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HR PODcast: Perspective, Outcomes, and Determinants Dave Ulrich
Podcasts broadcast insights on a wide range of topics. I propose an HR PODcast focused on how HR leaders can respond to increased expectations. The bar has been raised on HR: The Conference Board CEO Challenge 2014 survey found that human capital issues are the number one challenge around the globe. The leadership profile of successful CEOs matches the leadership profile of effective CHROs. HR issues are increasingly a part of firm valuation by thoughtful investors. Estimates are that about one-third of the issues discussed at board level are related to HR (for example, succession planning, talent review, executive compensation, governance, strategy execution, ethics, and culture). In brief, HR leaders now have more opportunity than ever to influence business success. HR professionals no longer need to get "a seat at the table" but to demonstrate real value when they are there. To deliver this value, I propose a forward-thinking Perspective, Outcomes, and Determinants (PODcast) for senior HR leaders.
Perspective: What Challenges Does HR Solve?
I begin most discussions with senior HR professionals with a version of the question, "What are the greatest challenges you face in your job today?" The answer to this question not only gives insight into the predisposition of the respondent but lays out an evolution of the HR profession. There are generally four types of responses that capture perspective on the challenges HR faces.
Phase 1 emphasizes administrative efficiency focusing on the operational efficiency of HR practices (for example, cost per employee hire).
Phase 2 highlights functional excellence in which HR's challenge is to manage people, performance, information, or work. In this phase, HR focuses on innovation and integration of HR services with an emphasis on HR best practices and new ideas.
Phase 3 features strategic HR work in which the HR practices align with business strategy. Depending on the organization's strategic goals (for example, innovation, customer service, or geographic expansion), HR practices can be used to deliver those strategies.
Phase 4 shifts to an outside-in focus in that HR practices align with customers, investors, and other external community stakeholders. Outside-in HR is based on the premise that the business of HR is the business. Outside-in logic goes beyond the current state of the HR profession, in which the focus is on connecting strategy to HR. We now believe that business strategy, often seen as a mirror in which HR practices are reflected, should be regarded as a window through which HR professionals observe, interpret, and translate external conditions and stakeholder expectations into internal actions.
Perspective means that HR professionals have evolved their thinking about how HR delivers value (captured in Figure 1.1). As HR has shifted from administrative to functional, to strategy, and to outside-in thinking, the perspective has evolved to one of value created through serving key external stakeholders and responding to business conditions of change. With their business focus, HR professionals can accurately converse about customers, products, operations, and financials, but also help create the right type of organization that sustains market value.
Outcomes: What Unique Value Does HR Contribute to Business Results?
With an outside-in perspective, HR professionals offer unique information, insights, and recommendations to deliver competitive advantage. In formal and informal business discussions, each staff group brings its own insights to drive business results: Finance talks about economic performance with information about revenues, costs, and financial returns; marketing discusses customers with recommendations on targeting key customers, customer response (for example, net promoter score), and customer connection; operations makes recommendations about systems, quality, and supply chain. When HR professionals partner in these strategy discussions, we propose that they provide insight, information, and recommendations on talent (people, workforce, human capital), capability (culture, processes, key success factors, systems), and leadership.
At the risk of grossly oversimplifying, let me suggest that there is actually a deceptively simple formula for talent that makes people more productive: Talent = Competence x Commitment x Contribution. All three elements of this equation need to be considered and integrated to fully manage talent.
Competence means that individuals have the knowledge, skills, and values required for today's and tomorrow's jobs. One company clarified competence as right skills, right place, right job, right time. For example, an emerging trend in the workforce planning domain of competence improvement is to identify key positions and match people to positions. Competence should start outside-in by turning customer expectations into the talent requirements for the future.
Committed or engaged employees work hard and do what they are asked to do, but may be doing the wrong things. By contrast, committed employees with an outside-in focus direct their attention to work and activities that will deliver value to customers, investors, and communities. Committed employees have an employee value proposition that balances what employees give to the firm with what they get back. Dozens of engagement studies have shown that more committed employees are more productive.
Contribution refers less to behavioral engagement and more to emotional connection to the organization. When employees find meaning (sometimes called well-being or growth mindset), they become personally connected to the values of the organization. Their engagement comes from within and endures over time.
In business conversations, HR professionals focused on talent outcomes can raise questions such as:
To what extent do our employees have the knowledge and skills required to deliver on our expectations for customers, investors, and communities?
To what extent do we have an employee value proposition that increases commitment and engagement of our employees to the right goals?
To what extent do our employees find meaning and purpose from their work so that they are self-motivated to accomplish work?
In the last 15 to 20 years, the HR profession has been shaped by remarkable work captured in the "war for talent." Many HR professionals have built systems for bringing people into the organization (sourcing, having a value proposition), moving them through the organization (development, performance management, engagement), and removing them from the organization (outsourcing).
But in today's business, HR professionals need to establish organizations that leverage individual talent through collective actions. Talent is not enough. The whole organization should be greater than the separate parts. United states are stronger than individual states. Teams outperform individuals. Individuals are champions, but teams win championships. The following simple statistics show the importance of teamwork over talent:
In hockey, the leading scorer is on the team that wins the Stanley Cup 22 percent of the time.
In soccer, the winner of the Golden Boot (leading scorer) is on the team that wins with World Cup 20 percent of the time.
In basketball, the player who scores the most points is on the team that wins the NBA finals 15 percent of the time.
In movies, the Best Picture winner also has the leading actor (25 percent of the time) and actress (15 percent of the time).
Let me propose a three-step process (summarized in Table 1.1) for HR professionals to bring discipline to moving from the war for talent to creating victory through organization.
First, organizational capabilities represent what the organization is known for, what it is good at doing, and how it allocates resources to win in its market. Organizations should be defined less by their structure and more by their ability to establish the capabilities required to win — that is, to serve customers in ways that competitors cannot readily copy. Organizational capabilities might include the ability to respond to or serve customers, drive efficiency, manage change, collaborate both inside and outside, innovate on products and on the business model, access information, and establish the right culture. HR professionals can facilitate capability audits to determine if the organization has prioritized the right capabilities to win.
Second, culture represents the pattern of how people think and act in the organization. Although organizations can have many capabilities, culture is likely to be the key for future success. The right culture takes what the organization should be known for by major customers and uses this external identity to shape internal thought and action. HR professionals can audit the extent to which an organization has the right culture.
Third, management actions can be identified and implemented to create and sustain the desired culture. My colleagues and I have classified these actions into intellectual, behavioral, and process agendas. Intellectual agendas ensure that managers create a shared culture inside and outside the organization. Behavioral agendas show the extent to which all employees behave consistently with the desired culture, and process agendas institutionalize the culture through management practices.
In business dialogues, HR professionals can be the architects (defining the logic and blueprint) and anthropologists (interpreting the right pattern) of capability by raising the following questions:
To what extent have we defined our culture from the outside in, making sure that our external firm brand becomes the basis for our internal ways of thinking and acting?
To what extent have we created a disciplined process of evaluating and transforming our culture?
Ultimately, leaders bring together both individuals and organizations to solve customer problems. But there is a difference between leaders and leadership. The term "leaders" refers to individuals who are able to effectively guide the behavior of others. "Leadership" refers to an organization's capacity to build future leaders. An individual leader matters, but an organization's collective leadership matters more over time. Looking forward, HR professionals will not only need to help individual leaders be more effective through coaching, 360-degree feedback, and individual development plans, but they will also need to build leadership depth.
The outcomes of effective leadership include employee engagement and organizational goal achievement, as well as shareholder (debt or equity) confidence. I have proposed a leadership capital ratings index (like the Moody's creditworthiness index) that could be used to define effective leadership. This index would have two dimensions, or domains: individual and organizational. Individual refers to the personal qualities (competencies, traits, characteristics) of the key leaders in the organization. Organization refers to the systems (often called human capital) that these leaders create to manage leadership throughout the organization and the application of organizational systems to specific business conditions. Using these two domains, previous leadership and human capital work may be synthesized into a leadership capital index that investors and others can use to inform their valuation decisions and HR professionals to enhance their impact.
Five leadership factors define the individual domain of a leadership ratings index that covers half of leadership capital.
1. Personal proficiency: To what extent does the leadership demonstrate the personal qualities required of an effective leader?
2. Strategist: To what extent does the leadership articulate a point of view about the future and strategic positioning?
3. Executor: To what extent does the leadership make things happen and deliver as promised?
4. People manager: To what extent does the leadership build competence, commitment, and contribution of the organization's people today and tomorrow?
5. Leadership differentiator: To what extent does leadership behave consistently with customer expectations?
Leadership capital includes not only personal or individual leadership traits but also investments made to build future leaders within the organization. To build future leaders, leaders create organizational cultures and invest in HR practices (often called human capital) in five domains:
1. Culture capability: To what extent has the leadership created a customer-focused cultural capability that is shared throughout the organization?
2. Talent: To what extent has the leadership invested in practices that manage the flow of talent into, through, and out of the organization?
3. Performance accountability: To what extent has the leadership created performance management practices (for example, compensation) that reinforce the right behaviors?
4. Information: To what extent has the leadership managed information flow to gain information asymmetries (which means that an organization has unique information that competitors may not have)?
5. Work: To what extent has the leadership created organizational and work practices that deal with the increasing pace of change in today's business settings?
By using a leadership capital index, the requirements of effective leaders could be defined and clarified from the outside in.
In business settings, HR professionals may prod a discussion of the right leadership with questions such as:
To what extent do we recognize the importance of collective leadership in reaching our goals?
To what extent do we create a leadership brand that defines how leaders inside our company better serve external stakeholders?
To what extent do we regularly assess our leadership capability to discover areas of strengths and weakness?
To what extent do we seriously invest in developing future leaders who will respond to future business requirements?
Determinants: How Can HR Invest in HR?
HR for HR means that HR professionals apply to their own function the knowledge and tools they apply to their organizations. This means building the right HR organization by making sure that the HR department aligns with the business organization. It also means designing the right HR practices to offer business solutions. And it means investing in the HR professionals to ensure that they respond to future opportunities.
The governance of the HR function should match how the business is governed. All organizational design choices can be arrayed into a centralized (efficient) versus decentralized (effective) grid. Highly centralized governance describes single businesses with a strong corporate agenda; highly decentralized governance describes holding companies with autonomous and independent operating units; diversified allied governance attempts to manage both through multidivisional firms governed through matrices of shared decision-making. The HR organization should match the business structure. Centralized businesses require functionally driven specialists (staffing, training, compensation, organization development). Decentralized businesses dedicate these functional specialists to each business. Diversified-allied organizations share knowledge through centers of expertise and embedded HR generalists.
HR practices should provide integrated solutions of individual HR practices focused on business results. For example, a firm seeking to compete through innovation will align staffing, training, compensation, organizational design, and communication practices to foster innovation. However, a firm competing through efficiency, service, or global growth would use these similar HR practices in a different way depending on the business's strategic focus. With an outside-in perspective, these HR practices should also reflect expectations of customers, investors, and communities. HR should not build practices only to be the "employer of choice" but rather to be the employer of choice of employees customers would choose. Instead of training occurring just for individuals inside the organization, customers could participate in the design, delivery, and attendance in the training activities.
HR professionals also need to up their game to deliver value in today's business settings. This means that HR professionals need to build relationships of trust with business leaders by being credible activists. They also take strong positions to build business success. These HR professionals must both know the business and be able to strategically position the business. They must master the processes of individual and institutional change. They must be knowledgeable in the science and art of HR. And they must use information to inform decision-making. When they master this knowledge, skill, and ability, they can deliver the talent, leadership, and capability a business requires to compete in a changing world.
Excerpted from "View from the Top"
Copyright © 2016 Patrick M. Wright, Dave Ulrich, Richard L. Antoine, and Elizabeth Sartain.
Excerpted by permission of Society For Human Resource Management.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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Table of Contents
Foreword by Henry G. "Hank" Jackson,
Introduction: Human Capital, Organizational Capability, and Competitive Success Patrick M. Wright, Dave Ulrich, Richard L. Antoine, and Elizabeth "Libby" Sartain,
Part I: New Demands for HR,
Chapter 1. HR PODcast: Perspective, Outcomes, and Determinants Dave Ulrich,
Chapter 2. Executive Team Member Needed Edward E. Lawler III,
Chapter 3. The HR Leadership Paradox James Duffy,
Part II: New Perspectives for the CHRO,
Chapter 4: The Four Levels of Impact of the Chief Human Resource Officer: HR 4.0 Marcia J. Avedon,
Chapter 5. 8C Model for Effective HR Leaders Richard L. Antoine,
Chapter 6. 7 Common CHRO Priorities that Create Good but Not Great Performance Wayne Brockbank,
Part III: New Levers for Competitive Success,
Chapter 7. In Search of Execution Kenneth J. Carrig, Scott A. Snell, and Aki Onozuka-Evans,
Chapter 8. Creating Sustainable Culture Change Elizabeth "Libby" Sartain,
Chapter 9. Believe in Your People, and They May Surprise You Michael D'Ambrose,
Chapter 10. Building Social Capital: An Invitation to Increased Impact and Influence Eva Sage-Gavin,
Part IV: Cases in Building Organization Capability,
Chapter 11. The Heart of Hilton Matthew W. Schuyler,
Chapter 12. Building Organization Capability at BASF Judy Zagorski,
Chapter 13. Strategic Human Resources to Help Build a Global Tech Leader: A Narrative at Lenovo Gina Qiao,
Part V: Managing Talent for Success,
Chapter 14. Talent Trumps Strategy Rich Floersch,
Chapter 15. Managing Your Talent Supply Chain Jill B. Smart and Debra Exstrom,
Chapter 16. Driving Organizational Success: Addressing the Leaky Talent Pipeline for Women Mara Swan,
Chapter 17. Great Leaders Deliver Great Business Results Joe Ruocco,
Chapter 18. The Strategic Value of Talent: From Anecdote to Evidence Robert E. Ployhart and Anthony J. Nyberg,
Part VI: Challenges in Managing C-Suite Talent,
Chapter 19. Mitigating Critical Risks in CEO Succession Susan M. "Sue" Suver,
Chapter 20. Choosing the Next CEO: Assessment Practices and Challenges Patrick Wright, Donald J. Schepker, Anthony J. Nyberg, and Michael Ulrich,
Chapter 21. Best Practices v. Best Fit: Challenging Conventional Wisdom in Incentive Design Michelle "Shelly" Carlin,
Part VII: Building CHRO Talent,
Chapter 22. CHRO Succession: Are We Practicing What We Preach? Mirian Graddick-Weir,
Chapter 23. Courage: A Critical Attribute for Success Amidst the Competencies HR Executives Need Debra J. Cohen,
Chapter 24. Are the Best CHROs Developed or Recruited? James M. Bagley,
Conclusion: Creating Value through Human Capital: The Journey Ahead Patrick M. Wright, Dave Ulrich, Richard L. Antoine, and Elizabeth "Libby" Sartain,
About the Editors,
About the Contributors,
Additional SHRM-Published Books,