linking individual performance to business strategy

Linking Individual Performance to Business Strategy • 17

LINKING INDIVIDUAL PERFORMANCE TO BUSINESSSTRATEGY: THE PEOPLE PROCESS MODEL

Human Resource Management, Spring 1999, Vol. 38, No. 1, Pp. 17–31© 1999 John Wiley & Sons, Inc. CCC 0090-4848/99/01017-15

Lynda Gratton, Veronica Hope-Hailey, Philip Stiles,and Catherine Truss

During the last five years, a team of researchers has worked with the senior human resource (HR)teams of seven large companies with United Kingdom operations. This research initiative hasfocused on a number of aims, one of which has been to understand and model how businessstrategies are translated through human resource strategies and people processes into individualand organizational performance. This article summarizes the key findings, provides a map ofhow this translation takes place in these companies, and discusses why some people processes aremore strongly linked to business strategy. © 1999 John Wiley & Sons, Inc.

Introduction

A key challenge facing organizations is how theycontinue to deliver sustained competitive ad-vantage in the short-term while also preparingfor longer-term success. It is widely acknowl-edged that the sources of sustained competi-tive advantage lie not only in access to financeor capital, but within the organization, in peopleand processes capable of delivering businessstrategies such as customer satisfaction or rapidinnovation (Barney, 1991; Lundy, 1994). Whatis the precise role of people and processes indelivering business strategy? This article buildson previous models of strategic human resource(HR) processes and describes what role theseprocesses play in linking business strategy andindividual performance.

The majority of models of the strategichuman resource process are normative, in thesense that they map how human resourcemanagement (HRM) should work and provideguidelines on best practice (e.g., Devanna,

Fombrun, & Tichy, 1981; Schuler, 1988;Legnick-Hall & Legnick-Hall, 1990). Empiri-cal models are more scarce, due to the rela-tive lack of empirical research in the field.Those that do exist are relatively sophisticatedand take into account a broader range of con-textual and output variables (Hendry,Pettigrew, & Sparrow, 1988; Hendry &Pettigrew, 1990). Conceptual or theoreticalmodels derived from the literature are alsomore scarce than are normative models. TheHarvard Business School, in one of the ear-lier books on human resource management(Beer, Spencer, & Lawrence, 1984), put for-ward a conceptual map of human resourcemanagement to guide thinking on the subject,while both Storey (1992) and Guest (1988)have derived variables and models from theliterature. We aim to build on these modelsby mapping, through a case-based methodol-ogy, the particular aspect of the model thatfocuses on how the link between strategy andindividual performance is played out.

18 • HUMAN RESOURCE MANAGEMENT, Spring 1999

The methodology and initial theory behindthe mapping was guided by a number of im-plicit assumptions. The first assumption wasthat as Mintzberg (1978) and others have ar-gued, we could not assume that what is in-tended would be realized. This suggested thatat this stage we focus on collecting exploratorydata rather than seeking a predetermined ty-pology. It also suggested that a case method-ology, with in-depth data collected from manypeople within the company, would be prefer-able to questionnaire data from senior HRpeople. The second assumption was that thelink between business strategy, human re-source strategy, and realized human resourcemanagement operates in a dynamic mannerand within a particular context. These twoassumptions had a profound impact on the

design of the methodology. We wanted to ex-amine what was intended (both in the contextof business and HR strategy) plus what wasactually realized and the context in which thisintention and realization took place. A moredetailed description of the factors examinedin the research is shown in Table I.

The aim was to create a map of those pro-cesses that link business strategy to the per-formance of individuals and the organization,and to use this map to increase our under-standing of the elements and leverage pointsof successful linkage.

Companies and Methodologies

During 1992 we created a research consor-tium comprising the United Kingdom (UK)

Intended Business StrategyArticulated Strategic Objectives: strategic-type stated business goals

Intended Human Resource StrategyStrategy Creation and Implementation: formal strategic planning processes; performance aspirations;clarity of corporate vision; extent of communication and understanding of strategy; perceived commit-ment of senior managers to strategic goalsHuman Resource Strategy: strategy documents; human resource goals; integration between goals;current major human resource initiatives

Strategic Human Resource ContextCharacteristics of the Human Resource Department: structuring of tasks, organization of the department;acquisition and use of knowledge; nature of the HR information systems; processes to identify and planfor the future; size of HR departmentLevel of Expertise: knowledge and expertise, perceived credibility; type of people employedDesign and Implementation of HR Interventions: participation of HR director in strategic decisions; levelof HR expertise; linkage between strategy and HRS; employees’ perceptions of the strategy of the HRdepartment. Senior managers’ expectations of the HR function; measures of success; main stakeholdersin the HR policy formulation and implementation; change-facilitation skills of the HR departmentHuman Resource Philosophy: psychological contract; level of investment in human resource activities

Realized Human Resource InterventionsType of Intervention: strategic linkage; major interventions; future plans; future challengesProcess Outcomes: recruitment and selection; induction; performance management; training anddevelopment; career and succession planning, equal opportunities, employee relations

OutcomesOrganizational Commitment: the ambience of a firm in terms of morale, conviviality, satisfaction, andshared commitmentProfitability and Growth: level and stability of profitability; growth rate of sales or revenuesAdaptability: flexibilityCompetence: employees have the competence to take on new jobs and skills as needed; a positiveattitude toward change and learning

The Major Factors Examined in the Research.TABLE I

The aim was tocreate a map ofthose processesthat link businessstrategy to theperformance ofindividuals andthe organization,and to use thismap to increaseour understandingof the elementsand leveragepoints ofsuccessful linkage.


heads of personnel for a number of large com-panies. The aim of this consortium was togather highly sensitive data about the truenature of human resource management inthese companies, to provide a forum in whichinformation could be reported and debated,and to make the research findings available toa wider audience (and by doing so, to create aplatform for a deeper and more informed de-bate about people management issues). Dur-ing 1992 and 1994 we collected data from theUK business of seven large, complex compa-nies: BT Payphones, Lloyds Bank (now LloydsTSB), Citibank, Glaxo Pharmaceuticals (nowGlaxo-Wellcome), Hewlett Packard, WHSmith News Distribution, and Kraft JacobSuchard (part of the Philip Morris group).Within each company we focused on one busi-ness, unit, or region to obtain in-depth data,rather than simply collecting broad-brush in-formation across the company as a whole. Abrief contextual description of each organiza-tion is presented in Table II: The Participat-ing Companies. All the companies hadsignificant operations in the UK. Althoughthey were from different sectors, all were inthe top five in their particular sectors in termsof turnover, size, and profit.

We are aware that the choice of locationand companies had certain weaknesses. In aneffort to reduce contextual differences, we choseto focus on one country—the UK. Secondly, thenature of a research consortium such as thiscreated the need, in the early stages, for confi-dentiality, and this removed the possibility ofwithin-sector comparisons with competing com-panies. Clearly this is a self-selected sample andmay not be representative of a wider sample ofmajor companies. We have attempted to com-pensate for this, however: by ensuring we haveidentical methods across all the companies, byconcentrating the analysis on a vertical slicethrough the organization, and by ensuring com-parable elements.

Case-based method is central to the re-search approach. This is well suited to an en-deavor such as our own, which is predominatelyexploratory, with emergent rather than a simpledominant or unifying theory, and where the fo-cus is theory building, rather than theory test-ing. This triangulation (Jick, 1979) uses acombination of methods to study the same phe-nomenon, the basic premise being that the par-

ticular limitations of a given method will be com-pensated by the counterbalancing strengths ofanother (Snow & Thomas, 1994).

Interviews

We took a vertical slice through each businessand interviewed about 37 people in each ofthe seven businesses. There were three dis-tinct types of interviews: (1) semi-structuredinterviews elicited the opinions of employeesabout the nature of the business strategy, roleof HR, and the nature of the HR interven-tions; (2) the “unwritten rules of the game”(Scott-Morgan, 1994) interviews were deeperand more prolonged, designed to uncover thesense-making activities of employees (e.g.,What do you have to do around here to getalong? Who gets promoted?); (3) an initialfocus group with members of the HR func-tion provided orientation and an initial frame-work about the structure and nature of theHR interventions. These interviews were taperecorded and transcribed before being writ-ten into the company cases.

Employee Survey

In order to increase the scope and depth, wecomplemented the qualitative methods with aquestionnaire sent to a representative sampleof 20% of the employees. In total, 2,200 werereturned, representing a response rate of 60%.The questionnaire contained measures on or-ganizational strategy and values, satisfactionwith HR interventions and the HR function,employee relations and standard scales on jobsatisfaction, commitment, and trust.

Archival Data

Internal and external documents were ana-lyzed to provide a validity check of field find-ings. We collected written information aboutthe intended HR strategy (policy documentsand plans), the HR interventions (forms, docu-ments), and outcomes (company surveys, re-tention rates).

The Emerging Map

The cases we prepared for each company wereshared extensively in a series of company

The cases weprepared foreach companywere sharedextensively in aseries ofcompanyworkshops inwhich theresearch team,and the HRteams from eachof the companiesmet together tocompare data.


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workshops in which the research team, and theHR teams from each of the companies met to-gether to compare data. Over a period of time,a map emerged of the relationship betweenbusiness strategy and individual and organiza-tional performance. From the case informationand discussions with the practitioner and re-search team, a number of propositions emerged:

• The link between business strategyand individual performance occurs inpart through the organizational capa-bility to create and embed people pro-cesses along a number of dimensions:vertical linkage (to create alignmentwith short-term business needs); hori-zontal linkage (to create cohesion);and temporal linkage (to transform tomeet future needs).

• These clusters of people processes canbe described and observed across allthe businesses in the sample.

• The strength of the linkage betweenpeople processes and business strat-egy varies across the processes andacross the businesses.

Proposition 1: Dimensions of Linkage

The notion of the creation of a link betweenbusiness strategy and the performance of ev-ery individual in the organization is central tothis model. Vertical linkage expresses the mostvisible aspect created, for example, throughlinking a business goal to individual objectivesetting, to the measurement and rewarding ofthat business goal. The concept of horizontallinkage is more complex, expressing as it doesthe linkage created within and between thepeople processes. These types of linkage areessentially static, however expressing imme-diacy. We created the term temporal linkage,To capture the notion of time and changewhich describes the linkage between the ca-pabilities of the present and the aspirations ofthe future.

Vertical Linkage. At the core of many mod-els of human resource strategy (HRS) is thevertical linkage between strategy (or the ob-jectives of the business), individual behavior,and ultimate individual team and companyperformance. This vertical integration—where

leverage or linkage is gained through proce-dures, policies, and processes—is widely ac-knowledged to be a crucial part of any strategicapproach to the management of people(Schuler & Jackson, 1987; Tichy, Fombrun &Devanna,1982; Truss & Gratton, 1994). Itensures the presence of an explicit comple-mentary relationship between internal peoplepolicies and processes and the external prod-uct market or larger business strategy. It alsocreates and supports the individual behaviorand competencies that have the potential tobe a source of competitive advantage (Wright,McMahan, & McWilliams, 1994). Linkageensures a focus on what Jackson, Schuler, andRivero (1989) have described as “needed em-ployee behavior,” that behavior which is cen-tral to the delivery of the business strategy.

Horizontal Linkage. We observed that hori-zontal linkage between the processes plays amajor role by ensuring key people processeshave cohesion and coherence. Underlying thisconcept is the proposition (Guest, 1987) thatcohesion is likely to create synergistic benefits,and the company’s strategic plans are morelikely to be successfully implemented.

Temporal Linkage. When we studied thesecompanies, however, it became clear that theconcepts of vertical and horizontal linkagewere not sufficient to capture the dynamicnature of this linkage. We found seven com-panies in periods of extreme change and trans-formation. Some had emerged from periodsof extensive downsizing (BT Payphones andWH Smith); others were restructuring theiroperations (Citibank) or preparing for merg-ers (Glaxo-Wellcome and Lloyds-TSB). Inshort, the HRS agenda they faced was one ofcontinual change, where the need was to bal-ance continuity and consistency with the chal-lenge of change. We termed the phrase“temporal linkage,” which acknowledged thatat the heart of the delivery of long-term com-petitive advantage there must be a vision forthe future and a focus on concerns that arebroader, more long-term oriented, and lessproblem centered than the short-term(Mahoney & Deckop, 1986).

This long-term perspective is a particularlycrucial aspect of people strategies becausethe time cycles for people resources are

This long-termperspective is aparticularlycrucial aspect ofpeople strategiesbecause the timecycles for peopleresources areconsiderablylonger than thosefor financial ortechnologicalresources.


considerably longer than those for financialor technological resources. Consider the fol-lowing: It takes ten to fifteen years to selectand develop an international senior executivecadre; a minimum of three years to pilot andimplement a reward system refocused on sup-porting a new set of competencies; five yearsto reshape the technological skill base of em-ployees. In sum, for the crucial people issues,the temporal perspective is not just months,and could even be decades, so the planningcycle for people resources must be capable ofcreating a foundation for skills and behaviorsfar beyond the one-year cycle favored for manybusiness strategies. We believe this distinctionbetween delivering short-term business goalsand the creation of longer-term capability isan important distinction. It has been forciblyargued by a number of commentators (Hamel& Prahalad, 1989) that too many Westerncompanies emphasize the short-term to thedetriment of longer-term success.

Proposition 2: The Relationship Between theCore People Processes

At the core of the model are clusters of pro-cesses that create vertical linkage (primarily

performance management processes) and clus-ters that create a link with the future (prima-rily the transformational processes). But whatwas the dynamic relationship between theseprocesses? We had, rather naively in retrospect,expected HRS documents (i.e., the intendedstrategy) to play a key role. What we found in-stead was a more complex, iterative relationship,which is shown in the italic ovals in Figure 1.

In the current model, the word “process”is intended to embrace philosophies, policies,and practices (Schuler & Jackson, 1987); how-ever, the emphasis is on practice and embed-ded processes, those that take place in asystematic rather than an ad-hoc manner andthat have a procedural reality rather thanphilosophical rhetoric. Change and transfor-mation are captured in the dynamic and it-erative nature of the model. Across all thecompanies we observed the use of four keypeople processes that essentially deliver short-term business goals:

1. the ability to set objectives that areclearly and consistently linked to thebusiness strategy;

2. the ability to create performancemetrics capable of measuring and

FIGURE 1. The people process model: Embedding transformational change.

Short-Term

Organizational


reporting on those behaviors and per-formance outcomes that reflect thebusiness goals;

3. the ability to reward performance inline with the business goals; and

4. the provision of short-term trainingcapable of supporting the delivery ofthe short-term business goals.

These are shown in the short-term cycleof the model.

We also observed within these companiesa set of processes that are essentiallytransformational, working with time cycles ofmany years:

1. creating a leadership cadre capable ofdelivering the international strategyover the next decade;

2. transforming the basic skills and as-pirations of the workforce to preparefor the longer-term; and

3. creating an organizational structureand value set that will underpinlonger-term success.

These are shown in the long-term cycleof the model.

These clusters of processes support thepolicies and systems that deliver short-term per-formance and prepare the foundation for long-term transformation. The continual adjustmentsof these processes to changes in the businessstrategy, however, requires a set of feedback andredirectional elements. In these companies,many of these dynamic feedback elements arerelatively weakly developed. It was possible,however, to observe vestiges in all companies.They consisted of three elements:

1. to scan and diagnose people capability;2. to create an understanding of the gap

between capability and business re-quirements (as expressed in strategydocuments); and

3. To create a people strategy through ananalysis of this gap (either implicitlyor explicitly), which influences thedesign and delivery of the people pro-cesses.

This cycle of activity operates in a short-term (i.e., the next six months) time frame and

a long-term (i.e., the next two years and ahead)time frame shown in the two cycles of themodel.

Proposition 3: The Strength of the Processes

Although all the people processes and ele-ments were apparent in these seven organi-zations, we observed varying strength in theability of the process to create linkage be-tween the business strategy and individualperformance.

In developing the map of the processesand feedback elements, it became clear thatsome processes are very strongly linked tobusiness strategy. They are sufficiently embed-ded, well understood, and communicated sothat changes in business and people strategycould be rapidly translated into adjustmentsin the process. Other processes are weak; theyhappen in an ad-hoc basis and are so looselycoupled that they could not respond tochanges in business strategy.

In trying to understand this, we set out toanalyze the strength of each process and ele-ment across each of the seven case compa-nies. We achieved this in two stages; first weagreed what each process and element wouldlook like if it were strongly or weakly linked,and created descriptions along a five-pointscale. There have been previous attempts todescribe the concept of linkage; these haveeither focused on a single process (e.g., strat-egy development, Tyson & Fell, 1986; Quinn& Mills, 1985) or described the strongest levelof linkage without articulating the weakest(Ulrich & Lake, 1990; Walker, 1980). We at-tempted to describe all of the processes at alllevels of linkages. An example of the level de-scription for the objective-setting process ispresented in Table III, Individual and TeamObjectives Linked to Business Goals.

The Findings

Using these level descriptions, the researchteam assimilated the data from interviews andquestionnaires to create both a rating processand elements across all the case companies.In Table IV we summarize the overall find-ings, and in the next section we describe strongand weak linkages and discuss the underlyingreasons and implications.

In developing themap of theprocesses andfeedbackelements, itbecame clear thatsome processes arevery stronglylinked to businessstrategy.


Strongly Linked: Objective Setting

All these companies had experienced restruc-turing, and many had delayered with a re-sultant emphasis being placed on managerialand employee responsibility. In these com-panies, this devolution had been accompa-nied by real efforts to create strong linkageamong the objectives of individuals, businessgoals, and outputs. Processes for setting an-nual objectives and agreeing targets were afeature of all the companies in the sample.Two of the companies, Hewlett Packard (withtheir ten-step process) and Kraft JacobSuchard (with their Managing and Apprais-ing People Process), operate with strong stra-

tegic linkage and had developed an objective-setting process that links individual objectivesto annual business goals in a clear and ar-ticulated manner. In both companies, jointobjective setting was the foundation of a per-formance management framework that en-sured objectives were flexed to meet thechanging needs of the business strategy. Theprocesses were well documented, systemati-cally rolled-out, supported by trained man-agers, and the quality was reviewed. As aconsequence, of the employees we surveyed,the vast majority were aware of the businessstrategy and how it linked to their perfor-mance, had clearly defined work goals, andunderstood the basis upon which their job

For all thecompanies,training thatfocused on short-term businessneeds was seen asa key aspect oftheir ability tocreate theflexible andmulti-skilledworkforcecrucial todelivering bothshort- andlonger-termbusinessperformance.

Strong LinkageLevel 1The business objectives of the overall strategic plan are clearly articulated to the individual and aretransformed into clear objectives that are discussed and agreed on an annual or bi-annual basis.Processes exist which ensure that individual objectives are realigned to take account of annual changesin business strategy.

The quality of the objective setting process is monitored and changes are made to ensure that it remainsan effective process.

Level 2The business objectives of the overall strategic plan are clearly articulated to the individual. There is somelinkage between these business plans and individual objectives, and some reshaping of individual objec-tives as business objectives change.

No explicit monitoring systems are in place that provide feedback on the success of the process.

Level 3There is some articulation of the business strategy to the individual. Managers meet with their teams atleast annually to discuss the objectives for the coming year. These objectives are recorded and kept to berevisited on an annual basis.

However, there are no clear processes in place capable of directly linking individual objectives to thebusiness strategy or flexing these objectives as the business strategy is realigned.

Level 4There is no clear articulation of the business strategy to the individual. A proportion of managers meetannually with team members to talk about performance and set expectations for the coming years. Theseexpectations relate to the individual and his or her manager; they do not have any clear link through tothe business strategy and key imperatives.

Level 5There is no clear articulation of the business strategy to the individual. While individuals and theirmanagers talk about performance, these discussions are infrequent, vague, ad-hoc, and unrecorded.There are no mechanisms in place to link these discussions with the business.

Weak Linkage

Individual and Team Objectives Linked to Business Goals.TABLE III


performance was appraised. A crucial ele-ment of the embedding of the process is thatin both companies the objective-setting pro-cess had been in place for over a decade andas a consequence had become part of the wayin which individuals saw the company doingbusiness. It was part of the fabric of theculture and an important managementdiscipline.

Strongly Linked: Short-Term Training

For all the companies, training that focusedon short-term business needs was seen as akey aspect of their ability to create the flexibleand multi-skilled workforce crucial to deliver-ing both short- and longer-term businessperformance. For a number, a key lever wasthe ability to maximize the performance ofknowledge workers and thus begin to build alearning organization.

For Glaxo, Hewlett Packard, and Citibank,on-line and off-line training was seen by em-ployees as making a significant contribution toorganization performance, and the surveyshowed that the majority believed they had the

skills needed to deliver against the performanceobjectives with which they had agreed. Manyalso felt that the organization encouraged thedevelopment of new skills. Interestingly, al-though these three companies had made sig-nificant investments in off-line training (withover 50% of those employees surveyed report-ing more than five days of training per year),their employees believed that being faced withchallenging jobs had played the most significantrole in developing their work performance.

Strongly Linked: Leadership Development

Processes to support the creation of leadershipcadres had been a central activity for many ofthese companies, particularly those requiringinternational executives capable of operating ina multinational context. Kraft Jacob Suchardand Citibank both had complex succession pro-cesses supported by the early identification ofhigh-potential people, accelerated developmentof this group, and succession lists and“backstopping” arrangements. Of the multina-tionals, only Hewlett Packard had chosen notto systematize a high-potential process. In part,

The Short-Term Cycle• Objective Setting: Strong Linkage, clear objectives set in most companies.• Performance Metrics : Medium Linkage, strong metrics around financial performance, much weaker

around “softer” people elements.• Rewards: Strong Linkage, particularly in the American multinationals, weaker linkage around team pay

and upward feedback.• Short-term Training: Strong Linkage, all had significantly invested in training to meet immediate skill

needs.

The Long-Term Cycle• Leadership Development: Strong Linkage, well-established leadership development and high-potential

cadres.• Workforce Development: Weak Linkage, focus on the present rather than the future; career planning and

psychological contract is problematic in many companies.• Organizational Development: Medium Linkage, some have a clear view of OD, others lack view and

capability.

Feedback and Redirectional Elements• Scanning Current Capability: Medium Linkage, some use of surveys and skills audit but lacks cohesion

and integration; rarely sufficiently communicated to line managers.• Short-Term Business/People Strategy: Medium Linkage, articulated HR strategy plan and influential HR

people in most companies; link between espoused and enacted can be weak.• Scanning Long-Term: Weak Linkage, isolated use of long-term visioning; limited feedback to managers;

broad directional element rather than clear articulation.• Long-Term People Strategy: Weak Linkage, vision rarely more than 2 or 3 years; generally the process is

not embedded; limited impact on management decisions.

Linkage Across the People Process Model.TABLE IV


this reflects the company’s commitment to ameritocracy, where the accelerated developmentof an elite group would be seen ascountercultural (Hope, 1994).

Weakly Linked: Long-Term People Strategy

In other areas, the link between business strat-egy and people processes was relatively weakacross all the companies. We focus here ontwo areas: the development of a long-termpeople strategy and the transformation of theworkforce.

From a methodological perspective, ana-lyzing the elements that support preparationfor the future was the greatest challenge forthe research team. These processes areopaque, occur in small management teams,may not be documented (and if they are thedocuments are not circulated), and occur onan ad-hoc basis. In summary, analysis is com-plex and circumspect, involving interviewswith senior management, document trawls,and questionnaires sent to the head office. Thepiecing together of this rather disparate infor-mation began to create a picture of how thesecompanies prepare for the future and the rolepeople issues play in this preparation. All isnot always as it appears: The existence of astrategic human resource document in onecompany signified the culmination of a realdialogue about the future and the role ofpeople, while in another company it was a“dead” document, devoid of meaning. In yetanother company, there was a lively ongoingdebate about the future, but no human re-source document.

Here we were looking for examples of pro-cesses that supported the creation of a long-term view of the future of the organization andits implications for people. Processes such asscenario planning, models, and simulationshave been described as central to the activityof reshaping the view of the organization.None of these companies regularly used theseprocesses, and usage tended to be rather ex-perimental and related to the issues of a singlebusiness, or the activities of a particular long-term oriented manager. Most companies wereoperating with a relatively weak strategic link-age. Cross-functional groups met occasionallyto discuss the likely people implications of stra-tegic intent, and these discussions tended to

concentrate on current issues. In each of thesecompanies, debates about people followed thedevelopment of strategy. In no case did hu-man resource consideration take precedenceover business strategy. At Hewlett Packard, thealignment was strongest because the “HPWay,” which informs the thinking in the orga-nization, places people as an intrinsic part ofthe values and culture of the company.

Weakly Linked: Scanning Long-Term PeopleTrends

These elements play a crucial part in prepara-tions for long-term business performance.They can provide a vehicle to scan the exter-nal environment, identify probable competi-tive pressures, legal trends, demographicchanges, or likely contractual trends. An un-derstanding of these trends can prepare thecompany for potential skill shortages and canbe helpful in planning for the impact of workor lifestyle changes. They also form the base-line for the gap analysis, which illuminates thepriorities for the long-term strategy. None ofthese companies engaged in frequent scanningof these long-term people trends, and as aconsequence, this information was not usedsystematically in the development of peoplestrategy.

Weakly Linked: Workforce Development

Although high-potential individuals are seen asa key source of longer-term leverage, this viewappears not to be held for the general workforce.For many companies, compared to the otherprocesses, the transformation of the workforcewas operating at the lowest level of strategic link-age. Analysis of the case studies suggest thatthis lack of strategic linkage results from twomajor factors: (1) profound downsizing and re-structuring, which have destroyed the old ca-reer paths and the psychological contractsassociated with them, and (2) acceleratingchanges in the technological and competencybase of the organization, which require a wholenew set of skills. Together these factors had cre-ated a real sense of instability for many employ-ees and a lack of understanding of future optionsfor employers.

The first factor, breakdown of the old ca-reer paths and the old notions of the psycho-

Here we werelooking forexamples ofprocesses thatsupported thecreation of a long-term view of thefuture of theorganization andits implicationsfor people.


logical contract, was apparent in all these com-panies. The career paths had in the past pro-vided the on-the-job experience to support(generally in a rather ad-hoc way) the longer-term development of experience and knowl-edge. As these organizations change, so thepaths become obsolete. For some companiessuch as Citibank, these new structures hadbeen in place for a sufficient length of time toallow the creation of associated career paths.The creation of task and project team basedstructures and the associated destruction offunctional, “silos” was a challenge faced byGlaxo Wellcome. The new structure requiredan emphasis on ad-hoc teams, project teams,and task forces as the predominant structuringmechanisms. This change had destroyed theold career paths and had only begun to createan awareness of what the new paths of experi-ence could be. Under these circumstances, itwas not surprising that only 18% of the totalemployees surveyed felt satisfied with theircareer management.

The move from the old paternalistic psy-chological contract to a new psychologicalcontract between employer and employee wasexemplified by BT Payphones and LloydsBank. Both are significant UK employers whountil relatively recently have operated in a pa-ternalistic, bureaucratic, and hierarchicalmanner. Historically, those joining these com-panies (generally at the beginning of their ca-reers) were assured of a job for life and arelatively clear career structure. This is nolonger the case. Since that time these com-panies have downsized and refocused theirstrategy to increase customer focus and prod-uct awareness.

The second factor, the profound changein the technological and competency base ofthe company, also serves to create uncertaintyand lack of focus. For many of these compa-nies, the processes required to predict futureskill needs were underdeveloped, and there-fore there was limited understanding of whatwork experiences are appropriate to createfuture-oriented skill sets. Although there wereexamples of career planning processes (par-ticularly in Hewlett Packard), none had de-veloped systematic portfolios of policies andcareer planning procedures which would en-sure that employees had an opportunity toparticipate in a series of work experiences that

would prepare them for future challenges.Instead, those policies and processes in placewere primarily serving the current skill andcompetency needs.

Given this lack of clarity regarding futureskill needs and the breaking of the old psy-chological contract, it was no surprise that thecareer appraisal processes that collect infor-mation about career preferences were viewedwith some skepticism. In all companies,changes in the organizational structure,delayering, and downsizing had severely re-duced employees’ opportunities to move ver-tically, yet processes to encourage or rewardhorizontal or team-based development wereunderdeveloped or lacking.

Although broad directives (e.g., to gainmulti-functional experience, to develop inter-national awareness, to gain customer experi-ence) can be seen, what was lacking at thisstage was the translation of these broad di-rectives into clear policies and processes.

Discussion

Embedding people processes and creatingstrong linkage to business strategy are of enor-mous importance to any HR practitioner. Wefound that some processes seemed more eas-ily embedded than others and that some com-panies were more skillful at embedding themthan were others. In this discussion, we ex-plore why this may be the case.

Differences Across the Processes

Perhaps the most striking feature of this re-search is the relatively stronger linkage forshort-term people processes and the weakerlinkage (with the exception of leadership de-velopment) for longer-term oriented processes.We believe that these have evolved for a num-ber of reasons, but are mainly due to the com-plexity of embedding these processes and thegeneral short-term view of the companies.

Complex Interventions: Developing humanresource strategies, reshaping the view of theorganization, and creating alignment are allprocesses that are highly complex and onwhich relatively little has been written. Forinstance, we looked for examples of processesthat supported the creation of a long-term

In all companies,changes in theorganizationalstructure,delayering, anddownsizing hadseverely reducedemployees’opportunities tomove vertically,yet processes toencourage orreward horizontalor team-baseddevelopment wereunderdeveloped orlacking.


people-oriented vision—using perhaps thescenario planning, models, or simulations de-scribed by various commentators (Gratton1994; Ulrich & Lake, 1990; Walker 1980).None of these companies regularly and sys-tematically used any of these processes, andwhere they had been used, they were experi-mental or related to specific issues or weresupported by a particular long-term orientedmanager. We believe that creating a clearerunderstanding of these longer-term HR pro-cesses is critical for practitioners.

Short-Termism: We found that generallythe support of the line manager was critical toboth the successful embedding and the qual-ity of people processes. Where managers weresupportive, they were generally appraised ontheir people-management skills and trained tosupport and deliver the process, but a strongcounter to the embedding of processes—par-ticularly the long-term processes—was the pre-vailing short-term drive. In many of thesecompanies, the key performance drivers wereto maintain and increase share price throughcost-cutting, which emphasizes short-term in-come. At Kraft Jacob Suchard for example, theperformance metrics were almost exclusivelyfocused on delivering profitability. The monthlymeasures and annual timescales increased thepressure on short-term delivery. This externalpressure has two distinct effects on managers’capacities to deliver these processes. First,managers generally understand, both formallythrough performance objectives and informallythrough the demands of their bosses, that themain priority is the “hard stuff” and the “num-bers.” Many of the comments from the “un-written rules of the game” reinforced thisperception. To advance in the company, whatmatters is delivering financial results, not in-vesting in long-term development. Second,managers have (as a result) little incentive toinvest in processes such as reshaping or trans-forming individuals that do not have a short-term payoff. Only at Hewlett Packard andCitibank did we see any systematic measure-ment of the managers’ capability and motiva-tion to develop their team. Team and collegiatefeedback were used across many groups, andwhile the other companies were piloting theseprocesses, they had not yet embedded them.We would argue that a key role of the HR

practitioner is to focus the organization on thelonger-term and to challenge the predominantshort-term thinking.

Differences Across the Companies

Clearly, there are differences in the strengthof linkage across the processes, with somegenerally more strongly linked than others. Weare considering this question in the longitudi-nal study that is taking place during 1996 and1999; however, for this article we have devel-oped a number of hypotheses about some ofthe key factors that influence theorganization’s ability to create and embedpeople processes. Before talking of the differ-ences among the companies, the most obvi-ous similarity is the significant downsizing andflattening of structures that all of the compa-nies in this sample had experienced. Whilethere are also commonalities that have had aprofound impact (particularly on the long-termdevelopment of the workforce), there are strik-ing cross-company differences in the abilityto create strong linkages. The following aresome of our current working hypotheses.

Multinational Companies: Generally, thesehad more strongly linked people processes thannationally based companies. Hewlett Packard,Citibank, Glaxo, and Kraft Jacob Suchard allhad stronger people processes than did BTPayphones, Lloyds Bank, and WH Smith. Asthese companies had moved outside the nationalboundaries, so the people processes appear tohave been more strongly embedded and linkedto the strategy and less ad-hoc and unmonitored(Adler & Ghoder, 1990).

Scale of Transformation: The strategic link-age of the processes was generally weakestwhere the company had recently experiencedmajor catastrophic transformation and change.This was perhaps most marked at BTPayphones and Lloyds Bank, where a refocustoward customer orientation had necessitateda fundamental shift in what is appraised, re-warded, and developed. In both companies,the company rhetoric was still way ahead ofthe reality, and people felt uncomfortable anddisorientated as they saw the processes aroundthem changing. Further, some of the newlyintroduced processes had created clear ex-

We would arguethat a key role ofthe HRpractitioner is tofocus theorganization onthe longer-termand to challengethe predominantshort-termthinking.


amples of procedural injustice, a topic we arefocusing on with particular interest in the lon-gitudinal study. Of course, change is part ofthe corporate agenda for Hewlett Packard andKraft Jacob Suchard, but this had been ab-sorbed in an incremental way without the “ca-tastrophe” and unfreezing experienced byother companies. This study highlights for HRpractitioners the severe weakening of HR pro-cesses associated with transformation and theneed to create a clear view of how these pro-cesses can be rebuilt around the new corpo-rate mission.

Administrative Heritage: Our final hypoth-esis concerns the administrative heritage andprocess discipline within the companies. Inthose companies where the processes hadbeen in place for many years and were rolled-out in a disciplined and often centralized man-ner, they were better embedded and supported.For example, the ten-step plan at HewlettPackard and the MAP process at Kraft JacobSuchard had both been in place for over fiveyears and were not subject to frequent changesin policy. Support and consistency were lessapparent where the processes had been re-cently introduced and where powerful regionalmanagers blocked the introduction. At WHSmith, performance management had beenrecently introduced and was not seen as partof a wider process of change. At BT Payphones,although much effort had been focused oncascading business objectives, a rapid seriesof initiatives had left employees uncertain andthe processes weakly embedded. The messagehere is clear: Faddish “flavor of the month”interventions serve simply to divert manage-ment resources. Strongly linked processes arebuilt over time in a consistent manner.

This leads us to the complex question ofwhether strongly linked people processes makefor strong corporate business performance.Rather than answering this question directly,we make two comments—one about method-ology and one about success.

First, with regard to methodology, we havefound that it is not unusual for there to be a

significant gap between rhetoric and reality.For example, in one company, the personneldirector believed that employees understoodthe basis on which they were appraised. Thereality was that 70% of those employees wesurveyed said they did not understand the ba-sis on which they were appraised. The trian-gulated, multifaceted methodology we usedallowed us to differentiate between rhetoricand reality and to comment on the reality. Webelieve that the gap we observed suggests thatthis type of triangulated, case-based compara-tive research is crucial to a real understand-ing of organizational experiences and canprovide a depth and breadth of understand-ing lacking in studies based exclusively on thecomments and conclusions of personnel di-rectors or human resource managers. It is ourview that case-based methodologies are criti-cal to moving the field forward.

Second, with regard to the nature of suc-cess, all the companies we considered were,at that time, within the top five business per-formers in their sectors. Some had morestrongly linked processes than others. For ex-ample, BT Payphones and Lloyds had recentlymoved from relatively stable environments tohighly turbulent environments. Partly as aconsequence, the people processes that hadhistorically been strongly linked to the “old”strategy were poorly linked to the “new” strat-egy. Without understanding the heritage of BTPayphones and Lloyds, and without monitor-ing these companies over time, it is impos-sible to fully understand the relationshipbetween their commercial success and theirpeople processes. A real understanding of HRpolicies and the relationship to commercialsuccess can only come through longitudinalstudies.

We have raised some questions as well asdiscovered some answers in this researchstudy. But what it has shown is that if we areever to truly understand the relationship be-tween success and people processes, then in-depth, case-based, comparative triangulated,and longitudinal studies have a crucial roleto play.

With regard tomethodology, wehave found thatit is not unusualfor there to be asignificant gapbetween rhetoricand reality.


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linking individual performance to business strategy

Education