Memo to business: human talent is real source of competitive advantage

The thinking behind the Aer Lingus memo is from a bygone era and has no place in modern people management, writes Michael McDonnell…

The thinking behind the Aer Lingus memo is from a bygone era and has no place in modern people management, writes Michael McDonnell.

In a world where organisations have almost unlimited access to capital and technology, it is human talent that is emerging as the real source of competitive advantage. In the Chartered Institute of Personnel and Development (CIPD) we have long argued that effective people management and development holds the key to a company's success.

But despite numerous research showing a clear statistical link between people management and bottom-line measures of organisational performance, such as productivity and profits, an understanding of the nature and the "how-to" of the link has been a problem up to now.

This explains the dogged persistence of some managers and their advisers to see people as just an expendable commodity to be disposed of when times are tough, without any adverse consequence for the organisation. In reality, it is the redundant thinking of a bygone era of industrial relations. Today, shoddy treatment, with or without the tacky uniforms, has no place in people management.

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Now a sharper focus is emerging from a variety of case studies developed by the CIPD. These studies delve into the inner workings of organisations - "the black box". They examine how and why organisations perform well or poorly and show what it takes to make the most of people in the workplace.

The common theme that emerges from our research is the increased pressure on organisations - private and public - to deliver high-quality customised products and services to ever more demanding and sophisticated consumers in an ever more knowledge-based economy. This has served to undermine the competitive effectiveness of the command and control Tayloristic model that inspires those "Aer Lingus type" discussion documents.

Our knowledge and information-based economy is characterised by greater technological complexity and especially with regard to services, more person-to-person contact between suppliers and customers.

This places, perhaps for the first time, a premium on the value added by people, whether in the knowledge that improves product quality, or the personal touch that enhances the flying experience of an airline customer. And it requires a different approach to the management and development of people.

Traditional hierarchical management structures are less effective at guaranteeing quality control in this kind of setting, making it necessary to devolve responsibility from senior management - who give organisations a vision and set strategic goals - to frontline management and employees.

But how is this achieved? And how can organisations guarantee that devolved responsibility delivers?

The overriding imperative is for organisations not merely to deploy and develop the people they employ but also, and crucially, to enable, encourage, and motivate their people and engage in "discretionary behaviour".

What organisations need from people they employ is the voluntary commitment to behave and deliver in ways that go far beyond the traditional requirement of the job description. This raises the ability of organisations to generate knowledge and share information and practices that add value to products and services, satisfy consumer requirements and meet business objectives.

Taken together our research demonstrates there is no single formula to successful people management that delivers high performance.

The key is tailoring to the context, the knitting together of bundles of people management practices and employment relationships within overall structures to deliver high-quality products and services, and continually improve quality in response to changing consumer demand.

These overlapping, integrated and mutually enforcing elements combine aspects of organisational architecture, which set the basic framework for management behaviour and employee behaviour, underpinning the effect of deployment and development of human capital within the organisation, and the system of employment relationships or social capital needed to facilitate people management practice.

Architecture, practice and relationships intertwine in numerous ways. The integration will not be the same for every organisation. There is no simple magic formula for success. But the research, nonetheless, points to a number of clear overlapping strands of organisational DNA that seem essential:

Vision: Organisations must have a "big idea" to motivate people in the workplace. Not just a routine mission statement but a clear statement of direction and purpose that engages people at an emotional "hearts and minds" level.

Leadership: Senior management must lead the way in delivering on the vision and ensuring that line managers do so too in the way they interpret and implement people management practices.

Learning: Organisations must create an environment in which people seek to acquire and share appropriate knowledge and skills. Line managers must actively support this process.

Voice: Management at every level must engage with employees by way of regular communications and involvement to maintain a high level of trust in the employment relationship. This helps underpin the psychological contract between employer and employee, based on trust, fairness and delivery of the "deal" in the workplace.

Finally, to be successful, organisations must also make sure that structure, practice and relationships complement each other. If not, the process of constantly adapting to changing consumer demands will prove difficult.

However, get the ingredients right for your organisation, and mesh them together well, and at least you will have in place the building blocks for high performance.

Michael McDonnell is director of the Chartered Institute of Personnel and Development in Ireland and the current president of the European Association of Personnel Management.