Global Trends in Human Resource Management

A Twenty-Year Analysis

Edward E. Lawler, John W. Boudreau

• Editore: Stanford Business Books
• Anno: 2015
• ISBN:
  9780804794558
• Edizione: 1
• Argomento: Commerce
• Categoria: Gestion des ressources humaines

Since 1995, USC's Center for Effective Organizations (CEO) has conducted the definitive longitudinal study of the human resource management function in organizations. By analyzing new data every three years since then, the Center has been able to consistently chart changes in how HR is organized and managed, while at the same time providing guidance on how professionals in the field can drive firm performance. Global Trends in Human Resource Management, the seventh report from CEO, provides the newest findings about what makes HR successful and how it can add value to organizations today. Edward E. Lawler III and John W. Boudreau conclude that HR is most powerful when it plays a strategic role, makes use of information technology, has tangible metrics and analytics, and integrates talent and business strategies.

To adapt to the demands of a changing global marketplace, HR is increasingly required to span the boundaries between its function, the organization as a whole, and the dynamic environment within which it operates. This report tracks changes in a global sample of firms that shows how HR differs across Europe, the U.S., and Asia, providing an international benchmark against which to measure a company's practice and shows how HR can adapt in a rapidly changing landscape.

CHAPTER 1

What HR Needs to Do

A changing workforce, global competition, advances in information technology, new knowledge, an uneven recovery from the 2008 global recession, demands for sustainable organizational performance, and a host of other changes are forcing organizations to constantly examine and reevaluate how they operate. They are using new technologies, changing their structures, redesigning work, relocating their workforces, and improving work processes to respond to an increasingly demanding, unpredictable, and global competitive environment (Lawler and Worley 2011). These important changes have significant implications for how their human capital should be managed and how their human resource functions should be designed and operated. But are organizations changing their human capital management policies, practices and processes? Are they redesigning their HR functions?

Over the past decade, it has been difficult to find a management book or business magazine that does not point out how many of the changes in the business world have made human capital—people—an organization’s most important asset. Human capital management has been the focus of a great deal of writing focused on finding, motivating, developing, and monitoring the right talent. The annual reports of many corporations in North America, Europe, and Australia argue that their human capital and intellectual property are their most important assets. In many organizations, compensation is one of the largest costs, if not the largest one. In service organizations, it often represents 70 to 80 percent of the total cost of doing business. Adding the costs of training and other HR management activities to compensation costs means that the HR function often has the responsibility for a very large and growing portion of an organization’s total expenditures.

In most organizations, the compensation cost of human capital is not the only, or even the most, important determinant of an organization’s effectiveness. Even when compensation accounts for very little of the cost of doing business, human capital has a significant impact on the performance of most organizations (Cascio 2000; Cascio and Boudreau 2011). In essence, without effective human capital, organizations are likely to have little or no revenue. Even the most automated production facilities require skilled, motivated employees to operate them. Knowledge work organizations depend on employees to develop, use, and manage their most important asset, knowledge. Thus, although human capital does not appear on the balance sheet of corporations, it represents an increasingly large percentage of many organizations’ market valuation (Lev 2001; Huselid, Becker, and Beatty 2005).

In an increasing number of organizations, having the best talent and talent management processes can be a continuous, difference-making source of competitive advantage. It can make companies more innovative and agile, better able to develop superior products and customer knowledge, and offer superior services (Worley, Williams, and Lawler, 2014).

Role of the HR Organization

Because of the way the business environment has changed, there are more and more ways the HR function can add value to an organization. For decades, it has added value primarily by performing administrative tasks. But two other roles that it can play allow it to add greater value. Lawler (1995) has developed this line of thought by describing three roles HR can take on. The first is the familiar HR management role (exhibit 1.1).

The second is the role of business partner (exhibit 1.2). It emphasizes developing systems and practices to ensure that a company’s human resources have the needed competencies and motivation to perform effectively. In this approach, HR has a seat at the table when business issues are discussed and brings an HR perspective to these discussions. When it comes to designing HR systems and practices, this approach focuses on creating systems and practices that support the business strategy. HR focuses on the effectiveness of the human capital management practices and process improvements in them. HR is expected to help implement changes and help managers effectively deal with people issues.

The business partner approach positions the HR function as a value-added part of an organization so that it can contribute to business performance by effectively managing what is the most important capital of most organizations, their human capital (Ulrich and Brockbank 2005; Lawler 2008). But this approach may not be one that enables the HR function to add the greatest value given the increasingly important role that talent plays in determining organizational performance. By becoming a strategic contributor (see exhibit 1.3), HR has the potential to add more value in situations where human capital performance can be a major difference maker.

Acting as a strategic contributor means that HR plays a role that includes helping the organization develop its strategy. Not only does HR have a seat at the strategy table, it helps to set the table with information about organizational capabilities, talent analytics, and the labor market. It helps shape and enhance strategies by bringing human capital decision science to strategy discussions. It helps organizations operate in ways that help it perform well financially, socially, and environmentally.

Exhibit 1.1. HR management

Exhibit 1.2. Business partner

Exhibit 1.3. Strategic contributor

In a knowledge business, a firm’s strategy must be closely linked to its talent. Thus, the HR function needs to be positioned to play a major role in both strategy formulation and implementation. Expertise in attracting, retaining, developing, deploying, motivating, and organizing human capital is critical to both. Ideally the HR function should be knowledgeable not just about the business and about talent; it should also be the expert in organizational and work design issues so that it can help develop needed organizational capabilities and facilitate organizational change.

To be a strategic contributor, HR executives need, in addition to knowing HR, an expert understanding of business strategy, organizational design, and change management, and they need to know how integrated HR practices and strategies can support organizational designs and strategies. This role requires extending their focus beyond delivery of the HR services and practices that are associated with being a business partner to a focus on making decisions about talent, organizational design, and business strategy.

To be an effective strategic contributor, HR needs to offer a perspective that is often missing in discussions of business strategy and change: knowledge of the human capital factors and the organizational changes that are critical in determining whether a strategy can be implemented. Many more strategies fail in execution than in their conception (Lawler and Worley 2006). What sounds good often cannot be implemented for a variety of reasons having to do with talent management and organizational culture.

Despite compelling arguments supporting HR management as a key strategic issue in most organizations, our research and that of others finds that HR executives usually are not strategic contributors and do not use data to guide their decision making (Lawler 1995; Brockbank 1999; Lawler, Boudreau, and Mohrman 2006; Lawler and Boudreau 2009, 2012). All too often, HR is largely an administrative function headed by individuals whose roles are focused on cost control and administrative activities (Ulrich 1997; Lawler and Mohrman 2003; Boudreau and Ramstad 2005a; Lawler and Boudreau 2009, 2012). Missing almost entirely from the list of HR focuses in our 2010 global survey of HR in large corporations were such key organizational challenges as improving productivity, increasing quality, facilitating mergers and acquisitions, managing knowledge, implementing change, developing business strategies, and improving the ability of the organization to execute strategies (Lawler and Boudreau 2012). Since these areas are critical determinants of organizational performance, the HR function was missing a great opportunity to add value.

There is some evidence that the HR function is beginning to redefine its role in order to increase the value it adds. The first six phases of the study collected data in 1995, 1998, 2001, 2004, 2007, and 2010. The results showed evidence of some change in large US corporations, but there was more discussion of change than actual change (Lawler and Mohrman 2003; Lawler et al., 2006; Lawler and Boudreau 2009, 2012). In addition, there is evidence of change in the profession. The leading professional association for HR, SHRM, has grown to over 270,000 members. Until 1984, SHRM was known as the American Society for Personnel Administration, a name that reflected HR’s administrative role in organizations. Nevertheless, although it has changed its name, it still is more focused on personnel administration than on talent management and business strategy.

Creating Change

Describing the new role of HR is only the first step in transitioning the HR function to be a business partner that contributes to organizational effectiveness. For decades, the HR function has been organized and staffed to carry out administrative activities. Changing that role will require a different mix of activities and people. It will necessitate reconfiguring the HR function to support changing business strategies and organizational designs. It also will require the employees in the HR function to have very different competencies from those they traditionally have had (Ulrich, Younger, Brockbank, and Ulrich 2012).

It is clear that information technology is playing an increasingly important role in the future of the HR function (Lawler, Ulrich, Fitz-enz, and Madden 2004; Boudreau 2010). Administrative tasks that have been traditionally performed by the HR function can be done by employees and managers on a self-service basis. Today’s HR information systems (HRIS) simplify and speed up virtually every administrative HR task: salary administration, job posting and placement, address changes, family changes, and benefits administration, for example. What is more, HR systems are available around the clock, and with mobile technology, they can be accessed from virtually anywhere by anyone, thus making self-service possible, convenient, and efficient.

Perhaps the greatest value of HRIS results from enabling the integration and analysis of HR activities, thus guiding strategy development and implementation. Metrics can be easily tracked and analyses performed that make it possible for organizations to develop and allocate their human capital more effectively (Boudreau and Ramstad 2007; Lawler, Levenson, and Boudreau 2004).

It is increasingly possible to measure and analyze the effectiveness of many HR policies and practices. With big data and a strategic mind-set, HR can be a data-driven function that practices evidence-based management. Business leaders can now be held accountable for HR measures such as turnover, employee attitudes, bench strength, and performance distributions.

A strong case can be made that HR needs to develop much better metrics and analytics capabilities. Our previous six studies identified metrics as one of four characteristics of HR systems that lead to HR’s being a strategic partner. Managers want measurement systems that inform their decisions about human capital. All too often, however, HR focuses on the traditional paradigm of delivering HR services quickly, cheaply, and in ways that satisfy their clients but fail to use HR measures to make a true strategic difference in an organization’s performance (Boudreau and Ramstad 1997, 2003). The issue is how to use HR measures to make a true strategic difference in an organization’s performance.

Boudreau and Ramstad (2007) have identified four critical components of a measurement system that drive strategic change and organizational effectiveness: logic, analysis, measures, and process. Measures certainly are essential, but without the other three components, they are destined to remain isolated from the true purpose of the HR measurement systems.

Boudreau and Ramstad (1997) have also proposed that HR can make great strides by learning how more mature and powerful decision sciences have evolved their measurement systems in order to improve decision making. They identify three anchor points—efficiency, effectiveness, and impact—that connect decisions about resources such as money and customers to organizational effectiveness and that can be used to understand HR measurement:

1. Efficiency asks, “What resources are used to produce our HR policies and practices?” Typical indicators are cost-per-hire and time-to-fill vacancies.

2. Effectiveness asks, “How do our HR policies and practices affect the talent pools and organizational structures to which they are directed?” It thus refers to the effects of HR policies and practices on human capacity (a combination of capability, opportunity and motivation) and the resulting aligned actions of the target talent pools. Effectiveness includes trainees’ increased knowledge, better-selected applicants, stronger qualifications, and performance ratings of those receiving...