It might not immediately strike you, but there are some serious implications for HR management thinking arising from the sub-prime mortgage fiasco. This started in the US and resulted in a credit crunch that has already brought two high-profile banks to their knees – Northern Rock in the UK and Bear Stearns in the US.
The main lesson is: if you are going to copy ‘American’ business and management models, be very careful that you copy the best of what the US has to offer and not the worst.
One UK-based organisation in particular, the Royal Bank of Scotland, had a declared aim of being “one of the most admired global financial services organisations”, and launched its own business school in 2006 using programmes run by American business schools Harvard, Thunderbird and Duke. This ambition is currently lying in tatters as RBS recently appealed to shareholders to provide emergency funding through a £12bn rights issue, amidst calls for its chief executive to resign.
HR people will also know that the HR team at RBS have, for some years now, been telling anyone who will listen that they can show a connection between employee engagement and the bank’s performance. So what conclusions do they now draw when the correlation has gone so sour?
No doubt the employees of US mortgage dealers were totally engaged with their business’s aims and objectives – to make a fast buck and not think too much about the long-term consequences of their actions. They knew plenty of banks would be queuing up to buy their dodgy mortgage debts at discount prices even though many of their customers would be unlikely to keep their homes.
This is just one glaring example of what happens when an organisation makes an ‘investment in a belief’ – particularly if that belief is based on shaky theories and practices that are not supported by any clear evidence that they work.
This is not new for the Americans though – they have a long history for making up in academic hype and marketing prowess what their methods fail to offer in substance. One should never generalise, of course, especially in these politically correct times. But when the contra-evidence starts to mount perhaps we should be forgiven for thinking the unthinkable. And the question I find myself asking with increasing regularity is: ‘Do the Americans have a clue about what good HR is?’.
I speak as someone often pilloried for being opinionated, so maybe I should at least keep my references close to my own specialisms of measuring and evaluating the impact of HR and learning strategies. In these fields, I have become well acquainted over many years with the works of American ‘gurus’ such as Dave Ulrich, Jac Fitz-Enz (founder of the Saratoga Institute) and Kirkpatrick and Phillips (Donald and Jack) in the areas of training evaluation and return on investment. Without wanting to bore HR practitioners whose interests lie elsewhere, it only takes a few minutes to reveal glaring errors and omissions in the work of these ‘experts’.
It was Ulrich who promoted correlating HR practices with business performance, Fitz-Enz erroneously correlates inputs (eg, training hours per employee) with outputs, and both Kirkpatrick and Phillips try to do the impossible, measure the impact of training without establishing a baseline first.
Anyone holding down even the most menial of HR jobs is intelligent enough to see how obvious these flaws are, but they do tend to produce clones. Nevertheless, it takes a particular type of intelligence among some HR directors to try and keep convincing their chief executives that these ’emperors’ have any clothes.
It could just be a coincidence that these worst examples of American management thinking reside in the HR community. However, is it not exactly the same sort of strategic thinking that produced the ‘shock and awe’ tactics in the Iraq war and yet failed to consider what the longer-term, practical implications of invading another country were? I think it’s time we looked elsewhere for our future role models.
Paul Kearns, director, PWL