Thursday, 17 September 2009

Evaluating the Impact of HR by Evaluating the Signals they Send

There has been an enormous amount of academic and consulting research on the impact of so-called high performance work systems (HPWS) on organizational performance, which has generated great interest in complementary ‘bundles’ of usually high commitment HR practices, including comprehensive recruitment and selection procedures, incentive compensation, performance management, extensive employee involvement, training and career development . Much of this work has linked the mere existence of such practices, particularly when integrated with an organizations business strategy of business model, to positive organizational outcomes. This work has been used by by academics and maybe should be used by practitioners to evidence the credibility and impact of the HR function through the substantial benefits resulting from high commitment HR.

However, as anyone who has been the recipient of the mismatch between the ‘people are our most important asset’ and the actual implementation of such practices will tell you, it is not the existence of such practices that are important but the consistency and vigour with which they are implemented, whether or not employees actually expect and value what they deliver and whether their experience of these bundles of practices is a coherent, beneficial and fair one. This was the subject of a symposium we took part in at the British Academy of Management’s HR in Healthcare track, the papers in which were all characterised by a simple but powerful idea, initially put forward by Greg Bamber from Monash. He drew on thinking from a chapter in a forthcoming handbook from Sage on human resource management which suggested that what is important about high performance work systems is not their existence but the signals they send to employees and whether these signals are interpreted by staff as strong - intense and consistent - or weak. This is based on so-called signalling theory: strategies, policies and practices are really signals and it is employee perceptions and behaviours resulting from these signals that really predicts organizational outcomes.

Our paper on the employer branding in the Scottish healthcare system could certainly be interpreted in this light. Like much of the other research in healthcare, re-interpreted into the language of signalling theory, we found that staff in healthcare often exhibit low levels of identification and/or engagement with their employers, despite the existence of well intentioned HPWS. This is due, in part at least, to the weak and mixed messages they receive from senior leadership teams, which sometimes see themselves as the 'meat in the sandwich' between at least two forces. The first are government initiatives and targets (often developed to satisfy the needs for politicians and the media to tell and sell simple stories to the general public and the media that shapes their interests). The second is the professional power of certain clinical groups to block their reforms. These mixed and weak messages were core themes of Greg’s paper on the key role of ward managers in fostering high performance and, indeed, as pointed out by Stephen Procter, the chair of the symposium, one of the themes of our own paper.

Perhaps the most demonstration of the impact of signals and HPWS was made by Jody Hoffer Gittell from the US, who has written extensively in the field of relational coordination for academics and practitioners (see her website for a full explanation of her ideas). Jody's paper was, for me at least, one of the most impressive of the conference because of its rigour and relevance to practitioners. She and her colleagues put together a very well constructed study that demonstrated a strong and positive relationship between staff reports of their experiences of HPWS in healthcare and positive organizational outcomes, which included, among other measures, variations in patient experiences and actual results of a particular kind of surgical operation in different hospitals. The line of sight was not a direct one but mediated by staff perceptions and experience of other team members' levels of collaboration and relational coordination. Her findings suggested that a small increase in the experience and reporting of relational coordination among healthcare teams led to proportionately very large increase in patient outcomes. The importance of relational coordination, one key measure of social capital, however, was less apparent among physicians, who tended to be less impressed by the idea or were reported to be less involved by others in relational coordination. This could be put down to structural problems, ie. they operated across a number of hospitals and were less integrated into hospital-based teams. Or perhaps maybe because of their lack of professional training in such issues? One of the implications of the study is that by having physicians more integrated into the care teams in hospitals, so sending signals about the importance of relational coordination, such a change would pay off markedly in key patient outcomes.

These ideas have important practical consequences for HR and assessing the impact of HR. Not only should we concerned with the design of HR strategies and architectures but also the signals they send, how they are interpreted and what intervening factors influence the messages received. Our argument is that there are two key ones, which don’t require a great deal of rocket science to understand. The first lies in the skill, will and, importantly, the opportunity (removing blockages and introducing enabling structures) of line managers to implement HPWS. The second is for senior leaders to signal and follow through on the messages of HPWS and, increasingly, on higher values in more ethical, innovative and caring forms of leadership 2.0 (see earlier post on management 2.0).

Friday, 11 September 2009

Employee Impact on Corporate Reputations and Web 2.0

I spent a very pleasant day on Wednesday with the HR team of Standard Life, one of Europe's major insurance and asset management companies as part of their 'Big Conversation' on the future of HR in the organization. It's great to see companies like this engaging in a serious way with outsiders who can bring something to their conversation to help them reflect on what they do and, hopefully, do things differently. The aim of the day was to help them enhance their own reputations and that of the company, and this was certainly what my co-presenter, Bill McEwen from the Gallup Organization, did.

One of the benefits that good consultants can bring to the table is often large data sets, which Bill certainly had at his fingertips. His theme was the relationship between employee brand advocacy and a range of customer satisfaction/ enagagement scores, which he demonstrated through close correlations. It was also interesting to see his data on the low levels of brand advocacy among government and financial services employees. However, perhaps the most powerful messages he put across were contained in two little stories. One was of the multiplicative effects of employee advocacy and engagement, e.g. great hotel buildings with disengaged employees equal zero customer satisfaction, according to Ritz Carlton's CEO. The other was the story of Dave Carroll, which appeared in Forbes magazine. To quote Bill:

'Dave Carroll was sitting in a window seat on a United plane at O'Hare airport in Chicago when he looked out and saw baggage handlers hurling guitar cases (Dave and his colleagues' guitars) through the air. He pointed it out to flight attendants; they responded with indifference. When he arrived in Nebraska, he found that his instrument had been smashed. After months of complaining to the airline and getting no response, he wrote and performed a song, "United Breaks Guitars," and posted it on YouTube. It was viewed more than 3 million times in its first 10 days'.

Bill's point was that it was the United flight attendant indifference and the indifference of the follow up staff that has caused probably United a great deal in terms of loss of reputation - a great deal more than the investment in effort to promote better customer service among flight attendants and/ or the $3-400 it would have cost United to replace the broken guitars and prevented the posting.