Corporate Reputations and Management Practices

I'm taking part in a forum on Corporate Reputations and Management Practices as part of an initiative organized by Macquarie University where I'm based for a brief period.  As part of my presentation, I'll refer to another recent session in Edinburgh in which I participated on the impact of new human rights developments arising from the Ruggie Report.  This report and indeed much of the discussion was relatively new to me but is likely to have major implications for multinational corporations and is already the subject of business school research.
You can find out a little more about it from the following Warwick University website, which has the details of the Edinburgh conference and the 'Edinburgh Declaration'.  For those of you interested in corporate responsibility and for those of you managing in multinationals this is essential reading.  

http://www.business-humanrights.org/Documents/NHRIsConference2010. 

New Assumptions about Strategic HRM?

I attended the Strategic Management Society annual Conference in Rome where I went to find out about what strategy academics have to say about HRM as a source of value creation.  And I’m pleased that I went if only to confirm what I’ve said in other blogs about the search for new business paradigms. Like many of the other management scholars, strategy academics have fallen out of love with business and with some of their most treasured assumptions about shareholder value.  This was evidenced by two new special interest groups that have formed in the Strategic Management Society on human capital and on stakeholder theory.

The opening plenary session given by some of the most prominent strategy academics  - Jay Barney, Russ Coff, Ed Freeman and … - raised lots of questions and some answers on the topic of ‘where strategic thinking in business needs to go’.  Jay Barney, the man most associated with what has become one of the most discussed ideas among management academics – the resource-based view of strategy (RBV) – outlined some of the assumptions/ predictions it has made with respect to human capital.   One of the most important is that firm-specific, as distinct from general (or transferable), human capital is a potentially great source of competitive advantage because it can be valuable, rare and inimitable.  This is why firms seek to engage employees to secure their identification and willingness to ‘go the extra mile’.   It also explains why firms are much more eager to train employee in the routines, processes, and ways of ‘doing things around  here’ and much less eager to give them a more general education, such as an MBA, which  they can use for their own advantage and for the advantage of other firms.  This last point, however, highlights a problem for the RBV: rational employees recognise that they do not benefit as much as firms from investing in their own firm-specific human because of what is called asymmetric power relations.  Basically, this refers to the lack of power and knowledge of individuals in relation to firms.  Thus, we are left with a distribution problem:  after all costs are paid, who should benefit from residual profits and how should this residual amount be shared?

The traditional answer, which has underpinned strategic management theory and corporate governance since the 1980s, is the normative theory of shareholder value.   Employees are paid a wage for their investment in general human capital in the firm and may gain in some of share ownership if they in invest in firm-specific human capital, but the shareholders have sole ownership rights and thus the only legitimate claim on residual profits.  Firms in the 1990s did try to limit their investment in firm-specific human capital by retrenching into employment contracts that were largely transactional rather than relational – the so called ‘employability contract’.  This, more or less stated that firms were unable or unwilling to guarantee the old style contract based on job security and firm-specific careers, but were willing to help employees develop skills (general human capital) that they could use to make them more employable in the future in return for their temporary demonstration of high commitment.  However, such psychological contracts have not proven successful, especially in attracting and engaging knowledge workers and senior managers, who often have high levels of general human capital and are capable of bargaining away much of the residual profits that would normally accrue to shareholders.  This is best exemplified by the case of premier league professional footballers and many CEOs and other star employees (who are both unique and capable of adding high value).

Russ Coff suggested the answer lay in developing a different theory of strategic management, one that is based on stakeholder theory rather than shareholder value.  This was hardly revolutionary stuff, but was positioned as such by these eminent strategy academics.  It was left to Ed Freeman, who has a new book coming out on stakeholder theory, to put the argument for a different view of what might count as useful theorising about strategy and where it may need to go.  His time seems to have come, especially given the weakening position of the US in the global economy.

I’m still stunned, however, over how large the gulf is between assumptions made by American scholars and those made by their (particularly continental) European counterparts.  However, we should be grateful for small mercies.

Back in the Frame and Following up on Engagement

I’ve had a (partly enforced) break over the holiday period (and beyond), due to some many writing deadlines, being overseas and being laid low for a few weeks (first time for me), so I'm likely to be a little ring rusty in the blogging sense. Anyway I would like to follow on with the post from November regarding engagement. In that post I was critical of the Macleod report’s discussion on the subject because it lacked the necessary rigour to make engagement a useful practitioner tool that would stand real scrutiny. Susan Hetrick and I first raised this issue of engagement in our 2006 book on corporate reputations and HR, suggesting it was little more than consultancy re-packaging of old ideas designed to refresh their HR product portfolio. Since then, I’ve come around to the idea of engagement, in part because it is so big in practice. So I’ve been working on developing a model of how leadership and high performance HR work systems influence different components of engagement to produce critical business and public sector outcomes. This model will be published in a forthcoming chapter on employer branding (with Saskia Dyke from Switzerland) and another in an article on leadership branding (with Julie Hodges from Durham). Susan and I will also be using it as the basis for a forthcoming financial services presentation.
Co-incidentally, two prominent HR academic colleagues of mine, Elaine Farndale from Tilburg and Paul Sparrow from Lancaster have been working on engagement, both of whom have made major contributions to the literature on the topic and have influenced my thinking significantly.
I’ve mentioned Paul’s work before and his Centre for Performance-led HR at Lancaster University. Along with Shashi Balain, he produced a really insightful contribution to the notion of engagement in a white paper. As part of that contribution, Paul and his colleagues have also made a series of short videos summarising their work. These are really worth looking at.
However, to my mind Elaine’s work on engagement with colleagues from Tilberg, represents a major breakthrough in bringing some rigour and evidence to the topic and anyone seriously interested in engagement should contact Elaine to get a hold of this paper by Bejier, Farndale and Van Veldhoven . For me , the most important contribution has been to define two different foci of engagement – work engagement, which I’ve already written about on this blog, and organizational engagement, which is what most consultants typically refer to as employee engagement. It also makes a key distinction between state engagement (attitudes and emotions which people hold to work and their organization) and behavioural engagement (actions that employees report taking to display engagement with their work and the organization). For example, many professionals are engaged in their work but not the organization, often to the point of over-engagement or burnout. Conversely, managers can become over-engaged (or over-identified) with the organization, which can lead to a form of collective blindness, intolerance of others who are not ‘organization men’ and a failure to privilege professional and moral values in decision-making. This is a topic that Elaine, Japp Paauwe and I hope to be discussing at a forthcoming symposium on HR’s contribution to corporate governance at the Academy of Management in August – the ‘darkside of engagement’ – something most of us can recognise but which has rarely featured in the practitioner literature..
Currently, we’re working on expanding the range of engagement foci – what people at work engage with – to show how they are distinct but related. For example, in healthcare and financial services, it is clear that people are engaged or can become disengaged with the industry, which is very important in explaining recruitment and retention. It is also clear that people can be more or less engaged with each other in the performance of their work, which is related to team-working and distributed leadership, both critical drivers of effective performance.

Much Shorter Reflections on the CIPD Annual Conference and Engagement

Picking up on the previous blog, a key theme of conference was employee engagement, which ran through a number of sessions I attended. Perhaps the most important was the presentation of the MacLeod Report by no less than David MacLeod himself and Nita Clarke. I've previously expressed a mild form of disappointment with this work during an earlier blog on Saturday 18th July, to which I want to return in the spirit of critical friendship. David McLeod encouraged this during his presentation, so I'll try to oblige.

To focus on the positive, firstly, these two advocates have turned into evangelists for their work and cause, and this can only be to the benefit of the British economy and for HR professionals seeking ways in which they can add strategic value. Secondly, they have also enlisted and marshalled an impressive set of fellow travellers and evidence to support their cause. Thirdly, they have produced a highly readable and informative report, which they outlined with vigour and dedication during their presentation.

However, they still have not yet nailed down the concept for my liking, nor shown how this consultancy-generated idea is an advance on what academics have been talking about for years. Indeed, listening to the presentation, a harsh reading might question - what's new! If you have any sense of history in the field, you could justifiably argue that the same message and mode of enquiry has re-surfaced at least five times in since the 1920s and 1930s, beginning with the reporting of some dubious human relations experiments by the arch-evangelist, gifted self-publicist and, some would claim, charlatan, Elton Mayo (I've written about this in the Managing People book) and most recently popularised by Peters and Waterman in the early 1980s when they began the culture-excellence movement with some sketchy research on so-called excellent companies. As many readers will know, half of these excellent companies experienced a significant fall from grace five years after they did their initial research. You can guess where I'm going with using only 'excellent' case study companies as the basis for providing long term predictions - not very clever, and a trap the McLeod report is in danger of falling into.

That said, just like In Search of Excellence, we should be careful of throwing out the baby with the bathwater, as some academics did and are likely to do with the MacLeod report. Instead, we should be building on its positives and its capturing of the zeitgeist. What David MacLeod needs to do, contrary to his dismissal of fifty-plus definitions as a way of avoiding the problem, is to begin to get some definitional clarity on the concept. For it is only by doing so that we will be able to measure engagement's impact and understand its drivers. Paul Sparrow's group at Lancaster are beginning to do just that; so are we in some forthcoming papers, where we have begun to disentangle the conflation of engagement into four related but distinct sets of ideas about what workers can engage with (and, just as important, measure them with valid and reliable scales with known drivers and outcomes) .

In the corporate reputations book I examined a number of consulting approaches to the concept and found them to be inconsistent in what people were supposed to be engaged with and just plain wrong in confusing correlations with prediction - are engaged workers likely to create high performance organisations, or are high performance organisations likely to create the conditions for engaged workers?. These are not just academic niceties but have important practical implications. Unfortunately, David MacLeod's presentation gave the impression of falling into into both traps.

To conclude, we are now at the stage that engagement is too important a concept for academics to dismiss as yet another consultancy-generated fad. It has a lot going for it and needs to be treated a little more rigourously; otherwise the MacLeod Report will loose a lot of its relevance - just like its predecessors!

Explaining Dissatisfaction with Senior Leaders

I'm faced with a little problem on a major research project we are conducting, and that is how to understand why staff in a public sector environment find their senior leadership teams to be disconnected, more interested in politics and government targets and not particularly focused on clients. It's also the subject of a 'provocative' commentary I'm writing about on the need for a leadership 2.0 for Skills for Health in the UK.

As you can imagine, senior leadership teams see the problem quite differently from so called followers. They see themselves as caught up in having to resolve, often conflicting demands from a variety of stakeholders, including the increasing need to meet public value objectives, and having to make tough decisions about resource allocation, which inevitably clash with the single-minded aims of powerful professional groups such as physicians and other clinical grades.

I’ve tackled this issue before in an earlier blog on a report Keith Grint and I did on the 'wicked problems' of leadership in the public sector for the Scottish Government. In that report, the issue of distributed leadership (DL) as an important new(ish) theory was raised as a possible panacea, and such is the head of steam behind it in organizations such as the NHS and other public sector bodies in the UK and elsewhere, it needs to be treated seriously, whatever it might mean. Peter Gronn, an ex-colleague at Glasgow University, has written extensively about this issue, and he often provides the starting point for a stimulating conversation. And he certainly did that at an excellent symposium at the British Academy of Management in September on this issue, which attempted to get under the skin of DL through four insightful presentations that have caused me to re-visit my recent thinking on the subject.

Jackie Ford from Bradford University pointed out that DL has come to the rescue of our unrealistic implicit theories of hero managers in the public sector, point out from her research what most public sector senior managers often feel, i.e. frustration and inordinate levels of stress because they have so little autonomy as a result of agendas being set for the over which they have no control. Leaders, as it were, become arenas for competing narratives and expectations, which they often seek to deflect by laying off responsibility to the centre, or, increasingly look to the language and promises of distributed leadership to others throughout the organization to help them resolve.

This was pretty much the message of Jon Gosling and Richard Bolden from Exeter following their recent research into leadership in Higher education. They found that distributed leadership existed in the sense that certain responsibilities and decision-making authority were delegated but only within bounds, and that power remained at the top, often linked to control over key resources. They argued that there were four dominant discourses of leadership and DL – as an alternative to management and administration (re-labelling), as a bridge between previous collegial styles and new theories of executive behaviour, as a reality (or appearance of reality) towards encouraging responsible followership, and as a rhetorical device to draw attention to some problems and solutions but mask others.

Annie Pye, also from Exeter saw ownership as an important missing link, reflecting Barbara Kellerman’s call for responsible followership as a way of thinking about distributed leadership, often operationalised in simple ways such as going the extra mile to help others or offer suggestions on how to improve things. However, in the private sector at least, this was less likely to be the case (unless you worked for a John Lewis organization that shared responsibility, ownership and rewards among all staff) because of the increasing gap between upper and lower eschalons.

The session was opened by a good colleague of mine, Paul Iles, from Leeds Metrapolitan University. His contribution was to set out some useful two-by-two matrices for comparing and contrasting the various features of leadership. Two of the most useful were to see leadership in terms of being a planned or emergent phenomenon and essentially an individual or collective phenmenon, with celebrity leadership and tradition leader development typically planned and individualistic while DL was typically emergent and collective. One of the best examples of this perspective of DL is work by David Buchanan and colleagues on the UK healthcare system, demonstrating that, under certain circumstances, 'no-one in charge' can lead to highly positive outcomes critical areas such as cancer care. However, another matrix has provided me with a perspective to criticise much of this work - that is to see leadership and the assumptions underpinning it either in rational-objectivist- unitary terms or in political/ pluralist terms. The first assumes that organizations among other things are essentially characterised by common cause and common spirit, amenable to rational solutions such as leadership and sophisticated HR. The second is more traditional in industrial relations teaching, seeing organizations made up of legitimate but competing interests, which frequently come into conflict, and are usually only resolved through compromise and negotiation to allow everyone gets something of their aims.

I've recently used this last perspective to provoke an arguably more realisitic discussion on the potential of leadership in healthcare to incorporate doctors into management, a popular solution in the UK NHS but one fraught with difficulty. This is because many hold a pluralist perspective and seek to remain a 'loyal' but necessary opposition to ensure that patient care is not submerged in the welter of politically-inspired changes and financially-driven targets. More of this in a later post. The main point, however, is that much of leadership's popularity is rooted in optimistic but innappropriate assumptions about organizations. Criticisms of this arguably misplaced faith in unitarism used to be the recieved wisdom thirty years ago in a more pluralist Britain before Thatcher, when opposition to power was sees in a more positive light, and when social engineering through culture management, HR and the 'cult of the customer' to discipline employees was less prevalent. Are we about to return to these pluralist assumptions with calls for a new leadership 2.0? I don't think so, but the zeitgeist is changing. The 'romance with leaders' is definitely on the wain - even in football, the subject of a forthcoming post.

Living the Brand at Abercrombie & Fitch

On what has turned out to be a very long journey back from Chicago to Scotland, I found myself killing time in a New Jersey mall after an unplanned ovenight stop at Newark Airport. I chanced to go into Abercrombie and Fitch's store, by far the most popular in the whole mall as far as I could tell. For those less familiar with fashion retailing, A&F is a top casual luxury American brand popular with young college students, so I'm not really sure what I was doing in there. Just a few hours later, I was amused and interested to read in the airport lounge at Newark a BBC news a story about A&F in London, which has just been found wanting in its application of its employer brand. A young, highly qualified woman, Riam Dean, had been 'forced to work in the stockroom after wearing a cardigan to cover her prosthetic arm'. The industrial tribunal which heard her case 'is satisfied the reason for the claimant's dismissal was her breach of the 'look policy' in wearing a cardigan. Throughout the hearing A & F's London flagship store management claimed they had an inclusive diverity policy.

A couple of points emerge from this case. The first is just how important decisions taken by a local management team can impact on a brand. This item was number three in the national UK news, and may result, like the charges levelled against the Gap and Nike a number of years ago, in costing this company very dearly in terms of reputational capital. The second, slightly more subtle point, is that it illustrates the problems local managers have in interpreting the different strategic logics discussed in previous posts. I can well imagine an agonised discussion/debate taking place either in the head of the manager who took the decision to put the girl in the stockroom, or maybe between a group of managers/ supervisors in the store over the logic of distinctiveness (most fashion brands feel the need to have their staff 'live the brand' in terms of their appearance) and the logic of legitimacy.

At 3.00 am this morning my colleagues who were also stuck in the airport with me (Continental Airlines certainly did not live up to its brand claim for satisfied customers) were debating the merits of sustainable management and corporate social responsibility. Our sleepy conclusions were that new standards of legitimacy will probably win in the end in spite of the edicts of Milton Friedmann on the unitary role of business, forcing firms to become more ethical in their approach to doing business. Not easy to square, but firms like A & F had better eat some humble pie to recover their reputation in the UK at least for being a 'cool brand'.

HR, Learning and Performance

Not sure how I've managed to miss this, but there's an excellent report in the Harvard Business School's Working Knowledge Series by Amy Edmondson, someone whose work is always worth listening to and I've often cited her publications in the past. In this Q and A session, she decribes her research journey into organizational learning and learning organizations over a fifteen year period following an earlier career as an OD practitioner. One of the key messages she has taken from it is the tension between the need for organizations to learn in order to survive in the long run and the short term problems learning creates for performance because such learning frequently involves making errors and, more importantly, acknowledging in public the errors you have made. This tension is a difficult one for managers to handle in most arenas so the tendency is to go for the short term performance gains at the expense of learning because of the typical basis on which their performance is managed and rewarded. Nowhere is this more evident than in the frequently reported and experienced clashes between short term target achievement in the NHS and long term organizational success. Edmonson's work is particularly appropriate in this context because her early research was set in a clinical context.


Edmonson describes the challenge for managers as two-fold:

'One is to become team leaders who promote open discussion, trial and error and the pursuit of new possibilities in the groups they directly influence. The other is to work hard to build organizations to produce extraordinary teamwork and learning behaviours'.

These challenges are part of the message of the papers and reports I've been discussing on engagement in the last few blogs. It is also a message we are delivering in a new paper we're (myself, Paul Gollan and Kerry Grigg) writing on how employer branding can and should contribute to the innovation agenda. Talent management, employer branding and engagement have traditionally been aimed at building human capital in organizations, focusing on the beliefs, values, attitudes, competences and behaviours of individuals. However, as much of the research on innovation has shown, it is the creation of social capital (building bridges, bonds and trust in teams and organizations) that is the necessary condition for organizational learning and innovation. Edmondson's work over the last decade and a half begins to show how this can be achieved.

New Perspectives on Engagement

Last week I had a very productive time doing some work with a large multinational company based in Zurich which is doing some really interesting work on employer branding and HR strategy – hello Saskia, Paulo and team. Like all organizations operating in a multinational context, they are struggling with the integration-responsiveness problem discussed in the last blog, which, in part, turns on the need to have employees identify and ‘engage’ with the organization globally and locally. Engagement has become one of the hot topics among HR practitioners, driven mostly by the management consulting industry’s desire to re-invent, re-package and re-fresh tired old ideas that have been around for many years in the academic community such as satisfaction, commitment, organizational citizenship and identity, and psychological contracting, and link them statistically to appealing notions such as share price increases, financial performance and a range of other outcomes.
In a chapter of a book we wrote on corporate reputations and HR in 2006, we criticised this arguably naive and perhaps even cynical attempt by consulting firms to re-invent the wheel and to do so in a with a lack of rigour that hardly justified the huge amounts of money being spent on this new ‘industry’. We examined a number of such approaches and found little or no agreement on what the meant by engagement, a significant problem in its own right; nor was the evidence particularly compelling since it was based on a lack of identifiable and sound logic connecting the precursors of engagement to engagement itself and onwards to the outcomes claimed for it. Our argument in the form of a question in that chapter was: why not use some of the more rigorous work on psychological contracting, citizenship etc., that has been around for a number of years and build in some of the newer ideas of the engagement industry to improve their utility? In part, we were basing our arguments on a book produced by Paul Sparrow and Cary Cooper in 2003, so it is with great interest we read a new working paper by Paul and one of his colleagues, Shashi Balain to be found on the website of Lancaster University’s Centre for Performance-led HR.
In this paper they begin with a section on why engagement is becoming so important to practitioners, arguing that it has served three functions: as an internal marketing process to sell complex change to the workforce; as a means of linking employee motivations and committed behaviour to process improvement; and as a predictor of service and organizational performance, usually in the form of a variation on the well known ‘service-profit’ chain. Like our own chapter, they proceed to evaluate the consultancy attempts to develop ‘theories’ of engagement, claiming that the research designs used do not allow them to infer that their own versions of engagement cause performance improvements, that there is little construct validity in what they choose to define and measure as engagement, and that they all use different items to measure what they describe as engagement. Though some promising work in proving useful statistical relationships has been produced by some of the consulting firms, it lacks strong logical basis and argument as why their versions of engagement should be linked to individual and organizational outcomes, and is thus unlikely to be helpful to HR practitioner seeking to manage the process.
Balain and Sparrow suggest an extremely useful way forward to make the concept more useful. They argue that HR directors in specific companies need to reverse engineer the type of performance that an organization is trying to create, in much the same way as the book previously reviewed by Becker et al does. What is it that we are asking employees to engage with at an individual level and organizational level? In answering these questions they produce a model of antecedents of engagements (job characteristics, perceived organizational support, leadership, reward and recognitions, procedural fairness and trust), which leads to strong performance bonds (individual and organizational identification, internalisation of company values, psychological ownership, etc), leading to conditions of engagement (i.e. job engagement and organizational engagement) , which result in important individual and group level outcomes (e.g. motivation, discretionary effort, commitment, improved group and organizational morale, organizational citizenship, etc). One of the key points of this model is that it makes use of well-known and validated scales. Another is that it is necessarily more complicated than most of the overly-simplified consulting models.
A further, extremely important point they make is that there is no single organizational performance recipe. The potential contribution that employee engagement makes in different organizations is likely to differ, so why should engagement have the same performance impact across different service models? To reinforce this point, they identify four different service models from the marketing literature - personal v non personal service, encounter v relationships, collaborative v single service relationship and B2B and B2C interactions – all of which are likely to make different demands on what and who employees need to be engaged with . Their claim is that HR directors have a ‘fantastic opportunity’ to really get under the skin of engagement in their own organizations by developing more complex understandings and models of engagement that apply to their specific circumstances. Two key questions they need to address is: what are they asking their employees to engage with, and what beliefs, attitudes, intentions and behaviours do we require of them to engage. To make the construct more useful to practitioners, HRDs need to identify the performance belief – ‘a shared belief of a team that it has the required ability, resources, goal clarity and leadership attributes to achieve the desired performance outcomes’ (p 38). The performance belief is the cause, while being engaged to perform is the effect. Answering these questions allows HRDs to manage engagement more effectively, but this requires them to measure different things from the standard attitude or engagement survey, which Balain and Sparrow begin to describe. Here they need to do a little more work. Overall, however, the general arguments in the paper are excellent and take us a lot further in understanding engagement than anything else I’ve read so far. There is still a need to do some tight editing and crisping up of the arguments to make them more accessible to most practitioners, but this paper is certainly the best place to begin for serious work in this burgeoning field.

In visiting this excellent site you will find other papers of interest and also a survey on HR in tough times that Paul would like you to help him out with.

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.

Evaluating Investments in HR

For many HR practitioners being able to provide a logical business case and proper evaluation that links HR investment to key financial outcomes would represent a huge step forward for their credibility. Yet, it is a fact that we typically spend large sums of money implementing leadership development programmes, talent management, employer branding etc, and almost nothing on assessing their strategic impact. In part, this is because we believe that it is impossible to measure intangibles - what's meaningful isn't measurable and what's measurable isn't usually meaningful. So we justify our actions on the basis of acts of faith or attempt to persuade senior managers with arguments along the best practice, 'everyone is doing it', so 'we don't want to be left behind' lines (often following attendance at some networking event). Unreflective copying and jumping on the bandwagon, alongside legal requirements (themselves often based on 'best practice'), are the main drivers and justification for spending vast sums of money on 'soft' initiatives. This is why institutional theorists argue most organizations and their HR architectures end up looking the same, and, as the more perceptive strategists point out, where is the competitive advantage (or even best practice) in that?

So it is with some relief (not total) that I've picked up two recent American books. One, the Differentitated Workforce' by Becker, Huselid and Beatty, I will leave for a later post because it is more mainstream and I'm currently testing some of their ideas with a group of great HR managers from Getinge as we speak. The other is Wayne Cascio and John Boudreau's 'Investing in People: Financial Impact of Human Resource Initiatives'. This book is probably the best I've read in the field, in part because it deals with measures in a sophisticated way, in part because it not so much a book about measures but about understanding the logics that link strategic decisions to human capital initiatives and their outcomes. John Boudreau is a 'name' on the HR circuit following his book in 2007 on 'Beyond HR', while Wayne Cascio I know from my time working at the University of Colorado where he teaches and researches. Wayne wrote one of the first books on measuring HR and this works represents the culmination of a long career in introducing rationalism into the HR profession.

For me, the highlights of their book are three-fold. The first is the LAMP framework, which states that you can only use HR metrics as a force for strategic change if you have the right logic (that link your measures to competitive advantage, pivotal points through causal modelling, etc), the right measures (timely, reliable and available data) the right analytics (good questions and analysis of data) and the right processes (good knowledge management in the organization and a culture that supports learning, not just assessment, from measurement).

The second is the use of yield curves to examine the types of jobs (and people) where firms should invest their money for the greatest return. Boudreau tackled this in his earlier book and the book by Becker et al also make great play of this very important point that it is the range of performance variation in jobs (the difference between best performance and poor performance) that helps determine this yield. The most quoted example is Disney: where do you put your money for greatest return ie satisfied customers, Mickey Mouse or the street sweepers who are key customer relations people? The answer is for a small extra investment in selecting and developing street sweepers you get an enormous yield in satisfied customers because their performance varies so much; investing more in the characters playing Mickey Mouse etc is unlikely to yield such returns because the performance variation in these characters has been effectively drilled out so that one Mickey Mouse is no different to another. You can apply this analogy in healthcare, education and many other jobs - well worth thinking about.

The third key element is the focus on causal modelling and logic. This is fast becoming de rigeur among sophisticated HR functions and forms part of a project we are conducting for the Scottish Governement and ESRC. The core argument is that organizations need to develop the right logic linking their HR practices to business unit or strategic peformance. Sounds logical but it is not what most organizations do, judging by the use made of engagement models and engagement data in the firms I observe. So if you are involved in assessing employee engagement, just reading the chapter on the logics of engagement (derived from sound evidence-based academic research) will be worth your time and money alone.

Two words of warning. This is not an easy read for the more mathematically challenged, but don't be put off because the arguments are the most important element in the book (and you can always employ a statistician). Second, it begins to sound a little like best practice by railing against best practice, just like the Becker et al book I'll discuss next. I'm always worried by the idea there is only one way or the highway approaches to HR, which this is close to becoming. There are some important assumptions and simplifications in this book that just don't stand close scrutiny. For all that, this is one of the HR books of the year for me, and I will use it extensively in teaching and consulting.

Local Problems with Global Significance?

Last Friday I had the privilege of helping facilitate a debate on the current problems and what to do about them with a group of highly insightful HR directors from some of Scotland's largest organizations. This debate was part of the CIPDs Roundtable discussions on 'Shaping the Future' and a summary of our deliberations will appear in People Management. However, in the light of recent posts I want to flag a couple of issues.

The first was that the group tended to see things in 'glass half full terms', describing the current crisis to bring about major changes in culture and the way in which managers and leaders manage. The second was the problems of reputation spillover from the banking crisis, both for bankers and for confidence among Scottish companies and employees following the problems of two of its major banks - RBS and HBOS - and new problems such as the demise of its largest building society, the Dunfermline.

During the debate, colleagues cited evidence of ordinary banking employees (in organizations relatively unaffected by the crisis) seeking support because of the vitriol being heaped on the Scottish banking sector. Much has been made in recent press commentary from the quality Scottish newspapers about this issue and needs little elaboration. However, much of the discussion focused on the impact of these failures on the reputation of Scottish companies generally and its managers. This represents a fast fall from Grace, paradoxically generated by the previous success of companies like RBS and HBOS, and its reputation over the last two hundred years for generating real innovation, e.g. the steam engine, television, telephone and even the principles of capitalism itself through the work of Adam Smith, a professor at Glasgow University. One of the potential consequences of this fall is a reversion to Scots managers 'knowing their place' and 'not getting above themselves', a problems discussed in an influential book by Carole Craig on the Scots' Crisis of Confidence.

To continue with this theme of management leadership, it is the subject of an Economic and Social Research Council/ Scottish Government event I'm taking part in on May 19th in Edinburgh. This event aims to bring policy makers, practitioners and academics together to debate the impact of new theories of leadership on the Scottish Public Sector. Two academics, Keith Grint from Warwick and myself, will provide some provacations to that debate in the form of an ESRC publication. Keith has written an excellent book on 'The Art of Leadership' and, among others, a recent paper on 'Wicked Problems and Clumsy Solutions; the Role of Leadership'. A key theme of his is a distinction between management and leadership rooted in n the context and nature of problems to be solved. Management, he argues, is about solving known problems, while leadership is about resolving new questions and issues - de ja vu versus vu jade (excuse the lack of accents)- for which there are no simple answers, only ambiguity, tensions and complexity. One implication of this is the innappropriateness of a model of leadership of all knowing forceful individuals being able to take decisions on their own or in a small cabal. This is the model of 'celebrity' or charismatic leadership in which many of us have placed so much faith in recent years, attributing them with almost mythical abilities and rewarding them on that basis (see last post). Keith's works brings together a long list of Greek philosphers and recent management academics including Aristotle, Kotter, Weick and Robert Chia, who have all discussed the importance of complexification rather than simplification in leadership and the need to draw on wisdom and reflective experience rather than schooled learning. Which brings me to my contribution to that debate, or at least one of them, because it is something close to my heart and a key message of my Managing People in Changing Contexts book.

A theme of mine will be that we have an increasing mistrust of senior leadership, not only in the private sector, as evidenced by the recent anticapitalist demonstrations and bad press, but also in the public sector in Scotland and elsewhere. We have some local evidence of this from recent research we have carried out in the NHS. Part of the explantion of this lies in our overloaded expectations of leadership and our culturally-generated implicit theories of leaders - we have come to expect them to have visions, be great communicators, motivate and inspire us, etc. And when they don't, we get very dissappointed and tell them so through surveys and focus groups. Another part of the explanation lies in the demands placed on leadership, which, in a public sector setting, are to meet strictly defined targets. Target setting, according to Grint, is a management problem and one that leaders in the public sector find it both easier and politically sensible to address. However, they do so at a cost, not only in failing to fulfil the expectations of their 'followers' but also at the expense of sound strategic and innovative thinking about creating public value. This requires greater involvement of those that can/ wish to contribute to innovation in public management, the creation of environments where risk taking can be exercised without individuals being nailed to the mask when they make mistakes, and the application and exercise of wisdom. This has been described as 'the achievement of ignorance' (Weick) - being able to admit you just don't know - but being confident enough while being ready to admit they you really don't know. It also means involving others who may know more - not rocket science but difficult to live with if you believe in management 1.0.

Other research we've undertaken shows that leaders in Scotland are less likely to seek solutions from business schools to their problems because leadership is not something that can be learned in schools. They are probably right in this assessment, which presents real challenges for the local business schools in being relevant and in making a contribution to the Scottish economy. A report shortly to appear from the Royal Society of Edinburgh on the Scottish business schools emphasises this point.

So, I'm going to go down the line of the need for a leadership/management 2.0 (see previous posts) articulated by Hamel and Birksinshaw in the Harvard Business Review recently to rescue the reputation of leadership (and management), and, beating my drum once again, the need to focus on innovation, a more realistic and modest 'branding' of leadership, its contribution/ relationship with governance and social responsibility.

More later when we've written the ESRC/Scottish Government pamphlet.

Recession-proofing Employer Branding

What future for employer branding seems to be all the rage just now in the current recessionary context. The CIPD are developing a conference on this topic in May, which I've been invited to speak at (thanks Anita and Rebecca and hello from down under). As luck would have it, I was doing a presentation yesterday with two colleagues in Sydney - Paul Gollan and Kerry Grigg - for a mixed audience of practitioners and academics, where we outlined some thoughts on this issue plus a future for employer branding that we're currently working on. I'm not the best judge, but I think it went down reasonably well, so the drift of the presentation may be worth sharing with some of the readers of this blog.

The core of my argument and of a new paper we're writing is that employer branding is recession-proof in the sense that it was never only or mainly about talent wars/ talent shortages caused by bouyant economies, though recruiting talented people was and will remain an important driver. Part of the presentation yesterday was that the four drivers of employer branding and its impact on corporate reputations are still relevant in todays recessionary economic circumstances - the need for talent in knowledge economies and knowledge intensive organizations, the long terms demographic problems faced by most economies, the long term decline in employee identification with employers and decreasing levels of trust, and the rise of idiosyncratic careers built around individuals rather than organizations. What has probably changed over the past decade is that employee expectations of good employers have been slowly ratcheted up by organizations engaging in practices such as employer branding/employer of choice schemes from which they will find it difficult to disentangle. Yes, organizations may not be recruiting so much, particularly in financial services, construction, retailing and manufacturing, but the impact of how they cut costs by laying people off and how they continue to create positive internal images for existing employees (particularly those currently being blamed for the mess we're in) will continue to have a major impact on their corporate reputations.

By corporate reputations, I'm referring to some really big ticket issues - corporate branding, corporate governance and corporate social responsibility - which require deft handling to manage the inevitable tensions between the needs of organizations to be simultaneously different through corporate branding and legitimate ( or the same) through the exercise of good governance and social responsibility. In many respects, these are, or should be, the key drivers of strategy and the endgame of good people management. Having just finished reading Robert Peston's excellent book on 'Who Runs Britain', which is an insightful guide to the complex financial engineering 'rocket science and crude incentivization that has been at the heart of the current problems, I'm more convinced than ever of the need for HR and employer branding to address these issues.

However, there is another agenda that places techniques like employer branding centre stage and that is the innovation agenda. We've been writing quite a bit about this recently, but to cut a long story short, good evidence suggests that innovation relies less on investment in human capital (talented individuals) and more on social capital (creating bonding and bridges or social networks) and organizational capital (what's left when people walk out the door at night, e.g. structures, systems, processes and technology etc). If advocates of employer branding and the HR function wants to make an impact, addressing the innovation agenda (wealth creation) in knowledge economies by ensuring that such innovation is socially responsible and well governed (ie. risk managed) is the place to be. Our argument is that employer branding has much to offer in this direction - by helping create the necessary diversity of talent, social capital and social networks needed for innovation. But such branding will only do so if it is authentic and is rid of much of the brandwashing and marketing/communications spin with which it has become associated. And this is where Web 2.0 comes in - these tools have enormous potential for surfacing authentic and challenging employee voices in organizations as well as facilitating collaboration and networking beyond conventional organizations boundaries, both of which are drivers of organizational learning and innovation.

Not everyone agreed with these arguments, so it may be worth a discussion either on this blog or at the events such as the ones that the CIPD and ourselves are running with the IES.

HR and the Governance Agenda

As part of our corporate reputations and HR agenda, I've been working on a chapter with a close colleague for a new book edited by Suzanne Young on governance. The chapter will focus on the links between HR and the governance agenda, but will do so from a public sector perspective, where governance issues are equally important.

Part of the reason for the book chapter stems from the current economic crisis, which, in part at least, is a crisis of governance. A few years ago, we wrote a case study on the financial services industry, which was sub-titled 'An industry fit for the future?' In that case we questioned the role of incentives in creating an industry driven by new business and new products rather than by servicing existing customers. Well, the forecast implied by the question in the title was along the right lines, with incentives, greed and lack of governance playing a role in most explanations of what has happened. So the challenge has to be raised, to paraphrase Bert Spector's classic paper on Enron, was HR the 'unindicted co-conspirator' in the demise of financial services?

To return to the public services, our work with some senior HR directors in the NHS in Scotland has led me to think about the links between how HR governs itself, and how that plays into the so called 'three pillars of governance' in healthcare - staff governance, clinical governance and financial governance. It has also led me to think about just how central an issue this is since governance seems to be about balancing innovation and risk in all three pillars and in the HR function itself. How HR organizes itself and is incentivised to be simultaneously creative and risk-conscious can have an enormous impact on how well employees experience their organisations as employers of choice, embracing principles of fair treatment, a say in decision-making, development, a good working environment and supportive leadership (staff governance). In turn, this has obvious consequences for clinical governance, which is concerned with balancing innovations in healthcare with patient safety, especially in so far as staff are fully trained and committed to caring/ prevention goals.

However, where HR at senior levels can really make their mark is at the corporate (read financial) governance level, providing advice and help in the selection, development, performance management and incentivisation of boards. As we have seen in the financial services sector, the culture of an industry and the organisations that represent it are shaped by leadership actions and the values they espouse. Consequently, HR and people management has a key role in to play in promoting their organisations as representatives of 'higher values' rather than just 'hired hands'. So, resurrecting the arguments of Karen Legge, my position is that HR needs to think less about being strategic partners (pace Ulrich) and more about more about becoming managers of reputations - for being simultaneously different (the branding agenda) and legitimate (the governance, ethics and CSR agenda). Any thoughts?