Human resource competencies: An empirical assessment

zyz Dave Ulrich, Wayne Brockbank, Arthur K. Yeung, and Dale G. Lake I - With data from 12,689 associates of human resource (HR) professionals in 1500 businesses in 109 firms, this research represents an extensive assessment of HR competencies. It extends current HR theory and practice in two ways. First, it proposes specific competencies HR professionals may demonstrate to add value to a business. Second, it offers an empirical assessment of how these competencies affect the performance of HR professionals as perceived by their Associates. The results indicate that when HR professionals demonstrate competencies in business knowledge, delivery of HR, and management of change, then HR professionals are perceived by their associates as more effective. zy zyxwvutsr 0 1995 by John Wiley & Sons, Inc. INTRODUCTION In the last decade, the role and responsibility of human resource (HR) professionals have changed dramatically (Dyer, 1984; Bowen & Greiner, 1986; Ulrich, 1987a). For years, HR professionals often faced closed door status; they were often perceived as second team players trying to gain access to key decision making forums. In more recent years, many HR professionals have successfully become business partners, have new opportunities for professional growth, and have greater opportunities to be active builders of their firms’ competitive advantage (Schuler & MacMillan, 1984; Ulrich, 1994). While the transition in HR roles and responsibilities has been well discussed (see Tichy et al. 1984, Schuler & MacMillan, 1984; Ulrich, 1986, 1994), much less discussion has occurred about what Competencies are required for HR professionals to fulfill their new role. This article (1) proposes a model for HR competencies, then (2) tests the model with information collected from 12,689 individuals in 1500 businesses in 109 firms. The proposal and testing begin to answer the overall question: What are the competencies required for successful H R professionals? We intend for this article to be a milestone in moving beyond the call for a new role for HR professionals to actually specifying specific competen- zyxwv zyxwvutsr Human Resource Management, Winter 1995, Vol. 34, Number 4, Pp. 473-495 Q 1995 by John Wiley & Sons, Inc. CCC 0090-4&48/95/040473-23 zyxwvu zyx cies that HR professionals must demonstrate to become full business partners. A RATIONALE FOR HUMAN RESOURCE COMPETENCIES Competency refers to an individual's demonstrated knowledge, skills, or abilities. While a number of papers have explored the requirements for effective HR departments (Boudreau, 1983; Tsui, 1984; Cascio, 1987; Ulrich, 1989a), little work has been done to conceptually or empirically identify competencies required of HR professionals. Competencies for HR professionals may be defined either by the insights of senior managers and other internal customers or by an empirically tested conceptual framework. Many firms follow the former approach, by appointing an HR competency task force which interviews a number of senior managers and other internal customers, then categorizes these interview data into a competency model. While tailored to the needs of a particular firm, this approach does not develop a broader perspective of HR competencies across firms. An alternative approach to defining competencies builds a theory, or logic, as to what competencies are necessary, then collects data to test against that theory. We propose a simple theory of HR competencies which suggests that HR professionals demonstrate competence when they add value to their business. They add value by ensuring that they deliver ideas, programs, and initiatives to their business which helps the business compete. Thus, the value of HR professionals resides in their ability to create competitive advantage thereby positively influencing bottom-line metrics (Ulrich 198%; Pfeffer, 1994). This value-added reasoning is based on a five step causal logic which results in the defining competencies of HR professionals: (1) business conditions are changing dramatically; (2) organizations, to respond to turbulent conditions, must focus resources on sustained competitive advantage; (3) competitive advantage comes from generating sources of uniqueness not easily replicable by competitors; (4) organizational capability is a unique set of organizational attributes that provides values to buying customers and may not easily be replicated; (5) HR practices are central to the creation and maintenance of organizational capability. If HR professionals develop the competencies to design and deliver practices which build organizational capability, they create and sustain unique sources of competitive advantage. HR professionals demonstrate competence when they help their firms compete. A FRAMEWORK FOR HR COMPETENCIES For the last decade2 debates on HR competencies have been consistent with the value-added framework we propose. Walker (1988) sug474 I Human Resource Management, Winter 1995 z zyxwvutsrq zyxwvuts zyxwv zyxwvut HR FUNCTIONAL EXPERTISE KNOWLEDGE OF BUSINESS MANAGING CHANGE Figure 1. Framework for HR competencies. gested that HR professionals may develop competencies on four dimensions: functional, business, role, and style. Eichinger (1987) suggested six leadership areas for HR competencies: cognitive complexity and agility, achievement directed assertiveness, interpersonal effectiveness, personal management, business savvy, and job skills. Burke (1989) suggested five management practices that impact HR competence: ensures effective HR practices, facilitates group relations, assesses business impact, encourages innovation, and gathers information for action planning. In firm-specific studies and the resultant discussions2 of competencies at Amoco, AT&T, Digital Equipment Corporation, Eastman Kodak, General Electric, Hewlett Packard, Honeywell, and Pfizer, similar competencies have been identified as critical to HR professionals. Consistent with previous discussions on HR competencies and based on our view that HR professionals must add value, a three-domain framework for conceptualizing HR competencies is proposed: knowledge of business, delivery of HR, and management of change processes (see Figure 1). Knowledge of Business HR professionals add value to an organization when they understand how the business operates because it helps the HR professional adapt HR and organizational activities to changing business conditions. Knowing the financial, strategic, technological, and organizational capabilities of an organization is a necessary condition of entry to any strategic discussion. HR professionals who are knowledgeable exclusively in industrial, employee, or human relations may be fully competent in their discipline, but may fail to understand the essentials of the business in which their firms compete. Some HR professionals know the technology of human resources but are unable to adapt that technology to business conditions. Business acumen requires knowledge, if not direct operational experience, in functional areas such as marketing, finance, strategy, technology, and sales in addition to human resources. The competence required of HR professionals in ”knowledge of the business” is not zyxwv zy Ulrich et al.: Human Resource Competencies / 475 zyxw the ability to do all the business functions, but the ability to understand them. Delivery of HR Practices HR professionals, like any other staff function, must be experts in their specialty. Knowing and being able to deliver state-of-the-art, innovative HR practices build credibility of HR professionals. As described by Tichy et al. (1984), Tsui (1984), and Ulrich and Lake (1990), HR practices may be delineated into six categories: staffing, development, appraisal, rewards, organization design, and communication. HR professionals who are perceived as being competent in these categories (depending on experience and position) will be seen as credible designers and implementers of HR systems. Credibility and professional respect evolve from HR professionals being seen as competent in their unique area of expertise. Competence in the “delivery of HR practice” goes beyond knowledge and requires that the HR professional be able to deliver HR practices to organizational members. Management of Change Processes As the pace of change increases outside businesses (e.g., globalization, information flow, customer expectations, technology), HR professionals will not be competitive unless the rate of internal adaptive change is commensurate with that of the external environmental. Businesses with a greater capacity for change will be more competitive over time. Individual resistance to change often keeps organizations from adapting a s quickly as desired. By having competencies to manage change processes, HR professionals can help other organizational members manage change, thus creating an overall organizational capacity for change as a key source of competitive advantage. HR professionals who have competencies to manage change processes demonstrate the attributes of an outstanding change agent (Tichy, 1983); they are able to diagnose problems, build relationships with clients, articulate a vision, set a leadership agenda, solve problems, and implement goals. By demonstrating competence in change, HR professionals will have competencies which will survive the selection test.3 The competencies exhibited in the management of change are knowledge (of change processes), skills (as change agents), and abilities (to deliver change). Based on the requirement of HR professionals to add value to their firm, we hypothesize that HR professionals who demonstrate competence in each of these three domains (knowledge of business, delivery of HR, and management of change processes) will be perceived by their work Associates as more effective. (See Figure 1.) zyx zyxwvutsr zyxwvuts 476 I Human Resource Management, Winter 1995 zyxw zy zy zyxwv Given this framework, our research explored a series of questions about competencies of HR professionals: OVERALL RESEARCH QUESTION: What are the most critical competencies for H R professionals to be effective in their job? SUB-QUESTIONS: A. Do HR competencies vary by: 1. Time: Do results vary over time? 2. Industry: Are required competencies different in different industries? 3. Respondent: Are required competencies different by job title of respondent? 4. Primary role: Are required competencies different by primary role of the HR participant? 5. Geography: Are required competencies different by country in which HR professional works? 6. Size of business: Are required competencies different by size of business? B. How are HR competencies related to business performance? zyxwvu zyxwvu The answers to these questions will shed insights on competencies expected of HR professionals. SAMPLE AND MEASURES To test the above framework and answer the questions, data need to be gathered from more than one organization so that idiosyncratic organizational demands do not bias the data. The test also requires that perceptions of the competencies and effectiveness of HR professionals should come from Associates of HR professionals, not from the professionals themselves to avoid self-report bias. The study reported here began in 1988 and continues through today. Two major waves of data collection (1988/1989and 1991/1992)which are reported here were conducted. The data were collected by asking Associates of HR professionals4 to rate their perceptions of the HR professionals’ competencies in each of the three domains. Associates were defined to include those individuals within the Participants’ companies who were familiar with the Participants’ functioning as HR professionals. This definition included Participants’ internal customers and other business associates (e.g., members of the Participants’ departments). This 360 degree approach provided extensive information about HR competencies from HR professionals themselves and from peers, subordinates, supervisors, and internal customers. The sample is summarized in Table I. It indicates that we have a zy Ulrich et al.: Human Resource Competencies / 477 zy zyxwvutsrqponmlk zyxwvuts zyxwvu zyxwvutsrqponml zyxwvutsrq . zyxwvutsrqp Table I. 3 R 2 0 3 ?? 2 Time 1 (1988/ 1989) \Z HR Participants Returned Associates Returned Response Rate Firms Represented Businesses Represented (1) Most admired companies in Fortune (2) 50 largest US employers (3) Firms with relationships with research team 2,100 1,407 8,884 70 % 91 1,200 (1) Orginal 91 firms (57 1,400 % zyxwvutsrqpo G 5 B 1 Survey Packets Sent Sample Selection Criteria s! ss Sample and Data Collection. c u) Time 2 (1991/ 1992) u u l) Total 751 3,805 52 % 75 441 participated) (2) Research team contacts with firms outside US (3) Requests by firms to join data base 1,928 (230) partici- pated in both rounds) 12,689 109 1,500 (firms in total data set) (businesses in total data set) zyx zyxwvu zyxwv Table 11. Characteristics of the Data Set (All Associates). ~ ~~ Time1 Time2 10,291 4,556 - - N (total sample) Respondent Associate Participant Sex Male Female Functional Specialty of Associates General management Financelaccounting Manufacturing/ production Marketinglsales Planning R&D HR Other Relationship of Associate to Participant Supervisor Peer Subordinate Client Primary Role of Participant Individual contributor Manager of ind. contribs. Director of managers General manager Primary Function of Participant Affirmative action Benefits Compensation Communication HR Planning LaborIIR Medicallsafety Org. Development Org. Research Recruiting Training Generalist Education of Participant High school Associate college Bachelor degree Graduate degree 8,884 1,407 3,805 751 77% 23 78% 22 11% 8 6 1 2 60 7 12% 5 8 6 2 2 56 9 12% 42 28 18 12% 41 26 21 20% 36 36 8 24% 42 29 6 2% 5 5 1% 4 5 1 7 8 1 3 2 6 13 45 5 0 4 6 1 2 0 3 7 61 zyxw 3% 5 48 44 7% 7 43 43 zy Ulrich et al.: Human Resource Competencies I 479 zyx zy zyxw substantial data set with 12,689 Associates and 2,148 HR professionals spread over the four year time horizon of the study. We believe this is the most comprehensive data available on competencies of HR professionals. The characteristics of the sample are in Table 11. This table indicates that the Associate sample is more male than female (78% to 22%), predominantly from respondents with the HR function (56%),generally management level (76% managers and above), responding to questions about HR professionals who are generalists (45%), and highly educated (90%with degrees). The large percentage of generalists and the percentage of those with degrees appear to indicate that the sample is dominated by relatively more senior HR professionals. Measures To measure indicators of competence in each domain, a three step process was followed. First, we examined literature on business knowledge, HR, and change management to identify a set of possible competencies in each domain. Second, through interviews with general managers, HR professionels, and an advisory group of Industrial Psychologists, we specified knowledge, skills, and abilities which reflected competence in each domain. Third, a pilot test of our initial instrument was administered to 23 HR professionals and 190 Associates. Based on these three steps, we derived our final instrument for assessing HR competencies.5 For the knowledge of business domain, 16 business activities or functions which are central to business operations were identified. The 16 business activities were conceptually classified into four "capabilities": financial, strategic, technological, and organizational (Ulrich & Lake, 1990).6 Organizational capabilities-which included a demonstrated knowledge of human resources practices and organization structure-were included in the business knowledge category for two reasons. First, and most obvious, these are essential elements in any business operation. Second, including them in the business domain serves as a validation of the instrument. If Associates do not perceive Participants high in these items and if these items are not seen as important, then the instrument has been misinterpreted. For the delivery of HR practices domain, 21 total HR practices were identified across the six HR categories: selection, development, appraisal, rewards, organization design, and communication. The specific practices in each category were selected based on choices that HR professionals made in each category (Schuler & Jackson, 1987; Ulrich & Lake, 1990). For example, in the selection category, choices can be made about hiring, promoting, and out placing employees. In the organization design category, decisions are made about creating reporting relationships, building accountability, restructuring an organization, and integrating zyxwvut zyxwv zyxwv z 480 I Human Resource Management, Winter 1995 zyx zyxwvut zyxwvu zyxwv diverse organizational units. The extent to which HR professionals demonstrate competence in each of these 21 choices is an overall measure of their HR ~ o m p e t e n c e . ~ For the management of change processes, 30 behaviors that reflected ability to manage change processes were identified. The ”management of change” domain is probably the most elusive. The 30 items identified in this domain were drawn from research on managing change by Warner Burke and his associates.8 The conceptual model used to develop these 30 competencies drew on the change agent literature (Tichy, 1983). Included in the 30 items were items around both the processes for making change happen (e.g., building relationships, managing data, problem solving, leadership, influence) and the content of change (innovation and creativity, business goals). When these 30 items were analyzed, they fell into four factors or categories: problem solving, influence, innovation, and contracting. In total, 67 competencies (knowledge, skills, or behaviors) in three domains (knowledge of business, delivery of HR, and management of change processes) were measured. We acknowledge that these 67 items are not inclusive of all the competencies which HR professionals may require and hope that future research refines and extends this initial list. To measure the overall performance of the HR professional, a 20-item scale was used that asked the Associate to respond to the following: Overall, compared with other HR professionals you have known, how does the participant compare? The response categories were in increments of 5%-from bottom 5% to top 5%.9 RESULTS Our results answer the questions we proposed. They help us identify overall competencies of HR professionals, how competencies vary by organizational characteristics and the relationship between HR competencies and business performance. Results will be reported by restating the target research questions, summarizing findings, and concluding with implications. zyxwv Overall question: What are the most critical competencies for HR professionals to be effective in their job? Figure 2 summarizes the overall findings from all 12,689 associates. The statistic used throughout this paper is multiple regression. A regression score reports the amount of explained variance (R2)by each Ulrich et al.: Human Resource Competencies / 481 zy H R Functional Expertise Knowledge of Business > zyxwvut M a n a g e m e n t of C h a n g e Figure 2. Overall results relative competencies for HR professionals as business partners (data from 12,689 associates). zyxwv zyx zyx zyx competence domain in the overall performance of the HR professionals. This percentage suggests how important a set of competencies is in explaining the overall performance of HR professionals.10 For example, the results of Table I11 indicate that knowledge of business competencies explain 18.8%of the overall performance of HR professionals; functional excellence 23.3%; and management of change 41.2%. These data suggest that effective HR professionals have all three sets of competencies in the indicated proportionality. The R2 for Knowledge of Business suggests that effective HR professionals will have substantial knowledge of a wide variety of business areas. Through follow-up interviews with selected participants, we concluded competencies in the business domain are prerequisite for HR professionals to join the management team. Without knowing the language and activities of business success, HR professionals are unlikely to be invited to the team. Functional expertise enables HR professionals to discern best practice. Knowing good from bad HR practices helps HR professionals implement best practice. This is significant because of a number of firms have attempted to hire key HR professionals who have little or no experience in HR. These data suggest that these hires would have difficulty being effective in their jobs, unless they quickly surrounded themselves with HR functional experts. While knowledge of business and HR functional expertise explain less variance in over competency, they may serve as the price of admission to the higher value-added agenda of change management. Having competence in managing change enables HR professionals to add value to their organization by facilitating the development of the organizational change capability in a way that encourages adaptation to key changes in the business environment. The high R* in managing zyxwvuts 482 I Human Resource Management, Winter 1995 zyxwvu zyxwvu zyx change suggests that this competence is the most important predictor for overall competence of HR professionals. Sub question 1: Do results vary over time? Table 111 shows that expectations of effective HR professionals vary over time. Even with a short span between time 1and time 2 (3 years), overall expectations of HR professionals went up. Table IV shows that knowledge of business went up the most (16.9% to 25.4%) followed by delivery of HR practices (22.5% to 27.8%), then management of change (41% to 45%). These data suggest that as time progressed from the late 1980s into the early 1990s, HR professionals were expected to know more about business. The specific items listed in Table I11 are statistically significant and listed in order of importance. A few interesting results occur. In the ”knowledge of business” domain, financial management was not a significant competence in 1988, but it is the second most critical business competence in 1991. The majority of the explained variance increase between time 1and time 2 was accounted for by knowledge of financial management. In the ”delivery of HR practices” domain, outsourcing became a critical competence during the three to four year time frame. This is probably due to the large number of outsourcing activities which occurred during this time in response to the deep recession of the early 1990s. The lack of any items in the performance appraisal practice may in time 2 reflect a shift away from “hard practices” of measurement and appraisal and a shift toward more attention being paid to the ”softer practices” of communications and feedback (Deming, 1988). Also of note are the consistency in the ”management of change” competencies. Establishing trust and credibility, vision, verbal communication, and taking a proactive role in change are critical items across the time periods. Over time, the overall expectations of HR professionals have risen, particularly in knowledge of business. The constant amidst the rising expectations is the ability to manage change. zyx Sub question 2: Industry: Are required competencies different in different industries? Table IV reports only the R* on each of the three competence domains by 10 industry groups (specific competencies within each industry group are available from the authors). Without this data base of over 12,000 Associates, such reports by industry would be impossible. At the macro level, the results across different industries are remarkably similar. Regardless of industry, the pattern for HR competencies is similar (except for automotivel*). Management of change is most important and is followed by the delivery of HR practices which is, in turn, followed by knowledge of business. We are surprised by these results. They imply that while industries may have very different technologies, competitive Ulrich et al.: Human Resource Competencies / 483 zyxwvut zyxwvuts zyxwv Table 111. Human Resource Competencies over Time. Time 1 Time 2 16.9% 25.4% Human resource practices Customer relations Computer/Information systems Competitor analysis Production capability Globalization Organization structure Marketing & sales Human resource practices Financial management Organization structure Customer relations Competitor analysis Globalization 22.5% 27.8% Staffing: Attract appropriate people Promote appropriate people Development: Design development programs that facilitate change Offer career planning services Design feedback processes Design performance appraisal systems to differentiate performance Design benefit systems Work with managers to send clear and consistent messages Attract appropriate people Promote appropriate people Out place appropriate people Offers development programs that facilitate change Knowledge of Business Delivery of Human Resource Practices Performance Appraisal: Reward: Communication: Organization Design: Help create reporting relationships Facilitate the integration of different business functions Management of Change 41.0% (none significant) Design benefits systems Work with managers to send clear and consistent messages Help explain why business practices exist Facilitate the process of restructuring the organiza tion 45.0% zyx zyxwvuts Establishes trust and credibility in relating to 0thers Is visionary Expresses effective verbal communication Establishes trust and credibility in relating to others Expresses effective verbal communication Is visionary (continued) 484 1 Human Resource Management, Winter 1995 zyxwvut zyxwvuts zyxwvut zyxwvuts Table 111. (Continued) Management of Change (cont.) Time 1 Time 2 41.0% 45.0% Puts specific problems in context of the larger system Takes a proactive role in bringing about change Builds supportive relationship with others Encourages others to be creative Uses reasoning to influence others Identifies problems central to business success Engages in constructive problem solving with client Clarifies roles and responsibilities Expresses effective written communication Clarifies business goals Takes a proactive role in bringing about change Encourages other to be creative Builds supportive relationships with others Expresses effective written communication Uses reasoning to influence others Articulates outcomes of change Engages in constructive problem solving with client Clarifies business goals Puts specific problems in context of the larger system Clarifies roles and responsibilities infrastructures, customer requirements, and other processes, the core competencies for HR professionals tend to be more similar than different. At the micro level, the data suggest that HR professionals in aircraft and finance must become masters of change processes, perhaps due to the upheaval in these industries between 1988 and 1992. The data may zyxwvu Table IV. Competencies by Industry (Overall Results-All Associates). Knowledge of Business Delivery Industry of HR Management of Change Aircraft Automobiles Chemical, pharmacy Electronics, computer Finance Misc. Manufacturing Petroleum, gas, coal Services Utilities Wholesaling, retailing 22.2 24.9 15.5 18.8 24.0 22.0 21.9 25.1 23.7 19.9 26.1 17.5 21.8 26.0 24.4 27.5 24.4 27.5 25.4 30.8 53.6 39.3 45.6 49.2 53.4 48.0 49.2 45.8 42.8 44.2 zy Ulrich et al.: Human Resource Competencies I 485 zyxw zyxwvu zy also suggest that in the chemical/pharmacy industries, HR professionals have fewer expectations about knowing their business, perhaps due to the technology drivers of these industries; while in the service industry where labor is a larger percent of operating budget, HR professionals need greater knowledge of the business. Sub-question 3: Respondent: Are required competencies different by job title of respondent? Table V reports expected competencies based on the title of the Associate. Again, at the overall level, these results indicate that regardless of the respondent’s relationship to the HR professional, the order of importance of competencies are: management of change, delivery of HR, and knowledge of business. In a more detailed view, General Managers are different from other groups. These scores are generally lower for the General Managers than for all other groups. These lower scores suggest that while the competencies we surveyed were important to General Managers, other competencies which we did not study warrant additional examination. Associates in Planning and Manufacturing functions seemed to require less knowledge of the business than did respondents in other functions, particularly marketing/sales and human resources (human resources respondents were generally subordinates, supervisors, or peers within the HR function). Planners, in particular, wanted HR professionals to be current in the delivery of HR and the management of change. Perhaps the most interesting finding of Table V is the lack of congruence between the Associate scores (regardless of respondent title) and Participant scores. Participants, when assessing what they think makes them more effective, suggest that the three competence domains are relatively equal (9.5%, 6.8%, and 13.6%).The R* is also smaller than all other Associate groups. Such self-assessments indicate that HR professionals may be somewhat out of touch with expectations of their Associates. Even Associates who work within the HR function identify a different set of competency predictors than do the Associates who work in non-HR functions. The fact that some HR professionals have knowledge zyxwvut zy Table V. Competencies by Respondent (Overall Results-All Respondent Title ~ ~~ ~ ~~ General Management Finance1Accounting Human Resources ManufacturingIProduction MarketinglSales Planning R&D Participant 486 I Knowledge of Business Delivery of HR ~ 7.8 19.2 23.9 15.5 23.1 13.3 16.3 9.5 Associates). Management of Change ~ 15.9 26.9 24.4 25.1 26.2 36.4 20.5 6.8 29.1 46.8 42.3 42.7 49.3 53.7 40.4 13.6 zyxwvut Human Resource Management, Winter 1995 zy zyxwvu Table VI. Competencies by Level of Participant (Overall Results-All Associates). ~~ Role of Participant Individual contributor Manager of individual contributors Director of managers General managers Knowledge of Business Delivery of HR Management of Change 19.0 21.2 21.5 24.5 43.3 45.4 22.4 19.3 29.8 25.3 48.6 51.9 zyxw zyxwvuts and skills and offer HR services which are less valued by Associates may detract from their credibility. This gap may be one of the reasons HR professionals may have moved more slowly than they would like in becoming full partners in the business. Sub question 4: Primary role: Are required competencies different by primary role of the HR participant? Table VI shows that as HR professionals move up the hierarchy from individual contributor to Director of Managers more is expected of them in all three competence areas, but relative importance of the three competence areas remains the same, regardless of hierarchical level. It is interesting to note, however, that HR professionals who are at the executive (General Manager) level are expected to have slightly less knowledge of business and delivery of HR competence but expected to have greater ability in managing change. There are two possible explanations. Perhaps, HR professionals who are most adroit at managing change are promoted to the most senior roles in the organization. Alternatively, at the General Manager level, the position itself requires greater ability in managing change as opposed to knowing the business or HR functional expertise. zy Sub question 5: Geography:Are required competencies different by county in which HR professional works? Table VII reports how competencies of HR professionals vary by geographical location. We formed two geographic groups because of data restrictions. More refined ”non-United States (US)’’ distinctions Table VII. Competencies by Geographic Region (Overall Results-All Associates). Geographic Region United States Non-US Knowledge of Business Delivery of HR Management of Change 17.1 26.9 22.3 41.1 26.9 34.8 Ulrich et al.: Human Resource Competencies / 487 zy zy (e.g., by country) would have been desirable, but our data analysis requires a minimum respondent to variable ratio of 5 to 1. With 63 competency items, we were forced to group the non-US sample. Even with this broad grouping, however, some interesting findings arise. Not surprisingly (given the large US sample), US results are consistent with the overall data set; however, non-US HR professionals have somewhat different scores. Successful non-US HR professionals need to be more balanced in their overall competencies. Their pattern of competencies implies that they must be stronger in business and delivery of HR and less strong in management of change than US HR professionals. After sharing these results with many non-US HR professionals, their explanation is that non-US HR professionals often serve on management committees. In some countries (e.g., Japan and Germany), senior HR professionals are very active and powerful within their companies. They often come to senior HR positions having worked in a number of other functions and are primarily business partners who happen to have HR titles. As a result, their knowledge of the business naturally will be higher, and the change management agenda will be shared with other members of the management team rather than being primarily the conceptual agenda of HR. zy zyxwv zyxw Sub-question 6 : Size of business: Are required competencies different by size of business? Table VIII reports how business size affects expectations of HR professionals. These results are consistent with the overall pattern of findings. Regardless of business size, similar expectations of HR professionals occur. The only unique finding is that very large businesses (with over 20,000 employees) score lower in all three domains. One possible explanation is that market dominance is a central element of business success rather than being a functional competency. In addition, other competencies not measured in our research may help explain the success of HR professionals in large businesses. Sub-question 7: How are HR competencies related to business performance? The analyses reported in Table IX are different from those above. In these analyses, we want to know if specific HR competencies affect Table VIII. Competencies by Size of Business (Overall Results-All Associates). Size of Business Knowledge of Business Delivery of HR Management of Change up to 1000 1001-5000 5001-2oooO Over 20000 20.6 21.2 21.5 16.5 28.1 20.9 29.7 20.1 46.5 46.3 46.2 34.9 488 I Human Resource Management, Winter 1995 zy zyxwvu zyxwvut Table IX. Overall HR Competence and Business Performance over Time. zyxwv Change in Overall Competency Competitiveness Change Decrease Same .004 Increase .080 .037 business performance (not the effectiveness of the HR professional). In an ideal study, business results would be regressed onto the competencies of the aggregated HR professionals. However, this asserted relationship makes too great a leap of faith. Many other factors predict business results. The competencies of HR professionals may be far down the list of critical success factors for a business. Nevertheless, we were able to give an indication of the relationship between competencies of HR professionals and business competitiveness through the following test. First, we used the 1,400 businesses as the unit of analysis. Second, we examined the impact of HR competencies on business competitiveness, which can better be done in a longitudinal research design. We thus selected the 200 businesses which were involved in the study in both time 1 and time 2. Third, for these 200 businesses, we examined the change in overall competency of HR professionals within the business relative to the change in competitiveness of the business itself between time 1 and time 2. The change in overall competence of HR professionals was calculated by averaging the competence scores for all HR professionals and Associates in the business (At minimum this included one HR professional and 3 Associates; at maximum, it included six HR professionals who serve a business and all their Associates within the business) at both time 1 and time 2. We then calculated a difference score between scores at time 1 and time 2. The competitiveness change score is merely time 1time 2 on the competitiveness items by the individual in the business most qualified to provide this score12. Table IX reports the overall results of this analysis. This table indicates that when overall HR competency increases, a subsequent increase in competitiveness also occurs. While the increase in competitiveness numbers is relatively small, it is consistent with our expected results. Evidently, businesses which increase the competence of their HR professionals also increase the competitiveness of their business. Again, caution is suggested in this interpretation and the cause could easily be in the other direction, e.g., because businesses are more competitive, they have more resources with which to upgrade the HR function. We believe, however, that these data suggest a relationship between HR competence and business performance. Table X offers more details of this relationship; it examines specific zyxwvu zy Ulrich et al.: Human Resource Competencies / 489 Table X. Specific HR Competencies and Business Performance over Time. zyxwv zyxwvu zyxwv Change in Knowledge of Business Decrease Same Increase Change in Delivery of HR Decrease Same Increase Change in Management of Change Decrease Same Increase Competitiveness Change - .054 -.lo5 .255 Competitiveness Change - .019 .087 ,054 Competitiveness Change - .098 .081 .137 domains of HR competencies. We find, for example, that when HR professionals increase their competence in knowledge of the business, business competitiveness goes up extensively (.255) as contrasted to when HR professionals decrease or stay the same in knowledge of business competence. Likewise, management of change competencies are highly related to change in competitiveness, while delivery of HR are less related. These results suggest that the competencies of the HR professionals within a business vary with business competitiveness. Such results are clearly tentative and need to be further pursued over time. IMPLICATIONS FOR HR PROFESSIONALS This research is important for two reasons. First, it extends thinking about HR as a competitive advantage and focuses on specific competencies required of HR professionals to deliver their new role. It identifies three competence domains and specific behaviors and knowledge within each domain that HR professionals should be able to demonstrate. Second, rather than continue to ”dialogue, debate, and discuss” these issues, we have created an extensive national data base to test the model proposed. These findings demonstrate that what HR professionals know and do affects how they are perceived by Associates. zyxwvutsr zyxwvuts 490 I Human Resource Management, Winter 1995 This research has implications for theory, research, and practice. While our study was limited to HR professionals, the three domain framework we propose may have implications beyond the Human Resource function. Knowledge of business and management of change competence domains may be generic to other functions, e.g., marketing, engineering, finance, management information systems. We may have identified a generic assessment of staff competencies. The relative importance of each of the three domains may remain much the same, with only the ”delivery of human resource practices” being replaced by practices in other staff functions. This conjecture may be the subject of future research. This is but one study in the ongoing process of increasing our understanding of the HR profession. These initial findings merit further study. More questions are raised than are answered: zy zy 1. Under what business conditions do different HR competencies become important? 2. What is the impact on business performance of different sets of HR competencies? 3. How will competencies of HR professionals evolve over time? 4. What is the source of the competencies? 5. How can competencies of HR professionals best be developed? While these and other questions will arise, this research represents a first step at moving beyond the talk toward a systematic assessment of how HR professionals may become strategic business partners. Additional and more precise research needs to explore some of these overall findings. For example, in this research, knowledge of mergers and acquisitions did not emerge as a significant predictor of overall HR effectiveness. The conclusion should not be drawn that this competence is unimportant. Obviously for businesses which have experienced mergers or acquisitions, such a competence might be critical. Our data set does not allow examination at this level of subtlety. A more refined analysis needs to examine the specific business challenges and to identify HR competencies relative to those strategies. Based on our analytical results by functional area, we could project that different business challenges and strategies will select and retain different HR competencies. At a practical level, this study has implications for the staffing and development of HR professionals. As companies wish to expand the talent of their HR professionals, these findings may indicate areas in which to invest time and money. Making sure that HR professionals know the business, can deliver state of the art human resources, and have the capacity to manage change processes appears to be an essential element in developing more competent HR professionals. Competencebased training and education of the HR professional have rarely occurred. Often HR professionals are so involved in developing training experience for other managers that they fail to invest in their own devel- zy Ulrich et al.: Human Resource Competencies / 491 opment. The conceptual framework and research reported in this article may serve to inform thinking and discussion as to how to better develop HR professionals. In addition, as companies seek to identify, replicate, and extend “best practices,” this study may offer a benchmark for HR professionals. We have already seen companies use these data to benchmark the competencies of their HR professionals against industry norms and against the competencies of businesses facing similar strategic and cultural profiles. We have also seen companies use this data to compare themselves against the ”best competencies” in an industry or against businesses with similar strategic or cultural profiles. By benchmarking, HR professionals may be able to better document and assess their progress. As businesses change and become increasingly dependent on building more capable organizations a s sources of competitive advantage, HR professionals’ role a s business partners may increase. To fill that role, however, better understanding of the knowledge, skills, and abilities required of the HR professionals needs to be generated. This study is one step along a path which may lead to such understanding. zy zyxwv zyxwv zyxwvut This research was partially sponsored by a research grant from the School of Business, University of Michigan. Dave Ulrich is a Professor of Business Administration at the University of Michigan. He has published over 80 papers on culture change, strategic human resources, H R competencies, learning capability, organization design, and leadership. He is a Fellow in the Academy of Human Resources and has been recognized by Business Week as one of the top 10 educators in the world in management education. His consulting focuses on building organizational capabilities through aligning organizational activities with customers. He has helped over 200 of the Fortune 500 change culture, improve HR functions, build leadership depth, and organize to serve customers. Wayne Brockbank (Ph.D., UCLA) is a Clinical Professor of Business at the University of Michigan. He directs Michigan‘s Advanced Human Resource Executive Program, Human Resource Executive Program, and Strategic Human Resource Planning and sewes as the Director of Global M B A programs. His current research and teaching focus on (1) conceptual and process linkages between HRM and business strategy, (2) creating customer focused organization cultures and structures, (3) executive leadership, and (4) competency development for H R professionals. He consults worldwide on these topics. He has published in Human Resource Management Journal, Human Resource Planning, and Personnel Administrator and has contributed numerous book chapters. Arthur K . Yeung is on the faculty of the University of Michigan’s School of Business Administration. He is also the founding Executive Director of the California Strategic Human Resource Partnership, a consortium consisting of 492 I zyxwvu zyxwvut Human Resource Management, Winter 1995 zy zyxwvu zyxw zyxwvuts zyxw marketing focus, production focus, and cost focus. These three factors are consistent with the conceptual framework used in developing this construct. 7. The 21 items were scaled into each of the six domains. The alpha values for each of the six domains were very high (above .75) (see Ulrich, Brockbank, & Yeung, 1990). 8. The research conducted by Warner Burke and his associates analyzes a series of dimensions of management change. While the results of this research have not been published, they have been applied both to general managers and to HR professionals. 9. In our pilot study, we had a more traditional 5-point Likert scale to assess overall HR performance. Unfortunately, 100%of the respondents responded with a "4" or "5." This left u s little variance in the performance measure. The 20-point scale, we knew, would also solicit a response skewed to the positive, but we felt it would also result in a relatively less skewed distribution. This turned out to be the case. 10. Each regression uses the overall performance of the HR professional as the dependent variable, then the competencies within each competence domain as the independent variables. The authors have more specific information on the BETA weights for each regression reported in the manuscript. We use multiple regression analysis because of ease of interpretation. We only report the R2 because it allows for comparisons across regression models. 11. The reasons for the substantially lower R2 for functional expertise may be due to the absence of questionnaire items which capture labor relations. The lower R2 for managing change may be likewise explained by the heavy labor focus in automotive firms and lack of the flexibility which may be imposed by heavily unionized environments. 12. The general manager of the business or senior financial executive we selected to be the individuals with the businesses who were most qualified to evaluate the competitiveness of their business relative to their direct competitors. REFERENCES Boudreau, J. W. (1983). Effects of employee flows on utility analysis of human resource productivity improvement programs. Journal of Applied Psychology, 68, 396-406. Bowen, D. E., & Greiner, L. E. (1986). Moving from production to service in human resource management. Organizational Dynamics, Summer, 34-45. Burke, W. (1989). Personal correspondence. Cascio, W. F. (1987). Costing Human Resources: The Financial Impact of Behavior in Organizations. New York: Van Nostrand Reinhold Company, Inc. Deming, W. E. (1988). Out of the Crisis. 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His areas of teaching and research interest include HR process redesignlreengineering, the transformation of H R functions, changing competencies of HR professionals, developing organizational learning capabilities, designing high value-added H R practices, and managing cultural change. He is the project manager of “Human Resource Competencies of the 1990s“ which won the 1989 Yoder-Heneman Personnel Research Award presented by the Society of Human Resource Management. Dr. Yeung is the author of three books and his articles here appeared in numerous professional journals. Dale G. h k e is President of Human Systems Development, a management consulting firm based in Fort Collins, Colorado. He has served as consultant to many organizations including General Electric, Acco, Mastercard International, Citicorp, Bankers Trust, lnland Container, Florida Department of Education, Kodak, Pfizer, Nissan, Sony, Harley-Davidson, Northern Telecom, Shell, and Amoco. He is currently a member of the Management Executive Committee at ConAgra where he serves as lead consultant on competitive advantage. Dale has written books and articles in such areas as organization capability, team development, leadership and management, sourcing, human resource development. He has served on the faculties of a number of universities and has extensive workshop experience. He received his doctorate from Columbia University. zy ENDNOTES 1. Summaries of the internal work done in these companies is available from the authors. 2. We highlight the word, “discussions.” In our experience, most organizations have falked about HR competencies, but little writing on the subject has occurred; to our knowledge, this is the most extensive published research on HR competencies. 3. Our use of Associates’ perceptions of HR effectiveness is not completely consistent with a selection argument. A selection argument would examine a longer-term view and identify the competencies of the HR professionals, then see which HR professionals continue in their jobs over time. The selection theory would argue that HR professionals without the competencies would be replaced by those who demonstrate the competencies. Using Associate rating of effectiveness is a viable, but not complete, substitute for survival because Associates’ perceptions are likely to predict which HR professionals will survive over time. If Associates perceive that HR professionals lack competencies today, over time they are likely to be able to replace those HR professionals. 4. The specific instructions given to survey participants for the selection of Associates are as follows: “Send the Associate surveys along with the mailing envelopes to individuals who are familiar with your work as a Human Resource professional in your business. 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