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Ultimate Measure of HR Initiatives is the Bottom-Line Value They Provide

7/26/2005 --

The focus of human resources should shift from internal to external business goals.

ANN ARBOR, Mich.—The success of any human resources (HR) initiative should be measured not by how well its design and implementation were carried out, but by what it did for the organization's key stakeholders.

Wayne Brockbank and Dave Ulrich, professors at Michigan's Ross School of Business and co-authors of the new book "HR Value Proposition," say that HR actions create value only when they create a sustainable competitive advantage, not simply when they look good on the surface.

In their new book, the authors pose the hypothetical scenario of a freshly implemented companywide initiative gleaned from a recent HR conference. A task force has been assembled and the new plan is carried out. After some initial resistance, the ideas take hold, and the program becomes part of the way this fictional HR does its work. The implementers declare victory and delightedly move on to the next new thing.

"Sounds ideal, doesn't it?" said Brockbank and Ulrich. "When we tell this kind of tale, people tend to snort and say, 'Nothing ever goes that smoothly.' True, but even if it did, would it be a success story? And the answer we get is generally 'Yes,' but we disagree. This experience is a 'false positive,' something that sounds successful but is at best incomplete."

Showing The Money

Creating a competitive advantage can be simplified into the 'wallet test.' Like product development initiatives and marketing programs, HR initiatives create a competitive advantage when they persuade customers to transfer money from their wallets to the company's instead of to competitors', according to Brockbank and Ulrich.

The concept of value is central to changing expectations for HR professionals. Value is defined by the receiver more than the giver; HR creates value when those who use the services of HR gain from them. Traditionally, this has meant that because of HR practices, employees are both competent (able to do the work) and committed (willing to work hard). In addition, line managers get value from HR when its activities help deliver strategy and reach business goals.

Brockbank and Ulrich believe that HR can greatly increase its value in the future as professionals and their practices help external customers become more connected to the organization and encourage investors to invest in the firm. Their research has shown that HR professionals from high-performing firms have substantially greater knowledge of external factors, such as customers and investors, than do their counterparts in low-performing firms.

The authors hold that HR professionals from high-performing firms are much more likely to account for external customer requirements in the design and delivery of HR practices than their low-performing counterparts.

Five Steps to Adding Value

Brockbank and Ulrich suggest five things HR professionals should know and do to help improve customers' experiences and deliver value through customer share:
  • Develop customer literacy, in other words, know who the customers are and why they are buying.
  • Think and act like a customer and a competitor.
  • Measure and track the firm's share of targeted customers, and contribute to their value proposition.
  • Align HR practices to the customer value proposition.
  • Engage target customers in HR practices.

"For HR professionals to fully appreciate customer experience, they must learn to think and act like customers and ask the question, 'If I were a customer, would I like being treated the way we treat our customers? If I were looking to make a purchase and could choose among several vendors, would I pick my firm?'" Brockbank and Ulrich said.

The authors urge HR professionals to think like a competitor by identifying the weak links of a firm's offering that a rival might go after. Review existing market research and tapes of customer focus groups, and talk with marketing and sales professionals.

"HR professionals can and should blur boundaries by integrating what happens in the organization more directly to what customers experience on the outside," they said.

Written by Nancy Davis

For more information, contact:
Bernie DeGroat
Phone:(734) 936-1015 or 647-1847
Email:bernied@umich.edu