Effective Human Resource
Management: A Global
Analysis
Ed Lawler
Director and Distinguished Professor of Business
John Boudreau
Professor and Research Director
© 2012 University of Southern California
Some of Ed’s focuses
Dr. Edward E. Lawler
CEO Director and Distinguished
Professor
© 2012 University of Southern California
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HR management
Compensation
Organization development
Board effectiveness
Talent
Recent books include Management Reset: Organizing for Sustainable Effectiveness (2011); Talent: Making People Your Competitive Advantage (2008) and the forthcoming Effective Human Resource Management: A Global Analysis
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Some of John’s focuses
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Dr. John W. Boudreau
Professor and CEO Research Director
© 2012 University of Southern California
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Bridge between superior human capital, talent and sustainable competitive advantage
Works with companies worldwide to discover and maximize specific strategic bottom‐line impacts of superior people and human capital strategies
Recent books include Effective Human Resource Management: A Global Analysis (forthcoming), Transformative HR: How Great Companies Use Evidence‐Based Change for Sustainable Advantage (with co‐author Ravin Jesuthasan, 2011) and Retooling HR: Using Proven Business Tools to Make Better Decisions About (2010).
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Effective Human Resource Management: A Global Analysis
By Edward E. Lawler III and John W. Boudreau (Stanford Press, 2012)
© 2012 University of Southern California
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Staff Functions …
• Are “Businesses” that deliver value to the firm
• Need a clear value proposition that contributes to the success of the business and its ability of the organization to carry out its strategy
• Are designed to optimize value delivered from customer’s perspective
• Are designed to fit the organization and business context • By virtue of how they function, they can foster or impede business strategy, help define and enrich, or constrain new strategic directions.
‐ Based on Mohrman and Worley
© 2012 University of Southern California
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HR As a Business With 3 Product Lines
I. Basic Administrative Services and Transactions involved with compensating, hiring, training and staffing ‐‐‐ Emphasis on resource efficiency and service quality
II. Business Partner Services involved with developing effective HR systems and helping implement business plans, talent management
‐‐‐ Emphasis on knowing the business and exercising influence‐‐solving problems, designing effective systems to ensure needed competencies. III. Strategic Partner Role contributing to business strategy based on considerations of human capital, and organizational capabilities, readiness, developing HR practices as strategic differentiators
‐‐‐ Emphasis on deep and broad knowledge of HR and of the Business, Competition and Market, and business strategies
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Business Partner
Business Strategy
HR
Practices
Org.
Design
Change
Management
HR Services
Execution
Implement
Change
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Strategic Partner
Human Capital
and Business Data
Business Strategy
HR
Practices
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Org.
Design
Change
Management
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How is the HR team doing?
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Criticism of HR
• Skinner, Wickham. (1981). Big Hat, No Cattle: Managing Human Resources.” Harvard Business Review.
• Stewart, Thomas. (1996). “Taking on the Last Bureaucracy.” Fortune Magazine.
 Why not blow the sucker up? Improvement’s for wimps. I mean abolish it. Deep‐six it. • Hammond, Keith. (2005). “Why we Hate HR.” Fast Company
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CEO-HRPS Survey 2010
What HR Professionals Believe
MEANS
Maintaining Records
Collect, track, and maintain data on employees
5 – 7 Years Ago
Current
23.2
13.6
Significant
Decrease
15.7
12.5
Significant
Decrease
32.8
30.4
Significant
Decrease
14.4
16.7
Significant
Increase
13.9
26.8
Significant
Increase
Auditing/Controlling
Ensure compliance to internal operations, regulations, and legal and union requirements
Human Resources Service Provider
Assist with implementation and administration of HR practices
Development of HR Systems and Practices
Develop new HR systems and practices
Strategic Business Partner
Member of the management team. Involved with strategic HR planning, organizational design, and strategic change
Difference N=190
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Relationship of Current HR Roles (Time Spent) and
Organizational Performance
Organizational Performance2
HR ROLES1
Maintaining Records
Collect, track, and maintain data on employees
Auditing/Controlling
‐.12
Ensure compliance to internal operations, regulations, and legal and union requirements
‐.13
Human Resources Service Provider
‐.23*
Assist with implementation and administration of HR practices
Development of Human Resources Systems and Practices
Develop new HR systems and practices
Strategic Business Partner
Member of the management team. Involved with strategic HR planning, organizational design, and strategic change
.16t
.27**
1 Based on percentage of time spent on HR roles as rated by HR Executives.
2 Based on Response: 1 = Much below average; 2 = Somewhat below average; 3 = About average;
4 =Somewhat above average; 5 = Much above average.
Significance Level: t p ≤ .10 * p ≤ .05 ** p ≤ .01 *** p ≤ .001
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HR’s Actual Progress Since 1995
Percentage of Time Spent in the Role
1995
1998
2001
2004
2007
2010
Maintaining Employee Records
15.4
16.1
14.9
13.2
15.8
13.6
Auditing and Controlling, Ensuring Compliance
12.2
11.2
11.4
13.3
11.6
12.5
Providing HR Services and Implementing Programs
31.3
35.0
31.3
32.0
27.8
30.4
Developing HR Systems and Practices
18.6
19.2
19.3
18.1
19.2
16.7
Strategic Business Partner
22.0
20.3
23.2
23.5
25.6
26.8
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Relationship of HR Strategy to Organizational
Performance
Organizational Performance
HR STRATEGY
Data‐based talent strategy
.22*
A human capital strategy that is integrated with business strategy
.33***
Provides analytic support for business decision‐making
.24**
Provides HR data to support change management
.23*
Drives change management
.20*
Makes rigorous data based decisions about human capital management
.18t
Significance Level: t p ≤ .10 * p ≤ .05 ** p ≤ .01 *** p ≤ .001
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HR’s Role in Business Strategy
ROLE IN STRATEGY
1998
2001
2004
2007
2010
No Role
4.2
3.4
2.0
5.7
4.3
Implementation Role
16.8
11.6
12.2
17.0
17.4
Input Role
49.6
43.8
45.9
45.3
47.3
Full Partner
29.4
41.1
39.8
32.1
31.0
3.0
3.2
3.2
3.0
3.1
MEAN
Percent Responding
Means Response Scale: 1 = No Role to 4 = Full Partner © 2012 University of Southern California
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HR’s Role in Business Strategy
MEANS
USA1
CANADA2
AUSTRALIA3
EUROPE4
UK5
CHINA6
No Role
4.3
2.2
9.4
4.6
2.2
15.5
Implementation Role
17.4
24.4
12.5
15.4
17.8
41.3
Input Role
47.3
42.2
40.6
56.9
42.2
37.6
Full Partner
31.0
31.1
37.5
23.1
37.8
5.6
3.056
3.026
3.066
2.986
3.166
2.3312345
ROLE IN STRATEGY
MEAN
123456 Significant difference between countries (p≤.05)
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State of Human Resources Information System
(HRIS)
PERCENTAGES
STATE OF INFORMATION SYSTEM
USA1
CANADA2
AUSTRALIA3
EUROPE4
UK5
CHINA6
Little or No Information Technology/ Automation Present in the HR Function
3.8
13.6
23.3
11.3
18.6
41.8
Some HR Processes Are Information Technology Based/ Automated
30.1
31.8
23.3
33.9
39.5
19.2
Most Processes Are Information Technology Based/ Automated But Not Fully Integrated
49.7
43.2
43.3
38.7
30.2
27.7
Completely Integrated HR Information Technology/ Automated System
16.4
11.4
10.0
16.1
11.6
11.3
3.796
3.506
3.40
3.586
3.35
3.02124
Meana
aResponse
Scale: 1=No Information Technology; 2=Little Information Technology; 3=Some Processes Integrated;
4=Most Processes Integrated; 5=Completely Integrated
123456 Significant differences between countries (p ≤ .05).
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Relationship of Information System Use to
Organizational Performance
INFORMATION SYSTEM
Organizational Performance1
Completely Integrated HR IT System
4.3
Most Processes are IT Based but not Fully Integrated
3.8
Some HR Processes are IT Based
3.7
Little IT Present in the HR Function
3.8
No IT Present
No Responses
1Based on Response: 1 = Much below average; 2 = Somewhat below average; 3 = About average; 4 =Somewhat above average; 5 = Much above average.
© 2012 University of Southern California
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Relationship of HRIS Outcomes to Organizational
Performance
Organizational Performance
HRIS OUTCOMES1
OVERALL Effectivenessa
.21*
Employee Satisfaction
.13
Efficiency
.22*
Business Effectiveness .18*
Improve Human Capital Decisions Of Managers Outside HR
.20*
Effective
.13
Create Knowledge Networks
.22*
Build Social Networks That Help Get Work Done
.24**
a
Includes items from Employee Satisfaction, Efficiency, and Business Effectiveness scales only.
Significance Level: t p ≤ .10 * p ≤ .05 ** p ≤ .01 *** p ≤ .001
© 2012 University of Southern California
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Relationship of HR Skill Satisfaction to Organizational
Performance
HR SKILLS1
Organizational Performance
HR Technical Skills .25**
Interpersonal Dynamics .29***
Business Partner Skills .23*
Metrics Skills .17t
Significance Level: t p ≤ .10 * p ≤ .05 ** p ≤ .01 *** p ≤ .001
© 2012 University of Southern California
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Relationship of HR Analytics And Metrics Use to
Organizational Performance
Organizational Performance
MEASURES1
EFFICIENCY
Measure the financial efficiency of HR operations (e.g. cost‐per‐hire, time‐
to‐fill, training costs?)
Collect metrics that measure the cost of HR Programs and Processes? Benchmark analytics and measures against data from outside organizations (e.g. Saratoga, Mercer, Hewitt, etc.)?
EFFECTIVENESS
Use HR dashboards or scorecards?
Measure the specific effects of HR programs (such as, learning from training, motivation from rewards, validity of tests, etc.)?
Have the capability to conduct cost‐benefit analyses (also called utility analyses) of HR programs?
IMPACT
Measure the business impact of HR programs and processes?
Measure the quality of the talent decisions made by non‐HR leaders?
Measure the business impact of high versus low performance in jobs?
.13
.14
.09
.13
.20*
.23*
.34***
.04
.24**
1
Response Scale: 1 = Yes, have now; 2 = Being built; 3 = Planning for; 4 = Not currently being considered.
Significance Level: t p ≤ .10 * p ≤ .05 ** p ≤ .01 *** p ≤ .001
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Relationship of HR Metrics & Analytics
Effectiveness to Organizational Performance
Organizational Performance
EFFECTIVENESS1
Strategy Contributions
Contributing to decisions about business strategy and human capital management
Identifying where talent has the greatest potential for strategic impact
Connecting human capital practices to organizational performance
Supporting organizational change efforts
HR Functional and Operational Contributions
Assessing and improving the HR department operations
Predicting the effects of HR programs before implementation
Pinpointing HR programs that should be discontinued
Logic, Analysis, Measurement and Process (LAMP)
Using logical principles that clearly connect talent to organization success
Using advanced data analysis and statistics
Providing high‐quality (complete, timely, accessible) talent measurements
Motivating users to take appropriate action
.19*
.38***
.19*
.10
.16t
.16t
.19*
.26**
.23*
.32***
.30***
1 Response Scale: 1=Very ineffective; 2=Ineffective; 3=Somewhat effective; 4=Effective; 5=Very effective
Significance Level: t p ≤ .10 * p ≤ .05 ** p ≤ .01 *** p ≤ .001
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Relationship of Decision Science Sophistication to
Organizational Performance
DECISION‐MAKING1
We excel at competing for and with talent where it matters most to our strategic success
Business leaders’ decisions that depend upon or affect human capital (e.g. layoffs, rewards, etc.) are as rigorous, logical and strategically relevant as their decisions about resources such as money, technology and customers
HR leaders have a good understanding about where and why human capital makes the biggest difference in their business
Business leaders have a good understanding about where and why human capital makes the biggest difference in their business
Organizational Performance
.32***
.27**
.33***
.24*
HR systems educate business leaders about their talent decisions
.27**
HR adds value by insuring compliance with rules, laws and guidelines
.27**
HR adds value by delivering high quality professional practices and services .30***
HR adds value by improving talent decisions inside and outside the HR function
.29**
1 Response Scale: 1=Little or no extent; 2=Some extent; 3= Moderate extent; 4=Great extent; 5=Very great extent
Significance Level: t p ≤ .10 * p ≤ .05 ** p ≤ .01 *** p ≤ .001
© 2012 University of Southern California
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Organizations are more effective when HR:
• Is a “full partner” in developing the business strategy
• Spends more of its time on strategy than on auditing and controlling
• Makes use of information technology
• Drives change management
• Provides analytic support for business decisions
• Make data‐based talent decisions
• Integrates the human capital strategy with the business strategy
© 2012 University of Southern California
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