Improve Sustainable HR Impact: Change Your Conversations

The name of this newsletter is drawn from the impact of our current research outlined in this article. Thank you to the Governance and Guidance for Growth through Human Capability (G3HC) Team as we continue to move this research forward - Norm Smallwood, Mike Panowyk, Scott Brown, Joe Grochowski, and Kevin Allgaier.

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Few question the increased attention business leaders are giving a proliferation of HR issues. In the last few weeks, I have participated in conferences, reviews, and webinars where I am clearly seeing this firsthand.

At conferences for senior executives (e.g., World Economic Forum, World Business Forum), recent topics included disciplined people practices, managing talent, goal setting and performance management, transformational leadership, resilience, inequality, collaboration, and so forth.

In doing reviews of 2022 and previews of 2023, many thoughtful colleagues are making lists of their HR agenda: employee experience, social responsibility (ESG, DEI), skill-based organizations, digitally enabled HR services, retention and removal of people, people analytics, and more.

In a recent webinar, I asked participants to answer two questions:

1 - In the last few days (weeks/months), what have been your priority topics (things you are working on as a company or individual)?

Answers included talent, talent review, employee engagement, great resignation, headcount, improving leadership, sharing vision, annual salary increases, and DEI.

2 - With whom have you been having conversations about these topics?

Answers included HR team, business leaders, and employees.

But many of the issues in today’s dialogues are extensions of previous discussions. Like other fields, HR may be prone to fads, quick fixes, shiny objects, or the “initiative du jour” where re-labeling and re-packaging occurs.

So how can business and HR leaders avoid quick fixes, evolve ideas, and cumulate ideas so that they have more sustainable impact? Let me suggest three steps for making progress.

 1.   Create a taxonomy (or typology) to classify “HR” work. 

Classifications or typologies affect daily lives and all types of work and make choices or work easier by organizing separate items into categories:

• Restaurant menus are organized into food categories: appetizers, drinks, main courses, or desserts.
• Libraries or bookstores are classified by type: fiction crime, mystery, poetry, or science fiction; and nonfiction biography or self-help.
• When choosing classes or a career, individuals can search by category: STEM, business, education, art, etc.
• Investors can create an investment portfolio based on categories: equities, bonds, commodities, cash, etc.
• Biology uses the Linnean system of ordering plants and animals from domain to species.
• Psychology uses the Diagnostic and Statistical Mental Disorders (DSM5-TR) system to define types of psychological disorders.
• Engineering work is categorized into chemical, civil, electrical, and mechanical specialty areas.
• Accounting assesses information in balance sheets, income statements, cash flows, and equity documents.
• Etc.

In each case, the categories are stable, and innovations occur on the items within the categories.

We have suggested the need to organize disparate people and organization initiatives into an integrated human capability framework with four elements that are stable and 37 initiatives that change and can be classified into the four domains (figure 1).

We have validated this framework with survey methodology (Organization Guidance System work with over a thousand organizations) and machine learning (Governance and Guidance for Growth through Human Capability [G3HC] work with over seven thousand organizations). The framework provides stability with the four domains and innovation with the 37 initiatives.

2. Link human capability to stakeholder value.

Often investments in any of the four human capability pathways have scorecards, dashboards, benchmarks, and best practices around accomplishing each initiative. But measuring the impact of initiatives on outcomes that matter provides more insightful information to an organization.

The impact on an organization’s stakeholders determine outcomes that matter. Organizations are comprised of stakeholders who each get value from their interaction with the organization. Human capability investments should be linked to the value they create for each stakeholder (see figure 2).

Our (and others’) research has demonstrated that organizations that invest in human capability will deliver these seven stakeholder outcomes.

3. Help each organization prioritize where to invest and disclose their human capability efforts.

With the human capability framework tied to stakeholder outcomes, leaders can make better choices about where to focus their people and organization efforts. Often a company invests in one of the 37 initiatives in figure 1 for several different reasons: it is considered a best practice in an admired company; it builds the organization’s reputation (socially or by being politically correct); leaders believe in the initiative (survey says “do this”); an advisor recommends it; or it is easy to do. Success is then defined by the initiatives being implemented on time and within budget.

We would hope that leaders can use rigorous analytics to determine which of the four pathways and 37 initiatives deliver the most value to the seven stakeholders. Prioritization is not just intuition but information.

Implications of Taxonomy, Stakeholder Value, and Prioritization for Conversations

The implications of this framework, stakeholder, and priority logic change HR conversations.

In conferences for senior leaders, the human capability topics chosen to talk about should be those that create the most value for stakeholders. Using the four categories, participants at these conferences get a balanced view of the talent, leadership, and organization choices that they could consider for their organization. They have a portfolio or menu of choices that they choose from depending on the needs of their specific stakeholders.

In my reviews of human capability agendas from one year to the next, agendas should build on each other to cumulate knowledge at the four-category level rather than focusing on isolated experiences. Instead of repackaging ideas, they could evolve based on new insights.

Conversations about HR can and should pivot. Each of the seven stakeholders (not limited to employees, business leaders, or HR) can engage in a conversation about how their needs are met through human capability initiatives. Based on these conversations, more strategic human capability investments (like a financial portfolio) and more intentional disclosures (like those with SEC reports on human capital, Compensation and Discussion Analysis [CD&A], or ESG) can be made.

This quest for changing HR conversations to create stakeholder value through human capability is not new, but now is the time to make progress. In the next two months, more than two-thirds of organizations trading on the NYSE and Nasdaq will release their next human capital disclose as part of their 10-K. We hope to see these organizations take the critical step to changing conversations by applying the human capability framework to the process and content of disclosures. Building a common language is key to elevating the visibility, understanding, and impact of conversations with all stakeholders.

We have been privileged to work with an incredible advisor board (Ram Charan, Rebecca Ray, Thomas Stewart, and Dixon Thayer) and to partner with Amazon Web Services (Bratin Saha, Sanjiv Das) to make progress on all three steps.

If you would like to move beyond anecdotes, isolated experiences, and well-intended but not well-measured initiatives, please let us know how we can support you. www.g3humancapability.com

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Dave Ulrich is the Rensis Likert Professor at the Ross School of Business, University of Michigan, and a partner at The RBL Group, a consulting firm focused on helping organizations and leaders deliver value.