cafeterias, supervise workplace security, and generally oversee “employee wel- fare.” It is no mistake that, in some British organizations, the HR director is called the “welfare officer.” It is the legacy of this past. In the 1950s and 1960s, modern human resource management was born. Fol- lowing a difficult recession in the late 1950s, economists and management thinkers alike began discussing the importance of the human side of the enter- prise. These thinkers emphasized that organizations should do more to unleash employee potential and should focus their humanistic efforts, made popular with the human relations school of management thought, toward improving productivity. It was an appealing philosophy that still impacts many organiza- tions to this day. The role of human resource management should be to create a work climate in organizations where individuals can realize their potential. The important focus of this role should be to strike a balance between organizational needs for pro- ductivity and profits and individual needs for increased autonomy. It was at this time that such terms as human resource management and human resource devel- opment were first coined to declare a new role for the old “personnel” function. But more recent thinking about HR has reflected different schools of thought. One view is that HR should shift its focus to become more strategic in its thrust, relegating highly transactional efforts (such as processing forms or record-keeping) to outsourcing agents or downloading them onto managers or employees to carry out. Another view is that HR should shift its focus to become more oriented to human performance improvement or performance consulting, which helps operat- ing managers to troubleshoot and solve “people problems” that exceed their skills. A third view is that HR should shift its focus to help managers and workers to man- age change, and that role links closely to OD. One study of HR managers revealed their own opinions about how their roles are changing. According to the study results (Lipiec, 2001), HR managers per- ceive that their successors will increasingly focus on the following: • Personnel management and managers’ competencies (training, path of careers): 43.5 percent • Organization development ( managing change, organizational culture): 41.8 percent • Employment policy: 33 percent • Employee cooperation: 21 percent • Personnel administration (pay, recruiting, work evaluation): 14 percent • Social relations: 9 percent From these results it seems clear that HR managers in the study perceived that HR will have to focus more attention on building an organization’s USING THE HRD AUDIT TO BUILD CONVERGENCE BETWEEN HRM AND OD 111 09_962384 ch04.qxd 2/3/05 12:01 AM Page 111 competitive advantage through focusing on human capital and on facilitating orga- nizational change. HR will thus become more strategically focused in the future, seeking to align people with organizational direction and competitive advantage. WHAT IS ORGANIZATION DEVELOPMENT? Organization development (OD) means “a system-wide application of behavioral science knowledge to the planned development, improvement, and reinforcement of the strategies, structures, and processes that lead to organization effectiveness” (Cummings & Worley, 2001, p. 1). Its purpose is to bring about progressive change in organizational or group settings. Unlike some other approaches to change man- agement, it is distinctive in its appreciation for—and emphasis on—human val- ues and the participation of those affected by the change as well. OD is differentiated from change management by Chris Worley (2005, per- sonal communication) as follows: • “Change management is agnostic to diagnosis. It doesn’t care if the change is the right one or not. It just implements.” • “OD is concerned about transferring knowledge and skill. In short, it is concerned that the client system learns. That’s the only value difference that I think is justifiable. I fear that saying OD is more ‘humanistic’ ori- ented is a slippery slope.” WHAT DO PRACTITIONERS IN THE OD FIELD TRADITIONALLY DO, AND HOW ARE THEIR ROLES CHANGING? Competency studies of OD have described the kind of person an OD practitioner must be to be successful. These studies are described in this book in Chapter Five. But it is worth emphasizing that OD practitioners are themselves the instruments of change. Being an effective OD practitioner is thus as much about “being” the right kind of person as it is about demonstrating specific occupa- tional knowledge and skills. WHY ARE THE TWO FIELDS CONVERGING, AND WHAT ARE THE IMPLICATIONS OF THAT CONVERGENCE? Few organizations operate in a stable, competitive environment. What is needed is a more systematic and strategic orientation to aligning people, and their cre- ative abilities, to the organization’s competitive objectives. That means OD must 112 PRACTICING ORGANIZATION DEVELOPMENT, 2ND EDITION 09_962384 ch04.qxd 2/3/05 12:01 AM Page 112 be integrated into HR practice. At the same time, many “levers” available to an organization’s leaders to effect change in organizations reside in HR, including recruitment, selection, reward, feedback and appraisal systems, career pathing approaches, and much more. For that reason, those who set out to effect change must be masterful in their applications of HR. The implications of convergence mean that OD practitioners must become more familiar with all aspects of HR, from strategic to tactical, and how they can be applied to improve productivity and organizational work climate. At the same time, HR practitioners should become more familiar with OD and its total system and humanistic approach to effecting change with people in organiza- tional or group settings. While this whole book is about OD, it may be appro- priate to present some of the HRD approaches here to familiarize the OD practitioner with the thinking in the HR field. Some of the frameworks across the world are reviewed to provide appropriate background for the OD practi- tioner and to indicate how OD has already been tied to HRD. Pareek and Rao’s Framework In 1975, Larsen and Toubro, a prominent engineering company in India, appointed two consultants from the Indian Institute of Management, Ahmed- abad, to study the performance appraisal system and make recommendations for improvement in it. The two consultants—Udai Pareek and T.V. Rao—stud- ied the system through interviews, observation, and analysis of secondary data and suggested a new system. They recommended that “performance appraisal, potential appraisal, feedback and counseling, career development and career planning, and training and development get distinct attention as unique parts of an integrated system they called the ‘Human Resources Development Sys- tem’” (Pareek & Rao, 1998, p. 24). This system was proposed as a separate sys- tem with strong linkages with the HR system. Pareek and Rao (1977), in their second report of the human resources system in L&T, recommended that the personnel function be transformed into a human resources function (HRF) and suggested a trifurcated function: personnel administration, HRD, and worker affairs. Adding organization development also to the HRD function, the con- sultants recommended that, since OD is being added and it is a new function requiring new skills, it is necessary to strengthen that component part of HRD. They recommended that the company appoint an OD manager with two offi- cers to do research and generate data needed for OD interventions (Pareek & Rao, 1977). The consultants differentiated HRD from other components of HRF. Struc- turally HRD was to be a subsystem of HRF and integrated with the other two subsystems (personnel administration and worker affairs) to be administered by the director-level person (for example, a vice president of personnel and HRD) through task forces and subsystem linkages. Intersystem linkages were outlined between various HRD subsystems to create an integrated system. USING THE HRD AUDIT TO BUILD CONVERGENCE BETWEEN HRM AND OD 113 09_962384 ch04.qxd 2/3/05 12:01 AM Page 113 Pareek and Rao also outlined a philosophy for the new HR system and fourteen principles to be kept in mind in designing the system. These principles dealt with both the purpose of HRD systems and the process of their implementation. These principles included: • HRD systems should help the company to increase enabling capabilities. The capabilities outlined in their report included development of human resources in all aspects, organizational health, improvements in problem- solving capabilities, diagnostic skills, and the capabilities to support all the other systems in the company. • HRD systems should help individuals to recognize their potential and help them to contribute their best toward the various organizational roles they were expected to perform. • HRD systems should help maximize individual autonomy through increased responsibility. • HRD systems should facilitate decentralization through delegation and shared responsibility. • HRD systems should facilitate participative decision making. • HRD systems should attempt to balance the current organizational culture with changing culture. • There should be a balance between differentiation and integration. • There should be a balance between specializations of the function, supported by other functions within the organization. • HRD systems should ensure responsibility for the function. • HRD systems should build upon feedback and reinforcement mechanisms. • HRD systems should maintain balance quantification and qualitative decisions. • There should be a balance between external and internal help. • HRD systems should plan the evolution of the function. • There should be a continuous review and renewal of the function. In sum, the integrated HRD systems approach of Pareek and Rao (1975) is characterized by the following elements: (1) a separate and differentiated HRD department with full time HRD staff; (2) six HRD subsystems including OD; (3) inter-linkages between the various subsystems; (4) fourteen design principles; and (5) linkages to other subsystems of the human resource func- tion. After L&T accepted these recommendations in full and started imple- menting them, the State Bank of India—the single largest Indian Bank and 114 PRACTICING ORGANIZATION DEVELOPMENT, 2ND EDITION 09_962384 ch04.qxd 2/3/05 12:01 AM Page 114 its Associates—decided to use the integrated HRD systems approach and decided to create a new HRD department. Since then, many organizations in India have established HRD departments. Other Frameworks of HR As HRD has come to prominence in the last decade, other frameworks and mod- els have come into existence. Some of these are briefly reviewed here. The Strategic HR Framework Approach. This framework, formulated by Ulrich and Lake (1990), aims to leverage and/or align HR practices to build critical organizational capabilities that enable an organization to achieve its goals. This framework offers specific tools and paths to identify how a firm can leverage its HR practices. Business strategy, organizational capabilities, and HR practices are the three important elements in this framework. Dave Ulrich (1997) pre- sented a framework for HR professionals in terms of four key roles: (1) man- agement of strategic human resources; (2) management of firm infrastructure; (3) management of employee contributions; and (4) management of transfor- mation and change. The activities for managing strategic human resources include aligning HR and business strategy, organizational diagnosis, reengi- neering organization processes, shared services, listening and responding to employees, providing resources to employees, managing transformation and change, and ensuring capacity for change. To manage the firm’s infrastructure, HR professionals must be heavily involved with examining HR processes for improvement, reducing unnecessary costs in HR efforts, and finding new ways to do old HR activities better. That requires HR professionals to design and deliver efficient HR processes for staffing, training, appraising, rewarding, promoting, and otherwise managing the flow of employees through the organization. To manage employee contri- butions requires HR professionals to listen and respond to workers and find ways to provide employees with resources that meet their changing demands. To manage transformation and change requires HR practitioners to identify and frame problems, build relationships of trust, resolve issues, set directions, and create and fulfill action plans. The Integrative Framework. The integrative framework offered by Yeung and Berman (1997) identifies three paths through which HR practices can contribute to business performance: (1) by building organizational capabilities; (2) by improving employee satisfaction; and (3) by shaping customer and share holder satisfaction. Yeung and Berman (1997) argue for dynamic changes in HR mea- sures to refocus the priorities and resources of the HR function. They argue that HR measures should be business driven rather than HR driven; impact driven rather than activity driven; forward looking and innovative rather than back- ward looking; and instead of focusing on individual HR practices should focus on the entire HR system, taking into account synergies existing among all HR practices. USING THE HRD AUDIT TO BUILD CONVERGENCE BETWEEN HRM AND OD 115 09_962384 ch04.qxd 2/3/05 12:01 AM Page 115 Human Capital Appraisal Approach. This approach outlined by Friedman, James, and David (1998) of Accenture, formerly Anderson Consulting, is based on the belief that there are five stages in the management of human capital: (1) the clarification stage; (2) the assessment stage; (3) the design stage; (4) the implementation stage; and, finally, (5) the monitoring stage. There are also five areas of human capital management: (1) recruitment, retention, and retirement; (2) rewards and performance management; (3) career development, succession planning, and training; (4) organizational structure; and (5) human capital enablers. A 5 by 5 matrix using these five stages and five areas could be used to evaluate and manage the human capital well. For example, during the clari- fication stage the managers examine their human capital programs to fit into their strategy and overall culture. They may also examine how each area fits into the strategy. HRD Score Card Approach. A recent approach formulated by Rao (1999) envisages that HR interventions designed for the greatest business impact should be of high quality (or mature) in terms of HRD systems, competencies, culture (including styles), and business linkages. An HRD audit is used to assess the maturity level and the appropriateness of each subsystem of HR, including the appropriateness of the HR structures and the level of competencies of HR staff, line managers, top management; the HRD culture (defined in terms of openness, collaboration, trust, autonomy, proactivity, authenticity, confronta- tion, and experimentation); the congruence of the top management and HR staff styles with HRD culture; and the extent to which all the systems and practices result in employee satisfaction and customer satisfaction. P-CMM Approach. Curtis and his team (Curtis, William, & Sally, 1995) devel- oped the People Capability Maturity Model (P-CMM) to provide guidance in improving the ability of software organizations to attract, develop, motivate, organize, and retain the talent needed for continuous improvement of software development capability. The strategic objectives of P-CMM are as follows: • Improving the capability of software organizations by increasing the capability of the workforce; • Ensuring that the software development capability is an attribute of an organization rather than that of a few individuals; • Aligning the motivation of individuals with that of the organization; and • Retaining human assets (that is, people with critical knowledge and skills within the organization). A fundamental premise of the maturity framework is that a practice cannot be improved if it cannot be repeated. Organizations act sporadically in their least mature state. The P-CMM describes an evolutionary improvement 116 PRACTICING ORGANIZATION DEVELOPMENT, 2ND EDITION 09_962384 ch04.qxd 2/3/05 12:01 AM Page 116 path from an ad hoc approach to a more systematic and sustained approach. It helps an organization move from inconsistently performed practices to a mature, disciplined, and continuously improvement-oriented approach that emphasizes the development of the knowledge, skills, and motivation of the workforce. It is intended to help the software organizations to (1) characterize the matu- rity of their workforce practices; (2) guide a program of continuous workforce development; (3) set priorities for immediate actions; (4) integrate workforce devel- opment with process improvement; and (5) establish a culture of software engineering excellence. It is designed to guide software organizations in selecting immediate improvement actions based on the current maturity of their workforce practices. The P-CMM focuses on improving practices related to the work envi- ronment, communication, staffing, managing performance, training, compen- sation, competency development, career development, team building, and culture development. The P-CMM is based on the assumption that organiza- tions establish and improve their people management practices through the fol- lowing five stages of maturity: initial, repeatable, defined, managed, and optimizing. Each maturity level comprises several key process areas (KPAs) that identify clusters of related workforce practices. When performed collec- tively, the practices of a key process area achieve a set of goals considered important for enhancing workforce capability. According to Curtis, William, and Sally (1995): “In maturing from the initial to the repeatable level, the organization installs the discipline of performing basic practices for managing its workforce. In maturing to the defined level, these practices are tailored to enhance the particular knowl- edge, skills, and work methods that best support the organization’s business. The core competencies of the organization are identified; the workforce activities are aligned to the development of these competencies. In maturing to the managed level, the organization uses data to evaluate how effective its workforce practices are and to reduce variation in their execution. The organization quantitatively manages organizational growth in workforce capabilities, and when appropriate, establishes competency-based teams. In maturing to the optimizing level, the organization looks continuously for innovative ways to improve its overall talent. The organization is actively involved in applying and continuously improving methods for developing individual and organizational competence.” All these approaches share much in common. All of them: 1. Are systems-driven approaches that emphasize HRD systems or subsystems or tools; 2. Attempt to link HR practices with business goals; 3. Recognize the importance of HR professionals; and 4. Recognize the importance of HRD. USING THE HRD AUDIT TO BUILD CONVERGENCE BETWEEN HRM AND OD 117 09_962384 ch04.qxd 2/3/05 12:01 AM Page 117 The integrated systems approach of Pareek and Rao envisages a separate HRD department for effective design and implementation of HRD systems. It uses strategy as a starting point (as in Ulrich & Lake, 1990) and therefore focuses on all the systems to achieve business goals and employee satisfaction. It aims at synergy—as in the integrated approach of Yeung and Berman. It also proposes the phased evolution of HRD function (similar to the P-CMM approach) and includes most elements of the human capital approach. These frameworks indicate that HRD is essentially a change-focused process. They also provide credence to the argument that the HR or HRD manager must be essentially a skilled change manager. OD skills therefore are needed to be a successful practitioner of HRD. They indicate that OD and OD skills are essen- tially embedded into HR practice. HOW COULD PRACTITIONERS IN HR AND OD WORK TOGETHER TO REALIZE BENEFITS OF SYNERGY BY USING AN HRD AUDIT? OD is sometimes thought of as part of the HR function. HR managers are expected to be change agents. They are also expected to undertake OD inter- ventions besides managing systems, such as recruitment, induction, perfor- mance management, career planning, training, rewards management, feedback and coaching, work redesign, and others. But one common point of reference that brings HR and OD together is human resource development, a systematic approach to develop people in organizational settings. (Of course, HRD has been renamed Workplace Learning and Performance [WLP] in many circles around the world today. That reflects new thinking about what was once called HRD.) In the early years of HR, HRD facilitators were frequently trained in process skills and functioned as OD consultants. As the HR function evolved fully and became stabilized, issues began to emerge about variations in the performance of the function. Some organizations assigned it a limited role and failed to use it for organizational improvements. On one hand the scope and opportunity for HRD to make an impact increased in terms of creating a learning culture and learning organizations. On the other hand, sometimes ill-prepared HRD man- agers do not use appropriate process skills. To evaluate the impact of HRD and establish accountability for HR efforts, the HRD audit emerged. Typically con- ducted by a group of auditors or consultants, an HRD audit can be viewed as an OD intervention in its own right. In the subsequent sections of this chapter, details of the HRD audit and the way it has emerged are presented. This is followed by a brief description of the results of an HRD audit and the linkages between an HRD audit and OD. 118 PRACTICING ORGANIZATION DEVELOPMENT, 2ND EDITION 09_962384 ch04.qxd 2/3/05 12:01 AM Page 118 Why an HRD Audit? To get the best from HR, alignment must exist between HR’s functions, strate- gies, structures, systems, and styles and those of the business. HR should be aligned both with the short-term and long-term organizational efforts. The HRD audit is an attempt to assess alignment and improve it. Having an HRD department does not guarantee effective HRD. Effective HRD in an organization requires that: • The top management of the organization recognizes the strategic advan- tage and the critical value addition provided by people; • The role of HRD be clear; • Line managers understand, accept, and internalize their own role in developing people; • A learning culture has been established and maintained in the organization; • Appropriate HRD systems are identified to suit the needs, requirements, and strategies of the corporation and are effectively implemented; • HRD systems are periodically reviewed and aligned and realigned with the organization’s goals; • Supportive HR policies are formulated and implemented; • The HRD function is staffed with competent people; • The styles, beliefs, and values of the top management are aligned to promote a good learning and competency-building culture; and • The HRD function and its approaches to implementing its strategies are periodically reviewed. It is to achieve the last objective that the HRD audit can be most effectively used. The HRD audit is a comprehensive evaluation of the current human resource development strategies, structure, systems, styles, and skills in the con- text of an organization’s business plans. The HRD audit attempts to find out the future HRD needs of the company after assessing the current HRD activities and inputs available. Concepts That Guide HRD Audits Several fundamental concepts guide any HRD audit. They are worth reviewing. First, an HRD audit is comprehensive. An HRD audit starts with a thorough investigation of an organization’s business plans and corporate strategies. While an HRD audit can be carried out in organizations that lack well-formulated plans, it is most effective when the organization possesses an effective strategic plan. USING THE HRD AUDIT TO BUILD CONVERGENCE BETWEEN HRM AND OD 119 09_962384 ch04.qxd 2/3/05 12:01 AM Page 119 Second, the HRD audit starts with attempts to answer the following questions: • Where does the company want to be ten years from now, three years from now, and one year from now? Answers to this question must be provided by top management. If strategic planning documents exist, they should be reviewed. On the basis of the answers to these questions, the consul- tants finalize the subsequent audit strategies and methodology. The consultants also make an effort to identify what core competencies the organization will need to realize its strategic plans. The consultants also attempt to identify what competencies will be needed at various levels— such as workman level, supervisor level, junior management level, middle management level, and top management level—and in such functions as finance, production, and marketing. The listing of all these core competencies and skills needed for the future is the starting point of the HRD audit. The HRD audit normally attempts to assess what com- petencies exist in the organization as well as what gaps exist for realizing the strategic objectives. • What is the current skill base of HRD staff in the company in relation to various roles and role requirements? To respond to this question, the qualifications of HRD staff as well as their job descriptions and the training programs they have attended are examined. HRD staff are also interviewed to identify the skill gaps in the organization. Training needs and performance appraisal forms provide further insights into HRD staff capabilities. Department heads and other employees provide insights into their competencies and other skill requirements. • What are the HRD subsystems available today to help the organization build its competency base for the present, immediate future, and long- term goals? The auditors attempt to identify various HRD subsystems that are available to ensure the availability, utilization, and development of skills and other competencies in the company. These HRD subsys- tems are evaluated and the framework is presented as part of the HRD audit. All HRD tools existing in the organization are listed and studied in detail. • What is the current level of effectiveness of these systems in developing people and ensuring that human competencies are available in adequate levels in the company? The focus of this question is to assess the effec- tiveness of each system. For example, what is the (relative) effectiveness of the performance appraisal system? That question is answered by dis- cussing it with employees. The auditors examine appraisal forms, look at the linkages between appraisal and training, conduct surveys to assess how much coaching and other components of appraisals are being used and also conduct workshops as necessary to assess the 120 PRACTICING ORGANIZATION DEVELOPMENT, 2ND EDITION 09_962384 ch04.qxd 2/3/05 12:01 AM Page 120 . motivation of the workforce. It is intended to help the software organizations to (1) characterize the matu- rity of their workforce practices; (2) guide a program of continuous workforce development; . their workforce practices. The P-CMM focuses on improving practices related to the work envi- ronment, communication, staffing, managing performance, training, compen- sation, competency development, . the organization installs the discipline of performing basic practices for managing its workforce. In maturing to the defined level, these practices are tailored to enhance the particular knowl- edge,