How do HR practices affect organizational performance? Decades of research has explored this question, and a simple framework can help leaders understand the results. Being more evidence-based about talent management may be a matter of knowing physics terms.
Kinetic energy is energy in motion. Potential energy refers to the energy of something in one position, such as a bow and arrow before you release the arrow. When you pull back the bow you create potential energy, which becomes kinetic energy when you release it. Whether your arrow hits the target depends on your aim and the proximity of the target. That’s the “opportunity” for the energy to do something valuable.
These basic ideas of kinetic energy, potential energy and proximity are surprisingly powerful as ways for leaders to understand why people and organizations perform.
You are probably familiar with the phrase, “ability times motivation equals performance.” That idea is not quite complete. Even the most motivated and capable people may not perform if they are not given the right opportunity.
For example, you need to be out front meeting customers, not in the back stock room, to use your motivation and capability for customer interaction. “Ability times motivation times opportunity equals performance” is actually a prominent model in the world of human capital strategy, called the AMO (ability-motivation-opportunity) framework. In our book Beyond HR, Pete Ramstad and I show how talent capacity combines this with COM (capability-opportunity-motivation).
While leaders may not remember complicated models of human performance, they can easily remember the mnemonic of talent COM or AMO.
Too often leaders jump to only one of these three elements to explain performance. How often have you heard a leader say, “performance is down, so your training didn’t work” — reflecting capability. Other leaders tend to say “performance is down because we don’t tie bonuses to performance enough” — reflecting motivation.
Often overlooked is the question of whether employees get the chance to perform. A good question for leaders is, “Have you given your people the right opportunity to perform?” Opportunity is often the leader’s job. For example, if you want creativity, you may need to create slack in your system to give people the opportunity to think beyond their immediate tasks.
Capability equals “Can they do it?” Opportunity equals “Do they get the chance to do it?” and motivation equals “Do they want to do it?” In the aforementioned bow and arrow example, these are similar to potential energy, target proximity and kinetic energy.
This three-part framework also summarizes research on how HR practices affect organizational performance. An article in the Academy of Management Journal by researchers at Rutgers and Notre Dame universities summarizes decades of research, combining findings from 116 articles, representing more than 31,000 organizations. They show that different HR practices work on different outcomes: “skill-enhancing HR practices were more effective in enhancing human capital, whereas motivation-enhancing HR practices and opportunity-enhancing HR practices were more likely to improve employee motivation.”
They found that financial and operational outcomes are affected by HR practices indirectly, through enhanced capability, opportunity and motivation, which in turn affects employee turnover and operational outcomes, which then affect financial outcomes.
They also found the impact of HR practices is more significant than many leaders imagine. Using the financial outcome called Tobin’s Q, the authors found, “a one standard deviation increase in motivation-enhancing HR practices is associated with 64 percent improvement in Tobin’s Q.”
Evidence-based talent leaders require practical tools that reflect the best knowledge available. Yet, talent management programs and decades of research can be dauntingly complicated. If leaders understand COM or AMO in talent management, they have a framework as powerful as potential energy, kinetic energy and proximity in physics.
How are you going to make your talent management systems more transparent and more evidence-based using these simple yet powerful metaphors?
John Boudreau is professor and research director at the University of Southern California’s Marshall School of Business and Center for Effective Organizations, and author of “Retooling HR: Using Proven Business Tools to Make Better Decisions About Talent.” He can be reached at firstname.lastname@example.org.