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Evidence-based and analytical people management: new or false dawn?
Article Type: Strategic commentary From: Strategic HR Review, Volume 10, Issue 2
Thought leaders share their views on the HR profession and its direction for the future
News in 2010 that the UK’s Coalition Government planned to re-instate an Operating and Financial Review (OFR), to improve financial reporting and address the needs of wider corporate stakeholder interests, provides an appropriate context for this issue of Strategic HR Review. Somehow I feel more frustrated than excited about the OFR and the stimulus that it might provide for more analytical people management.
Seven years ago, the Accounting for People Taskforce’s report called for a new era of more productive and people-focused management, with human capital data published in the OFR regarded as a key vehicle to stimulate and demonstrate the shift. Yet, within six months, the anti-red tape business lobby had successfully blocked the compulsory OFR proposals. Analytical human capital management once again apparently retreated into its geeky, specialist HR bunker.
Evidence of progress
Are we simply seeing the start of another unsuccessful attempt to refute Drucker’s allegation 50 years ago that “the constant worry of all personnel leaders is their inability to prove they are making a contribution to the enterprise” (Drucker, 1954)?
Feelings of déjà vu are reduced if you consider the progress in the intervening period. In our increasingly challenging contemporary economic climate, “competing on analytics” (Davenport, 2006), detailed “strategy mapping” (Kaplan and Norton, 2004) and “evidence-based management” (Pfeffer and Sutton, 2000) are being popularized as essential to organizational survival and success. Barry Beracha, former CEO at Sara Lee, reportedly kept a sign on his desk reading: “In God we trust. All others bring data” (Armstrong et al., 2010.)
Moreover, the importance of employee engagement in our knowledge and service-based economy has become much more widely accepted. Organizations in recent research from the Institute for Employment Studies, such as McDonalds and Nationwide, are able to show powerful relationships between how their employees are managed, how customers respond and financial outcomes. There is a lot more data available in many more organizations and more powerful IT tools to analyze and report on it. Dr Tim Miller at Standard Chartered Bank (SCB) told me: “Every manager here is expected to understand and implement improvements based on robust human capital data.”
The majority have still to come on board
But employers like SCB are still, unfortunately, in the minority, which is why this issue of Strategic HR Review is important. Our recent survey of 200 UK employers found that just 45 percent systematically analyze their HR and reward policies and changes, which has been a constant figure over the past three years. While the majority gather employee attitude information, less than a quarter use business or customer data and less than a fifth conduct financial cost-benefit analysis. Only 10 percent could put a financial cost on their rate of labor turnover.
Many HR decisions still seem to be based on what Pfeffer and Sutton brilliantly describe as “obsolete knowledge, often irrelevant personal experience, hype, dogma and mindless mimicry of top performers.” HR faddism is still alive and well.
Getting started on the measurement journey
Analytical, evidence-based management in HR is not an easy option. Common difficulties include the inability to isolate the effects of changes in many HR practices; the inaccessibility of much of the academic research in the HR field; a lack of demand from senior managers and a lack of training and skills among HR professionals; and the fear of becoming, in Oscar Wilde’s words, those “who know the price of everything and the value of nothing.”
Perhaps most of all, the difficulty is not knowing where to start on the human capital measurement journey. Hopefully this issue will give HR professionals some practical ideas and help with this. Yet, as Angela Wright from Westminster University puts it:
Research on effectiveness may seem like a lot of work. But if people are an organization’s greatest asset, then surely more solid evidence of what practices add value and what do not is vital management (Armstrong et al., 2010).
The leading organizations in evidence-based HR management we researched were not perfect and nor were they obsessed with data and statistics. Rather, they followed a process with almost every people-related decision of asking two simple questions:
Why are we doing this?
How are we going to know if it is going to work or not?
To quote Tim Miller at SCB again:
Measuring our human capital is more than just metrics: it is about capturing meaningful information to drive business performance.
If more companies followed his example, we would have many more productive and engaging workplaces.
So, let’s get reading and get on with it.
Duncan Brown Director of HR Development at The Institute for Employment Studies.
About the author
Duncan Brown is Director of HR Development at the Institute for Employment Studies, an independent think tank and research body on employment and HR issues. He has more than 20 years’ experience in HR consulting and research and is a leading commentator on HR issues, who has published numerous reports, articles and books. He has just published a new book on evidence-based reward management. Human Resources magazine placed Brown in its listing of the top ten most influential thinkers in UK HR in 2009. Duncan Brown can be contacted at: firstname.lastname@example.org
Armstrong, M., Brown, D. and Reilly, P. (2010), Evidence-based Reward Management: Creating Measurable Business Impact from Your Pay and Reward Policies, Kogan Page, London
Davenport, T. (2006), “Competing on analytics”, Harvard Business Review, Vol. 84 No. 1, January, pp. 98–107
Drucker, P. (1954), The Practice of Management, HarperCollins, New York, NY
Kaplan, R. and Norton, D. (2004), Strategy Maps: Converting Assets into Tangible Outcomes, Harvard Business School Press, Boston, MA
Pfeffer, J. and Sutton, R. (2000), The Knowing-Doing Gap: How Smart Companies Turn Knowledge into Action, Harvard Business School Press, Boston, MA