There are three important factors that comprise 67 per cent of HR’s total influence on a firm’s competitive advantage, writes Wayne Brockbank

What HR agendas differentiate a firm’s performance from its competitors? I recently undertook a research project to provide some initial insights into this question. The issue under investigation was not “What HR agendas or initiatives impact firm performance?” Rather, the project investigated, “What HR practices differentiate the performance of firms from their competitors?”

I interviewed the senior HR executives in firms representing two broadly defined industry sectors: technology and finance. Three high performing firms, three medium performing firms and three low performing firms were selected in each sector. Performance was defined by market share growth and profitability.

The interviews identified six major HR agendas that were seen as having greatest impact on differentiating a firm’s competitive advantage. I weighted the six agendas by frequently of mention and then weighted each by the performance of mentioning firms relative to their competitors. I present the results in more useable percentages.

I found that there are two tiers of results.

Tier one

HR agenda Importance of HR agenda as weighted by firm competitiveness
Rigorously ensure a clear and explicit line of sight of HR practices to strategic business priorities. 23 per cent
Identify and utilise culture as the basic integrating HR framework 23 per cent
Apply a standard of excellence in the development and implementation of talent management tools (e.g. staffing, performance management, rewards, training and development) 21 per cent

Tier two

HR agenda Importance of HR agenda as weighted by firm competitiveness
Build leaders through classroom training and on-the-job development 12 per cent
Ensure strong business partners within business partner structures 11 per cent
Involve line managers in the design and delivery of high level HR initiatives 10 per cent

Four noteworthy conclusions

The tier one agendas are high-level concepts that are applied with systemic discipline. These are not tactical details nor are they empty words on a paper. Rather, they are rigorously applied throughout the HR infrastructure. The senior HR executives in the high performing firms could enunciate their firm’s strategic business priorities as clearly as they could state their HR priorities. Furthermore, they had explicit expectations of the business focus of their HR professionals.

When compared with the low and medium performing firms, high performing firm certainly applied their talent management tools to create and sustain individual talent; however, their primary focus in applying of their talent management tools was not to develop individual talent but rather to establish and embed the culture that is required for high-level competitive performance.

“Talent management tools should be designed and implemented to support and sustain the desired competitive culture”

The tier two agendas tended to be seen as independent agendas; that is, a firm could one of the tier two agendas without doing the other two.

However, and perhaps, most important in the high-performing firms with greater competitive advantage, the tier one agendas were not only developed and implemented as individual agendas, but they were framed and implemented as an integrated and institutionalised system.

Stated differently:

1. HR departments in the high performing firms with a greater level of competitive advantage had a clear line of sight to the business;

2. This line of sight served as the basis for defining the required culture;

3. All talent management tools were applied to create and embed the cultural foundation of competitiveness.

When done as an integrated system, these three comprise 67 per cent of HR’s total influence on a firm’s competitive advantage.

3 action items for HR

  • Ensure that your collective HR professionals have clear understanding of the strategic priorities of the businesses that they serve. This mandate is not only for HR senior HR professionals but for HR practitioner throughout the HR function.
  • Define and create the culture that is required to achieve competitive business results. This is the culture that your firm must have to create competitive advantage for the firm.
  • Apply the full breath of talent management tools to build the firm’s required individual talent but more importantly, talent management tools should be designed and implemented to support and sustain the desired competitive culture.

Image source: iStock

 

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