Effective human resources strategies and people operations are an essential part of any successful organization. People are at the heart of business.
Think about it – how can your business achieve results without them? You need people to make the widgets, sell the widgets, ship the widgets, etc. In service-based businesses, who delivers the service? People. This article takes a look at organizational development, and how HR can align the people within your organization to your organizational development goals.
Not only does a business need people, but they need the right people. Talented people. People that have the knowledge and skills to execute their job tasks to take the company where they want to go. People with the right attitude that fit your organizational culture. People that perform at or above your standards, people that can grow within your organization, and that will stay with your company for as long as possible.
Strategic HR is all about strategically managing your greatest resource – your humans – to obtain a competitive advantage for the business.
HR and the Lifecycle of an Employee
To ensure that organizational strategies are executed and goals are met, HR must:
- Develop your employer brand to attract and hire the best talent.
- Ensure successful employee onboarding.
- Create and deliver learning and development initiatives.
- Ensure proper rewards and incentives are in place, including a clear benefits and compensation policy.
- Work to increase employee satisfaction and engagement to boost productivity and performance, and to ensure the accurate management and evaluation of that performance.
- Implement effective retention strategies, while also ensuring seamless employee exits.
This is the life cycle of an employee. HR professionals must create and deliver effective HR strategies to move the needle forward for your organization on overall business objectives and goals.
As I wrote in my book Intentional HR: A Revolution in Strategic Thinking, “HR is responsible for the people within an organization, which is undoubtedly the most important aspect of a business and has monumental impacts to the bottom line. Gallup’s 2017 State of the American Workplace report, and the book The Employee Experience Advantage by Jacob Morgan both clearly illustrate that, when a company has a strong HR foundation and is strategic in the right way, the company’s performance soars. Businesses have four times higher profit per employee, three times higher revenue per employee, four times the average profit, two times the average revenue, and two times the employee growth.”
As you can see, HR makes a big impact on a business. But what is HR’s place in organizational development?
I can tell you that HR plays a large role in organizational development. HR strategies and initiatives and people are within every segment of a business. To understand how HR is involved in organizational development, it's important to first understand what exactly it is.
What is Organizational Development (OD)?
The Organizational Development Network, an organization committed to advancing the science, practice, and impact of OD, provides a great history of how the definition of OD has changed over time. OD as a concept and practice came about after WWII. It has since evolved in response to the changing needs of both businesses and communities.
In 1969, Richard Beckhard’s book Organizational Development: Strategies and Models provided a foundational framework for OD, describing it as “an effort that is planned, organization-wide, managed from the top, increases organizational effectiveness and health, through planned interventions in the organization’s “processes”, using behavioral-science knowledge.”
To break this complex concept down further, the University of Pennsylvania explains Organizational Development as a “field of research, theory, and practice dedicated to expanding the knowledge and effectiveness of people to accomplish more successful organizational change and performance.”
In a nutshell, Organization Development is a means of optimizing an organization’s effectiveness and improving the achievement of business objectives. It is achieved through effective workforce planning, training, and utilization of the knowledge and skills of the people within the organization.
Organizational Development Vs. Business Strategy
The term “Organizational Development” seems pretty straightforward – it’s the development of an organization. Pretty simple, right? However, thinking of Organizational Development in this manner is a very simplistic view of a rather thorough and structured practice. Many may even confuse organizational development with general business strategy.
Business strategy is also focused on progressing the business forward to achieve success. This success might be defined by profit, maximizing shareholder value, family legacy, or even social impact. However, business strategy and organizational development are not the same.
Kauffman FastTrac defines business strategy as “your map [to] determine the direction of your business and what you want it to look like in the future…once defined, your business strategy sets priorities for the company and management team.”
The Association for Talent Development defines Organization Development (OD) as “an effort that focuses on improving an organization’s capability through the alignment of strategy, structure, people, rewards, metrics, and management processes. It is a science-backed, interdisciplinary field rooted in psychology, culture, innovation, social sciences, adult education, human resources management, change management, organizational behavior, and research analysis and design, among others.”
As you can see, Organizational Development isn’t as simple as “developing an organization”, and it isn’t quite the same as your general business strategy.
Why is Organizational Development Important?
To be successful, an organization must have a plan and clarity on strategic objectives. This is essential to guide the organization and achieve desired results. Without a vision, mission, and solid strategic planning, it becomes easy for any company to lose their way and stray further away from profitability and growth.
Organizational Development is important to driving profitability and growth, as it is a critical part of strategic planning, and keeping an organization headed in the right direction.
Sampson Quain, writing from CHRON, states in an article that Organizational Development “affects every aspect of decision making” as it determines the “use of organizational resources to improve efficiency and productivity in the workplace… boost[s] employee morale… and extends to how [businesses] solve problems within [the] company as well as the ways in which you analyze a process to find a more efficient way of doing it”.
When a business engages in Organizational Development, gap and opportunity areas are identified where productivity can be maximized. For example, by making changes in job tasks, processes, and procedures, allowing the company to grow in alignment with their overall strategic plan. This keeps the organization headed in the right direction, and also works to drive innovation and development in products, services, and employees.
Successful organizational development has a direct impact on the bottom line, as redundancies are eliminated, production and service delivery are streamlined, and appropriate resource allocation reduces unnecessary expenditures.
HR’s Place in Organizational Development
People are at the heart of every organization, as they are the individuals performing the work that is necessary to maintain operations. HR is of course the function responsible for the people within the organization. HR also ensures that the people are performing in alignment with company values and objectives.
The Academy to Innovate HR (AIHR) describes organizational development’s ultimate goal as to “increase the organization’s competitiveness in order to create a business that wins in the marketplace. This can be done through increasing profits, margins, market share, morale, culture values, or other sources of competitive advantage.”
HR is heavily involved in creating this competitive advantage through designing effective people strategies, implementing workforce plans, and designing appropriate OD processes and OD interventions that fit the needs of the organization.
Typically, HR’s part in organizational development will focus on talent management interventions, team dynamics, job design, culture development, and change management. What each organization needs will differ based on their particular challenges and goals. It may be that HR must assist in an entire organizational restructuring, determining what positions are needed (and when), as well as appropriate reporting structures to maximize communication and efficiency.
Reviewing job tasks and design through job evaluations is another intervention that HR is primarily responsible for. Though the HR practitioner generally works in tandem with operational managers to determine the technical aspects of positions to determine their essential duties, HR crafts the job descriptions.
Performance and Talent Management
Once appropriate job designs are in place, appropriate performance metrics must be determined, and talent must be evaluated against those metrics. Employees must also be developed to be successful in the performance of job duties, as well as to prepare for future roles within the company.
Continual culture development is another important aspect of organizational development that HR takes a large part in. Per Walden University’s studyThe Impact of Organizational Culture on Corporate Performance, “lack of effective organizational culture and poor performance integration in the corporate group affect organizational performance and decrease shareholder returns.”
HR is a key driver of the creation and continual development of company culture, as it is present throughout the employee life cycle. Specifically, employee performance metrics are usually tied to company culture – including the organization's mission, vision, values, and core competencies. How employees are recognized and rewarded also depends on the company culture. Company culture is reflected in company policies, corrective action, and management practices as well.
People are naturally resistant to change. HR is a driver of successful change management. It is HR’s job to ensure employee buy-in to avoid any decline in employee engagement and morale, and to avoid employee turnover – all of which have an impact on the organization’s bottom line. As engagement and morale decrease, productivity declines right along with it.
Turnover is costly as well, and retention strategies are important for HR to implement when organizational development interventions are designed and advanced within the company.
Recruitment’s Place in Organizational Development
In Richard G. Luecking, Ed.D’s white paperDoing it the Company Way: Employer Perspectives on Workplace Supports for the George Washington University Health Resource Center, he writes that “Common employee-focused OD interventions include coaching, training, performance appraisal systems, job analysis and descriptions, and process improvement.”
Workforce planning, job analysis, and job descriptions are key starting points in the recruiting process. These are needed for a company to identify recruiting tools, recruit the talent needed at the right time, communicate the essential duties of a position, and find and attract candidates that can effectively perform the job functions needed.
Luecking’s paper provides a great example of the intersection of organizational development interventions with recruiting, as it relates to individuals who commonly face barriers to employment due to disabilities.
He writes “…successful companies get the most out of their employees, and doing so requires processes, interventions, and supports that exploit individual’s strengths. In the absence of these processes and supports, any employee is likely to experience difficulty in the workplace. For people facing workplace barriers, including those with disabilities, there is an even greater likelihood that they will struggle without internal company systems and supports that contribute to optimal company operation. In fact, one might ask how likely it is that people with disabilities will be considered at all for positions in companies where, in addition to less than optimal processes and supports, there are conflicting perceptions about employee roles.”
Though Luecking wrote specifically regarding those with disabilities, this example can transfer to recruiting of any individual. Organizational Development interventions provide clarity in company culture, which should influence the individuals the organization seeks to attract, as well as the employer’s brand in the labor market.
Organizational Development interventions provide clarity on organizational structure, job tasks, and workforce planning, which is essential for recruiting the right talent at the right time. Performance management and internal career pathing are also informed by OD interventions.
Understanding the future trajectory of a position a recruiter is seeking to fill is vital in understanding how the future potential of a candidate can serve the organization over time, as they perform well and are promoted.
Internal Promotion’s Place in Organizational Development
HR works in collaboration with managers and leaders to determine criteria for internal promotion. When a position becomes available (or a new position is created), employees may be objectively reviewed to determine if they are ready to take on additional responsibilities and a move to the next position within an internal career path. Using quantifiable data to identify leadership potential is the best strategy.
Creating career paths is an excellent tool for employee retention, and in determining employee training and development needs. This ties into organizational development interventions, and here’s why: Strategic workforce planning, job evaluation, analysis, etc. uncover current skill gaps among staff, as well as future talent needs, to support company growth. Mentoring is one aspect of career development OD practitioners can focus on as it aid both the employee experience and leadership development within the organization.
Succession planning is an activity conducted to ensure business continuity. As per Knowledge Management Solution Inc.’s white paper by Jack E. Lee titled Succession Planning and Organizational Development with KMx, “the knowledge and skills required for the organization to function are the double-stranded helix of instructions that must be encoded and conveyed to each individual contributing to the success of the organization… the execution of a successful succession plan will require that measures be in place to determine which individuals are best prepared to perpetuate the organization’s DNA code.”
For a business to sustain operations, achieve strategic goals, and optimize their competitive advantage (the point of organizational development), succession planning becomes a critical Organizational Development intervention. To effectively conduct succession planning, identification of key roles and career paths, as well as the necessary resources and criteria for internal promotions promotions should be an ongoing part of the organizational development process, and employee development plan..
Aligning the Professional Development Strategies of Your Workforce
When embarking on your OD journey, it’s important to align the professional development strategies of your workforce with your overall business goals.
Continuous improvement and professional development of internal talent is something many individuals have come to expect from their employers. However, if you aren’t ensuring a connection between the skills development initiatives you’re implementing and the ultimate results you want to achieve, you can very easily get off course. This can lead to employees feeling frustrated.
Employees may perceive unaligned professional development activities are a waste of their time, as these activities do not apply to their current role or one in which they can see themselves being promoted. When this occurs, your workforce may experience a higher level of disengagement, negatively impacting productivity, workplace morale, and ultimately your bottom line.
Stick to your Strategic Goals
Before designing an intervention around professional development and implementing learning and development strategies, you must consult your business processes, business plan, and strategic goals. Then identify what skill development programs would best serve your organization as a whole, individual employees (such as those identified as high potential employees in succession planning activities), and your organizational development interventions throughout the organization.
For example, if you have identified the need for an OD intervention related to a specific process to streamline and optimize that process, training is in order. Technical development seems like a no-brainer, but what about other professional development, such as management and leadership skills and “soft” skills? Time management training, change management training, and other professional development courses can be a great support to your OD interventions, helping you to upskill your workforce while also gaining their buy-in. This also points this whether the OD interventions you need are group interventions or interventions aimed at specific stakeholders.
Communicate the Why
Another component to ensure alignment with your Organizational Development interventions and professional development is clear communication and transparency. When employees are made aware of the why behind your strategies and action plans, they are much more likely to embrace them. This is because the positive investment into their career is an evident result of the time and work they put in.
I recommend determining specific results you wish to achieve with each professional development activity before implementation. Gather information that supports how the activities will enhance your OD interventions and progress the company forward. One way to do this is using S.M.A.R.T. goals. These are goals that are Specific, Measurable, Attainable, Relevant, and Time-Bound.
When using S.M.A.R.T. goals, you’ll list information related to each letter of the acronym. This is a great way to verify if the professional development plans you wish to proceed with truly are aligned with your organizational development strategies.
Measure Progress with Key Metrics
Anything worth doing is worth measuring. After all, how will you know that your OD interventions are making a difference? Tracking key HR metrics related to OD interventions is essential to ensure you are garnering the results you wish to achieve.
Which metrics you track will of course depend on which OD interventions you implement, but standard HR metrics can include:
- Active headcount: For workforce planning, continuity, and growth.
- Attrition/Turnover rate: For pattern recognition regarding separation reasons and monetary losses associated with turnover.
- Compensation metrics: For retention purposes and to create a competitive advantage in the labor market
- TCOW (Total Cost of Workforce) metrics: Specific to pay, total rewards, and labor costs associated with recruiting and onboarding.
- Employee engagement, satisfaction, and well-being scores: To promote your desired company culture. Specific employee engagement metrics in this area can include absenteeism (absence rate and absence cost), your Employee Net Promoter Score in feedback surveys, and Glassdoor reviews, as well as patterns of performance over time.
- Recruitment metrics: Including key recruitment KPIs such as cost in dollars, time to fill, quality of hire, applicants per role, and new hire failure rate.
- Talent rating: This includes tracking internal hires and promotions.
- Time to proficiency: For new hires.
- Training costs
- Average tenure
Many payroll and HRIS systems today have data and analytics dashboards that track and measure these metrics for you at the click of a button. At the very least, many have robust reporting capabilities that can allow you to track such metrics, allowing you to identify how your OD interventions are impacting your company over time.
Creating a Leadership Development Plan
Once you’ve aligned your professional development strategies with your organizational development initiatives and overall strategic goals, it's important to take the next step and create individualized leadership development plans.
These are detailed plans to help high-performing, high-potential individuals gain the knowledge, skills, and experience necessary to ascend the ranks of your organization. Either as part of an official succession plan or as a part of general professional development activities within the company.
The Need for Skills Development
You may think that developing the skills of individuals who are not identified as pertinent to succession planning is a waste of time and resources. However, 2020 ManpowerGroup research has shown the global talent shortage has almost doubled in the last decade.
54% of businesses around the world reported significant skill shortages and difficulties attracting talent in 36 of 44 countries. Korn Ferry showed in their Future of Work report that by 2030, more than 85 million jobs could go unfilled because there aren’t enough skilled people to take them. Per the report, that talent shortage could result in about 8.5 trillion dollars in unrealized annual revenues.
This is not a surprise though. The 2018 World Economic Forum reported in their Future of Jobs Report that 54% of all employees will require significant reskilling and upskilling in just three years – and here we are over three years later, with a tight labor market and many organizations in need of upskilled and reskilled workers.
The 4 Components of a Leadership Development Plan
The International Institute for Management Development outlines four main components that are essential in leadership development plan design. First, they list creating a vision, to “set the overall tone of voice for the professional development strategies” to “ensure you will be able to bridge the gap between your current situation and the things you want to achieve”.
Next, a clear timeline is called for. The article states “having a clear and very specific timeline for achieving results will ensure you make your vision a reality. It will push you further to take specific actions…[and] lead you to make pro-active steps.”
This is followed by including “specific action steps that can be measured daily, weekly, or monthly”. This is where those S.M.A.R.T. goals I previously mentioned can be especially helpful. Using the S.M.A.R.T. formula will help you to identify ways to measure progress and effectiveness, as well as key performance indicators that can be regularly and frequently monitored.
This regular and frequent monitoring is the last step in creating a leadership development plan. As per the article, “you need to regularly reassess your leadership development plan to keep it relevant… [and adjust it] in order to address the deficiencies and problems encountered”. As challenges may come up, it’s important to be proactive in thinking of ways to either avoid or overcome them, and to ensure that your leadership development plans remain flexible.
Some Last Thoughts on Organizational Development
HR is clearly a major player in organizational development and should play a key role in how and why you implement changes for continuous improvement in this field. OD interventions, and the transformational change it brings, affect the people in the business, and HR is responsible for these people. Human resource management plays a large part in company culture, people data collection, talent acquisition, total rewards, retention, professional development, performance management, change management, and more. All of which are critical components of organizational development. Though you may not need OD interventions in all of these areas at one time, they do all intersect and have profound impacts across the organization.
Before you embark on an organizational development initiative, be sure you have the right HR partner in place to help guide you and support your OD interventions in your workforce. Your human resources department is a strategic partner that can help your business to gain the competitive advantage you want, achieve your business goals, and implement your OD interventions more seamlessly to attain your desired outcome.