It is wise to reflect from time to time on the ultimate purpose of HR in organizations, its ‘raison d’être’. A bit of historical background helps to clarify this discussion. It was under the flag of Scientific Management (late 19th century) that we started experimenting with people’s work designs to ultimately enhance their productivity. Later, and as a kind of counter-reaction, the Human Relations Movement advocated for a greater consideration of workers’ needs; however, again with the ultimate aim of enhancing their productivity. In line with these perspectives, the various HR activities (e.g., recruitment, selection, training, leadership, motivation, and culture) should ultimately seek to promote performance and raise the bottom line for organizations.
It is only much later, and this trend was significantly accelerated by the recent Covid pandemic, that the ultimate goal shifted toward ‘true’ employee well-being. Concrete examples of this trend include increased attention from HR for topics such as work-nonwork dynamics, equitable pay, diversity, and (especially) inclusion.
So let’s ask ourselves: what’s the ultimate HR KPI: performance or well-being?
In a recent academic article, Louis Tay (Purdue University) and colleagues provide a refreshening perspective, by introducing the concept of ‘optimal functioning’. Accordingly, optimal functioning encompasses both traditional performance indicators AND measures of well-being. There are two crucial elements in this perspective. First, optimal functioning does not imply a specific hierarchy in the importance of these outcomes (e.g., ‘performance is more important than wellbeing’), nor a causal argumentation (e.g., focusing on wellbeing is important because happy workers will also perform better). Second, optimal functioning operates and can be evaluated at different levels: the individual worker, the organization as a whole, and finally also the linkage with broader society.
Applications: diversity & inclusion and CSR
Efforts in the areas of key organizational topics such as diversity and inclusion and corporate social responsibility (CSR) are often constrained by the need to demonstrate a positive impact on performance. However, the explicit attention to wellbeing in optimal functioning sheds a new light on these practices, hereby expanding HR’s radius of action. Indeed, when only performance is conceived as the ultimate criterion, HR is confined to building an overly narrow ‘business case’ for much wider responsibility such as diversity and inclusion.
Likewise, the positive impact of CSR is often considered in terms of its influence on organizational performance – specifically financial performance – and is used to legitimize these efforts. Indeed, organizations are also taking a more nuanced approach to performance. Think of the “triple bottom line” or the 3 P’s: profits, people, and planet.
With optimal functioning as the ultimate criterion, diversity and inclusion as well as CSR do not need to serve the predominant purpose of performance, nor does it need to justify their value from performance.
Conclusion
While optimal functioning might seem like a mere label, it’s important to realize that seemingly innocuous labels tend to carry vast weight in terms of what ultimately matters. What does optimal functioning mean for your company?
About the author
Bart Wille is an Associate Professor Industrial-Organizational Psychology and HRM at Ghent University and co-founder of Low Lands Assessment Systems. His research focuses on psychological individual differences, particularly vocational interests, personality traits, and career competencies.
Reference
Tay, L., Batz-Barbarich, C., Yang, L. Q., & Wiese, C. W. (2023). Well-Being: The ultimate criterion for organizational sciences. Journal of Business and Psychology, 38(6), 1141-1157. https://doi.org/10.1007/s10869-023-09908-5