Beyond HR: The New Science of Human Capital.

Beyond HR: The New Science of Human Capital Authors: John W. Boudreau and Peter M. Ramstad Publisher: Harvard Business School Press, Boston, 2007 ISBN: 142210415X

Reviewer: Michael L. Moore, Ph.D., Professor, Michigan State University

I became aware of the concept of a "human resources decision science" earlier this year when I reviewed another book for the Human Resource Planning journal. That book, Achieving Strategic Excellence (2006), presented the fourth iteration of a longitudinal study beginning in 1995 of HR functions and practices by the leaders of USC's Center for Effective Organizations. Ed Lawler, John Boudreau, and Susan Mohrman were the authors. That book introduced the concept of HR as a "decision science." I began to wonder, "What exactly is a decision science and how does this construct add value to HR strategy and impact?"

Boudreau and Ramstad present data from the Lawler, Boudreau, and Mohrman book to illustrate the HR function's move from "personnel" to "HR" to "talentship." They deal with the fundamental conundrum of how to be especially successful in identifying the "A-level players" who can truly change the impact of the company while improving outcomes for all employees. Chapter 1 focuses on how talent decisions are made today and why an HR decision science must emerge in order for HR to change its strategic relevance.

The authors distinguish between the three essential markets faced by firms for financial capital, product and customer capital, and for human capital. They make a fascinating distinction between professional practice and a decision science. Decision sciences are seen as combining five key elements:

1. A decision framework;

2. Management systems integration;

3. A shared mental model;

4. Data, measurement, and analysis; and

5. A focus on optimization.

These elements are explicated in Chapter 2, "A Decision Science Applied to Talent."

Here is the crux of Boudreau and Ramstad's line of analysis. They separate professional fields from the decision science for that market. For example, the professional practice of accounting has existed for at least 500 years. The decision science for financial capital decisions called finance has existed for only about 100 years since its origin in the DuPont Corporation. Today, no student of business will confuse accounting with finance and the ratios necessary to determine the best places to invest financial capital. Finance is the decision science of accounting, according to the authors.

In like manner, the professional practice field of sales has existed since time immemorial. The decision science field for sales is marketing which arose less than a century ago to give us insights on markets, customers, satisfaction, and segmentation. Because the third great market resource for a firm is human capital and the practice profession is human resource management, what is the decision science of HRM? Boudreau and Ramstad assert that it is "talentship." This line of analysis is pivotal to this book. Once a field reaches decision science status, it is recognized as a core knowledge base and competency for all executives as finance and marketing are today.

Chapter 3 of Beyond HR contains the model called the HC BRidge framework for making talent decisions in a decision science paradigm. "HC" is human capital; the capitalized "BR" stands for the authors' last names, Boudreau and Ramstad, and reflects their appreciation for marketing and consultation possibilities stemming from HR as a decision science. Chapter 3 relates the model to three anchor points in impact, effectiveness, and efficiency. This model provides the structure for the other chapters in Beyond HR.

The remaining chapters spell out each aspect of the HC BRidge framework in terms of strategy (Chapter 4), organization and talent (Chapter 5), building a culture to leverage performance and potential (Chapter 6), building a portfolio of talent programs with effective policies and practices (Chapter 7). Chapters 8, 9, and 10 are focused on efficiency measures such as optimizing the talent portfolio, talent measurement, and installing an HR decision science approach. Chapters 4 and 5 focus on impact. Chapters 6 and 7 focus on effectiveness. The remaining chapters are anchored to the construct of efficiency.

One special strength of this book is the quality of examples used to portray elements of the Boudreau/Ramstad model. The drama of Boeing versus Airbus informs many chapters. Case histories from Disney, Southwest Airlines, Williams-Sonoma, Mitsubishi, and General Electric are used to illustrate the model. Case histories include 2007 data. It is a pleasure to read such timely examples and models.

The authors of this book are highly credible. Each possesses a long career in the academic world and/or consulting. The lead author, John W. Boudreau, is professor and research director at the University of Southern California's Center for Effective Organizations, a unit in the Marshall School of Business. Peter M. Ramstad is now a vice president of the Toro Company after spending many years as a consultant and executive vice-president at a major consulting firm, Personnel Decisions International (DDI). Both authors hold Ph.D. degrees.

Beyond HR is a paradigm shift. I recommend it as "must" reading for HR executives and thought leaders. I think the best way to appreciate the framebreaking work of this book is to purchase and read the data-filled Achieving Strategic Excellence book (2006) that does such a competent job of illustrating the current state of HR as a profession and the evolving role as a strategic business partner. Following, readers who read Beyond HR will better understand the leverage possible when HR becomes the decision science of human capital and talentship.

Becoming a decision science will move the HR field from its role as a strategy implementer to a field with the capacity to drive a firm strategically and to have major impacts. At that point, all executives will want to know and ask the right questions about talent just as they now have learned to ask the right questions about capital allocation and about products and customers. Beyond HR serves as an enjoyable thought-starter for a paradigms for HR in the 21st century. These ideas are new. My research located articles by this book's authors discussing decision science as early as 2005. There is no particular need to go back to the 2005 writings. The 2006 book and Beyond HR reflect much more complete and sophisticated development of the decision science construct.

Top HR executives spend a great deal of effort teaching their fellow officers how to connect the dots to make decisions that maximize human capital development and retention. They gain credibility by helping their fellow top managers identify the talent pools that make a difference that affects the strategic destiny of the firm. Beyond HR provides important constructs and tools necessary to take the HR function to the next level: that of a decision science called "talentship."

REFERENCE

Lawler EE, Boudreau JW, & Mohrman SA (2006). Achieving Strategic Excellence: An Assessment of Human Resource Organizations, Stanford, CA: Stanford Business Books.