Linking People, Strategy and Performance THE HR …

1 Published by Soundview Executive Book Summaries, 10 LaCrue Avenue, Concordville, Pennsylvania 19331 USA 2001 Soundview Executive Book Summaries All rights reserved. Reproduction in whole or part is people , Strategy and PerformanceTHE HRSCORECARDTHE SUMMARY IN BRIEFMost CEOs and senior line managers are skeptical of the role of humanresources in their companies success. While many executives say theybelieve that people are our most valuable asset, they don t understandhow HR functions make that vision a reality. The root of the problem issimple: It s hard to measure the impact of HR functions on company per-formance and Performance measures that most HR departments use don t meas-ure HR contributions to company success.

2 For example, as an HR manager,you may believe that having a capable and committed work force and atraining system that helps your employees learn faster than the competitionare true competitive advantages and part of the company s strategic , you most likely measure items such as total compensation, employeeturnover, cost per hire and the percentage of workers who were evaluated inthe last 12 months. None of these measures relate directly to employeecommitment or learning the competitive advantages you new approach is necessary. Rather than concentrate on a bottom-upperspective emphasizing compliance and traditional HR, you must move to atop-down perspective emphasizing the implementation of Strategy .

3 You mustthen develop an innovative assessment system that measures HR s contribu-tion to what matters most to CEOs: firm profitability and shareholder summary shows you how. In the following pages, you will: Learn about a seven-step process that will lay the foundationfor your HR department s strategic influence company-wide. Understand how to move from the seven steps to an HRScorecard that identifies and measures the HR deliverables needed to make the corporate Strategy most potent action HR managers can take to ensure their strategiccontribution is to develop a measurement system that convincingly show-cases HR s impact on business system is the HR Knowledge for the Busy Executive 23, No.

4 10 (2 parts) Part 1, October 2001 Order # 23-24 CONTENTSHR as aStrategic PartnerPage 2 Implementing HR sStrategic Role:A Seven-Step ModelPages 3, 4 CreatingThe HR ScorecardPages 4, 5, 6 Cost Control vs. Value CreationPage 5 Cost-Benefit Analyses For HR InterventionsPages 6, 7 CompetenciesFor HR ProfessionalsPages 7, 8 ImplementingThe HR ScorecardPage 8By Brian E. Becker,Mark A. Huselid and Dave UlrichFILE: PERSONNEL/HUMAN RESOURCES HR As A Strategic PartnerAfter struggles with a lack of focus and billions ofdollars in losses in the early 1990s, Sears managementteam developed a Strategy to turn the company around:For Sears to be a compelling company for investors, ithad to be a compelling place to shop; for it to becomea compelling place to shop, it had to become a com-pelling place to then went about validating this vision withhard data.

5 The company developed objective measuresfor each compelling goal. For example: Support for ideas and innovations helped makeSears a compelling place to work. Focusing on becoming a fun place to workhelped make Sears a compelling place to then developed a series of competencies andbehavioral objectives designed to reach each competencies became the foundation on whichto build recruiting, training, Performance and compen-sation precise were the measures Sears developed thatmanagers could say with confidence that a 5 pointimprovement in employee attitude drove a pointimprovement in customer satisfaction, which in turndrove a.

6 5 percent improvement in revenue DeliverablesThe human resources function has traditionally beenseen as overhead a cost center rather than a value-creating function. However, human resources canbecome a valuable strategic partner that helps the com-pany achieve its goals. The key is to identify and meas-ure the HR deliverables that support corporate strate-gy and the HR systems that create those Sears, the deliverable was making Sears a com-pelling place to work. The HR systems behind the trans-formation were recruiting, training, Performance andcompensation structures for example, a reward struc-ture that recognized employee ideas and HR Architecture as a Strategic AssetIf the focus of corporate Strategy is to create a sus-tained competitive advantage, the focus of HR is tomaximize its contribution to that advantage through itsarchitecture.

7 HR s architecture is really three dimen-sions that make up the value chain: the HR function made up of HR professionalswith strategic competencies; the HR system the company s high-perform-ance, strategical-ly aligned poli-cies and prac-tices; and employeebehaviors strategicallyfocused compe-tencies, motiva-tions and associ-ated HR system isthe linchpin of HR s strategic influence. The mosteffective model is a High- Performance Work System(HPWS). In an HPWS, each element of the HR systemis designed to maximize the overall quality of humancapital throughout the organization.

8 Specifically, theHPWS: links its selection and promotion decisions tovalidated competency models; develops strategies that provide timely and effec-tive support for the skills demanded by the firm sstrategy; enacts compensation and Performance manage-ment policies that attract, retain and motivatehigh- Performance employees. 2 THE HR SCORECARDby Brian E. Becker, Mark A. Huselid and Dave Ulrich THECOMPLETESUMMARYThe authors:Brian E. Becker is a Professor andDepartment Chair of Organizations and HumanResources at the State University of New York atBuffalo.

9 Mark A. Huselid is an Associate Professor ofHuman Resource Strategy at Rutgers University. DaveUlrich is a Professor at the University of MichiganSchool of Business and the best-selling author of HumanResource Championsand co-author of 2001 by President and Fellows of HarvardCollege. Summarized by permission of the publisher,Harvard Business School Press, 300 North BeaconStreet, Watertown, MA 02472. 234 pages. $ Executive Book Summaries Published by Soundview Executive Book Summaries(ISSN 0747-2196), 10 LaCrue Avenue, Concordville, PA 19331 USA, a division of ConcentratedKnowledge Corporation.

10 Publisher, George Y. Clement. V. P. Publications, Maureen L. Solon. Editor-in-Chief, Christopher G. Murray. Published : $195 per year in , Canada & Mexico, and $275 to all other countries. Periodicals postage paid at Concordville, PA and additional :Send address changes to Soundview, 10 LaCrue Avenue, Concordville, PA 19331. Copyright 2001 by Soundview Executive Book formats:Summaries are available in print, audio and electronic formats. To subscribe, call us at 1-800-521-1227 (1-610-558-9495 outside &Canada), or order on the Internet at Multiple-subscription discounts and Corporate Site Licenses are also the focus of corporatestrategy is to createa sustained competitiveadvantage, the focus ofHR is to maximizeits contribution to thatadvantage throughits HR s StrategicRole.