Saturday, 13 June 2009

Linking Employer Branding to Strategic HRM and Customer-based Reputation

I'm working on a couple of projects just now, which require me to focus on some of the problems involved in employer branding in multinational environments. I've also just finished an enjoyable exercise acting as a judge on Personnel Today's employer branding awards, which has caused me to reflect on the criteria for assessing and measuring the impact of employer brands. With both of these projects in mind, there are a couple of good sources of material that may be worth looking at if you are working in this field as a reflective practitioner ( I've got a few people in mind when writing this blog) or academic. One source I've written myself with Susan Hetrick ( I'm saying this is good but I'm not really the best judge of that); another is in the recent edition of the British Journal of Management. These works are written mainly for academics in the field but are accessible and useful for those who want to get beyond the usual homilies or lack ofevidence-based practice that characterised much of the employer branding literature.

Our piece is entitled 'Employer branding and corporate reputations in an international context' (pages 293-320) and can be found in the new 'bible' edited by Paul Sparrow on 'Handbook of International Human Management: Integrating People, Processes and Context' published by John Wiley and Sons, Chichester, UK, 2009. This chapter sets out a model of employer branding in an international context and illustrates some of the problems of negative capabilities associated with 'thinking global and acting local' using a case from the financial services sector. In the case we argue the need for authenticity in employer branding to favour the local rather than the current fashion for global. More of this in later blogs, because this issue gets to the heart of strategic HRM and employer branding in international contexts, the subject of a forthcoming paper by myself, Paul Gollan and Kerry Grigg.

The second extremely useful source is an excellent if somewhat parsimonious attempt to provide a theory of customer-based reputations (C-bR), written to explain the basis on which customers attribute positive reputations to companies and what such reputations lead to in terms of important outcomes. The paper by Walsh, Mitchell, Jackson and Beatty in the British Journal of Management current edition and the core argument is that customer satisfaction and customer trust in the organizations drive positive (and negative) customer-based reputation attributions. In turn, C-bR causes customers to be more loyal (CL) and to produce high levels of customer advocacy through word-of-mouth (WM). The authors show highly significant links among these variables, especially among C-bR and its consequences for CL and WM.

I'm sure I can learn from this parsimony in two ways, largely because my own attempts to explain the causes and consequences of employer branding are so complicated and cannot easily be tested. The first way is to ask the question: what are the workforce and HR antecedents or drivers of customer satisfaction and customer trust? This is likely to lead us into a refinement of the logic of the 'three compellings' from the Sears service-profit chain, a favourite example of many who wish to demonstrate links between satisfied employees, satisfied customers and profits. So, you might expect that employee satisfaction, employee commitment and employee engagement might by related in some way, together with the authenticity of the employer brand, to drive trust in organizations and their leaders (see CV Harquail's application of authenticity to personal branding for an idea of where I'm going).

The other use of this model is to translate the variables into employer branding language. So, you might expect that high levels of employee satisfaction, commitment and engagement, and high levels of trust on the part of employees in the organization and its leaders may drive Employee-based reputation (Eb-R). In turn high Eb-R is likely to result in key outcomes such as employee loyalty/ intention to remain and to word-of-mouth advocacy of the organization, the latter of which is so important to our current project for the NHS.

Although this line of reasoning has been pursued by Gary Davies and Rosa Chun from Manchester Business School in a number of recent articles, the ideas from the Walsh et al paper do suggest how their work could be developed.

When I've worked through some of these ideas a little more, I'll put these up for consideration in a further blog.

Dealing with 'Negative Capabilities' in Strategic HR: Social Capital and Corporate Branding versus Human Capital and Segmentation

The notion of negative capabilities, often attributed to the poet John Keats, refers to the ability to work with issues that can't be resolved and the need to keep an open mind. W. Scott Fitzgerald, a famous American writer, dubbed this a sign of intelligence - being able to hold two or more inconsistent ideas in your head simultaneously and still work with them. Such an intelligence is one that HR practitioners need to develop in spades, especially when dealing with the paradoxes and tensions manifested in the 'think global, act local' mantra of many organizations - and not just multinational ones. Unfortunately, most organizations treat this as a problem to be solved rather than resolved by drawing on packaged solutions, which usually create further and potentially worse problems down the line.

Two such examples of these HR paradoxes are the corporate (global) employer brand versus segmented employer brand issue and the decision-making over whether to put your money behind social capital (teams and organizations) versus human capital (talent and stars), which has been at the heart of the talent management controversy for the last decade or so. For the purposes of this blog I've conflated them because they naturally link together. As I mentioned in the last post, I've been working with a group of excellent HR managers from a Swedish-based multinational, all of whom come from different countries and different business units within the one corporate entity. Our job has been to raise our game, individually and collectively, by learning to think more strategically and more corporately, which turns out to be another negative capability. To that end I've been helping them learn and in doing so learning myself about what strategic HR might mean in their context. So I drew on a number of new books and research from the US that offer excellent insights into this question. These books offer sound, evidence-based practical advice of the kind that most consulting manuals don't. However, they still need to be treated with a certain caution in complex situations because of the potential problems created by an unreflective application of heavy doses of human capital and segmentation. The one that seems to summarise this more than any other is the new blockbuster by Brian Becker, Mark Huselid and Richard Beatty on the Differentiated Workforce, which encapsulates a number of messages from solid, research-based work by these authors themselves and others. The others are Boudreau and Ramstad's 'Beyond HR: The New Science of Human Capital', Cascio and Boudreau's book on Investing in People: the Financial Impact of Human Resource Initiatives(reviewed in the last blog), and the work on HR architectures by my good friend, now returned to Rutgers to work with Mark Huselid, David Lepak.

Being US in origin, these books are strong on prescriptions, especially the new Becker et al book. One such prescription is that HR begins with understanding the strategy and environment - the strategy map - of the organization, and not its people, which is where most HR specialists are likely to begin - a 'trained incapacity' often used to beat HR over the head with. Incidentally, this is a view that the high priest of strategy, Michael Porter, would endorse but not so resource-based strategy theorists who argue for a more inside-out approach to these issues. A second prescription is the need for sound logics and the need measure. All of these works are especially strong in making a case for causal measurement rather than best practice, benchmarking and scorecards. This, they argue is single most important activity that HR can do to prove its credibility with senior managers - being able to identify and predict the strategic outcomes of HR initiatives. A third and probably the tie that binds these books and research more than any other is the need for greater segmentation of the workforce, which is to use the power law (80/20 rule) to focus on those 'A roles and players', 'pivotal positions', or 'core' segments of workforce that add most value, exhibit most performance variation (the range of performance variation between the best and worst performers in very high), and which are relatively unique. The Differentiated Workforce is particularly strong on these messages, the logic (though not the intent) of which leads us further and further away from any notion of global, including corporate strategies, corporate employer brands and global value propositions, global employer of choice approaches etc. Indeed, the authors repeat their 2005 message in the 'Workforce Scorecard' that adopting employer of choice approaches are a recipe for mediocracy - an argument and rail against 'best practice' that I mostly agree with. In essence the logic, and in one case the title of these works, is to attribute strategic performance and capabilities to human capital in the form of individual roles, people, pivotal points etc, and workforce segmentation.

However, in working though these ideas with the HR group in Sweden, we constantly came up against problems with this logic, one of which is that human capital and segmentation divide organizations. The line pursued by Boris Groysberg from Harvard with increasing sophistication over the last five years on why the focus on stars can be bad for business is testament to this excess focus on human capital. A second problem is that human capital and segmentation is rooted in a US centric view of equity that does not always translate into the more equality-conscious continental European mindset. A third, related problem is the over-attribution of performance to human capital rather than social capital, which can be defined in terms of the bonds between people, the internal and external networks or bridges they build, and the extent of trust needed in organizations, especially networked organizations, to survive and prosper. As excellent research in the field of innovation by Subramaniam and Youndt has shown, it it social capital more than human capital that accounts for transformative innovation; at the very least these have to be seen as complementarity forms of capital assets.

Some of these features of social capital were beautifully illustrated during a factory tour we had in the plant where the group and I were working. The fact that manufacturing was been conducted at all in this very Swedish plant was bucking the trend towards off-shoring to Eastern Europe or Asia, although it was high-end batch production rather than mass production. One of the reasons why the design, development and manufacturing of a family of products was so successful (and successful it is) seemed to be down to the focus on design, development and manufacturing based on social capital (i.e. involving customers, designers, shop floor workers in the interative design and development process, flexible manufacturing based on autonomous work groups, extensive job rotation and group training so that everyone could do everyone else's job, investment in work life balance and flexitime to engage the workforce, etc etc). In other words, it was the system and social capital that seemed to be important rather than any notion of A players, pivotal positions, valuable and unique segments.

All of which brings me back to the broader issues raised in the title of this blog. The logic of these books, excellent though they are, is of human capital and segmentation. And it is a compelling logic. However, it doesn't sit easily with the equally compelling logics of investment in social capital and the need for a reflective and reflexive corporateness (corporate strategy, branding, identity, value system) that considers and is influenced by what goes on at local levels. One way of working with these negative capabilities is to treat them as complementary, not competing, assets. What that might mean in practice is to do what most organizations don't do, which is to begin with and even privilege the local rather than the global to ensure ideas - brands, strategies, values, etc., ring true among employees and managers at business unit levels - in other words to privilege authenticity. Arguably from the perspective of organizations, whether or not we have high levels of human capital is not really so important to organizations; what is important, especially for innovative organizations. is how human capital and identity feeds forward into group learning and team-building and then into organizational learning and organizational identification. In other words, by building on what is locally authentic and on evidence of good local practice (maybe even created by A players who aren't 'assholes'? - see the book by Robert Sutton) we learn to develop social capital, organizational IQ, corporate strategies, and authentic corporate and employer brands.