Five Steps to Realigning HR with Organizational Performance
“On a basketball team, you have to have pretty good players, or you’ll never win,” Wayne Brockbank, a clinical professor of business at the Ross School of Business at the University of Michigan. “But that group of midlevel players who work together as an integrated, effective team will almost always beat the team that has a bunch of individual superstars that do not work together.”
Brockbank uses this example — which he credits to fellow Ross School of Business professor Dave Ulrich — as a way to illustrate that “talent is not the only paradigm around which to organize HR agendas.” Brockbank believes that talent is of great importance — “You have to have good people,” he says — but he also feels that today’s HR departments focus too much on talent, at the expense of larger, organizational matters.
“Over the past decade or so, the talent paradigm has gained considerable momentum in the HR field,” Brockbank wrote for the Harvard Business Review. He attributes HR’s growing focus on individual talent to three factors. First, he cites growing numbers of people trained in psychology taking jobs in human resources: industrial-organizational psychology is a rapidly growing field, according to the American Psychological Association, and the U.S. Department of Labor predicts that it will grow 26 percent by 2018.
“By definition, psychologists work with individuals,” Brockbank says. Because such people are trained to operate at the individual level, they tend to focus on employees, rather than on organizational goals.
Brockbank also names McKinsey & Company’s famous book, “The War for Talent,” which made a case for the critical importance of recruiting and maintaining great talent for corporate performance. “[The book] seemed to resonate with a lot of executives, because a lot of their HR folks were not versed in economics, finance, and the general nature of the business, and so they tended to focus more on individuals, as opposed to the institution as a whole,” Brockbank explains.
Lastly, Brockbank says that contemporary HR departments tend to focus on talent instead of organizational performance because it is much easier to address the talent agenda than it is to tackle the organizational agenda. “To address the organizational agenda requires intimate familiarity with the business and the complexities that make a business institution successful, whereas hiring, training, and developing individual talent is still challenging, but it’s less challenging than the somewhat formidable organizational agenda,” he says.
The problem with all of this is that talent may be important, but great HR departments don’t limit their focus: great HR departments should act as what Brockbank calls “strategic enablers of organizational performance.”
What Happens When HR Takes an Organizational Focus?
In a talent-focused HR department, recruitment, training, and employee performance management become the major concerns. Organization-focused HR, on the other hand, takes big-picture issues as its major concerns: organization structure, work process design, and information flow, among other, similar items.
The difference between “leader development” and “leadership development” might serve as a good analogy for the difference between talent-focused and organization-focused HR. Leader development is what talent-focused HR does: it focuses on developing individual leaders. Leadership development is what organization-focused HR does: it develops what Brockbank calls the “cadre of leaders that comprise [the organization’s] leadership.”
Brockbank says that organizations have plenty of reason to want their HR departments to take the organization as a primary concern. “Somebody once said that organizations are generally designed to get not the results that they want, but to achieve the results they get,” Brockbank says. “They want to get higher performance? Then they have to design their organizations differently.”
Over the course of 25 years, the University of Michigan has been collecting data from tens of thousands of people — Brockbank estimates that there will be up 90,000 people in the dataset by the end of the year. “We use business performance as the outcome variable of what we’re trying to predict as we assess and analyze all the different areas of HR competencies and practices that HR professionals can get involved in,” Brockbank explains. “With some great degree of consistency, it’s the organization level and agendas that are highly related to business performance.”
Brockbank says that, unfortunately, the organizational level is not often addressed well, and the individual-related activities of talent-focused HR departments “result in a medium or very small level of impact on business outcomes.”
The takeaway according to Brockbank, is simple: “In today’s world, getting the entire institution to work together in a focus-directed manner is simply going to get better results than if you have a bunch of individuals heading off in all kinds of different directions.”
For organizations, the challenge exists in shifting HR’s focus away from talent at the individual level and realigning it with organizational issues and agendas.
But how to do that?
Five Steps to Refocusing the HR Department
“If you’re going to undertake the organizational agenda, then you have to make sure that all of the basic HR functional areas — measurement, rewards, training, development, recruitment, promotions, outplacement, and transfers — all integrate and work together,” Brockbank says.
This level of integration is a significant obstacle for many organizations. “Many HR departments fail to integrate their HR functions along a common set of clear but concise business outcomes,” Brockbank says. “You sometimes get people hired on one criteria, [then] they reward them for something else, [and] they train them for something else.”
But the integration can happen, Brockbank says. Organizations just have to follow five steps:
“[Organizations] need to have a clear understanding of what’s required in the external marketplace for the company to win,” Brockbank says. This includes things like analyzing customer buying criteria, identifying effective competitors, noting what makes competitors effective, and pinpointing what you are doing — or can do — better than the competition.
“You need to understand the structure of the industry you’re involved in,” Brockbank says. “You need to understand the core of what’s going on in the business environment.”
Once a business has developed a clear understanding of the external marketplace, it needs “to translate that external environment into a clear set of competitive criteria and decisions that have to be made on the inside of the firm.”
Brockbank elaborates: “You need to be able to identify, based upon that external world, what are the sources of competitive advantage that the firm must develop if it is going to be successful.”
3. Design a Culture
“Based upon understanding those sources of competitive advantage and the realities of the external marketplace, then you have to identify how people need to think and behave together in order to meet the criteria of competitive advantage and the criteria of the customers,” Brockbank says.
Organizations must identify a shared way of thinking and behaving, a way that integrates all parts of the business and gives the organization an overall sense of focus and direction. In other words: they have to identify their company culture.
4. Promote the Culture
A culture envisioned is worthless, but a culture enacted makes all the difference. The next step, then, is fostering the desired company culture.
“Once the corporate culture is clearly defined in a way that is consistent with what the firm needs to do to compete, then [the firm] needs to be aware of all of the organizational practices that can create and sustain the collective way of thinking and behaving,” Brockbank says. “That includes the organizational structure, work process design, the flow of information, planning and development, leadership communications, performance management, and all the tools of recruitment, promotions, transfers, and outplacement.”
Brockbank says that organizations must identify which practices are currently out of alignment with the desired culture and what sort of impact each practice will have if brought into alignment. “Once you understand that, it’s pretty straightforward to be able to redesign those practices to be consistent with the culture you’re trying to create that will help you win in the marketplace,” Brockbank says.
If a culture envisioned is worthless, then a plan on paper might as well not exist. Which is why the final step is, of course, to execute the newly aligned practices.
“You have to execute those practices in an integrated, unified way with a great deal of discipline and focus, and not have HR folks continue to do what they’ve always done, but to modify all of those practices to be consistent with the requirements of the external marketplace,” Brockbank says.
The process can seem a bit daunting from the outside, but, if organizational performance is the goal, then it’s a process that HR departments — and whole organizations — will need to face and enact.
Otherwise, every company will be a team of superstars that never figured out how to play together.