Achieving Strategic Excellence: An Assessment of Human Resource Organizations.

Achieving Strategic Excellence: An Assessment of Human Resource Organizations

Authors: Edward E. Lawler III, John W. Boudreau, & Susan Albers Mohrman

Publisher: Stanford Business Books, Stanford, CA, 2006.

ISBN: 0804753318

This book is the latest in a series of studies of the human resource management function in organizations. The studies have been funded by the Human Resource Planning Society and by the corporate sponsors of the Center for Effective Organizations at the Marshall School of Business at the University of Southern California. Achieving Strategic Excellence reports the most recent study results from the year 2004 and compares these results with findings for 1995, 1998, and 2001. In reading this book, one can see and assess changes in the HR function over the last decade, which is exceptionally valuable. An HR thought leader could easily use the findings in the book's 15 chapters to assess his/her own HR organization and its functioning.

Before purchasing the book, HR leaders may want to assess the credibility of this source. The book has three primary authors and three listed research associates. The lead author, Edward Lawler III, is Distinguished Professor of Business and director of the Center for Effective Organizations at USC. His remarkable achievements include 38 books and over 300 articles over the past four decades. He has received numerous honors and awards from the HR profession. The second author, John Boudreau, spent a long career at Cornell University before joining USC as a professor and research director at the Center for Effective Organizations. He is widely published and has won research awards. The third author, Susan Mohrman, is a senior research scientist at the Center for Effective Organizations and has been instrumental in conducting multi-year assessments of HR functions and practices. She has served on the Board of Governors of the Academy of Management and the Human Resource Planning Society. This team of authors brings great credibility and continuity to these studies of the HR function.

With such credible authors, the next question becomes "how good are the data foundations of this study?" As noted earlier, this is the fourth study of the HR organizations of large and medium-sized corporations in service and industrial industries. The number of surveys and response rates were as shown in Exhibit 1.

For the 2004 survey, in addition to the survey completed by HR executives that characterized the prior studies, each HR executive was asked to distribute a questionnaire to individuals who were not in HR, but were in a position to evaluate the function. Of these surveys, 77 were returned and were used to provide general manager perceptions of the relative efficacy of HR practices compared to those perceptions of HR executives. Although the final response rates were not stellar, the companies in the sample averaged nearly 31,000 employees and had 307 staff in their HR functions. The authors sent multiple waves of questionnaires and did everything possible to increase the number of firms in the sample. Given the extensive nature of the questionnaire instrument, the response rates are acceptable and the data are credible for general comparative purposes. It is definitely worth the price of the book to gain access to this dataset and analysis.

We now turn our attention to the topics of this study and an overview of major findings. Chapter 1, "How HR Can Add Value," focuses on the roles of the HR function. The current paradigm is still seen as HR service delivery as compared with Finance's "decision science" approach that teaches clients financial criteria for making good choices. The authors see major roles for HR in company organization design and in re-design of the HR function from an expensive hierarchy to a design more decentralized with alignments to contractors, and alliances with information technology. The authors explain this new HR as being more cross functional and as a site for job rotations with line functions and vice versa. The authors are appropriately cautious but emphasize that HR can play a major role as a driver of business strategy.

Chapter 2 explicates the research design. Chapter 3, "Role of Human Resources," provides data on the percentage of time current HR practitioners spend on key HR roles. This is compared to time spent in each role five to seven years ago. Significant changes such as an increase in the strategic business partner role were found and are highlighted for discussion. Chapter 4 deals with "Business Strategy" and locates where HR has or does not have a role. A summary of HR strategic roles is presented, but the conclusion is that HR still has a considerable way to go to be fully recognized.

Following their model in Chapter 1, Chapter 5 is a creative chapter titled "HR Decision Science." This chapter links HR strengths in human capital to business strategy and compares how HR managers see their expertise with ratings from upper managers from other functions. The results indicate that significant differences appear. HR is rated as "moderately effective" but the authors see plenty of room for improvement. Chapter 6, "HR Organization Design," offers insights into the HR organization of the future in terms of use of service teams, information technology, and talent development. Relatively little actual change is seen between 1995 and 2004.

The book's other chapters are equally insightful. The nice thing about this study is that the authors took time to formulate their questions well. Questions provide continuity from 1995 to 2004 but are also expanded to identify new HR topics whenever possible. Chapter 7, "Human Resource Activities," covers changes in focus across an array of HR activities in each of the four studies, with areas in metrics, employee development, and design showing the greatest increases. Chapter 8 examines "Outsourcing" of HR and the growth in that area.

Chapter 9, "Use of Information Technology," is a powerful chapter worth the price of the book. Along with its sister Chapter 10, "Effectiveness of Information Systems," the book shows that HR is highly rated as a strategic partner when it effectively uses HRIS. Related, Chapter 11 deals with evaluating HR's efficiency, effectiveness, and impact through the use of HR metrics. The authors conclude that HR metrics and analytics have a long way to go in terms of acceptance and quality as strategic tools.

Chapter 12 deals with "HR Skills" and shows trends across the four time periods. The 2004 findings show an increased focus on organization change skills in areas such as teams, coaching, and leadership. Chapter 13 on "Effectiveness of the HR Organization" brought ratings from line managers to bear. Non-HR managers rate HR significantly lower in two areas, providing HR services and tailoring practices to fit the needs of the business. The encouraging word is that HR has increased its perceived effectiveness since 1995.

Chapter 14 focuses on "Determinants of HR Effectiveness." This one of the major chapters of the book. The authors present 11 summary findings. Several findings stood out. Having a highly integrated HR IT system was correlated with high ratings of effectiveness. Other high ratings came from the use of HR metrics and HR roles in organization design.

Chapter 15, "HR Excellence," summarizes all four studies and concludes that more things stayed the same than changed from 1995 to 2004. The authors suggest that the "war for talent" during this period may have overemphasized staffing roles to the detriment of developing other aspects of the HR function. The authors also suggest that the HR function needs to upgrade the educational background and skill sets of HR practitioners to enable them to play the high leverage roles of strategy, design, IT, metrics, and analytics where high value contributions can be made.

Conclusion

One main effect of this study is to show the importance of information technology to the credibility of HR and its credibility as a strategic partner. HR schools and MBA programs should redouble their efforts to turn out HR graduates with HRIS/HRMS competencies. An area of mild disappointment was that the survey has over the years become less specific about HR's roles in TQM, Six Sigma, labor-management cooperation, and employee involvement. Major HR initiatives in lean manufacturing, kaizen, learning organizations, and hoshin planning remained relatively untouched. Earlier books provided more detail in the areas of organization-wide initiatives. (Lawler, et al., 2001) Although unions now represent less than 10 percent of the private labor force, they are a major constituency for HR work and skills. Union-related findings are almost non-existent in these results. Despite the fact the study companies have 30 percent of their employees and 24 percent of their HR staff located offshore, few findings contribute to our knowledge and trends in international HR. One final comment is that the book is well grounded in HR's role in the development of human capital but is surprisingly silent on HR's role in developing social capital in the firm, a key strategic role. Despite these mild criticisms, the book is highly worthwhile.