Beyond HR – The New Science of Human Capital
Boudreau, J. W. & Ramstad, P. M. (2007). Beyond HR – The New Science of Human Capital, Harvard Business School Publishing Corporation, USA
The field of HR plays a pivotal role in the effective management and operations of the firm but its contribution is frequently clouded with uncertainty and ambiguity due to the frequently opaque internal decision making logic of the HR field. As with a number of professions, there comes a time in the maturation of a profession where its evolutionary path takes it towards new frontiers and fields, as has been demonstrated with the development of the finance discipline from accounting and the marketing discipline from the sales function. This evolution has typically involved an extension of the paradigms of compliance to include the adoption of services thought to be valuable to key constituents, to finally include decisions which alongside frameworks, enhances the decision making logic and provides the profession with the ability to hold constituents accountable for the quality of their decisions.
To this point, the field of HR has been clearly lacking this next step towards new frontiers of decision making to move away from the ‘compliance plus services’ approach currently in practice. In more mature professions, there have been decision sciences in place that provide the logic and facilitate the synergistic interplay between decision frameworks and measurement systems. This interplay leads to the ability to optimise the use of resources. In this respect, the HR profession has often been fragmented in its approach and has centred on maximising performance levels to all customers rather than finding the pivotal areas where optimisation and increased performance may be attained. This shortfall is succinctly illustrated by an observation made by the leading HR scholar, Professor Wayne Cascio of the University of Colorado Denver, in a recent email discussion with the authors of this review: “There is a definite need for better metrics in HR, but not just any metrics. What we need are metrics that are grounded in a broader logical and strategic framework.”
It is in this area that Boudreau and Ramstad’s Beyond HR provides the HR profession with the next step by providing intriguing decision making metrics surrounding the optimisation of talent acquisition and development. The authors successfully identify the benefits that a decision science approach could give to the HR profession and illustrate through clear and practical examples how HR professionals with an understanding of this shift in thinking could provide revolutionary possibilities with regard to their talent processes and operational strategies. Boudreau and Ramstad provide a persuasive argument that applying a scientific logic to the resource of talent in a similar way to that which has occurred in the accounting and marketing disciplines would enable organisations competing for talent to refocus on reframing talent based decisions. This reframing is exemplified in the optimisation theme that acts as the centrepiece of the text.
The authors argue that too often talent investments are centred on the maximisation of workforce attributes such as engagement, learning, competencies and performance. The authors note that this mentality is drastically different from the operational decisions surrounding resources such as money or customers where the primary objective is to leverage and optimise rather than maximise. The implementation of a decision science approach to talent proposes that the focus shift to helping the organisation excel in its acquisition and development of talent in alignment with where it matters most to their strategic success.
This rethinking of what should constitute core talent decisions by incorporating ‘talent segmentation’ is a novel and comprehensible proposition through which the underlying value of the ideas in this book are most convincing. The authors provide the reader with numerous, real world examples illustrating how various common assumptions or approaches to talent management may require rethinking as the HR profession transforms into a decision science. The authors successfully incorporate the ‘zeitgeist’ surrounding talent management and the war for talent by reframing the decision making process to provide a convincing depiction of the importance of talent segmentation. Boudreau and Ramstad argue that the critical success factors for future competitiveness will be found by selecting which talent wars to win by clearly distinguishing what is important from what is ‘pivotal’.
The identification of ‘pivot points’ and subsequent acquisition and development of pivotal talent is defined as “where specific improvements in talent and organization performance will most enhance sustainable strategic success”. The authors expand on this premise by explaining that a key function of this form of decision making will hinge on the organisation’s ability to identify the target talent and organisation performance improvements that will have the biggest effect on sustainable strategic success. This requires the organisation to dig deep into their processes to determine what untapped pivotal talent and organisational elements are as yet unrecognised by competitor firms. Subsequent questions to resolve include how to adjust the organisation’s talent strategy in the midst of environmental changes and how to manage disproportionate investments in talent rather than the traditional approach of spreading investment funds.
A key feature of ‘Beyond HR’ is that it is successfully organised around a robust and easily decipherable framework that clearly articulates the logic connecting investments in HR practices to their flow on effects on the workforce and their eventual impact on strategic success. It could perhaps be argued that there is nothing new with this approach but the use of a coherent framework provides a unique means of identifying the critical pivot points alongside each connection point thus, providing a general and comprehensive way to move beyond description of talent decisions to identifying the areas where focused investment will provide the greatest probability of success, however, unexpected their location.
In conclusion, ‘Beyond HR’ provides the reader, whether practitioner or academic, with a compelling introduction to ‘the new science of human capital’. The authors have comprehensively built on past research and experience to develop a book that will undoubtedly open up a useful dialogue regarding the future of talent management. As in the maturation of all fields, there comes a pivotal development point where one piece of work may have a significant impact on its progression. The innovative core ideas within this book clearly advance the case that the field of Human Resources can further develop as a business discipline.
Victoria University of Wellington
Victoria University of Wellington