The HR Maturity Scale

The HR Maturity Scale offers a range of positions against which an organization can assess the maturity of its HR thinking and systems.
I do not know what it must have been like to work in a dark satanic mill at the beginning of the industrial revolution, but I guess it was not much fun. Probably about the same as working in one of the many sweatshops -- still in operation in different parts of the world today. If sweatshops were such a brilliant way to run a business though, then they would probably still be the predominant type of business organization. So why are they not?

Sweatshops tend to be the type of production method used only in simple, low value goods. The sort that can only be produced by highly labour intensive methods in low wage economies. Many textile and shoe businesses still operate this way. As do many of the craft shops selling cheap jewellery that so many of us encounter on our travels. Typically, they will operate outside any legal or regulatory framework.

Obviously you would not choose to buy your prescription drugs, or your brake pads for your car from such a supplier because you would not expect any safety or reliability guarantees. Quality systems would be unlikely and the producers of such goods may not be around very long to deal with any returns or defective goods. Those who work in sweatshops probably do so out of necessity and probably do just enough not to upset their boss. This is not an environment in which to discuss the possibilities of maximising employee value. Consequently we will not be looking at sweatshop HR strategies. That would be a contradiction in terms.

If sweatshops are at the bottom end of the ´strategic HR´ scale then presumably large, global businesses are at the other. They employ thousands of people and use sophisticated marketing or production techniques. Here, attracting the right calibre of people and managing that human resource well is more likely to be a key issue. Pharmaceutical businesses would be one good example.

In between these two extremes though must be a whole range of different types of enterprises that employ people from small, family owned businesses, to medium sized public companies -- as well as a whole range of public sector and not-for-profit organizations. Where would all of these be on the scale?

In Figure 4.1 the HR Maturity Scale offers a range of positions against which an organization can assess the maturity of its HR thinking and systems. If this strikes you as similar to any other scale then you may recognize that it is along very similar lines to the HR scale explained in The Bottom Line HR Function. However, it also owes a great deal to the Software Engineering Institute - Capability Maturity Model for Software (CMM) from which it has borrowed some key ideas (for further information contact SEI Customer Relations, Software Engineering Institute, Carnegie Mellon University, Pittsburgh, PA 15213-3890).

Figure 4.1 Where is your organization on the HR maturity scale?
In essence, maturity is the key concept in both of these models. So, using an IT example, does your organization just buy in new software, or IT systems as and when a need arises, or do they take a much more forward-looking, long-term, holistic, systems thinking approach to the whole issue of IT systems?

Although it is extremely difficult to define precisely what your organization´s perspective is on any particular issue this scale at least offers a framework and a starting point. It should be used as a means for assessing your organization´s view of the importance of human resource management and its role in trying to maximize business performance and value. It also represents an organizational journey through a series of clearly identified stages of evolution and development.

At the far right of the scale, Stage 6, is the ´whole system´ view that accords with much of Peter Senge´s Fifth Discipline (Random House, 1993) concept of systems thinking. The worst position on this scale, Stage 0, is for those organizations that do not even have a view on how it manages its people. Over time, any organization will have to go through this series of phases or stages in order to mature into an organization that really does get the best value out of its people.

The Stages of the HR Maturity Scale
Let us look at each stage in a little more detail.

Stage 0 - No conscious Personnel management
Stage 0 is not actually on the scale. There is no sense here at all that any form of human resource management is taking place. For an example of Stage 0 we could envisage a small contract catering company that recruits casual workers for occasional catering contracts such as a wedding or party. There is no real selection process and the workers get paid in cash at the end of the event and no records are kept. Based on this description there should be very few organizations left who are still at Stage 0.

Stage 1 - Personnel Administration
For the catering company to progress to Stage 1 it starts to keep records of previous recruits and contacts the same people for the next contract. By now everything is being done in accordance with the law and a proper payroll system is in place. The company can tell the tax authorities how many people it employed and how much they were paid.

Any MD satisfied with Stage 1 perceives people management as just managing ´bodies´. Man management means controlling staff, making sure the job gets done and dealing with any immediate disciplinary matters. This is seen as the sole preserve of their catering managers or supervisors. Such an MD does not know anything about human resource management and would not understand the difference between this and simple man management.

Stage 2 - Good professional practice
From having the bare minimum personnel records at Stage 1 to developing a Stage 2 personnel approach the company has to start seeing that there is more than just man management if you want to have any chance of getting the best value out of your people. It starts to realize that good, professional personnel management practices can make a difference. So the personnel records used for payroll purposes are used to record rudimentary performance comments from the supervisor. These are then used during the next recruitment exercise to contact only those previous employees who did a good job.

It is worth noting that there is no mention here of actually having a personnel department to do this work. The supervisors could quite easily carry out this function. So the HR maturity scale is not necessarily saying anything about the need, or otherwise, to employ a team of HRM professionals. However, a professional, personnel practitioner could well introduce other ideas such as a simple psychometric questionnaire to gauge an applicant´s suitability for catering work, which could result in a better selection of candidates, a better quality of customer service and less waste through staff turnover.

There is nothing very difficult about getting to Stage 2. It just requires a belief among the management team that ´personnel management´ disciplines bring something to the operation that good man management skills, on their own, do not. Stage 3 though is a significant shift forward in management thinking.

Stage 3 - Effective HR management
Stage 3 is a conscious move towards a systematic and structured approach to HR management. It is an open acknowledgement that there are such things as professional HR practices.

Some benefits will be gained at Stage 2 from the rudimentary systems being put in place but as time moves on the catering company finds that some of its competitors are winning more contracts on price. So the MD wants more effort put into cost controls and efficient ways of working. She finds that some supervisors have no understanding of portion control and levels of wastage are unacceptably high. So she decides to try to raise the standard of supervision by assessing their skills and providing training where necessary. But she does not have the time or the skills to do this so decides to hire an HR professional.

The HR professional quickly establishes that some of the older supervisors will never make the grade in the new, leaner company and advises the MD to bring in some new blood, increase salaries to attract a higher calibre of supervisor and institute a structured training programme for new supervisors. Very quickly the MD sees wastage figures, staff costs and turnover tumble. She drops her prices accordingly and starts winning more contracts still with a healthy margin. She really starts to value what effective human resource management can offer and this helps as her business strategy, of moving the company into bigger, longer-term catering contracts, starts to take shape.

Some of the longer serving supervisors who managed to keep their jobs have found the transition quite difficult. Nevertheless they raise their game and start to improve their own people management skills. This is supported by the new formal performance management system, introduced by the HR manager with the blessing of the MD. Every employee, on every contract, now has to have a formal assessment on file. Those who do not reach the required standard are managed out of the business. The whole atmosphere of the business is changing slowly but surely. This is a well-managed business; it does not carry passengers and, crucially, the workforce see that as a positive development. We start to see the beginnings of a performance culture.

Before we move on to consider Stage 4 we should stop for a second and ask whether an organization has to move, sequentially, through each of the stages on the maturity scale? There is probably a two-pronged answer to this. In an existing organization at Stage 0 a decision could be taken by a new MD to bring in an HR manager and try to move the organization immediately to Stage 3. While there is nothing to stop them doing so, it raises many questions about how line managers would cope with suddenly having an ´HR expert´ advising them how to do their job.

In general terms, if an organization wants to short-circuit the natural, evolutionary, organizational development cycle the chances are there will have to be a firmer and less easy-going approach to HR matters (some would call it brutal or hard-nosed but that is a bit emotional). I mean issues like replacing supervisors with new blood and allowing less time for the remaining supervisors to cope with the changing demands of their role. One only has to consider other HR matters such as attitudes to employee relations and unionisation to realize that there are some very contentious areas that cannot just be swept aside or leap-frogged so easily.

In new organizations, with all of the human resource management benefits of starting on a greenfield site (which will be specifically covered later) it is much easier for the ´entry-level´ to be set at a much higher standard in HR terms. Here the management selected and recruited will already probably come from organizations where HR thinking is well developed and they will be working with performance management systems that are regarded as the norm from day one. It is likely that a clear decision about union membership will also have been made already.

Stage 4 - HRM becomes integral to operations
If the move from Stage 2 to Stage 3 represents a significant shift in thinking then the transition to Stage 4 is an even bigger step, both conceptually and practically. The main reason for this is the obstacle between these two stages referred to as ´people seen as competitive advantage´. Only consciously addressing this hurdle enables an organization to get over it. Lip service and rhetoric does not work. Saying ´our people are our greatest asset´ or ´are our only source of competitive advantage´ counts for nothing. To get to Stage 4 the organization has to put its money where its collective mouth is. So what does it look like in practice?

Budgeting and management information systems change
One simple example is Provident Financial Services in the UK, a business that built 10% extra cost into its staff budgets to allow time for training and coaching on the job. They knew that unless managers had time built-in for this they would never find the time. Another indicator, using the catering business as an example, might be that budgeted staff turnover figures for the coming year dictate how much money is available for recruitment and training. Managers that do not manage staff turnover will be struggling to find the funds to shore up levels of turnover that are higher than planned.

These sorts of indicators, of course, on their own do not automatically mean that the organization has reached Stage 4. There needs to be a whole collection of indicators to earn this position (don´t forget that we are learning the complete art of wine tasting here). Stage 4 sets a very tough standard in terms of HR thinking and action.

Business measurement systems start to produce ´people measures´ rather than just financial and operational measures. This could mean that the annual employee opinion survey starts to correlate employee views and attitudes with actual business performance. Managers who get good employee opinion ratings and are performing well in the business start to become the role models.

In fact, the whole organization´s management information systems start to be regarded as employee, performance measurement systems. Someone actually measures project lead times and identifies who was running and sitting on the project teams that were the best and the worst. When choices for new project team leaders are made these measures are used as the basis for such decisions. Similarly, in an R&D environment, each phase of the product development process is closely monitored so that those staff that deliver what they have to, on time, can be distinguished from others who seem to delay the process or fail to produce an acceptable output.

Line management sees effective HRM as integral to their role
Another significant shift that has to happen is line managers do not just value HRM expertise now, but they cannot do their jobs effectively without it. At Stage 3 they could actually choose whether to include HR considerations in their management decision-making. Now they do not have that option. They are not able to restructure their team or develop new roles (or just agree new job titles) unless this fits with the HR strategy. They also have to actively engage in developing and coaching their staff to meet the needs of the business. It is no longer an optional extra. Managers who do not have these coaching skills no longer work for the company.

Stage 5 - Transition - from operational HR to strategic focus
While the organization is developing a much more strategic perspective on HR, and ensuring that line management follows suit, the emphasis still tends to be on existing business objectives and targets.

An organization at Stage 4 is very well managed, but somewhere along this continuum it needs to move away from super-management methods to a state where everyone in the organization is focused not only on delivering performance today but is thinking about their performance tomorrow.

The production line manager who manages to reduce wastage or scrap parts to very low levels is already thinking about how to redesign the production process to move onto another level of performance entirely.

Stage 5 might be a slight misnomer because it is a transitional phase. At the far left of this maturity model are organizations that are very tightly controlled. There is no freedom to act and decision-making only takes place at the highest levels. In the middle are well-managed organizations, which inevitably include varying levels of controls and accountability. On the far right is an organization where only the strategic direction is set and everyone in the organization translates that into both their day-to-day operations and their forward thinking.

They have to pass through Stage 5 to get to Stage 6. There has to be a period of management enlightenment. The reins have to be completely loosened. Teamwork is absolutely critical if the extremely high levels of performance that can be achieved are to become a reality (have another look at the league table in Appendix 1 to see how far Toyota has moved away from all of its competitors). While the organization may look like it is structured according to a conventional organization chart, one that shows functional silos and reporting lines, the reality is a much more fluid organization. For example, individual managers do not have to get agreement from their own boss every time they are asked for assistance by another department or project team.

You may have noticed that the indicators of each Stage become much more difficult to define clearly and pin down the further along the scale we move from left to right. This is not surprising when we are talking about the difference between a Personnel activity such as using a simple psychometric test for selection purposes at one end and a whole new mindset at the other. Mindsets almost defy categorisation and specific, detailed description. Nevertheless let us try to establish what Stage 6 might look like.

Stage 6 - The organization becomes a whole system
Can you remember when you stopped being a teenager and became an adult? Or how about when you moved from being a trainee to being a fully experienced professional? These may seem like valid questions but they are very difficult to answer because there was never a single point in time when you were transformed from one state to another. In fact, it is not even a continuum. You were expected to act like an adult maybe to go for a job interview but later the same day you acted like a typical teenager with your friends. Or, despite being professionally qualified, whenever you are faced with a completely new challenge you know only too clearly what it feels like to be the ´trainee´ again.

This may not be schizophrenia in the technical sense but we, and the organizations we work for, often manifest schizophrenic tendencies. To make matters worse, sometimes this behaviour is quite conscious and on other occasions we are not conscious at all of the inconsistencies. Let us paint a scenario to explain exactly what I mean in an attempt to provide some real insights into what Stage 6 might feel like if you worked in such an organization.

For a start you cannot use your present frame of reference. Stage 6 organizations are extremely rare, if they exist at all. So you cannot imagine what it might feel like in your own organization because that will not be at Stage 6. Maybe the first fresh perspective is to consider to whom you report. You see even the word ´report´ might be inappropriate. You will still have a nominal boss, but you may work with many other individual managers and teams on a regular, or even a completely ad hoc, basis. This will seem quite natural to you.

You will not feel much frustration. You are already contributing a great deal but you are always coming up with new ideas. The reason you are not frustrated, even if your idea is not adopted, is that you have confidence in the organization´s system for appraising such new ideas. If the idea did not get through this process it was probably for a good reason. You certainly do not feel that any unnecessary barriers have been put in your way.

Send me an email and tell me where you think you fit on the scale and what indicators you use to assess this.

This is an extract from Paul Kearns´ latest book "HR Strategy: Business Focused, Individually Centred." to be published by Butterworth Heinemann early in 2003. He has been developing and refining the concept of the HR Maturity Scale for some years and uses it regularly to help HR teams benchmark their performance and effectiveness. He asks readers to assess the maturity of their own organisation against it and welcomes any debate that this may generate; especially from those who believe they have already overcome the ´HR as competitive advantage´ hurdle and reached Stage 4 or above.

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