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).

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.

Talent Management, Football Teams and Metaphors

Following up on the last blog on investment in human capital and social capital, and the example of football teams, I was taken with a little article in this week's edition of the Economist (August 22nd, 2009, p. 32) on the economics of Real Madrid's strategy for re-gaining their competitive position in world football by recruiting a new clutch of gallaticos - a metaphor for what many companies have done in the past and, apparently, one that finds support in the Harvard Business School study by Jose Luis Nueno of the soccer industry in emerging markets such as the USA, Japan and China.

For those people less engaged by football (soccer) than I am, Real Madrid have spent many millions this summer in re-applying a strategy first tried nearly ten years ago by their then president, Florentino Perez. He has has just been re-employed to help the club regain their former pre-eminent status in Spanish and world soccer from their arch-rivals Barcelona, who, interestingly, have followed much more of a 'grow your own', social capital approach to world domination of soccer.

The Real Madrid strategy is not just based on the ability of the new gallaticos to turn their considerable individual talents into results but to generate merchandising revenue in the way David Beckham did during the first wave of this strategy. It is also based on the ability of Perez to convince banks in Spain to supply sufficient credit to a club operating in one of the worst hit countries in Europe in terms of GDP growth and decline. Finally, much lower levels of income tax on players coming to Spain than in other European countries helps explain that the real costs to Real Madrid in paying wages is lower.

The point of the article is to contrast 'cheque book power' with Barcelona's largely 'home grown' strategy as a route to success. Metaphors, however, such as make or buy strategies are partial - they hide as much as they reveal. What the article fails to mention in Barcelona's strategy of building social capital not only through its attempts to create 'bonds' among the team by its development strategy but by its building of 'bridges' in the community it serves and the wider world through its ethical approach to promotion. So, like all, rather lazy, single factor theories of strategic success, of which sports team metaphors are among the most popular, are likely to be found wanting. Perhaps the secret lies in complementarity among different forms of capital investment. It certainly lies in developing better mid-range theories of success in industries like soccer; otherwise we will end up repeating this make or buy argument in football, which has a long history going back a century or so but has generated little light in what makes for sustainable success.

Which Counts More for Performance: Human or Social Capital?

We've been doing quite a bit of work recently (one of my PhD students, Stacey Bushfield and I) on the drivers of innovation in public sector organizations. These drivers are often described in tripartite terms - human capital (broadly individual competences), social capital (bridging and bonding capital, and trust) and organizational capital (the non-human capital left in the organization when people walk out of the door at night). And this is the basis of the model we are testing in the NHS in Scotland, which, like many industries, invests enormous sums of money on talent management.

So, it is with interest I read about the recent investments in football stars in the English Premier League and the attempts by one of Barclays subsidiaries to pay almost obscene amounts of money to recruit staff from US competitors. It seems that some organizations and industries' strategic recipes are based heavily on human capital and hiring in stars. And, where they go, others seem to follow.

However, this strategy for banks and football teams and the unreflective imitation by others seems to fly in the face of good research as Jeff Pfeffer has recently reminded us in citing a series of articles by Boris Groysberg from Harvard on the problems of hiring stars. He did so in his book with Robert Sutton on Dangerous Nonsense, but here's a recent summary of his arguments if you haven't read it. Worth reading and reflecting on because they demonstrate the importance of social capital and its interaction with human capital, which most most of us know about but some forget in committing the fundamental attributional error - attributing too much cause to individuals and not enough to the context. So why don't firms and football teams get it?

I recently watched my local football team in the Scottish Premier League draw with and beat two English Premier league clubs (actually one was recently demoted, which tells you something). My club cost less than £500,000 to assemble in total, which was less than the cost of the cheapest player on the demoted side and about a hundreth of the cost of assembling both Premier League sides. Cheap shot or a cheap lesson here for talent management?

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'.

New Perspectives on Engagement

Another wonderfully illuminating session from the AOM conference, which most consultants and HR managers interested in engagement would have found very beneficial. To my mind this session represented all that is good in academic research and made up for what I've not found in any of the consulting work on the topic. It dispelled commonly held myths about the 'engagement industry', helped define what engagement was, provided robust and logical models of the how and why of engagement, and provided some great evidence from extremely tight studies of 'how to get engagement and keep people engaged'.

Here's a precis of their blurb (I've only changed the tense, changed a few pieces of academic jargon and added in a few parenthetical comments).

'Because of claims from both research and practice that engaged employees result in competitive advantages for today’s organizations, researchers have focused a great deal of their attention on identifying drivers of engagement that could suggest levers for managerial control. The symposium presented four papers that expanded our understanding of key antecedents which help employees become and remain engaged in the workplace. The first paper, by Sabine Sonnentag et al., from Germany was a longitudinal examination of how job demands combine with off-the-job psychological detachment to predict employee engagement. Results suggested that periods of psychological detachment (mentally “switching off”) during non-work hours reduced or eliminated the negative relationship between job demands and engagement.

The second paper, by Eean Crawford et al., from the University of Florida was a meta-analysis (a survey of surveys) that clarified ambiguities concerning the relationship of job demands with engagement in the job demands-resources model (this is definitely one that practitioners should get to grips with). Meta-analytic estimates revealed that job resources (autonomy, control etc) had consistently positive relationships with engagement, while job demands appraised as hindrances have negative relationships with engagement and, job demands appraised as challenges have positive relationships with engagement.

The third paper, was by Jill Waymire Paine from Columbia (was an absolute gem). It examined multi-level data from five organizations predicting employee engagement in organizational change initiatives. Arguments for change and followers’ regulatory focus (whether they were risk taking optimists, or risk averse pessimists) were most predictive of employee engagement in change initiatives. This paper had really important implications of how leaders management change and keep people engaged while doing so, rather than inducing resistance or cynicism.

The fourth paper, by Ronald Bledow et al., from the University of Geissen, examined daily fluctuations!!! in employee engagement and found that positive workplace events interact with social and personal resources to predict daily levels of employee engagement'. Again, this work brings into question the stability over time of a concept such as engagement.

Link these papers to the one by Balain and Sparrow reviewed in an earlier blog and you begin to get a far better understanding of what engagement is than anything that I've come across so far. I'm certainly going to use them in my research and consulting, and others may want to do the same.

More on Talent Management from the Academy

I'm doing a new chapter with a practitioner colleague of mine for a book on Global Talent Management edited by Hugh Scullion and Dave Collings, so it was with great interest I attended probably the best session for me so far. This was chaired by Paul Sparrow and summarised by Chris Brewster, with some top class presentations in between, all of which will feature in a special issue of the Journal of World Business later this year.

I'm not going to try to summarise the papers as some can be found on various websites, including the opening literature review by Randall Schuler from Rutgers and Ibraiz Tarique. Of the four papers presented two were of most interest for me. The first was by Hugh Scullion, Paul Sparrow and Elaine Farndale on the the role of Corporate HR departments in global talent management. They argued that what they did and how effective they were depended to a great extent on the degree of corporate control or decentralisation of the organization, or in our terms, how the organization addressed the integration-responsiveness logics, which maps onto my earlier posts on this topic on Negative Capabilities. In trying to develop a framework for helping academics and practitioners think more systematically about global talent management, I think they have come up with something of real interest which is both empirically based and shows important connections among the four roles that corporate HR departments play or should play. These four roles are:

1. Champions of Process - systems monitors, or in our terms guardians of corporate integration
2. Guardians of Culture - in our terms, ensuring integration and legitimacy through spreading the message of corporate values
3. Managers of Internal Receptivity - preparing the organization and its business units to facilitate and accept mobility among leaders, and
4. Managers of Networks of Leaders and Corporate Intelligence

They argued employer branding was the binding tie between 1 and 2, with which I readily agree. We've discussed this in earlier posts as employer branding following a logic of similarity and legitimacy through help build and disseminate shared values. However, there are a couple of problems with the framework, one of which was picked up by Paul Evans, who pointed out the corporate HQ perspective they had on global talent management, a view evidenced by the frequent mention that decentralised multinationals experienced the greatest problems in implementing global talent management. This, of course, depends on where you are standing, because the interests of business units are sometimes in conflict with the interests of the corporation as a whole. And, as Paul Evans rightly mentioned, Web 2.0 technology is facilitating a much greater bottom up approach to talent management, which is not in the gift of corporate HQ to control. I would also add that our discussion of employer branding needing to reflect authenticity and privileging the local (see earlier post) also implies a perspective that global talent management is not something that corporate HR departments should necessarily control in the way they often do - in other words, decentralisation of some decisions on talent is not always a problem, rather the reverse.

So, Paul, Hugh and Elaine, if you read this blog(I know we discussed that following the questions you may have to rethink your model a little) you may want to take into account some of these points in revisting your model. But even if you didn't it is certainly a help for HR practitioners in multinationals in giving them a useful framework to think about their jobs in relation to talent management.

A second paper from some Finnish and Swedish colleagues presented by Kristina Makela which was also very interesting examined the question of who made it into the talent pool and why. Apart from the obvious reasons connected with performance appraisal, which was a rear view mirror, 'on-line' search', they found three explanations, which were more forward looking, 'off-line' reasons - cultural and institutional distance (the less that this was between corporate HQ and individuals, the more likely they were selected), 'homophilly' (the more like the existing talent pool, the more likely to be chosen) and network centrality (were they key nodes in the organizational networks). Some worrying findings here!