Academic journal article Human Resource Planning

Measuring the Performance Impact of Human Resource Initiatives

Academic journal article Human Resource Planning

Measuring the Performance Impact of Human Resource Initiatives

Article excerpt

Managing strategic human resource practices and processes, superbly, is a means of gaining competitive advantage through one of a company's most significant assets: its people. The resource-based view of competitive advantage implies that resources provide enduring distinctive advantages to a company to the extent that they remain scarce or hard to replicate, have no direct substitutes, and enable companies to pursue distinguishing business opportunities (Barney, 1991; Lado, et al., 1992).

As other sources of competitive advantage, such as manufacturing capabilities and technological resources, have become easier to emulate, the critical differentiating factor between companies can be how human resources work within an organization and, in fact, represent an unique source of competitive advantage (Pfeffer, 1994). The concept of human resources as a source of competitive advantage implies that people have competencies, experiences, and knowledges that provide economic value to the company. Barney and Wright (1998) indicated that in order for human resources to contribute to sustained competitive advantage, they must remain hard to imitate, create value, and co-align, uniquely, to the organization's business strategy.

This article describes a regional-driven measurement project that determined the effect of an integrated group of HR practices and processes -- known as People As A Competitive Advantage, or PACA, at Wells Fargo. It was believed that a "bundle" of integrated HR practices -- such as PACA -- would provide greater sources of competitive advantage because of their inherent synergy with one another (Becker & Huselid, 1999). Overall, the measurement initiative sought to determine whether PACA would provide an enduring source of competitive advantage to Wells Fargo as a function of improved employee commitment, strengthened customer loyalty, and enhanced financial performance. And as Dick Kovacevich, CEO of Wells Fargo, recently said, "The way I see it is, when you take care of your employees, they take care of your customers... and your shareholders wind up winning..." (Kover, 2000).

Strategic Intent & Implementation of PACA

PACA was introduced as one of 10 key business strategies in Wells Fargo in February 1997 to strengthen the company's long-term organizational performance. Three objectives were identified: (1) enrich the Wells Fargo culture -- move from a credit, sales, and profit orientation to one of credit, sales, profit, and people; (2) focus employees (team members) on areas where business requires outstanding performance; and (3) shift the performance curve of employees (measured, e.g., by "revenue per FTE") and the organization (measured, e.g., by "ROA").

With objectives identified, teams of business and HR/learning professionals established a number of interrelated tools and practices thought to be critical and complementary to strategy execution (Exhibit 1). The idea was to provide leaders and managers with new and improved tools to strengthen their leadership and management capability and provide a template of practices that would improve overall business results. From a "tools" perspective, Wells Fargo streamlined its existing HR operating procedures and policies. It identified critical competency models for its leaders and managers, and developed proprietary 360-degree feedback tools and processes. Multiple learning tools were developed including development guides, online management development, and new leadership courseware. It also introduced, as part of PACA, a new performance management process that provided managers with web-based templates and training for support.

From a "practices" perspective, Wells Fargo held "people managers" accountable for new people goals. As performance goals were identified, a minimum of 20 percent of the performance plan needed to be assigned to people management outcomes. The outcomes focused on quality work environment, business and employee capacity to produce, and the alignment and commitment of a manager's people to the business goals. …

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