Leveraging firm diversity
The role of the HR function has evolved over the last decade and a half to keep pace with business realities. A number of definitions of the HR function and its roles has been put forth by business leaders and researchers alike. For example, a simple typology of four groupings of HR practices that follow the processes central to organizational success are 1:
- Flow of people
- Flow of performance management
- Flow of information
- Flow of work
The role of HR has also been defined through the lens of strategy, wherein the HR function is actively involved in both the creation and implementation of the overall strategic direction of the organization. HR no longer has to worry about working doubly hard to convince leaders that it is central to the business and about achieving the proverbial “seat at the table”. In this context, HR is a Strategy Architect, looking at organizational challenges through the lens of both business and people. This leads to the HR function facilitating strategy creation, clarifying and articulating the strategy, ensuring timely execution, aligning leadership behavior to strategy and bringing the view of the outside customer into the organization2.
However, there is also a third, and extremely crucial function with respect to strategy implementation. This ‘missing link’ is only now beginning to be understood by HR practitioners and business leaders. The link assists in seamlessly integrating the four crucial groupings laid out above, and is sometimes seen as the ‘soft side’ of management. However, experienced leaders will tell us that it is actually the hardest, because it deals with attitudes and behaviors which seem vague, but are critical to the firm. This missing link is Culture.
What then is organizational culture? The concept of organizational culture has been defined from many perspectives in the literature. There is no one single definition. The topic of organizational culture has been studied from many perspectives and disciplines, such as anthropology, sociology, organizational behavior, and organizational leadership to name a few. Deal (1999) defines organizational culture as values, beliefs, and behaviors that differentiate one organization from another3. Simply put, culture defines the proper way to think, act and behave within an organization4.
This simple, yet accurate definition of culture gives us scope to ask several questions about the nature of firm culture. What is our current culture? Who creates culture? Who sustains it? Is it always aligned to firm strategy? Is it well aligned with the firm’s vision, mission and values? 5 What leads to changes in firm culture? Is it always managed top-down? And most importantly, it leads us to the question: What role does HR play in shaping firm culture?
Leveraging Firm Culture for Competitive Advantage
Human, not financial, capital must be the starting point and ongoing foundation of a successful strategy6. Significant advantage accrues to companies that encourage open communication and that know where and how to break down barriers to honest feedback. Risk management programs at large companies tend to be finely tuned to financial and compliance risks but rarely focus on cultural sources of risk7.
If the collective attitudes, perceptions and behaviors of all employees in an organization shape its culture, then alignment of culture with the firm strategy is imperative to firm success. It is common to talk of an organization’s culture as if it is simply “the way things are”. But no culture is static8. It is continually reinforced and balanced by internal and external events that drive the organization.
How then can HR play a pivotal role in shaping firm culture? Would some of the traditional tools of pay systems, performance management, recruiting, selection and training & development suffice in this endavor? Or is something more required?
- Ulrich, Dave; Brockbank, Wayne, The work of HR part one: people and performance, Strategic HR Review; Jul/Aug 2005; 4, 5; ABI/INFORM Complete
- Ulrich, Dave; Brockbank, Wayne; Johnson, Dani, The Role of Strategy Architect in the Strategic HR Organization, People and Strategy; 2009; 32, 1; ABI/INFORM Complete
- Boniface C. Madu, Grand Canyon University, Organization culture as driver of competitive advantage, Journal of Academic and Business Ethics.
- HR.com, HR Impact on Corporate Culture, Jul 1, 2005.
- Andy Hanselman, Moneywatch, How to Use Culture for Competitive Advantage, July 22, 2010.
- Christopher A. Bartlett & Sumantra Ghoshal, Building Competitive Advantage Through People, MIT Sloan Management Review, Winter 2002, Vol. 43, No. 2.
- Paul Edelman, Srikanth Seshadri and Randeep Rathindran, Organizational Culture: An Overlooked Internal Risk, Bloomberg Businessweek – Companies & Industries, October 01, 2010.
- Peter M. Senge, The Fifth Discipline, Random House Business Books.