Adding Value: Support the Practices That Build Value

In Investors and HR section of his book, “The HR Value Proposition”, Ulrich discusses a “pattern of
techniques” that increase organizational intangibles and make them tangible.  He calls the pattern the “Architecture for Intangibles”.

This “Architecture” is a sequential hierarchy that follows the steps below:

  1. Keep your promises – build and maintain a relationship with external and internal stakeholders for doing what you say you will do. 
  2. Imagine the future while investing in the present – define a growth strategy and manage trade-offs in customer relationships, product innovation, and geographic expansion.
  3. Put your money where your strategy is – financially support the intangibles of R&D, brand names and brand equity, reputation, quality management, quality and well trained workforce, and institutional knowledge.
  4. Build value through the organization and people –  Develop the capabilities of corporate culture, talent, innovation, collaboration, leadership, leaning, efficiency, etc.  This is where HR can have the biggest impact as it shifts HR’s focus from being on people to the organizations where the people work.
An organizations capabilities are basically how an organization uses resources and gets things done. As Ulrich states in this section of his book:

An organization’s capabilities are the deliverables from HR efforts.  These capabilities enhance (or reduce) investor confidence in future earnings and increase (or decrease) market capitalization.  HR professionals who link their work to capabilities and who then find ways to communicate those capabilities to investors deliver shareholder value.  

An example would be Apple’s capability to innovate an how they have turned that intangible into a key factor in how investors view the company.  They have seen amazing market cap growth with the introductions of their iPods, iPhones, and iPads over the past decade.  It now seems that the level of innovation has stalled and as a result, investor confidence has been suffering along with the stock price.

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