More on global HR challenges: Japan

Last week’s Economist carried a very interesting article on businesses and people management in Japan, Sanyora, salaryman.

Short-term and part-time contracts, mergers and acquisitions and demographic change are all contributing to changes meaning that Japanese employees are increasingly unwilling to accept boring jobs, provincial postings, late night / early morning drinking and their other hardships that come with the corporate paternalism of earlier decades. Work-life balance is starting to make waves.

God job too! In December last year, the Economist ran another article, Jobs for life, looking at 'karoshi' or death by overwork in Japan. In November, a court ruled that a Toyota employee was a victim of karoshi when he collapsed at work at 4am after 6 months of putting in 80 hours overtime each month.

The employee's widow thinks Toyota's success has less to do with its efficiency and flexibility than it has with the free overtime Toyota receives from its workforce. I understand her sentiment but think this is unlikely - long-hours in Japan as in the UK and elsewhere doesn't generally produce greater productivity Indeed the more recent Economist article notes that little work actually gets done in evening working - employees just don't feel able to leave before their bosses.

So its a positive sign that the salaryman system seems to be on its way out. But the cultural and systemic norms linked to Japan's seniority-wage system will take careful unpicking.

More on global HR challenges: Russia, China…

In my recent HR.com VIEW webinar on global HR trends, I talked about the challenges of people management in emerging economies. In their recent talent management article, McKinsey provide a colourful description of the sorts of problems employers face in some of these countries:

‘Poor English skills, dubious educational qualifications, and cultural issues – such as lack of experience on teams and a reluctance to take initiative or assume leadership roles.’

Look at this graphic presenting the proportion of graduates organisations and recruiters feel they would be employable. Three of the biggest economies: Brazil, Russia and China come out the worst.

Take Russia – organisations feel able to employ just 10% of graduates for engineering and generalist management positions. From my two years based in Moscow leading HR support for five countries in the former USSR, I am not unaware of some of the challenges managing people there, but I was still shocked by this.

Or China – where only 3% of relevant graduates are seen as employable for generalist roles. This supports the Economist's view (in the World in 2008):

'Much of the shortage of qualified staff is the result of the education system, which has not been able to keep up with China's fast-evolving labour market. The schools system still teaches by rote, producing people who foreign employers often say are inflexible, lacking in creativity and initiative.'

Again, I understand where these figures are coming from, but given the rate of growth and recruitment demands in China right now, these are very scary figures indeed.

Using the language of people

In my last post, I advised moving from HR’s current focus on using the language of business to the language of people. This is a language based on emotions and stories that resonates with employees.

There is a good article which relates to this in today’s FT, comparing the oratory of Barack Obama to the US’ other Presidential candidates. Have a look here.

Business language is good for driving efficiency and effectiveness, but it does little to gain people’s engagement. HR's going down to the wrong road if its just tries to become more and more business-like. As I’ve said before, what it really needs to do is to encourage and develop the rest of the business to speak the language of HR, or really the language of people and relationships.

(I do, by the way, see the irony in this recommendation when I’m more guilty than most in often using very technical and not particularly inspiring language. What can I do? – I’m trying, but I'm still an engineer at heart.)

More about the talent problem

I’d like to add some further interpretations to my previous two posts (here and here) on McKinsey’s latest talent management article.

To me, a major reason for the short-term focus in talent management is that organisations are approaching this as a HRM rather than HCM strategy.

As the slide attempts to show, the difference is that HRM is about implementation. It reacts to short-term business priorities, emphasises the management of a business resource, and assumes that people can be managed and monitored through facts and metrics.

HCM is about new opportunities. It puts people and their human capital front and central, looks at accumulating this human capital over the longer-term, replaces business language with the language of people, and focuses on enabling rather than monitoring their performance.

In my opinion, it is by using this perspective that talent management will have the sort of impact that McKinsey believes it needs.

HR's role in talent management

What should be HR's role in ensuring that talent management is effective, and how well are we performing in it?
In Management Consultant International, Kennedy are upbeat, finding that HR has been successful in gaining executive attention for talent management and pointing to 'a current trend of elevating the role of human resource professionals'.

This is unfortunately not what McKinsey have found:

'Our research confirms the idea that HR's influence is declining. The executives we interviewed criticised HR professionals for lacking business knowledge, observing that many of them working in a narrow administrative way rather than addressing long-term issues such as talent strategy and workforce planning (see graph). As one HR Director explained, senior executives "don't see us as having business knowledge to provide any valuable insights. We're doing many things based on requests, and they don't see HR as a profession." '

According to McKinsey, 58% of all line managers believe that the HR function lacks the wherewithal to develop talent strategies in line with a company's business objectives!

The need is that:

'Human resources should asset its influence over business strategy, and provide credible and proactive counsel and support for the chiefs and line managers of individual business units. Only HR can translate a business strategy into a detailed talent strategy: for instance, how many people does the company need in order to execute its business strategy, where does it need them, and what skills should they have?'

I don't really understand why we're not doing this. What are we waiting for?

McKinsey's War for Talent: still a strategic priority ten years on

It was ten years last year that McKinsey's seminal War for Talent research was conducted, but a decade ago this year that their research was published in the McKinsey Quarterly. Now this journal has published an important update based upon more research undertaken in 2006 and 07.




In this latest article, McKinsey find that the talent management problem remains as business leaders believe that competition for talent is only going to increase. In fact the problem has become more acute. This is driven by three external factors - demographic change, globalisation and the rise of the knowledge worker, but also the enemy within - short termism: too much time is spent on 'today's business' with little value attached to building for the future (see also my earlier post on this).





The consequence of this short-term focus is that most talent management programmes have been 'insufficient at best, superficial and wasteful at worst' and therefore that expensive efforts to address the problem have largely failed.



This is compounded by 'minimal collaboration and talent sharing among business units, ineffective line management, and confusion about the role of HR professionals' (I'm going to come back to this in my next post).




The article is a depressing read. Talent management shouldn't be this hard! As McKinsey advise, organisations just need to to 'ensure talent management is addressed as an integral part of a long-term business strategy, requiring the attention of top-level management and substantial resources.'



Supporting this, they also recommend:

• Investing in the whole workforce, not just the 'A' players to support inclusiveness
• Developing multiple employee value propositions for different groups of staff
• Bolstering HR.

Perhaps 2008 will be the year that companies finally start to seriously tackle this problem. If they need to, they should certainly think about asking McKinsey to help, although I come slightly cheaper.

Best companies for Leaders

I’ve just been sorting out the various surveys I’ve reviewed during 2007. I think one of the best of these on leadership was conducted by Dave Ulrich’s consulting firm, RBL, together with Hewitt and Fortune magazine earlier this year. The survey finds that leadership development is increasingly important, particularly within what were identified as top companies for leadership. These companies make leadership a critical part of the company’s organisational fabric. So for example, they are more successful in attracting the quality of leadership talent they want (95% of top companies vs 57% of other companies say that they are successful or very successful in doing this). These benefits translate into higher company reputation and business performance. I particularly like this quote about Ken Chenault at American Express (number 19 in the North American list of best companies for leaders) published in Fortune this September:

"You couldn't be blamed for rolling your eyes when American Express chief Ken Chenault says, "People are our greatest asset." CEOs always say that. They almost never mean it. Most companies maintain their office copiers better than they build the capabilities of their people, especially the ones who are supposed to be future leaders, and for decades they've gotten away with it. But now their world is changing profoundly - and at long last we're going to find out which self-proclaimed people-cherishers actually mean it."

These changes mean that the bar to gain advantage through leadership development has been raised. Most companies do identify top talent, conduct talent reviews, do succession management, and develop talent in multiple ways. Top companies do more, and “although the gap between good and great is narrowing… the Top Companies continue to differentiate themselves”.

The survey emphasised that to move ahead, organisations need to do more that just develop individual leaders at all levels – they also need to create a differentiated model of leadership that is right for their organisation and which provides a common language and way of thinking for people within the organisation. Doing this also provides the basis for a leadership oriented employer brand .

I think two major paradigm shifts are required as well. Organisations must see leadership as a vehicle for enabling their organisation to move in a different strategic direction. So if their business needs to enter a new area, a key question needs to be whether the organisation possesses the necessary leaders to deliver this strategy.

To make this work, leaders need to demonstrate a passionate and unwavering commitment to leadership. And they must spend more than 30% of their time and effort directly on leadership issues. In fact CEOs at the top companies spend 60% of their time on talent. And at American Express, 25% of an executive’s variable pay depends on talent development.

And more generally, organisations need to understand the value of their human capital. As Fortune note: “Even given the credit crunch, money for investment is more abundant than ever. It isn’t the scarce resource in the business anymore: human ability is.” And Hewitt explain “Organisations need talented people a lot more than talented people need organisations.”.

Leadership and social acumen

Still catching up on a few things from last year.

One of December's most provoking blog posts was Gill Corkindale's Harvard Business blog on the leadership crisis in the UK. Looking at the prime minister, the chancellor and the government, the Bank of England and its governor, and a couple of football managers (you can probably guess which ones), Corkindale notes a long string of leadership failures. Most of them, to me, see to have developed through these leaders being too remote from their organisations – a lack of social connection. Lisa Haneberg’s blog, Management Craft has alerted me to Ram Charan’s latest book, Leaders at all Levels. Charan's explanation of ‘social acumen’ may help leaders build the sorts of networks they need if they’re to avoid the sorts of problems that currently seem to be so common in the UK:

"Leaders who possess it are not loners or bookworms. They have an innate desire to work with diverse people and naturally cultivate a broad range of social networks that permeate the company, including subordinates, peers, and superiors. As these leaders develop their social acumen, their networks often extend beyond the business to include customers, suppliers, regulators, politicians, and various interest groups. The relationships tend to be durable because they are built on trust, and that trust allows information to flow both ways, exposing the leader to new ideas and different ways to see things. The social networks also allow him or her to energize and synchronize people's energy and actions and to do a better job managing a crisis than would otherwise be the case."

Social acumen isn't yet a common topic in many leadership development programmes, although rotating leaders across the organisation or bringing them together into formal leadership courses, may provide the basis for some of these networks to evolve.

Reward, happiness and performance

And there is a third article from last year's Employee Benefits magazine I wanted to comment on before time moves on too far. This is from the October edition. And I wanted to refer to it not because it includes insightful comments from me (it doesn't) but because I thought it was a really interesting survey that probably demands more attention that it got.

The survey, conducted by YouGov, found that 59% of employees are happy in their current job role and 54% are happy with their employer. Looking at how happy an employee is on these two scale provides the matrix in the attached slide:

The survey found startling differences between ‘total happys’ and ‘misery guts’. For example 87% of total happys but only 10% of misery guts are committed to their organisations.

Comparing employee satisfaction with different elements of the employee value proposition (EVP) against their happiness with their employers shows that reward, recognition, communication, career development, line management and the working environment have most impact on happiness with the employer. Reward, benefits, recognition and career development are identified as critical improvement areas as these have a high impact on happiness and come with generally low levels of employee satisfaction.

Focusing more specifically on benefits, out of a list of 24 benefits, total happys get 4.3 and misery guts just 2.8:

“Analysis identified that the benefits which result in employees being most satisfied with their benefits package are: a bonus, private medical insurance and flexible working. In fact, the survey showed that 85% of employees who get all three of these benefits are satisfied with their benefits package, 37 points above the average. Other specific benefits which have a big impact on satisfaction are discounts on the organisation’s own or other company’s products and a pension (final salary of other occupational pension such as a stakeholder or group personal pension).

Other benefits, such as free car parking, access to free counselling, employee share schemes, sports club membership and season ticket loans are all ‘nice to haves’ but it is really the five high impact aforementioned benefits which lead to the most satisfied employees. Furthermore, there is a whole ream of benefits which, in overall comparison, have little effect on benefit package satisfaction (but may meet other HR objectives).”

These benefits which have little impact on satisfaction includes life assurance cover, retail vouchures, healthcare cash plans, critical illness insurance, car allowances, personal accident insurance, optical care, luncheon vouchures, income protection and crèche provision / payment for childcare.

YouGov’s findings contrast with those in Human Resources magazine’s August 20007 survey which found a correlation between benefits and employees’ perspective of their employers as great places to work. This found that homeworking had the greatest impact on engagement. Employees who spend 10-30% of their time working from home feel 13% more engaged than those who do not. Profit related pay, sabbaticals, flexible benefits, duvet days and gifted days also have a positive impact on engagement. However, free private health and free or subsidised sports facilities did not produce any noticeable improvements in engagement.

Of course, it is possible to make a number of challenges to these findings. There are three main questions that occur to me:

Firstly, supporting last year’s Towers Perrin Global workforce study, but contrasting with Gallup's Q12 results, YouGov find that satisfaction with line management (at a high 65%) does not have a high impact on happiness with the employer. So does engagement come mainly from the individual?, the line manager, or the organisation?

Secondly, this research seems to contrast with previous previous research showing that happiness does not have a connection to performance. For example, Herzberg’s theory would suggest that as a hygiene factor, benefits can improve satisfaction but are unlikely to impact engagement. It’s an important question because most organisations probably don’t really care, from a capitalist rather than a humanistic perspective, whether people are happy at work or not.

In this survey, happiness does seem to have an impact on levels of commitment, motivation, engagement, advocacy, loyalty and customer focus. However, do benefits and other HR deliverables cause happiness which then causes commitment, or are happiness and commitment both outputs of these deliverables. Or does commitment cause happiness? And where does being seen as a great place to work fit in, as given Human Resources' varying findings, this is obviously measuring something slightly different.

These questions reinforce the need to construct a strategy map / value chain to try, as much as possible, to understand that interconnection between elements such as HR deliverables, satisfaction, happiness, engagement and business results.

Also it is important to remember that even if we had a clear answer to this question, different organisations and different groups of employees respond in different ways, so although this type of research provides an interesting straw model, each organisation also needs to construct a bespoke model of what they believe causes what for themselves.

Thirdly, despite the positive correlations between benefits, happiness and commitment, there is always the potential problem that emphasising financial benefits will have a negative long-term impact on commitment.

According to a study by Maarten Vansteenkiste from the University of Leuven in Belgium, published in the British Psychological Society's Journal of Occupational and Organizational Psychology, and described in HR Review, employees who value material success, status and power more than helping others at work or developing their talents are less likely to be satisfied at work. Dr Vansteenkiste commented:

"The current ethos in many organisations today is to reward workers with material benefits, but this research shows this could be counter productive for both the organisation and the employee. Although these benefits may appear to be great motivators they, rather paradoxically, are not. This is because material rewards divert employees away from recognising/attaining other less tangible goals that are important to maintain good mental health, such as good working relationships with colleagues, autonomy and job satisfaction."

There's still an awful lot we don't know about HR!

So in 2008, this blog will continue to share interesting and useful research and helpfully contribute to helping raise understanding of how we can help raise the performance of our organisations through our people.

See also:

• Increasing the impact of benefits through total reward statements


• The impact of benefits on business performance

Increasing the impact of benefits through total reward statements

Secondly, I was quoted in Employee Benefits’ October issue providing advice on strategies reward and benefits practitioners could implement to increase (rather than just measure) the return on their investments.

'When proving their worth to finance and managing directors, ammunition for benefits practitioners can come in the form of salary sacrifice. The national insurance (NI) savings that an employer can make via salary sacrifice benefits such as pension contributions, bikes for work and childcare vouchers can show the powers that be that benefits are not just a cost. Jon Ingham says: "A great way to improve the return from benefits provision is to reduce the costs of perks. One way of doing this is via salary sacrifice."

NI savings through salary sacrifice can then be spent in other areas of the organisation outside HR, re-invested within employees' pension funds or used to fund a new project such as flexible benefits.

Another tool that can be used by benefits professionals to add value to the organisation is total reward. By communicating the entire employment package to employees, including pay, bonuses, benefits, working environment and career prospects, the theory is that staff become more engaged and, in turn, more productive and are less likely to leave as they appreciate the full value of what is on offer. By tracking staff turnover rates, benefits professionals may be able to prove that their total reward initiative has indeed made an impact.'

I think it's the second of these two strategies that has the greatest potential impact.


Research conducted by the Corporate Leadership Council (Employee Engagement Framework and Survey, 2004) has found that engagement consists of two main factors. Emotional engagement (the extent to which employees value, enjoy and believe in their jobs, managers, teams or organisations) encourages people to exhibit discretionary behaviour that goes beyond what can be required or mandated and to act as advocates of the organisation. Rational engagement (the extent to which employees believe their managers, teams or organisations are acting with their financial, developmental, professional or other interest in mind) influences how likely they are to stay.

There is little benefit in convincing people to stay with an organisation if they are not emotionally involved enough to go the extra mile while they are retained. So generating emotional engagement must take priority over gaining the rational kind. Organisations can develop this engagement, and encourage discretionary behaviours, by better understanding and influencing the psychological contract they have with their employees. The psychological contract outlines the employer’s and employees’ expectations about what the employer will provide in return for an employee’s contribution (including greater benefits for higher contribution). Emotional engagement comes from delivering on this psychological contract in everything that an organisation does.

But having successfully gained its people’s emotional engagement, how should an employer convince these fired-up employees to stay? One approach to improving retention is to formalise and articulate the psychological contract as an employment value proposition (EVP).





An EVP clearly spells out what employer and employee should each expect to receive from their relationship and, hence, demonstrates to employees why they should continue to work for the employer. The organisation can then use the EVP as the basis for ongoing communication with its employees. For example, it can provide them with total reward statements which describe the real benefit that employees receive from the ‘benefits’ that are provided to them. Total reward statements are most effective when they really do cover the whole spectrum of total rewards, including:

• Compensation: base and incentives
• Benefits: health and wellness; pensions, other
• Career and development opportunities: including training but also areas like advancement opportunities and job security.
  

However, statements can also be extended to support the full EVP - describing, for example:

• Work content: practices and people’s employment experience
• Organisation: image and culture
• People: the quality of other talent in the organisation and the social networks that exist between them.
  

Whatever the extent of the information total reward statements provide, ideally, these statements should be personalised to each individual. This can be done, for example, by taking account of a person’s unique circumstances and achievements, for example attendance on training courses or recognition scheme awards.

Organisations are increasingly finding that drivers of engagement vary from individual to individual. This variety is only going to increase in future as organisations continue to diversify their workforce by sex, age and nationality etc. in response to their increasing need for talent.

There are two main consequences of this. First, it means that rather than trying to address the employment-related interests of all of its employees, an organisation’s overall EVP must specifically focus on meeting the needs of its most important talent.

Second, simply personalising total reward statements to reinforce a standard EVP may no longer be enough - the EVP itself may need to be tailored and agreed with each employee, or at least those who have been identified as being within the organisation’s talent pools. This means that the total rewards, benefits and other elements of the EVP to be received by these key individuals (depending upon their actual performance and contribution etc.) must be agreed with them, and that a summary of the rewards and other benefits they have already received needs to refer back to what had earlier been agreed.

So, as a very simple example, a talented individual who wants to work on high-profile projects needs to be given this opportunity, and subsequently, the summary of the benefits they have received should outline the opportunities these projects have provided to them. A summary statement for someone whose engagement comes from developing their own direct reports might focus more on the particular accomplishments of that person’s team.


(Note, much of this post was published by my previous employer last year).