ENHANCING ORGANIZATIONAL PERFORMANCE

Organizational performance can be seen in how effectively the products or services of the organization are delivered to the customers. The human resources in organizations are the ones who design, produce, and deliver those services. Therefore, one goal of HR management is to establish activities that contribute to superior organizational performance. Only by doing so can HR professionals justify the claim that they contribute to the strategic success of the organization.

INVOLVEMENT IN STRATEGIC PLANNING Integral to being a strategic partner is for HR to have “a seat at the table” when organizational strategic planning is being done. Strategically, then, human resources must be viewed in the same context as the financial, technological, and other resources that are managed in organizations. For instance, the strategic planning team at one consumer retailer was considering setting strategic goals to expand the number of stores by 25% and move geographically into new areas. The HR executive provided information on workforce availability and typical pay rates for each of the areas and recommended that the plans be scaled back due to tight labor markets for hiring employees at pay rates consistent with the financial plans being considered. This illustration of HR professionals participating in strategic planning is being seen more frequently in organizations today than in the past.

DECISION MAKING ON MERGERS, ACQUISITIONS, AND DOWNSIZING In many industries today, organizations are merging with or acquiring other firms. One

prime illustration is the banking and financial services industry, in which combinations of banks have resulted in changes at Bank of America, Wells Fargo, Nations Bank, First Union, and others large and small. The merger of Chrysler and Daimler-Benz has had significant implications for the automobile industry. Many other examples could be cited as well. In all of these mergers and acquisitions there are numerous HR issues associated with combined organizational cultures and operations. If they are viewed as strategic contributors, HR professionals will participate in the discussions prior to top management making final decisions. For example, in a firm with 1,000 employees, the Vice-President of Human Resources spends one week in any firm that is proposed for merger or acquisition to determine if the “corporate cultures” of the two entities are compatible. Two potential acquisitions that were viable financially were not made because he determined that the organizations would not mesh well and that some talented employees in both organizations probably would quit. But according to one survey of 88 companies, this level of involvement by HR professionals is unusual. That study found that less than one-third of those involved in mergers surveyed have adequately considered HR issues.

REDESIGNING ORGANIZATIONS AND WORK PROCESSES It is well established in thestrategic planning process that organization structure follows strategic planning. The implication of this concept is that changes in the organization structure and how work is divided into jobs should become the vehicles for the organization to drive toward its strategic plans and goals.

A complete understanding of strategic sources of competitive advantages for human resources must include analyses of the internal strengths and weaknesses of the human resources in an organization. Those in HR management must be the ones working with operating executives and managers to revise the organization and its components. Ulrich likens this need to that of being an organizational architect. He suggests that HR managers should function much as architects do when redesigning existing buildings. In this role HR professionals prepare new ways to align the organization and its work with the strategic thrust of each business unit.

ENSURING FINANCIAL ACCOUNTABILITY FOR HR RESULTS A final part of the HR management link to organizational performance is to demonstrate on a continuing basis that HR activities and efforts contribute to the financial results of the organization. Traditionally, HR was seen as activity-oriented, focusing on what was done, rather than what financial costs and benefits resulted from HR efforts. For instance, in one firm the HR director reported every month to senior management how many people were hired and how many had left the organization. However, the senior managers were becoming increasingly concerned about how long employment openings were vacant and the high turnover rate in customer service jobs. A new HR director was hired who conducted a study that documented the cost of losing customer service representatives. The HR director then requested funds to raise wages for customer service representatives and also implemented an incentive program for those employees. Also, a new customer service training program was developed. After one year the HR director was able to document net benefits of $150,000 in reduction of turnover and lower hiring costs for customer service representatives. In the past HR professionals justified their existence by counting activities and tasks performed.

To be strategic contributors, HR professionals must measure what their activities produce as organizational results, specifically as a return on the investments in human resources. HR management that focues on highperformance work practices has been linked to better financial performance of the organization.

This shift to being a strategic business contributor requires that all HR activities be examined and justified as producing results and value for the organization.

For instance, training must be justified by the increase in capabilities of employees and the value that training produces in greater organizational results.

In summary, HR must justify its existence as an organizational contributor, and not just a cost center.