Newsletter: 2003 August Issue

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Newsletter

August 2003

Spotlight: Huselid on Measuring HR

Dr. Mark Huselid was an authority on return on investment (ROI) for HR practices long before ROI became a rallying cry. He will be among the top educators leading the Queen’s Industrial Relations Centre High–Impact People Practices program this September. Dr. Huselid is Associate Professor of HR Strategy in the School of Management and Labour Relations at Rutgers University, and for many years has been doing original research in the linkages among HR management systems, organizational strategy, and firm performance. We spoke with him recently about measuring HR’s impact – his topic for this fall’s program – and about highlights of his latest research. ...more

This Issue: Autumnal brilliance: Look what we have for you this fall. ...more Meet our new friends: We’re partnering with HRPAO. ...more I gain, you gain, we all gain: An excerpt from In Search of the Eighteenth Camel: Discovering a Mutual Gains Oasis for Unions and Management. ...more Our prized subscribers: These are the lucky folks who won the big prize in the July newsletter contest. ...more Huselid on HR ROI: The guru on what HR professionals need to know to make an organization-wide impact. ...more

Upcoming Programs All - Toronto- Regina - Halifax Sept. 21 - 26, Kingston Industrial Relations Register Sept. 22 - 25, Kingston Building Smart Teams Register Sept. 23 - 26, Toronto Change Management Register Sept. 30 - Oct. 03, Regina Dispute Resolution Register Oct. 07, Toronto Performance Management Essentials and Strategy Register Oct. 07 - 08, Toronto Compensation Clinics (Performance+Group Benefits Programs) Register Oct. 08, Toronto Employee Group Benefits Register Oct. 15 - 17, Toronto Business Strategy Register Oct. 19 - 24, Kingston Negotiation Skills Register Oct. 21 - 24, Regina Building Smart Teams Register

Autumnal brilliance

We have a little bit of everything this fall at the Queen’s IRC. We are introducing a brand-new program – Organization Development Foundations – leading to new certificates in OD. We have leading return on investment expert Mark Huselid joining a stellar faculty for our Designing HR for Results program. We will be seeing some major role-playing and title-swapping at the ever-popular Negotiation Skills program. And, of course, our Industrial Relations program, the ultimate IR finishing school, runs again. Here is the line-up:

Building High-Performance Teams > Sept. 14 to 19 2003
The art and theory of group excellence. Goto: http://www.industrialrelationscentre.com/team-building/

Designing HR for Results > Sept. 21 to 26 2003
With ROI expert Dr. Mark Huselid. Go to: http://www.industrialrelationscentre.com/hr-management/

OD Foundations > Sept. 28 to Oct.3 2003
Be a part of this maiden program: Go to: http://www.industrialrelationscentre.com/organizational-development/

Change Management at Warp Speed (Toronto) > Oct. 7 to 9 2003
Three days to transformation. Go to: http://www.industrialrelationscentre.com/change-management/

Negotiation Skills > Oct. 19 to 24 2003
Give-and-take learning to experience. Go to: http://www.industrialrelationscentre.com/negotiation-skills/
Save $300 by registering before August 19

Industrial Relations > Oct. 26 to 31 2003
Canada's ultimate IR finishing school. Go to: http://www.industrialrelationscentre.com/industrial-relations/
Save $300 by registering before August 26

Meet our new friends

Queen’s IRC has been working hard behind the scenes with Human Resources Professionals Association of Ontario to develop professional development programs of interest to HRPAO members. We have developed a series of “clinics”, one- and two-day programs run in Toronto and designed to give core learnings in areas of interest to HR professionals. Over the coming year, we will be offering, jointly with HRPAO, clinics in high-performance teams, strategic thinking, and organizational learning. We hope to develop similar arrangements with other associations over the coming year.

I gain, you gain, we all gain

As promised in last month’s newsletter, we are pleased to offer an excerpt of In Search of the Eighteenth Camel: Discovering a Mutual Gains Oasis for Unions and Management, by David S. Weiss. Published recently by IRC Press, this book does a good job of laying out the argument for mutual gains negotiating. In this excerpt, the author describes a real case where a mutual gains approach achieved impressive results:

Perhaps the most dramatic turn-around case, facilitated by my firm, GSWconsultants, was with an international company that had a manufacturing facility in Canada. In the previous six bargaining periods, five bargaining rounds resulted in strikes. These strikes were very acrimonious, and resulted in bitter labour management relations throughout the term of each agreement. The compelling contextual reason for change was that the corporate head office was debating whether to continue operating this plant. As a result, there was interest on the part of the union and management leadership to improve labour management relations. Although they understood the need for change, unionized employees and supervisors were locked in an adversarial mindset that was very entrenched.

We jointly committed to an 18-month approach that was built on the concept of “baby steps.” This means that we agreed to proceed slowly and attempt to achieve the desired change in the labour management environment over an extended period of time. The process we undertook was as follows:

We focused on the joint health and safety committees, which were legislated to exist but were addressing issues sub-optimally. The committee agreed to learn how to engage in joint problem solving. There were some quick wins in the interests of both union and management as the joint committee contributed to making the work environment safer.

Individual confidential interviews with management and union leadership explored their openness to a more positive labour management relationship. Separate reports were prepared and reviewed with each group.

Subsequently, both the union and management summarized their own reports in their own language and held a meeting to discuss what they learned. Both union and management were surprised to discover the common interest in enhancing the quality of the union-management relationship.

The union and management agreed to proceed through joint problem-solving training. They applied the mutual gains approach to grievance and day-to-day working issues. They also explored how they could better communicate changes that were happening on the global level for their company, as well as changes within their own manufacturing facility.

Management then made an offer that was received well by the union because of the trust built over the previous year and a half. Essentially, management said the cost of building inventory in anticipation of a strike was exorbitant. Management and the union agreed that if a negotiated agreement could be reached three months before the strike deadline, then management would share an unmitigated financial bonus with all employees to offset some of the savings from not building up inventory. As it turned out, the union and management did not reach an agreement by the target date. However, management did have a reduced cost in inventory and, as a result, agreed to begin the increase in wages from the time the agreement was ratified (one month before the strike deadline). The management goodwill gesture was received very positively by the union and employees.

After the new agreement was signed, union and management continued their efforts to build their relationship. Currently, they are participating in a joint learning curriculum on a quarterly basis. Half day learning sessions focus on health and safety, conflict resolution, business issues, and literacy. Corporate head office has recognized the plant as an environment of positive labour relations. There also has been further technology investment in the plant, to upgrade the facility so that it can manufacture more advanced production lines.

In Search of the Eighteenth Camel is available at Books for Business in Toronto or from IRC Press directly by contacting Chris Salmon at cs15@post.queensu.ca.

These people are riding high on the Camel

Congratulations to the following people who won a copy of In Search of the Eighteenth Camel: Discovering a Mutual Gains Oasis for Unions and Management, in our July e-newsletter contest: Cindy Arcand, Jonathan Barrett, Bill Bishop, Michel Charette, Sheila Gore, Michelle Jammes, Gail Koswan, Luc Lajoie, Kim LeBlanc, Paul Marshall, Dick Newson, Gilles Pepin, Wendy Piercy, Judy Porter, Lorraine Robinson, Cathy Romanko, Ann Sapingas, and Shane Young.

Spotlight
In Conversation with Mark Huselid

Dr. Mark Huselid is Associate Professor of HR Strategy in the School of Management and Labour Relations at Rutgers University, and co–author of the bestseller The HR Scorecard: Linking People, Strategy and Performance. His new book, The Workforce Scorecard: Creating a Human Capital Scorecard for the CEO, will be published next year by the Harvard Business School Press. Queen’s IRC spoke with Dr. Huselid recently about measuring HR’s impact and his latest research.

How do you go about measuring the effectiveness of HR?
There are different roles in any organization, and the contribution of each role will likely be measured differently as well. For example, in a pharmaceutical company, value is created in one way in the R&D function, and in quite another way in the legal function, and in still another way in manufacturing. Each of those three elements is really crucial: if you don’t design better compounds in new drugs, you’ve got nothing to sell; if you can’t move them through the legal process, you’ll never get them on the market; if you don’t manufacture drugs of flawless quality, you are in deep trouble. The question is, What are the human capabilities and competencies in each one of those three roles – and there certainly may well be others – that really drive firm success?

Once we know that, the hardest part is over. I tell people that coming up with the measures is the easy part of the process, and they always roll their eyes at me. Then once we go through it, it starts to dawn on them that coming up with specific measures once you know exactly what you are trying to measure is not the challenge. The challenge is to really understand what drives the organization’s success, however the organization defines it, and then asking, ‘How are we going to put markers along the road to help people understand where they are in the process?’

The answer to the question, ‘How you go about measuring HR?', will be different depending on the organization. That’s why I’m so critical of broad–brushed benchmarking efforts. They don’t capture that richness.

Some say it’s a waste of time to try and measure the effectiveness of intangible HR activities. How would you respond?
What I would say is this: the market value of intangibles, R&D, brands, patents, and, primarily, HR, has increased dramatically over the last 15 years. An example of the most popular bellwether of intangible assets is the market-to-book ratio – this is the book value of assets divided into market value. Right now, for example, on average, for every dollar shareholders have invested in hard assets, the stock market says that investment is worth $6 or $6.5 (for the Standard and Poors 500). What that means in practical terms is that $5.5 out of every $6.5 isn’t captured on organizational balance sheets. This figure is much larger in high tech companies.

What I take from this statistic is that conventional accounting systems, which were really designed over 100 years ago primarily to meet the needs of large industrial companies, are a miserable failure when we’re interested in managing and valuing knowledge–intensive organizations. We’ve got many more Microsofts being created these days than U.S. Steels, and in an economy that’s dominated by intangible assets, we’ve got to develop accounting systems that reflect this new reality. To argue that the process is a waste of time is a bit like saying that the value of a university can be captured by the value of the bricks and the mortar. The real harm here is that conventional HR metrics can lead to a misallocation of people in organizations, which can lead managers to do things of that aren’t in the long term interest of either people or shareholders. Widespread layoffs would come to mind, for example. There is a wealth of literature now that shows that knee–jerk layoffs diminish shareholder value over the long term. But we continue to see them. It doesn’t mean it’s easy to fix the problem, I hasten to add, that but there’s really an opportunity to make a difference.

What skills and competencies do HR professionals need in order to implement strategy and tools such as the HR Scorecard?
They need critical thinking skills, systems thinking skills, and the ability to understand causal relationships in organizations. I say that because the HR function is really unusual: it’s different than any of the other functional areas in the business in that we’re helping to hire, develop, select, and maintain the organization’s leadership. In most businesses, the senior leadership team, primarily, was hired anywhere from five to 20 years ago, so the decisions that are made in conjunction with HR and line managers really have an enormously long shadow in the organization.

So what you really need to understand are the long-term implications of hiring for the position as opposed to hiring for the firm, for example, or hiring for a certain skill set we need today versus hiring for a skill set we might need sometime in the future. And you need to see how development and training procedures link with that process. There are all those types of questions, so looking over the horizon and thinking about being able to meet challenges we haven’t even identified yet is really one of the key issues here.

Do you have a key finding from your new book you’d like to share?
Here’s one of the interesting things that we found. If you think of a firm’s strategy having a couple of pieces, one piece is, ‘What business are we in?’ That’s the choice variable, and then the second part is, ‘How do we execute? How do we get that done?’ Firms can go wrong or right on either one of these. What we found is that, generally, firms get the choice part right because there are not that many choices to make for most businesses. But the difference between firms lies in the extent to which they execute effectively. We found that strategy execution has six times the economic impact of choice.

If you think about it, the choice variable is, ‘We’re going to be an Internet service provider or we’re going to be in paper products,’ or whatever. Managers usually make those discrete choices, and then they execute them. So execution is a relentless part of the process, whereas choice is kind of discrete: you make it and go along and change or don’t change. However, historically we have focused – both academically and as practitioners – on choice. So that’s a very significant finding.

To read the entire article, follow this link:
http://www.industrialrelationscentre.com/hr-management/articles/measuring-hrs-impact.htm

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