Human Capital Measurement and Performance

I've mentioned that we are doing some work, sponsored by the Scottish Government and the ESRC, on measuring the impact of human capital investment in the public services. One of the most useful pieces of research that we'll draw on is the Institute of Employment Studies (IES) report 'Human Capital Measurement: Approaches, issues and case studies', Report 454. This report, written by Dilys Robinson, Hulya Hooker and Mary Mercer, has only just been published in July 2008.

The report stemmed from a series of workshops with IES network members, some of whom were relatively advanced in linking their human capital measures to performance, including the Royal Bank of Scotland (RBS), Standard Chartered Bank, Civil Aviation Authority (CAA), Centrica, the Royal Navy, the MoD, two local authorities (East Sussex and Haringey Councils) and Medway NHS Foundation Trust.

It comprises a well-written review of some of the academic literature on human capital and a summary of the good consulting work in this field. However, the report's real strengths lie in the short case illustrations of how the above organizations have developed and used human capital measures and in the approach they used to producing their findings, which was very much in the action research mode.

Some of the key findings were as follows:

Few of the participating organizations used the term 'human capital', which was poorly understood, sometimes meaningless and sometimes offensive to managers.

Although there was some consensus over basic measures, there was no 'one-size-fits-all' approach or framework. Context mattered: while each organization felt they could learn from others, their was little possibility of developing a standard set of measures. This was most obvious in the differences between the private and public sectors, with the latter having to concern themselves with more intangible measures and more diverse stakeholders.

A 'workable' approach emerged during the course of the research workshops, fitting the needs of a majority of participants. This was the CAA's approach of asking a series a searching questions on what they wanted to know (e.g. are we retaining key employees?) and attaching a series of measures to each question, forming a four stage hierarchy - basic underpinning employee data, operational measures (e.g recruitment costs, training days), outcome measures (employee turnover) and 'strategic' measures, where the links were made between, say, absence and engagement. On this last series of measures, much more work was needed. We would suggest that this was particulalry true of the public sector, where intangible issues such as public value come into play.

In the cases, there is quite of bit of evidence of correlational work, though much less in the field of predictive measurement, which is our goal for the Scottish Government research. The most notable exception is RBS's well publicised and researched integrated human capital system.

In summary, this report is well worth the £18 investment for any practitioner or researcher. It is another example of good research/knowledge into practice from the IES, an organizations with which we are beginning to do a little bit of work . This starts with a 1-day conference on employer branding in Glasgow on November 4th, but more of this in a future post!

Leadership: What is it and Does it Matter in Healthcare?

I'm doing a presentation on leadership next week for the senior management team of NHS Greater Glasgow and Clyde, the largest health authority in the Scotland employing upwards of 40,000 people. This has caused me to think seriously about what I can usefully say - without being academically bland - to experienced people operating at a senior level on matters that can have extremely serious outcomes.

Like most management academics in these situations, I've chosen to do something which challenges the shibboleths of the 'leadership industry' from an evidence-based perspective and points to some useful things that leaders and leadership can achieve, again drawing on evidence rather than managerial cant. Some of this evidence is drawn from the provocatively titled and beautifully written books by Jeff Pfeffer and Robert Sutton on 'Hard Facts, Dangerous Half-Truths and Total Nonsense', Phil Rosenzweig on 'Eight Delusions that Deceive Managers', and Rakesh Khurana on 'The Irrational Question for the Charismatic CEO', with a of little Henry Mintzerg's 'Managers not MBAs' thrown in for good measure.

Other evidence, however, is taken from recent articles in journals or reports that most managers wouldn't pick up on. These include new material by Helen Dickinson and Chris Ham (2008) Engaging Doctors in Leadership', which can be found on the NHS Institute for Innovation and Improvement website at the bottom of this page; research into the importance of social capital; research into public value creation, including Mark Moore and Jean Hartley's (2008) paper 'Innovation in Governance' Public Management Review, 10, 1, 3-20; and two articles in the current issue of the British Journal of Management on something call 'top echelon theory', which deals with the impact of top management teams on performance (Patzelt, H., Zu Knyphausen-Aufseff, D. and Nikol, P., 2008, Top management teams, business models and performance of bio-technology ventures: an upper echelon perspective, British Journal of Management, 19, 3, 205-221; Naranjo-Gil, D., Hartmann, F. and Mass, V. S. (2008) Top management hetrogenity, strategic change and operational performance, British Journal of Management, 19,3, 222-234).

It's a real shame that these latter two articles weren't written with managers in mind because they have important practical things to say about what effective senior management teams in the healthcare sector need to take into account and need to become. However, I'm drawing readers, especially my postgraduate healthcare students, attention to these articles and to the other references because they are certainly worth reading, though some are more easily understood than others.

My storyline is as follows:

1. that leaders matter a little less than the leadership industry would have you believe, especially in organizations that remain professional bureaucracies, dominated by doctors,
2. that investment in followership and microsystems of distributed leadership in healthcare is key to effective performance, but they need to be connected to:
3. diversely-constituted top management teams that both fit and shape innovative 'business models' or organizational architectures. These TMTs can be a positive force for strategic change in healthcare in ways that charismatic individuals can't. However, the composition of these teams matter a great deal because it determines their absoptive capacity to take in and exploit new knowledge. The diversity of these teams also matters because different people bring different things to the table and, equally importantly, diversity is also likely to reduce professional tribalism and motivate increasingly dissenchanted and/or sceptical clinicians to become more involved in the running of their organizations.

There may be little that's novel in this message, but I hope the evidence-base just about makes it credible.

Web 2.0, HR and the Long Tail

I've just come back from the Academy of Management (AOM) annual conference in Disney's 'smile factory' at Anaheim convinced of a couple of contradictory thoughts about that conference and Web 2.0. Now being something of a regular (this was my seventh stint in the last nine years) at what is the world's premier academic management event, I'm more convinced than ever that practitioners, consultants and non-attending academics in HR would benefit greatly from coming along. There is no doubt that the standard of papers and presentation of evidence-based HR (and any other topic on management) is higher than at any other academic or practitioner event I've attended; yet, there is a certain anti-intellectual bias, not in the sense of there being a lack of strong academic rigour but because there is too much focus on academic/scientific specialisation at the expense of big or innovative ideas and engagement of practitioners.

Nevertheless, if you can past the formulaic hypotheses testing, numerous discussions of regression and structural equation modelling, etc., by young academics looking to hit the top tier journals, most of whom have had few connections with practitioners, you can pick up many real chunks of insights that other conferences just won't give you.

One such paper dealt with the role of social network sites in hiring. Written by two not so young American academics, Donald Kluemper from Louisanna State University and Peter Rosen from Evansville University, this work was both rigorous and relevant. They argued that the use of social networking websites, like Facebook, has become extremely popular, particularly with
high school and college students in the US (interestingly more than half of the academics in the room had facebook sites). As a consequence, employers have begun to use the personal information available on social networking websites not only for recruitment, which we all know about, but also to make hiring decisions. Using ratings from 274 Facebook websites of students, this study assessed the validity of using Facebook to predict self-rated and other-rated
personality. Their data showed that Facebook ratings of Big-5 personality traits were correlated with each of the self-ratings of the Big-5 personality factors often used to predict performance at work: correlations ranged from .23 for neuroticism to .45 for extroversion, which in selection studies would be seen high. In a follow-up study of 54 employees, Facebook ratings were also shown to predict supervisor rated job performance and to show additional validity beyond self-rated personality in predicting supervisor ratings of job performance. In summary, Facebook entries can do a reasonable job of predicting the important personality characterisitics employers seek from potential employees without having to bring them in for assessment.

This study led to an interesting discussion of why this should be so, what employers can use Facebook and other sites for beyong recruitment and what happens when people wise up to the potential uses by employers of social networking, e.g. faking, impression management through competing over friends, etc. It also raised the issue of whether or not people will be left behind if they don't have a social networking site as recruiters week passive rather than active candidates.

So, here we have a paper that provided evidence on an important social phenomenon in a useful way, but will probably be read by only a few interested academics because practitioners don't tend to read academic journals (for good reason). So it was left to a guru to give me further food for thought and to provide some genuinely intellectual argument that will be read. On the journey back I picked up the new addition of Chris Anderson's recent reworking of 'The Longer, Long Tail' with a new chapter on marketing. Although we have used his ideas from the earlier book in our discussion paper for the CIPD, re-reading this book and the new material, showed the power of genuine insight and engagement with practitioners to present innovative issues in a rigorous fashion. His discussion of how the the the long tail of employees in Microsoft changed the way in which that company does business, despite the worries of lawyers and the brand police, showed the power of letting employee blogging rip. As he argues, ...Microsoft is a less monolithic company run by two titans, and more a collection of thousands of people pretty much like us. Whatever, Microsoft product you use..., there is an engineer or product manager carrying on a conversation in public about it.' (p 241). He also makes the point that Microsoft's customer and employer brand is now controlled by employee bloggers, and, what is more, they are relatively happy about this.

There is no doubt in my mind that social media will be more and more used by employees to give voice to their thoughts about their employers in ways that shed much more light on what matters to them than than through conventional attitude surveys. Some firms are beginning to recognise this, for example, IBM, which is one of our CIPD case study companies; perhaps others should begin to think about how the surface employee voice more innovatively.

If you want to participate in our CIPD study on Web 2.0, please go to CIPD website and look up the discussion under 'Helping People Learn'; if you are not a member, you can repond to this entry by going into the discussion listed on the side-bar.

Because there was so much at this conference of interest to readers of this blog, I'll take up a few more of the HR themes, such as the impact of HR and innovation and performance in forthcoming entries. I'll also examine the growing practitioner and academic interest on employer branding and corporate reputations, which was the subject of my paper.

Employer Branding and Reputation Management in China and Glasgow's Supporting Role

In this week's Economist there are a number of stories highlighting the importance of branding and reputation management in China, some of it centred on the Olympics and some on the increasing need for Chinese companies to develop strategies based on branded goods and services that can be sold to the West. The available evidence also points to the need for many of the top Chinese companies to be able to compete more effectively in labour markets to attract and retain talented people to support branding strategies. So it comes as no surprise to see the establishment of a similar centre to our own being established in China, and we are pleased to announce that we have signed a memorandum of understanding to set up a co-branded Peking-Glasgow International Research Centre for Employer Brand and Reputation Management. This is to be based at Peking University, with Dr Hong Zhang (from Glasgow) and Professor Wang Hansheng from Peking University as co-directors. The relationship is to be strengthened by forming a partnership with the Zhaopin company, a leading Chinese recruitment consulting firm, and CCTV's China Best Employer Programme.

The aim of this new centre is to undertake research into employer branding and reputation management, and to examine the relationship between HR and branding. I will be helping launch the Centre with a presentation at Peking University in November of this year, and will be helping to put together an international conference on employer branding at Peking University in 2009.

We would be pleased to hear from anyone who may have something to contribute to this conference, so please take the time to email us with your ideas.