Good HR practice improves the bottom line

May 14 2003 by Brian Amble Print This Article

Effective HR practices make an enormous difference to organisational performance, according to new research by the Chartered Institute of Personnel and Development (CIPD). Where they are not in place, levels of employee commitment are up to 90 per cent lower.

But even the most carefully thought through HR strategy is a waste of time unless it is embraced by line managers who have the skills and understanding necessary to engage and motivate employees.

These are the critical conclusions of a three year investigation by the CIPD examining the HR practices, staff views and performance in 11 large organisations including Jaguar Cars, Nationwide Building Society, Selfridges and Tesco.

The study, Understanding the People and Performance Link: Unlocking the black box sought to understand more about why and how people management practices influence business performance – to unlock what has been termed the "black box." It confirms the powerful relationships between HR practices, employee commitment and operating performance, tracking organisational performance over a three year period and puts HR under the spotlight.

The study found that an organisation needs a clear direction and purpose, beyond the bland mission statement or generic goal of financial returns, which engages, enthuses and unites people. At The Nationwide Building Society this is a commitment to mutuality. At Royal United Hospital (RUH) Bath it is saving lives. This ‘big idea’ appears essential in motivating and directing people behind the strategy of the organisation.

High performing organisations invariably employ some form of balanced performance scorecard or methodology. Be it the stakeholder value model employed at Selfridges, the six-sigma methodology at Jaguar or the EFQM framework at the Court Service, this demonstrates the importance of different stakeholder groups to the organisation’s success, and links individual and corporate goals.

The research confirms that there is no universal ‘best HR practice’. It is all about having a broad and integrated ‘bundle’, tailored to the needs of the organisation. For example, the practices employed at technology company AIT would be unlikely to go down well on the production line at Jaguar. Yet every worker there could tell you Jaguar’s position in the JD Power quality league table.

CIPD adviser on Organisation and Resourcing, Angela Baron, said; "Strong attention to team working, extensive employee communications and involvement, and positive perceptions of training and careers emerge as common ingredients in this performance-driving HR mix."

"Leadership, not at the top of the organisation, but at the front line appears to be the Achilles heel in many UK organisations ability to compete and in delivering HR strategies. Middle managers and supervisors set the context in which the HR/business performance relationships happen, or all too frequently don’t."

For example at Tesco, where 88 per cent of staff feel loyal and share the company’s values, a typical section manager described their role as, "mobilising the team with a goal, motivating people". And building management capability is a core component of the Inland Revenue’s HR strategy.

Another example in the research is nursing staff at the RUH Bath describing the change after a new ward manager worked with her HR colleagues on a range of new policies, such as flexible shift working and 360 degree appraisal. Comments include:

"I’m much more motivated now, there’s training, the atmosphere’s totally different";

"Communication is excellent now…our manager is very approachable";

"When I came here it was unsettled. Now we have a strong team…you want to do the job to the best of your ability".

The high level of staff turnover in the ward has since fallen to almost zero.

In another of the case studies, the management was subsequently changed in one location, to replicate the high levels of commitment and performance evident in the company’s other sites.

According to Angela Baron: "Organisations can make progress very quickly. They need to survey employee attitudes and commitment; assess, train, coach and support their first line managers and integrate HR policies with goals and values."

"This will get them started – and the good news is that once these processes are underway there is a very high likelihood of the kind of transformation we have seen in our case study organisations. The evidence is here for all to see."