Linking People, Strategy and Performance

  Linking People, Strategy and Performance

“The greatest concern here is that, in the New Economy, human capital is the foundation of value creation. (Various studies show that up to 85 percent of a corporation’s value is based on intangible assets). This presents an interesting dilemma: the asset that is most important is the least understood, least prone to measurement, and hence, least susceptible to management. Clearly, we are at a watershed”(ref.The HR Scorecard, Brian E. Becker et al).

If we are to resolve this dilemma, HR leaders and practitioners, being custodians of the people management apparatus, need to have sharp-shooting clarity about what and where their contribution lies – hence this article. There is a reason why Phillips’ brand promise is ‘sense and simplicity’. They promise that “in a world where complexity increasingly touches every aspect of our daily lives, our innovations will lead in bringing sense and simplicity to people”. Likewise, the more human resource practitioners are able to make sense of their involvement in organisational leadership, then and only then can they provide innovative YET simple and impactful solutions to people.

From Administrative Expert to Strategic Contributor

Strategic Human Resource management is the entire field that deals with how the HR function contributes to organisational design and development/execution. “Recent decades have witnessed dramatic shifts in the role of HR. Traditionally managers saw the human resource function as primarily administrative and professional. HR staff focused on administering benefits and other payroll and operational functions and didn’t think of themselves as playing in the firm’s overall strategy” (ref. The HR Scorecard).

HR managers now know that they need to be more ‘strategic’ in their involvement by plugging themselves into the strategy design and execution/implementation chain. This means that even the administrative aspects of the job are handled with a clear line of sight to the strategy.

Strategic HR is all about Strategy Execution/Strategy Execution is the almighty lever

To be able to achieve strategic objectives, organisations need to execute their strategies almost flawlessly. Strategy execution is the hinge on which organisational success swings. Every corporate strategy aims to achieve certain customer, operational and thus financial outcomes. But it is what employees actually do that will decide how well business strategy is executed. And what they do is dependent upon what they have (skills, abilities, competencies) and how they feel (motivation, commitment, engagement). How employees feel and what they have are influenced by the people management strategy of the organisation. See the picture on the page.So strategic HR is about corporate strategy execution, plain and simple.

linking people and strategy

Strategic Human Resources is about utilizing different elements of people management to focus what-employees-do upon corporate strategy. It’s about focusing/aligning what-employees-feel and what- employees-have upon organisational strategy. It is concerned with fostering/engendering a tight harmony between how people are managed and the deliverables of the corporate strategy. Find below excerpts from SHRM’s Effective Practice Guideline on Human Resource Strategy.

What Employees Do is Based on What They Have and Feel

The initial impact of HR practicesis on what employees have and feel. Recruitment, selection, training and development are all aimed at bringing in or building certain skills, enabling employees to effectively perform their jobs. In addition, their experience with these practices, along with rewards, performance management and communication, shapes workers’ perceptions of the company’s fairness and desirability. And those perceptions then influence their commitment, motivation and engagement.What employees do is largely a function of what they have, because they cannot be productive if they don’t have the right skills.

What they do is also a function of what they feel, because they may choose not to be productive if they have negative feelings toward the organization.Ultimately, HR strategy has the most significant impact on what employees actually do on the job. If the strategy focuses on customer service, for example, it will affect things like whether employees are friendly and helpful, whether they give the right answers and solve customers’ problems. If the strategy is about efficiency, it will encourage employees to look for ways to lower costs or operate more efficiently. Do they engage in cost-saving behavior or waste time and money?

Employee Actions Affects Business Success

There are five types of employee behavior relevant to a company’s success.

1)      Task behavior refers to things that employees are supposed to do as part of their jobs (from the bare minimum to the maximum).

2)      Discretionary behavior refers to employees using their discretion to go above and beyond their job descriptions – such as the airline gate agent who races to return a forgotten briefcase.

3)      Counterproductive behavior is all those things we do not want to see our employees doing: stealing supplies, taking long personal calls, even sabotaging products or equipment.

4)      Attendance is the extent to which employees show up on time. Although perfect attendance is neither possible nor even desired (in the case of a sick employee), workers who call in sick when they feel fine create scheduling hassles and reduce productivity.

5)      Turnover, of course, refers to anemployee leaving the organization. Again, zero turnover is neither possible nor desired, but excessive turnover of average employees results in additional replacement costs, and turnover of an outstanding employee (if replacedby a less skilled employee) may result in a permanent decrease in productivity. In discussing HR strategy, productivity is usually measured using the number of products produced or delivered divided by the number of full-time employees or number of labor hours. If employees are engaged in positive behaviors, fewer will be needed for a high level of output. On the other hand, careless or deliberate mistakes and negative employee behavior can cause product defects, some of which can’t be repaired.In some industries—such as mining and refining—accidents can be costly or fatal, and HR strategies must be developed to encourage safe behavior of employees.

Employee Actions Affects Customers and Company Finances

Any employee who interacts with customers has the potential to elicit positive or negative experiences. Our people management HR strategy will influence what employees feel and do, with significant impact on customers and company profits.Employee behavior can affect your firm’s financial outcomes, especially in its impact on operations and customer service.

For instance, when quality and productivity decrease, there is an immediate impact on expenses if products must be destroyed, reworked or produced at higher cost. When customers get defective products or services, they will take their business elsewhere, obviously affecting the firm’s revenue stream. As revenues decrease and expenses increase, the firm’s profitability will soon deteriorate.

The bottom line is that what employees actually do will decide how well the business strategy is executed. In the end, what employees do is the critical link in executing strategy. Because what employees do depends on what they have and feel, HR strategies need to focus simultaneously on building skills, motivation and behavior for a successful business strategy.