Adding Value: Align HR practices and investors’ requirements

This is the final post in the series of how HR can add value to investors taken from the classic David Ulrich book The HR Value Proposition.

The final action is to align HR practices and investors’ requirements.  By looking at the company through the investors’ perspective, HR pros can develop a more value oriented HR strategy for the organization.

Ulrich suggests four HR practices to consider when viewing the company as an investor.  These practices focus on senior management.

  1. Staffing: HR pros should try to involve and engage the largest shareholders of an organization in the hiring and promotion decisions.  When looking at these decisions from the investor’s perspective, the staffing process may be more disciplined and rigorous.  Since Ulrich’s book was published, the Dodd-Frank Act has given investors some engagement with the Say on Pay provision.
  2. Training and Development: When designing and conducting leadership programs for senior management, consider how the largest single investor would think of the program if they participated in it.  Would they add to their position, hold, or sell off?  Ulrich believes, and I agree, that investors want the participants to focus on real business issues withing the company, instead of reviewing case studies of other organizations.  They would want the participants to have a clear understanding of actions to take to move the company forward after an open and candid dialog of the challenges facing the organization.
  3. Appraisal and Rewards:  Many organizations tie performance and management behaviors to investor focused rewards by putting a large portion of total compensation into stock based incentives like stock options and RSUs.  The theory is that when managers become investors through stock ownership programs, they will think and act like investors.
  4. Governance and Communication:  This practice anticipates that investors will become more interested in the intangibles contribute as much to shareholder value as financial performance does.  Behaviors like decision making, responsibility allocation, etc.
The goal, of course, is to increase investor confidence in the company’s ability to deliver profitable results through applying these HR practices.
This concludes the series of Adding Value from David Ulrich’s book, The HR Value Proposition.  The six parts of the series are listed below.

Introduction to How HR Adds Value to Investors


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