The impact of benefits on business performance

To finish 2007, I wanted to refer to a couple of articles published by Employee Benefits magazine that include some of my comments.

First of all, December’s report on how benefits impact business performance provided for Financial Directors:

"In today's knowledge-based, service economy, a substantial proportion of an organisation's value is held in its employees. Customer service levels, sales ability and intellectual assets tend to be worth more to the bottom line than the physical, non-human assets of many companies.

Increasingly, therefore, business leaders are recognising the correlation between employee attitudes and total shareholder return. David Ulrich, professor of business at the University of Michigan and HR guru says organisations which have seen an average 10% increase in positive employee attitudes, experience an average 4% increase in customer sales, leading to an average 2% increase in investor returns. "It's a clichÈ, but in a knowledge economy, employees are an organisation's greatest
asset," says Ulrich.

As Jon Ingham, director at human capital consultancy Strategic Dynamics, points out: "Many organisations are starting to understand that ongoing competitive advantage will depend increasingly on the quality and engagement of their people compared with competitors. So investing in human capital is partly about ensuring that the people in the organisation are fully equipped to deliver short-term business success, but secondly, it's also about having the capability to take the organisation forward and ensure that there is a basis for sustainable competition too."

In the UK, vanguard organisations such as the Royal Bank of Scotland, Nationwide and Standard Chartered have been able to apply scientific approaches to quantify the value of human capital investment on improved business performance. They have the advantage of holding data that they collect for the Financial Services Authority, as well as having many branches or call centres all doing pretty much the same thing, so they can scientifically test one operation against another, apply the data they hold and look for statistically valid correlations.

Ingham warns that in most organisations the costs of gathering that level of data is punitive. He recommends a more qualitative, and discursive analysis on understanding the value of human capital in the organisation: "Look at the investments that have gone into human capital, like the spend on employee benefits. [Gather information] across the boardroom or the executive team involving finance and HR and managers of the business about what the organisation is experiencing in terms of engagement; external perception; [being an] employer of choice; staff engagement survey results; and then finally place focus on the business results."

Naturally, a financial director's primary attention tends to be on the harder metrics of cost control and growth, than the seemly intangible, hard-to-measure HR concerns of employee recruitment, retention and engagement. But focusing solely on what can be measured can undermine the potential to improve business performance."

Regular readers of this blog will understand that I’m referring to the HCM value chain here. This provides a much more appropriate form of measurement than others quoted in the report.

For example, calculating a ROI:

“One company that Towers Perrin worked with received £47 back for every £100 invested in pay, and £700 for every £100 invested in leadership."

This is far too simplistic an analysis to provide any useful information to FDs. Calculating a financial return on investment is hard because of all the other factors in an organisation that will also inform the financial results. And it may not be the best measure anyway. ROI may be useful if a benefit is introduced simply on the basis of costs and returns. But in many cases, benefits are used to support the positioning of an organisation, helping it become an employer of choice, or just ensuring that it is offering at least the same level of benefits as its competitors. In these cases, benefits are not being introduced purely for financial reasons, and a financial ROI is not the best measure of their success.

For example, in a 2006 survey, McKinsey found that the main reasons companies offered benefits to employees were: to attract and retain talent (58%), to meet responsibilities to employees (30%), the comply with Union agreements (7%), to support its corporate image (2%), to increase employee productivity (1%) and to secure tax advantages (1%). It is only the last two of the reasons that lend themselves easily to the calculation of ROI.

Reward and benefits managers should also be wary of requests to prove a return on investment. In many cases, if a Chief Executive asks to see a ROI, it is simply because they do not think there is a positive return. In this situation, a manager would do better to spend their time improving the effectiveness and delivery of the benefits, rather than worrying about calculating the return.

Wise organisations make investments in pay, benefits, leadership development and other areas depending upon their people management strategy and what’s required by individuals and the organisation, not by comparing returns between these different potential investments.

Belief #2 - HCM is difference to HRM because of its focus on human capital

I started posting on my beliefs about people management last month.

Belief #2 is that HCM is substantially different to HRM, because of its focus on human capital, or because it accepts that, as I explained in belief #1, people are more than just cogs in the wheel.

I don't think this is a particularly common view - HCM is sometimes just used to indicate a more 'modern' approach to HRM, sometime to indicate a focus on measurement, and sometimes in connection with people management technology.

And it's not a very popular piece of terminology either. People object to their classification as 'human capital'. But for me, HCM isn’t the management of people AS human capital, but the management of these people FOR human capital. It’s about how organisations accumulate human capital as an intangible capability that is increasingly the most important and sustainable source of competitive success.

HRM tends to treat people as resources which can be expended and used up in the pursuit of business goals. It’s a perspective that has helped make organizations much more effective and efficient, but it tends to produce compliance rather than commitment from employees.

HCM recognizes that people are investors of their own human capital, and that they will only keep this capital invested if they’re well looked after and their investment produces a suitable return.

HCM isn't different to HRM because of the processes it includes, but the strategic and people centred approach it brings to each of these processes.

Suppose for example that you saw a really good job for one of your people advertised in the Sunday Times. Even if this job would be the perfect next role for this individual, in general, most business leaders today would ignore the fact that the job had been advertised. They might well suspect that the individual will have applied for it, but the unwritten rules in most organizations suggest that this can never be mentioned. Some business leaders would go as far as to keep the employee working over the next weekend to reduce the chance of them seeing the ad!

I think in the future, business leaders are going to see the advert as an opportunity rather than a threat. They will want to talk to the employee about the advertised position and how their organization might be able to offer an equal experience. Or if their employment value proposition is strong enough, they may even encourage the employee to apply for the advertised role, knowing that they can keep in touch, and bring the employee back into their organization with even more skills and experience later on.

This may seem a million miles away from how organizations work today. But I think when you’re truly focused on human capital, it becomes a very obvious step to take. And I believe it will become a common way of managing in the new S-curve.

Please note however, that this is only an example. They key is to ask what potentially strange approaches may work for your organisation depend upon what the form of human capital or organisational capability will differentiate your organisation from its competitors or help to transform the level and type of services you provide.

See also:

Belief #1: People are more than just cogs in the wheel

Kenny Moore and HR capability

The session at HR.com's VIEW that was most meaningful to me was Kenny Moore's, author of The CEO and the Monk: One Company's Journey to Profit and Purpose. Moore is also corporate ombudsman at KeySpan and is primarily responsible for awakening joy, meaning and commitment in the workplace

A lot of his presentation made a lot of sense to me, including that, although KeyFast also run engagement surveys, more powerful 'measurement' seems to come from face-to-face contact between managers and their staff.

This reminds me of one of Dave Ulrich's comments when he says:

‘Useful as studies are, they’re often unnecessary. You can find out much about commitment by simply observing it. When we teach classes on employer commitment, the participating executives often seek precise, rigorous, and trackable measures that they can use for management action. Then we ask those who visit multiple sites how long it takes them to discern the employee commitment level of a unit they are visiting. Without exception, they reply in terms of hours rather than days and they refer to dialogues, not data’.

I particularly liked Kenny Moore’s description of the sessions he facilitates with employees and the CEO where the CEO is simply asked to listen to his staff.

But what particularly resonated for me was Kennny’s point that he doesn’t feel he needs to worry about not understanding the business: “We’ve got a lot of MBAs, a lot of smart people who do understand the business. What I can ask is how we can connect them to the business.”

Now, I’m not advocating that HR abandons its ambition to become more business focused, but I would repeat my view that what separates, or at least what I believe will separate in the future, great HR from the merely good, is the function’s deep, psychological understanding of people, and how people can best be helped to work effectively in their organisations, or in Kenny Moore’s language, how the two can be connected.

Global / virtual x local / personal = social?

In my HR.com VIEW session, I introduced Bartlett and Ghoshal’s Integration Responsiveness Framework. This consists of four quadrants shown:

• An International company clones itself around the world.


• A Global company forms one integrated whole and provides standardised products across the world, responding to what Theodore Levitt sees as the convergence of global tastes and values and resulting in economies of scale.


• Multinational companies form businesses in each different country responding to local tastes, responding to what Kenichi Ohmae sees as the need to become an insider in each market.


• Transnational companies seek to gain all the benefits of these different approaches: global economies of scale together with local market customisation. So for example, in forming ABB, Percy Barnevik set out to create ‘a company that is big and small, global and local, decentralised but with centralised control’.
  
  

The transnational model is a later development, but is the most mature form in most business areas, and you can often see companies from the three other forms gravitating towards this one. An example is Proctor & Gamble, which for Bartlett and Ghoshal was an international company but has since moved firstly towards a global approach, cutting out the country manager’s role and handing all strategic questions about brands to new global divisions, and then towards a transnational approach, differentiating between high-income and low-income markets. In richer countries, the global business unit has main responsibility for profits and the allocation of resources; in poorer countries, which are often tougher and less familiar, it is the regions, in order to give country managers more clout over sourcing and the flow of goods, as well as over marketing.

The model your business uses will have a significant impact on how global and local your HR processes need to operate, and also on how your HR function needs to be organised. However, you might need to organise policies and practices in different ways. And you may find that the strength of needs for localisation vary according to each country. This means that you might end up with varying application of global processes which is leading many transnational organisations to segment their global business into a small number of different categories.

But the major problem with the model is that it doesn’t take account of globalisation and e-commerce, blurring boundaries between international and global firms. Today, companies can move directly to a virtual organisation without having to become global in a physical sense in order to maximise their global customer range and without having to diversify operations to different countries. This also helps to ensure greater consistency in service every time it is provided. The power of the Internet therefore creates a force which acts beyond globalisation.

And the model also fails to respond to the need to get closer to customers regardless of geography through mass customisation. This focus goes far beyond simple national distinctions. The combination of virtualisation and mass customisation creates a new opportunity which CK Prahalad refers to personalisation - involving a customer in co-creating their own experience based upon a blending of a firm’s products and services

These new options can be combined with the Integration Responsiveness Framework as shown below.

The e-personal model here is one which operates globally but deals with all organisational and individual customers on an individual basis. This is the area that is driven by social media and is governed by what Don Tapscott calls Wikinomics.

So in my business, my website, blog and social networking give me a global footprint, and most of my work is now generated from outside the UK. But I deal with all clients on an individual basis, with an approach that is informed by, but not limited by, the country that they're from.

Global HR Trends and Differences at HR.com VIEW

In yesterday's virtual conference session, I was asked about which surveys supported the points I made about increasing convergence in HR. I promised I would provide some links to these on my blog.

(In the session, I discussed the global trends operating across the world that may allow us to take advantage of greater standardisation in HR activities, before going on to consider some of the major cultural and environmental differences driving divergence in HR).

My slide showed the top concerns of CEO’s in Europe, Asia and the US, and this came from the Conference Board. This deals with business concerns, rather than just people concerns, but I think they emphasise the consistent importance of people, as the same issues are generally shared across regions, and I, and I am sure many of my readers, would argue that people are behind success in each one of them, particularly excellence in execution. And pure people issues are also rising up the agenda (finding qualified managerial talent is #6 in Europe and #7 in the US as well as #1 in Asia).

In addition, there are a number of recent surveys focusing specifically on people management which all emphasise the global importance of people, particularly leaders and talent, and that demonstrate that the war for talent has a global reach.

I think there is a good overview of the top HR challenges globally, and in Asia, Australia, Europe, Latin America and North America in Mercer's report, HR Transformation v2.0. This finds four trends that include the top three challenges in all of these geographies:

• Acquiring key talent
• Retaining key talent
• Driving cultural and behavioural change
• Building leadership capability.

The Watson Wyatt report, Playing to Win in the Global Economy found that the majority of employers globally have problems attracting critical-skill employees (70 percent) and top-performing employees (67 percent). It notes in particular that there are more similarities among the regions than there are differences. (See also my post on this.)

There are also a number of challenges which are presented as a result of globalisation itself. In a study of 27 countries across Europe, Boston Consulting Group identified these as:

• Forming international teams
• Developing corporate cultures across national boundaries
• Increasing diversity.

Again, these issues appear to be common across countries. (Also see my post on this.)

In terms of variations, Deloitte's report, Aligned at the Top found that while companies tend to agree on the the importance of people, key challenges and approaches vary from one region to the next. (Again, see my post.)

And although it's a bit more dated (2005) than the above reports, I'd also recommend a report published by PwC on behalf of the World Federation of Personnel Management Associations, Survey of Global HR Challenges: Yesterday, today and tomorrow.

See also my other blogs on global HR:

• Overcoming global HR challenges
• Global HR in a flat world

HR.com VIEW is underway

HR.com's virtual conference, VIEW, is underway, with an opening, pre-recorded address from Carly Fiorina.

Carly has been recounting her parents' disappointment when she dropped out of law school. I wish I'd been as brave when I was 18 to drop out of my engineering degree, and take up something I found more interesting. And when my daughters are 18, I'll celebrate if they make the same decision. I think this sort of proactiveness in shaping your career, including admitting when you've made a mistake (something I have learnt to do over the years) is one of the best indicators of potential leadership. And as Carly says, leaders are not born, but made.

Anyway, I'm looking forward to the rest of the conference. I'll be attending some of the other sessions and visiting some of the exhibition stands. If you join in, check if I'm around and do say hello. And remember my session on Global Trends and Differences at 3.50 pm ET.

Edward de Bono and HCM measurement

This quote from Edward de Bono pretty much summarises my views on HCM strategy and analytics:

"I was in the desert and our guide was explaining the spikes on the local cacti. 'It's so they don't get eaten,' he said. 'No, it's not,' I said. 'The spikes help keep the air around the plant still, to minimise evaporation.' Everyone thinks it's to stop animals eating them. They looked at the data and came up with the idea. And that became the received wisdom. In fact, it's the wrong idea. Many organizations believe that if they collect enough data in their computers that will set their strategy for them. In fact, unless you see the data in different ways, you will be stuck with the same old notions."

The quote comes from Phil Dourado's Taking the Lead newsletter, reporting on the recent Leaders in London conference.

Complexity in global HR challenges

I attended a meeting of the CIPD’s international forum last week to hear initial findings from research into HR management in global organisations conducted by Paul Sparrow at Lancaster, and Chris Brewster at Reading universities. This research will be presented in full at the WFPMA world congress to be held by the CIPD next year.

The major focus of the research seems to be the complexity of decision making in the global environment. First of all, there is the well known duality of centralisation supporting economies of scale, and localisation responding to different labour markets. But regionalisation is increasingly having an effect. Then there’s outsourcing / offshoring and a wide range of technology based options.

Sparrow and Brewster stress that in this environment, “even the most sophisticated organisations have difficult questions”. Issues these questions need to address include streamlining processes balancing standardisation and optimisation, sourcing strategies to provide HR services effectively, and the role of line managers and the HR function, particularly the business partner.

But there’s also a need for what Sparrow and Brewster call “differentiated decisions” where these questions are answered on a local basis depending on each country operation’s particular business model, legislation, labour market, culture (eg preferences for in-sourcing versus outsourcing) etc. HR business partners need to be able to make local judgments to meet these particular requirements.

We also need to accept that nobody can understand the whole world. Even the most internationally experienced HR practitioner isn’t going to understand all the different issues in every country so we need to be realistic about the pace that we can build the level of knowledge about countries that is increasingly required. But one way we can do this is through networks of HR practitioners, and good networks may provide more impact on the overall effectiveness of global people management than the formal organisational model that’s used within HR.

So this is yet one more issue in people management that largely comes back down to the need to talk to people!

I’ll be talking about some of my own perspectives on global HR at the launch of HR.com’s virtual conference programme VIEW at 8.50pm GMT / 3.50pm ET on 12th December.

I would love to offer you the opportunity to participate for free. In addition, your free show admittance will enable you to see other Keynotes such as Carly Fiorina (Leadership is a Choice), Keith Ferrazzi (Never Eat Alone) and Kenny Moore (The Monk and the CEO), and Marcus Buckingham (Trombone Player Wanted).

Sign up at www.hr.com/view.

What if your competitors stole your people management strategy?

In my last post, I stated that InfoHRM's capabilities, and the great case studies described at the conference illustrate beyond doubt just how powerful HCM analytics can be.

However, I still believe that a good HCM strategy has to come first.

In fact, my main take-away from the conference was something said by one participant right at the end of the conference. In response to my keynote, he said he was going to go back and make his strategy more creative. He sometimes wondered, he said, whether it would matter at all, if his organisation’s competitors got their hands on his people management strategy.

I thought it was a great question, and I’m a firm believer that the answer must be that it should. To drive business outcomes, people management strategies need to be differentiated and focused on the particular context of the organisation to which they apply.

In fact, this is going to be one of my ‘key beliefs’ that I will post on later on…

InfoHRM European conference

I’ve spent most of the last two days at InfoHRM’s European conference. It was a great event, well organised, well attended and with some great speakers. My highlights included Tony Rucci talking about his experience developing models linking people management, customer experience and financial results at Sears and elsewhere. And practical examples of organisations undertaking this journey themselves, particularly BAA and Standard Chartered.

My keynote focused on the use of the value triangle and related models (which coincidentally I’ve been posting on recently to support the first of a number of posts I will be making on my key beliefs about people management). I think my session went well – I’d be interested in comments from any existing or previous readers who were there.

I know I didn’t give a very strong example of actually using the HCM value matrix, and visualisation in practice. I do use these on a regular basis, but not always together. In fact most of the time I use them in the way I demonstrated, it’s as part of a programme to develop the strategic capability of HR teams. We spend a half, or even a full-day, on the content I described in my keynote, and therefore the ideas participants develop for how they can create value through human capital are generally a bit more advanced than those we came up with yesterday – partly because of having longer time, and partly because these participants all work for the same organisation, and the exercise is a little more practical and contextualised as a result. But even then, these ideas always need to be taken away for more work.

And actually, the main benefit of the exercise, I believe, is having undertaken the exercise, not necessarily, the ideas that result. My aim isn’t so much about participants going away with a new idea which is going to guarantee an organisation’s success for the next 10 years, it’s about them developing a mindset that I would like to hope everyone who experiences the exercise, takes away and applies to everything they do in people management for the rest of their career. And it doesn’t really matter whether they ever come up with something that creates value. It’s about continually pushing activities up the value triangle as far as they will go. Continually asking, ‘how can I add and create more value through this?’.

I also hope that I didn’t depart too far from the conference’s clear focus on HCM analytics. As long as you promise not to tell anyone, dear reader, I will admit that in my blog posts, I do sometimes over-state my criticism of those who I feel sometimes over-exaggerate the role of measurement and analytics in HCM.

InfoHRM’s capabilities, and the great case studies described at the conference illustrate beyond doubt just how powerful HCM analytics can be.

The value of human capital solutions

HR practitioners often talk about the need to think about and present their work as business solutions rather than HR solutions. A lot of the time, I think what they're actually talking about is 'adding value' solutions rather than 'value for money' solutions (in the value triangle). And I'd agree with this need to increase value.

But of course, most value comes from the creating value level. Through human capital and organisational capability. So we do need to steer away from delivering HR or really Personnel or value for money solutions. But it when we're delivering human capital solutions that we're going to have real impact and gain credibility as a strategic function in our own right.

But this is going to require a change in mindset after years of getting closer and closer to the business. Yes, of course, we still need to do this, but we need to develop a greater understanding of how to leverage human capital too.

Organisational capabilty

Another way to look at the primacy of people management is through the concept of organisational capability.

The slide suggests that intensified competition; growing access to financial capital; and work that is ever more knowledge based, have all led to new opportunities for a company to increase its competitiveness. Organisations in the private and voluntary sectors can translate this into transforming the type and level of services that they provide. This is not just about doing things more effectively or efficiently, but doing better things.

Most business leaders are comfortable with the concepts of competitive strategy and competitive positioning: particularly Harvard professor, Michael Porter’s ideas around differentiation, cost leadership and focus. Within this paradigm (shown at the bottom of the slide), people management is a secondary activity and the HR function, as we all know, is often left in a bit of a strategic backwater.

I believe that the opportunity for HR to increase its contribution started to emerge in the early 1990s with the realisation that an organisation could leverage its own resources or core competencies to provide itself with a competitive advantage. Core competencies are partly built upon people’s skills and abilities (which does give HR some leverage), but they tend to focus even more on particular business processes, technology and customer loyalty. So, for example, the originators of this concept, Hamel and Prahalad identify 3M’s core competencies as specialist expertise in substrates, coatings and adhesives, not as the ability of its people to innovate new products within these areas. So core competencies provide HR with a more central role, but it is still easy to see other functions as more important.

The concept of organisational capability (shows at the top of this slide) builds on the idea of core competency by recognising that it is people and the way they are managed and developed that are an organisation’s most important source of competitive advantage.

Out of these three approaches to competition, I think there is a growing belief that the further along this arrow, the higher up the slide, the more sustainable the approach becomes. There’s just too much change these days for competitive advantage from external positioning to be anything other than elusive and fleeting.

Organisation capability / human capital / people provide the basis for ongoing strategic success, not just the implementation of current strategy.

The value triangle / creating value

The model I use to describe the potential role of people management is called the Value Triangle. And it suggests that HR can provide value to the business in three different ways:

At the base of the triangle, HR provides value for money when it increases the efficiency of HR activities. This may not improve customer satisfaction or help deliver business results, but it is still useful value to have. An example would be improving a recruitment process by automating relationships between suppliers, HR and line management to reduce the time to fill vacant positions.

The next level is adding value. This is about helping the business to implement its strategies by translating business objectives into people management activities. Another recruitment example at this level might be helping a business achieve its growth objectives by launching a campaign to fill a number of new positions.

And then creating value. Here, HR generates value for the business through its own activity, rather than by how its activities support the business as a whole. So, adding value at level 2 provides an organisation with the ability to implement business objectives. Creating value at level 3 develops new capability that enables the organisation to set different or more stretching business goals. A recruitment example would be developing an employer brand to position an organisation as an employer of choice, and by doing so, significantly increasing its potential to grow.

Creating, rather than simply, adding value through people informs the organisation’s business objectives, it doesn’t just help the organisation to meet them.

So the importance of people is much greater than thinking about their role purely in terms of implementation would suggest.

Belief #1: People are more than just cogs in the wheel

Many business leaders today agree that we need to put people first. Most chief executives trot out the tired adage ‘people are our most important asset’ on a fairly regular basis. But what does this really mean?

Most things I hear said and that read about HR still refer to people’s increased importance in reference to their role in implementing business strategy. Managers know that it is not enough to develop a great strategy, they need to be able to deliver it too. And they know that execution of these plans is increasingly difficult. So they need to engage their people. People are no longer just a resource to be used and expended, they need to be treated as a key asset; being developed and invested in.

I agree that people are central to effective implementation of strategy but I also think people, or at least talent, offer a much more significant opportunity than this. People can be central to the identification and development of strategy as well as its implementation.

The right people, managed in the right way, and supported by the right environment now offer any organisation the greatest opportunity for competitive advantage (or for organisations in the public sector, for transforming the type and level of services that are provided).

This is why the concept of human capital is useful. We should no longer see people as just resources or assets (human resources) but providers of human capital. And increasingly, an organisation’s success is determined by the amount of human capital it has available. Not just because human capital enables it to implement its business strategy, but because of the strategic ambition that human capital enables the organisation to have.

Think about the other sources of competitive advantage which were previously the most important: financial capital and customer capital. When these were each most important, businesses didn’t just think about using them to implement existing business strategies. They have been used to develop new business strategies supported by activities that would have been impossible without them. So why do we think about human capital / people management simply as something that will ease implementation of existing business strategies?

I think we need to be thinking about the extra capability or engagement we could develop in our people, and the additional business benefits this would provide. People management shouldn't just support existing business objectives, it can also provide the basis for setting more stretching or different business goals.

My beliefs about people management

To continue my recent attempt to increase the authenticity of this blog, over the next month or so, I am going to post my top beliefs about people management.

I think these beliefs are probably already quite clear to regular readers and subscribers to this blog, as well as to those who have read my book, and to my clients and other contacts. However, rather than simply present my views about other people’s research and thinking, it may help to see where I am coming from, as a commentator and consultant, if I make it a bit clearer what I do actually believe in.

This may also help you confirm your own beliefs… and you may like to add comments to my blog to agree or disagree with mine…

Strategic Human Capital Management is now available on Kindle

My book is now available on Kindle, Amazon's new e-book, for the amazingly good value of $28.75.

Amazon hopes that the Kindle will become the ipod of reading, and it does seem to offer significant advances over previous similar technologies.

In particular, the Kindle provides access to the web, through mobile broadband which can be picked up from anywhere, not just wi-fi hotspots. So readers can, for instance, check my blog posts on the points I am making on the page of my book they are reading. Or they can easily check what other blogger, or authors such as Peter Cheese, Gary Hamel, Lynda Gratton, Gurnek Bains or John Boudreau are saying about these areas.

88,000 other books are also available, many for just £9.99. And although the Kindle sells at £399, costs will no doubt falls, as its functionality further improves, over the next few years.

It may be difficult to imagine using this advice now, but how many of us could have imagined the ipod and podcasting taking a fairly central role in our lives even just ten years ago?

Then there's the environmental benefits as well.

As well as signalling major changes in reading patterns, the Kindle suggests a very different approach to writing books. This week's Newsweek features an article on the Kindle which includes this quote from Ben Vershbow at the Institute for the Future of the Book:

"The idea of authorship will change and become more of a process than a product."

The article goes on..

"This is already happening on the Web. Instead of retreating to a cork-lined room to do their work, authors like Chris Anderson ["The Long Tail"], John Battelle ("The Search") and NYU professor Mitchell Stephens (a book about religious belief, in progress) have written their books with the benefit of feedback and contributions from a community centered on their blogs."

So what do you want our next book to be about?

Imagination Based Management

I think SHRM President, Susan Meisinger, described the advantages of imagination over evidence quite nicely in August's HR Magazine.

Firstly, she quotes Albert Einstein as stating:

"Imagnation is more important than knowledge. For knowledge is limited to all we know and understand, while imagination embraces the entre world, and all there ever wil be to know and understand."

As AnneLiseKjaer explains, there are no facts (knowledge / evidence) about the future.

Meisinger quotes Thomas Friedman, author of The World is Flat, interviewing an internet expert behind Israel's economic success, as saying:

"We are not investing in products or business plans today, but in people who have the ablity to magine and connect the dots."

Meisinger notes:

"HR professionals have an important role in creating an organisation culture that cultivates the imagination of their workers, taps the power of those imaginations, encourages experimentation and removes obstacles for innovative action."

Absolutely. I think SystematicHR's got some good posts on this.

But my build on this is that HR is more likely to help the rest of the organisation be more innovative when it is being imaginative itself.

So, welcome to the world of imagination based management...

Evidence based management

I was a bit more critical of Philip Stiles' article on global HR than I'd intended, probably because I had just been listening to some mp3 files sent out by the CIPD after the September conference, including one on Phil Rosenzweig on the Halo Effect. And I thought that some of the challenges aired by Rosenzweig applied to Stiles' research.

Rosenzweig emphasises the need for decisions to be based not just research, but good research, which as he explains in his blog , posting on his experience at the CIPD, must be: "well designed, with solid data, and appropriate inferences drawn from the data".

So commenting on in-company research conducted by First Direct (HSBC), he questions whether engagement leads to business performance, or the other way around, and indeed challenges the value of engagement itself: "Engagement is surely important, but by itself is likely to be of little value". Based upon this, he then questions the value of celebrating personal events like births and weddings if this is at the expense of making tough decisions in a business.

Mmm. Well, my belief is that engagement does have tremendous value, and I know that there is engagement research which indicates causation not merely correlation. But I'm not sure I could ever prove this fact to the level of confidence that Rosenzweig requires.

Of course, Rosenzweig isn't alone in emphasising the value of research based decision making. Jeffrey Pfeffer published a book on the subject, Hard Facts, last year. And see this website.

The Academy of Management Journal's October edition also emphasises the need for this research to come from academic rather than just practitioner periodicals.

Also, a few weeks ago, People Management featured an interview with Rob Briner, who is fairly well known for his view that there is no medical or psychological meaning behind stress, and has more recently been talking extensively about evidence based management.

Briner lists empowerment, TQM, excellence, downsizing, emotional intelligence, business process re-engineering, and what he describes as his current favourite, talent management as fads developed due to lack of clear research evidence. Unfortunately he doesn't provide any evidence for this inference. To me, these are all part of my current tool bag, and I use them when the need arises. Yes, these were probably all over hyped when they were introduced but there were good reasons for these peaks in activity too - companies need to be able to identify and apply new thinking that can provide them with competitive advantage, and organisations that have applied these techniques effectively have and do gain advantages from using them.

In fact, Briner does note that "evidence is only one of many factors, such as past experience and organisational data, that should also shape decisions". I agree these other factors are important - and I do agree that research evidence has its place. But I'd also add intuition and imagination to this list.

So if I favour a more rounded approach to people management to pure evidence-based management, why do I post so frequently on the latest research findings (Watson Wyatt , Towers Perrin and IBM etc)? I'll admit this is is partly because doing this draws a lot of traffic to my blog. More importantly, it allows me to describe my own views and the extent to which they agree or differ from the research findings. And this to me is the real benefit of research - it provides the basis for conversations within organisation about what it is that executives within those organisations believe, and what they're going to do.

And most research studies, even the most informal, and even if there are findings that can be challenged, are usually based upon a central nub of 'truth'. On this, I'd agree with Rob Briner who states that: "You need to look at the picture emerging from the cumulative body of research". When many pieces of research say the same thing, for example that engagement does inform performance, this is enough for me.

You may also be interesting in reviewing my comments on HCM as a decision science (here and here). And I also recommend Lancaster lecturer Anthony Hesketh's challenge of scientism.

Global HR in a Flat World

People Management includes an article written by Cambridge lecturer Philip Stiles; 'A world of difference'.

Stiles' research in multinational companies has found that organisational culture has more influence on HR practice than national culture. To some extent, this contrasts with Hofstede's findings that national culture provides the strongest influence on the behaviour of employees. It also contrasts with Laurant's findings that national culture has an even greater impact in global companies than in domestic ones: "a multinational environment causes people to cling even more strongly to their own cultural values". (*)

Why do I say 'to some extent'? Well, firstly, just because this is what HR practice is, it doesn't mean that it's what HR practice should be.

For example, Stiles notes that:

"In performance management we might have expected a large divergence of views in areas such as pay for performance or merit-based promotion, but we found little
or no difference across the world."

To me this is less about global practice diversity than it is about practice diversity per se. It takes me back to Gary Hamel's point that although in most sectors there are a number of different business models, across all sectors there are very few variations in management practice.

We tend to apply 'best practices' without thinking too hard about their application - to sector, function or geography. As Stiles notes:

"Organisations seek what works - and, for HR in multinational companies, the range of options is limited to a few common practices that are believed to secure high performance... Companies imitate the practices of other successful firms to gain legitimacy".

So just because we don't vary our HR practices across countries doesn't mean they would perform much better if we did.

Secondly, Stiles does note that practices do vary, but that these variations are driven by regulatory criteria rather than variations in values:

"We did see local adaptations of global standards, of course, but these were often to do with a particular country's regulatory practices, labour market issues and stage of economic development, rather than its cultural values."

In my experience, it's often hard to disentangle these: regulatory practices are often a result of cultural values. So I'd argue that values are having an effect.

Thirdly, it turns out the culture itself, does actually make a difference:

"Rolls-Royce recognised that traditional, western-style performance appraisals and forms of upward feedback could be problematic in Asian countries. Other western-based multinational were careful when it came to recognising individual achievement in countries with collectivist cultures. But even here we saw in many cases that the companies took a "non-negotiable" approach to their global practices. The local variations they allowed were minor."

Well actually, these look like quite significant variations to me. And even if they are small, it doesn't mean that they're not important. In my book, I quote Thomas Davenport as explaining:

"God is in the details. Nuances make all the difference. Subtle shadings in the definition of human capital elements are magnified when applied in a strategic context."

I'm still with Hofstede - flat or not, I think cultural issues are bound to have a very significant impact on the way we manage our people around the world.


* = Note Stiles quotes research conducted by Gerhart and Fang which shows organisational differences accounted for more variance in employees' values than did country differences.


PS:



I will be speaking on these and related issues in a presentation at VIEW, the online and “virtual” conference and trade show for HR, Benefits, Staffing, Compensation, and Training professionals, on December 12-13, 2007. The event is 100% online, virtual and free to corporate HR practitioners.

My session on Global HR: Trends and Differences is scheduled at 9.00pm GMT / 4.00pm ET and will be followed by a live Q&A with attendees.

VIEW features all the benefits of a premier in-person HR conference without the cost, travel or hassle associated with traditional events. Attendees will be able to interact with over 1,000 people via chat or email, attend educational presentations by over 40 of the best thought leaders in each of 9 pavilions, visit over 70 booths in the exhibit hall and enter to win prizes. The best part is that it can be done without leaving the comfort of your office (in fact, you attend VIEW from wherever you happen to be, as long as you have a high speed Internet connection).

For more information, see www.hr.com/view.

HCM jobs?

In the spirit of authenticity, I should note that although my plan is to focus on consulting through Strategic Dynamics for at least the next couple of years, as I’m making a transition of sorts, it has seemed to be an appropriate time to look more widely as well.

So I’ve recently been talking to a range of consultancies for roles as diverse as Practice Director for HCM at Axon (Europe’s leading SAP implementer) and Client Partner in Leadership Services at Korn/Ferry, but I’ve not yet found a role in another consulting firm that I have felt would enable me to provide as much value as I know I can, and indeed have been doing, through Strategic Dynamics (well, OK, some of them I've not been offered either).

I’ve also considered a return to a corporate HR position. For example, I’ve recently been interviewed by Saxton Bampfylde Hever for a very interesting role: VP, HR Strategy & Planning for a 100,000 employee, UK based multinational.

If you know of any roles like this, or know of anyone who might, or even just someone who may want to talk to me about how we could create more value through their people management strategy and activities, but on an employed rather than consultancy basis, I’d be pleased to hear from you.

For me, the vehicle / contract basis I use for my work is less important than what I do within this work - and what enables me to optimise the value that I add and create. If I can do this best within a corporate role, and can move to this without letting my current clients down, then so be it.

But for the meantime, my main focus will be continuing to go into consultancy work through Strategic Dynamics.

HCM consultancy

As I'm going to be doing more consultancy through Strategic Dynamics, I thought this would be a good time to describe a bit more about the sort of work I do.

Also, I had a very interesting conversation earlier this week with William Tincup and Bret Starr, from US based HCM marketing firm Starr Tincup who have been talking to a number of HR suppliers in the UK this week (see William's new blog). Once we'd talked about the state of the UK's HR / HCM consultancy market, I asked whether they had any advice for me / Strategic Dynamics.

One of their ideas was to set up an HCM ning, which I have started (largely for my own interest and amusement) and you can access here. I must admit I'm not too sure what I do with as yet, however!

They also observed that although I appear strong on intellectual capital, it's difficult to tell from my website and my blog what it is that I do. "You need to make the invisible visible", they said.

This wasn't a surprise to me. I'm continually frustrated that I've not yet found a way to post on my blog about my client projects without betraying client confidentiality (although I'm not sure there will ever be a solution to this). I do need to write up a couple of case studies but other than this, I would simply summarise what I do as follows:

"I help UK / European / global business that already have sound approaches to people management (I'm happy to work on basic, transactional HR activities but don't want this to be the focus of my work) to gain further improvements in the capabilities and engagement of their people, and the effectiveness of their organisations. I do this by working with my clients to:

• Review and develop their people management strategies (through short diagnosis studies, workshops etc)


• Develop strategic objectives and measures for these strategies (often using my HCM value matrix)


• Lead and support major projects to implement these strategies, particularly in engagement, talent management, organisation development etc (I have plenty of experience in assessment, leadership development, organisation design, communication, change management etc)


• Develop the capability of HR Directors and teams to do more of this themselves.

In everything I do, my focus is on providing a significant benefit - helping clients meet their business goals and create human capital / organisational capability that enables them to set different or more stretching business objectives.

So I think what clients get from me is an insightful and collaborative approach, but mainly the ability they need to make the difference through their people."

In many ways, I'm in the same situation with my clients, and particularly potential clients, as these clients, mainly in HR, are when they (you?) have to convince their (your) business colleagues of the benefits of investing in HCM invisibles like engagement.

So, any suggestions, particularly from those of you in corporate HR roles, as to how I can make my services less invisible to you?

In search of Authenticity

In making his move, Andrew reminded himself of the old proverb; "A turtle makes progress only when it sticks its neck out".

I have a mental picture I use to remind me to move forward in life and my career. This is of me, when I was learning to ski, and about to launch down a slope, remembering that I needed to look down the fall line rather than lean back into the mountain - if I didn't want to fall over. It reminds me that I need to embrace change and momentum - to make a move when I know I need to do so.

Some of my regular readers will know that I've been juggling a rather busy portfolio over the last 18 months - my main roles being working for myself (as Strategic Dynamics), as a Research Associate for Learning Light, a Lecturer for CBA in Croatia, and as a Director for Human Capital Consulting with Buck.

This last role has provided me with some good experience while I’ve been developing my own business, and useful development in reward and HR outsourcing (through ACS) - both of which are outside my main areas of experience. It's also been a real pleasure to work with a very talented team.

But it's not been somewhere I want to continue to build my career. So to be authentic to myself, I have recently made the decision to leave and will be concentrating on my own business from the end of this calendar year.

I've still got availability in January if anyone wants to do some work together!

Where's your True North?

One of the key leadership behaviours required to engage their people identified by Towers Perrin is authenticity.

This has been getting a great deal of interest recently.

In Authenticity, Pine and Gilmore, authors of the Experience Economy, argue that businesses / products need to be authentic, noting that consumers choose to buy or not buy based on how real they perceive an offering to be. And the Harvard Business Review has been asking whether outsourcing is killing authenticity.

Perhaps more relevant for HR folks are Rob Goffee’s and Gareth Jones’ Why Should Anyone Led You and and former Medtronic CEO, Bill George’s True North (see http://www.truenorthleaders.com/).

This book shows how anyone who follows his or her internal compass can become an authentic leader. Someone who is genuine, true to what they believe in, and who can lead with consistent values; through their heart as well as their head.

This is the subject of a conversation I had with Invensys VP of Talent Management, Andrew Armes, recently. Andrew is one of the most authentic people I’ve ever met and puts this at the centre of his coaching and process development activities. In fact, for the sake of authenticity, Andrew is in the process of leaving Invensys to set up his own vehicle, Sixth Patriarch, an HR consultancy / executive search firm focused on unlocking individual and organisational performance through authentic awareness and behaviour.

For those of us who have more to do in this area, Bill George recommends creating a personal development plan centred on five key areas:

• Knowing your authentic self


• Defining your values and leadership principles


• Understanding your motivations


• Building your support team


• Staying grounded by integrating all aspects of your life.
  

Not easy, but certainly worth doing, if we want to both get the sorts of business results we need, and to live our lives in a way that will make best use of our time on Earth.

Playing to Win in a Global Economy

Watson Wyatt's Global Strategic Rewards Report (2007/08) notes the difficulty organisations around the world are experiencing in attracting and retaining their employees, particularly those with critical skills and those rated as the highest performers.

The report also notes that we need to better understand the wants and needs of employees.

Employers think the key drivers for people to join their organisation are, in order: career development opportunities (47%); base pay (46%); employer reputation (44%); company culture (34%); nature of work (26%). Employees themselves believe these drivers are nature of work (44%); base pay (31%); job security (30%); employer reputation (23%) and length of commute (23%).

Similarly, employers' views on drivers for retention are: base pay (52%); career development opportunities (47%); promotion opportunity (45%); relationship with supervisor / manager (35%); work/life balance (24%). Employees say the true drivers are stress levels (37%); base pay (33%); promotion opportunity (25%); career development opportunities (23%) and work/life balance (22%).

SHRM recently found a similar lack of understanding of drivers for employee satisfaction. HR professionals noted that these are relationship with immediate supervisor; compensation; management recognition of job performance; benefits and communication between employees and senior management. Employees said the factors were compensation; benefits; job security; work / life balance; and communication between employees and senior management.

As well as employers' lack of understanding of their employees' needs, both reports note that HR tends to think people and longer-term issues are more important than they are.

SHRM: "It remains a challenge for HR professionals to balance the relational aspects of job satisfaction with tangible rewards, such as benefits, compensation, job security and flexibility."

And commenting on Watson Wyatt's report, Richard Donkin in the FT notes:

"Employers, for example, failed to grasp the importance attached by employees to the nature of their work. This intrinsic satisfaction to be found in a job was overlooked by managers, who believed that opportunities for career development would be of prime concern. The distinction is important because the latter assumption relates to future possibilities while it seems the immediate concern of employees is for the here and now of their work."

The reports also reinforce Towers' finding that a range of organisational factors have more impact than employee's relationship with their line manager (although it could be argued that an employee's experiences of these factors is felt through their line manager):

SHRM: "HR professionals viewed employees' relationships with their immediate supervisers aer the most important aspect of employee job satisfaction, while employees placed it eighth on their list."

I think there are some potential flaws in these surveys. The first relates to how well employees understand the basis for the decisions they take. Secondly, in my experience, drivers for joining, satisfaction and retention vary from organisation to organisation. This means that employers' / HR's views of their own employees' needs could be closer than these reports suggest, the actual situation being disguised by the process of averaging. Nevertheless, I think the findings do ring broadly true.

Watson Wyatt point to two further pitfalls linked to this lack of understanding:

• "Misguided investments - Companies and employees have divergent perceptions of the reasons for attraction and retention, so the changes that companies make may not align with employee priorities.

• Poor execution / implementation - Employees may not understand the changes that employers are making."

The last point is a clear concern given that only half of employers say that they communicate reward plan designs.

I would add one further pitfall to this list, from Towers Perrin's recent report on performance management and reward, that there is too much 'timid tinkering' in the design of reward systems where what s really needed in much more fundamental and innovative change.

However, Watson Wyatt's report did identify good news too: organisations are already stepping up their actions, and particularly those focused on the critical employee groups identified in the report:

"To reduce turnover, companies are increasing both their efforts to survey employees (40%) and their responsiveness to the survey findings (37%). Organisations have also implemented off-cycle increases (32%), improved work-life balance (29%) and increased the use of recognition programmes (29%).

Companies are approaching turnover among top-performing employees differently, most often with accelerated career development opportunities (50%), off-cycle pay increases (49%) and rotational assignments (37%)."

Towers Perrin Global Workforce Study 2007

Towers Perrin’s new report provides some interesting insights into engagement

1. Engagement has a significant impact on business and financial performance.

2. Engagement has a significant impact on retention. 51% of engaged staff have no plans to leave their organisation compared to only 15% of disengaged. (Actually the bigger problem may be that 50% of disengaged employees are not looking for a job and are therefore contributing to the ‘living dead'. Towers suggests these staff “may need to be driven out with a crowbar”.

3. Employees are eager to invest more of themselves to help the company succeed. 63% say they set high standards for themselves and 88% say they enjoy work that will allow them to learn new skills:

“Our study paints a picture of a workforce that is energetic, ambitious and committed to working hard and giving its best. This lays to rest several persistent stereotypes: that employees are loyal only to themselves and their careers and are looking to do the minimum to get by.”


However people will only make this investment if they see the personal ROI:

“While the nature of that ROI differs across countries, cultures and demographic segments, there are common elements in terms of people’s desire to be challenged at work, to grow and learn, to feel pride in working for a socially responsible organisation and to make a real contribution.”


4. Despite these positive indicators, the global workforce is NOT highly engaged. Only 21% of employees are engaged compared to 38% who are either disenchanted or disengaged. In terms of global differences, Mexicans proved to be the most engaged, followed by Brazilians and Indians. US respondents ranked fourth. The last engaged workers were the Japanese, followed by residents of Hong Kong and South Korea.

In summary, there is an “engagement gap – between the discretionary effort companies need and people actually want to invest and companies’ effectiveness in channelling this effort to enhance performance”.

5. Engagement depends more on organisational factors than it does personal characteristics and other factors (geography, industry and employee segment etc):

“Personal values and work experience factors have less of an impact on engagement than what the company does – particularly the extent to which employees believe senior management is sincerely interested in their well-being… Organisations can make a huge difference in engaging their people.”


The key influencers are rewards, learning and development, strategic direction, senior leadership, image and reputation, and innovation.

6. Developing a best fit, high performance culture is important:

“There is no one right model for a high performance culture – there are many, depending on an organisation’s strategic priorities.”


7. Senior leaders have an important role:

“People’s views about the company are also shaped more by what senior leaders say and do than by what the individual’s direct bosses say or do. This too contradicts conventional wisdom.”

This findng / conclusion echoes my own perspective and experience with engagement, and was supported by research conducted by myself and colleagues when I worked for Penna. This showed that for knowledge roles at least, key engagement factors tended to be work life balance, senior leadership, organisational value and then the line manager's role (in that order). However the finding directly contrasts with Gallup’s perspective that the line manager has the most important role in engaging their staff.

One potential reason for these differences may be the way that the various tools define engagement. I’m going to have a longer look at this over the next couple of weeks.


Towers’ findings indicate that senior leaders are not making the most of this opportunity. Only 49% of workers say that senior management’s actions are consistent with their values and just 38% say that senior management are sincerely interested in employee well-being. Only 10% agreed that “senior management treats is as if we’re the most important part of the organisation” (the core concept in HCM). More than half felt “senior management treats us as just another part of the organisation to be managed” (as in Human Resources) or “as if we don’t matter” (Personnel).

To engage their people, leaders need to make the leap to a more inspirational and engaging style of leadership (see graphic):