The Game Plan, the Path, and Achieving Organizational Results that Matter
Part 2 of 2
By Kim LaFevor
Drawing a Picture of an Effective Human Capital Management Strategy
I think we would all agree that in today’s current business climate and notable variance among adopted business practices, there remain opportunities for the design and implementation of more robust human resource models of performance management. However, we have to start thinking about performance management in a much broader framework of operational performance and business outcomes. In practice, current employed organizational approaches generally treat performance management as a distinct process managed apart, but parallel to, organizational processes. Performance Management is not an appendage. It is not tied to business practices that only HR needs to think about and have responsibility. Herein is the problem. While there is a gap that exists between current performance management practices and their affiliation to desired organizational key performance indicators, there lacks a good game plan for an effective Human Capital Management Strategy. It is a necessary means to a desired end in performance management and organizational performance.
When we think about performance management and the key drivers of human capital effectiveness, it does include HR practices, such as recruitment and retention initiatives, talent development, international workforce planning and global mobility, elevated levels of employee engagement, enhanced organizational change agility, and a pipeline of mission-critical talent. However, there often remains some disconnect between these initiatives and actions and a connection to the bottom line. There is a need for congruency between human resource practices and accountability for organizational key performance indicators (KPIs).
What’s the recipe for an effective Human Capital Management Strategy? Figure 1 depicts the four primary components of a comprehensive human capital management strategy: 1) performance leadership, 2) performance management, 3) employee engagement, and 4) culture of accountability (see Figure 1). This holistic view provides for a more complete identification of the needed characteristics of human resource practices that directly connect to organizational outcomes. This represents a shift from the historical literature that describes loosely connected integration of human practices to one that involves and interdependent set of transformational practices (Liff, 2015).
Poor management practices can cost businesses billions of dollars each year. According to one recent Gallup survey, one of the most critical decisions an organization can make is in the selection of managers with the right knowledge, skills, and abilities to execute such an integrative system. This research concluded that managers are responsible for as much as 70% of variance in employee engagement towards organizational goals. Only three in ten managers have basic or advanced talent management skills, yet these small groups of managers are responsible for 48% of higher profit (Beck & Harter, 2014). By selecting managers that have the right fit, it can provide a clear path for organizational operational and strategic goals to be met, create and administer human resource policies that will enable employee engagement and establish a culture of accountability through communicating and measuring employee performance against key performance indicators and business outcomes. Therefore, performance leadership is the first of the primary components of an effective human capital management strategy (Beck & Harter, 2014; Groscurth, 2015).
Human resource systems must work in tandem to realize both operational and strategic goals (Gurbuz & Mert, 2011). Human resource policies should support culture, mission, and business plans of the organization. There should exist well-designed performance standards and human resource practices that institute individualized training plans to achieve identified goals, continuous feedback, and consultation when performance does not meet expectations. Rewards, inclusive of merit, benefits, and promotion, should be leveraged to continuously reinforce excellence in performance. Employees should be involved in decisions that affect them to solidify higher levels of engagement.
These aforementioned human resource practices work interdependently to contribute to favorable levels of employee engagement. This is an underlying distinctive competency that contributed to a fundamental difference between organizations that excel compared to those with lackluster or underperforming outcomes. Employees define and enable organizations towards goal attainment. While every organization has operational data and strategic objectives by which success It has been estimated that as little as 30% of employees are actively engaged and committed to organizational success. When organizations can increase these levels of engagement, organizational performance can also be improved. While 30% of employees are engaged, 70% of employees are disengaged, either not engaged or actively disengaged, resulting in lower levels of performance or disruptive performance (Beck & Harter, 2014; Adkins, 2016).
Finally, creating a culture of accountability is realized when an organization is anchored on performance leadership, performance management, and employee engagement human resource practices that are measured against key performance indicators (KPIs). To achieve higher levels of accountability, these measures must be tied directly to an employees work and defined outcomes. Performance targets should be clear and have at least one single point of accountability, and be relevant and attainable by those tasked with the tasks (Ridler, 2014).
Figure 1-LaFevor’s Human Capital Management Strategy
The above figure below depicts such a model that demonstrates the direct relationship of performance leadership, performance management, employee engagement, but embedded in a culture of accountability. These factors each in isolation are important, but independently not sufficient in that they are not coordinated and synchronized and aligned to optimally deliver established business goals. There is an interdependent nature of performance leadership, performance management, employee engagement, and a culture of accountability in any robust Human Capital Management Strategy (HCMS).
Charting the Path-Developing an Effective Human Capital Management System
To achieve such an integrated and interdependent system, there must be full support of an organization’s board of directors who are thoughtful and rational about their human capital strategy, executive leadership fully committed to the idea of human capital as a strategic asset, an establishment and ongoing measurement of human capital performance standards that tie human resource practices to organizational business outcomes, and managers who embrace the idea of that performance should directly tie in measurable and meaningful ways to organizational performance (Zhu, Cooper, Thomson, DeCieri & Zhao, 2013).
Over the past 25 years, research examining strategic human resource management and its effects on organizational performance has provided important linkages. While this research has contributed to a greater understanding of this relationship, it has lacked some theoretical logic and empirical evidence (Kaufman, 2012; Piening, Salge & Baluch, 2013; Kramar, 2014). These findings do suggest methods in which managers can improve financial performance through improving employee’s experience through various HR practices. These solutions are marginalized without understanding the broader framework of the overall human capital management strategy. Each of these elements of human resource design and measurement must work in tandem to optimize outcomes. What will be your approach?