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High performing organisations

Editor's Note to Readers

Welcome to the seventh edition of Human Capital Matters for 2015—the digest for leaders and practitioners with an interest in human capital and organisational capability. Human Capital Matters seeks to provide APS leaders and practitioners with easy access to the issues of contemporary importance in public and private sector human capital and organisational capability. It has been designed to provide interested readers with a monthly guide to the national and international ideas that are shaping human capital thinking and practice. The inclusion of articles is aimed at stimulating creative and innovative thinking and does not in any way imply that the Australian Public Service Commission endorses service providers or policies.

Thank you to those who took the time to provide feedback on earlier editions of Human Capital Matters. Comments, suggestions or questions regarding this publication are always welcome and should be addressed to: humancapitalmatters [at] apsc.gov.au. Readers can also subscribe to the mailing list through this email address.

This edition focuses on high performing organisations (HPO), which, depending on the discipline of the authors, have been referred to as high performing systems, high performing work organisations, high performing work systems, high commitment or high involvement organisations. The plethora of names underscores the variety of ways in which high performance organisations are understood. Underpinning all however is the notion that such organisations and systems are characterised by employer-employee relationships which enable high performance through people. The critical idea is to have high employee involvement and consequent empowerment; as some would see it, employees as owners rather than agents of organisational outcomes.

As reported in the HCM of September 2014[1], the APSC has implemented a performance management diagnostic for the APS[2] to identify key areas of performance management within the public service that might warrant attention. The diagnostic is based on the argument that gains in performance outcomes emerge through a focus on performance management as a core activity in all management functions.

Critical to this notion of gains through performance management are four principles and practices:

  • Clarity and purpose: what does high performance look like and what roles are required to support this outcome
  • Alignment and integration: alignment between strategic and individual goals and integration of HR practices and organisational systems to support the active management of performance
  • Mutuality and motivation: mutual ownership of performance management between the employee and management and awareness of employee motivation
  • Adaptability and progress: being able to adapt with change and continue progress towards outcomes

Underpinning these principles and practices certain supportive foundations are necessary: capabilities (assets, processes and competencies), evidence-based data (includes clear communication of performance trends and targets to inform decision-making) and realism or pragmatism about what can be achieved and what works in the current climate or context.

At this time data are still being collected from several APS agencies to test the utility of the high performance framework for the APS. Once available the report on the utility of the framework for the APS will be provided publicly and included in future editions of HCM.

The State of the Service Report of 2014[3] provided a review of the core APS value of 'accountability' which, it was stated, necessarily included a requirement to answer for individual performance through performance management systems. Accordingly, the APS and its employees are required to, among other things: engage with stakeholders; take any initiative required to remain client-centred; develop a culture of achievement within agencies; identify and manage risk; plan to achieve strategic results; and, be responsible for their individual performance, including developing personal capability and responding constructively to performance feedback. In response to this imperative the APS implemented two methods to assess organisational performance and capability: the Capability Review Programme and assessment against a capability maturity model[4], both of which have been discussed in detail elsewhere. Both are complementary processes designed to help an organisation establish priorities for improvement.

This edition of Human Capital Matters serves to provide a broader outlook about HPO; one which provides context for the rationale behind putting performance management at the forefront of a diagnostic tool for high performance organisations.

The articles are:

The first article is a review of Jeffrey Pfeffer's The Human Equation which appeared in s+b magazine. Pfeffer, the Thomas D. Dee II Professor of Organizational Behaviour at Stanford Graduate School of Business notes the disconnect between management rhetoric and practices: the gap between words and action, double standards and the unwillingness, as he sees it, of managers to address the need for 'high commitment work practices' to ensure organisational success. The book focuses on seven key practices found in most successful organisations. The practices have been reported and discussed in the review.

The second article by the Netherlands-based HPO Center is about diagnosing unique organisational characteristics that will provide leverage in developing high performance capabilities. The HPO Center has developed an HPO Framework based on research across 1,470 organisations in 50 countries. The Center identified 35 characteristics, grouped into five factors, which have a direct relationship with improved performance.

The third article is a much-abbreviated synopsis of the 118 pages on high performance work organizations produced by the Center for Creative Leadership in 1999. The reader interested in the evolution of thinking about high performance organisations is encouraged to browse the book for a detailed and critical analysis of the many contributing strands to HPO.

The fourth article is a meta-analysis—a statistical method of comparing and contrasting results from different studies to identify patterns, relationships or divergence among them—of 92 studies that examined over 19,000 organisations. The aim of the meta-analysis was to determine the relationship between high performance work practices and organisational performance. This was based on the authors' review of existing literature. From the review the authors' understood that high performance work practices (HPWP) improve organisational performance through two interactive and overlapping processes: firstly, HPWP give employees both the knowledge skills and abilities (KSA) needed to perform job tasks and, the motivation and opportunity to do so. Secondly, HPWP improve the internal social structure within organisations. This facilitates communication and cooperation among employees. Jointly these processes are believed to increase job satisfaction and productivity and reduce turnover.

The final article gives an overview of the Baldrige Criteria. The Baldrige Performance Excellence Program, founded by the Baldrige Foundation, exists to support organisational performance excellence. The assessment processes of the Criteria are applicable across industries and organisations, profit and not-for-profit. The aim is to help organisations identify strengths and opportunities for improvements. The assessment process contains a detailed set of questions and guidelines aimed at producing an organisational profile which includes alignment with and integration of strategic organisational objectives. The questions and guidance are divided into process and results sections that represent all the components of a performance management system.

In many respects the Baldrige Criteria provides the most structured and accessible method of assessing organisational performance. The process in making such an assessment is not easy however. The Criteria poses difficult questions that require well-kept organisational infrastructure and the collection and collation of significant amounts of supportive data or evidence.

The Baldrige Criteria has become something of a 'gold standard', particularly in the US—where it has links to the government and the US President gives the Baldrige Award to high performance organisations—but also internationally. It is used by many organisations to benchmark how well they are achieving what is important to them and whether what they are doing is 'best practice'. The sharing and communication of best practices among organisations is an important element of the Criteria. While the research reported in the fourth article by Combs et al notes that high-performance work systems produce better organisational outcomes, according to Baldrige individual components of the Criteria can be used as well for organisational learning purposes.

A modified form of the Baldrige Criteria has been incorporated into the 2015 APS Agency Survey.

Pfeffer, J. (1998) The Human Equation: Building profits by putting people first. Harvard Business School Press (Review, s+b Second Quarter 1998, Issue 11)

Pfeffer, in reporting seven practices found in most successful organisations, bases his findings on research from a range of industries across more than 20 countries. The seven practices identified are:

  • Provide employment security. Partnerships with employees are seen a vital to help tide organisations through short-term turbulence. Security of employment applies to those employees who have demonstrated effective performance and are now faced with organisational threats beyond their control. Rather than lose such employees to competitors, a constructive relationship—working with employees to manage threats—is necessary.
  • Use different criteria to select personnel. Screen for cultural fit and attitude, not just skills that can be acquired through training.
  • Use self-managed teams and decentralisation as basic elements of organisational design.
  • Offer compensation contingent on organisational performance. This is more complex obviously for the APS but recognition and reward of individual high performance is often cited by public servants as something they would like to see in their agencies[5].
  • Train extensively. Pfeffer notes that whilst this begs for some sort of return on investment story, such calculations are often impracticable at best and mostly impossible. It should be a matter of faith.
  • Reduce status distinctions and barriers. Dress, language, office arrangements, parking and wages are potential considerations in this regard.
  • Share financial and performance information.

None of the above is new. Their presence as behaviours of high performing organisations however warrants their (re)consideration in enabling a high performance culture. While there is value in at least considering the application of the principles within the constraints of a particular context, reviewers have noted that all is not as simple as the principles suggest. For example, there is the risk that in having security of employment, employees may become complacent; and, that stable conditions may not facilitate the agility or adaptability most modern organisations require. Management still needs to be vigilant and proactive in cultivating the culture and practices required of the organisation in the face of security and stability. Whilst mindful of the risks it is evident that HPO engender employee autonomy contained by clarity and ownership of the organisational vision and mission. As a consequence of shared ownership it is anticipated that there will be an adaptive response to change.

Jeffrey Pfeffer is the Thomas D. Dee II Professor of Organizatiol Behaviour at the graduate School of Business, Stanford University where he has taught since 1979. His book was reviewed by

Tim Dickson, formerly the management page editor of the Financial Times, publisher and director of the FT Mastering Management Review, a monthly journal published by the Financial Times Group. He is based in London. His review was published by

strategy+business (s+b) is an award-winning management magazine whose purpose is to illuminate the complex choices that leaders face — in strategy, marketing, operations, human capital, governance, and other domains — and the impact of their decisions. s+b is published in print, on the web, and in digital editions on a variety of platforms.

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HPO Center, The High Performance Organization Framework, 2015

The five factors of high performance organizations as seen by the HPO Center are:

  • Quality of management
  • Openness and action-orientation
  • Long term orientation
  • Continuous improvement
  • Quality of employees

This edition of HCM about HPO will focus on management, employees and performance management.

Quality management is served by respectful interactions at all levels and the maintenance of trust and individual relationships between managers and employees. Essential to quality management practice is the supportive role managers adopt towards employees. Managers are seen as coaches and facilitators and act as buffers for employees.

Performance management is core to the HPO Center's concept of an HPO and is seen as a critical management responsibility. Managers are expected to hold employees responsible and accountable for results and performance. They are able to do so by ensuring that the values and strategic direction of the organisation are communicated clearly. While performance management is seen as a core task of management, the HPO Center suggests there is still a lot to be learned about what drives performance. They identified nine factors and associated behaviours:

  • Structure: clear identification of roles, responsibilities, strategic targets and their reinforcement at each level of management
  • Reporting: Availability of performance information, focus on things like KPIs, bench-marking targets
  • Data integrity: reliable, timely and consistent information
  • Management of information: user friendly reports, exception reporting, easy access to performance information
  • Accountability: alignment of performance at all management levels, performance information is relevant and performance results can be influenced
  • Management style: visible commitment, consistent behaviour— most likely including ethical behaviour and, oriented to improvement
  • Action: performance information is treated as integral to business as usual, corrective action as required, future problems anticipated and corrective action planned
  • Communication: two-way, regular communication; information and knowledge sharing across business units
  • Alignment: HR management tools in place—performance evaluation tools, recognition and rewards in place, training available; positive attitude to and improvement as a result of performance management.

In terms of a diagnostic tool, the quality of management may be addressed in questions such as 'the management of our organisation has integrity' or 'the management of our organisation focuses on achieving results'.

The APS assesses performance management practices through census questions like 'my manager provides me with clear and consistent performance expectations'

In regard to the quality of employees, the workforce is perceived as diverse and as having complementary skills which allow employees cross-agency collaborative work to improve skills and creativity. Employees in an HPO are encouraged to participate in continuous development opportunities. Diagnostic questions might be: 'organisational members are trained to be resilient and flexible'. In the APS census, one question is: 'my performance agreement provides me with meaningful and relevant information that enables me to perform my role'.

The HPO Center, based in the Netherlands, aims to be the source of knowledge about what makes an organisation better and what drives managers and employees to improve their performance. They offer diagnostic tools, workshops and presentations to this end.

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Kirkman, B.l., Lowe, K.B., & Young, D.P. High-Performance Work Organizations: definitions, practices and an annotated bibliography. Center for Creative Leadership, Greensboro, 1999

This review of the literature on high performance work organisations, referred to by these authors as HIPOs, contains the various definitions from the literature, a description of the dimensions incorporated into the definitions, a new definition which is based on a synthesis of the reviewed literature and, an annotated bibliography. The review is premised on the need for a common definition of high-performance work organisations so that appropriate bench-marking or diagnoses can be made.

The five key components identified in the review are: self-managing work teams; employee involvement and empowerment; total quality management; integrated production technologies; and, 'the learning organization'. Jeffrey Pfeffer's work features prominently in the review as syntheses of existing literature. The authors believe, based on their review, that the five components are utilised (rather than present) differently by different organisations and the choice and mix of components will depend on the environment in which the organisation is operating.

Each of the components is discussed in detail and the review concludes that the impact of HIPO elements and practices has been positive.

The Center for Creative Leadership (CCL) is an international, non-profit educational institution founded in 1970 to advance the understanding, practice and development of leadership for the benefit of society worldwide.

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Combs, J., Yongmei, L., Hall, A. &Ketchen, D. (2006) How Much Do High-performance Work Practices Matter? A meta-analysis of their effects on organizational performance. Personnel Psychology 2006, 59 501-528

The authors begin their review with the statement that:

'Although there is growing evidence that high performance work practices (HPWPs) affect organizational performance, varying sample characteristics, research designs, practices examined, and organizational performance measures used has led extant findings to vary dramatically ...'

In view of this dramatic variation the authors determined a need to better understand the relationship between HPWP and organisational performance and the conditions that moderate that relationship. The authors believed that improved insight into the relationship could potentially benefit strategic human resources management theory and help practitioners justify investment in HPWP.

They selected 92 studies in which they examined the effects of HPWP on organisational performance, specifically: differences between HPWP systems and individual practices; operational versus financial performance measures; and, manufacturing versus service organisations. They found:

  • HPWP materially affect organisational performance
  • Systems of HPWP have stronger effects than individual practices
  • The relationship appears invariant (remains unchanged) to the choice of performance measures

This last finding has most significance perhaps for a public sector environment in which performance is difficult to measure.

James Coombs and Yongmei Liu (at the time this article was published) were from the Department of Management at Florida State University, Angela Hall was from the Department of Risk, Management and Insurance, Real Estate Business Law at Florida State and David Ketchen was from the Department of Management, Auburn University.

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Baldrige Performance Excellence Program. The Baldrige Criteria 101

Management is at the heart of the Baldrige definition of performance excellence in organisations. Incorporated in this are seven criteria: leadership, strategic planning, customers; measurement, analysis, and knowledge management; the workforce; operations; and, results. The links among these components define the success of an organisation according to the Criteria. Assessment is in three parts:

  • The organisational profile that describes the operating environment, key relationships, competitive environment and strategic context
  • A guided description of how the organisation accomplishes what is important to it
  • Scoring guidelines for assessment of accomplishments, maturity of processes and identification of the significance of the organisation's results

An example of the level of detail required for the assessment is, for example in regard to leadership:

  • How do your leaders lead?
    • Vision and values
    • Promoting legal and ethical behaviour
    • Creating a sustainable organisation
  • Communication
    • How do senior leaders communicate and engage the entire workforce?

For each of these questions the Baldrige criteria provides exhaustively detailed guidance. At its heart is the synthesis of the literature and definitions of organisational high performance provided in the previous articles.

More detail about the assessment process may be found in Criteria for Performance Excellence (including non-profit organisations), 2013-14

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[1] Australian Public Service Commission Human Capital Matters Vol 7, High Performance Organisations, Canberra,  Sep, 2014

[2] Australian Public Service Commission Strengthening the performance framework-Diagnostic implementation,  Canberra, July, 2014

[3] Australian Public Service Commission 2014 'Chapter 9 Delivering performance and accountability' State of the Service Report 2013-14, commonwealth of Australia, Canberra.

[4] Australian Public Service Commission 2013 'Chapter 10 Organisational accountability', State of the Service Report 2013-14, Commonwealth of Australia, Canberra.

[5] Australian Public Service Commission, RN 53-15 Education, Q82, Tier 2, Canberra 2015