How Effective Is HR In Your Organization?

Answering the question about HR’s effectiveness has evolved over the last 70 years as the management of people has shifted from seeing people as a tangible asset (like property, plants, and equipment) to an intangible asset (like intellectual property, reputation, and goodwill) to a strategic resource that helps your organization win in the market place through individual competence (talent, workforce), organization capability (culture, workplace), and leadership (beyond individual leaders). My colleagues and I (www.rbl.net) have been privileged to join many thoughtful others in the last 25 years of this HR effectiveness journey (see some of the key ideas and books in Figure 1):

Figure 1: Evolution of HR Effectiveness 1995 through 2020

Many committed colleagues continue to provide valuable insights on HR’s continued effectiveness. Some focus on HR redesign and how to find ways to coordinate the work of HR specialists and generalists; others highlight technology and how digital information changes HR decision making; others emphasize HR analytics and how to track HR activities and outcomes; yet others spotlight innovations in HR practices; and so forth. Each of these ingredients of HR’s overall effectiveness is making progress.

As an analogue, I believe that the individual ingredients (flour, sugar, eggs, chocolate chips, etc.) that combine to make cookies are of less interest than the end result of the tasty cookie itself. For assessing HR’s effectiveness this means spending less time on the individual HR ingredients (HR design, analytics, technology, or practices) and more time on creating an overall logic for HR effectiveness. An overall HR effectiveness logic consists of three parts: [1] HR maturity and evolution, [2] HR domains and activity, and [3] guidance for how to improve. 

[1] HR maturity and evolution

As noted, “HR” has evolved. HR people no longer merely try to “get to the table” and be seen as commercial, but to deliver value when there; HR practices are no longer about isolated functional excellence in staffing, training, reward, digital, analytics, and other practice areas, but offer integrated solutions to business problems; HR departments are no longer just about coordinating HR resources to improve talent, but about helping the business win in the marketplace through talent, leadership, and organization. 

We (“we” refers to my colleagues from the RBL Group and University of Michigan and collaborators on studies, books, and articles) have captured this HR evolution in four waves that shows a maturation of HR work (see Figure 2). In our executive programs at the University of Michigan and consulting through the RBL group, we often start with what participants want to learn and accomplish through our engagement. The answers are often desirable works like improve succession, build a culture, upgrade talent, design a total rewards system, etc. When we put the two words “so that…” behind these answers, we move through the four waves, ultimately defining value from the outside in (wave 4) and how improvements in HR work results in customer, investor, and community value. 

These waves also help us focus dialogue on emerging and next HR issues, not recycling or repeating previous work. For example, in the culture space, we want to move beyond describing a culture to predicting the “right” culture as defined by customers and investors or to move HR analytics from scorecards and dashboards that map the present to guidance that will create the future as determined by customers and investors outside the company.

Figure 2: Waves of HR Evolution

[2] HR domains and activity

The four waves in Figure 2 represent an evolution, or maturation, in definitions of HR effectiveness. Determining overall HR effectiveness also requires identifying domains of HR work that can be tracked along these four waves.  As noted, many select one domain of HR, e.g., HR department structure or design, HR practices, HR analytics, HR technology, or competencies of HR professionals.  

In our work, we started (see book HR Champions) by looking at the single domain of HR department structure or roles (domain #4 below) We have expanded our work into thinking about all nine HR domains, each of which has been and should be studied extensively.  We can assess each of the 9 domains by the four levels of HR maturation (see Figure 3). For a full review of this HR assessment contact me at [email protected]. 

Figure 3: Maturity of HR Across 9 Domains

Figure 3 provides a comprehensive template for assessing overall HR Effectiveness either for each of the 9 domains or for each of the 36 cells (4 levels of maturity * 9 domains).  

[3] HR Effectiveness Guidance for How To Improve

As we look forward, we see a shift from a description of HR effectiveness (using Figure 3) to guidance about which of the nine domains of HR delivers the most value to key stakeholders: employees, business results, customers, and investors. This organization guidance system (OGS) will help focus HR investments to improve. A summary of the guidance logic is shown in Figure 4 where we will be able to determine the relative impact of each of the 9 domains of HR effectiveness (rows) on stakeholder outcomes by dividing 100 points in each of the 4 outcomes (columns) depending on the impact of each domain.

 Figure 4: 

HR Guidance: Relative Impact of 9 HR Domains on Key Outcomes

Conclusion:

Determining and improving HR Effectiveness continues to evolve. We hope that by defining four waves of HR impact, nine domains of HR work, and an assessment of guidance to improve will continue to upgrade the value of HR work. We hope you will join us in this ongoing journey by participating in our research and databases. 

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Dave Ulrich is the Rensis Likert Professor at the Ross School of Business, University of Michigan and a partner at The RBL Group, a consulting firm focused on helping organizations and leaders deliver value.