High Impact: HR’s Operating Principles

It’s important that there’s a clear line of sight between what the business needs and what HR does. More than this, HR practice needs to be rooted in a robust theoretical framework. It is easy to be seduced by ‘shiny new objects,’ but unless these have a solid scientific foundation and are appropriate for the organisation’s particular business context, they can become an unnecessary distraction from the critical task of delivering value to that organisation.

CRF believes organisations need to address the following key elements when thinking about the operating principles that underpin HR:

1. Analysis before action. This means being clear about the problem that’s to be fixed. What are the causes of the issues? In what ways might the proposed course of action address those problems?

2. Definition of terms. Many HR and management terms are vague. Working on issues where definitions are unclear creates confusion and makes it impossible to set objectives for improvement.

3. A robust underpinning theory. HR initiatives need to be founded in the principles of social science (e.g. determining cause and effect, establishing validity, and designing experiments). This is just as important as agreeing clearly defined business objectives.

4. A sound business case. Although the returns on HR efforts are not necessarily financial, it is important to give consideration to both financial and non-financial returns on HR activities. Consider:

– What improvements will the proposed actions deliver? Are there alternatives that can deliver similar benefits at lower costs?

– What are the costs (both financial and in time spent) and what outcomes do we expect as a result?

– What will we stop doing to free up time to do this?

5. Delivery against a clear HR plan. HR needs to have a written-down people plan that describes what it is committed to doing, how that connects to overall business objectives, and how its performance will be evaluated. Critically evaluating all HR activities using the matrix below can help you determine priorities (focus on activities that sit on the right hand side of the chart). Further consideration should be given to how this is communicated throughout the organisation and who gets a copy. Effective people strategies include the following features:

– HR understands how the organisation’s people and capabilities enable success, and how those capabilities need to be developed to execute future strategies;

– clear linkages between HR actions and business outcomes;

– clarity around the respective roles of HR and line managers in delivering the people plan;

– a feedback loop for evaluating the effectiveness of strategy and plans.

6. Evidence. Decisions about HR actions should be based on evidence. It is an approach to decision making that involves applying logic, searching systematically for the best available evidence, appraising it critically and acting on it. Understanding the organisation context and the needs of stakeholders is an element of evidence based approach. Evidence based management requires three behaviours (Pfeffer & Sutton):

– making decisions based on the facts and what we know to be true (NB. be wary of studies purporting to show that certain management practices lead to higher performance. We need to be clear about the difference between causation and correlation);

– a commitment to hearing the truth, obtaining the data and acting on it;

– treating the organisation as an unfinished prototype – running experiments and constantly learning.

7. Evaluation. Advances in HR systems and analytics capabilities mean that in many cases HR now has better tools to make data-driven decisions and to measure the effectiveness of the function. But it’s important to distinguish between evaluation and measurement. Not everything can be measured (and not all measures are meaningful) but most things can be evaluated. In thinking about how to evaluate the HR function, we suggest HR professionals consider the following:

– effective evaluation begins with being clear about what HR is there to deliver and why that’s important for the business;

– therefore the starting point is the organisation’s strategic priorities. What does HR need to support execution of the business strategy? How can you measure HR’s contribution against these priorities? How can you connect HR measures to revenue and profit?

– it’s also important to understand who HR’s key stakeholders are, what they want, and how satisfied they are. Involve stakeholders in developing, executing and evaluating the people plan;

– decide how you will evaluate performance against the plan while you are putting it together. Focus on outcomes, not activity or inputs. Measuring HR for its own sake is meaningless;

– set a performance baseline against which to measure progress;

– work out what data you need and what you have (data quantity and quality);

– triangulate as many data points as possible, both business and HR measures;

– communicate results to the business;

– build in feedback loops to identify current opportunities for continuous improvement.

 

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This piece is extracted from CRF’s 2017 research report ‘High Impact HR – how do we create a more business-relevant function?’ For more information email gillian@crforum.co.uk or visit www.crforum.co.uk

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