Investing in blue-chip employees

Written by NS Rajan | Updated: Feb 1 2009, 05:14am hrs
We are in an unsettling environment, fuelled by the rising cost of capital, falling consumer confidence, pressure on profit margins and decreased equity valuations, which calls for prudence from business leaders. The newspapers are peppered with the news of layoffs seeming to imply that this is the first response of HR to the crisis. Announcing short-term measures like staff cut would send a signal to stakeholders that there is a definitive focus on cost control. The question, however, remains, Are we conserving or destroying value in the bargain

How to make a difference

The intent of HR function is to align with business needs and ensure that the human capital within the organisation provides it sustainable competitive advantage through sourcing, nurturing and maximising potential.

Though these are unusual times, by sticking to the basics and strengthening the foundation, we should be able to get through. HR can continue to play a pivotal role by recognising the likely impact of the environment on business to proactively take decisive action and reassess the focus areas. Though its difficult to resist pressures to take swift actions, we must recognise that intellectual capital is not added overnight and efforts to nurture have to be valued as an investment, not as an expenditure. An action plan that pays attention across the value chain of human resources is suggested. These refocused efforts should aim at creating an all-new, performance-oriented culture that drives accountability, sustainability and organisational objectives.

The first step is to assess the implications of current changes on business and recalibrate people strategies. Alignment should result in focused and high-impact HR interventions. The prioritisation and narrowing down of HR interventions will ensure better utilisation of energy and resources and allow management focus and control. It is also necessary to measure the performance of HR function by measuring the HR costs on people programmes and tying them to financial returns to estimate the HR ROI. A tightly knit HR strategy must put in place before work on performance management begins.

Driving performance

A key building block of achieving performance focus is driving accountability based on an effective organisation design. Organisation design and structure are important, as they either drive or limit the performance potential of an organisation. Two decades of economic growth must have built up inefficiencies in the way organisations are designed. Organistions need to review their structure to bring in more agility and flexibility. The focus should be on restructuring the organisation to adapt to the new business environment, which should realign reporting relationships and delegation of authority for swift decision-making. Workforce planning too should be reviewed to match changed business projections. Organisation structure is the effective bridge between business goals and execution.

Goal-setting

Goal-setting would need senior management attention, and clear, measurable metrics for every constituent of the organisation is vital. New sets of financial and non-financial goals are likely to emerge, such as percentage increase in credit days, percentage decrease in debtor days, consistency of cash flows, number of new long-term projects initiated, reduction in decision-making and lead time, percentage decrease in cycle time to resolve adjustments, employee training, crisis communication etc. A periodic review that ties a performance management system together will help course correction. An effective reporting system must also be established.

Micro-view

When every move counts, each employees performance or lack of it assumes significance. Often, performance management and people reviews operate at a superficial level when the economy and company growth are buoyant. A sharp focus on performance-orientation, where high performers get recognised and rewarded and poor performers are tracked and brought under the spotlight for remedial attention, is needed here. Organisations should enhance the linkage between performance and variable pay. Strengthening the linkage of performance and reward is the key.

Smart companies distinguish the difference between enabling employee compliance vis--vis a culture of commitment amongst its people. When storms gather outside, it is important to preserve the fabric of the organisation through sustained employee engagement and communication. The message that we are all in it together; that we can survive the times, and more importantly that the leadership has a clear plan would create ownership. The aim should be to preserve value inside the organisation by recognising people asset to be at the heart of creating a sustainable competitive advantage. Implementing a performance-oriented culture requires focus and discipline. The role of HR in this capacity is to guide the process and create a transformation across the organisation to embrace performance as the vital differentiator.

The current crisis of confidence will hopefully be a thing of the past, as mirrored by the graffiti on a New York subway: This too shall pass. Our actions to remedy the ailment are likely to lead to fresh discoveries by people practitioners. Anticipate fundamental changes ahead. Fresh bursts of outsourcing embraced organisation-wide may transform HRs role, managing performance more on the outside than inside. Workforce uncertainties and rightsizing, across geographies, are likely to create irregular availability and unemployment, coupled with a highly diverse workforce, redrawing the models for acquisition of talent. The intellectual capital will be depended upon as a talent portfolio. Performance management would move towards creating a differential investment in those blue-chip employees who deliver on results, accelerating the positive correlation between rewards and achievement, and where people only need to be led, and not managed. For now, the real and imminent challenge for HR is to convert current adversity into an opportunity. Performance is reality!

The author is partner-human capital, business advisory services, Ernst & Young

Components of performance appraisal used by different organisations

Total 45 (34 private & 11 public sector)

62% Some form of agreement between a boss and his subordibnate on tasks or targets or functions forming a basis of appraisal

78% Appraisal on potential for promotion

87% Identification of training and development needs

73% Appraisal on qualities required to perform any managerial job (for example, leadership, coordination, etc)

69% Appraisal feedback (written or verbal) to tell the employee the areas s/he needs to improve