Changing demographics, the increasing importance of intellectual capital and the war for talent with its constant battles to attract, retain, motivate and manage people has hauled interest in human resource management back to centre stage after stint in the wings.
The ‘soft’ management discipline is increasingly ‘hard’ core business function. There is even talk of it becoming critical ‘strategic partner’ that boards and top management must consider in their tactical options.
Edward E Lawler, distinguished professor of business at the Marshall School of Business at the University of Southern California and the founder director of USC’s Centre for Effective Organisations, has been charting the twists, turns and fortunes of the HR discipline for nearly 30 years. He is still enthusiastically thinking about where it is headed.
Lawler is the author of 35 books and more than 300 articles on the subject. His writings range from studies on compensation to organisational structures for the 21st century. His bestsellers include High Involvement Management and Corporate Boards, co-authored with Jay Conger and David Finegold. His latest book, Treat People Right, examines how companies can and must move beyond simply calling people their greatest assets to treating them right for the benefit of both the individuals and their organisations. He talked to Stuart Crainer in London recently for Management magazine.
Is there linking theme to your work?
The linking theme goes back 40 years. The link is to organisational practices which are good for both organisations and people because they help individuals and organisations work more effectively. It is easier to accomplish this today because organisations now recognise how important human capital is.
Are the ways people were treated in the past now dead?
Some of the old principles of treating people are, thanks to changes in technology, financial structures and the rise of complex organisations. Long-term employment contracts and loyalty are outdated. My point is that when organisations change, so too must individuals. There is now change-oriented career cycle. People simply shouldn’t expect long-term career with one organisation.
Are people comfortable with this?
It depends on their age. Individuals 50-plus aren’t necessarily eager for change. Younger people have it drummed into their heads that it’s new world.
There’s virtuous spiral to this. If organisations install the right practices they can improve their performance and, over time, individuals benefit from this. Some companies have sustained virtuous spirals for long time. Microsoft, for instance, surfs through most things thanks to the commitment of its people.
At the same time it is easy to get off this virtuous spiral and get into death spiral. Sustaining high performance, for example, is precarious for organisations. People can walk out and take great deal of an organisation´s value with them. Look at Arthur Andersen. It went from being large organisation to virtually nothing in six months. It is all about intangibles.
Isn’t treating people right simply common sense?
Yes. It is obvious but execution is not so obvious. Douglas McGregor’s The Human Side of Enterprise was the first book I read on the subject. What McGregor advocated is not what I now advocate. Implementation is different today, but the search for principles is eternal.
An appetite for changing practice exists now thanks to increased competition and the increased importance of human capital.
In the US we are pulling back from the view that shareholders are all that matters. Large stock options led to an obsession with share price among many executives. Now there are numerous examples of the excessive and dysfunctional behaviour which focusing too much on shareholders can lead to.
Other countries never got so obsessed with share prices. Nor did CEOs’ financial packages become so excessive, corporate governance so lopsided or CEOs become so powerful as in the US.
What are you working on now?
More research on corporate boards. There is growing focus on boards, mainly because people now see the critical role they play inside companies and in society generally.
Potentially, boards have four resources to use: power, information, rewards and knowledge. When these four resources are present and effectively directed at, first, handling emergencies; second, making sure an effective strategy is in place; and, third, truly influencing the decisions of the CEO, then we can say that the board is acting in high-performance way.
But there’s another key point that should be stressed. board is group, sometimes team. I have tried to look at boards through the lens of group and organisational effectiveness. Boards must have the same conditions and behaviours that make groups of any kind effective.
What leads to group effectiveness?
It is not simply the product of one element but rather combination of behaviours and practices converging to create an effective unit. Research on organisational effectiveness shows that effective decision makers need information, knowledge, power and rewards that motivate plus opportunities to perform their duties. These are also the keys to effectiveness for high performance boards. Boards must think of themselves as group which can use these tools to become better and guide their respective companies in more enlightened ways.
What new forms of corporate governance do you envisage?
The core issues involve re-addressing who governs corporations and who corporations should serve. This goes beyond management and leadership. Governance is political issue. Should directors look out only for the shareholders of the company or should they care about all stakeholders. If employee interests, supplier interests, perhaps even customer interests, were all represented on boards companies would behave very differently.
Boards are not as diverse or as independent as they should be. This is not just an American issue. No country has really cracked this problem although some Europe legislation that mandates worker representation on boards is noteworthy.
Membership diversity is not simply gender or race issue. How board members govern is the real issue. Women board members often see their role the same as their male counterparts. We need board members who see their role differently; regardless of gender, race or ethnicity.
And the second strand of your research?
I am looking at the structure of the human resource function, especially the outsourcing of HR. I am looking at BP as an outsourcing case study. Every three years I survey the status of HR. There is lot of talk about HR becoming strategic partner but I see little progress on that. So, the question is: does outsourcing enable HR to become strategic partner or does it spell the end of HR?
The outsourcing pioneers seem to be using their approach as way of developing HR as strategic partner. Early adopters are using web-based HR systems strategically. With them, HR receives analytic data to do strategic analyses.
This could, hopefully, give HR more strategic role within organisations. But some suggest that outsourcing will undermine the function’s role and authority. I disagree. The closest analogy is with the outsourcing of IT management which hasn’t diminished the role of the chief information officer.
Are organisations more effective now?
Watching organisational change over decades, as I have, it is easy to become jaded. But I’m not. This is an exciting time to be studying how organisations are managed because many changes are occurring. Yes, I think organisations are generally more effective. They have to be. Look at the complexity of the things organisations can now do and you have to be optimistic. They are incredibly complex because, to deliver complex services, you can’t keep it simple. You need knowledgeable people and
