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Why should we take the management of people seriously? By Rod Eames
From Issue Four of our newsletter.
We hear a lot these days about people being the most important asset in any business. It is one of those truisms, which we may agree with instinctively but are uncertain if it is reflected in our current priorities. Why is such a statement of any interest to management in any case?
The answer is that an increasing body of research is showing that effective people management has a direct impact on the bottom line performance of the business.
Research over a 7-year period into 67 UK companies (Sheffield University 1997) found that management practices positively “explained 19% of the variation between companies in changes in profitability and 18% in changes in productivity”, being far more important than corporate strategy (2% impact), technology (1% impact), or R&D (6% impact).
The 1998 Workplace Employee Relations Survey (CIPD) of 28,000 employees confirmed that in the private sector a strong association exists between people management, employee attitudes and workplace performance. A US survey (Huselid) of approximately 4000 firms found that firms using high performance work systems (including Human Resource Management) achieved higher values of shareholder equity( 24%) and higher accounting profits( 25%).
This important set of data demonstrates conclusively the central role of people management practices in strategies for performance improvement. Reasons for this are not hard to find. To improve business performance we rely on the contribution of our people. To contribute, we need them to be motivated, committed and satisfied with their jobs. To achieve this, we need to manage them effectively and we need the management practices in place to make it happen.
So what does this mean in practice and what does it take?
Firstly, it means that businesses need to address core personnel and development practices i.e. those concerned with the acquisition and development of skills, knowledge management, job design and employee involvement. Managers then need to work on tailoring these practices to their own business, by aligning the people strategy to the business strategy and ensuring a coherent approach across the business.
To do this, discussions about people management will need to move away from administrative detail and fire-fighting to core issues of management capability and strategic intent. These are Board-level issues, which require clear leadership and vision with concrete performance measures to assess results. This means bringing people management and organisation development to the top table; a job for an HR Director with in-depth knowledge, leadership vision and impact.
Click here for a profile of Rod Eames.