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Business-Focused HR

11 Processes to Drive Results

Society For Human Resource Management

HR Processes and Business Outcomes

Over the years, organizations have steadily improved the overall implementation of numerous HR processes. These improvements are apparent in many ways, from the manner in which organizations execute the hiring and development of employees to the implementation of company-wide opinion surveys. However, organizations and HR functions often come up short, specifically in these key areas:

• Building the business case for HR initiatives

• Effectively executing HR initiatives from start to finish by applying proven best practices

• Demonstrating the cause-and-effect relationships between HR initiatives and business outcomes

• Calculating expected return on investment (ROI)

• Creating a culture of measurement and modification

These five key areas represent significant opportunities for HR leaders to confront, overcome, and leverage for competitive advantage. This book is the step-by-step guide HR practitioners need in order to incorporate best practices and fully leverage data and senior- leadership buy-in, across numerous HR initiatives, to drive business outcomes in their organizations. HR initiatives (and human resources, in general) should have a demonstrated impact on business outcomes, particularly in the current economy in which any opportunity to gain a competitive advantage is critical. At the same time, the outsourcing of human resources is becoming a real proposition; therefore, showing a definitive connection between what we do as HR leaders and how it impacts business results will help keep the function relevant in organizations and improve our professional standing. Human resources typically has a great reputation as a function that gets things done; it is now necessary to take the next step and show the true impact of all our hard work.

Incorporating the steps outlined in this book will enable HR leaders to be considered business partners and trusted advisors. The constant desire by HR leaders to be given a "seat at the table" has been hindered by our inability to demonstrate the value of HR initiatives in terms of their impact on bottom-line business results. The process outlined in this book will allow you to demonstrate meaningful and measure-able value and impact the health, stability, and growth of the organization while also providing direction to the leadership team on how to execute effectively.

The Science-Practice Gaps

Let us start with a quick story: Every year we, as scientists-practitioners, attend the annual conference for the Society for Industrial and Organizational Psychology (SIOP). SIOP is a division of the American Psychological Association (APA) dedicated to industrial- organizational (I-O) psychology. In case you are not familiar with this discipline, it is basically the scientific study of the workplace where methods of psychology are applied to issues of critical relevance to business. The point is not to educate you on the field of I-O psychology but rather to highlight a key issue we talk about every year at the conference. For nearly 15 years, we have attended this annual conference and for most of those years, the content has focused on "closing the scientist-practitioner gap." This topic is discussed and debated every single year. In fact, it is the topic of the keynote address of the president at least every other year. So what is this science-practice gap, and why are we so concerned with it? This "gap" refers to the lack of alignment between the I-O academic community and I-O practitioners. A 2009 survey of I-O psychologists suggested that the gap exists for several reasons:

• Practice underutilizes available science and research.

• Science undervalues innovations in practice.

• Science does not produce research findings that are relevant to practice.

• Practice does not provide sufficient opportunities to research relevant issues.

This survey was specific to the I-O community, but it has relevance to a much broader issue in human resources. As HR professionals, a significant opportunity exists to build our processes and programs based on applied, scientific research. There is also an opportunity for researchers to conduct more meaningful, practitioner-oriented research. In response to these existing needs, the purpose of this book is threefold:

• To summarize relevant applied research for key HR processes

• To describe best practices for each HR process

• To identify how to make the processes business-focused — link the processes to relevant business outcomes (i.e., show ROI for each process)

This book is written to assist HR practitioners in utilizing key research findings and best practices to design and implement more effective HR processes. Taking the key points from tested, reliable, valid, and objective research and incorporating them into the initiatives will improve execution, limit legal risks, keep human resources on the cutting edge, and most importantly, help human resources demonstrate business impact and return on investment (ROI).The goal is not to get hung up on the science or the math of the research; we are in the people side of the business — and that is a good thing. One of the goals of this book is to briefly summarize the scientific research for key HR processes to make human resources relevant, practical, and people-focused. Most HR practitioners understand why this goal is necessary, but just in case you are not convinced yet, we will review a simple example of this gap and the relevance of this book.

Let us consider employee selection, which is probably the most researched HR process of all. When it comes to selection, we know a lot about what works and what does not. The validity of the employee interview has been studied literally hundreds of times — probably more, but we could not finish the book if we counted all of them. The research shows that an unstructured interview is only slightly better than "chance" at selecting a high performer. This means that when hiring managers interview candidates in the typical "tell me about yourself" approach, the decision they make about whether or not to hire the candidates is only slightly better than flipping a coin. However, as HR practitioners, we also know that this method is exactly how most hiring decisions are made. Often an organization will have multiple people conduct an unstructured interview with a job candidate. This practice does not add any validity to the process — it just adds to the number of people flipping coins. Of course, ask hiring managers about their ability to make good hiring decisions, and they will respond with a resounding, "I am a great assessor of talent!" However, applied research suggests that the typical manager is not a great assessor of talent. Moreover, the unstructured interview process lacks legal defensibility and thus opens the door to lawsuits.

Applied research indicates that structured interviews (for example, behaviorally based interviews) are three or four times more valid than unstructured interviews. Knowing this simple fact makes it hard to stand behind unstructured interviewing. By simply defining the critical competencies (i.e., knowledge, skills, abilities, and behaviors) required to perform a role and then systematically assessing those competencies in a structured interview, HR practitioners can dramatically improve the hiring process for their organization. Of course, the trick is to develop structured interview processes that are simple and easy to use. We will tackle that topic further in Chapter 2. The point is that we know unstructured interview processes do not work well — from both research evidence and practical evidence. However, in many organizations they are the prevailing selection methodology applied for most jobs.

This book will provide the best practice for 11 critical HR processes, including employee selection. You will learn how to get the most out of an HR process, how to execute it properly, and how to determine the impact that it has had on business outcomes. All of this is accomplished by briefly examining applied research, incorporating practical experiences, and using analytics rather than depending on subjective, intuitive decisions.

As we reviewed the research that is available to practitioners to guide them in their practice, we found good material on bringing applied science to HR management. However, we could not find a comprehensive resource that would help HR practitioners incorporate the best applied research in a pragmatic manner and show them how to make the direct connection between what they do every day and business outcomes. We found entire books (hundreds of pages) on multi- rater assessments, but the information was primarily presented in an abstract, theoretically oriented way, making it less relevant to the needs and interests of practically focused readers. Additionally, the sheer amount of information was overwhelming, thus getting in the way of its usefulness for practitioners with demanding day jobs. We found "best practice" documents that summarized the latest thinking about various HR processes. However, they were based solely on what "leading" organizations were doing regarding a specific issue or HR process. These best practices were not always based on research or ROI; they simply described the latest trends. Some of those untested trends in the last 20 years include quality circles, leaderless teams, and employee engagement — just a few consultant-driven trends that have no real definition and have rarely, if ever, shown a true impact on the business.

We decided to fill this science-practice gap with a practical book that summarizes the volumes of research for key HR processes and topics and describes it in a constructive manner that would lead to proven HR practices in the field. Quite frankly, we got tired of seeing organizations putting themselves at legal risk with their practices, not effectively executing initiatives, or not following through to show any business impact. All the while, volumes of applied research are available to guide organizations in their practices but no realistic and practical way to access and apply the information in business.

The Business Partner Roadmap

In our previous book, Investing in What Matters, we introduced the Business Partner RoadMap TM. This proven process was outlined to help organizations discover and quantify the people drivers of business outcomes. Ultimately, this process allows organizations to create an HR strategy that is based on analytics, demonstrated business impact, and ROI.

As stated earlier, a primary goal of this book is to describe how to link core HR processes to relevant business outcomes (that is, show an ROI for each process). Therefore, the application of the Business Partner RoadMap TM is relevant for our current purposes. So before we dive into the core HR processes, a brief review of the Business Partner RoadMap TM is necessary.

What Are the Steps For Linking Employee Data to Business Outcomes?

The Business Partner RoadMap TM is a six-step process (see Figure 1.1) that can drive your HR strategy by connecting what you do as an HR leader directly to the business. It moves beyond conducting just analysis and creates an environment of executive buy-in, cross-functional interaction, targeted initiative building, and a culture of measurement and refocusing.

Step 1: Determine Critical Outcomes

An organization must first determine the top two to three most critical priorities that it anticipates will be accomplished through its employees. For example, increasing productivity or customer satisfaction and decreasing turnover are commonly desired outcomes. The outcomes that matter most to your organization can be gleaned by reviewing strategic documents and plans. Key stakeholder interviews of the board, CEO, CFO, or other business leaders are also very helpful in the process. Once this information has been collected and summarized, the results must be prioritized into two to three desired outcomes.

Step 2: Create a Cross-Functional Data Team

Once the various owners of the critical business metrics have been identified, a cross-functional data team (CFDT) needs to be organized. This team should consist of measurement experts, the key line of business leaders or metric owners, and HR leadership. The measurement experts are needed in order to determine data requirements, link the necessary datasets scientifically, and conduct the requisite statistical analyses. This cross-functional team will also facilitate and sponsor the linkage initiative. Therefore, having influential company leaders and decision- makers participate in this process is crucial. Often times, the data needed to build an HR strategy already exist. The key focus should then be pulling the data into one place to facilitate proper analysis.

Step 3: Assess Measures of Critical Outcomes

Once the critical outcomes have been identified, the next step is to determine how data are currently captured in the organization. Several characteristics of each outcome measure must be assessed, including the following:

• Frequency of measurement (e.g., monthly, quarterly, annually)

• Level of measurement (e.g., by line of business, by work unit, at the store level, at the organization level)

• Organizational owners of each of the outcome measures (e.g., the department or leader of the particular measurement)

It is critical to understand each of these measurement characteristics before any linkages to employee data can be made. The goal is to have apples-to-apples comparisons of the data.

Step 4: Objectively Analyze Key Data

This part of the process will require advanced statistical knowledge. Most large organizations employ statisticians or social scientists. If this type of internal resource does not exist in your organization, then hiring a consultant or full-time statistician for this role is necessary. This critical step is where the carefully collected datasets are statistically linked through various methodologies. Many business leaders are familiar with correlation and regression but not with a technique called structural equation modeling. Correlation is not sufficient, and regression is merely adequate. Structural equation modeling is the preferred solution for these types of data linkage analyses, as it accounts for measurement error, and cause-effect relationships can be inferred. Structural equation modeling affords us the ability to state, for example, that employees' attitudes about work/life flexibility are a cause-and-effect driver of increased customer satisfaction. This implied cause-effect relationship is important for understanding how these different measures relate to each other as well as for calculating an expected return on investment for the initiatives.

The statistical component of this step sounds complicated, but it is really just a tool for accomplishing three things:

• Understanding the relationship between employee initiatives, skills, behaviors, attitudes, and meaningful business outcomes

• Prioritizing types of interventions

• Calculating expected ROI

All of this work is designed to allow you to identify organizational priorities and to determine appropriate levels of investment. The result of the data analyses is a list of key priorities, derived from the employee data that will drive the desired business outcomes. For example, the analyses may indicate that improving employee attitudes about work/life balance initiatives leads to increased employee productivity and customer satisfaction and decreased turnover. The results will also show which initiatives are not having their desired impact(s) and could be candidates for "cost cutting."

Step 5: Build the Program and Execute

Once the critical priorities have been identified, the next step is to determine what types of interventions will have the desired effect. This is the action-planning stage where activities can be focused at the systemic (organization-wide) level, line-of-business level, or work-unit level. This stage encompasses the bulk of the work and investment associated with any people-related process. The big difference is that the investments being made are focused on those employee processes, skills, attitudes, demographics, and other characteristics that have been shown to have a direct impact on the organization's desired business outcomes. The expected return can thus be used to guide the HR strategy.

A common trap at this stage is to look for the "silver bullet" of interventions. Best practices (another name for "silver bullets") are great to guide action planning. But simply replicating a "best practice" will get an organization nowhere. Initiatives must be customized and placed in the context of each unique organization. Throughout this book, we offer best practices as a guide to what has worked well at different points in time for other organizations. However, we caution readers against falling into the best-practice trap and blindly replicating these practices without considering what is most appropriate within the unique context of your organization.

Step 6: Measure and Adjust/Reprioritize

The last step is to re-measure in order to assess progress and calculate actual return on investment. Most business leaders understand the importance of goal setting and measurement. They also understand the importance of creating a culture of measurement and accountability. Similar to how other organizational decisions are made, slight adjustments to initiatives should be made along the way, based on regular measurement results. However, making frequent, wholesale changes to the strategic focus of the interventions is not advisable. In other words, pick your two to three priorities, and build action plans around those priorities. Measure progress against those plans two to three more times, and then recalculate the dataset linkages and reprioritize. This analysis process should occur annually. For your HR strategy, a yearly assessment of its overall effectiveness is in order, particularly when the annual budgeting cycle begins. Figure 1.2 outlines a high-level timeline of the analysis, strategy, and budgeting cycle.

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Excerpted from Business-Focused HR by Scott P. Mondore, Shane S. Douthitt, Marisa A. Carson. Copyright © 2011 Strategic Management Decisions, LLC.. Excerpted by permission of Society For Human Resource Management.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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