Notes

FOREWORD

1. Robert S. Kaplan and David P. Norton, “The Balanced Scorecard—Measures That Drive Performance,” Harvard Business Review 70, no. 1 (January–February 1992): 71–79.

CHAPTER 1

1. Raphael Amit and Paul J. H. Shoemaker, “Strategic Assets and Organizational Rents,” Strategic Management Journal 14 (1993): 33–46.

2. Steven P. Kirn, Anthony J. Rucci, Mark A. Huselid, and Brian E. Becker, “Strategic Human Resource Management at Sears,” Human Resource Management 38, no. 4: 329–336; and Anthony J. Rucci, Steven P. Kirn, and Richard T. Quinn, “The Employee-Customer-Profit Chain at Sears,” Harvard Business Review 76, no. 1 (January–February 1998): pp. 82–97.

3. Rucci, Kirn, and Quinn, “The Employee-Customer-Profit Chain at Sears,” 89.

4. Robert McLean, Performance Measures in the New Economy (The Premier’s Council of Ontario, Ontario Canada, 1995), 3.

5. Thomas Stewart, “Real Assets, Unreal Reporting,” Fortune, 6 July 1998, 207.

6. Lawrence R. Whitman, GTE Corporation, from a transcript of an interview conducted by GTE employees for an article in CFO magazine, which was provided to the authors of this book.

7. J. R. Morris, W. F. Cascio, and C. E. Young. “Downsizing after All These Years: Questions and Answers about Who Did It, How Many Did It, and Who Benefited from It,” Organizational Dynamics 27, no. 3 (Winter 1999): 78–87.

8. For further discussion of the concept of an HR Architecture, see Mark A. Huselid and Brian E. Becker, “The Strategic Impact of High Performance Work Systems,” paper presented at the Academy of Management Annual Meeting, 1995; and Brian Becker and Mark Huselid, “High Performance Work Systems and Firm Performance: A Synthesis of Research and Managerial Implications,” Research in Personnel and Human Resources Management, vol. 16 (Greenwich, CT: JAI Press, 1998), 53–101.

9. Mark A. Huselid, Susan E. Jackson, and Randall S. Schuler, “Technical and Strategic Human Resource Management Effectiveness as Determinants of Firm Performance,” Academy of Management Journal 40, no. 1 (1997): 171–188.

10. The fifth wave of this study is being conducted as of this writing (Summer 2000).

11. Our entire research program is described in more detail in the appendix and in Becker and Huselid, “High Performance Work Systems and Firm Performance.”

12. Robert S. Kaplan and David P. Norton, “Having Trouble with Your Strategy? Then Map It,” Harvard Business Review 78, no. 5 (September–October 2000): 167–176.

13. Robert S. Kaplan and David P. Norton, The Balanced Scorecard: Translating Strategy into Action (Boston, MA: Harvard Business School Press, 1996).

14. Gary Hamel and C. K. Prahalad. Competing for the Future (Boston, MA: Harvard Business School Press, 1994), 11.

15. Kaplan and Norton, The Balanced Scorecard, 144–145.

CHAPTER 2

1. Anthony J. Rucci, Steven P. Kirn, and Richard T. Quinn, “The Employee-Customer-Profit Chain at Sears,” Harvard Business Review 76, no. 1 (1998): 90.

2. Ibid., 91.

3. Robert S. Kaplan and David P. Norton, The Balanced Scorecard: Translating Strategy into Action (Boston, MA: Harvard Business School Press, 1996).

4. A more detailed description of the Quantum experience is available in Deborah Barber, Mark A. Huselid, and Brian E. Becker, “Strategic Human Resources Management at Quantum,” Human Resources Management 38, no. 4 (Winter 1999): 321–328.

5. Robert S. Kaplan and Nicole Tempest, “Wells Fargo Online Financial Services (A),” Case 9-198-146 (Boston, MA: Harvard Business School, 1998, rev. 1999); and Robert S. Kaplan and Nicole Tempest, “Wells Fargo Online Financial Services (B),” Case 9-199-019 (Boston, MA: Harvard Business School, 1998).

6. These results are part of an ongoing research program by Mark Huselid and Brian Becker linking HR to firm performance.

7. This research also supports the fundamental premise of the new work by Robert Kaplan and David Norton, The Strategy-Focused Organization (Boston: Harvard Business School Press, 2000).

8. Michael E. Porter, Competitive Advantage: Creating and Sustaining Superior Performance (New York: The Free Press, 1985).

9. Robert S. Kaplan and David P. Norton, “Having Trouble with Your Strategy? Then Map It,” Harvard Business Review 78, no. 5 (September–October 2000): 167–176.

10. Garrett Walker, HR director, GTE Corporation, interview by author (Brian Becker) August 2000; and George Donnelly, “Recruiting, Retention and Returns,” CFO 16 (March 2000): 68–73.

CHAPTER 3

1. Jeffrey Pfeffer, Competitive Advantage through People: Unleashing the Power of the Workforce (Boston, MA: Harvard Business School Press, 1994).

2. For further work on efficiency and effectiveness metrics, see also Jac Fitz-enz, How to Measure Human Resources Management (New York: McGraw-Hill, 1995), and Dave Ulrich, “Measuring Human Resources: An Overview of Practice and a Prescription for Results,” Human Resource Management 36, no. 4 (1997): 303–320.

3. Dave Ulrich and Dale Lake, Organizational Capabilities (New York: John Wiley & Sons, 1990).

4. See also Ulrich, Measuring Human Resources.

5. Dave Ulrich, Human Resource Champions: The Next Agenda for Adding Value and Delivering Results (Boston, MA: Harvard Business School Press, 1997).

CHAPTER 4

1. See Wayne F. Cascio, Costing Human Resources: The Financial Impact of Behavior in Organizations, 4th ed. (Boston, MA: PWS-Kent Publishing, 2000), for a series of detailed examples.

2. This question has received a considerable amount of attention in the field of utility analysis. For seminal contributions, see F. L. Schmidt, J. E. Hunter, and T. W. Muldrow, “Impact of Valid Selection Procedures on Work-Force Productivity,” Journal of Applied Psychology 64 (1979): 609–626; and John Boudreau, “Utility Analysis in Human Resource Management Decisions,” in Handbook of Industrial and Organizational Psychology, vol. 2, ed. M. D. Dunnette and L. M. Hough (Palo Alto, CA: Consulting Psychologists Press, 1991), 621–745.

3. Schmidt, Hunter, and Muldrow, “Impact of Valid Selection Procedures on Work-Force Productivity,” and Boudreau, “Utility Analysis in Human Resource Management Decisions.”

4. Thomas D. Cook and Donald T. Campbell, Quasi-experimental Design and Analysis for Field Settings (Boston, MA: Houghton-Mifflin, 1979).

5. A functionally equivalent procedure, known as the internal rate of return (IRR), discounts costs and benefits back into today’s dollars, but solves for the interest rate yielded by the stream of cash flows less benefits. NPV analyses solve for the dollar value benefits of the investment.

6. See Cascio, Costing Human Resources.

7. Robert S. Kaplan and Robin Cooper, Cost & Effect: Using Integrated Cost Systems to Drive Profitability and Performance (Boston, MA: Harvard Business School Press, 1998).

CHAPTER 5

1. This famous quote is taken from Steve Kerr, “On the Folly of Rewarding A While Hoping for B,” Academy of Management Journal 18 (December 1975): 769.

2. The relationships described in this analysis were based on more sophisticated and complex models than those included in our description. The purpose of these models was to rule out alternative explanations for the estimated effect of the Employee Engagement Index.

3. There are exceptions at the extremes. If product information availability and skills are very highly correlated, it becomes more difficult to isolate the separate effects of each.

4. Mark A. Huselid and Brian E. Becker, “An Interview with Mike Losey, Tony Rucci and Dave Ulrich: Three Experts Respond to HRMJ’s Special Issue on HR Strategy in Five Leading Firms,” Human Resource Management 38 (Winter 1999): 360.

CHAPTER 6

1. See also Jeffrey Pfeffer, The Human Equation: Building Profits by Putting People First (Boston: Harvard Business School Press, 1998), for a similar approach.

2. See R. N. Shepard, “Introduction,” in Multidimensional Scaling: Theory and Applications in the Behavioral Sciences, vol. 1, ed. R. N. Shepard, A. Romney, and S. Nerlove (New York: Seminar Press, 1972), 1–20.

3. See J. Woelfel and E. Fink, The Measurement of Communication Processes: Galileo Theory and Method (New York: Academic Press, 1980); and J. Woelfel and J. E. Danes, “Multidimensional Scaling Models for Communications Research,” in Multivariate Techniques in Human Communications Research, ed. P. R. Monge and J. N. Capella (New York: Academic Press, 1980), 333–364, for a discussion of the academic research surrounding Galileo. Perceptual maps have been widely used in marketing to understand consumer preferences and to guide advertising strategies (see J. Woelfel, What’s Wrong with This Picture? How to Spot a Bad Perceptual Map [Amherst, NY: RAH Books, 1995]). We have adapted this technique to create perceptual maps of strategic alignment.

4. Woelfel, What’s Wrong with This Picture?

5. See P. N. Johnson-Laird, Mental Models: Towards a Cognitive Science of Language, Inference and Consciousness (Cambridge, MA: Harvard University Press, 1983).

6. The strategic goals for this example are drawn from the experience of Mobil’s North American Marketing and Refining Group. See Robert S. Kaplan, “Mobil USM&R (A): Linking the Balanced Scorecard,” Case 9-197-025 (Boston, MA: Harvard Business School, 1996, rev. 1999), 16, exhibit 7.

7. The most complete description of the programs on which these figures are based is Joseph K. Woelfel, Galileo CATPAC: User Manual and Tutorial (Amherst, NY: The Galileo Company, 1990).

CHAPTER 7

1. A number of consulting firms have been instrumental in developing competence models for managerial behavior. In the 1930s, the Hay group worked to calculate how much to pay workers based on their demonstrated competence. Their model was built around know-how, accountability, and problem solving. Building on work by Dave McClelland, the McBer consulting firm has been instrumental in creating and propagating competency models. Much of this work is summarized in R. E. Boyatzis, The Competent Manager (New York: Wiley, 1982).

2. Arthur Yeung, Patricia Woolcock, and John Sullivan, “Identifying and Developing HR Competencies for the Future: Keys to Sustaining the Transformation of HR Functions,” Human Resource Planning 19 (Spring 1996): 48–58.

3. IBM and Towers Perrin, Priorities for Competitive Advantage (New York: IBM and Towers Perrin, 1991).

4. Stephen C. Schoonover, Competencies for the Year 2000: The Wake Up Call! (Washington, D.C.: SHRM Foundation, 1998).

5. Dave Ulrich, Wayne Brockbank, Arthur Yeung, and Dale Lake, “Human Resource Competencies: An Empirical Assessment,” Human Resource Management 34 (Winter 1995): 473–495.

6. Ibid.

7. Ibid.

8. Connie James worked as project manager for the third round of data collection. Her conceptual and project management work is acknowledged and much appreciated.

9. John P. Kotter and James L. Heskett, Corporate Culture and Performance (New York: Free Press, 1992).

10. Ulrich, Brockbank, Yeung, and Lake, “Human Resource Competencies.”

11. Dave Ulrich and Robert Eichinger, “Delivering with an Attitude,” HR Magazine 43 (June 1998): 154–160.

12. Todd D. Jick, “Mixing Qualitative and Quantitative Methods: Triangulation in Action,” Administrative Science Quarterly 24, no. 4 (1979): 602–611.

13. Wayne Brockbank, Dave Ulrich, and Dick Beatty, “HR Professional Development: Creating the Future Creators at the University of Michigan Business School,” Human Resource Management 38 (Summer 1999): 111–117.

CHAPTER 8

1. P. M. Senge, A. Kleiner, C. Roberts, R. Ross, G. Rother, and B. Smith, The Dance of Change: The Challenges of Sustaining Momentum in Learning Organizations (New York: Currency Doubleday, 1999).

2. Ron Ashkenas, “Beyond the Fads: How Leaders Drive Change with Results,” Human Resource Planning 17, no. 2 (1994): 25–44.

3. James Champy, Reengineering Management: The New Mandate for Leadership (New York: Harper Business, 1995).

4. Jeffrey Pfeffer and Robert I. Sutton, The Knowing-Doing Gap (Boston: Harvard Business School Press, 2000).

5. See Douglas Smith, Taking Charge of Change: Ten Principles for Managing People and Performance (Reading, MA: Addison Wesley, 1996); John Kotter, Leading Change (Boston, MA: Harvard Business School Press, 1996); and Michael Beer, Russell Eisenstat, and Bert Spector, “Why Change Programs Don’t Produce Change,” Harvard Business Review 68, no. 6 (November– December 1990): 158–166.

6. Dave Ulrich, Human Resource Champions (Boston, MA: Harvard Business School Press, 1997).

7. This design team included Steve Kerr, Dave Ulrich, Craig Schneier, Jon Biel, Ron Gager, and Mary Anne Devanna (outsiders to GE) and Jacquie Vierling, Cathy Friarson, and Amy Howard (GE employees).

8. This material has been adapted from Ulrich, Human Resource Champions, chapter 6.

9. Garrett Walker, Director HR Strategic Performance Management, GTE, telephone interview with author (Mark Huselid), August 2000.

10. Ibid.

11. G.R. Salancik, “Commitment and the Control of Organizational Behavior and Belief,” in New Directions in Organizational Behavior, ed. B. M. Staw and G. R. Salancik (Malabar, FL: Robert E. Drieger, 1977): 1–54; B. M. Staw and J. Ross, “Commitment to a Policy Decision: A Multi-Theoretical Perspective,” Administrative Science Quarterly 23 (1978): 40–64; B. M. Staw and J. Ross, “Understanding Escalation Situations: Antecedents, Prototypes, and Solutions,” in Research in Organizational Behavior, vol. 9, ed. B. M. Staw and L. L. Cummings (Greenwich, CT: JAI Press, 1987); B. M. Staw, “The Experimenting Organization,” Organizational Dynamics 6 (1977): 2–18; B. M. Staw, “Knee-Deep in the Big Muddy: A Study of Escalating Commitment to a Chosen Course of Action,” Organizational Behavior and Human Performance 16 (1976): 27–44.

12. Garrett Walker, interview by author.

13. Ibid.

14. Learning Map is a trademark of Root Learning, Inc. of Perrysburg, Ohio. Learning Map products are solely owned by Root Learning and cannot be reproduced or modified in any form without the company’s express written permission.

15. Anthony J. Rucci, Steven P. Kirn, and Richard T. Quinn, “The Employee-Customer-Profit Chain at Sears,” Harvard Business Review 76, 1 (January–February 1998): 95.

APPENDIX

1. Our entire research program is described in more detail in Brian Becker and Mark Huselid, “High Performance Work Systems and Firm Performance: A Synthesis of Research and Managerial Implications,” in Research in Personnel and Human Resources Management, vol. 16, ed. Gerald R. Ferris (Greenwich, CT: JAI Press, 1998), 53–101. See also Mark A. Huselid, “The Impact of Human Resource Management Practices on Turnover, Productivity, and Corporate Financial Performance,” Academy of Management Journal 38 (1995): 635–672.

2. We have also tested several specific alternative explanations for our results. One possibility is reverse causation. For example it might be that more profitable firms were more likely to develop such policies because only these firms could afford to do so. Another possibility is that the results are due to the nature of the firms responding to our survey. Huselid (in “The Impact of Human Resource Management Practices”) found no support for these hypotheses.

3. Firm performance is measured as the ratio of market value to book value of shareholder equity. These relationships are part of a broader model performance that includes industry, prior sales growth, size, investment in R&D, and unionization.

4. Over the past decade there has been a virtual explosion of interest in this topic, with scores of studies having been conducted in the United States, Canada, the United Kingdom, Germany, France, Hong Kong, Singapore, and Japan. Taken as a whole, the new body of research also supports the basic assertion that “HR matters.” Interested readers can contact Mark Huselid for a bibliography.