Is “Evidence Based HR” the latest HR fad?

Lots of people criticise HR.

Actually I could just stop there, but the point of this post is that lots of people criticise HR for jumping on the latest workplace fad without any evidence that it works. “Netflix have dropped performance reviews – we should too” “Employee engagement is a big issue – we need to do something about it” Too often we adopt some new initiative more because it creates the impression that we are doing something about something, regardless of whether it will actually solve the problem.

So the increasing trend for evidence-based HR is something that generally I welcome – the concept that we should be able to prove, using properly constructed evidence, that doing A leads to B. And I particularly enjoy academic Rob Briner’s frequent challenges to the profession to consider the evidence for our various HR sacred cows.

But (and you sensed there was a but coming…) there are four reasons why I think we should be as cautious about evidence-based HR as we should be about anything else in the profession.

  1. Organisations are dynamic and different. A might lead to B (our preferred outcome) in one organisations but it might lead to C or D in others. Taking an overly academic approach would lead us to say that there’s no evidence that A works, because its results can’t be replicated outside  one organisation.
  2. There’s a danger of paralysis. “Should we drop or change our performance reviews?” “Well there’s no evidence that that would work” “Ok, better not do it then” – If someone doesn’t sometimes back a hunch, without evidence to support it, then we’ll always be stuck where we are.
  3. In the business world, we don’t always need to know the middle step of why A leads to B. It can just be enough to know that it happens. It’s a little like the fact that scientists know (from observation) that if you split a magnet in half, the two resulting magnets will have a north and south pole. They don’t know why (currently) but they know what will happen and can then plan accordingly.
  4. We might just end up with one size fits all “Best Practice” under a different name. If doing A leads to B, and we have evidence that this is the case, then if we want to achieve B then we must always do A. A may not fit with our own organisation, its culture and business context, but the evidence says this is what we should do.

The danger is that Evidence Based HR might fall victim to the very thing it seeks to challenge – becoming the latest bandwagon and seeing HR practitioners uncritically misapplying it. After all, we’ve already seen Dave Ulrich’s model feted then condemned, people with only a modicum of knowledge parading neuroscience as the future, and a nonsensical obsession with millennials, as flavours of the month in the last few years.

Nobody expects the Spanish Inquisition

Apart from working with small businesses, I’m also a CIPD Tutor with one of the UK’s leading HR training providers. Quite often when doing some of the more “theoretical” stuff, I can see learners’ eyes glaze over with a “what has this got to do with the real world and my job as an HR business partner” expression.

But the practical application of some of these theories and models is frequently key to many HR and business decisions.  For example, what we rather grandly like to call “environmental scanning” – with models such as STEEPLE, Five Forces and Blue Ocean – is essential to anticipating likely changes that may affect our organisations.

Take for instance George Osborne’s “National Living Wage”.  Judging by some of the reactions from some business organisations, this is the greatest disaster to hit business for years. Yet businesses have worked within the minimum wage rules for nearly 20 years and the “shock” of this new policy was that – for many – it was an unexpectedly large increase. But any business which had done any kind of serious forward planning would have been aware that all the parties at the last election were committed to significant increases in minimum wage levels – not necessarily for altruistic reasons but as part of the strategy to reduce the deficit. (I’m happy to say that a client I work with in a low pay sector had factored in big increases to their wage costs into their business plans as a result of doing some of this planning, so it hasn’t proved as much of an issue for them).

HR professionals continue to agonise about how they “add value” to businesses. Being aware of what’s going on in the wider world, and anticipating how this might affect the companies we work for, is one easy way in which we can demonstrate that HR is actually a vital part of modern business.

What if all Employment Law were abolished?

I’m sometimes told that business life would be much easier if “employment laws were abolished”. But would that be the case? I’ve worked in an industry in which all regulation was abolished and the consequences for business were mixed, to say the least.

In late 1986, the bus industry outside London was completely deregulated. Prior to this, buses were controlled and run by the public sector, and operated as localised monopolies. Routes, fares and all other aspects were set by local authorities or other similar regulatory bodies, the industry was heavily unionised with various national and local agreements governing terms and conditions. Unprofitable routes could be, and were, subsidised either through profitable ones or from more general taxes (usually local authority rates).

Overnight (literally) this changed.  Anyone who satisfied very minimal safety standards could set up their own company, run on routes and frequencies they decided, and set pay and conditions as they wished. With only a few exceptions, the public sector could not subsidise unprofitable routes – and where they could, this was subject to a competitive tendering process.

So what happened? There were short-term and long term effects.  In the first couple of years, the existing large public sector owned companies stopped unprofitable routes and made many staff redundant. They sought ways of reducing wages and becoming more competitive – and in consequence suffered a good deal of industrial relations problems. At the same time, there was a glut of new entrants to the market – usually offering wages significantly below the existing rates – and a resulting increase in competition especially on profitable routes (something which became known as “bus wars”).

In the longer term however the situation changed and the market nationally became dominated by 4-5 big players who grew in the main by buying out competitors.  Very small companies, who could survive by being specialists, also thrived but usually on the fringes of the market.

What does this mean in the wider employment context? Well, it shows that in the absence of legislation economic factors would take an even greater role than they do now.

In a market like public transport, where there are low barriers to entry, and a plentiful source of labour, wages will fall. The market will, in this case, set a new “minimum wage” which will vary across industries and sectors.

Interestingly though, again based on the bus experience, existing employees are less likely to be affected – even though their employment rights have been abolished. Employers in the majority of cases will want to avoid the disruption to their existing workforce, especially if they are suddenly being faced by new competitors. Unless it makes them completely unviable financially, they are likely to want to retain staff to fight off competition, and facing internal “battles” over terms and conditions won’t do this. Most of the ex-public sector bus companies eventually concluded deals which retained existing staff conditions and only provided worse terms for new entrants.

Employers wouldn’t have it all their own way though – one of the other characteristics of the bus wars period was a high turnover of staff among the new entrant companies. Drivers had no loyalty to their employer and would often leave for a new employer for a small increase (say 50p an hour) in wages. In fact one of the ways the bigger companies reasserted their dominance was to pay at a rate that was higher than competitors (though lower than pre-deregulation levels).

Of course, not every industry is like the bus industry, where it is easy to recruit and train new employees. Where it is more difficult to recruit or more expensive to train people, the economic balance of power will shift. If I’m a whizz at coding or programming and sought after by several hi-tech companies, then I may well be able to name my price (this already happens in sport, most particularly football, where star players can and do receive extremely high salaries).  The economic power moves towards the employee.

And with the end of employment law, enforcing things like notice periods or restrictive clauses will become impossible for employers. An employee can, and will walk off the job, if they are unhappy with the way you manage them – and while in a recession you may be able to find an easy replacement it may be more difficult when times are good.

Moreover, for more mobile employees, leaving to work in other countries that offer better job security or protection may become an attractive option – potentially weakening the UK overall. (Indeed, a general reduction in wages as a consequence of the abolition of employment legislation would have a very negative effect on the UK economy as spending power would decrease)

Employees who are economically weak may also try to strengthen their bargaining power by forming unions. It’s worth remembering that unions originally came into existence at a time where there was virtually no employment law, in the early/mid 19th century, and there’s no reason to suppose this wouldn’t happen again.

The impact of social or cultural “norms” shouldn’t be underestimated. The fact that an employer could now sack a pregnant woman or refuse to employ anyone black doesn’t mean that this sort of behaviour would be considered acceptable by customers, suppliers or other stakeholders. It’s very easy to damage the reputation of a company, sometimes fatally, in these days of social media.

So, in the end, it all comes down to economic power. Employment legislation will be replaced by the rules of the market – which will vary from industry to industry and region to region. Existing workers may not see many immediate changes but the world would change – but not always to employers’ benefit.

Can’t Buy Me Love

While catching up on blogs post-holiday, I came across this piece by Neil Morrison. Neil is a well-respected HR Director with a household name company and member of the CIPD council, so when I read it I could only guess that his post was written to be intentionally provocative.

His argument, in a nutshell, is that when we in HR talk about “discretionary effort” from employees, we are in effect expecting them to do more than we are paying them for. If individuals just do the bare minimum, we don’t consider that satisfactory. In effect we want something for nothing – if we want more we should pay more.

At a very superficial level, that seems an attractive argument (and indeed a Marxist would argue that the essence of capitalism is that workers are not paid the full value of their work – as I pointed out in this post about Wayne Rooney)

But there are two strong points against this. The first is that many employers also offer “discretionary” things to their employees. If your workplace has a canteen or buffet bar; if you get paid your normal salary during sickness or any part of your maternity leave; in fact, even if a family member dies and you are given compassionate leave; then you are receiving something your employer does not have to offer. It doesn’t matter why the employer is doing this, they are giving you something more than you are legally entitled to. So to expect in return that you as an employee might give a little extra back is not, in my view, unreasonable. In fact, if we want to view work as a purely economic transaction, then I’m damned if I’m going to say “thank you” for a piece of work – after all it’s what you’re paid to do. And to take Neil’s analogy, if you ask for two scoops of ice-cream and it’s poor quality mass produced tasteless stuff, you’ve no grounds to complain – it’s what you asked for. I don’t have to give you hand-made full cream Italian gelato.

And secondly, while paying a decent level of pay is important, it’s been well recognised for decades that individuals value things like recognition, career development and personal satisfaction from work. Even if you consider someone like Dan Pink, with his suggestion that what people want is autonomy, mastery and purpose from work, is a bit too much of a modern fad (despite his very well researched books) then I’d direct you to that old HR staple, Herzberg, who 50 years ago suggested that pay was not enough on its own to provide satisfaction at work.

To put it simply, as a well-known band once said “I don’t care too much for money, money can’t buy me love”

The Emperor’s New Clothes?

Last week I needed a taxi to Lime Street station in Liverpool at 530am, so I tapped an app on my tablet and within 5 minutes a car was outside my front door. Chatting to the driver he told me that he chose the hours he worked and he tended to work 5 in the morning till around 230pm as it allowed him to pick up his children from school. As we pulled up at the station he pressed a smartphone screen on the dashboard to accept his next job from the taxi firm.

Was I using Uber, the “disruptive” firm that is now apparently the world’s largest taxi company? No, simply the same local firm I’ve used for the last 20 years. Their drivers are all self-employed, use their own cars and pay a weekly “settle” to the firm for the work that is pushed their way. Probably the only difference is that the company still operates a small office so that if you are not smartphone savvy you can ring for a taxi.

Which is why when I saw this graphic being tweeted it brought a wry smile to my face.

Graphic

I think we’re meant to think “wow, aren’t these companies radical and different?” But in truth, they aren’t. What they have done is to use technology successfully to minimise costs and to trade more easily across international boundaries, but otherwise they are little different to traditional models.

Let’s look at some of the others. Facebook – “creates no content”. Neither do most cable/satellite TV channels – they are simply media platforms which generate income by selling advertising. Where does Facebook get most of its income? Advertising.

Alibaba – well here’s how it works: you pay them a fee to have a presence on their site and then sell your goods. Sound like a giant fleamarket or car-boot sale? That’s because that’s what it is. Markets don’t hold inventory either.

Airbnb – back in the 90s I used to get a brochure for “Rural Holiday Cottages”. Some were people’s homes they’d let out for a couple of weeks, some were renovated farm buildings, but they were all available to rent for a week or fortnight. Rural Holiday Cottages charged a fee to advertise them but didn’t own a single one. Again, the Airbnb model – they just operate on a global scale

And what’s this to do with HR? Well, if business isn’t really changing – merely incorporating new technology – then the skills, knowledge and practices that HR people should use probably haven’t really changed either. We may need to react faster and jettison some cumbersome procedures (and perhaps even use new technology) but the fundamentals of good people management remain the same.

Roll Over Beethoven

Government Minister Lord Freud got himself in hot water last week when a recording of a Conference Fringe meeting was revealed where he stated that some disabled people were not worth the minimum wage, and suggested that employers could pay them £2 per hour with a state benefit being used to top this up. While most criticised him, there were some who sought to defend his comments, with this Daily Mail article being a particular example. In summary, it makes two points; firstly that the author’s father, who was blind, accepted he should be paid less because he required support to carry out his work – despite the fact that he was a highly rated newspaper columnist; and secondly that “the market” would inevitably value some jobs (by implication those done by people with disabilities) below the current level of the minimum wage.

Taking the second point first, it is quite possible that, if we simply allowed the market to determine wages, some jobs might be paid less than the current minimum wage rate of £6.50 per hour. If Lord Freud and his supporters want to make the case for abolishing the minimum wage, then that’s a perfectly acceptable position to argue (though none of the mainstream political parties seem to support it) – but it does seem to me that dressing up this argument as some form of altruistic help for the disabled is at best disingenous.

What worries me though about the first point though is that it demonstrates how out of touch politicians and media “commentators” are with the modern world of work. Firstly they seem completely unaware of the Access to Work Scheme, which provides  support for those with disabilities in work. To take the example of the blind Mr Utley, these days he wouldn’t require his employers to provide him with a paid secretary to read the newspapers to him, since a) most modern software includes a “read aloud” feature (as well as other accessibility options) b) if he did need special equipment it would be paid for and c) even if he did require a full time support worker his employer would get assistance with the costs. Without making a political point, it seems as a taxpayer that the government spending £500-£1000 providing an employer with special equipment to support an employee with a disability to work  is a more cost-effective solution than subsidising the disabled employee through the benefits system. Even in the case of  severe disability, where the individual requires a full time support worker, the current system (though not perfect) seems a better option.

Secondly,  they assume that a disability means an inability to do anything. No-one (even his political opponents) seriously suggests that David Blunkett was less effective than any other Home Secretary because he was blind. Indeed, rather than paying him less, if Mr Utley Snr really was the “leading Tory thinker of his generation” you’d expect the Telegraph to be paying him top dollar (it’s that thing called the market again) rather than ripping him off. Just imagine how Beethoven would have managed under Lord Freud and his supporters. “I’m sorry Ludwig, I know this symphony is genius but as you’re deaf, we’re only going to give you a third of what we paid Schubert for his inferior composition”.

Are our workplaces designed to fail?

I’m a big fan of economist Tim Harford, and recently read his book “The Logic of Life”.  In one chapter he deals with an economic idea which offers an explanation of the reasons both for high executive pay and office politics – Tournament Theory.

The argument – supported by some statistical evidence – runs like this. Modern workplaces reward relative performance, not absolute performance. Good performers are defined, not by specific targets, but by being better than other performers. So work becomes a series of endless tournaments between ostensible colleagues – if one wins, another loses. And with victory comes reward.

Now just like in the current World Cup, victory can be obtained in various ways.  You can go all out to achieve success, putting in lots of discretionary effort – the equivalent of playing free-flowing, attacking football. But there are equally successful strategies that will win you the match without necessarily benefiting your employer. You can be risk averse, blocking anything new and sticking to the tried and trusted, stifling your more innovative opponent – the work equivalent of “parking the bus“. Or you can go out of your way to discredit, disrupt and stab your colleague in the back – the equivalent of trying to kick your opponent off the park. Your tactics are determined by doing not what is best for the organisation but what will work for you –  and just like the group stages of the World Cup will be decided not just by who your current opponent is but also what your other  colleagues are up to.

In this model, the prize for getting to the next level  has to be sufficient to make it worth competing at all. So if you earn £20000 pa, the prospect of a promotion to a salary of £25000 is a big jump. At £70000, an increase to £75000 will have far less effect but an increase to £90000 may well incentivise you. Chief Exec salaries of say £500000 aren’t designed to reward the individual in the role, but to act as an incentive to Directors below them who may be earning a “mere” £300000.

Of course, it’s easy to spot problems with this theory from an HR perspective. For example, it makes no allowance for intrinsic motivation, despite increasing scientific support for this playing a major part in the way individuals behave in the workplace.

But what the theory does do is to explain why many of our HR initiatives fail. If our organisation structure and pay and benefits system is set up to reward relative performance, it will inevitably encourage people to behave in the way that tournament theory predicts. No amount of family friendly policies, team building exercises, empowerment or innovative recruitment strategies will change this if we have designed systems that work against what we are trying to achieve. So while OD and “compensation & benefits” are seen as the less ‘sexy’ end of HR, maybe they are the ones we should be paying more attention to if we really want to change the world of work.

 

Dads Army & Crisis Management

Originally published February 2011, at a time when everyone was seizing on the latest economic statistics as evidence that we were all “doomed”

It’s often helpful, in a difficult situation, to see how people have handled such crises before.  For example, the different ways in which the members of the Walmington on Sea Home Guard reacted to the constant threat of invasion in WW2 is strikingly similar to how many are behaving in the economic climate today.  See if you can identify yourself or colleagues in the list below:

Capt Mainwaring – in charge because of his status rather than his competence, he uses bluster and nice sounding phrases to disguise that he has no idea how to deal with the situation.
Sgt Wilson – the calm voice of experience, refuses to get flustered as he knows that things have been this bad before and will resolve themselves again.  He always takes the considered view, which often pulls Mainwaring out of trouble.
Cpl Jones – panics at the slightest thing and over-reacts to the mildest bit of bad news. Unless controlled, his attitude infects the rest, creating mayhem and negativity.
Pte Fraser – the voice of despair, who enjoys seeing how bad things can get and is secretly hoping they will get worse.
Pte Walker – spots the opportunity to make money in everything. Sometimes his scams backfire but often they come to the aid of the platoon as well as his own pocket.
Pte Pike – never experienced anything like this before, really not sure how to deal with it except that it all looks very bad indeed and his Mum wouldn’t like it.

Looking around, it seems to me that at the moment we have a lot of Frasers (especially in the media) and Joneses, and perhaps not enough Wilsons and Walkers.  While many under 35s, who have never experienced any kind of negative economic conditions before, are cast in the role of Pikes, slightly bewildered and looking for reassurance.  As for Mainwarings – are there any you could suggest?

Wayne Rooney and Marxism

This post was originally published in October 2010, and was a tongue in cheek response to footballer Wayne Rooney’s attempts to negotiate a new contract with Manchester United.

News of Wayne Rooney’s new deal with Manchester United – a reported £160-200000 per week – caused a mixture of amusement at the very public negotiations, followed by tabloid anger that someone should be earning so much at a time of great economic uncertainty.
While I doubt Wayne has read much Karl Marx, it struck me that he is behaving exactly as Marx suggested a member of the “proletariat” would do:
•    He is attempting to sell his labour for the highest price possible, knowing that whatever he gets for it his employer will still get more (if he scores the winning goal in the Champions League, will all the profit Man Utd make go back to him?) – the concept of “surplus value”
•    He is “alienated” from his team mates (not just because he criticised them!) as his football skills have just been reduced to a commodity to be traded on the market. His apparent gain will be at the expense of other players who cannot sell their skill at such a high value.
•    He recognises that no-one is interested in him as a person, but for his ability to do a job to a particularly high standard and for his subsequent value as an image – what Marx termed “commodity fetishism”.
So there you have it – Wayne is an exploited, alienated member of the proletariat, just like the rest of us (and Karl Marx is quite a useful left-winger by all accounts).