CANADIAN MANAGEMENT CENTRE

SPECIAL REPORT NOVEMBER 2005

MEASURING ORGANIZATIONAL EFFECTIVENESS

CONTENTS
About the Authors Introduction Is Measurement a Problem? Organizational Effectiveness Systems Theory Measuring Organizational Effectiveness Alpha Test of OCI Conclusion References Conclusion Bibliography
Human Resource Institute

Copyright 2004

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Measuring Organizational Effectiveness

About the Authors

JAY J. JAMROG is the Executive Director of the Human Resource Institute and Distinguished Lecturer at The University of Tampa. As a futurist, he has devoted the past 20 years o identifying and analyzing the major issues and trends affecting the management of people in organizations .Jay is Associate Editor for Human Resources Planning magazine, has had articles published in major business magazines and is frequently quoted in business publications and newspapers. He is a member of the Bureau of National Affairs (BNA) Advisory Group. In addition, he often collaborates with, and speaks before, other organization sand associations (e.g., HRPS,SHRM, The Mayflower Group, The Conference Board, ASTD, ABA, AGA, NEDA) on major research topics related to the future of people management. Prior to joining HRI in 1982, ay held numerous management positions, including vice president of purchasing for a large import/export wholesaler. He has an MBA and taught labor relations in the School of Management at the University of Massachusetts and is currently a Distinguished Lecturer at The University of Tampa. Jay also spent five years living in the Far East, has a Black Belt and reads history for leisure. DR. MILES H. OVERHOLT is the Director of Systems Measurement at the Human Resource Institute. His research expertise is in organizational design, change, and behavior. He is the author of Building Flexible Organizations: A People-Centered Approach and has written numerous articles on change processes. He is also a lead researcher on a comparative organization project on alignment, congruency, employee behavior, and organizational performance. He is the co-developer of the Organizational Flexibility Profile and the Organization Behavior Database and the author of several copyrighted instruments for assessing organizational culture. Additionally, Miles is a practicing psychotherapist, hypnotherapist, and family therapist. His undergraduate degree is from Lafayette College, and he earned his doctorate at the University of Pennsylvania.

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Measuring Organizational Effectiveness

Introduction
In the late 1970s and early 1980s, many firms were struggling with the combined impact of high interest rates, growing international competition and shrinking productivity, which led to the demand for greater accountability in all functions of the company. The new human resource function was not exempt from this trend, and while methods for It seems that assessing the costs and benefits of HR programs were available, they instead were not widely utilized. Because of the lack of accountability, many commentators and executives began to view HR activities as of responding to nonproductive drains on overall organizational performance. A few the calls for even advocated that the HR function should be blown up and the change, activities should either be outsourced, allocated to the legal and HR responded by finance departments, or given to line managers. Amid the criticism maintaining the the external environment was also changing. Social and demographic trends (more women and minorities in the workforce, growth of status quo. immigrants, older workers and poorly educated workers) accelerated the demands for improving the quality of work life, for managing Lawler and cultural and ethnic diversity, and for continual training and retraining. Mohrman,2003 As a result, during the 70s and 80s the human resource profession was put under the microscope. While many companies still viewed HR professionals as personnel administrators, a growing number of professionals were responding to their changing environment, and in their firms they were seen as people who were truly adding value to the company and giving the company a competitive advantage. As a result, about 15 years ago, many human resource experts began to urge HR professionals to adjust to the times by changing their role. The HR function, these experts felt, should add value to the firm in everything it does, and to this end they advised the HR function to move from transactional to strategic activities and to become strategic business partners. Human resource professionals must think of themselves as business people first and HR people second. HR professionals should be so well versed in the operations side of the business, these experts argue, that the HR department is taken seriously when it offers insights. Today there is widespread agreement that HR professionals have indeed accepted the role as strategic business partner. The fourth iteration (2002) of the Human Resource Competency Study conducted by the University of Michigan Business School found that 43% of HRs impact on business performance came from its strategic contribution. A smaller study conducted in the same year by the Human Resource Institute (HRI) found that becoming a business partner and a strategic thinker had become the most important roles of HR professionals in respondents organizations. Yet, theres something elusive and ambiguous about this widely touted goal of becoming a strategic business partner. At a recent conference on the future of HR, a panel of experts was asked to define what a strategic business partner was. After much hesitation, they finally agreed with the statement, I cant define it, but I know it when I see it. And although a growing number believe that theyre filling this role, they dont seem to be

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Measuring Organizational Effectiveness spending any extra time doing so, according to a study conducted by the Center for Effective Organizations. It found that a greater proportion of respondents (41.1%) said they were full partners in the development and implementation of business strategy in 2001 than in 1998 (29.4%). Although this statistic suggests HR is changing, the authors of the study do not believe so. Even though more HR professionals profess that they are strategic business partners, the expected increase in time devoted to this role is not reflected in the data from 1995, 1998 and 2001. It seems that instead of responding to the calls for change, HR responded by maintaining the status quo (Lawler and Mohrman, 2003). Other studies also point out that becoming a strategic business partner remains an elusive goal for many HR professionals. In a 2002 survey conducted by the Society for Human Resource Management, respondents were asked to select the best description of the view of HR held by the executives in their organizations. Only 34% indicated that HR was viewed as a strategic partner. Helen Drinan, the former president and CEO of the Society for Human Resource Management, believes that the HR profession is at a crossroads. If HR does not force its way into the heart of strategic planning in organizations, it will default to a technical and transactional dead end, she said. She believes that upper management in most organizations is finally willing to recast HR into a role as equal business partner, but HR managers have to be willing and able to step up to that bigger role. There is a seat at the table. Is that seat going to be filled by an HR pro or someone else? (Drinan, 2002). Given the immense amount of attention over the years to the need for HR to change its role in the organization, why has progress been so slow? Its not because HR lacks the will to move in that direction; in an effort to free HR to become more strategic, traditional transactional activities have been either put online, centralized or outsourced. Its not because of a lack of knowledge; the competencies needed to transform the HR professional have been described in detail and made a top priority for most HR departments. And as the data above shows, its not for a lack of effort; more and more HR executives believe that they are being business partners.

Is Measurement the Problem?

The problem may well be in the area of measurement proving with data that HR is adding value. The Accenture High Performance Workforce Study 2002/2003 found that a major shortcoming in many companies is a lack of measurement on the impact of HR, which is preventing executives from understanding where and how they should best apply resources. The report went on to say that some companies are achieving success in this arena and that these organizations are more likely to see the HR function as valuable and strategic. This premise also is supported by the research conducted by Ed Lawler and Sue Mohrman. When organizations have a strategy that focuses on knowledge and information, HR is much more likely to be a full strategic partner. Knowledge and information strategies inevitably lead to a focus on human capital and the degree to which the company possesses the knowledge and information it needs in order to implement the strategy (Lawler and Mohrman, 2003).

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Measuring Organizational Effectiveness Why should the measurement of HRs performance be the problem? After all, measurement strategies for HR have been around for over 30 years. During the 1970s, research and development using human resource accounting principles led to formulas for measuring the return on investment and value of human capital (Woodruff, 1970; Pyle, 1970; Lickert and Pyle, 1971; Baker, 1974; Scarpello and Theeke, 1989). This, in turn, led to the development of literately hundreds of efficiency and effectiveness ratios for measuring virtually every aspect of HR. The proliferation of these ratios made benchmarking against other organizations possible (Fitz-enz, 1995). In 1985, the Society for Human Resource Management and the Saratoga Institute started publishing an annual HR Effectiveness Report, which compares ratios across literally hundreds of companies. Technological advances allow companies to gather data quickly and to use dashboards to distribute the results. Today, many companies also have completed HR audits and implemented balanced scorecards for HR (Kaplan and Norton, 1996). In addition, surveying the workforce for satisfaction and/or engagement is common in most large organizations. And, there are many other measurement strategies (e.g., Watson Wyatts Human Capital Index). The point is that there is no shortage of HR measures. So why is a lack of metrics keeping HR from being a fully integrated strategic business partner? Maybe HR is simply not measuring the right things and therefore failing to accurately gauge HRs value proposition or the impact that HR has on the business. Some of the best HR departments develop human capital objectives that clearly position them to be strategic business partners e.g., the drive to win, be flexible, embrace risk, be creative, think globally and be fast. The problem is that most, if not all, of the feedback that HR measures is the output of HR the efficiency of a specific HR activity: headcount, turnover rates, number of succession candidates, time to fill, cost reduction, training completed, grievances, client satisfaction surveys, performance ratings, sales per employee, and best practices recognized (Boudreau, 2002). Knowing how many hours of training have been delivered with the current budget provides pretty much the same amount of information as knowing how many advertisements the marketing department is running. In either case, nothing is said about the impact (outcomes) that those investments had on achieving the organizations strategy. Just as marketing needs to know the impact that the campaign has had on sales and brand recognition, HR needs to know the impact that the HR activities are having on the business (Cabrera and Cabrera, 2003). Organizational Effectiveness We believe that for human resources to be seen as strategic business partners the profession must evolve to the next level organizational effectiveness. Organizational effectiveness is the measure of how successfully organizations achieve their missions through their core strategies. Organizational effectiveness studies are concerned with the unique capabilities that organizations develop to assure that success (McCann, 2004). To understand how human resources impacts organizational effectiveness, these approaches to organizational effectiveness must embrace systems thinking and systems measurement.

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Measuring Organizational Effectiveness If organizational effectiveness is the measure of how successfully organizations achieve their missions through their core strategies, then for HR practitioners to be true strategic business partners in the future, they must develop processes that directly measure the impact that HR has on organizational effectiveness and the execution of the businesss strategic priorities. Because of the pace of change, the need for this type of measure has been growing. Over the past three years, nearly 40% of the top 2,500 global CEOs have been removed from their posts. The vast majority of them were let go because of a failure to execute. The main reason companies do so poorly at execution is that their leaders have either been unable or unwilling to make a connection between their companys goals and the realities of how their companies actually operate, how the market is actually performing, or how their customers needs can change almost every day (Charan, Burch and Bossidy, 2002). Good execution requires leaders to manage three interrelated and interdependent business components: By emphasizing people, strategy and operations. Normally, executives devote a lot of the relationships time, money and energy into developing a good strategy. And they among the parts of often do a good job of aligning operations to support that strategy. the whole, HR The most common set of problems stem from leaders failure to align professionals could their people processes with the strategic priorities of the company. We believe that for HR to have an impact on organizational effectiveness, HR must develop processes that directly support the execution of the businesss strategic priorities. This requires a measurement tool that assesses how the larger business environment interacts with the company and how all the components of the company interact with each other, including how HR interacts with all the components and the company as a whole. To be effective HR professionals will need the ability to think and measure systems. Systems Theory Since the late 1940s, and especially during the 1970s and 1980s, human resource professionals have drawn on the emerging knowledge from systems thinking. Through research conducted by these academic and applied disciplines, we now know that the way people behave in organizations cannot be explained simply by human relationships. The organization itself, its unique culture and constraints, all impact and modify human performance. The way the organization is structured, the authority in different positions, and job and technology requirements also clearly affect behavior. Systems thinking is a conceptual approach that views all events as interrelated and part of a greater whole. By emphasizing the relationships among the parts of the whole, HR professionals could understand how a change in one component of an organization can have repercussions throughout the firm. For example, if a corporation hires people with greater skills and more education than those it has hired previously, it may also need to upgrade its training programs and pay more attention to opportunities for advancement.

understand how a change in one component of an organization can have repercussions throughout the firm.

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Measuring Organizational Effectiveness Historically, systems theory can be traced back to the concept of natural philosophy in the early Renaissance. Naturalists were describing their perception and discovery that all aspects of nature are interrelated and interdependent. Over the centuries, this abstract, non-linear thinking was incorporated into the sciences, particularly in what are now known as the biosciences. Ludwig von Bertalanffy, an Austrian biologist and an international scholar from 1930 through the 1960s, is acknowledged as the modern founder of general systems theory (Bertalanffy, 1968). In the social and organization sciences, James G. Miller articulated the basic principles of systems thinking (Miller, 1972). He carefully applied Bertalanffys thinking to organizations, describing the basic principles in axioms and postulates. His is the foundational work for most of todays proponents of viewing organizations as systems. Famous organizational theorists such as Ackoff, Deming, Beers, Lawrence and Lorsch, Schein, Argyris, Mohrman, Lawler, Porter (Ackoff, 1981; Deming, 1993; Galbraith, 1973; Lawrence and Lorsch, 1969; Mohrman and Lawler, 2003; Schein, 1987; Senge, 1990) and many others have built their theories on a foundation of systems thinking.

In Eastern thought, systems thinking can be traced back at least 5,000 years in the roots of classical Chinese medicine. In the 3,000-year-old text The Yellow Emperors Classic of Medicine, the Chinese emperor listens to his advisors detail how lifestyle, eating choices and thought are interrelated to create health and disease. This theoretical foundation is the basis for acupuncture and for the practice of moving ones personal energy to create health, as in QiGong and Tai Chi. With the current convergence of Western and Eastern thought, few organizational experts are surprised at the emergence of systems theory as being the best way to view organizations. In 1999, David Nadler opened his keynote address to the HRPS Annual Conference by stating that we all understood that systems thinking was the basis for intelligent discussion of organizations. A systems theory approach views all aspects of the organization as interrelated. And all systems have a larger system that they reside in and have smaller systems that reside within them. But what is the system? The system is any size group within the organization that has a natural affinity, for example, a training function within HR is a sub-system of the larger HR system, which is a sub system of the company and so forth. The interdependency between the company, the HR department and the training function is easy to see. When the company rolls out a new quality process approach, such as six sigma, the HR department will be assigned the task of designing, developing and delivering the training to its sub-system specialists in the training department. To be able to design and develop the six sigma program, training will need to coordinate with a group of other functions, such as research and development, engineering and manufacturing. All these functions are interdependent on each other to design, develop and deliver the needed training. To see HR from a systems perspective, its also important to understand the concept of outputs and outcomes (see Figure I).

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Measuring Organizational Effectiveness

Figure I: Systems

Outputs are generally considered to be things produced within the focus system (the HR department), and they cross the system boundary into the user system or systems (the company or other functions). Outcomes, on the other hand, are the effect that outputs have on the user system or systems. Alignment creates a system in which all inputs and outputs are balanced and used efficiently and effectively. Its also critical to understand that systems exchange information continuously, a dynamic labeled feedback. Feedback (measurement) can be thought of as two types, internal and external. Internal feedback loops occur entirely within the focus system and contain information about the output(s). In external feedback loops, the feedback information is obtained from outside the focus system and contains information about the outcome(s). This external feedback finds its way back into the focus system and so is able to modify the process.

Figure II: HR Training Systems

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Measuring Organizational Effectiveness

Therefore, in our example, the training functions output is how efficiently the six sigma training program was delivered, and the outcome is the impact it has on increasing the product quality. The internal feedback is the training participants feedback on how well the program was taught. The external feedback is the degree of improvement in product quality (see Figure II: HR Training Systems).

Measuring Organizational Effectiveness

Academicians, researchers and consultants are rapidly developing ways for executives to assess and guide alignment to increase organizational Our HRI team is effectiveness. Among these approaches are the search for convinced that this correlations between HR practices and business performance same type of measures (Huselid, 2001), the identification of links between human revolution can be capital resource practices with shareholder value measures (Pfau, achieved in the 2002) and longititudinal studies that identify factors that differentiate human capital top performing companies (Collins, 2001). In one form or another, all area. these efforts are attempting to measure the HR outcomes and their impact on how well the company performs. They are attempting to capture the interdependencies and interrelationships of the organization as a system. Over the last three years HRI, in collaboration with Elena Grnell (University of Madrid) and Al Vicere (Pennsylvania State University), has been conducting research into the efficacy of measurement tools that assesses how the larger business environment interacts with the company and how all the components of the company interact with each other including how HR interacts with all the components and the company as a whole. The quality control movement and Japanese manufacturing methods of the early 1980s altered the concept of business measurement. Prior to then, measurement was something done mainly by the accounting function and the engineering function. Both disciplines tracked data that provided their functions with key information that enabled them to manage their areas of responsibility. However, Japanese manufacturing methods emphasized the power of sharing engineering and cost data with production managers and employees. Armed with data and combined with the knowledge of how their machines worked, manufacturing managers and employees implemented statistical quality control processes that dramatically increased productivity and decreased cost. The results proved beyond question that looking at the broader view was powerful and profitable. Today, we have Six Sigma methodologies that combined with process reengineering, a statistical quality control approach, and monstrous computing power are fueling the nano-technological revolution. Our HRI team is convinced that this same type of revolution can be achieved in the human capital area. We have learned as we have measured peoples attitudes, behavior and perceptions that the data is revealing and helpful. But just as we needed to combine statistical quality control methods with

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Measuring Organizational Effectiveness process reengineering to gain a broader view of the interaction among machines, materials and people, now we need to combine our efforts at measuring employee behavior and organizational culture with strategy and customer focus. We believe that the time has arrived to measure the entire organization as a system in conjunction with its environment, to map the interaction of the key aspects of the organization as it executes its strategy. Once HR executives are comfortable in systems thinking, they need to develop a process for monitoring that complex whole a process that listens for, and is actually attentive to, the alignment of the companys human capital with its strategic priorities. This process should help executives confront reality, analyze data, and conduct relentless follow-ups in order to find and solve problems quickly. The objective is to build a process that enables HR to easily see the linkages among the business environment, strategy and execution. This process should work much like a global positioning system (GPS) in a new car. At all times it shows where you are in relation to the larger system and the regional map, and it allows you to see not only where to make the next turn but where the alternative routes are as well. In addition, you can see the whole region at one glance, understanding where you are within the region. When executives have the ability to see the whole system, as in a GPS map, and the direction they are headed, then their ability to align the organization with market shifts is greatly increased. This GPS for HR is a two-phased process that consists of what has been known historically as environmental scanning and the emerging field of organizational systems capabilities analysis. In the first phase, HR (and the entire organization) must continuously scan the environment that most impacts HR. A regular and consistent scanning process helps to develop insights into the changing ebbs and flows of the external environment and into how these changes affect strategic priorities and HRs work. To do this well, HR must have a deeper understanding of their companys business past, present and future environment. Only by understanding the business environment can they see and understand how to influence where the organization meets the environment and where the strategy meets the market space. A SHRM study of eight leading consulting firms (SHRM, 2002) found that demographics, economics, technology, globalization, competition, customer focus and the political environment are key indicators influencing HRs work. It is especially important today for HR leaders to carefully scrutinize economic indicators so that when the economy moves from recession to recovery, they are prepared to move with it. In the second phase, HR must be able to assess the organizations capabilities. HR and other executives need to see how all the organizations subsystems interact so they can create and maintain alignment, rebalancing the organization as the market shifts. In the past, leading companies have addressed this need in a variety of ways. For years, culture assessments have been state-of-theart, serving as a way to see some of the whole organization. To supplement the culture assessments, most companies flood executives with survey results from leadership, customer satisfaction, employee behavior and traditional business outcomes measures. The hope is

It is especially important today for HR leaders to carefully scrutinize economic indicators so that when the economy moves from recession to recovery, they are prepared to move with it.

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Measuring Organizational Effectiveness that the executives will be able to integrate this data into a map of the whole organization. While some executives have been able to do this in the past, they have been unable to readily share it with others. HRIs team has developed the first generation of this type of measurement, the Organizational Capabilities Index (OCI). The OCI creates a map of the organization that enables executives to quickly see where the companys human capital is, or isnt, aligned. This map enables executives to locate key gaps in the companys connecting alignments and linkages and identify which combination of factors makes one unit better than another. Our research indicates that information and knowledge around the interactions and interrelations of five key components are critical for determining alignment:

Strategic alignment how well the strategic priorities are transmitted, shared and made consistent with peoples values and behaviors. Customer focus alignment the strategic, performance and people approaches needed to successfully focus on the customer relationship. Leadership and talent management alignment how the leadership style, communication, motivation, commitment and behaviors create the climate thats necessary for the organization to be productive.

Performance alignment how the processes and day-to-day behaviors and activities match and support the strategic priorities. Cultural alignment the values and beliefs of employees and the processes that directly link them so that their behavior supports the strategy.

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Measuring Organizational Effectiveness Figure III illustrates these major concepts and how they are interrelated, as well as the key concept of alignment. The environment is the largest system depicted (the largest hexagon) with the organization as the next smaller system. The organization is centered or aligned within its environment, driven by its strategy that is depicted as the next smaller subsystem. The organizations strategy guides it within the environment, positioning the organization to succeed. If the strategy is accurate, then the organization is aligned with the environment and thrives. When it moves out of alignment, moving out of its ideal environment, then it is out of balance or alignment and fails to thrive. The same logic applies to the subsystems within the organization, from the customer focus culture strategy to leadership, performance and the culture. Each subsystem needs to be aligned with the larger system (and the next larger systems, also) that it lies within. Thus, the customer focus culture must support the organizations strategy, and the companys leadership capabilities must be able to support the needs of its customer focus and its overall strategy. As an example, lets look at the toy industry. A significant segment of the toy market is extremely faddy, dependent on the many trends and factors that influence what children want and parents are willing to buy. Some major toy manufacturers conduct a two-pronged strategy, with one prong aimed at the previously proven toys and the other at the latest fad. Divisions of the toy manufacturers that focus on fads must continually scan their environment, essentially the popular culture, to find what is hot, quickly design and produce the toy, and distribute it to the retailers while the concept is still hot. Their target market is ever moving, demanding that they be highly flexible. They have three strategic imperatives: 1) identification of what is hot, 2) rapid development and production and 3) flexible logistical capability to send the toys to hot retail stores and markets. Peeking into their organizational system, we can see that their customer focus needs to be simply designed to meet the retailers needs. They will not be forming a long-term relationship with their end-users, the children or parents who buy the toy. Rather they are focused on making the toy that is hot this year and will not be popular next year. So the customer focus strategy and supporting culture will be designed to meet the retailers needs for just-in-time sales, with the capability to quickly produce mass quantities if the toy is very popular. Leadership capabilities will have to match this focus. The successful toy manufacturer in this niche will have leadership that is fast paced and focused on getting the product out the door. Management will be focused on current profits and infrastructure speed and innovation. The performance infrastructure must be able to be easily reconfigured to produce and support the distribution of an inconsistent, relatively unpredictable flow of new products. The organizational culture must inculcate a necessary team approach required for rapid development of many new products. If you are like most of us, as you read the preceding paragraphs you may

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Measuring Organizational Effectiveness well have become overwhelmed with the complexity of aligning multiple systems within systems. Its similar to the situation when someone tells us directions to his or her home; we often retain only one segment of the directions, having to stop and reread the directions after a few turns or landmarks. This basic tendency is in most of us, and it is why HRI has spent the last four to five years trying to develop a GPS roadmap for organizational systems. Alpha Test for OCI Using this as a theoretical model, HRI also has developed an approach to measuring the organization as a whole system. Initial results from Alpha testing of our Organizational Capabilities Index (OCI) are very revealing. The results of the OCI are rich, providing a high level overview of a companys strategic alignment and capabilities, as well a wealth of detail in all areas. Our Alpha test company is a small manufacturer of office furniture, an industry dominated (like so many others) by three major competitors and hundreds of niche players. With an annual volume of $25 million, our European-owned company should be aligned to three strategic At a glance we imperatives to succeed in its highly competitive market: (1) a clearly could see multiple defined and defensible niche, (2) a highly customer-focused culture, opportunities for and (3) a lean and efficient manufacturing operation.

change and the key intervention points to realign the company. So the concept of providing a GPS reading truly works

Instead what we found was a company that had lost its way. Instead of having a clearly defined niche, the company could not decide whether it wanted to be an industry niche leader or follower. As the parent company vacillated from one strategy to another (think strategic program of the quarter), operations managements focus turned inward and away from embracing the customer. Like most good operations management, they were committed to evolutionary improvement and were careful and reserved going about their work. Unable to intellectually and emotionally support the ever-changing strategic direction, they became careful technicians instead of passionate supporters of quality and service.

As typically happens when management focuses inward, performance suffered. The manufacturing facility became high control, with job responsibilities narrowly defined, performance measures relatively unclear. The organization became rigid, with employees focused on themselves, moving at a deliberate pace and uninterested in changing. Consequently, instead of being a vigorous and vibrant company competing on its strong relationships with customers and willingness to exceed expectations, it became incapable of doing much more than being a nice place to work. The results of our Alpha test were indeed startling. Without any sophisticated data analysis, we could readily see that the companys inability to focus on a specific market niche divided the leadership team into two camps, dulled the companys efforts at creating high-touch customer focus and created a gap between the beliefs of the employees and the companys expectations for performance. At a glance we could see multiple

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Measuring Organizational Effectiveness opportunities for change and the key intervention points to realign the company. So the concept of providing a GPS reading truly works and now the HRI team is looking forward to conducting extensive applied research. Satisfied with the results of our Alpha test and well into our Beta testing process, we will soon be presenting more detailed findings and comparisons. However, our work so far has led us to several conclusions. First, companies are always in a state of flux and need to be continuously realigned. Second, organizations always have their own unique alignment. Thus, organizational capabilities analysis will simply identify where the organization is at a particular point in time. No organizational capabilities analysis will be couched in terms of good or bad. Third, technology is enabling us to see the complexity that surrounds us more than ever. We need to be ready to understand and manage the complexity because our era demands it. In the future, we believe that the OCIs ultimate value will be prediction strategic planning and what if analyses. If the external environment (economy, customers, competition, etc.) shifts and causes the organization to shift its strategic priorities, what organizational capabilities (culture, leadership, performance, etc.) also must shift in order to align the people to support the new strategic direction? And if HR shifts certain dimensions of leadership, what will the impact be on customer focus and/or other key components? Conclusion Stepping back we need to address the broader question of what does this mean for the HR profession? What is the bottom line for HR? For at least the last decade, Dave Ulrich (Ulrich, 1997) has been writing about and demonstrating the need to become a strategic business partner. He Stepping back we has been a true visionary, accurately seeing the need for HR to need to address become a more powerful influence in companies as human capital the broader becomes the key strategic differentiator. The need for this role will question of what only increase in the future. To become does this mean for strategic business partners, he believes that HR professionals need the HR profession? competencies that fall within a three-domain framework: 1) What is the bottom knowledge of business (which includes financial capability, strategic line for HR? capability and technological capability), 2) knowledge of HR practices (which includes staffing, development appraisal, rewards, organizational planning and communication) and 3) management of change (creating meaning, problem-solving, innovation and transformation, relationship influence and role influence) (Ulrich, 1997). Given the complexities of managing people in organizations today, and even more so in the future, we would add a fourth domain to this competency frame-work: the ability to measure organizational effectiveness. To see the necessary alignments and linkages among strategy, people and daily work and to understand how these components influence and interact with each other. In short, they need the ability to think and measure in terms of systems. Of course, more research and application is needed before it will become the accepted way for measuring the HR professions value and contribution.

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