Evaluating the Impact of HR by Evaluating the Signals they Send

There has been an enormous amount of academic and consulting research on the impact of so-called high performance work systems (HPWS) on organizational performance, which has generated great interest in complementary ‘bundles’ of usually high commitment HR practices, including comprehensive recruitment and selection procedures, incentive compensation, performance management, extensive employee involvement, training and career development . Much of this work has linked the mere existence of such practices, particularly when integrated with an organizations business strategy of business model, to positive organizational outcomes. This work has been used by by academics and maybe should be used by practitioners to evidence the credibility and impact of the HR function through the substantial benefits resulting from high commitment HR.


However, as anyone who has been the recipient of the mismatch between the ‘people are our most important asset’ and the actual implementation of such practices will tell you, it is not the existence of such practices that are important but the consistency and vigour with which they are implemented, whether or not employees actually expect and value what they deliver and whether their experience of these bundles of practices is a coherent, beneficial and fair one. This was the subject of a symposium we took part in at the British Academy of Management’s HR in Healthcare track, the papers in which were all characterised by a simple but powerful idea, initially put forward by Greg Bamber from Monash. He drew on thinking from a chapter in a forthcoming handbook from Sage on human resource management which suggested that what is important about high performance work systems is not their existence but the signals they send to employees and whether these signals are interpreted by staff as strong - intense and consistent - or weak. This is based on so-called signalling theory: strategies, policies and practices are really signals and it is employee perceptions and behaviours resulting from these signals that really predicts organizational outcomes.


Our paper on the employer branding in the Scottish healthcare system could certainly be interpreted in this light. Like much of the other research in healthcare, re-interpreted into the language of signalling theory, we found that staff in healthcare often exhibit low levels of identification and/or engagement with their employers, despite the existence of well intentioned HPWS. This is due, in part at least, to the weak and mixed messages they receive from senior leadership teams, which sometimes see themselves as the 'meat in the sandwich' between at least two forces. The first are government initiatives and targets (often developed to satisfy the needs for politicians and the media to tell and sell simple stories to the general public and the media that shapes their interests). The second is the professional power of certain clinical groups to block their reforms. These mixed and weak messages were core themes of Greg’s paper on the key role of ward managers in fostering high performance and, indeed, as pointed out by Stephen Procter, the chair of the symposium, one of the themes of our own paper.


Perhaps the most demonstration of the impact of signals and HPWS was made by Jody Hoffer Gittell from the US, who has written extensively in the field of relational coordination for academics and practitioners (see her website for a full explanation of her ideas). Jody's paper was, for me at least, one of the most impressive of the conference because of its rigour and relevance to practitioners. She and her colleagues put together a very well constructed study that demonstrated a strong and positive relationship between staff reports of their experiences of HPWS in healthcare and positive organizational outcomes, which included, among other measures, variations in patient experiences and actual results of a particular kind of surgical operation in different hospitals. The line of sight was not a direct one but mediated by staff perceptions and experience of other team members' levels of collaboration and relational coordination. Her findings suggested that a small increase in the experience and reporting of relational coordination among healthcare teams led to proportionately very large increase in patient outcomes. The importance of relational coordination, one key measure of social capital, however, was less apparent among physicians, who tended to be less impressed by the idea or were reported to be less involved by others in relational coordination. This could be put down to structural problems, ie. they operated across a number of hospitals and were less integrated into hospital-based teams. Or perhaps maybe because of their lack of professional training in such issues? One of the implications of the study is that by having physicians more integrated into the care teams in hospitals, so sending signals about the importance of relational coordination, such a change would pay off markedly in key patient outcomes.


These ideas have important practical consequences for HR and assessing the impact of HR. Not only should we concerned with the design of HR strategies and architectures but also the signals they send, how they are interpreted and what intervening factors influence the messages received. Our argument is that there are two key ones, which don’t require a great deal of rocket science to understand. The first lies in the skill, will and, importantly, the opportunity (removing blockages and introducing enabling structures) of line managers to implement HPWS. The second is for senior leaders to signal and follow through on the messages of HPWS and, increasingly, on higher values in more ethical, innovative and caring forms of leadership 2.0 (see earlier post on management 2.0).

Picking up on Negative Capabilities and Talent Management

I know as academics we're not supposed to look for confirmatory evidence to support our views, but it's rather difficult not to feel pleased when some ideas you have just written about seem to be supported by what is going on in the big bad world of talent management.

I've just attended another session at the Academy of Management on 'Developing Top Executive Talent; How Employers Do it' featuring three presentations by the heads of HR/ Talent management of three American multinationals - GE, Boeing and Sara Lee. Common themes of these presentations were:

1. The linking of executive development to key strategic capabilities and the distinctiveness logic, which was also expressed in the exclusive approach to talent management focusing on the top 20% of performers
2. But the need to connect and assess executive development to the expression of core, corporate values. Indeed corporateness and corporate values were core themes in all three presentations but never fully explained as to why. GEs performance-values matrix seemed to sum up the way these organizations attempt to reconcile these two dimensions, with leaders measured not only on how the perform but also on the extent to which they express core values. Indeed, they seemed to be pretty ruthless about 'removing' (their word) high performers who didn't live up to the values ('would you want these people in GE' was the question?), whereas they were willing to give second chances to low performers who expressed the core values.

When questioned on this, all three suggested that the strategies weren't forever and that they frequently amended the values to reflect changing environments. In other words, strategic direction was more learning than planning, though the planning word did feature in their presentations - implying even these giants of the corporate world 'muddled through', to some extent at least.

Two further noticeable features were:

1. the desire and reality of all three to focus on developing rather than hiring talent, especially in the engineering divisions of GE and in Boeing. Leadership development in the core businesses was based on taking talented engineers and subjecting them to intensive and extensive development opportunities - in other words seeing leadership and management as an extension of 'craft' and not as something which was separate from and above the core business of engineering and manufacturing quality products, and

2. that sustainability, the core theme of the AOM conference, was not even mentioned in the three presentations. Is this a case of the Academy leading practice, or failing to be in touch with the reality of business?

Finally, the Boeing case highlighted a potential problem in the development-oriented approach to talent management. Everything they seemed to do was aimed at creating strong internal cultures and strategic capabilities based on promotion and development from within. Yet much of the research suggests that innovation often requires the injection of fresh blood and ideas from outside. The Boeing VP for talent management didn't seem to recognise the irony of this philosophy with her need to visit GE at Crotonville and Harvard to develop herself to develop others!

Leadership 2.0 and the CIPD HRD conference.

Two blogs in one day (and a third on the way).

Because of my interest in leadership development and forthcoming seminar with the ESRC and Scottish Government on the topic, I attended two sessions at the CIPD conference, both of which were good in some ways but worrying in others. To begin with the positive, they were both beautifully presented and contained lots of interesting material based on evidence and experience - no problems here. The first was on the global competences needed for tomorrow’s leaders and the second was on positive psychology and its applications (not necessarily leadership but could be). Both issues are highly topical, especially positive psychology in current circumstances of recession.

My worries, however, stem from passing of yesterday’s ideas as the future, and outlining ideas that are strong on face value and commonsense but weak on theory and in spelling out the limited assumtions on which they are based. As John Maynard Keynes pointed out, all practice and commonsense are based on theories-in-use; all are also rooted in fundamental but partial assumptions about how the world works and how it should be. These assumptions need to be made explicit when placed in the public domain for them to be truly useful because a way of seeing is also a way of not seeing.

I'm not being an academic purist here, just re-stating the precept that there is nothing so practical as good theory. For example, the attempt to glean a set of global leadership competencies has a long history and has been done many times before. For example the GLOBE programme has spent a lot of time researching these ideas, so why do we need another attempt that may no reference to this work nor states how it will improve on this excellent work? Perhaps more importantly, why are we still looking to leadership comptences rooted in the past? For, as we have pointed out before on this blog, it is those same leaders and leadership competencies that have shaped the current crisis of governance and performance associated with the recession and major corporate failures. I've just finished reading Paul Krugman's excellent account of how yesterdays leaders, many recently hailed as messiahs in their day, have been responsible for our current problems ( see 'The Return of Depression Economic and the Crisis of 2008'). So do we want to repeat the mistakes of the past, or should we be engaging in reflective learning of the lessons of the past to design a leadership 2.0?

Secondly, I couldn’t understand why I was sceptical of positive psychology until one of the seminar leaders gave the game away by stating that most of the evidence was based on the powerless (not her term but mine). As the presenters were taking about the attributes of positive psychology, I couldn’t help thinking that they fitted perfectly well with Fred Goodwin and his can do approach to leadership. So one person’s positive psychology and confidence to act may be another’s narcissism and lack of wisdom in not knowing their limitations or those of their ideas. The point I guess I am making is that arguments such as those made by positive psychology are context-bound; they may not apply and may even be positively dangerous in the hands of the powerful, especially if they don’t embrace the kind of self doubt that is necessary for the exercise of wisdom.

The presenters responded by claiming my understanding of positive psychology is limited; that it is not to be equated with positive thinking. May so! I may be guilty of creating staw men (or women), but they also might want to reflect on the merits of 'one size fits all' theory that applies equally to self-styled masters of the universe and the kinds of people for whom the assumptions underlying positive psychology might hold.

To return to the positive, I think that what we need more of at these events are evidence-based insights into leadership combined with rigorous examinations of the future. The latter could be done using scenario forecasting sessions as the basis for reflection along the lines of the Hamel and Birkinshaw exercise in previous posts. Readers may want to suggest other ways of delving into the future without repeating the mistakes of the past.

Web 2.0 and HRD: Reflections on the CIPDs Annual Event in London

Not having been to the CIPDs annual HRD event, I was pleased to get the opportunity to launch our report on Web 2.0 and HRM during a session on Wednesday this week and to do some further stress testing on our arguments in that report (I'm also doing this summary for a great European HR class I taught in Nijmegen yesterday, which I under-serviced in spending too long on other issues - say Hi).

For those of you who’ve not heard these arguments before, they are as follows. Technology in the form of information and communications technologies have an enormous potential to change the way in which HR works and to change the business model of HR by allowing it to make a fundamental contribution to the innovation agenda of organizations, regardless of sector (though innovation is more likely to be important in the knowledge-intensive and creative industries). Previously, our work focused on e-HR and how it could create operational efficiencies; however, we have been flagging for some time how a newish read-write, bottom up Web 2.0 could help HR create strategic value in three, interconnected ways (and, more importantly for some, avoid being left behind).

The first of these is by facilitating the use of Web 2.0/Enterprise 2.0 to allow employees make online connections with others, inside and outside the organization, to collaborate, create knowledge and learning and share it. In doing so it helps enhance the absorptive capacity of organizations for new knowledge, create organizational learning and learning organizations, and enhances the ability of people to connect with one another across time zones and traditional organizational boundaries in networked organizations (the subject of a new excellent report for the CIPD by Mick Marchington and his colleagues at Manchester University).

The second way is by enabling more effective forms of engagement and employee voice. Because Web 2.0 is a democratic architecture for participation, it enables employees of all levels and types, so long as they have access to the web, the chance to engage in decisions that affect them and to exercise the voice in the ways in which they are managed. In short, it has tremendous potential to enhance staff governance by reaching the parts that other techniques (e.g staff surveys) can’t reach in ways that are more meaningful to staff and owned by them. And by enhancing staff governance, you enhance the governance of innovation and risk (the wealth creation and wealth protection functions of organizations), which, in turn, feeds through into corporate governance.

These two features of Web 2.0 are also thought to be necessary to connect to the natural ways of learning, playing and working of so-called Gen Y. So organizations can learn and engage with the new generation of employees using social media which are relevant and natural to this demographic group. However, we prefer to think in terms of the V(irtual)-Gen, because it is not only young people who use these social media (as good research has shown). The V-Gen even embrace people like myself who have to use these media to collaborate across time zones etc, but are best characterised by two pastiches of modern day working, Meet Charlie and Meet Jessica, referred to on this site before.

So, given these arguments, I was really pleased that we had two updated cases from our report that showed how these organizations had moved on since we first visited them and how they illustrated these three arguments beautifully. Ruth Ward, who looks after knowledge management in Allen and Overy, a major UK legal firm, demonstrated how a firm can enhance its knowledge creation, sharing and dissemination through the use of an integrated portal that gave employees access to a range of Web 2.0 social media, including wikis, blogs, feed readers, etc. One of her key points was that if a staid, risk averse occupation like lawyers find these media attractive, then anyone will. I’m sure that this was said tongue in cheek to illustrate the point that it is not only Gen Y that use these media, but the comment led to an important discussion about the blockages to change and how to overcome these.

Graham White, HR Director of Westminster Council, who has worked with us before then gave a beautiful illustration and illustrated presentation on how the Council’s engagement with its employees through online staff discussion forums has been transformed in important ways. Although there were some teething problems in getting staff to use the forums, they have turned out to be one of the principal ways of helping staff to exercise their voice on matters ranging from ‘who stole my milk’ (which generated lots of replies) to the understanding of the need for downsizing. On this latter issue, Graham had tracked through an online survey the extent to which employees understood the reasoning behind certain critical decisions connected with public sector finance, which, according to his data, has increased markedly over the space of the year as a result of the online discussion forums.

Both cases have something in common, however, in that the users of these media were not Gen Y but people of all ages who either needed to or were minded to use online forms of communication. To my mind, these examples spell out some of the dangers in talking in terms of demographic or age related terms. Yes, it may be a technology that younger people as early adopters wish to claim some degree of psychological ownership over , but network effects will eventually mean that the more these technologies are used by people of all ages, the more they will be used and have to be used. So the lesson here is that HR practitioners may want to get ahead of the curve to shape its use and to take advantage of the benefits it will inevitably bring.
The event showed there were lots of practitioners unaware of what is going on – less than six months ago, but still the majority in the audience were not leading the charge (maybe that was why they were there?). More research and effort needed?

Local Problems with Global Significance?

Last Friday I had the privilege of helping facilitate a debate on the current problems and what to do about them with a group of highly insightful HR directors from some of Scotland's largest organizations. This debate was part of the CIPDs Roundtable discussions on 'Shaping the Future' and a summary of our deliberations will appear in People Management. However, in the light of recent posts I want to flag a couple of issues.

The first was that the group tended to see things in 'glass half full terms', describing the current crisis to bring about major changes in culture and the way in which managers and leaders manage. The second was the problems of reputation spillover from the banking crisis, both for bankers and for confidence among Scottish companies and employees following the problems of two of its major banks - RBS and HBOS - and new problems such as the demise of its largest building society, the Dunfermline.

During the debate, colleagues cited evidence of ordinary banking employees (in organizations relatively unaffected by the crisis) seeking support because of the vitriol being heaped on the Scottish banking sector. Much has been made in recent press commentary from the quality Scottish newspapers about this issue and needs little elaboration. However, much of the discussion focused on the impact of these failures on the reputation of Scottish companies generally and its managers. This represents a fast fall from Grace, paradoxically generated by the previous success of companies like RBS and HBOS, and its reputation over the last two hundred years for generating real innovation, e.g. the steam engine, television, telephone and even the principles of capitalism itself through the work of Adam Smith, a professor at Glasgow University. One of the potential consequences of this fall is a reversion to Scots managers 'knowing their place' and 'not getting above themselves', a problems discussed in an influential book by Carole Craig on the Scots' Crisis of Confidence.

To continue with this theme of management leadership, it is the subject of an Economic and Social Research Council/ Scottish Government event I'm taking part in on May 19th in Edinburgh. This event aims to bring policy makers, practitioners and academics together to debate the impact of new theories of leadership on the Scottish Public Sector. Two academics, Keith Grint from Warwick and myself, will provide some provacations to that debate in the form of an ESRC publication. Keith has written an excellent book on 'The Art of Leadership' and, among others, a recent paper on 'Wicked Problems and Clumsy Solutions; the Role of Leadership'. A key theme of his is a distinction between management and leadership rooted in n the context and nature of problems to be solved. Management, he argues, is about solving known problems, while leadership is about resolving new questions and issues - de ja vu versus vu jade (excuse the lack of accents)- for which there are no simple answers, only ambiguity, tensions and complexity. One implication of this is the innappropriateness of a model of leadership of all knowing forceful individuals being able to take decisions on their own or in a small cabal. This is the model of 'celebrity' or charismatic leadership in which many of us have placed so much faith in recent years, attributing them with almost mythical abilities and rewarding them on that basis (see last post). Keith's works brings together a long list of Greek philosphers and recent management academics including Aristotle, Kotter, Weick and Robert Chia, who have all discussed the importance of complexification rather than simplification in leadership and the need to draw on wisdom and reflective experience rather than schooled learning. Which brings me to my contribution to that debate, or at least one of them, because it is something close to my heart and a key message of my Managing People in Changing Contexts book.

A theme of mine will be that we have an increasing mistrust of senior leadership, not only in the private sector, as evidenced by the recent anticapitalist demonstrations and bad press, but also in the public sector in Scotland and elsewhere. We have some local evidence of this from recent research we have carried out in the NHS. Part of the explantion of this lies in our overloaded expectations of leadership and our culturally-generated implicit theories of leaders - we have come to expect them to have visions, be great communicators, motivate and inspire us, etc. And when they don't, we get very dissappointed and tell them so through surveys and focus groups. Another part of the explanation lies in the demands placed on leadership, which, in a public sector setting, are to meet strictly defined targets. Target setting, according to Grint, is a management problem and one that leaders in the public sector find it both easier and politically sensible to address. However, they do so at a cost, not only in failing to fulfil the expectations of their 'followers' but also at the expense of sound strategic and innovative thinking about creating public value. This requires greater involvement of those that can/ wish to contribute to innovation in public management, the creation of environments where risk taking can be exercised without individuals being nailed to the mask when they make mistakes, and the application and exercise of wisdom. This has been described as 'the achievement of ignorance' (Weick) - being able to admit you just don't know - but being confident enough while being ready to admit they you really don't know. It also means involving others who may know more - not rocket science but difficult to live with if you believe in management 1.0.

Other research we've undertaken shows that leaders in Scotland are less likely to seek solutions from business schools to their problems because leadership is not something that can be learned in schools. They are probably right in this assessment, which presents real challenges for the local business schools in being relevant and in making a contribution to the Scottish economy. A report shortly to appear from the Royal Society of Edinburgh on the Scottish business schools emphasises this point.

So, I'm going to go down the line of the need for a leadership/management 2.0 (see previous posts) articulated by Hamel and Birksinshaw in the Harvard Business Review recently to rescue the reputation of leadership (and management), and, beating my drum once again, the need to focus on innovation, a more realistic and modest 'branding' of leadership, its contribution/ relationship with governance and social responsibility.

More later when we've written the ESRC/Scottish Government pamphlet.

Preventing Managers from Doing Dumb Things and the Consequences for Others

Following on from the previous posting and from recent events in the news, a timely book has just been published 'Think Again', by and American-Anglo collaboration, Finkelstein, Whitehead and Campbell. Reviewed in the Economist, it is a book about why managers make poor decisions. Coming from a long line of research and writing in this field I wonder what it has to add to previous, scholarly work on the limitations of rational decision-making in the 1970s by March & Simon, and Janis's ideas on 'groupthink' and its derivatives. These ideas were subsequently made more accessible and given a given new twists through the insights of Gareth Morgan on the dark sides of strong cultures and 'psychic prisons', Richard Pascale and 'nothing fails like success' and Pfeffer and Sutton on 'why smart people do dumb things'.

Maybe wanting to appear smart, I'm tempted to ask why smart readers should continue to read the same narrative, albeit using different examples. Perhaps this is something to do with willing consumers looking for 'new' ideas (and silver bullets) and willing producers looking to recycle 'old' ideas (and make quick income), which are good theories of management fads and fashions. However, in a less cynical vein, I'm sure this book will certainly serve a useful purpose in bringing to the fore some modern examples of why trends and history don't contain their own justification, pyschologically-biased 'prejudgement', close friendships with colleagues, self-interest in seeking rewards and power, and so on.

Such a list of reasons, especially when combined with the earlier, more scholarly, works help explain the current financial crises from a micro perpective (for a more macro perspective, have a look at the recent video from MIT featuring two excellent financial economists outdoing each other in pessimism). Knowing a little from the inside about the RBS crisis in my own country and reflecting on the current vilification of its former CEO, Sir Fred Goodwin, who's house has just been vandalised by self-styled 'anti-capitalists', I'm sure we would be able to apply some of these lines of analysis to the failure of one of the world's largest banks, the loss of reputation of its former boss, and the reputation spillover to its former managers, employees and Scottish firms (see earlier posts and 'Security Stepped Up for Senior RBS Staff'). And, surprise, surprise, I note that they do in the excellent little video introduction to the book on the Amazon website and the near full text of the book posted online. I'm also sure we can learn from some of the safeguards proposed by Finkelstein, et al, in testing theories and business models to destruction through the equivalent of courtroom advocacy and defence, the promotion of devils advocates and naysayers (where have I heard this before, Tom Peters?), and checks on the power and narcissism of celebrity CEOs, the subject of the last post.

My point is that the rather indigestable question we really should be asking is: despite managers knowing all about the problems of their less-than-rational behaviour and the above solutions (most will have read some of the books), why do smart people continue to do dumb things (the will and skill problem) and why do we continue to let them do dumb things (the opportunity and regulatory problem)?

I will raise this question tomorrow at the meeting of HR directors in Scotland because it has implications for HR and because it has major implications for the reputations of those people who have been caught up in the collapse of major banks, a small number of which are culpable for not speaking up to power but a large majority who had no access to power. The public feelings over banks and 'bankers', made worse by media interest in bad news, may blight the employment prospects of many ordinary people for some years to come (see CV Harquail's post a few weeks ago on reputation spillover on Authentic Organizations). That is an empirical point we should be taking up. However, we should also be taken up the questions of will, skill and opportunity referred to in the previous paragraph. Do managers actually know about the problems and consequences of irrational decision-making? Are they aware of the trained incapacity problems that socialisation into firms' strong cultures are likely to result in, and are they aware of the benefits of widening minds through a critical management education versus the challenges created by narrowing them through much in-company management training?

And do we need more effective regulation of managers that impose on them certain obligations, not only principles of good corporate governance (the current solution) but also a requirement to actually learn in the true sense of that term from the lessons of the past. By which I mean not just knowing about but knowing how (to learn). In other words, do managers need to become more professional in the widest sense of that term, which is an old but still relevant debate? Easier said than done I suspect. I had better read the book and maybe think again.

Corporate Reputations, Executive Pay and Shaping the Future of HR

This coming Friday I'm co-hosting an event in Glasgow for a group of senior HR professionals in Scotland with the CIPD as part of their flagship 'Shaping the Future' programme. At that event, we are going to debate a series of questions on the current economic and financial services crisis, which are particularly relevant in Scotland given its large financial services sector. Two of these questions relate to how the present situation came about and what HR professionals can do about it.

On that issue, a series of events have taken place in the town near where I live that illustrates some of the problems of this crisis for the Scottish economy. The events relate to the decision taken by Ohio-based multinational NCR, one of the world's leaders in the design, development and production of ATMs, to cease manufacturing in Dundee and relocate to Hungary and China. This closure is particularly close to my heart since NCR Dundee was something of a personal laboratory for me for a period of ten years. The Dundee plant had developed and manufactured NCRs first ATMs in the early 1980s. It then became one of Britain's great development and manufacturing success stories, winning the best factory in Britain award twice, the Queens Award for Exporting and one of the very few British companies to feature on a Harvard Business School video as an excellently-led company. These achievements were gained on its way to becoming the world leader in its field for some twenty plus years, in and bringing great pride and much needed quality jobs to Dundee. I wrote a number of articles, book chapters and cases about the NCR Dundee story explaining why, three of which were the role of serendipity in strategic decision-making, committed and engaged leadership that had the Dundee plant's interests at heart, and HR practices way ahead of their time but largely based on the 'old deal' of high commitment in return for job security and career development.

The final closure of the manufacturing function of ATMs in Dundee (some design and development is still located there, but for how long?) is a good example of some of the causes of this present economic and financial crisis, which is, in part at least, a failure of leadership and corporate governance, and perhaps a failure of senior HR leaders to engage in this debate. I say this because at the same time as manufacturing was being closed down in Dundee, the site that had given NCR much of its revenue and had helped it survive as a global concern since the early 1980s, its CEO in the USA, Bill Nuti, was awarded a $5.6 million bonus. The local newspaper in Dundee, reflecting on this local tradegy, calculated that Nuti's bonus was enough to pay the manufacturing workforce a salary for a year of £22,000, maybe enough time to see the company through the present crisis until demand rose again in the financial services industry. While the local paper's reasoning may be misplaced, it does raise issues that lies at the heart of HR's ability to secure high commitment and high performance working, which is the aim of the CIPDs Shaping the Future initiaitive - senior leadership and their pay.

I've just finished researching and writing a book chapter with a colleague on corporate governance and HR, so I have a number of figures at my fingertips that show how socially unhealthy senior executive salaries have become in relation to the normal worker in the USA, the UK and in other countries. Some might say this socially-generated 'disease'is a product of a system of shareholder value which gave CEOs enormous power, unchecked by weak boards (and weak HR), to arrogate to themselves a huge share of company profits, is now being called into question. Witness the punitive tax on bonuses at AIG introduced by the US government and the public outcry over Sir Fred Goodwin's pension and rewards at RBS in the UK.

The question is: why did this take so long to emerge as a potentially socially dislocating disease in damaging trust relations between employees and their employers? Even the chief protagonist of shareholder value, Jack Welch the former leader of GE who was apparently instrumental in promoting the idea in a speech he made in the early 1990s to the Business Rountable, has just recanted, claiming shareholder value as a principle of governance was a 'dumb idea' (see the great debate on the FT blog between Henry Mintzberg and Colin Mayer). And as academics with an interest in such matters, we have known the statistics for some time on the rapidly growing disparity between CEO pay and typical employees in the US, which grew from 42 times the average US worker in 1980 to 400 times in a twenty year period 1980-2000. This pattern of growth was less marked in most European countries but the pattern was evident neverthless, particularly in the UK, Switzerland, France and Germany. Moreover, most of this growth in disparity came about because of equity-based options, though salary and bonuses have accounted for a significant portion of total CEO (and other senior executive) remuneration. The rub is that most of these rewards are not linked directly to CEO performance directly, which is diffcult to measure but what evidence we have is not particularly supportive of their claims to adding value. And in many cases these bonuses have been awarded despite relatively poor long term performance and declining corporate reputations, as we are now beginning to see.

So why has HR as a profession been relatively silent on one of the worst demonstrations of leadership power over the last twenty years? I raise this because there is evidence to suggest that this among other things has has caused a widespread lack of trust by employees in senior managers and declining levels of employee commitment over the same period? What lessons are there from the NCR case and in the problem of executive pay for shaping the future of HR? This is important, not because HR could have prevented NCR closing down its Dundee manufacturing, which has been the story of much of manufacturing industry in developed countries, but because it is difficult to generate high commitment, high performance working in a context where the share of returns to ordinary employees has not grown much over the last 20 years and in countries like the USA has probably declined. My recent comments about the need for HR to promote higher values has to be seen in this light; technical solutions to engaging employees are unlikely to work unless basic issues of fairness are addressed, perhaps starting with some reforms in corporate governance that limit the powers of CEOs to dominate boards in the way in which many have do so in the recent past.

Web 2.0 and HR: Groundswell or Hype?

We are really pleased to see our research report for the Chartered Institute and Personnel Development (CIPD) out today. In that report we posit a rosy future for Web 2.0 and Enterprise 2.0 in changing HR's business model - for three main reasons. The first is to connect with the (overhyped) generation Y, or as we prefer, the V-generation, which is a more sophisticated and useful demographic category. The second is the potential (and problems) these social media hold for leveraging genuine employee voice (over more traditional top down surveys, etc). The third is the potential for increased innovation, collaboration, knowledge sharing and networking, which is probably the number one argument in our judgement. The report sets these out in some detail, provides ten short case illustrations (longer versions are available on the CIPD website) and outlines four future scenarios for organisations.

So in this fast moving world, we were very interested in an excellent article in the Economist on the potential for social networking to impact the kind of networking that is necessary to build social capital (see Primates on Facebook, Economist, Feb 28th-March 6th, pps 88-89). This article cites two views on the investment in grooming that is necessary to develop social networks. One is based on established research by Dunbar that argues the power of the brain limits the size of effective size of social networks that anyone can usefully develop to around 150 (the Dunbar number). More recent work by Marsden at Harvard found that even if people can develop wide networks, they only have significant discussions with a handful of these people, and this handful is on a downward trend according to subsequent research. So the Economist commissioned Facebook's resident sociologist to do some work on online networks. He found that the average number of 'friends' was around 120 with a side variation (women have more than men), but the number of active online friends was about seven. Online social networking doesn't seem to increase the core network but the more casual contacts.

The conclusion the Economist artilce draws from this is plus ca change, that what social networking sites have done is to allow us to 'broadcast' or advertise ourselves more. I'm more inclined to take a different perspective, but one that needs researched. And this is based on the paradox noted by earlier work on the relationship between social networks and innovation. To simplify the argument, \Mark Granovetter some years ago argued that closely networked people tended to think alike - like attracts like - which is not a good recipe for new ideas and knowledge creation in organisations. So what was necessary was more casual networks to introduce diversity and new ideas into organisations for innovation. Is this what online social networking helps us do? Or is there an innovation paradox at work - loose networks may be good for knowledge creation, but tight networks may be necessary for knowledge dissemination? If so, how can organisations resolve this dilemma?

The Changing Context of Employer Branding

This post is prompted by a number of initiatives we're involved in that deal directly or indirectly with the changing context of employer branding (EB) and HR (see next paragraph). It is also prompted by direct communication from a colleague who has just posted an item on 'reverse employer branding' on http://authenticorganizations.com/. This post is definitely worth reading because it points out that the reputation of 'toxic' firms can spillover to their employees, so making them less employable in the future because of their association with the unethical/inept practices of their leaders. This must certainly be a worry to those employees/managers in some of the major UK/US financial institutions that have had to be rescued or allowed to collapse over the last few months.


To return to the initiatives we're lucky enough to be part of (and do a bit of advertising for the Centre), the Chartered Institute of Personnel and Development has just promoted two important initiatives in this field. The first is their 'Shaping the Future' programme, the Scottish edition of which we are launching with them in Glasgow on March 27th with a working lunch for an invited group of HR directors to consider the future of HR in the current economic conditions. The second is an advisory board established by Rebecca Clake of the CIPD to examine the role of EB research in the current recessionary context. In addition to these initiatives, we're also running a one day seminar we're running with the Institute of Employment Studies in Glasgow on EB in changing contexts on April, 16th.


So what does all of this activity add up to? Well, all will have to re-visit EB with a critical hat on because it was largely a product of the talent management agenda and employee shortages of a few years ago. For some people, EB and recruitment were almost synonomous. Therefore, what is the future for EB when talent management takes a downturn?

A few months ago I posted some thoughts on that issue following a series of seminars in Australia, to which I still adhere no matter how deep the recession bites. However, I'm working with two sets of colleagues in Australia and Canada on different projects that may have something more to say about this question. The Australian project, with colleagues from Macquarie (Paul Gollan) and Monash (Kerry Grigg) and supported by ADCORP and other organizations, is examining the impact of EB not only on the talent management/human capital agenda, but also on the creation of social capital (creating strong organizational identities and creating strong bridges/networks among people) and organizational capital (e.g. Web 2.0 - our CIPD report on this comes out in a few weeks). Surprisingly, some excellent research has shown that both of these forms of capital have more of an impact on innovation than human capital/talent. The Canadian/British project is a new book I'm editing with Ron Burke and Cary Cooper on Corporate Repuations for Gower. A key focus of this book is on managing reputation risk, which leads me back to the opening comments on reputation spillover and reverse employer branding. The more I think about this issue, the more important I think it is to investigate. So thanks to CV, the author of Authentic Organizations, for raising this issue. Any comments, experiences, examples would be greatly appreciated to help inform our events and research.

HRs Role in Governance

Been very busy with writing deadlines, so no posts recently. We've just finished writing a chapter for a book edited by Suzanne Young on Corporate Governance, a particularly important issue just now, especially given Gordon Brown's recent criticism of governance in the British financial services sector. We've argued in the past that HR has a key role to play in governance and sometimes a negative one. I'm thinking here of a paper written by Bert Spector in 2002 claiming the HR was the unindicted co-conspiritor in Enron because of its advocacy of a certain brand of McKinsey-style talent management.

Our focus in the chapter, probably quite apposite given the UK Government's 'nationalisation' of some of the UK banks to inject more responsible management (see John Kay's insightful comments on Newsnight last night), is to look at this issue in the public sector, particularly healthcare. To help us think about this issue, we've adapted some excellent work by Jaap Paauwe on four faces of governance and its relationship to risk. Our adaptation, which we have illustrated with material from current research into the Scottish healthcare system, shows how governance of the HR function itself - how it is organized and led - play directly into the 'three pillars of governance' in healthcare. Firstly, it does so by shaping staff governance (or climate governance) - the ways in which staff are encouraged to participate and exercise voice in their organizations. Secondly, staff governance has an obvious and important impact on clinical governance - the balancing of innovation in heathcare with risks to patient safety etc. Innovation is key to creating public value in any 'enterprising' public service, but there are often real risks to innovation that must be governed effectively (the banks have suffered from this because senior managers didn't seem to know what was going on in their innovations in the wholesale banking market for which they were responsible). Finally, clinical and staff governance directly impacts on the third pillar of financial governance, which in turn refracts back on these two other pillars. How NHS boards (with many lay members) are selected, developed and performance managed will have an enormous influence on the management of innovation in healthcare. In turn, the costs and demands by professional for greater innovation will impact on financial prudence among these authorities.

Our key message is that HR at a strategic level has to understand these causal links, and has to manage its own house to make an impact on these three pillars of governance in healthcare and in other industries. All three rely on effective people management, but aren't always seen as part of HRs role. HR should 'step up to the plate' to help make their organizations legitimate as well as different, which are the two central objectives of reputation management. As an aside, a good starting point for understanding the governance problems of the financial services industry would be to read Niall Ferguson's excellent book, 'The Ascent of Money', which was my Xmas reading and why I haven't had time to post

Corporate reputations, images and identity: how theory can help practitioners

I’m just about to begin a two-week stint running some courses and doing presentations on HR’s contribution to branding and reputation management in Australia and China. As always, I’m on the lookout for interesting material from academics to help me provide some insights into these important topics; hanging around airports and spending time on long plane journeys gives you plenty of time to do just that. So I brought with me the new edition of the Corporate Reputation Review (Volume 11, number3 for those interested). This special edition brings together leading people in the field of organizational identity to write about their emerging frameworks and data. In this increasingly arcane field, this special edition produces some gems. Though the papers are difficult to decipher, even for academics versed in the language of social identity and social actor theory, they yield some blindingly obvious-in-retrospect insights that cause me to re-think some of my ideas on employer branding, some research and consulting work we are doing in the field of employees’ images of healthcare organizations, and the nature of the HR.

The first is an examination of the well-worn distinction in the literature on reputation management between organizations’ needs to be simultaneously different and legitimate in terms of their organizational identities, the characteristics of which are their central, enduring and distinctive attributes (CEDs). Brayden King and Dave Whetten (the latter always a great bet for new insights) suggest that this ‘paradox of identity’ can be thought of in a rather different way than has hitherto been the case. Traditionally, this tension has been seen in terms of organizations attempting to solve seemingly incompatible needs for being different (i.e. branded) from competitors in product and labour markets but also being similar (social legitimate) to their comparators (e.g. being socially responsible, adhering to legal and governance standards, etc).
King and Whetten’s insight – rather obvious when you think about it - is that these needs are linked by the notion of ‘accountability standards’, which define norms of both appropriate behaviour (legitimacy) and esteemed performance (reputation).

Thus, when an organization seeks to become or remain a member of a business/ industry category, say a healthcare provider, it has to meet the minimum expectations of external and internal ‘audiences’ for patient care and the delivery of public value – the necessary, legitimacy-based conditions for membership. However, to become an esteemed member, it has to meet the ideal or aspirational standards of that group of businesses/ industry (reputation). The two, of course, are linked in the form of a continuum from minimum standards to ideal standards. And, because they are linked, changes in one have an impact on the other and vice versa. So, for example, as our expectations of the minimum standards of an employer change in relation to what might be expected, say, of an ‘employer of choice’, this leads to a ratcheting-up of our expectations of the ideal standards of an employer of choice - in other words, employer branding becomes a moving target. Similarly, as organizations compete harder to become employers of choice, such competition leads to a ratcheting-up of minimum standards. The probable results of this last dynamic is that the previously held ideal of an employer of choice becomes the the minimum table stakes, because audiences focus on, and increasingly use as their benchmarks, these prominent players in their industry and exclude reference to others.

Applying this line of thinking to the legitimacy and reputation of the HR function itself, you might be better able to understand how excellence in HR is no longer just associated with meeting the standards associated with cost control and service delivery to internal stakeholders, its two traditional and necessary functions (see Martin, Reddington and Alexander, 2008). Nor, we argue, is it good enough for HR to meet the aspirations of being ‘strategic’ (i.e. to contribute to corporate needs for innovation, customer satisfaction, productivity through high performance work systems, etc) , which has now become the prototypical expectation for HR excellence. Instead, HR needs to focus on the long term reputation and legitimacy of the organization itself by contributing to corporate branding, corporate governance and risk management, corporate social responsibility and ethics, and the creation of intellectual capital. These are all intangible assets, which, according to the well-known economist John Kay (2005), are the reason ‘why some nations are rich and others remain poor’.

The downside of this process, however, is that the market and competition over organizational and even professional identities leads to ever more risky behaviour, in much the same way that competition in financial services has seen firms develop riskier products and riskier HR strategies (talent management and bonuses). What will HR need to do next to help organizations become an employer of choice, and to become a function that rates high in the credibility stakes with CEOs?

The second article is by Kristin Price (who tragically died recently) and Dennis Gioia, both of whom featured in a recent blog. This time, their specific contribution is to raise the question: how can organisations improve their images in the marketplace for images – that is, among customers, employees, the media, prospective employees, shareholders, governments and the like? Building on their previous work on the notion of organizations having multiple, intended and unintended images, they propose the notion of the self monitoring organization. This concept is borrowed from the literature on individual differences. So just as high self monitoring individuals have to be vigilant about the multiple images of themselves (their own self concept, professional images, family members’ images etc), so high self monitoring organisations use a range of strategies and individuals to further the organization’s interests in reconciling self image with others’ images (the press, employees, prospective employees, shareholders, etc). Most of these are well known – brand ambassadors or even bloggers who are high in self-monitoring and become the eyes and ears of the organization, newcomers not yet socialised into the system, boundary spanning functions such as marketing, communications and, yes, and outward looking HR function, social networking and leadership liaison functions, which interact with outsiders, etc.

Two critical points emerge from this paper. The first is to expect multiple images in organisations and leadership difficulties in understanding them, especially if they aren’t high self monitoring as a group. The second is the problem of managing organizations with purposively different intended images, for example, a merger between two quite different companies even in the same industry. Both of these problems can be solved, to a degree at least, if organizations become high in self monitoring. As an afterthought, it in self-monitoring that Web 2.0 can make an enormous impact in helping act as the eyes and ears of the organization – another connection between technology and branding.