Strat. Change 14: 121131 (2005) Published online in Wiley InterScience (www.interscience.wiley.com). DOI: 10.1002/jsc.

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Strategic Change

Creating HR capability in high performance organizations

Jean M. Hiltrop*
Visiting Professor at the Copenhagen Business School and the Universitt Bern Institute for Finanzmanagement

This paper examines some of the key factors that inuence the effectiveness of human resource management (HRM) in organizations. Particular attention is given to the inuence of HR capabilities on the competitiveness of organizations and the practical implications of this for the way in which the HR is organized. The questions addressed here are thus: What are the key HR capabilities that increase organizational performance? To what extent can these capabilities help to create and sustain competitive advantage? And what are the implications of these capabilities for the HR function? Copyright 2005 John Wiley & Sons, Ltd.

Introduction
The beginning of the 21st century will probably be remembered as a time of dramatic social and political change when some of the principles and assumptions on which societies and organizations are based were being challenged and undermined. Even in countries where social change has traditionally been slow and incremental, sudden shifts in the global political environment have been of such signicance that governments and organizations have been forced to implement dramatic improvements in their ability to cope with uncertainty, and nd better ways to manage and control resources that are most critical and sensitive to sudden changes in the environment. As Buchanan and Huczynski (2004) point out, most organization theorists of the 20th century described business environments that were stable enough to be under-

stood and acted upon by their managers. In recent years, however, such thinking has changed. The simple linear models of cause and effect have broken down and for many organizations, both in the public and private sectors, the environment is moving so rapidly that top managers cannot expect to understand sufciently well how the outcomes of their actions will be inuenced by the changes in their environment. Often, intended outcomes will be diverted by sudden external events or even by unexpected actions of the people within the organization itself. Clearly, the old ways of managing organizations and people have ceased to be either credible or effective, reecting the fast-changing environment in which most companies now operate.

Best practice models

For many years, academics and practitioners have debated how to ensure that the human resources of an organization are used in such a way that the employer obtains the greatest
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* E-mail: jm@hiltrop.wanadoo.co.uk

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possible benet from their abilities and the employees obtain both material and psychological rewards from their work (Graham, 1978). This debate has led to the formulation of a number of general theories or models of strategic human resource management (HRM) which link the HR policies of the organization with the overall business strategy of the rm (Walker, 1980; Fombrun et al., 1984; Schuler and Jackson, 1987; Miles and Snow, 1984). Most of these theories remain untested and closer examination of the links proposed in these models has exposed many awed assumptions and non sequiturs that abound in the reasoning of their supports (Beardwell and Holden, 2001). Fortunately, there are a number of studies and growing evidence supporting the claim that certain HR practices can indeed contribute to the nancial performance of an organization. For example, Huselids (1995) extensive survey of HR practices and performance in a cross-sectoral sample of American organizations clearly suggests that organizations using certain people practices have higher levels of productivity and protability per employee than those that ignore them. However, the survey was limited to senior HR professionals and the results provide only a snapshot in time, making it difcult to make the causal link between HR practices and nancial performance. At the very least, the ndings present a signicant challenge to those who dismiss people management as commercially irrelevant or question its impact on the bottom line.

Certain HR practices can contribute to the nancial performance of an organization

Anecdotal evidence also abounds regarding the effect of people management on such things as voluntary turnover, absenteeism and customer orientation. For example, in one
Copyright 2005 John Wiley & Sons, Ltd.

study of 986 rms, representing all major industries in the USA, organizations whose managers implemented so-called highcommitment management practices and demonstrated personal competency in leadership and good people management, had on average a decrease in employee turnover of more than 7%, increased prots of 1% per employee, signicant increases in sales per employee and a higher stock market value per employee, compared to rms that had less effective people management (Whetten and Cameron, 2004). A study of German rms in 10 industrial sectors produced similar results (Blimes et al., 1997). These studies indicate overwhelmingly that good management fosters organizational success, whereas less effective people management practices foster failure and distress. As a result of these ndings, much of the debate in the area of HRM has now shifted towards the formulation of various theories and models that link certain HRM practices to superior organizational performance (Pfeffer, 1994; Collins and Porras, 1998). In general these theories suggest that organizations will outperform their competitors in terms of turnover, efciency and protability to the extent that they are able to implement the 13 management practices listed in Table 1. Taken together, these practices describe the types of management policies and practices that have been identied in recent studies of what effective organizations do with people and can therefore be used as a checklist for evaluating the effectiveness of HRM and those who are responsible for implementing it. They also reect a particular set of beliefs and assumptions about people and how they can contribute to the success of the organization. Underlying this list of management practices is a number of assumptions which, generally speaking, form the basis of strategic HRM. The key assumptions are that people make the difference with respect to organizational performance; that HR decisions are strategic decisions; that all managers must be able consistently to implement good HR practices; and that HRM policies must support each other and corporate strategy in an integrated manner.
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Creating HR capability
Table 1. High-impact management practices 1. People are doing work that matters to them personally and to society. 2. People are doing work that is stretching, growing or enhancing his or her capacity to create new things. 3. People are told what is going on in different parts and levels of the organization, so they know how their actions are inuencing the work of others. 4. Information is shared widely and openly. There are few (if any) sacred cows or non-discussable subjects. 5. There is mutual trust and respect between employees and their bosses, no matter what their background and position. 6. People feel free to take risks. No one is punished for making honest mistakes. 7. People receive strong rewards and incentives for excellent performance. 8. There is sufcient decentralization of decisionmaking and empowerment to allow people to do their jobs well. 9. People are encouraged to question what they do, try a lot of new things and keep doing only what really works. 10. There is a relentless pressure for self-improvement with the aim of doing better and better. 11. There is a clear strategy to achieve the long-term and short-term objectives of the organization. 12. People receive a consistent set of signals and incentives to reinforce the attitudes and behaviours that support the core mission and values of the organization. 13. There is rigorous selection and selectivity in the recruitment and promotion of employees.

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role and credibility of the HR function and could determine the extent to which an organization is willing to invest in the development of talent.

The case of high performance organizations

Another approach for exploring the link between HRM and organizational effectiveness is to compare and contrast the HR practices of high performance organizations. Consider, for example, the list of companies shown in Table 2.This lists the 20 largest companies in the world, measured in terms of market valuation (in US$) over a period of 30 years. A number of major shifts become clear when comparing the names and gures between 1982 and 2002, including the explosive growth in market valuation during the 1990s, the growing concentration and expansion of large organizations (mainly through mergers and acquisitions), the shift from manufacturing to service companies (especially nancial services), the shift in nationality from mainly US owned companies to more global ownership (especially Japanese companies), and the emergence of new types of industries, such as retailing and information technology. Some of the big companies, such as Cisco Systems and most of the Japanese nancial institutions, managed to stay within the top 20 for only a few years. Others, such as General Electric and Exxon, have been on the list for many decades and have been able to maintain and strengthen their position within the top 20. There are many possible reasons for the rise and fall of large organizations and there clearly is no consensus among strategists, economists and other management specialists on which factors are most important. Yet, when asked to explain the long-term success of companies such as GE and Exxon, the middle and senior managers in our workshops invariably mention the importance of strong brands, the ability to innovate, investment in research and development, global presence, customer responsiveness and technological superiority
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In practice, these practices and underlying assumptions could easily be used as a framework to determine the extent to which an organization adopts a strategic approach to HRM. As Buchanan and Huczynski (2004) put it, to nd out if managers or organizations are really making the most of its human talent, just ask the following three questions: 1. Do they regard their people primarily as costs or assets? 2. Are line managers able and willing to implement effective people practices? 3. Are HR policies and practices integrated and mutually supportive? Obtaining positive answers to these three questions is of more than theoretical interest. It can have considerable implications for the
Copyright 2005 John Wiley & Sons, Ltd.

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Table 2. Market capitalization of the worlds largest organizations (US$) 1982 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. IBM AT&T Exxon General Electric General Motors Shell Eastman Kodak Schlumberger Toyota Motor Amoco Chevron Mobil Sears Roebuck Atlantic Richeld Hitachi P&G Matsushita GEC(UK) J&J British Petroleum 57.0 52.2 25.7 21.6 19.0 16.9 14.2 13.4 12.6 11.7 10.9 10.7 10.3 10.2 9.9 9.8 9.6 9.3 9.3 8.7 1992 Exxon General Electric Wal-Mart Shell Nippon Tel Philip Morris AT&T Coca-Cola Mitsubishi Bank Merck Industrial Bank Japan Sumitomo Bank Toyota Motor Fuji Bank Dai-Ichi Kangio Bank Sanwa Bank British Telecom P&G Glaxo Holdings Bristol Myers Squibb 75.8 73.9 73.5 71.8 71.4 69.3 68.0 55.7 53.5 50.3 46.5 45.6 44.1 41.8 41.8 37.9 37.3 36.4 36.1 36.1 2002

Jean M. Hiltrop

General Electric Microsoft Exxon Wal-Mart Citigroup Pzer BP J&J Intel American IntlG Coca-Cola IBM NTT Docomo Nerck GlaxoSmithKline Novartis Philip Morris Shell Bank of America P&G

309.5 275.7 271.2 240.9 223.0 216.7 192.1 186.9 184.7 174.9 137.9 137.7 135.8 129.7 126.3 123.9 122.9 119.0 117.1 116.8

or advantages. Only when questioned about the role of human resource management in sustaining the performance of these companies do they recognize the importance of soft factors such as leadership and the ability to attract and retain talent. Reducing or eliminating this bias towards traditional means of gaining competitive advantage will not come by quick xes, simple training programmes or management speeches, but involves a major shift in principles, beliefs and attitudes, which in turn guide and reinforce certain management practices and behaviours. As Ulrich and Lake (1990) have pointed out, it is a way of thinking as well as acting, and it begins with the realisation that there is a strong link between competitiveness and effective people management.

Table 3. Ten dimensions of HRM 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Reliance on internal recruitment and promotion Emphasis on teamwork Strategic career systems Openness and information sharing Decentralization and delegation of authority Concern for people in the management philosophy Recognition and reward for high performance Rewards for skills and competencies Training and development of employees A longer-term focus of HR decisions

The core capabilities of HRM

In an earlier paper (Hiltrop, 1996), I suggested a practical framework that can be used for categorizing and assessing the wide range of HRM policies and practices that are found in large organizations. The framework was based on the assumption that there are 10 core factors
Copyright 2005 John Wiley & Sons, Ltd.

or dimensions that underlie the different approaches to HRM used by managers (see Table 3). In practice, these 10 dimensions are interrelated and their exact number and their labels are somewhat arbitrary. However, taken together, they describe the types of management policies and practices that have been identied in recent studies of strategic HRM and can therefore serve as a checklist for evaluating the effectiveness of HR practices and those who implement them. However, in order to translate this list into an effective management tool, a more pragmatic categorization of HR policies and practices is required. Having such a tool is
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important as it helps to avoid the risk of randomly discussing policies and practices and may help line managers appreciate and recognize the effects of their actions on the operational and strategic objectives of the rm. To construct such a tool, the organizational capability model proposed by Ulrich and Lake (1990) is followed. Organizational capability in this proposal is dened as a businesss ability to establish internal structures and processes that inuence its members to create organization-specic competencies and thus enable the business to adapt to changing customer and strategic needs. Research on the connection between people management and organizational performance suggests that organizational capability, from a human resources perspective, includes four sets of abilities that will enable the organization to build and sustain its competitive advantage. They are: 1. 2. 3. 4. The The The The ability ability ability ability to to to to attract and retain talent. develop and grow talent. utilize and mobilize talent. innovate and change.

In practice, these four abilities are complementary and mutually supportive. The rapid rise and fall of some hi-tech and consulting companies during the turn of the century has shown that merely attracting and retaining talent will not increase organizational success. Clearly, hiring talented people and then developing and growing their skills and knowledge is more likely to yield competitive advantage than simply hiring and ring people, or hiring and hiring talented people and not giving them opportunities to develop their potential. Also, there is little point in developing people if there are no opportunities or processes designed to utilize the knowledge and skills

acquired during the development. This simple logic may explain why some companies consistently fail to reap the benets of their investments in management development programmes. Nor is it likely that an organization will develop its ability to innovate and change when there has been little or no investment in the acquisition, development and utilization of talent. In other words, the ability to attract and retain talent is a prerequisite for sustaining the ability to develop and grow talent. This ability in turn forms the basis for superior motivation and utilization of talent, and there is no doubt that continuous innovation and change cannot be achieved without the ability to mobilize and utilize the diversity of talents throughout the organization. Organizational capability through people, much like success in sports, depends on layering one skill level on top of the other. There are no shortcuts. So how can the four HR capabilities be built and sustained? Although none of the existing HR theories and models provides a complete answer, closer examination of the HR policies and practices used by high performance companies offers some powerful suggestions for managers and professionals who wish to use HRM as a source of competitive advantage and strengthen the strategic capabilities of their rm. 1. Maintain a high level of consistency between strategy and HR practices Throughout the 1980s and early 1990s, studies of HRM have stressed the importance of developing appropriate HR systems that are consistent with broad organizational requirements such as quality enhancement or productivity improvement. One of the most documented models was proposed by Fombrun et al. (1984). The underlying assumption was that organizational effectiveness depends on there being a tight t between human resource practice and business strategies. As Sparrow and Hiltrop (1994) state: Different HRM practices serve to elicit and reinforce the appropriate behaviours in
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Merely attracting and retaining talent will not increase organizational success

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the organisation. These role behaviours cut across the specic skills, knowledge and abilities that are required to perform particular tasks. They are considered as instrumental in the implementation of competitive strategies. HRM strategies are all about making business strategies work. The practices that Fombrun et al. (1984) felt to be the most important in achieving this t are selection, performance, appraisal, rewards and development. To make them work, these four areas of HRM policy have to be both externally consistent, so that HRM practices are linked with the business needs of the organization and internally coherent, in order to achieve congruence and coherence among various HRM practices. This dual alignment is deemed critical to channel behaviours and create a dominant value or culture in the organization that enables the effective implementation of strategy (Wright and McMahan, 1992). One of the clearest examples of this consistency theory was given by Schuler and Jackson (1987). In their model, HRM is seen as a menu of strategic choices to be made by HR executives intended to promote the most effective role behaviours that are consistent with the organization strategy and are aligned with each other. The starting point of the model are the generic competitive strategies outlined by Porter (1980) i.e. quality enhancement, innovation and cost leadership or reduction. For each strategy, Schuler and Jackson proposed a set of needed role behaviours which vary across a number of dimensions and then described a set of human resource practices that are needed to bring about these behaviours. For example, an organization that adopts an innovation strategy needs to foster behaviours that are creative, have a long-term focus, a relatively high level of cooperation and interdependence, a moderate concern for quality and quantity, attention to both the process and the results, a high degree of risk taking and a high tolerance of ambiguity and unpredictability. In order to foster these sorts of behaviours it is argued, the organization
Copyright 2005 John Wiley & Sons, Ltd.

needs job specications that dene close interaction and coordination among groups of individuals; performance appraisal systems that reward group-based achievements; compensation systems that emphasize internal equity rather than market-based pay; and broad career paths to reinforce the development of a wider range of skills. Another clear example of the need for consistency between business strategy and HRM is Miles and Snows (1984) model of organizational adaptation, which suggests that there are four basic types of organizational strategy, called Defender, Prospector, Analyser and Reactor. Each type has its own unique organizational features and supporting characteristics. For example, Defenders need to build human resources, as opposed to acquiring or allocating them. This means that a defender company typically engages in little recruiting above entry level, with selection based on weeding out undesirable employees. In contrast, Prospectors typically seek to buy the needed talent a strategy that requires sophisticated recruiting at all levels of the organization, limited training, and extensive psychological testing before hiring. Hence, Miles and Snow (1984) suggest that organizations should match their HRM strategy to the nature of the product market and thus engage in make or buy HRM approaches as appropriate to the different product market domains. Probably the best example of how companies can benet from maintaining a high level of consistency between strategy and HR practices is the case of Coke and Pepsi, as described in Box 1. The example of Coke and Pepsi serves to highlight the importance of ensuring that there is some sort of coherence and consistency across a range of human resource policies and practices in order to speed up the implementation of any strategic change. The prescriptions are however highly culturebound and generally only tested against US organizations. Contingency models also assume that generic typologies of strategy such as those articulated by Porter (1980) are
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Box 1. Coke vs. Pepsi

Few organizations are more similar in terms of the products they promote than Coke and Pepsi. Although Pepsi is signicantly more diversied than Coke, the two companies are head-on competitors in the soft beverages market, with core products that are the most recognized trademarks in the world. Established some 70 years before Pepsi, Coca Cola has become an icon of American history and culture, and its business strategy has been focused on maintaining and strengthening its market share throughout the world. In Miles and Snows terminology, Cokes strategy is one of Defender organization, maintaining its leading position and building on its carefully groomed brand. In contrast, Pepsi has adopted a Prospector strategy. From its early position as a price leader, Pepsi has tried to attract the New Generation of customers and ll the gaps in niche markets left in the wake of the Coke brand. The culture and HR practices of these two companies are totally consistent with these differences in strategy. Sustaining the strategy of Coke requires a thorough understanding and commitment to its tradition, strong brand and culture, which cannot easily be brought in from outside or even created from within the organization. Coke therefore typically recruits college graduates at the lower managerial level and gradually promotes suitable candidates, possessing the right mix of talent and values, from within. A system of intensive training, strong job security and seniority-based remuneration keeps suitable talent from leaving and ensures that only career-oriented managers who are loyal and committed to the organizations unique brand and culture make it to the top. Every CEO of Coke so far has been a career Coke manager. Pepsi has a very different HRM policy. Pepsi typically hires employees with signicant work experience, encourages individualism and competition, rewards personal achievement, and rapidly promotes those who enjoy the challenge of fullling its mission, namely beating Coke. Decision-making is highly decentralized and performance is evaluated against achieving clearly dened market-driven goals. Pepsi employees have relatively less job security and are perhaps less likely to stay than their Coke counterparts. The advantage for Pepsi is a continuous ow of talent through the organization, the ability to adapt quickly, and a fasttrack promotion system for those who t the highly competitive culture and strategy. Both Coke and Pepsi are high performance organizations. Neither system is superior to the other.The key to their success can at least partly be found in the high consistency between their strategy and culture, and the highly consistent HR systems that have been created to support these.

a valid starting point. They are not. Generic strategies tend not to be as mutually exclusive as asserted and the process of strategy implementation is often one that creates its own learning about HRM. Finally, the approach tends to ignore important areas such as the design and organization of work and the role of industrial relations. At what point and what level is an assessment of t best made? Hence, it is not surprising that in reviewing this approach Hendry and Pettigrew (1986) conclude:
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. . . The contingency framework readily led to prescriptive theorising, especially when linked to typologies of strategy, culture itself tended to be treated as a manipulable variable, and people tended to get excised from the equation. (p. 23) These are serious shortcomings and it may be difcult for the HR strategist to overcome them completely. It must be remembered, however, that integrating HRM into an overall strategic thrust may be highly desirable. For example,
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when British Airways embarked on a programme of sustained growth and globalization, it developed an integrated HR strategy aimed at achieving signicant cultural change in ve main areas: Communications, Management style, Reward management, Customer satisfaction, and Employee relations. The links between each aspect of this strategy were emphasized in extensive training programmes and new communication channels were developed and used to ensure that everyone knew the new business strategy and requirements. 2. Create a culture of openness, teamwork and delegation Increasingly, a culture of openness, teamwork and delegation is recognized as one of the key attributes of high performance organizations and much time, effort and resources are being invested in creating a culture in which people (1) openly share and discuss their knowledge, views, interests and opinions, (2) consider themselves to be an integral and essential part of a group of co-workers who have a common objective and consider themselves to be accountable for the success of the group and (3) are willing and able to make decisions at the lowest possible level in order to increase efciency and be more responsive to customer needs.

company and its members in many other ways, including the following:

It can be an ideal mechanism for releasing the talents and energies of smart and creative people to be innovative. It creates trust and allows people to feed on each others ideas. It can free the organization by opening channels of communication, breaking down barriers between functions and departments, and generally creating a situation where change and new ideas are more rapidly accepted. It creates a sense of belonging, people have more fun together, and colleagues are helped and supported in times of difculty.

A culture of openness, teamwork and delegation is one of the key attributes of high performance organizations
The possible return on these investments are numerous and diverse. Perhaps the greatest is the achievement of organizational synergy, where the output of the whole organization becomes greater than the sum of the individual contributors and in so doing boosts the enthusiasm and creativity of their units and functions. Having a culture of openness, teamwork and delegation can benet the
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However, there are disadvantages as well. One is that relying on teamwork and delegation may reduce an individuals sense of urgency, personal responsibility and contribution to organizational performance. It may also impact upon the image of the organization, creating the impression that its managers do not have their human resources under control. Many people have a misplaced fear of delegating too much power and sharing too much information with their employees. Finally, encouraging openness, teamwork and delegation may create opportunities for abuse. No matter how committed most managers are to honesty and forthrightness in all communications, it would appear that some people are steeped in the habits of political game playing and never see the point of breaking the vicious circles supporting traditional political behaviours. Hence, building an organizational culture characterized by openness, teamwork and delegation may be one of the most difcult tasks of managers. Especially when jobs are at stake, information is too often marked condential and shared with only a few of the people whose work it will affect. 3. Build HR capability into the role and mindset of every manager The third determinant of HR capability is the attitude and behaviour of managers towards
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their people (Hiltrop, 2003). To what extent is the ability to attract and retain talent seen as a line responsibility? Are line managers required to train and develop their direct reports? Are senior members of the organization willing and able to take on mentoring and coaching roles? Who are the real change champions and what are the incentives for those who are able to mobilize the talent of their staff? In many annual reports, the talents of people are often described as our most important asset. However, those words are merely empty statements if the words, attitudes and behaviours of managers are not aligned. Studies of high performance organizations indicate that such alignment is an absolute prerequisite in order to benet from the investment in costly management practices such as training and development. How can this alignment be achieved? The most common advice offered in the literature is to pay and treat talented people well (Cappelli, 1999). However, plenty of studies have shown that in most countries and industries, pay does not have a strong lasting effect on workplace attitudes and behaviour. In fact, most participants in our leadership workshops say that pay is the weakest motivator in terms of inuencing managerial attitudes and approaches to manage people. As long as pay is not seen to be insultingly out of line, other things matter much more. The two things that managers appear to cite most often when discussing their willingness and ability to mobilize people are corporate pride and trust in their chief executives decisions. Pay, as a way of developing and mobilizing talent, came third, after pride and trust. Furthermore, using pay as an incentive to encourage managers to take responsibility to attract and keep talent may be very costly. As Pfeffer (1994) says, pay is the crudest instrument in all of the resources at an employers disposal; if it is an employers sole source of loyalty, then he always runs the risk of being outbid. The results of McKinseys study of the war for talent (Chambers et al., 1998) also suggested that pay is not the most effective method to inuence managerial attitudes and
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behaviour towards people. According to the McKinsey research, talent has been the most under-managed corporate asset for the past two decades. As Chambers et al. (1998) put it: Companies that manage their physical and nancial asset with rigor and sophistication have not made their people a priority in the same way. For instance, only 23% of some 6000 executives surveyed agreed that their companies attract highly talented people, and just 10% said they retain almost all their high performers. Perhaps more alarmingly, only 16% thought their company knows who the high performers are. And only 3% said their company develops people effectively and moves low performers out quickly (Chambers et al., 1998). The study concludes that companies should hold their line managers much more accountable for attracting, developing and keeping talent. For example, at First USA, the ability to recruit talented new people is a criterion for promotion. However, only 7% of the managers surveyed believed their companies actually do so. As Chambers et al. (1998) state: It seems that many line managers are not accountable for the quality of their staff. This was perhaps our most shocking nding. Things must change. 4. Create many opportunities for learning and development, supported by individual coaching and mentoring As mentioned in the Introduction, sudden shifts in the global political environment have been of such signicance that organizations have been forced to implement dramatic improvements in their ability to cope with uncertainty, and nd better ways to manage and control resources that are most critical and sensitive to sudden changes in the environment. These pressures will not go into reverse. If anything they will probably intensify in the next decades as the political and economic landscape changes and the need for exibility, competitiveness, speed and productivity improvements becomes even greater. At the same time, changes in the social and demographic environment mean that manStrategic Change, May 2005

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agers and professionals cannot be managed the way they used to be. Job security and steady promotion is becoming the motivational currency of the old generation. What matters more to the new generation of graduates is challenge, freedom, international assignments and developing the skills and knowledge needed to make rapid progress and be able to make their own choices in life. Their sense of identity is linked to their family, friends and profession, rather than to a specic location or organization. Consequently, HR systems must be designed so that people are no longer developed, rewarded and promoted on the basis of their status and position, but instead on their actual or potential contribution to the rm. This does not mean that traditional career management is dead. Rather, these techniques must be liberated from the Organization Man phenomenon of the 1960s, in which an employee completely immersed himself in his company, worked 60-to-70 hour weeks when needed, and did whatever the company required to get promoted. The implications of these developments are that in the face of uncertainty, complexity and growing political controversy, organizations need to create heaps of opportunities for learning and development in order to generate an adequate pool of talented managers and professionals who wish to use HRM as a source of competitive advantage and strengthen the strategic capabilities of their rm. As de Geus (1997) points out, this pool of talent cannot be bought. It cannot even be developed as a programme within ones own company. It can be produced only by taking risks and giving people time to develop. When working at Royal Dutch/Shell, de Geus says he required all his managers to spend at least 25% of their time on the development and placement of the people who reported to them. Similarly, at GE Jack Welsh claims he required managers to spend 50% of their time on mentoring and developing their direct reports. Whatever the percentage of time managers and leaders spend on this sort of people management activity, the ability to create countless opportunities for learning and development,
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supported by individual coaching and mentoring, may well be the most important determinant of an organizations HR capability to attract, retain and mobilize talent.

Conclusion
Creating organizational capability through HR practices is not a panacea. To build and sustain success over the long term an organization needs, among other things, good facilities, reliable accounting procedures, smart marketing tools and efcient control mechanisms, as well as effective HR policies and practices. However, there is growing evidence that organizations frequently fail because the prevailing thinking and behaviour of managers is too narrowly focused on the implementation of systems and structures designed to control,

Creating organizational capability through HR practices is not a panacea

minimize or eliminate the factors that create organizational capability through people. To put it another way, companies often die because their managers focus entirely on the objective of producing good nancial results, and they forget that their organizations true strength (or weakness) is that of the talent and dedication of people (de Geus, 1997). Moreover, there is evidence that even when they realize the importance of human talent and HR capability for the competitive advantage of their business, managers do not easily put this knowledge into action (Pfeffer and Sutton, 2000). This knowingdoing gap can be seen most clearly in the failure to implement some of the high-performance management practices that are listed in Table 1. These practices have been described, and their positive effects illustrated, in numerous case studies, books and articles. Yet, research suggests that they are rarely implemented in practice and that knowledge that is actually implemented by
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Chambers EG, Foulton M, Handeld-Jones H, Hankin SM, Michaels EG. 1998. The war for talent. The McKinsey Quarterly 3: 4457. Collins J, Porras J. 1998. Built to Last. Century Business: Chatham. De Geus A. 1997. The Living Company. Harvard Business School Press: Boston, MA. Fombrun C, Tichy N, Devanna MA. 1984. Strategic Human Resource Management. John Wiley & Sons: New York. Graham H, 1978. Human Resource Management, 2nd edn. MacDonald and Evans: Plymouth. Hendry C, Pettigrew AM. 1986. The practice of strategic human resource management. Personnel Review 15(5): 38. Hiltrop JM. 1996. A framework for diagnosing human resource practices. European Management Journal 14(3): 243254. Hiltrop JM. 2003. Key issues for deciding HR policies and practices. Human Resources and Employment Review 1(3): 138145. Huselid M. 1995. The impact of human resource management practices on turnover, productivity, and corporate nancial performance. Academy of Management Journal 38(3): 635672. Miles R, Snow C. 1984. Designing strategic human resource systems. Organizational Dynamics 12(2): 3652. Pfeffer J. 1994. Competitive Advantage Through People. Harvard Business School Press: Boston, MA. Pfeffer J, Sutton RI. 2000. The KnowledgeDoing Gap. Harvard Business School Press: Boston, MA. Porter M. 1980. Competitive Strategy. Free Press: New York. Schuler R, Jackson S. 1987. Linking competitive strategies with human resource management practice. The Academy of Management Executive 1(3): 207219. Sparrow P, Hiltrop J. 1994. European Human Resource Management in Transition. Prentice Hall: London. Ulrich D, Lake D. 1990. Organizational Capability: Competing from the Inside Out. John Wiley & Sons: New York. Walker J. 1980. Human Resource Planning. McGraw-Hill: New York. Whetten D, Cameron K. 2004. Developing Management Skills. Pearson: New Jersey. Wright P, McMahan G. 1992. Theoretical perspectives for strategic human resource management. Journal of Management 18: 295320. Strategic Change, May 2005

managers is much more likely to come from learning by doing than from listening to a presentation or reading a book. It is almost as if there is some kind of invisible barrier that prevents knowledge turning into action. High performance companies are aware of this problem and have developed mechanisms for bridging the knowledgedoing gap. They get remarkable performance from talented people by maintaining a high level of consistency between strategy and HR practices, creating a culture of openness, teamwork and delegation, building HR capability into the role and mindset of every manager and creating countless opportunities for learning and development.

Biographical note
Dr Jean M. Hiltrop is a Visiting Professor at the Copenhagen Business School. He specializes in international human resource management and organizational behaviour. His career to date includes teaching executive development programs at several leading business schools, such as Nyenrode, TIAS at Tilburg in the Netherlands, IESE in Barcelona, IMD in Lausanne, Cape TownUniversity Graduate School of Management and Bradford University Management Centre. Jean has worked as an adviser and trainer for many international companies and has published numerous articles and books, including European Human Resource Management in Transition, The Essence of Negotiation, and The Accidental Manager: Surviving the Transition from Professional to Manager. He is currently working on a new book on global HRM.

References
Beardwell I, Holden L. 2001. Human Resource Management: A Contemporary Approach. Pearson Education: Harlow, Essex. Blimes L, Wetzker K, Xhonneux P. 1997. Value in human resources. Financial Times, February 10. Buchanan D, Huczynski A. 2004. Organizational Behaviour. Pearson Education: Harlow, Essex. Cappelli P. 1999. The New Deal at Work: Managing the Market-Driven Workforce. Harvard Business School Press: Boston, MA. Copyright 2005 John Wiley & Sons, Ltd.

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