The recent (and on-going) crises of our day (global coronavirus pandemic, racial and civil unrest, global immigration, economic decline, political squabbles, and personal and emotional malaise) have accentuated the importance of human resource issues to help an organization succeed in the marketplace.
Numerous HR innovations in programs, processes, practices, and digital apps have occurred under the rubric of HR transformation. For HR to create, deliver, and capture value in the future, it is time to offer guidance on the extent to which human capital initiatives in talent, capability, and leadership deliver results to all stakeholders (employees, strategies, customers, investors, and communities). We have developed and offered a free Organization Guidance System (OGS) to guide the portfolio of these efforts.
HR transformation underlies organization effectiveness. Looking back, we have written 13 books and 100’s of articles, collected data from over 100,000 respondents, offered hundreds of workshops, and consulted on how to deliver HR transformation. Building on this work and looking to the future, we have evolved the study of HR transformation into four stages of maturity and nine domains of action.
Figure 1 provides a comprehensive template for assessing overall HR Transformation along 9 domains for each of the 4 levels of maturity (36 cells overall).
Our point of view on HR Transformation is NOT limited to describing what is done in these 36 cells, but by demonstrating the extent to which the work in these 36 cells delivers results to key stakeholders. By focusing on results, we want to prescribe where HR should focus to deliver results. This moves beyond benchmarking and best practices to guidance on the right practices. Let us share some of the preliminary findings of this work.
Report Guidance on Human Resource Transformation
After 18 months of creating an OGS, we can now report how well companies perform on the four stages of maturity and nine domains of HR and the impact on results. Figure 2 reports pilot results (with a sample of 148 respondents) about the performance and impact of the four stages of HR maturity on four key results. This figure reports the overall mean (column A) of the four stages of maturity (with outside in being the lowest score) and the relative impact of each of the four stages (rows) on four outcomes we measured in the pilot (columns B, C, D, and E). We used proprietary analytics (variance decomposition) to understand how different levels of HR maturity (rows) will deliver different results (note: in the pilot, we focused on 4 results; we have since added fifth, social citizenship).
These results are startling! First, we had assumed that foundational/essential HR work was not as critical for results as the strategic and outside HR work. Our results show that doing HR foundational/essential work is critical to all results (green cells in columns B, C, D, E have high impact; yellow moderate; and red lower). Further Figure 2 shows that the functional (best practice) and even strategy HR work has less value than either essential/foundational or outside in work.
Second, we worked to understand these results and discovered in Figure 3 a very different view of the stage of HR maturity and results depending on who answered the survey. HR professionals saw an improved financial performance from doing essential/foundational work; while non-HR respondents (business leaders) see HR outside as much more critical for financial performance. This dramatic difference in the perceived impact of the HR stage and financial results may suggest that HR professionals and line managers see the impact of HR work differently.
Third, in Figures 2 and 3, we found that functional excellence (best practice) and strategic HR are highly correlated (r=.82) and neither focus delivers results that matter. It may be time to do less “best practice” or even “strategic” HR work and more focus on aligning HR to external stakeholders.
In Figure 4, we report the findings by the nine domains of HR activity. The results in Figure 4 are also striking as they inform the effectiveness of HR transformation. First, the attention on “HR organization” (#4) does not show much impact on any of the results. We still find that most “HR transformation” work obsesses on the HR design. This research shows that HR practices (#7) have the most impact on the results. Second, it is interesting that each result (column B, C, D, E) is shaped by different HR domains. We need to explore more why these results require different domains of HR transformation.
Looking forward, these findings dramatically shift the discussion of HR transformation from what is done to what should be done. While these findings are with a small pilot sample, the implications of this human resource guidance are profound. Rather than randomly create innovative HR initiatives, business and HR leaders can receive rigorous guidance on where to focus for results.