Published on August 7, 2014
Great strides can be made by enlarging our focus beyond the HR profession, to learn how more mature and powerful decision sciences have evolved their measurement systems (Boudreau & Ramstad, 1997). Three anchor points connect decisions about resources such as money and customers to organizational effectiveness (Boudreau & Ramstad, 2005). The three anchor points are efficiency (Do we deliver HR programs and practices through frugal use of resources such as time, money and labor?), effectiveness (When we implement HR programs and practices, do they have an effect on the people to whom we apply them?), and impact (Do we apply our HR programs and practices to the talent pools where they have the greatest effect on ourstrategic and organizational effectiveness?). Today’s measurement systems largely reflect the question of efficiency, though there is some attention to effectiveness as well, through such things as turnover, attitudes, and bench strength. Rarely do organizations consider impact (defined as the relative effect of different talent pools on organizational effectiveness). More important, HR measurement is rarely specifically directed where it is most likely to have the greatest effect on key talent decisions (Boudreau & Ramstad, 2003). In this article we extend earlier work by proposing a framework of four elements integrating HR measures within a system for achieving strategic organizational change. The framework provides a diagnostic tool for finding the “sweet spots” whereHR measurement is most feasible and effective, and it provides a guide to HR and business lead- ers looking to take their HR measurement systems to the next level. Hitting the Wall in HR Measurement In most organizations there is no shortage of HR measures, and no shortage of technology and products to analyze, organize, and report them. Type “HR measurement” into a search engine, and you get over 900,000 results. Scorecards, summits, dashboards, data mines, data warehouses, and audits abound. Some HR organizations lament that their measurement efforts are stymied by limited budgets, but even in those with significant resources (in fact, especially in these cases), the array of choices is daunting. The paradox is that the ability to implement measurement systems is not the key issue. Even when such systems are implemented, the organizations we work with typically hit a“wall.” Despite ever more comprehensive databases, and ever more sophisticated HR data analysis and reporting, HR measures only rarely drive true strategic change (Lawler, et al., 2004). As Exhibit 1 shows, over time the HR profession has become more and more elegant and sophisticated, yet this trend does not seem to be leading to the desired result. Success is often claimed because business leaders are induced or held accountable for HR measures, such as turnover, employee attitudes, bench strength, or performance distributions. Having business leaders manage to such numbers is not the same as creating organization change. The issue is how to make HRmeasures create a true strategic difference in the organization. Many of the organizations we work with arefrustrated because they seem to be doing all the measurement things “right,” yet increasingly they and their constituents arefrustrated by the gap between the expectations for the measurement systems and its true effects. Why do HR organizations hit the wall? Today’s HR is on the cusp of a fundamental paradigm shift. It is the same paradigm shift that saw the evolution of the Finance decision science from the professional practice of accounting, and the evolution of the Marketing decision science from the professional practice of sales. Marketing and Finance serve as frameworks for enhancing decisions about customers and money,and those decisions happen both within and outside the Marketing and Finance functions in organizations. Accounting and sales are essential and important professional practices, and they support and integrate with the Finance and Marketing decision sciences. Obviously,Finance is quite distinct from accounting and Marketing is quite distinct from sales. The evolution of HR and HR measurement will require a sound “decision science” for human capital that truly informs and enhances decisions about human resources wherever they are made. We have coined the term“talentship” for this emerging decision science, by combining the word “stewardship” with the word “talents,” which focuses on the hidden and apparent talents of current and potential employees. The new decision science will augment today’sfocus on delivering excellent HR programs and processes, by providing a framework to identify what decisions about human capital aremost 26 HUMAN RESOURCE PLANNING 29.1 Over time the HR profession has become moreand more elegant and sophisticated, yet this trend does not seem to be leading to the desired result ... The issue is how to make HR measures create a true strategic difference in the organization. EXHIBIT 1 The “Wall” in HRMeasurement Value Ad hoc HR Measures Bench- Marks Data Systems and Portals Scorecards and Drill- Downs s Strategic Impact s Organizational Change s Validity and Rigor s Causation s Leading Indicators Time ?