My recent question in the forum (please do add your views to this too) promoted me to argue that it is important to focus on and talk about social capital, not just to discuss things which may be a bit easier to focus on, including the end results we are trying to achieve, or the activities involved in doing this, whether these be HR, enterprise social networking, organisation network analysis, or anything else.

I'm aware that this isn't necessarily a common viewpoint and there are some people who apparently feel sick by the idea of being social within business. To me, that's a problem, as we're never going to be able to develop social capital effectively if we can't even refer to the thing we're trying to build and accumulate.

So here are some notes (from The Social Organization) which explain why I think the concept of social capital is important, and which are supported by the attached slide, which presents the links between these various things. Sorry the article a bit long, though in fact it's only the first half of what I want to share, so there will be more too:

The need to shift focus from activities to outcomes

Hopefully this value chain, building on inputs and activities to create outcomes, will resonate for you, as it is what all organizations do. However, it is not how we usually think. I see this whenever I work with business executives on their business strategy maps. When I look into the learning and growth perspective I will always find plenty of objectives for activities but very rarely anything for inputs or outcomes. Similarly, when working with HR or others on people management strategies I will find the same focus on activities and a similar absence of objectives for inputs and outcomes.

There is a reason for this, which is that in our psychology we pay more attention to things that we can see, touch and describe – things that are tangible – than things we cannot as they are intangible. This is part of the halo/horns effect, which explains the way that our perceptions about people and things are framed by the most readily available information on them (Rosenzweig, 2007). Many of the outcomes of people and organizational activities are intangible so we tend to pay more attention to the tangibles (ie the activities) than the intangibles (ie the outcomes). But doing that is a mistake.

We need to have a more balanced approach to setting objectives, including targets for inputs and outcomes as well as activities. Shifting focus from activities to outcomes is particularly important as it provides three important benefits – becoming more strategic, being seen as more credible and creating value – as set out below.


Becoming more strategic

First, focusing on outcomes tends to make HR and people management more strategic. The outcomes in the organization value chain are our deliverables. It makes no sense to ignore them. Doing so is a bit like a car manufacturer paying all their attention to their engineering and manufacturing operations but not bothering to check on the finished vehicles.

In addition, if we focus on activities we tend just to do more of these activities. (If you have a hammer every problem seems to become a nail.) My best example of this comes from my time working as HR Director at Ernst & Young (now EY) in the UK when the international firm announced that 90 per cent of its development activities would in future be provided by e-learning. In my view, doing this was a mistake, contributing to lots of fairly boring e-learning (a common experience back then and which still puts many people off e-learning even today, despite how far this technology and the solutions that are available have improved). The problem occurred simply because we were developing strategy by looking at the activity of learning, not the outcomes we needed to achieve.

The common alternative to just focusing on activities is to try to connect activities and business results, ie to miss the outcome step in the organization value chain. Unfortunately this tends not to work that well either. It is actually quite hard to look at the business objectives of a firm and then identify what HR activities will support these objectives. It is a lot easier, and results in better alignment, to ask what organizational outcomes will support and enable these business objectives, and then what activities will create those outcomes.

I like to explain this by looking at performance management. I do not particularly like competency frameworks but I think one benefit they provide is helping to connect performance objectives and training needs. So, if a manager and employee sit down at the start of the year and the performance management system asks a manager to identify six specific and measurable objectives, most managers can give this a decent go. However, if the next page of the form or system asks them to identify the training that will help that person to achieve their objectives, many managers will struggle – and the person does not get any training.

It is easier if the second page of the system asks what competencies will help the person to achieve their objectives. Most managers can do this. And then if the third page asks what training does the person need to develop these competencies they can do that too. Result – the person gets more training to support their competencies to achieve their objectives. These two systems are asking the same thing, but without the use of competencies there is just too big a conceptual jump between what the person needs to do and the training they need in order to do it.

Competencies help cut down the time and distance between the work and training objectives and make each question smaller, making them easier to answer and providing greater align- ment too. It is the same with the organization value chain. It is actually quite hard to look at the business objectives and then say what HR activities will support these objectives. It is a lot easier, and results in better alignment, to ask what outcomes will support and enable these business objectives, and then what activities will create those outcomes.

Aligning activities with outcomes also helps ensure that these activities are best fit, rather than simply best practice. This means that they are designed to be appropriate for a particular organization, its strategy and context etc, rather than just copied from what other organizations are doing. This is particularly important as many of our current best practices are not even that good, never mind best! But there is also a growing amount of evidence that what is important to organizational success is best fit, not just best practice.

My favourite example of this comes from John Boudreau and Ed Lawler at the University of South California (Lawler and Boudreau, 2015). Their research into global trends in HR suggests that the effectiveness of HR activities depends upon the business strategies that are being followed. A very relevant example for the social organization is that a business following a strategy focused on innovation would seem to benefit strongly from investments in social networking activities and systems (correlation coefficient r = 0.33). However, investments in employee relations correlates in reduced performance for these same innovation-focused businesses (r = −0.16). That is not an issue with employee relations – other businesses, for exam- ple those using a sustainability-based strategy, would seem to benefit from investments in this practice area (r = 0.16). The research indicates that what matters is not best practice, it is best fit.


Being seen as more credible (forgive me that I focus on HR - I think many of the points apply more broadly)

As well as making us more strategic, focusing on outcomes makes those of us who focus on people management, eg in the HR department, seem more credible. People who create something are always seen as more valuable than people who just do something. For example, HR practitioners will be seen as more impactful if they talk about raising commitment or the skills of the sales forces rather than if they talk about running communications briefings or delivering training courses.

In addition, one of the major challenges faced by many HR and other practitioners in raising their credibility is showing that they are accountable for something important in the organization. In fact many business leaders question whether HR is accountable for anything at all, and if they are not accountable, whether the function can be abolished.

It is easy to see how we have got to this situation – HR is obviously accountable for the design of the quality and effectiveness of HR processes but no one cares very much about that. More important is the use of these processes, but it needs to be line managers who are accountable for the bulk of this as they are the people who implement the processes. It is important to remember this point. When HR tries to be accountable for delivery of activities we end up taking a policing role, which can substantially interfere with our desire to be strategic. There is also a need in most businesses to strengthen line managers’ accountability for the operation of these processes, which often makes HR wary of taking accountability in case this further reduces the accountability that line managers are taking.

HR is also clearly not accountable for business results (though we do play a role as a support function in helping to produce them). So if we only focus on organizational activities and the broader business objectives we very naturally end up not taking accountability for anything important. Outcomes give us a way to square the circle – to take accountability for something that is absolutely critical to business performance – the outcomes in the organization value chain. This is not about accountability at the individual team or department level. It still needs to be team leaders, lines managers and business leaders who take accountability for the people in their teams and units. But we can take accountability for the outcomes we develop across the whole organization. For things like the overall levels of skills, engagement and people’s propensity to collaborate. And if we do not do this, who will?

Note that I am not suggesting HR should take more responsibility for delivering people management activities. But HR can, and I strongly believe should, take accountability for providing the capabilities our organizations need to be strategically successful. Therefore, the HR practitioners in my earlier example will be seen as even more credible if, as well as talking about the increase in sales skills, they put their jobs on the line and accept there will be consequences if they do not succeed in ensuring that this change is delivered. We need to focus on outcomes because that makes it more likely that we will talk about, and take accountability for, these outcomes too.


Creating value

Finally, outcomes provide the most important basis to create value through people - which will be the topic of my follow-up post...

What do you think? - does this help? ie, does it make at least part of the case for focusing on social capital as well as the activities we're using, and the business results we're trying to achieve?

Anonymous