Lessons from the ball diamond can help HR transform from transactional to strategic
Billy Beane, general manager of the Oakland Athletics, wanted to find out what player skills lead to winning games. Using sabermetrics, a process that analyzes past performance in baseball such as batting averages, bunting, stealing and getting to base, he found the hitters most skilled at getting to base were most strongly linked to winning scores.
So the Oakland A’s hired these types of players and did not have to pay a premium for them because other teams did not value this competency. Since implementing this HR strategy, the Oakland A’s have been near the top of the league’s standings, despite having one of the lowest payrolls in Major League Baseball.
Strategic human resources management is about using HR programs to shape employee competencies to achieve an organizational goal. In the case of the Oakland A’s, the goal was to win. The HR strategy was to select and develop the competency — superior skills at getting to base — that facilitated the achievement of that goal. HR departments that want to play a strategic role in the organization could use this simple HR strategy example.
First, identify the organization goals. In the private sector, these could include client retention, client satisfaction and revenues and profits. In the public sector, the goals are more likely to be efficiency related, such as time spent with each patient, cost of processing claims and percentage of the population who has been treated.
Step two consists of analyzing the competencies that lead to these goals. For example, for a telecommunications company such as Bell, what are the employee competencies that result in increased customer retention?
These competencies could range from the ability of a marketing professional to develop programs that are attractive to customers to the technical skills that allow an engineer to produce high-quality products and services that result in fewer customer complaints to the knowledge and communication skills that enable call centre workers to give clients good answers, quickly.
Then, determine which HR programs produce these competencies. For instance, HR must show the recruitment and selection programs for marketing personnel focus on the selection of candidates with the exact skills that have been proven to be linked to the organization’s goals. The same must be shown for orientation, training and compensation programs and these should never be outsourced.
Split HR into two groups
HR management should be split into two areas, much like accounting and finance or sales and marketing. One area would deal with transactional activities, such as payroll, that are routine but necessary. The second area would function like a decision science, concerned with the effective use of human capital.
In this model, strategic HR management would be concerned with making decisions, based on evidence, about the most effective HR programs to produce the employee competencies to reach the organizational goals.
HR programs, not people, biggest asset
Many people say, “People are our greatest asset,” which is then followed by a warning that your greatest assets can walk out the door at night. Instead, consider HR programs as an organization’s greatest asset.
Imagine a scenario of “processing” an employee, almost like a manufacturing line. An organization hires a skilled and motivated employee. The employee retains and improves his skills and motivation because of the organization’s perfectly aligned HR programs of orientation, training, development of effective managers to manage employees and incentive systems to reward and retain them, and the development of an engaging organizational culture to increase employees’ organizational engagement.
If the employee quits, then another candidate is selected and managed through these unique HR programs. The employee who quits might go to another organization, with weak HR programs, and soon lose his skills and motivation.
These HR programs, which are imbedded into a system, are not easily duplicated or imitated, which gives them a competitive advantage and makes them the organization’s greatest asset.
Monica Belcourt is director of the School of Human Resources Management at York University in Toronto. She can be reached at [email protected].
How to determine if HR is a strategic partner
More HR departments are making the shift from transactional to strategic. The following questions will help an HR professional determine if she is a strategic partner.
• Do you understand the business?
• What financial indicators are important to the company?
• Who are your customers and what is your competitive advantage?
• What major technological changes will affect your work?
• Do you know what the corporate plan is?
• Can you quickly list the major initiatives of your organization?
• Do you align HR programs, policies and practices with organizational strategies and goals?
• Are the people management processes focused and measured on deliverables and not functions?
• Does HR report on effectiveness (the impact a training program has on employee competencies and organizational goals) or just efficiencies (such as the number of people being trained)?
• Are major organizational decisions made with your input?
There are many different reasons an HR professional might not be considered a strategic partner, including:
• Top managers don’t see a need. They don’t see HR as a profession.
• HR personnel are seen as personnel experts, not experts in the business. HR is seen as economically illiterate.
• HR information is useful to HR but incompatible with business needs.
• Business managers have a short-term focus with an emphasis on current performance. Quarterly results are more important, even though some investments in training and culture development won’t pay off for years.
• HR professionals are unable to think strategically because they have an incomplete understanding of the business.
• Senior managers lack appreciation for the role HR can play in enabling an organization to achieve its goals. HR is seen as an adversary, demanding unnecessary bureaucratic work in the managers’ day-to-day jobs.
• Few functional managers see themselves as HR managers. They have functional responsibilities but do not see the principal role of management is to manage people.
• It is difficult to quantify the benefits or outcomes of HR programs. In the competition for organizational resources, why should HR be allocated any part of the resource pie?
• HR assets are not owned by the organization so any resource allocation to people programs is seen as a high-risk investment.
• HR initiatives almost always mean change, which can be resisted. Any program that requires different ways of treating or managing employees upsets the status quo and means learning new behaviours.
Source: Human Resource Champions: The Next Agenda for Adding Value and Delivering Results, by David Ulrich