Strategic Industrial and Organizational Psychology and the Role of Utility Analysis Models

Abstract

The beginning of the twenty‐first century poses an interesting paradox for I/O psychology and strategic human resource management. Leading I/O psychology journals, especially in the United States, have reduced attention to utility analysis at a time when the quantitative measurement of human capital is receiving unprecedented attention. This chapter admonishes scholars and practitioners in I/O psychology and human resource management to integrate their disciplines, and create a more strategic approach. We show how the logic and methods of utility analysis provides a framework for I/O psychology to be more strategic, and for strategic human resource management to be more operationally rigorous. We review developments in utility analysis research since 1991, but propose a new perspective based on decision support. We address the “criterion problem” in SDy research with this decision‐based perspective, as an alternative to the traditional I/O focus on measurement and psychometrics, to show how the decision‐based perspective reveals opportunities to link human capital and organizational success. We present a model, HC Bridge™, that links human capital and organizational performance, and use it to describe new directions for research on utility analysis estimation, acceptance, and decision making. Finally, we address SDy measurement from a strategic perspective, to show how SDy addresses a fundamental gap in human resource strategy.

The problem of action and interest alignment: Beyond job requirements and incentive compensation

“…Whereas historically human resource management research developed out of a concern with functional personnel issues such as the development of valid selection tests and the design of compensation and benefits systems (Wright & Boswell, 2002), in recent years the issue of how employees are aligned with organizational needs has become an important focus of HRM research (cf Boswell, in press;Boudreau & Ramstad, 2003;Gratton et al 1999;Truss, 2001). In part, this focus in HRM research has involved a shift in the outcomes of interest from individual level impacts to outcomes at the level of the organization (Becker & Gerhart, 1996;Delery & Shaw, 2001).…”

“…Yet, having a HRM practice in place has no direct effect on the realization of organizational strategy. It is ultimately the actions put forth by the actual human resources (i.e., the employees) that produce desired outcomes (Boudreau & Ramstad, 2003;Wright & Snell, 1991). That is, realization of an organization's strategic objectives is through individuals and their behavior (Boswell, in press;Gratton, et al, 1999;Jackson, Schuler, & Rivero, 1989).…”

“…Thus whether an employee behaves in alignment with the strategic goals of the organization depends on he/she having traits, skills and abilities compatible with the needs of the organization, whether he/she has the occasion and opportunity to behave accordingly, and whether he/she has the incentive to do so. The basic idea that HRM practices affect behavioral outcomes by influencing employee capability, opportunity, and motivation has received increasing recognition in the HRM literature (Bailey, 1993;Boudreau & Ramstad, 2003;Delaney & Huselid, 1996). We will follow this approach in exploring the determinants of action alignment.…”

Global Human Resource Metrics

“…Talentship builds on HR management practices and measures, and goes further, to create a framework of tools that enhances decisions. These decisions may cover a broad range of areas, such as individual choices about whether to take an international assignment as a development opportunity, or global HR policies about decisions for international career development (Boudreau & Ramstad, 2002a;Boudreau et al, in press). …”

“…It is well-recognized by academics and practitioners in the accounting and management fields that in the new economy, traditional corporate measurement systems must include measurement of intangible assets (Boudreau & Ramstad, 2002a). In the field of strategic HR management, scholars (e.g., Boudreau, 1998;Boudreau & Ramstad, 2002a) have noted the importance of understanding the value of talent.…”