are experiencing is the shame of belonging to a failing business and particularly a business that did not seem to understand the position it was in.

    It is a legitimate emotion, not so? People are staring - to put it in plain English.

    And in so far as HR Managers should have as a core competence understanding emotion and helping everyone cope, I would be interested in hearing how they approaching the issue. They are not the only ones and we can all learn from this!

  3. Good HR provides a business with the most productive use of staff. But as mentioned, I do not think that a not-so-efficient HR or HCM is what is to blame in a failing business. Companies with very well managed HR do fail. This is due to the unproductive use of the HR, if it plays a part in the downfall. Business and good HCM has a positive correlation, but does not fall in a simple linear equation.

  4. Thanks Jo, Joanne.

    Yes, I agree, all elements of a business need to be integrated for an organiation to be successful.

    But I still think HCM plays a special, albeit separate role, in a way that these other business functions do not.


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