Tag Archives: PwC

Judge HR by the ‘metrics’ they choose

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One of the most common HR ‘metrics’ cited by HR people is the number of HR people per 100 FTE’s (full time equivalents – employees) and this is used by HR itself and auditors (see “Primary Indicator 2″ on page 13) as a benchmark to suggest how well they are doing.  The perspective of an EB-HR manager would suggest the exact opposite.

The PwC/Saratoga/audit ‘school of thought’ – that’s being generous, it’s more a mentality – encourages HR departments to choose these ‘metrics’, presumably, in the belief that either: -

a. There is an ‘ideal’ ratio to aim for (based on what?) or
b. HR is a necessary evil that should aim to eliminate its cost (otherwise known as HR’s suicide note)

The thinking EB-HR manager does not adopt either of these views.  To them it is a meaningless ratio that tells them everything they need to know about HR teams whose primary focus is activity rather than value.  Such ratios can only have meaning when allied to indicators of output.  So the EB-HR Manager asks each member of the team what they are contributing?    Let us compare a couple of possible answers.

1. ‘I deal with 100 managers’ queries a day’

EB-HR manager’s response? - ‘Let’s seek to remove all of the causes of those queries’.

This does not endear them to the HR team, or their line managers, who have become ‘HR support junkies’.  However,  this will not deter the EB-HR manager from adopting a two-pronged approach in removing transactional inefficiencies whilst resolving the underlying, strategic causes.  For example, if one of the ‘queries’ is to do with union issues it is because the HR Strategy has failed in some way.

2. ‘I’ve been working on re-designing team roles to increase efficiency, improve customer service and save us about $100,000 a year’

EB-HR manager’s response? - ‘Great. Can I see some of the detail of how things are going? What other plans have you got and do you need more resources?’

The choices are that stark and that simple; regardless of how difficult it might be to gauge value added.  Now take another staple HR activity – hiring – and ask yourself three questions: -

a. Which ‘metrics’ should be at the very top of the priority list?
b. Which are the easiest to gauge?
c. Which would your CEO most like to know?

  • The average time it takes you to hire someone?
  • The average cost of hiring someone?
  • The industry benchmark?
  • The number of applicants per vacancy?
  • The performance of the new hires?
  • Job offers turned down?
  • How often you get the hiring decision ‘wrong’?
  • How much value they add?

The choice is yours.

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Criteria for producing the Best HR Evidence.

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A recurring theme in this series, and a rather irritating obstacle to the further development of the evidence-based management movement, is the limitations of language – especially the one word that is meant to underpin everything – evidence.  What should be the movement’s greatest strength could prove to be its biggest impediment, unless we clarify it once and for all.

If that task were not difficult enough, we have the added complexity here of concentrating on evidence-based human resource management, which has its own data measurement problems.  Human data is different to most other types of organisational and performance data and just calling it ‘human analytics’ doesn’t suddenly transform it into evidence.  In order to break down this dual barrier there needs to be more precise use of language and clear criteria as to what constitutes valid evidence.

We should not lose sight of what we are trying to do here though – we define EBM as ‘making managerial decisions based on the best evidence available’ accepting that we do not live in a perfect world.  The best we can do therefore is aim for the highest probability that we are using the best evidence available.  Below is one set of pragmatic, working definitions (I don’t want any of my academic colleagues to get me bogged down in semantics) and you can add this to your favourite management checklists if it works for you.

1. Data, information and knowledge

First, let us make a distinction between 3 commonly used terms whilst adding a few human insights -

Data – straightforward facts, statistics and numbers that do not provide a basis for decision making – e.g. the population of the UK is 60 million, the earth is 93 million miles from the sun.

Human insights – some people think they can make decisions based on such raw data saying the UK is ‘overcrowded’ or ‘we have too many immigrants’.  Beware those who try to promote data as knowledge. Also, human error might have got the data wrong.

Information – a human being has processed all the relevant data in their head and started to draw some conclusions e.g. the population growth trend in the UK relative to available water resources, how long it would take to get to the sun – but it is still unusable in this format.

Human insights – Information only has meaning when processed by human beings and it is always unique to the individual. Once human beings are involved you can forget trying to regard this as a science.  An engagement survey score of 52% can be seen as both a success and a failure, depending on your perspective, and will not change the attitude or behaviour of the manager who does not perceive it as having value.

Knowledge – here we will use the simplest, purest definition – you actually know something to be true.  We know ‘1 + 1 equals 2’ because no one disputes the basis of the calculation, it is regarded as proof or perfect knowledge.  Better still, we can see, touch and experience it for ourselves.

Human insights – you are rarely, if ever, going to achieve a state of pure knowledge in EB-HR and genuine evidence-based managers do not pretend otherwise.  Beware anyone working in HR holding out the promise of proof.  Managers should openly admit their knowledge is imperfect and always accept they have to continuously learn (yeh, right), rather than blame, because imperfect knowledge inevitably produces imperfect decisions.

2. Defining Evidence

These definitions, on their own, might not appear to be particularly helpful though until we use them to define what evidence means to an evidence-based manager -

Evidence = Actionable Knowledge

This is really the only pragmatic definition.  Decisions have to be made, regardless of how well they are made.  At any point in time we just try to ensure we get as much knowledge as we can in order to act.  So, in the south east corner of the UK, an action plan is required to continue to provide water according to the population growth projections and what is ‘known’ about climate and weather pattern predictions.  Over time those decisions could turn out to be unsuccessful or appear to have been ‘wrong’ but taking no action at all is not an option.

What we need to do now is look at what data we might come across in the fields of HR, human capital and learning and how we can develop our own heightened awareness of what constitutes the best knowledge and evidence available and the skills to use them effectively.

3. Criteria for ‘best evidence’

Here is a simple list of questions to help you make intelligent choices about the quality of evidence presented to you and how you are prepared to use it.

Activity – avoid activity data like the plague. Probably the best example is ‘number of training days’ or ‘annual training hours per employee’.  PwC/Saratoga (see page 6) still insist that knowing the ratio of HR people to FTE’s is meaningful data – it isn’t. This type of data just tells you somebody is sitting somewhere, not what they are producing.  See also INPUT and CORRELATION below.

Causation – both Gallup’s Q12 “Proven Approach” and Watson Wyatt’s* (now Towers Watson) “Human Capital Index” refer to their statistics as PROOF that their methods work. No credible EB-HR Manager would dare to suggest this without establishing CAUSATION from the beginning: statistical regression mistakenly tries to do this after the event.  Regression is an aircrash investigation while EB-HR is aircraft design.  EB-HR managers have a much simpler, more practical and convincing way to deal with CAUSATION – they go and ask the people using Q12 or the HCI to show their original, causative hypothesis (e.g. which particular employees in this department will sell more if they become more engaged).  If they don’t operate in this way they failed to use the best evidence available.

Correlations – In the absence of CAUSATION the purveyors of very popular, off-the-shelf, HR ‘solutions’ substitute CORRELATIONS, which is the lazy statistician’s way of making up data to suit themselves in order to make a fast buck.  For example, suggesting there is data that shows the more a company spends on training the better it will perform.  Even if these spurious correlations are made to look statistically valid the dimmest, first grade student of statistics will remember they were taught not to trust CORRELATIONS**.  Instead, the evidence-based learning manager will make sure training is designed strictly in accordance with the principle of causation by only investing in training that is designed to deal with specific business issues.

Input – generally cost, time or manhours expended. It cannot be turned into useful INFORMATION until it is set against a corresponding OUTPUT (e.g. how much did all this produce in terms of cars, bank loans etc.)  HR departments and training managers often resort to measuring input data (happy sheets) simply because they don’t know how to measure outputs.  The worst ones think measuring inputs tells their bosses something about the way they work – yes it does, but not what they intended it to.

Output – The only thing that matters and produces value. Goods or services actually produced and sold, their costs reduced or quality improved and any extra revenue earned.  Any HR or training not focused on these outcomes is not only non-evidence-based but a waste of resources.

Performance – a rule-of-thumb definition of a performance measure is that you should know which way the measure should move, which is not as easy as it sounds.  For example, should your staff turnover or attrition rate go up or down?  Should your ratio of HR to FTE’s go up or down – well surely it depends on what they are doing? The key is for everyone involved to understand and agree what ‘good’ looks like.  Stupid measures or ratios encourage stupid behaviour: reducing your HR to FTE ratio could seriously damage the business if you lose people in HR who were adding a lot of value.

Qualitative – a confusing term – the best definition is to view it as the opposite of OBJECTIVE.  Some people use the word QUALITATIVE to mean SUBJECTIVE data (i.e. how much do you respect your boss on a scale of 1 to 5?) while others regard it as a measure of intangibles (i.e. engagement, empowerment etc.).  It only becomes tangible EVIDENCE (actionable knowledge) though when someone has a stab at making it OBJECTIVE by putting a potential value on it.

Quantitative – the meaning should be very obvious – it is simply data that has a number attached (the population is 60 million) – regardless of whether the number has any intrinsic validity, purpose or application.  It is often viewed, mistakenly, as the opposite of QUALITATIVE on the basis that any number or measure is preferable to an indistinct or subjective statement.  But some things are extremely important without any numbers attached – how about the question ‘do we have a financial regulation SYSTEM in place?’ It’s not quantitative, it’s not qualitative (it can be clearly demonstrated) but it’s probably the most valuable element in evidence-based human resource management.

For personal development linked to this topic visit the Consummate Professional Series Module 2 and Module 4

*Compare Towers Watson’s ‘proof’ with a contradictory statement from their own European Survey Report in 2000 – “(HCI) Demonstrates a very strong correlation between effective people practices and shareholder value…but on its own does not prove a causal link.”

**“It is important to state 3 caveats about regression models. First, correlation does not mean “cause”. The fact that one variable is correlated to another does not necessarily mean that one variable causes another…. Generally, you should conclude that one thing causes another only if you have some other good reason besides the correlation itself to suspect a cause-and-effect relationship. Second, keep in mind that these are simple linear regressions…. Finally, in multiple regression models, you should be careful of independent variables being correlated to each other…. regression modelling …is a useful tool, but proceed with caution.”

From “How to measure Anything – Finding the value of ‘intangibles’ in business” (2nd Ed.) Douglas W. Hubbard, Wiley, 2010

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Managers with ‘ODD’ attitudes do not get EBM

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One of the many aspects of human behaviour that I have never been able to fathom is the ‘polar shift’ – moving from one extreme position to another without any rational explanation.  Anyone who has children will have witnessed it.  You are just about to go out and you say to your child ‘put your other shoes on’ and it ends up with them moodily selecting the most inappropriate shoes or simply refusing to go out.  There is no halfway house, no moderation. The worst cases are now classed as ‘oppositional defiance disorder’ (ODD).

When such behaviour continues into adolescence we put it down to teenage petulance – ‘be back by midnight’ turns into either sulking in their room or arriving back at four in the morning.  Being told to do something makes us want to demonstrate that we are not a slave to authority and what better way to demonstrate our independence than to do exactly the opposite of what the authority wants?  But I think there’s more to it than that and, when it persists into adulthood, the behaviour becomes even more extreme and, frankly, bizarre.

Tell someone in HR or learning that they have no evidence to support their favourite activity and they immediately move from a position of zero evidence to demanding the highest, most sophisticated level of evidence possible. Trainers, who do no evaluation at all, suddenly want to use control groups, randomised control trials or double blind experiments when a simple chat with a trainee would suffice (‘have you used what we taught you – were there any problems?’)

HR departments who never want to measure anything suddenly start producing masses of ‘HR metrics’ and because this mountain of data fails to answer the most obvious question (what value do you add?) they go and change the name to ‘human capital analytics’ – the child’s equivalent of choosing their flip flops to walk in the snow.

Of course the other polar response to the simple question – ‘how do you know your methods work?’ – is the asinine challenge – ‘well you prove to me that they don’t’.  It is a pity but these ‘managers’ are a little too old now to be sent to their room.  No evidence-based manager is going to waste their organisation’s precious time and money looking to prove anything. They know only too well that you cannot prove a negative (e.g. you cannot prove a god does not exist).  All the EB professional hopes for is a positive and constructive response, not the recalcitrant attitude of the teenager who simply refuses to do what is in their own, best interests.

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HR playing the Fool

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I was sorely tempted to write an April Fool’s piece today but instead I opted for a history lesson on ‘The HR Department’.  In case you were still wondering, this is not a site for HR people – or at least not the majority of those in conventional HR roles.  As far back as I can remember there were soothsayers predicting that HR was at a ‘crossroads’ and had to decide which path to take.  In 1991 I decided to take a very different path to the one that the other 99% of the ‘HR profession’ thought was a safer bet.  So let’s go back 20 years and remind ourselves what the current thinking was then.

1991

The precursor of the UK’s CIPD was the IPM (Institute of Personnel Management).  Its president was Barry Curnow who wrote a piece for Human Resources magazine (Summer issue) entitled -

“Measuring the intangible – performance criteria in jobs without a bottom line”.

Barry, obviously having a penchant for self-immolation, did not present the most positive face that one might expect from a professional body’s titular head.  But even in 1991 Barry was totally out of touch with the real world, which was increasingly demanding a ‘total quality’ approach to management that had to exclude all muda (a Japanese term used in the Toyota Production System for an activity that is wasteful, unproductive and adds no value) and personnel people were definitely starting to be seen, at best, as a necessary evil and, at worst, as the PC (political correctness) police.

1993

Two years later I was asked to speak at the IPM’s annual conference on the radically new theme of ‘The added value of Personnel’ (HR was still not on the scene).  Someone had finally decided that the Personnel department should at least acknowledge it had a bottom line.  Although it had not yet registered with the 500+ members in the audience: the majority of whom had bemused looks on their faces, as though I were speaking a foreign language.

The keynote conference speaker that year was Dr. Richard Pascale (“The art of Japanese Management”)  who told his audience -

“In the US people in personnel take on a psychological contract to be a victim.” (reported in Personnel Today, 9 November 1993).

So the US experience was no different apparently.

1995

By 1995 the response from beleaguered personnel departments, to all of this damning criticism, was to re-invent themselves as ‘HR’ – because it sounded more like the sort of department that might actually have a ‘bottom line’.  Yet the guy who had taken over Barry Curnow’s role, the infamous Geoff Armstrong, was having none of it.  In a book review in Personnel Today (23 February 1995) he predicted –

“In my view, it is wrong to tie strategic people issues to the HRM bandwagon.  They were around before HRM was invented, and will still be around long after its faddish label has faded.”

Whilst over-staying his welcome at the CIPD, and building a sycophantic regime that even Colonel Gaddafi would envy, Armstrong arguably did more damage to the cause of business-focused HR professionalism than any other person.  Certainly it set back the CIPD’s development by at least 10 years, IMHO.

1996

Meanwhile observers such as Thomas Stewart in Fortune magazine (15 January 1996) had a simple solution to the HR department ‘problem’ -

“Why not blow the sucker up?”

and added -

“Human resources has come to the proverbial fork in the road.  One path leads to a highly automated employee services operation…. The other leads straight to the CEO’s office.”

What he didn’t cover in any detail was what the HR director would do once they got there (having never been a strategic HR director himself).  Stewart is now the MD and editor of Harvard Business Review (HBR), a journal that has also failed to come up with an answer to maximising HR’s impact on the bottom line, despite publishing many questionable ‘solutions’ in the meantime (Prahalad and Hamel’s ‘core competence’ theory being probably the worst culprit, IMHO, although W. Chan Kim and Renée Mauborgne’s piece on ‘Blue Ocean Strategy’ gets my personal award for the most crass HBR article of all time).  I think it’s high time he blew that sucker up as well.

1998

Then Dave Ulrich turned up on the scene with his own HBR article entitled “A new mandate for human resources” where he argued -

“In recent years, a number of people who study and write about business have been debating whether we should do away with HR. The debate arises out of serious and widespread doubts about HR’s contribution to organizational performance. And as much as I like HR people, I must agree that there is a good reason for HR’s beleaguered reputation. It is often ineffective, incompetent, and costly; in a phrase, it is value sapping. But the truth is that HR has never been more necessary.”

This was a very clever article.  Ulrich knew his audience.  At a single stroke he wrote off HR departments as ineffective but then held out the prospect of a promised land, for the very same people who were so obviously ineffective, with his magic wand that would transform them all into strategic, business partners. He also remembered that when ‘personnel’ people were struggling in 1991 they were happy enough to just change their name rather than their modus operandi.  So he offered them an opportunity to pull the same stunt again, with new titles, only to suggest a full decade later, in …

2008

… at a conference hosted by PwC, that HR had failed to make his model work, rather than admit he had produced a seriously flawed model (which remains fundamentally flawed despite his more recent amendments).

Which roughly brings us up to the present day.

2011

So what are the key items on the organisational, HR agenda now, when HR no longer pretends it does not have a bottom line?*

  • Human capital management and reporting
  • Evidence based (HR) management methods
  • Tougher professional standards for HR people (SHRM is currently working on this)
  • Demonstrating added value and ROI

So, after two decades, HR has arrived right back at the same historical junction.  Of course, some HR departments have already tried to get away with their re-naming stunt once more – this time calling themselves ‘Human Capital’. Others are stuck on a vicious, circular path that always leads back to the transactional ghetto still fooling themselves that efficient transactions have something to do with value – but they are no longer fooling anyone else.

For personal development linked to this topic visit the Consummate Professional Series

*But see Ulrich’s 2003 book “Why the bottom line isn’t!”

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HR is NOT a support function

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After hearing Neil Roden’s very late admission that the function he headed up at RBS (Royal Bank of Scotland) was merely a support function it is time to finally put a few hoary old misconceptions about HR to rest.

First on that list is the simple fact that when we all talk about ‘HR’ most people forget that this is short for human resource management – HR is a management function. Second, managing an organisation’s human resources (or human capital if you prefer) is inherently and necessarily a strategic role. The reason RBS went bust was because a sizeable chunk of their bankers were not managed well enough to stop them creating huge bad debts.  RBS’s strategic ambition to become the ‘most admired bank’ was not matched by an ability to get the best value from its human capital. If that isn’t the job of an HR director then I don’t know what is.  For Roden, as with the HR directors of all the other banks that failed, if they somehow think this is not their job then they need to make room for those who do.  Otherwise they are turning the clock back to the bad old days of the lowly, unprofessional personnel manager – often appointed because no other department would have them.

A support function like Roden’s involves recruitment, advising on contractual pay and conditions, dealing with the usual grievance and disciplinary issues and reacting to any changes happening in the business such as relocations, revised terms and conditions and the like.  This is what passes for HR in the vast majority of organisations today but is just old-fashioned personnel administration by any other name, with all the severe limitations that entails.  The world might have changed in many ways and the job titles too (e.g. talent manager) but a support function runs training courses – it doesn’t get the best value out of its talent.

Day-to-day maintenance and reacting to operational demands, such as filling vacancies and running courses (even in expensive, purpose-built business schools or corporate universities) is intrinsically low value work because it is so easy to replicate; as evidenced by the low salaries of personnel and training officers relative to other professions.  Nevertheless, even basic tasks need to be managed well and constantly monitored for how efficiently and effectively they are carried out.  This leads personnel administration teams to resort to the sort of number crunching promoted by PwC/Saratoga to show how quick or cheap their recruitment process is.

The key distinction between personnel admin and real HR is that real HR people know that their main priorities are getting the right people and ensuring they are performing to their full potential, adding as much value as possible.  They know this presents them with a much more problematic set of issues but they are not stupid enough to be taken in by the sort of simplistic and misleading data used in PwC/Saratoga-type metrics.

The biggest problem of all though with an HR ‘director’ believing an organisation like RBS can operate in a global banking and finance system with only a personnel support function is the most obvious one – it failed miserably – because if you leave human capital management to personnel people, or even other senior, operational directors, it doesn’t happen. Fact.

For personal development linked to this topic visit the Consummate Professional Series

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PwC – The March of the Clones

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Anyone who has ever seen the films Village of the Damned (based on the book The Midwich Cuckoos) or Stepford Wives, or any other work in the genre of people being turned into crazed automatons, and has also had the misfortune to work with PwC’s ‘HR consultants’, cannot fail to have noticed some very disturbing similarities.

This might leave me open to charges of libel if it were not for the fact that the person who pointed this out to me was one of PwC’s own staff development managers – puts a whole new spin on the word ‘development’ doesn’t it?  To protect this person’s identity, and to save them from the sort of gruesome fate that usually befalls anyone who tries to halt the march of the humanoids, I will refer to them as ‘A’.   ‘A’ said that PwC had a reputation for producing “clones” (A’s word not mine), and very arrogant ones at that: apparently some of the partners were increasingly concerned about it .  As A was telling me this in a very public gathering I suddenly felt an urge to look over my shoulder and clock everyone else in the room for any suspicious or menacing behaviour.

Unfortunately, in the time since A told me this PwC does not seem to have had any success in stemming its descent.  I stumbled across an interview yesterday, about the totally discredited ex-HR head of RBS (Royal Bank of Scotland) that only confirmed my worst fears.  I first met Neil Roden in 2001 and suffice it to say that his is a classic case of  over-promotion (in every sense) having become CEO Fred ‘The Shred’ Goodwin’s HR head while he was at Bank of Australia.  Roden, like many HR directors, was struggling to maintain some semblance of competence and composure in a job that was obviously too big and too strategic for him.

At the time he was boasting about reducing his ratio of HR people per 100 FTE’s since RBS acquired Natwest: an obsession with irrelevant minutiae fostered by Saratoga – a specious benchmarking regime now run by PwC and inflicted on many of their clients.  Also, as one of Fred Goodwin’s henchmen, he had to show his macho credentials by mimicking his master’s appetite for  slashing costs. What has never occurred to Roden, or PwC/Saratoga for that matter, is that really effective, evidence-based and value driven  HR people are not a cost but a sound investment.  What a difference a few good HR people, who understand the true value of human capital, might have made to this now state-owned bank.

Roden was never one to hide his ‘talents’ and ‘achievements’ as he won awards and was regularly chosen to top HR league tables.  I even had my own clients asking me what was so good about RBS?  I tried to put them straight and even challenged him head on but to no avail because one of the biggest myths in HR, that companies making lots of profits must be good at HR, is perpetuated by those very HR directors who work in profitable companies but have no evidence to demonstrate what their own contribution is.  The old saying ‘no one ever got fired for buying IBM’ has been replaced by ‘She must be good – she worked for Pepsico‘).  Only when it is too late is the reality revealed, when companies like RBS or Enron crash.

So what is Roden’s hindsight view now?

“There’s a debate here about what HR can reasonably be held accountable for. People think HR runs companies. I say, stop getting carried away; HR is a support function, no more or less important than sales or IT. HR critics are way ahead of themselves; they need to get back inside their box.”

Roden is of course referring to ‘critics’ like yours truly but what Neil always failed to realise was that any criticism was objective and evidence-based and we were never criticising HR, per se, only its worst exponents.  It would not be so bad if he actually stopped contradicting himself: compare this with an interview he gave to PwC’s newsletter ‘Hourglass’ in February 2008 (just before RBS collapsed) in which he was quoted as saying -

“I was personally involved in the group executive committee on whether or not we should proceed with ABN Amro.”

This contradiction and bare-faced hypocrisy actually makes Roden a perfect candidate to join PwC, having passed their integrity standards test with flying colours.  As Michael Rendell, head of HR services at PwC, commented on Roden’s appointment:

“In addition to a wide ranging role advising clients on all aspects of HR, Neil will be focusing on the role of the HR function, how to optimise its activity and the critical impact of people on business performance.”

Obviously Rendell and PwC don’t care what Roden did at RBS.  The fact that they are already contradicting each other will soon be resolved because PwC’s core competence in cloning will soon ensure their latest recruit is mouthing exactly what their clients want to hear.

For personal development linked to this topic visit the Consummate Professional Series

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Evidence-based management has to be a new paradigm

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Evidence-based management (EBM), and particularly EB-HR, are already in danger of being consigned to the trash can of fads before they have even started. There are many different definitions of what EBM is supposed to be and plenty of people will happily jump on any passing bandwagon if they get the scent of a fast buck. So how might we distinguish between the real thing and the pretenders? Let us look at one attempt to provide some definition, the Conference Board E-B Human Research Report (E-0015-07-RR) and ask the questions: –

  1. Is EB-HR (as proposed by the Conference Board) old wine in new bottles or a completely new management paradigm?
  2. If it is genuinely meant to be a new paradigm then where has this fundamental shift in thinking come from?

According to this Report there are already -

“Practitioners of Evidence-Based Human Resources” who “ focus squarely on the impact of management practices on observable financial and organizational outcomes; and their decisions are guided by the best available evidence.”

If such practitioners really do exist, and we accept the Conference Board’s definition of EB-HR, there are still many crucial questions that need to be asked: –

  1. Who taught them how to become evidence-based?
  2. Where exactly do they get their evidence?
  3. Is it meaningful evidence, that is evidence of real value in terms of output, cost, revenue or quality, rather than inputs such as engagement surveys and number of training days?
  4. How did they use that evidence and what difference did it make to their HR decisions and policy making?
  5. Who exactly are these people?

Perhaps we can answer this last question by looking at the “Evidence-Based Human Resources Advisory Panel” (Appendix 1), which presumably comprises those they regard as being leading exponents of the art and science of EBM?  One of these members is Jac Fitz-enz (Saratoga founder) whose work, according to the report -

“.. was revolutionary, applying basic formulae to everyday HR functions to measure their efficiency and effectiveness. His research sought to identify basic formulas for identifying the costs and benefits resulting from employee turnover, recruiting methods, training learning curves, etc.”

But it later admits that -

“Since Fitz-enz introduced measurement to the HR function in the 1980’s most of the focus has been primarily on measuring the efficiency of HR functions. This focus fails to address the more meaningful issues of how human capital creates value and how HR interventions serve as catalysts for improving business outcomes.”

Indeed Jac Fitz-enz did create a whole industry of measurement to keep HR departments busy, and PwC continue his work under the Saratoga brand today, despite the fact that it reveals nothing to its clients about human capital management or value creation.  PwC probably do not bother to remind their HR clients either that they cannot be ‘efficiently’ doing things that add no value whatsoever (e.g. sending people on pointless training programmes).

Another member of the panel is Dave Ulrich who has used masses of his own academic data to support his theories but when the crucial question is asked, is this an evidence-based approach, the answer has to be no. This is best exemplified by one his own reports ‘Reporting on Employee Surveys’ (Ulrich, Smallwood, Creelman – 2007) in which Ulrich offers his basic proposition that -

“Companies with good employee survey results will in general outperform companies with poor results.”

That may well be ‘generally’ true but it is, at best, only a correlation and in the case of the failed GM it patently does not apply. Yet this does not stop Ulrich and his co-authors, in this simplistic report, declaring that this is not just a correlation but actually -

“there is research demonstrating engagement does cause higher performance”

This blatant attempt to pass off simplistic correlations as causal evidence brings conventional HR into disrepute and is as far away from EB-HR as it is possible to be.  It marks out Ulrich, and those like-minded members of this panel, as non-evidence-based.  Using retrospective data, out of context, to support HR practices in completely different contexts is a classic example of the failed, one-size-fits-all, HR policies that have been the stock-in-trade of HR departments around the world; blindly copying competence frameworks, talent management and employer branding based on a questionable belief system, not hard evidence that any of these initiatives work. This has left many senior HR people ‘up a creek without a paddle’ when trying to demonstrate their worth.

The real irony here of course is that the very practices that the Conference Board praised in the past (Fitz-enz et al) are exactly the same ones that have failed to gain credibility with a more questioning management and investment analysts.  In view of this it is surprising to see that one of the ‘fathers’ of EBM, Jeffrey Pfeffer (see his book ‘Hard Facts, Dangerous Half-Truths and Total Nonsense’) has allowed himself to be associated with this sort of company; especially when one of his own, founding ‘Principles of EBM‘ includes –

“5. Avoid basing decisions on untested but strongly held beliefs, what you have done in the past, or on uncritical “benchmarking” of what winners do.”

-  perfectly describing Ulrich’s modus operandi.

As someone who has dedicated his entire career to people management I would be more than a bit miffed – and wonder why I had bothered – if I suddenly discovered that there is no connection between employee engagement and performance but, at the same time, I know only too well that any relationship that might exist is not simple but highly complex.  Even if there were evidence that a causal relationship did exist, in a particular organisation at a particular point in time, it would not encourage me to advocate spending more time, money and energy on improving engagement per se if, as an evidence-based HR manager, I had unearthed much more pressing and more valuable management issues that needed to be resolved first.

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