First of all I would make people wholly responsible for their own performance results. I have often seen people pass on responsibility of their lack of results on other people, and successfully get the other person reprimanded or terminated as a result. This usually happens with middle-tier managers who get people they manage terminated, not with same-level employees.
Secondly, I would seriously review all employees and see how well they are not only performing but can engage in other aspects outside of their direct jobs. For instance, I know that many of 3M's innovations (stickies / post-it note for example) came from personal side projects which the company allows employees to do. Whilst free-form thinking is a great idea, employees should be able to actively take on temporary of permanent challenges as the needs of the company changes.
Completely revamp the HR structure, from hiring to HR operations to benefits. HR people should only be involved in organizing resumes for the direct manager of the position who will do the hiring (and possibly team hiring process a-la Google; has to be analyzed) and acquiring final information (SS, previous addresses, etc...) once the job offer has been made. Instead of utilizing HR personnel to handle HR issues, hire behavioral psychologists or industrial psychologists.