An organizational change effort at the Albert Einstein Healthcare network (Einstein Medical) illustrates how companies formulate and use HR strategies to help execute their strategic plans. In the early 1990s, it was apparent to Einsteinâ€™s new CEO that intense competition, scientific and technological changes, the growth of managed care (HMOs and PPOs), and significant cuts in Medicare and Medicaid meant that his company needed a new strategic plan. At the time, Einstein Medical was a single acute care hospital, treating the seriously ill and infirm. His vision was to change Einstein into a comprehensive health care network providing a full range of high-quality services in various local markets.
The CEO knew that this strategic change would require numerous changes in Einstein Medicalâ€™s organization and employee behaviors. Given the highly dynamic and uncertain health care environment of the 1990s, Einstein Medical would require a much more flexible, adaptable and professional approach to delivering services. Based on that, he decided to summarize the goals of his change program in three words: initiate, â€œadaptâ€ and â€œdeliverâ€. To achieve Einstein Medicalâ€™s strategic aims, its HR and other strategies would have to help the medical center and its employees to produce new services (initiate), capitalize on opportunities (adapt) and offer consistently high quality services (deliver).
The CEOâ€™s next question was, What sorts of employee competencies skills and behaviors would Einstein Medical need to produce these three outcomes? Working with the HR head, the CEO chose four: Einstein employees would need to be â€œdedicated accountable, generative, and resilient. They would have to be dedicated to Einsteinâ€™s focus on initiate, adapt and deliver. They would have to take personal accountability for their results. They would have to be generative, which means able and willing to apply new knowledge and skills in a constant search for innovative solutions. And they would have to be resilient, for instance, in terms of moving from job to job as the companyâ€™s needs changed.
Management ultimately judges the HR function based on whether it creates value for the company, where â€œvalue creationâ€ means contributing in a measurable way to achieving the companyâ€™s strategic goals. HR creates value by engaging in activities that produce the employee behaviors the company needs to achieve these strategic goals. Mangers often use an HR Scorecard to measure the HR functionâ€™s effectiveness and efficiency in producing these employee behaviors and thus in achieving the companyâ€™s strategic goals. The HR Scorecard is a concise measurement system. It shows the quantitative standards, or metrics the firm uses to measure HR activities and to measure the employee behaviors resulting from these activities and to measure that strategically relevant organizational outcomes of those employee behaviors. In so doing, it highlights, in a concise but comprehensive way, the causal link between the HR activities, and the emergent employee behaviors and the resulting firm wide strategic outcomes and performance.
Need for such a measurement system can be explained as,
The most potent action HR managers can take to ensure their strategic contribution is to develop a measurement system that convincingly showcases HRâ€™s impact on business performance. To design such a measurement system, HR mangers must adopt a dramatically different perspective, one that focuses on how human resources can play a central role in implementing the firmâ€™s strategy. With a properly developed strategic HR architecture, managers throughout the firm can understand exactly how people create value and how to measure the value creation process.
To create an HR Scorecard, the manager needs three types of information. First, he or she must know what the companyâ€™s strategy is, because (as at Einstein Medical) the strategy will determine what the important employee behaviors and strategically important organizational outcomes are, and how the firm will measure organizational performance. Second, the manager must understand the casual links between the HR activities, the employee behaviors, the organizational outcomes, and the organizationâ€™s performance. Third, the manager must have metrics he or she can use to measure all the activities and result involved, specifically the HR activities, the emergent employee behaviors, the strategically relevant organizational outcomes and the organizational performance. —