What creates high-performing companies? It’s a question every customer, investor and employee tries to answer, and one that academics and business theorists study and debate incessantly.
Jim Collins, author of “Good to Great: Why Some Companies Make the Leap … and Others Don’t,” writes that companies can’t achieve great things without great people.
But what defines “great people?” Are they the smartest, most ambitious, most aggressive?
In reality, creating a high-performing company depends on finding and hiring the right people, then nurturing, developing and rewarding those people to deliver “great things.”
This is the role of human resources departments: managing human capital in such a way as to create a healthy company culture that delivers high performance.
Every company has a culture, whether it is positive, negative or somewhere in between. Within this environment, there is a cultural steward: the company’s HR department.
The role of stewardship is a complex one. A steward can serve as an advocate and an assistant, as a guide and mentor — someone who often has to deliver the truth, even when it’s difficult to hear.
Within this context, the best HR professionals are people who shape a company’s culture by balancing creativity, especially in finding and developing talent and discipline.
Core Tasks of HR Professionals
As effective company culture stewards, HR professionals perform five key tasks:
1. Attract and identify talent. This process begins during recruiting with effective sourcing strategies and selection practices, and it continues once people are hired. HR needs to make sure the right people are being placed in the right roles within the company and that early on, employees understand and truly feel they are valued contributors.
2. Assimilate talent into the workforce. To accomplish this task effectively, the HR department needs to integrate new talent effectively, whether that talent comes as a result of hiring or from an acquired organization. Clearly, HR seeks to assure employees the company will strive to meet their needs while employees actively work to excel in their jobs. If done consistently well by HR, the company’s culture takes on a positive tone from the very beginning of an employee’s tenure.
3. Develop and assess talent. In this role of stewardship, HR and senior leaders stay invested in employee growth and development. One of the keys to effective training and development within a company is clear, visible support from senior leaders. Senior participation shows that development and growth matter to the business and that personal investment in improvement is really encouraged. If leaders say development matters but then fail to support that message with their actions, cynicism takes root quickly and deeply. Nothing will diminish employees’ personal investment faster than seeing a lack of commitment from senior leadership.
In addition to employee development, companies need to assess people’s performance in their roles to see whether they are learning and improving as a result of their training experiences. Accordingly, effective performance management practices, such as clear goal setting, midpoint reviews and annual appraisals, need to be part of a healthy culture — it’s what guarantees that people understand what’s expected and know how they are doing.
In this stewardship role, HR should provide common standards determined according to the company’s values and collaborate with management so that employee contributions can be measured accurately. Remember: Assessment is not just a matter of determining who’s a high-performing employee and who isn’t — it’s also about recognizing human potential (who can be developed into a leader and raise the company to a higher level of high performance?).
4. Develop rewards and incentives to increase retention. Effective HR professionals continually ask such questions as, “Are we offering the right combination of compensation and benefits that allow us to optimize our workforce? Do our rewards drive the behaviors and performance we want? How do our company’s employment practices stack up against Fortune 100 companies or those rated as ‘best places to work?’” Coupled with the right performance plans and assessment mechanisms, higher retention based on effective compensation leads to a high-performance culture, as well as the productivity and results every organization desires.
5. Implement an effective exit strategy. Although this role sometimes can be a challenge, especially in the context of stewardship and preserving (or improving) a company’s profile, the best HR departments are good at both identifying the best talent and also making the tough calls on marginal contributors. Of course, there is a continuum here: from aggressive “top grading,” in which the best employees are handsomely rewarded and weak players managed out, to being endlessly patient and forgiving of poor contribution. The ideal strategy lies somewhere in between, where, guided by HR, a company establishes and abides by employee performance standards and measurements and then commits to making decisions based on them.
The desired outcome for all these HR core processes is to create a positive, engaging company culture. To do their jobs consistently and effectively, HR professionals use several human capital metrics to do their work. For example, they monitor attrition and retention rates, levels of employee engagement and industry-specific salary and benefits packages.
But the intangibles need to be measured, as well. For example, is the company parking lot empty promptly at 5 p.m.? Or are there still cars there at 8 p.m., a reflection your associates are giving you greater discretionary effort? Do employees seem happy, and do they say so? Are employees striving toward what Collins calls Level 5 leadership, where ego takes a back seat to company goals?
Although there is no single measure within HR that conclusively points to the existence of a positive or negative company culture, HR professionals must rely on and analyze several indicators before making decisions related to their roles as company stewards.
Nurture an Employment Brand
In truth, the goal of every HR department is to create not only a positive company culture in which employees strive to emulate Collins’ Level 5 leaders but also a positive “employment brand.”
Companies with a positive employment brand are seen, simply, as good places to work, a reputation that creates a cycle by which it becomes easier to find and keep great talent.
Being labeled this way is no accident, and it requires high-level strategic work.
Fortune magazine’s annual list of the “100 Best Companies to Work For” is filled with examples of businesses with a positive employment brand.
Such companies as Genentech (ranked No. 1 in 2006), Whole Foods Market, The J.M. Smucker Co. and others consistently perform well in part because they have a good employment brand. The No. 1 company on the 2007 Fortune list, Google, is almost as well-known for its work culture as it is for its search engines.
Collins’ book lists other companies that constantly enjoy good financial performance, including Wells Fargo, Pitney Bowes and Walgreens, because they value their employees and treat them well.
With those conditions as a backdrop, companies have a much better chance at reaching their highest level of performance.
Mediocrity Leads to Disappointment
HR is charged with inviting the right people into a company and then building a positive company culture. The right people can take an average set of employment goals and elevate them to a higher level.
On the other hand, brilliant strategy executed by mediocrity inevitably leads to disappointment. If a company’s HR department isn’t using the firm’s human capital effectively, executives and others need to find out why.
Quite simply, it’s one thing to hire people — it’s another to hire the best people and have them show up ready to work, truly prepared and enthusiastic about contributing.
If a company isn’t there just yet, HR professionals and others within the company need to tackle some important questions: What will it take for us to become a high-performing company? How can we make our employment brand more attractive? How can we create a company culture that encourages our employees to strive to take on leadership roles?
The answers might take work, but as the stewards of company culture, HR professionals must seek to create that unique value for the organization. HR can help find, develop and leverage the right human capital, which is just as integral to high-performing companies as the creation of the strongest business plan.
Ron Lawrence is vice president of organization development at VF Corp., an apparel company that is one of Fortune’s “Most Admired Companies.” Lawrence can be reached at email@example.com.