social responsibility | Evidence-Based HR

Now is probably as a good a time as any to introduce a new ‘ism’ to the world – as we start a brand new decade knowing we have yet to find a long-term solution to the catastrophe of the 2008 financial meltdown. But it is not just the global banking and financial system that is being scrutinised more closely than ever but the very basis on which we run society. The BP oil spill will get paid for by BP continuing to operate as a conventional, capitalistic entity but you don’t have to be a rampant communist to be thinking is this really how we want to run our world – as long as somebody pays the price all is well? Obviously the green, environmentalist and social responsibility pressure groups will be muttering ‘we told you so’ but they have not put together a complete, holistic, coherent and systemic alternative to move us from where we are now. Communism failed and even democratic socialism is facing its toughest test ever. So maybe we need to start looking for a totally coherent, evidence-based approach to resolving issues of economic regeneration, social policy-making and organisational management simultaneously. Welcome to the world of valuism.

While capitalism was supposed to create wealth rather than destroy it and socialism was meant to distribute that wealth equitably, at the moment neither side seems to be sticking very closely to their part of the bargain. The goal of valuism, therefore, is much the same as the combination of these two competing forces but without any of the inherent conflict that has always produced an uneasy relationship between the two. Valuism aims to create as much value as possible for the greatest benefit of as many people as possible. Under valuism capitalists still have to produce as much profit as they can but socialists will also see that the rewards produced are more evenly and equitably spread. The only difference is the key part played by the management of people – human capital. Valuism is founded on the simple tenet that value cannot be maximised unless everyone is motivated to do their best to produce as much value as they possibly can.

Of course these arguments are not new (e.g. from each according to their ability, to each according to their need) but the world was not ready for them. Take Nobel prize-winning economist Milton Friedman’s view that -

“there is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”

From ‘Capitalism and Freedom’ (1963), but quoted in his seminal New York Times Magazine article, September 13, 1970

Friedman knew exactly what he was saying and equally knew the reaction it would unleash – some of us do take great pleasure in shaking up conventional thinking – and as an economist myself I find I have to agree with Friedman – up to a crucial point. Where we would part is the word ‘profits’ – I would insert the word ‘value’ instead. So what’s the difference?

Take Bill Gates (or maybe Steve Ballmer as well) as an example. Bill Gates is one of the richest men in the world and is often described as a philanthropist; as are many successful entrepreneurs and businesspeople who give their money to societal causes. In Bill Gates’ case one of these is looking for a cure for malaria. The only problem is that this view of Gates does not sit easily with Microsoft’s reputation as an abusive monopolist (for which it has been fined) and I doubt if anyone would view Ballmer as the epitome of the beneficent philanthropist. Hence we have a phenomenon I call the ‘Microsoft Paradox’ (see ‘The Value Motive – The ONLY alternative to the profit motive’) – are these people a force for good or evil? They cannot be both simultaneously – an ‘evil philanthropist’ would be a perfect oxymoron.

So what is the solution to this conundrum? It’s incredibly simple – for Gates and Ballmer to truly earn the love of their fellow citizens they should have subscribed to the goal of value – that is, the most efficient, effective and innovative version of Microsoft without abusing their market position (which fits with Friedman’s view) – then they would be true philanthropists who could happily spend their well-gotten gains on whatever cause they chose.

From an evidence-based perspective there is also a simple lesson here – the only evidence that society should be interested in is value – not profit – and they are not mutually exclusive. We will explore the implications and ramifications of valuism in much more depth as this series continues.

Having borrowed that famous saying from the advertising industry – where the reality is probably even worse than they are prepared to admit – conventional wisdom has accepted this lame excuse as a truism for far too long. In the era of evidence-based management it is about as valid and convincing a justification for poor management as ‘the dog ate my homework’ used to be at school. This basic notion has a particular resonance for HR departments though because they are often deemed, by other managers, to be at least one step removed from producing anything tangible or measurable for the organisation. It doesn’t have to be that way.

Let us first take all the transactional time and money spent by HR departments dispensing advice on legal matters, contractual queries, disciplinary cases and grievance procedures – how much of this money is wasted? Well, one answer is 100%, if HR adopts the philosophy of ‘zero defects’. Contracts of employment should spell out exactly what is expected and cover virtually every eventuality; including the possibility that a completely new contract might be required – like in a serious downturn.

Every time the contract is challenged or breaks down it should be regarded as a defect in the contracting process. Therefore, busy HR advisers should always be aiming to spend no time at all on these activities and yet, if that is their only marketable skill-set, they have a vested interest in ensuring that they unearth as many defects as possible and might even cause a few – like trying to justify their existence by presenting managers with dire, litigation scenarios that are never likely to happen. No wonder HR is so unloved.

The evidence-based, HR manager’s take on this is to be constantly working at removing the need for HR advice, not looking to outsource it or place it in a shared service centre. Money wasted is money wasted, regardless of how efficiently you waste it.

Of course, other aspects of HR are not transactional at all. Performance management and training and development, to enhance skills, can both be seen as a potential source of value creation rather than a cost. These offer a golden opportunity to present a clear, business case, against which HR should be held accountable for delivering a return. So what would a 1% improvement in employee performance across the board be worth, in £’s? Has anyone in the public sector calculated this yet for their own department or authority? If we trained all employees to perform 25% better would we be able to achieve significant cost reductions, without affecting customers or service users? This approach is the only way to say, with confidence, that HR and learning folk are focused on making money rather than spending it. Perhaps HR ought to re-visit its core purpose and role?

Advertising has basically two purposes in life –

To let the customer know you are there, and/or
To let the customer know that you have something to offer that is better than the competition

This does not stop some companies (e.g. mobile phone companies who offer exactly the same deal) from thinking that advertising will somehow differentiate their product. Even public sector agencies, when faced with intractable social problems such as drug use, allow their forlorn hopes to triumph over their experience and resort to advertising. Paradoxically, such advertising is a last resort and a clear indicator that you have actually run out of ideas.

The same logic has led many HR departments over the years to desperately try to market themselves, often dreaming up very high profile public initiatives, under the banner of social responsibility. This will usually involve allowing staff time off to do community works or something for ‘charidy’, when they could probably add a great deal more value to society by focusing their attention on helping the organisation offer the very best product or service it can. Why should any employee be spending their (paid) time outside the organisation while there is room for significant improvement within it?

“In Personnel Today (17th May 2005) it was reported that Marks & Spencer’s CSR policy ‘boosts productivity and morale’. This was a community programme called ‘Marks & Starts’, no doubt to mirror the fact that the company is referred to by most of its customers as ‘Marks and Sparks’ (the sheer ingenuity of company employee motivation schemes knows no bounds) which provided work experience for disabled, homeless and young unemployed people. There is no actual measure of productivity included in the article but there are claims for 42% of staff having more confidence and apparently 24% said their job was now more worthwhile (whatever that means). It does not say what impact this was supposed to have had on the business, either before, at the planning stage of this programme, or afterwards.”*

No, there is absolutely no reason, or excuse, for HR to waste any time or money and, rather than copy the hype that emanates from their marketing colleagues, maybe they could teach them a thing or two about how to apply the principles of evidence-based management to advertising?

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

* taken from ‘The Value Motive. The ONLY alternative to the profit motive.’