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Creating Value in Your Workforce: Affiliation Is a Foundation by Ron Elsdon From HR West, NCHRA, May/June 2003, pp. 7-10 A central dilemma in many organizations today is integrating the drive for organizational performance with the search for individual fulfillment. Exceptional organizational performance is built on meeting individual aspirations. HR is at the center of this dilemma being expected to advocate both for the individual employee and the organization. This speaks to the strategic importance of HR’s role. This article explores two related aspects: HR’s role in linking workforce development to value created by the organization in tangible financial terms, and building employee affiliation as a key contributing element. The following vignettes speak to the contribution the workforce can make to organizational value. "One of our top performers just resigned. We were mystified; after all, we had been giving him regular raises and promotions and we thought that was enough." These are the words of one HR professional wrestling with a significant recent departure. It turns out that the departing employee didn’t want the rewards he was given. Rather, he sought visible signs of value and respect that gave him responsibility in key staffing decisions. "Two of our top performers left recently. We were in shock; both were on our high potential list and it turned out that neither knew it." "We are beginning to build links into the community by educating children of 12 years old about our field, as these are our potential future employees." In the first two cases value is subtracted by the loss of key people, in the third case the expectation is that long-term value is created by investment in education. It could just as easily be investing in individual or leadership development, or in learning that strengthens competencies. But here we face a challenge in translating our intuition about organizational impact to the tangible financial language of business. It is somewhat easier in the first two cases, because recent studies showed subtraction of more than 10 percent of organizations’ value in one year due to unwanted attrition. Demonstrating the impact of committing resources to workforce development for long-term gain is more challenging. And yet such investments provide the foundation for sustainable workforce excellence. Especially in today’s slow economy, securing the resources needed to leverage the ability of the workforce to contribute value is not easy. "I am ready to invest in our workforce. I just haven’t seen a sound business case presented for most investments," said one senior executive recently who was considering other potential uses for those same scarce resources. Our challenges are to build a clear link between committing resources to enhance workforce effectiveness and business value contribution, and to identify steps we can take to secure these gains. How can we demonstrate that investing in people will reap organizational benefits? Isn’t this one of those "nice-to-haves" that we can dispense with in tough economic times? To answer these questions we need to examine what is meant by organizational value and how the workforce contributes to it. Organizational value is the sum total of the organization’s knowledge, capabilities, operating practices, connections inside and outside, how they fit together, and the ability to marshal these to meet customers’ needs. It is created one person at a time and maximized when people work at their full potential. But how often do people work at their full potential? In posing the question recently to several groups of HR professionals, less than five percent said they were working at their full potential. Enabling people to work closer to their full potential by investing in the workforce is a source of tremendous potential value as the individual contributions combine to create overall organizational value. Investments in the workforce can be reflected financially, in a for-profit organization, by the organization’s ability to generate future cash flows. But our traditional financial measurements begin to break down here. They are based on arbitrary time periods, usually a year, focus on past performance and are tied to fixed assets such as plant and equipment. Value creation, on the other hand, is unbounded by time, based on future potential and largely tied to an intangible asset, namely an energized and effective workforce. So we need to re-examine how we measure value creation linked to the workforce to meet the rigorous financial demands of senior executives. One approach is to create a series of cascading measurement tiers beginning with overall measures of organization or unit performance, moving to descriptors of workforce effectiveness, incorporating workforce processes and finally linking to resource commitments. Creating this framework can define those items that add value and those that subtract value at each stage, for example: Workforce effectiveness and efficiency Workforce processes Workforce resource commitment Within this framework, the impact of investing resources in workforce development warrants special attention as it involves difficult funding decisions. The projected impact of resource commitments can be addressed using a six-level approach. Here is an example applied to the funding of employee development workshops:
As the evaluation level increases, so does the complexity of information gathered and the potential impact of that information. We move from the first level which addresses an individual’s immediate reaction to a workshop, to the sixth level which addresses the predicted impact of future resources on organizational performance. Not all projects warrant or need evaluation at all six levels. As the complexity and cost of a project increases so does the importance of including more evaluation levels. Establishing targets using this approach helps prioritize scarce resources. Emerging techniques of quantitative modeling that not only describe the financial impact of past practices but also predict potential future gains from resource commitments, for example investments in HR, can complement this approach. Compounding the need to re-examine financial measures is a need to recognize that the contributions of organizations extend well beyond short-term, shareholder financial expectations. Organizations impact the lives of employees, the communities within which they operate, and the destinies of partners, customers and suppliers. So the ability of the organization to enhance the quality of life for those in its constituent communities – its social contribution – is the essence of long-term value creation. In the words of David Packard, one of the founders of Hewlett-Packard, as quoted by Izzo and Withers in their book Values Shift, "I think people assume wrongly that a company exists solely to make money. Money is an important part of a company’s existence. But a result is not a cause. We have to go deeper … a group of people get together and exist as an institution we call a company so that they are able to accomplish something collectively that they could not could not accomplish separately – they make a contribution to society." Having created a framework that links workforce development to organizational performance and value creation we might ask what workforce issues stop our organizations from growing and prospering and what can we do to remove these barriers? A primary barrier is the lack of alignment of individual aspirations with organizational needs so that people operate well below their full potential. Recent studies show people expressing concerns about the lack of alignment between their aspirations and their organizations’ purpose and a frustration at not being able to do their best work. These concerns and frustrations all speak to a major opportunity to enhance workforce effectiveness. Historical approaches to alignment and workforce stability used retention as a measure and an operating practice. Retention is at its core a one-way relationship, done by the organization to the individual. It limits individual options and choices and can have the undesirable side effect of depressing productivity by keeping people who are not engaged. It is also impractical in a world of employee scarcity, which is the world we are moving into. People will have many more employment options and choices in the future. They will leave organizations that fail to address their primary needs, one of which was shown in recent studies to be support for career development. In looking forward, a more effective approach to the relationship between individuals and organizations is needed that fosters openness and individual development in addition to performance, thereby aligning individual aspirations with organizational direction. This approach is one of affiliation. Affiliation is at its core a two-way relationship, supported by both the individual and the organization. It is built on the principles of understanding individual needs, providing options and choices, fostering learning, supporting breadth in development and engaging individuals as volunteers. Peter Drucker originated this volunteer perspective. Affiliation is central to successful organizations that build partnerships with their employees. It is voluntary and occurs at multiple levels. It is an emotional connection built on the principles of inclusion whether internal or external. For the individual, affiliation offers the benefit of enhanced fulfillment in work through greater alignment of individual aspirations with organizational direction. Building strong affiliation offers three potential benefits for the organization: The following seven steps are important elements that help to strengthen affiliation: Leadership teams that formed around primarily functional rather than interpersonal skills need to understand the importance of the changing relationship with employees. Recent studies have shown the direct link between the ability of leaders to communicate meaning and a sense of inspiring purpose and the strength of affiliation felt by employees. HR can play a key role in supporting such communication. Modeling tools provide the capability to create future perspectives and guide resources, and HR can act as a bridge to such resources. Listening to the organization and learning through formal and informal approaches are needed to avoid the problems illustrated in the first two vignettes at the beginning of this article. HR is central to ensuring that effective listening occurs. In considering organizations of the future, it will be important to acknowledge and value many different workforce segments. Approaches are available to identify and characterize these segments and HR needs to spearhead the use of these techniques. Having listened to the organization and defined workforce segments it is then possible to target solutions to address specific needs, such as career development or leadership development. HR is central to guiding line management in the implementation of these solutions. Finally, monitoring value creation and individual fulfillment allows the processes and systems to be refined and improved for the benefit of all – again, a key role for HR. Taking a comprehensive look at organizational value and building affiliation can strengthen our organizations and communities and enhance individual fulfillment. In guiding this, HR becomes a true strategic contributor to the organization. |
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