People make a difference
People do make a difference. Trite perhaps, but the scale of that difference is often not clearly understood.
Assume a company where human performance could be improved 10%; and assume that for every 1% improvement in human performance produced the following gains - sales increase 0.2%; direct costs decrease o.2%, and overheads decrease 0.2%. This amounts to a 2% improvement in each line of the profit profile as below.
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| | 2% change |
| Revenue | 100 | 102 |
| Direct costs | 70 | 70 |
| Gross margin | 30 | 32 |
| Overhead | 23 | 22.5 |
| Profit (EBIT) | 7 | 9.5 |
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The result is a 35% increase in profits based on existing staffing and without increasing prices or altering market share.
Would your board like a 35% increase in profits? Could human performance in your business improve 10%? Do you understand how to do that, and do you understand the link between improved human performance and the financials?
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The way to think about it is that the human resources of the firm being more efficient at the two crucial activities namely generating sales revenue and converting it to operating profit.
This sort of thinking leads to a practical and useful definition of strategic human resource management namely those activities that improve human performance relative to the strategic direction and financial aims of the business.
Buy and burgle
Management and organisations are firmly part of social science, and cannot be considered in isolation from the factors and research that underpin social science. In 19781 two researchers asked 50 people to view a house with the intent of buying it, they then asked 50 other people to view the same house with the intent of burgling it. They placed each group in a separate room and asked them to write down everything they could recall about the house. They participants produced lists so different you would not recognise they had seen the same house.
The research is simple and elegant driving home the point we see what we look for. What is significant is the degree of influence of the thought completely dominating perception. In other work I have examined this phenomenon more closely2 and concluded it to be general, in that we 'see' the environment through conceptual templates3 (the 'buys and burgles') which completely orientate us to the circumstances directing decision making and all subsequent conduct. I summarise this by saying the conceptual template orientates us to the circumstances.
To understand conceptual templates or models imagine a box of transparencies in the front of your mind and you can click the lever and up comes - say - buy, and so we see the world through that set of eyes. Then we click the lever again, and up come burgle so we see the world thorough that set of eyes - but it is a completely different world and we see things we cannot see and will never see with just buy. This illustration is easy to say, not easy to do, it gives scientific force to the De Bono rule of putting on the right hat.
What if the model is flawed?
Going deeper into social science and overall models of the causes of human mood and conduct it emerges we can and can only see the world through such conceptual templates; as such we can only see that which is consistent with the template and will act accordingly. The full set of templates (transparencies we must use to 'see' the world) is called our world view - that is the complete system of thought through which we 'see' and understand and orientate ourselves to the world and to our environment.
What will happen if some part of our world view is flawed? Merely trying harder cannot overcome deficiencies implicit in the very model we are using to orientate ourselves. Trying harder may improve things for a while, but inevitably if maintaining the extra performance requires an unbalanced effort, then once balance restored the results will fall to the level the model is intrinsically able to deliver.
What has this to do with human performance?
Human performance is a strategic factor in the profit and loss and as illustrated above it can be a very significant factor, greater often than many things the board pays great attention to such as marketing plans, new products, acquisitions or new equipment. I suggest the reason why marketing plans get attention while strategic human resource management does not is that there are few if any clear guidelines on how to address issues of truly improving human performance, there is a lot of very confused advice and comment available on culture, engagement, performance management, leadership development etc... all of which are lacking in the same very critical manner namely there is no orientating model, and where there is it is weak and unrelated to key issues in social science.
How the team leaders 'see' the team and 'see' people in the business will directly orientate them to the situation and will dominate their deliberate and reactive conduct to the situation. Useful questions include:
What is the direct link between staff behaviour and business strategy?
What should team leaders do to better manage this link?
In summary what is the model team leaders are to use to 'see' and so orientate themselves to managing better team performance?
How will we ensure team leaders adopt this model and use it?
What gains in profits do we expect?
A very important backdrop is the underlying principles to be used in pressing for better models and solutions, some of those principles are summarised as follows:
Management is part of social science, so any model must relate to key issues in social science, for example, to a sound and fundamental insight into causes of human mood and conduct.
Mediocrity is not acceptable.
Merely doing what we have done before and expecting a different result is not acceptable.
Any models must be direct and clear, and not include convoluted statistics, the causal links must be direct otherwise we need mistrust them.
The model needs to be quantifiable and able to be readily replicated and understood at all levels.
Any model must have active support of management who must carry out the delivery. In short it needs make definite sense to the management at all levels otherwise they will not buy in.
The model must guide improved human performance which in turn will result in increased profits, if there is no direct link, then again we need be wary of any expenditure.
The only model matching these criteria in full is The OPD Complete Manager® Leadership Solution
In the absence of OPD, then it is as well to follow what the management are prepared to do to enhance human performance, since at least then management will do it, and not treat it as some 'tick the box' admin exercise. With this, the business will achieve results as good at least as that of those organisations who give lip service to HR processes that just do not ever seem to quite deliver. In making decisions without strong and definite models it is as well to stay with some very simple principles, such as ensuring goals clear with strong alignment up and down the organisation, and that people are treated with understanding and respect backed up by an expectation of excellence in performance. Much like top sports teams.
SHRM is an undervalued contributor to business success, but to do it better we need reconsider the quality of our thinking and 'see' the necessary links and performance factors. Doing harder anything done already will not produce improved results, we need new and better models of how human behaviour links to business results.
1) Anderson, R.C. and Prichert, J.W. Recall of previously unrecallable information following a shift in perspective. J.Verb.Learn.Verb.Behav. 1978, #17, pages 1-12.
2) Papers at www.grlphilosophy.co.nz.
3) The term 'conceptual template' is interchangeable with 'conceptual model' or 'theory' or just 'model'.
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