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Retooling HR: Using Proven Business Tools to Make Better Decisions About Talent
HR professionals have made major strides toward becoming strategic partners. But they need to do more - by generating value through savvy decisions about talent. HR leaders typically assume that, to make such decisions, they must develop sophisticated analytical tools from scratch. Even then, the resulting tools often fail to engage their peers. In Retooling HR, John Boudreau shows how HR leaders can break this cycle - by adapting powerful analytical tools already used by other functions to the unique challenges of talent management. Drawing on his research and examples from companies including Google, Disney, IBM, and Microsoft, Boudreau explains six proven business tools leaders already use. And he shows how HR can apply these tools to talent management. Examples include: Using engineering tolerances to find pivot points that job descriptions miss Using inventory and supply-chain analytics to ensure a ready supply of the right talent Applying logistics tools to optimize succession planning and leadership development Adapting consumer research tools to find untapped value in total rewards Retooling HR builds on Boudreau's bestselling book Beyond HR, which traces HR's evolution as a decision science. For HR professionals seeking to sharpen their decision-making prowess, this provocative new book blazes an innovative new path.
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Sunday Times HR Business network
At workshops with HR professionals, we often begin by asking: “What is the biggest challenge you face in your job today?” As we go around the room, the challenges mentioned usually range from getting HR practices right and relating to business leaders to managing the increased personal demands of the job. Heads generally nod in agreement until we say that all these answers are wrong - or, at least, incomplete. Silence then ensues.
Our point is that HR professionals often focus internally on their own function and roles, rather than externally on what their customers need. We believe that the biggest challenge they face today is helping their organisations succeed. That’s not to say that activities such as hiring people, developing leaders or building incentive programmes do not matter. They obviously do. However, our argument is that HR professionals should be at least as concerned with the outcomes of these activities – the value they create - as with the activities themselves.
The same goes for efforts to transform the HR function. Initiatives such as implementing e-HR, restructuring the function or designing new HR practices are often described as transformational. However, our experience of working with many thoughtful and innovative HR executives, combined with over 20 years of research, suggests that these actions will not be transformational and are unlikely to be sustained unless they are tied to clear business objectives. HR transformation, in other words, is not about doing HR more effectively, but about building business success.
To help practitioners achieve this goal and avoid the mistakes that are often made along the way, we have developed a four-phase model for HR transformation. Phase one consists of building the business case for transformation, phase two of defining the outcomes, phase three of redesigning HR, and phase four of engaging line managers and others in defining and delivering the transformation.
Phase one addresses the question: why carry out transformation? We believe that HR transformation should begin by making sure that all those involved in the process have a clear understanding of the context of the business. When HR professionals start thinking about the outcomes of their work as defined by the business context, they change their conversations with line managers and are able to justify and build a business case for the transformation. They are also more likely to avoid the common mistake of seeking to implement internally focused ideas that come across as solutions looking for problems.
The approach we propose has a number of practical implications. For example, many HR leaders launching transformation programmes call an all-hands meeting to share the vision and goals of the new HR organisation. We strongly recommend beginning this event with a detailed discussion of the business and the challenges it faces, as this will set the agenda for the entire HR transformation.
The second phase of a transformation programme involves defining its expected outcomes. We recommend that you start by picking the stakeholders you are most worried about, be they customers, employees, investors or the wider community, and then discuss and define the outcomes that will be most important to them. These stakeholder outcomes should be tracked over time to measure the progress of your HR transformation.
HR transformation should also change the fundamental identity, culture, or image of the organisation. We refer to this outcome as defining and building capabilities. These capabilities become the identity of the firm, the deliverables of HR practices, and the keys to implementing business strategy. For a retail firm, for example, service might be the critical capability, while for a firm moving into Asia, it might be the ability to collaborate with business partners. Senior leaders must be clear about the two or three most critical capabilities the firm must have in order to execute its strategy.
Our experience suggests that while there is no magic list of desired or ideal capabilities, certain capabilities seem to be inherent in most well-managed firms. For example, they are good at building leaders who generate confidence in the future, at creating a shared agenda around business strategy, at fostering enduring relationships of trust with customers and at working together across organisational boundaries. They also tend to have a strong reputation for corporate social responsibility, innovation, efficiency and accountability.
The third phase of our transformation model focuses on redesigning the HR function to make sure that it is aligned with business strategy. We have found that the most successful designs are those where the structure of the HR function reflects that of the business organisation. So if the business has a centralised structure, HR should also be centralised, or if the business is decentralised, the HR function should be similarly decentralised. The HR organisation should also mirror the structure of any professional service organisation. This means that there will often be centres of expertise where specialists with distinct knowledge – of learning and development or reward, for example - are charged with turning that knowledge into productivity. Lastly, the redesigned HR function needs to differentiate between transactional and transformational HR work.
These design principles can result in an HR organisation with five distinct - and at times overlapping – elements or channels. These are corporate HR, which oversees the whole function; operational executors, responsible for implementing initiatives; embedded HR, including both strategic business partners and generalists; centres of expertise, and service centres carrying out transactional work (see figure below).
Some organisations try to transform the HR department by focusing on only one of these channels. For example, they may create a service centre using a new HR information system. This can increase the efficiency of HR administration, but it will not be a complete HR transformation unless the other roles are also redesigned.
When the HR function is redesigned, HR practices may need to be revamped as well. First, however, they need to be described. So we have divided the vast array of HR work into four domains representing the flows or processes central to organisational success:
- Flow of people: how people move in, through, up, and out of the organisation.
- Flow of performance management: what links people to work, including standards, measures, feedback and financial and non-financial rewards.
- Flow of information: the information people need to do their work can flow up, down, or laterally, and from the outside in or from the inside out.
- Flow of work: who does the work, how and where work is done, and how business and operating processes turn individual efforts into organisational outputs.
To transform HR, work in each of these four flows of HR practices needs to be innovative and aligned to customers. The flows should also be integrated with each other.
Ultimately, HR transformation depends on the quality of HR professionals, who may need to upgrade their competencies in order to perform their roles in the new organisation. HR transformation has therefore raised the bar for the profession. Using data from just over 10,000 people around the world, we have identified the competencies required of today’s HR professionals. They include the ability to form relationships of trust with others, to contribute to the formulation of strategy and to make change happen. These competencies are not standards for entry into the profession but the differentiators of those who succeed in delivering value from HR.
The fourth and final phase in our HR transformation model is concerned with accountability. Four groups of stakeholders should be involved in any HR transformation: HR, line managers, customers and investors, and external consultants. HR’s role is to design the process and facilitate the implementation of the transformation. However, it is line managers who are ultimately accountable for ensuring that the organisation has the right talent and right structures in place to deliver on the expectations of customers, shareholders and communities. So line managers need to work with HR on implementing the transformation and on making sure it is aligned to business goals. Another group of stakeholders, external customers and investors, can play a role in guiding HR decisions throughout the transformation. Lastly, consultants and advisers can work as partners to advance the transformation. Clear role definition and rigorous accountability will help an HR transformation succeed.
Although we have listed the four phases of a transformation sequentially, in reality they are likely to occur concurrently. For example, while knowledge of business conditions has to frame the HR transformation (phase one), having the right transformation team (phase four) is critical to initiating the process. The challenge for HR professionals throughout is to remember that HR transformation is not an end in itself but a means to helping their organisations succeed.
HR Director Attributes - an effective HR Director..
- Provides strong leadership and direction
- Can work across a multi stakeholder community
- Has ability to deliver cohesive OD and people strategy enabling business strategy
- Knows how to drive through change improving performance and productivity
- Has excellent interpersonal skills
- IS Highly influential
- Leads and drives HR capability
- Develops and implements HR policy including Management/Leadership development training
- Enables Succession planning and reward processes
- Is an agent of cultural change enabling a collegiate and participative culture
A joint Acas and CIPD guidance note
1. Think long term
- Think creatively about how to reduce employment costs, such as new ways of working and work reorganisation.
- Remember that making people redundant and recruiting again later when the market picks up is expensive.
- Protect and make the most of the training budget – focus resources on key areas such as improving line management capability and customer service.
- Bear in mind your long-term reputation and responsibility to act as a fair employer.
2. Maintain employee engagement
- Redouble your efforts to boost or maintain employee engagement.
- Manage expectations and set a clear sense of direction.
- Keep employees in the picture even when there is little concrete news.
- Use all available media to beat the rumour mill.
- Think about creative, non-financial ways of motivating employees such as recognition schemes, team-building days and employee awards.
3. Strengthen line management capability
- Support your managers so they are better able to operate in periods of traumatic change.
- Brief line managers in full on developments so they can talk to their teams – face-to-face communications are best.
- Recognise the vital role that line managers play in every aspect of the employment relationship – make sure they are properly trained in day-to-day people management skills.
- Line managers also need support and leadership from senior management and from HR to equip them to manage difficult situations and avoid burning out.
4. Support employees’ health and well-being
- Recognise the psychological burden and impact that can arise in a recession – make sure workplace support and occupational health provision are in place to prevent high levels of work-related stress.
- Where possible provide opportunities for flexible working to help employees balance their work and home lives.
- Ensure you have mechanisms in place to deal with workplace stress and potential conflict at an early stage.
- Recognise the potential negative impact of ‘survivor syndrome’ if your organisation has made redundancies – employees that remain in organisations where there have been job cuts often suffer from guilt while coping with increased workloads.
5. Develop a strategy for redundancy so it’s there when you need it
- You need to start thinking about how you will handle significant redundancies at least three months before you anticipate they might need to take effect.
- Ensure the HR team is equipped to deal with redundancy situations at both collective and individual levels.
- Understand the law relating to redundancies and review procedures.
- Establish a policy and procedures to be used if workforce reductions are unavoidable.
- Tell employees about the policy.
- Manage any redundancy situation in a fair and equitable manner.
6. Think about ways to minimise redundancies if workforce reductions are inevitable
- Take advantage of natural wastage and/or offer voluntary redundancy terms – redundancies can have a serious negative impact on morale and performance.
- Cut back recruitment and review your use of temporary staff.
- Retrain employees whose skills are no longer in demand and redeploy employees to other parts of the organisation where possible.
- Reduce or eliminate overtime working.
- Consider short-time working, temporary lay-offs or sabbaticals.
- Plan reward strategies carefully – especially if the scope for pay awards is restricted.
- Encourage staff to suggest how jobs can be done more efficiently and costs saved.
7. Consult with your workforce and employee representatives
- Consult with your trade union if one is recognised.
- If there is no trade union, set up a special employee forum or consultative body long enough before the redundancies occur to provide information and to consult.
- Ensure that employee representatives have paid time off and appropriate facilities in order to meet and communicate with their constituents.
- Provide training for representatives – legally this has to be done, but it will also help the smooth running of the whole process.
- Consult employee representatives about ways to avoid redundancies, reducing the number to be dismissed and mitigating the consequences of any redundancies. The consultation must take place with a view to reaching an agreement.
- Recognise the difficult but key role that employee representatives have to play. Reassure them that they will not suffer as a result of carrying out their role.
8. Establish fair and objective selection criteria that will help you to retain key people
- In selecting people for redundancy, use objective criteria that can be applied in an unbiased way. This can include, for example, attendance records, disciplinary records, skills, experience or competence, work standards or aptitude to work.
- Ensure that the selection criteria are based on accurate records and are not discriminatory, directly or indirectly.
- Ensure that you are not losing vital skills in encouraging voluntary redundancy.
9. Help redundant employees to find other work
- Those who are facing redundancy need support and advice on how to cope – consider offering outplacement services and counselling to help redundant employees find new employment.
- Give time off to let affected employees look for other work or arrange training.
- Explore the possibilities of help or financial support for training and advice from government agencies such as Jobcentre Plus and Train to Gain.
- Remember your treatment of employees who leave the organisation will impact on the attitudes and loyalty of those who remain.
10. Plan for the future
- Reallocate jobs and responsibilities among the remaining workforce.
- Reorganise work spaces to eliminate gaps where people used to work: plan for a fresh start.
- Provide training for new jobs and new positions.
- Communicate and consult at all stages and pay particular attention to ensuring that line managers are fully involved in the change programme.
- Give positive messages focusing on the opportunities as well as the challenges ahead.
HR Directors Business Summit 2011
The ICC, Birmingham, United Kingdom
24th – 25th January 2011
The HR Directors Business Summit 2011 features the leading HR business practitioners and thinkers sharing insights into the challenges faced by the HR Director and the future of the HR function.
2010 and 2011 are important years for the HR Director to
- Steer the corporate people strategy.
- Remain competitive and to build team working.
- Further embed talent and engagement strategies.
And over 500 HR Directors will attend this strategic summit now in its 9th year to gain knowledge from a variety of case studies, keynote presentations, panel debates, workshop and masterclass sessions.
The 2011 agenda is being developed to address the core issues including:
- Business transformation - Managing change to build the new flexible and business agile company
- Skills shortage - What are the current strategic employee needs and gaps in skills?
- Team building - How one great team can change an entire organisation
- Self service HR – Managing quality in delivering HR services
- HR 2.0 - What technologies and social networking tools can be used to collaborate between staff and add business value?
- Challenges for the European HR Director - how do you manage HR effectively across multiple jurisdictions?
