HUMAN RESOURCE MANAGEMENT PRACTICES

Winston Churchill once observed: “the further that we look back the more we can see ahead

”. He was implying that events and information are best understood in the context of the past.

Patterns and trends in data give meaning to our current circumstances.

Over the past fifteen years CCH and AGSM have been gathering and analysing data about

strategic level human resource activities. Our purpose has been three fold. First, to understand how

managers integrate their people management practices with their strategic plans and processes.

Second, to identify which practices and processes are linked to organisational performance. Third,

to present the findings in a way that encourage the reader of this report to critically review practices

and thinking in their own organisation and to take initiatives that enhance both the performance of

their organisation and the engagement and well being of their people.

In this report, which is based on survey replies from 669 respondents, we will first consider

the level of strategic activity in Australia organisations. We will then turn our attention to the

extent that managers formalise their strategic processes, the degree of alignment between how

people are managed and the organisation’s strategic fundamentals, the dissemination of information

about strategic issues, innovation in people management practices, and finally, links between these

practices and organisational performance.

Indicators of strategic activity

Strategic management activity is often indicated to both employees and other stakeholders

by activities such as the formulation, propagation, implementation and review of key statements.

Organisational mission and vision, corporate and business level objectives and plans and business

models all articulate the essence of an organisation’s identity, purpose and aspirations.

Changes in these parameters reflect responses to developments in the environment and to

organisational performance and aspiration. Our most general observation is that the march of

change continues at a relentless pace. Specifically 61% of respondents have made significant

changes to their organisational mission over the past five years; 21% made these changes over the

past 12 months (cf 25% in 1998, 34% in 1993 and 36%in 1989). Over the past five years 70% of
respondents modified their statement of aspirations or vision of which 27% made these changes in

the past year.

Similarly 78% of respondents made significant changes to their organisation’s goals and

objectives (cf 74% in 1998, 76% in 1993 and 73% in 1989). Eighty two percent of the sample

made changes to their strategy over the past five years, 41% of the sample within the past year (cf

49% in 1998, 46% in 1993 and 42% in 1989). Changes were also reported in respondent

organisation’s corporate philosophy or values: 24% reported making these changes within the past

year; 61% in total over the past five years.

Given the nature and magnitude of these developments it was no surprise to observe that

commensurate changes were made to the structure of these organisations. Eighty two percent of

respondents (cf 84% in 1998) indicated that major changes had been introduced over the past five

years; 44% reported that such changes had been introduced within the past year. As a result of or

driving these developments, CEO turnover continues at a relatively high level. Table 1 reports the

trends.

Table 1
Length of Tenure of CEO
Expressed as percentages

Length of Tenure 2003 1998 1993 1989

N=669 N=386 N=702 N=427

Less than 12 months 15 24 19 17

1-2 years 23 21 22 25

3-5 years 30 30 31 32

6 years or more 32 25 28 26

CEO tenure was found to be related to organisational performance. In organisations that

reported significantly better performance over the past three years. CEO turnover was 34% during

this period. In organisations with reduced performance CEO turnover was reported as 52%. Where

performance was stable turnover was 37%.

 We also considered relationship between an organisation’s performance over the past three

years (significantly improved, stable, significantly lower) and the likelihood of the introduction of

change. Lower performing organisations reported greater changes to their mission (50% cf 42%),

vision (63% cf 50%), corporate goals and objectives (72% cf 62%), strategy (75% cf 66%) but not

values (in lower and higher performing organisation 50% reported changes over the past three

years).

Given these trends it would be unfair to take Australian managers as either unresponsive or

static in their approach to their environment. Changes in the strategic fundamentals of respondent

organisations are pervasive and ongoing. Later in this report we will turn our attention to the

crucial issues as to whether these changes are guided by a coherent logic and whether they are

associated with improvements in organisational performance.

Formalisation of strategic fundamentals

The documentation of an organisation’s strategic fundamentals, mission vision goals

strategy and values, usually represents the output of processes which develop and refine these

important management agendas. Furthermore, such documentation can form the basis for planning,

communication and review. For these reasons documentation has been linked to organisational

performance (Pearce and David, 1987).

Eighty eight percent of respondents reported that they had a formal (written) mission

statement, (75% formalised their vision, 82% their corporate objectives and goals, 85% their

corporate and business plans and 79% their corporate philosophy or values.

This year we explored the documentation of strategy in more detail drawing on key

dimensions developed by Hambrick and Fredrickson( 2002). Eighty percent formalised their

strategic focus (eg geographic areas, market segments, product or service categories); 65%

documented their specific plans to achieve growth (eg organic growth, acquisitions, joint ventures,

franchising/licensing etc); 46% had specific plans that covered their speed of expansion or sequence

of strategic initiatives; 60% specified how they sought to differentiate themselves from their

competitors; and 53% had articulated the financial/economic logic of their business model.
 Similarly we used Miles and Snows’ (1984) strategic orientation typology to explore

differences in respondent organisations. Prospectors are organisation that made relatively frequent

changes, especially additions to their sets of products and services. They consistently seek to

pioneer by being first in new areas of market opportunity; they respond rapidly to signals of market

need or opportunity. Twenty four percent of respondents described themselves as Prospectors. In

contrast, Defenders maintain a position in their industry by offering a relatively stable set of

products and/or services and are rarely at the forefront of new developments. They tend to

concentrate on doing the best job possible in their existing area. Thirteen percent of respondents

self selected as Defenders. Analysers combine the attributes of Defenders and Prospectors. They

maintain a relatively stable base of services and/or products at the same time as selectively moving

to meet new opportunities and developments. They are seldom first in but carefully monitor to

actions of Prospectors and follow with more cost-efficient or well-conceived initiatives. Analysers

made up fifty percent of the sample. Finally, Miles and Snow describe Reactors as lacking a

consistent approach. Sometimes they lead; at other times they change only when external events

force their hand. Reactors comprised 13% of respondents. This distribution has been relatively

stable over the past 15 years.

We also canvassed the extent to which respondents utilised their strategic documentation

and found this to be beneficial and productive. Nineteen percent of the sample made very little use

of their strategic documentation; 49% made extensive use. Forty percent of the sample considered

the documentation to be highly beneficial while 23% found it to be not at all productive or

beneficial.

Organisations that reported significantly highly performance over the past three years not

only made more use of their strategic documentation but also found it more productive than

organisations that reported a significant lowering of their performance over the same period.

We also explored the links between reported performance over the past three years and the

formalisation of the organisations strategic fundamentals. Performance was found to be unrelated

to the documentation of an organisation’s mission, vision or corporate goals. We did find a strong
positive relationship between the formulations of yearly corporate and/or business plans, longer

planning horizons and corporate values and higher organisational performance.

Dissemination of strategic information

One of the beneficial HR practices identified by Jeffrey Pfeffer is the sharing of corporate

information. Such dissemination contributes in at least two ways. First, it is a signal that people are

trusted with high-level information about strategy and performance. Second, with such information

people are better informed to enable them to make better decisions.

Over the past five years we have noted an increase in the extent to which information is

shared with all employees. Fifty six percent of current respondents (cf 46% in 1998) placed high

emphasis on this activity. In contrast 19% still indicated that this aspect of their HR was given low

priority (cf 26% in 1998).

Exploration of the data indicated that CEOs and senior managers were becoming more

active in this communication process. Presentations by CEO’s were given heavy emphasis in 55%

in respondent organisations (cf 49% in 1998) and by senior managers (52% in 2003 cf 48% in

1998). It is noteworthy that reliance on each manager to brief her/his staff is still relatively low and

in decline (reducing from 70% in 1998 to 64% this year). There has been a similar drop in the

emphasis placed on informal communication channels, for example, management walkarounds.

On a more positive note CEO communication was clearly highest in organisations in which

mission version strategy values and structure had changed. An associated finding was that the

shorter the CEO tenure, the more emphasis the CEO placed on communicating their organisation’s

strategic fundamentals. CEOs who were reported as being more heavily involved in people

management issues generally were also found to be more active communicators of their

organisation’s performance, future aspirations and plans.

We then received the links between these communication patterns and prioritise and

organisational performance. In the better performing organisations CEOs, senior and direct

managers were significantly more active in communication. This finding is consistent with the

Hewitt Associates Best Employers study. This research indicates that leaders in Best Employer
organisations take more time to communicate their goals and strategy, current performance and

progress to plan. They also found that such leaders created more opportunities to talk informally

with their people and to be personally accessible.

HR practices and organisational performance

Over the past decade researchers have produced compelling evidence for the causal link

between how people are managed and led, and organisational performance. The current cross-

sectional research methodology does not lend itself to robust causal analysis. However, our

findings in this survey are remarkably consistent with the longitudinal findings and our own CCH-

AGSM findings over the past eight years.

Organisations in the current survey that reported their performance was significantly better

than it was three years ago (54% of the sample of 669 organisations):

• Were expanding both their business activities and workforces;

• Were more likely to have retained the same strategy and structure over the past two years;

• Were more likely to have undertaken annual corporate and business planning with longer

time horizons and translated these plans into formal strategic documentation;

• Were more likely to undertake formal and informal workforce planning and to cross

reference this planning with their organisation’s corporate and business plans;

• Were more likely to offer induction training to recruits and to give this process higher

priority;

• Engaged in more management training and development and held their managers to account

for the training and development of their own people;

• Placed greater emphasis on performance management and required their managers to work

with their people to both produce and review action plans derived from the performance

review;

• Relied more heavily on the conduct of employee surveys and held their managers to account

for both the provision of feedback and the survey results themselves;
 • Were more likely to monitor and seek to implement “best HR practices” as identified in

applied research such as the Hewitt Best Employers’ Study or the Watson Wyatt Human

Capital Index.

• Placed greater emphasis than organisations whose performance was stable or declining on

all seven high performance work practices that Jeffrey Pfeffer ( 1998) identified as drivers

of organisational performance . These practices were

1. emphasis on employment security in both good and difficult times (providing people

make effective contributions).

2. emphasis on robust selection practices (eg attracting a large applicant pool, selection

on attributes that are difficult to influence by training etc).

3. emphasis on the devolution of decision making (eg through self managed teams or

high delegations to key individuals).

4. offering remuneration/rewards that are both comparatively high and contingent on

organisational performance.

5. heavy investment in training of their people relative to their industry or competitors.

6. the removal of status differences that separate individuals and/or groups in their

organisation.

7. the active propagation of information among all staff about the organisation’s goals,

strategies, plans and performance.

• In higher performing organisations the CEO was more directly involved in HR activities (eg

induction and management training, succession planning).

We also explored specific aspects of the strategy of respondent organisations. Our findings

indicate that the high performing organisations were more likely to

• Specify how they plan to grow and achieve their objectives (eg organic growth, acquisitions,

joint ventures);

• Specify the speed of their expansion and/or the sequence of their growth initiatives;
 • Specify how they will differentiate themselves from their competitors (eg image, price,

product quality, styling, product innovation);

• Articulate the economic/financial logic of their business model; and

• Be prospecting for new opportunities, markets, products or services.

We found no significant differences between organisations with higher, stable or lower

performance in terms of their emphasis on strategic focus (eg geographic markets, market segments,

or product/service categories).

In summary, it was possible to identify clearly the features that distinguished high performing

organisations from those whose performance was stable or in decline. The list of features contains

no surprises; the features have been identified by earlier research. The real surprise is: if these high

performance drivers have been recognised for so long, why do so many managers continue to

ignore them at such peril?

Dissemination of strategic information

Our own findings over the past ten years and the findings of other studies, for example

Pfeffer and Hewitt Associates, indicate clearly that workforces that are better informed with

strategic information are more likely to be engaged, and in turn more likely to deliver superior

performance.

In our survey we explored the emphasis that organisations placed on communicating

information to their people and the channels that they relied on to get this information through.

Table 2 presents our findings of the relative importance placed on various communication channels.
 TABLE 2

RELATIVE EMPHASIS PLACED ON CHANNELS

TO COMMUNICATE STRATEGIC INFORMATION
(Relatively within channels expressed as percentages
N=669)

VERY MODERATE HEAVY

CHANNEL LITTLE EMPHASIS EMPHASIS
EMPHASIS

Presentations by the CEO to employee forums, and conferences 11 63 26

Presentations by senior management to forums and conferences 9 72 19

Each manager to brief her/his staff 6 63 31

Printed statements displayed on notice boards and/or in work areas 19 65 16

Written documentations (manuals, booklets) 8 68 24

Employee newsletters, magazines 17 66 17

HR Intranets 23 56 21

Videos screened to employees 62 34 4

Induction programs 6 62 32

Training programs 12 69 19

Special employee communication workshops 33 61 6

Informal processes (eg management workarounds) 22 70 8

Our employee performance management system (eg accountability 9 68 23

statements, annual performance interviews)

As noted elsewhere in this report we found a strong link between organisational performance

over the past three years and the emphasis placed on communicating information to all members

about the organisation’s purpose, aspirations, strategy and performance. A finding of interest was

that CEO’s who were more directly involved in their organisation’s HR activities was not only

more likely to be personally involved in communicating information about their strategic

fundamentals, but also their organisation placed greater emphasis on using multiple channels for

such communication.

The CEO’s level of personal involvement was also found to be related to changes in the

preceding two years in their organisation’s mission/purpose, aspiration, strategy, core values and

structure: the greater the change the greater the involvement, particularly for those organisations

that reported higher performance over the past three years. The length of the CEO’s tenure did not

influence the level of emphasis on personal communication; more recently appointed CEOs were no

more personally involved than their longer tenured counterparts.

Innovation in HR practices

We again surveyed the approaches used by respondents to innovation in their people

management practices, in part because we have established in earlier surveys that such innovation

in linked to higher organisational performance, and also because it is through processes of

innovation that organisations can evolve their current practices.

Those organisations that developed qualitatively new practices were described as leaders.

Early adopters usually incorporated new practices to stay ahead of other organisations. Followers

adopted new HR practices when a consensus in their industry supported these practices. Late

adopters incorporated new practices only after they were proven effective in other organisations.

Table 3 presents the distribution of approaches to innovation for our 1998 and 2003 surveys.

Table 3 Approaches to adopting new HR practices

(expressed as percentages)

2003 1998
N=669 N=395

HR leaders 14 14

HR early adopters 32 36

HR followers 33 31

HR late adopters 21 19
Does innovation pay dividends?

We can answer this with a qualified but confident “yes”. Early adopters reported the highest

percentage of stronger performance over the past three years: 64% of early adopters were in the

better performance category, 6% were in the lower performance group. The HR leaders were next:

54% of HR leaders reported better performance over the past three years, 15% reported lower

performance. The sequence then moves to HR followers and late adopters. These findings are in

line with more general findings about the performance of “first movers”; they often deliver high

performance but there are advantages to fast followers (early adopters) who monitor and quickly

learn lessons from the initiatives and mistakes of prime movers.

What insights do the survey findings provide into the dynamics of innovation in HR

practices? Organisations that reported higher levels of innovation (HR leaders and early adopters)

were driven by different agendas: their innovation was activated by demands from customers or the

market place, by changes in workforce characteristics and by managers and/or members who

wanted to develop better ways of managing people. In contrast, the slower innovators were more

reactive reporting that their innovation was more likely to be driven by the need to reduce costs or

by new legislation or changes in government policy.

Similarly the more innovative organisations perceived different barriers to progress in

innovation. The slower innovators identified difficulties in gaining the attention of top

management, the costs of making changes, and a culture which doesn’t emphasis the importance of

people for success as barriers to innovation. In contrast the more innovative organisations indicated

that the barriers that they experienced were difficulties in identifying what would be effective HR

practices and workforce resistance to change.

Across industry sectors there was evidence that indicated that the public sector and not for

profits were less innovative than either the private sector or statutory authorities. Within industries,

financial services reported the highest levels of innovation.

In contrast to earlier surveys our current findings indicated that subsidiaries of overseas

companies reported significantly higher levels of innovation than their locally owned counterparts.
One possible explanation for these findings is that innovation is passed down from overseas

advances to be implemented locally. This is the first time over the past eight years that we have

detected this trend.

Not surprisingly we found that organisations that were growing either or both their activities

and their workforces reported higher levels of HR innovation. Growing businesses are associated

with experimentation with new processes and/or resources allocated to developmental activities. In

contrast, poor performing organisations have less slack resources for experimentation and the

reduction of workforce numbers is often associated with conservative employee behaviour: “don’t

make mistakes, don’t take risks!” Thus high performance and growth can establish a virtuous circle

of innovation and development, which in turn fuels further enhancement of both performance and

growth.

Finally, it is noteworthy that HR innovation was reported to be higher in organisations in

which the CEO was more directly involved in HR activities and the communication of strategically

important information to all members.

Organisational alignment and realignment

Australian organisations are experiencing and creating unabated change. Over the past

twelve months 21% of our respondents made significant changes to their mission, 27% modified

their aspirations, 36% made significant changes to their corporate goals/objectives, 24% modified

their corporate values, 41% made changes to their strategy, 44% reported major changes in their

structure, and 15% appointed a new CEO over the past year. Some of these changes have been

made in response to unsatisfactory performance. Other changes have been made in preparation for

the future and in order to sustain and enhance success.

One critical feature of all these changes is their connectedness: are changes in structure for

example a direct response to changes in objectives and/or strategy? The idea of “fit” or “alignment”

is an important one because such alignment is a powerful explanatory factor in organisational

performance. High performance is related to known configurations in strategy, technology,

structure, culture, systems, processes, and workforce characteristics. For these reasons we would
expect that changes to goals and strategy would be followed by related modifications to the

organisation’s structure, culture and HR practices and processes. In this section we will explore the

evidence for such changes.

Table 4 presents the linkages between changes in respondent organisation’s purpose/mission and

strategy.

Table 4
Relationships between significant changes in mission
and strategy in Australian organisations
N=669
(expressed as percentages)

Significant Significant changes in strategy

change in
Mission/Purpose Over past 12 1-2 years 3-5 years Our strategy has
months remained stable

Over past 12 38 17 7 6
months

1-2 years 21 36 5 10

3-5 years 11 12 54 12

Our 30 35 34 72
mission/purpose
has remained
stable
Table 5 reports the relationships that we found between changes to corporate mission and

aspirations.

Table 5
Relationships between significant changes in mission/purpose
and aspiration/vision
N=669
(expressed as percentages)

Significant Significant changes in aspiration/vision

change to
mission/purpose Over past 12 1-2 years 3-5 years Our aspirations
months have remained
stable

Over past 12 76 13 1 3
months

1-2 years 14 60 1 0

3-5 years 3 10 86 2

Our 7 17 12 95
mission/purpose
has remained
stable
Table 6 reports the relationships between changes to mission and corporate objectives/goals

Table 6
Relationships between significant changes in mission
and corporate objectives/goals
N=669
(expressed as percentages)

Changes in Changes in corporate objectives/goal

mission/purpose
Over past 12 1-2 years 3-5 years Our
months objectives/goals
have remained
stable

Over past 12 57 11 6 3
months

1-2 years 18 49 0 5

3-5 years 8 13 68 6

Our 17 27 26 86
mission/purpose
has remained
stable
Table 7 reports the relationships between changes to organisational strategy and structure over the

past five years.

Table 7
Relationships between significant changes to strategy
and structure over the past five years
N=669
(expressed as percentages)

Changes to Changes to structure

strategy
Over past 12 1-2 years 3-5 years Our
months organisation’s
structure has
remained stable

Over past 12 63 24 25 23
months

1-2 years 20 45 20 23

3-5 years 7 20 44 10

Our strategy has 10 11 11 44

remained stable
Table 8 reports our findings on the relationships between changes to mission/purpose and corporate

values.

Table 8
Relationships between significant changes to mission/purpose
and corporate values
N=669
(expressed as percentages)

Significant Significant changes to corporate values

changes to
mission/purpose Over past 12 1-2 years 3-5 years Our corporate
months values have
remained stable

Over past 12 59 18 4 10
months

1-2 years 20 54 0 6

3-5 years 7 13 77 14

Our mission has 14 15 19 70

remained stable

A review of Tables 4 to 8 reveals that managers have generally made changes in their

organisational configurations that reflect the sequence: changes in structure and core values follow

significant changes in mission, aspirations, objectives and strategy. The most interesting finding

(from what may appear to readers as a mass of data!) is that response times in strategic change are

shortening. Ten years ago there were significant lags in response to changes in mission aspiration

goals and strategy; we are now witnessing evidence of greater attention to rapid structural and

cultural change that can re-establish organisational alignment.

A second dimension of organisational alignment is the extent to which HR practices and

systems are integrated with strategic planning and systems. Our findings indicate that progress has

come to a halt in this area. Seventy four percent of respondents who undertook formal corporate

and/or business planning indicated that their corporate and/or business plan specifically covered HR

issues (eg outsourcing, significantly downsizing, illume change interpose agreements, succession
planning); this compares with 73% five years ago. When asked if they used their corporate and/or

business plans to formulate or review their workforce plans, 73 % indicated that they did undertake

such an integration (down from 79% in 1998).

Our findings did indicate that CEO involvement in the HR function explained most of the

variance in our findings: CEO’s who were more directly involved in HR issues and activities were

more likely to lead organisations in which HR was more closely integrated with corporate and

business strategy and planning. These findings and those reported earlier in this document indicate

convincingly the high impact role that a CEO plays in the dynamics and performance of HR

processes and systems in their organisation.

Discussion and conclusions

Several decades ago we “discovered” the phenomena of organisational change.

Concurrently we witnessed the rise of strategic management. These two features of organisational

life are now firmly embedded as distinctive and central challenges for Australian managers and

corporate leaders. They also represent key agendas for those who seek to develop higher employee

engagement and performance.

Managerial responses have been comprehensive and systemic. Over the past five years

more than two thirds of the 669 organisations surveyed had made significant changes to their

organisation’s purpose, identity and aspirations. Furthermore, most organisational made

configurational adjustments that realigned their purpose, strategy, structure and core values in their

attempt to improve their performance. Fifty four percent of the sample reported that they lifted

their performance significantly over the past three years.

We identified a range of initiatives that were associated with improved organisational

performance. For some it was the appointment of a new CEO and subsequent changes in their

business model, in organisational design and functioning, and greater attention to their strategic

fundamentals. Other improvements could be attributed to changes in people management practices.

In organisations which improved their performance CEO’s, senior and direct managers

played a more active part in communicating their organisation’s purpose, aspirations and
performance against goals. In these organisations HR was more closely integrated with corporate

and business planning. The CEO was more highly engaged in HR related activities. And the

organisations placed greater emphasis on well identified HR processes: employee induction,

management training and development, workforce planning that is integrated with business

planning, performance management that requires greater managerial involvement and

accountability, the effective use of employee surveys and scanning for better HR practices. As with

our earlier surveys we found support for the impact of the seven high performance work practices

identified by Jeffrey Pfeffer. We also identified links between improved organisational

performance and the development of specific components of business level strategy. Finally, we

found clear evidence that managers are re-aligning their organisations more quickly than they were

five years ago. These are not break through findings. They confirm what others and we have

identified over the past decade as distinctive drivers of organisational performance. The obvious

question to which we as yet have no comprehensive answer is: if we know the initiatives that will

enhance performance, why don’t more managers undertake these initiatives?

Our findings do provide several insights into this dilemma. First, reliance on HR systems

and processes to improve performance generally needs to be led by the CEO and senior

management. In particular CEO involvement appears to be especially important. Second, HRM

needs to be closely integrated with corporate and business planning. Such alignment demands

collaboration between executives and HR leaders. Third, managers can increase the likelihood of

innovation in HR processes and systems by relying on key drivers of innovation: use demands from

customers and the market place, explore changes in workforce characteristics and expectations, and

engage the volunteers who express a desire to develop better ways of managing people. But be

prepared for the likely barriers to progress: identifying the sources of better HR practice and

employee (and management!) resistance to change.

Our findings clearly identified the benefits of a virtuous circle of high performance: work on

your strategic fundamentals, align your HR processes and systems, gain managerial commitment

and skill in the application of well documented high performance work practices and critical HR
processes. The resultant performance fuels growth which in turn resources and demands more

enhancement of people management practices.

Finally, CCH Australia Ltd and the Australian Graduate School of Management wish to

thank the 669 respondents to this important survey. We wish you well in your endeavours to

continue to enhance the performance of your organisation, the well-being off your members and the

consequent benefits to our communities.

Authors Professor Roger Collins and Karen van Druten

References

Hambrick, D. C. and Frederickson, J. W. (2002Are you sure you have a strategy? Academy of
Management Executive, 15(4), 48-59

Pearce, J. A. and David, F. (1987) Corporate Mission Statements and the Bottom Line. Academy of
Management Executive, 1(2), 109-116

Pfeffer,J. ( 1998 ) The Human Equation, Boston : Harvard Business School Press.