Identify Human Capital Deliverables that Impact the Business

Once the business strategy and subsequent objectives are well understood, the organization can establish how its human capital will help implement the strategy and impact its objectives. The importance of such a linkage was greatly popularized by Larry Bossidy and Ram Charan’s landmark book Execution: The Discipline of Getting Things Done, which based an organization’s success on its ability to execute its business objectives. Bossidy and Charan argue that three core processes—people, strategy, and operations—and the degree to which they are linked are at the heart of providing an organization the competitive discipline needed to execute and succeed in today’s marketplace. (See Figure 1.1.)

Bossidy and Charan emphasize that the people process is more important than either the strategy or operation processes, arguing that if the people process is not done right the organization will never fulfill its potential. Based on their vast experience and research with successful companies, Bossidy and Charan emphasize that getting the people process right involves integrating and linking it with business strategy and operations. They base this on a set of building blocks that leaders must use to effectively design, install, and operate the people process, as follows:

• Linkage to the strategic plan and its near (0–2 years), medium (2–5 years), and long-term (5+ years) milestones and the operating plan target, including specific financial targets.

• Developing the leadership pipeline through continuous improvement, succession depth, and reducing retention risk.

• Deciding what to do about nonperformers.

• Transforming the mission and operations of HR.

In essence, it’s the first building block that links people to the strategy and operations. Bossidy and Charan argue that business leaders create this linkage by making sure they have the right kinds and numbers of people to execute the strategy. And meeting the medium and long-term milestones depends on having a pipeline of promising and promotable leaders. Only after reviewing your human capital in regard to an ability to execute the strategy will you be able to identify the specific human capital needs that must be addressed to allow the organization to achieve its objectives. But it doesn’t stop there. Human Resource professionals have an opportunity to identify specific human capital deliverables that can support the accomplishment of business objectives. For example, let’s say a given company has an objective to introduce a new product line as part of its business strategy, and its subsequent review of its human capital indicates that the current talent pool and its internal pipeline are sufficient to meet this objective. But let’s say that, as HR professionals of this given company, we also know that our staff with product expertise is highly sought after, both from within the company and by external competitors. Any turnover would seriously impede the achievement of this objective. Seeing such a connection would prompt us to design incentives like bonuses or other reward programs that would encourage and retain staff until the objective is achieved.

These kinds of human capital deliverables can be identified when human capital is linked with how the business strategy and objectives are implemented. This is also evident in the pioneering work of Kaplan and Norton who, through their balanced scorecard approach, help organizations implement their business strategy and provide a way to measure the organization’s progress toward achieving its goals. The premise of their approach is to measure business performance based on how the strategy is implemented (utilizing a strategy “map”) rather than solely on what the strategy consists of.

As in the work cited by Bossidy and Charan, Kaplan and Norton found successful organizations to have a clearly defined business strategy and human capital to be integrated with the implementation process of their strategy. The balanced scorecard is essentially a framework that provides a more balanced view of organizational performance by providing other measures than the traditional financial ones, including measures regarding internal processes, customers, and an organization’s human capital. It recognizes that people are related to improving business processes that deliver more value to customers, ultimately leading to increased revenue. By utilizing multiple measures, both financial and nonfinancial, the scorecard ensures that managers don’t just rely on the limiting view of financial statements, which are inherently backward-looking, in assessing the performance of the organization. It is this balanced scorecard framework that pioneered moving beyond mere monitoring of financials, and actively engaged employees with the strategy implementation process of their organization. By specifying the vital measures, assessing them, and regularly communicating the organization’s performance on these criteria to employees, managers ensure that the entire organization participates in strategy implementation. Although the balanced scorecard framework identified human capital as a key performance driver in the implementation of strategy, it did not specify how to measure the specific impact these deliverables will have on organizational performance. This leads us to the next and final part for alignment—assessing the contribution of human capital deliverables in implementing the business strategy and ultimately to an organization’s bottom line.