High performing companies invest more in people?

A 2012 global survey on the relation between capabilities and firms’ profitability has revealed that high-performing companies consistently invest a lot more than others in the following activities: recruitment, induction of new joiners and retention, talent management, employer branding, performance management and rewards, and leadership development.

Having in mind the globalised character of the shipping industry where companies operate, the scarcity of talent, the financial pressures in crew salaries, along with the intermediating role of manning and crewing companies, we see that the decision of shipping companies to invest more in the long-term development of their human resources is of great importance. If we also consider the scarcity of talent, shortage of officers, pressures of maritime legislative framework and the fragile and disrupted employer-employee relationship within the shipping industry, we understand that in shipping the matter of managing people’s performance requires a more holistic approach.

Research in the human resources management throughout the years has shown that employees’ performance can be driven higher if they are motivated, satisfied and supported by the organisation. Linking business performance with people’s performance seems relevant, but to understand the ‘how’, it is worth probing on the applied HR management practices; or what we define as the ‘HR Architecture’.

If we are to develop an approach that aims to support employees’ value making and competencies development, then a coherent form of processes in managing people is required. This unified approach considers that the process of managing people within an organisation resembles a chain of activities, all of which – when linked – can produce high performance and increase the value of the human capital in a way that this contributes to the creation of sustainable competitive advantage.

In construction, ‘architecture’ (coming from the Greek ‘άρχι’-chief and ‘τέκτων’- creator) means the process and the product of planning, designing and building physical structures. The architecture considers both the macro- and the micro-level of the construction. With regards to the HR Architecture, the structure considers both the content of each activity, as well as the inter-relations among them, and the loop between the HR Architecture and the organisation’s strategy.

The HR Architecture comprises a set of primary human resource management activities, and a set of supporting ones. The core activities represent rings in the HR Architecture chain, as they add value to the people’s performance within the company in the form of a strong capability of managing human resources. In architecture, design precedes the construction, and before design comes planning.

Similarly, in our HR Architecture, before evaluating performance comes new joiners’ induction and familiarisation, while recruitment follows the HR planning activity. The activities of HR planning, recruitment, induction, appraisal, rewarding, training and career management are those that drive people forward from candidates to the company’s valuable and talented HR force. In parallel, the supportive activities aim to brace the core initiatives and assist in building a strong foundation of performance management. Supportive activities are the screws that keep the craft stable, and as such, every now and then need a winding.

The HR Architecture elements are presented as a chain of activities because they are interlinked and take place in a continuous manner. The essence of the unified HR Architecture is the alignment of HR activities and the bond to the company’s strategy. Through this, the impact of people’s performance is reflected on the business as it helps the firm achieve its objectives. The HR Architecture is the organisational support needed to manage the company’s bundle of human resources and management capability with the aim to reach sustainable competitive advantage.

In this chain of HR performance value, the principles of architecture shall apply:

Quite often shipping companies request our help on evaluating their employees’ performance. Special concern lies in the evaluation of the crew’s performance from the captain, as well as the appraisal of the masters and chief engineers from the office. Most frequently managers come with a ready solution request, like ‘fix us the appraisal’- but from a Green-Jakobsen perspective, there are other activities that also need to be amended. In order to mold employees’ performance, one needs to shed light on how performance can be managed from the time that the seafarer is a candidate employee.

There are times when managers state ‘why spend money to evaluate them? They should know their job and we should employ only those who know their job’. When companies feel that ‘the problem lies in the recruitment of non-talented employees’, in our view, this reflects the non-existent HR planning or the weak induction. So, if we try to fix only the performance appraisal process, we target on improving one of the stepping stones of the crew’s performance management. If so, even when the appraisal process and content is replaced, the problem of limited performance remains.

While it is important that business objectives are translated into clear team and individual objectives, people need much more to thrive. Leading people’s performance is crucial, as it can make or break any strategic plan. For the process to breathe, take action and progress, leadership force is in need. Leadership is a lot more than steering the business and work.

The management of people lies in the leaders who drive performance towards the company’s vision and goals. Leaders can turn the HR Architecture from a mere process to be the means of creating value from people and reaching excellence. The modern approach in leadership requires for managers to lead by coaching and facilitating; thus, leading by supporting the others’ development in a way that self-efficient employees are nurtured. Leadership, and more precisely performance leadership, meets the need to support the HR Architecture by helping people identify goals that are relevant and challenging, strengthening their capabilities, motivating and coaching them to develop further, and encouraging them to stay in the company. This kind of leadership has the greatest impact on the employees’ behaviour, engagement and reaching organisational goals.

Performance management is a process that companies shall be using to help their employees channel their talents towards the company’s business objectives. Strategic human resources management is rather undermined in the shipping industry where seafarers are claimed to be the most valuable asset, however still being handled by many companies solely as a cost element. To excel in performance management, the unified structure of the HR activities is vital. The aligned HR processes on managing seagoing (and shore-based) personnel, linked to the company’s policies and strategy form the foundation of the company’s HR Architecture. This is to be regarded as a strategic business asset and a source of sustainable competitive advantage.