Evidence-Based

H R Management

2015 NHRMA Conference

Robert J. Greene

Reward Systems, Inc.

“Evidence-Based”

H R Management

• Other disciplines have morphed – Accounting into Finance

– Sales into Marketing

• They have become “decision sciences”

• We need to be “science-based”

Scientific Method

• State a hypothesis (i.e., increased pay will reduce unwanted turnover)

• Specify the assumptions underlying the hypothesis (i.e., people value pay and turnover is impacted by pay)

• Support your recommendation with all valid and relevant evidence or create your own evidence by testing the hypothesis

Good Policy: “We trust in God: everyone

else must present evidence”

The Practitioner’s World

What “evidence” is used in decisions?

Intuition

It worked at my last job

Pop literature

We have always done

this Guru counsel

“Best” practice

Research

How Do Practitioners Typically Make/Support Decisions?

Make decision and then look for evidence that supports it?

Decision-based evidence making

OR

Search for best available evidence and make decision based on it? Evidence-based decision making

Management will almost certainly

ask the practitioner

What are others doing?

Benchmarking Against Competitors

Competitor Organizations

Our Organization

How Will It Work Here?

Contextual Evaluation

Conceptual Evaluation

Contextual & Conceptual Evaluation Often Ignored!

Use Of Benchmarking In Decision-Making

• Benchmarking has limitations

– Contexts must be the same if “what worked there” will “work that way here”

– Emulation limits opportunity to differentiate your organization

• Decisions based on past only valid if the present and future are the same as the past

Problem With Utilizing Survey Data: 2008 - today

• Economy caused some organizations to freeze/cut pay

• They dropped out of surveys in disproportionate numbers

• If samples from year to year not aligned results were inflated

• Those responding with pay actions ran ahead of market

Value Of Research

• Value depends on the validity and relevance of research findings

• Internal validity is achieved by using sound method… but valid only for that specific case

• External validity = generalizability and this is what is at issue when benchmarking

Elusiveness Of External Validity

• Example: lab research in “Drive”: Impact of external rewards on intrinsic rewards finding only holds for throwing tennis balls at targets (even if internally valid)

• Question: is that generalizable to employee doing a job they would not do for entertainment… and would they do it for thirty years?

• Problem is relevance

The Value Of Research In Decision-Making

• Research that is sound and relevant – Suggests what will be likely to happen

when specific strategies are adopted – Can support or reject “common

knowledge” – Provides an alternative to using

instincts as the primary basis for decisions

– Provides support for recommendations to management; is “evidence”

– Can be used as the basis for reframing issues as conditions and/or objectives change

What impedes use of evidence in practitioner decision-making?

Don’t know it exists

Don’t know how to apply it

Don’t understand

it

Don’t see its relevance to own issues

CREATE RESEARCH

IDEA

CONDUCT RESARCH

ANALYSIS/ FIDINGS

COMMUN- ICATE

CONFIRM/ SUPPORT

SELECTION

IDENTIFY CHALLENGES

DETERMINE ALTERNATIVES

SELECT BEST

ALTERNATIVE

RESEARCHER PRACTITIONER

The (Regrettable) Gap Between Research and Practice

CREATE RESEARCH

IDEA

CONDUCT RESARCH

ANALYSIS/ FIDINGS

COMMUN- ICATE

CONFIRM/ SUPPORT

SELECTION

IDENTIFY CHALLENGES

DETERMINE ALTERNATIVES

SELECT BEST

ALTERNATIVE

INFORMED PRACTICE

RESEARCHER PRACTITIONER

The (Ideal) Road To Evidence-Based Management

Alignment

What do researchers research? * what will get published? * what tenure committee will value? * what practitioners are dealing with?

What will practitioners read? Use? * what address their career interests? * what will address current problem? * what is topical currently?

What Practitioners Read Makes A Difference

Pop Literature Contributes To Fads *Dominated by “new best thing” *Biased, including only successes

Too much “3D” writing Dichotomize; Demonize; Deify

Sloppy use of terminology (e.g., Broadbanding; Competencies)

Reading Habits: Break The Mold? How?

Academics Practitioners

A M J A M R A of M Perspectives

HBR/ Books

HR Magazine

Demonstrate value of reading more broadly?

“Translate” research from A journals?

Create a role in B schools responsible for building the bridge? Adjuncts? Advisory boards?

BRIDGE

SIOP Prof. Practice

Series

SIOP I & O Psych

W A W Journal

Work span J A P

Where Do We Start?

• Recognize when there is a lack of knowledge on the part of practitioners (Rynes research)

• Identify the causes of the disconnect

• Address the causes

• Track the impact of more informed decision-making and actions

• Communicate the value of EBM

Let’s Test Our Knowledge: True or False?

• “Increasing employee satisfaction will increase productivity”

• “Conscientiousness is a better predictor of performance than intelligence”

• “There will be no difference between rating distributions whether or not the manager must share the rating with the employee being rated”

• “Encouraging participation in decision –making impacts performance more than setting performance goals”

Let’s Test Our Knowledge: True or False?

• “Increasing employee satisfaction will increase productivity”

• There is no strong evidence for this

• There is strong evidence that it will positively impact attendance and unwanted turnover

• Moral: Only promise that which is likely to result from increasing satisfaction

Let’s Test Our Knowledge: True or False?

• “Conscientiousness is a better predictor of performance than intelligence”

• False. G (general intelligence) is the best predictor

• Many believe conscientiousness SHOULD BE the better predictor… we all have seen brilliant people who accomplish nothing and others do a lot with less

• Moral: Select based on both… this produces the best predictive model

Let’s Test Our Knowledge: True or False?

• “There will be no difference between rating distributions whether or not the manager must share the rating with the employee being rated”

• False. Ratings on a five point scale not shared with employees typically increase by a full point when they now must be shared with employees

• Moral: Make sure there is consistent communication of ratings

Let’s Test Our Knowledge: True or False?

• “Encouraging participation in decision –making impacts performance more than setting performance goals”

• False. Setting clear performance goals results in more positive impact on performance than participation in decision-making

• Moral: Value goal-setting and feedback as a tool for improving performance (p.s., set goals in advance and communicate continuously)

Lessons To Be Learned From This “Test”

• Using available and credible evidence

is prudent… want your surgeon to do that?

• Practitioners have poor understanding – median score of 20; guessing would be 18 (35 T F questions)

• Research evidence does not always support what we believe, due to intuition or personal experience

• We more easily accept that which is consistent with our beliefs/what we think should be

Example Of Underutilized Research Evidence

• A “realistic job preview” has a significant impact on unwanted turnover in first 18 months

• Think about impact of what a candidate/new hire is told about how performance is rewarded

• Pay secrecy has a negative impact on satisfaction (Lawler)… how much do you tell employees?

Example Of Underutilized Research Evidence (Cont.)

• Unstructured one on one interviews shown to be the least valid selection tool

• Guess which is still the most common approach

• Biases impact perceptions: – Appearance; like me?

– Culturally mandated behaviors; • Over or under state qualifications

Practitioners Need To Understand

The difference between correlation and causation

The difference between causation and reverse causation

Example

Satisfaction Performance ?

Practitioners Must Understand Quantitative

Analysis Principles

Example: When comparing to market the statistical measures used (median; mean) make a difference in validity of analysis

Example: Using multiple regression and other exploratory methods can help to determine what really causes what

Example: Developing, testing and applying hypotheses provides a sound basis for decision-making

Hypothesis Formulation

• Develop a “If A, then B” hypothesis that identifies what needs to happen in order to close “is… should be” gaps

• Make explicit the assumptions

• Construct an experiment to determine if the hypothesis is supported

• Determine if the results are valid in other contexts (e.g., other company locations if a pilot is done in one location)

Example Of A Hypothesis

• “If salaries are raised by 10% turnover will drop by a third”

• Assumptions: – Higher pay leads to better retention – Pay is the reason people are leaving – Other factors are not causing turnover – What others do you think are implied?

• Formulate a hypothesis in the form “If A, B,…X, then turnover will decline by C” (in other words, put in all the factors you believe would impact turnover)

Testing The Hypothesis

• Develop a practical experiment that would test your hypothesis without creating negative side effects (for example, raising salaries for some people might cause some difficulties with others)

• Be sure that you are prepared at the end of the experiment to clearly specify the benefits and downsides for proceeding

Example: Functioning As A Business Advisor

VP of Engineering reports to CEO that they are missing R&D objectives because ‘high’ turnover is causing poor performance

HR should not respond with a quick fix to the ‘problem’:

e.g., “We need to raise pay for Engineers to lower turnover”

An Appropriate Response

• “We have worked with Engineering management to identify what is causing the loss of valuable personnel, since this is causing us to miss our R&D objectives

• We conducted focus groups with Engineers • We analyzed the nature of the turnover • We evaluated the workforce skill mix and

compared it to the mix of work • We evaluated our pay structure compared

to the market

• AND OUR FINDINGS ARE…”

Total Turnover

Voluntary Involuntary

Functional Dysfunctional

Unavoidable Avoidable

(Dysfunctional)

Internal Functional Dysfunctional

Dysfunctional Turnover: Too High?

12% 6%

6%

29%

3% 14%

External 17%

4% 10%

5% 5%

Current Staff Mix In Engineering Compared To Work Mix

Current Staff Mix

Consultant 20%

Senior 45%

Intermediate 30%

Developing 5%

Work Mix Required

Consultant 10%

Senior 25%

Intermediate 45%

Developing 20%

Conclusions: We are overstaffed at the most senior levels, resulting in work being done by people who are overqualified, too expensive and not motivated or challenged by lower level work… and “doing rookie work” has led to dissatisfaction on the part of senior people… not working at leading edge

Comparison Of Pay Structure & Pay Rates To Market Levels

Market Midpoint Avg Pay

Consultant 145 128 138

Senior 110 100 90

Inter-mediate

85 80 70

Developing 60 60 55

Making Recommendations Informed By Evidence

• “We have identified a source of much of the dysfunctional turnover to be attributable to our pay ranges being low relative to market: we recommend adjusting them to market”

• “We recommend making equity adjustments to bring current pay rates to competitive levels”

• “We recommend hiring at the entry level and investing in training, to over time align the workforce mix to work mix”

Bottom Line: Make HR A Decision Science

• Accounting has evolved into Finance

• Sales has evolved into Marketing

• Both increasingly use science in their practice

• Being a “staff function” is fatal in today’s world

• So let’s transform HR into a decision science

You Can Impact The Quality Of Decisions… Success Depends On:

• How you prepare yourself

• How you define issues/alternatives

• How you formulate hypotheses

• What evidence you use to decide

• How you present recommendations

• How you implement strategies

• How you evaluate outcomes

And when the answers are not clear…

Don’t hesitate to consult wizards

Robert J. Greene PhD, SHRM-SCP, SPHR, GPHR, CPHRC, CCB, CBP, GRP

• Reward $ystems, Inc. • 1917 Henley, Glenview, IL 60025-4242

• RewardSystems@sbcglobal.net

• RobertJGreene.com

• 847-477-3124

• Mission: “Helping Organizations

Succeed Through People”