Friday 28 August 2009

The People Factor


   The other book I’ve been reading this holiday (thanks, Ray) is ‘The People Factor: Strengthening America by investing in public service’, by Harvard professor Linda Bilmes and IBM VP W Scott Gould.  This book suggests that investment in US public sector (particularly federal) employees has long been insufficient, and that the accumulation of this deficit  is now leading to a crisis point, which is compounded by:
  • Increased volume and complexity of government transactions
  • Old fashioned personnel systems
  • A lack of leadership
  • Changing demographics and particularly the retirement crunch’
  • A deep-rooted negative perception among young people about the federal government as an employer.


The need is therefore to “establish an environment in which people are recognised as the government’s core strategic asset” and to manage the US’ “enormous investment in human capital strategically to deliver the highest possible quality of government for everyone”.  The book defines using an employees’ human capital strategically as:

“Going far beyond simply paying him more or offering additional benefits.  It means leveraging his knowledge, performance and commitment as a federal government employee and a human being.”


The people factor

The ‘people factor’ that the book’s title refers to is offered as ‘shorthand’ for this approach, and consists of:

“A fundamental value system that focuses on motivating every worker by recognising his of her contribution to the success of the enterprise.

Organisations that embrace this philosophy tailor their personnel systems- how they recruit, train, evaluate, compensate, reward, and promote people – to the individual worker and the specific type of job.

Using this approach, federal government agencies can achieve gains in productivity similar to those achieved by the best private sector and military organisations.”


The book provides some examples of these benefits in chapter 2 (an excellent chapter - just ignore its recommendations for the Huselid / Becker / Beatty scorecard, and Jack Phillips’ ROI process, and use the HCM value chain)  and estimates that gaining the same benefits in the public sector would require an investment (“an investment in democracy”) of $10bn but that this would then produce a return of £300-600bn in productivity gains.

Some of the changes that are offered as solutions to the current problem include:

  • Slimming down the civil service but improving its quality, mainly through better training, including in management and leadership skills
  • Supporting this by more effective HR approaches (especially workforce planning, recruitment, managing poor performance, and reward – although not through performance based pay)
  • Upskilling HR practitioners and bringing in new HR talent from the private sector (in part because ‘it is difficult to image something you’ve never seen’).


 Going beyond the people factor to HCM

I agree with most of the suggestions made within the book, many of which could easily apply to the UK as well.  The only one that really gives me pause is a rather sweeping (and very costly) suggestion to increase the average pay of 7000 senior executives by about $35k each.  Earlier on the book the authors suggest that civil service employees should be motivated by the public good rather than a paycheck and I’d suggest federal government tries to make more of this opportunity to engage its leaders before simply throwing money at them (an approach that the UK’s experience suggests doesn’t necessarily result in the desired service improvements).

The book includes some nice examples of strategic HR - for example there’s a nice vignette explaining that the Federal Aviation Administration needs to “replace its entire workforce with highly skilled professionals – while at the same time safeguarding public safety and coping with increased air travel” which also describes how the FAA can meet this challenge by recruiting top-calibre candidates more quickly and investing in training (especially in state-of-the art, customised technology for simulating air traffic control) with all of this being supported by better mentoring, performance evaluation, feedback, supervision and a new ability to weed out poor performers early on.

Plus there are longer case studies on the Defence Logistics Agency and the Government Accountability Office.

But I’m not sure any of this is necessarily anything that I would recognise as strategic HCM.  Of course, not everything the federal government needs to do to improve the current situation does require HCM, but I think some of it will.  So I think it’s a shame that the authors have chosen to focus on the ‘people factor’ (rather than on human capital), particularly because I think the definition of this, ie “motivating every worker by recognising his of her contribution”, is quite weak.

There are probably two key opportunities that I don’t think are adequately addressed:


-   Developing organisational capabilities

The civil service contains a very broad range of organisations, and of functions.  I’d have liked to have seen more emphasis on the need for each of these organisations to define for themselves the sort of human capital that they need, and then to ensure they take the specific actions that developing this particular capital requires.


-   Differentiating talent

The book suggests that the complex environment in which the civil service operates requires federal workers to capture, manage and share knowledge quickly and effectively and that this requires new skills including agility, adaptability, creativity, flexibility, resourcefulness and speed of service.  But this can’t apply equally to all 15 million employees!

The book does note the need to reward and retain the best employees (the highest performers).  But I think much more could be done to identify which employees are really most important, and to treat them in different ways (differentiating the workforce isn’t something I always recommend, but in a workforce of 15m, it’s got to be an important strategy).

This I suppose, is what’s behind the book’s most innovative proposal, the development of a ‘core-ring model’:

“This refers to an organisation structure in which the ‘core’ of the workforce consists of a cadre of permanent career employees surrounded by a middle ‘ring’ of full-time and part-time temporary government workers, can can move in and out of government.  The third, outer ring is comprised of the traditional contract workforce provided by the commercial and nongovernmental sectors.”


I think this sort of structure would be useful (I’m less convinced by the other proposal for an HR passport which sounds incredibly bureaucratic – and could therefore anchor rather than change the current civil service culture) but I think the breakdown probably needs to go much further than this.


In overview, the book’s main recommendation that people are seen as the federal government’s main priority has got to be a good thing, and is certainly a welcome change in focus from my other Summer reading!





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  • Tuesday 25 August 2009

    Profits aren’t Everything, People Count Too!


          Regular readers will know that as well as creating value, one of the other ideas that underpin this blog is organisational capability, or just human capital.  This concept is about generating competitive advantage and profitability through the intangible value provided by an organisation’s people.  Using people not as resources but as sources of human capital to create value and profit.  But this only happens by putting people first.  By taking a human capital-centric view and developing this capital, knowing that the longer-term payback will be increased profit.

    So, I was intrigued to receive information on a new book that I’ve included in my holiday reading: ‘Profits aren’t the only thing, they’re everything’ by George Cloutier.

    The key idea of this book is pretty simply: small business owners need to focus obsessively, and exclusively, on profit, in order to stay in and grow their businesses.

    Now this isn’t my focus, but I’m not going to argue with the statement.  I can quite see Alan Sugar on the Apprentice, or the BBC’s Dragons agreeing with the idea, and they’ve built up small businesses, not me.

    But some of the consequences of this exclusive focus are highly controversial:

    “Weekends are for work.”

    “Trust no one…  Micromanaging is a good thing  (I’m proud that my employees still complain they can feel me breathing down their necks).”

    “Sales people should have 100 percent of their compensation based on pay for performance”

    Providing workers “written documents detailing what they failed to deliver..  We call it a ‘Deficiency Notice’.”

    “Turnover is a good thing…  The biggest mistake owners make is trying to rehab employees.  Forget it.  Fire first and agonise later.”

    “Teamwork is vastly overrated…  [It] simply doesn’t work in most small businesses.”


    And I have to say I think these ideas are also quite daft.  The problem is Cloutier’s ideas about people:

    “You’ve got to be a tyrant…  Let your employees fear and respect you first .”

    “I want my employees to do what I say, not what they think.”

    “Fear of not getting a paycheck was, is, and always will be the best motivator.”

    “During office hours the only growth they should care about is the growth of your profits.”

    “Their only stake in your company is making sure they meet or exceed your expectations is they can continue to collect a paycheck.  Trust is beside the point.”


    And how about this paragraph:

    “Two thirds of the business owners we met delegate important tasks, follow up randomly, and whine when their orders are ignored.  They think they should have over their duties because that’s what the HR seminars and management books tell them to do.  But what they’re not admitting to themselves is that delegating is just another word for shirking responsibility.”



    It’s no wonder that later on in the book, Cloutier notes:

    “I can’t get my people to do what I tell them to do – We hear this refrain over and over again from our clients”.


    It’s no surprise that Cloutier’s clients are getting this response if they’re taking his advice!


    Organisational capability really is more suited to more established and sizeable businesses (or public sector and voluntary organisations).  But smaller businesses absolutely aren’t going to benefit from behaving in the way that Cloutier suggests either.

    This isn’t even about putting people first, but keeping some perspective and balance between different factors, as the balanced business scorecard suggests for example.  Cloutier suggests his clients:

    “Ignore the human resource gurus who preach patience, calm, civility, and multiple warnings.”


    I don’t think it’s about these things.  But I do suggest fairness, respect and a bit of humanity.

    A good example of a more appropriate and intelligent approach in a smaller, or at least, fairly simple business is Timpson’s, which runs its business very successfully by putting employees and customers ahead of profits (thanks to MOK at the Innovation Beehive for link to this).

    Overall though, I did enjoy reading the book.  A lot of the time, it reads like a sales brochure for the Cloutier’s consultancy, but them given his focus, it’s pretty clear why he’s written the book, so you’d be surprised it it didn’t.  But I liked the very frequent stories and anecdotes.  And I did note down a number of ideas relating to my own business (not dealing with companies who read this book and decide not to pay their vendors on time is one!).



    Also see: my post on Whole Foods and Conscious Capitalism on Social Advantage (“profits should not be pursued – they ensue from working towards a higher purpose”).



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  • Tuesday 18 August 2009

    Adding and creating value at QBE Insurance


       There’s a great case study of one of my clients, QBE Insurance, in this month’s Strategic HR Review.

    The case study describes the recent transformation of HR at QBE Insurance, focussing specifically on how the group HR team has engaged both the business and divisional HR teams across an international operation to enable this transformation.

    But there’s one bit of this that relates very closely to the focus of this blog, and I want to note here.  This is QBE’s use of the value triangle:

    “The human capital model is still central to the 2009 plan, having been updated to reflect progress since 2004. However, a recent enhancement that created an air of excitement with the group executive team has been the inclusion of the HR ‘value triangle’. This model shows the three different ways in which HR can provide value to the business, increasing in impact from the bottom to the top of the triangle.

    This model is now used to engage with the business leaders about the type of support they need, and their ongoing expectations of HR. The divisional chief executives understand that value for money HR activities are provided by their own HR teams, and should be implemented consistently in each of their divisions to maximize overall results. They understand that the transformation of the HR functions (implementing the Ulrich business partner model) has moved them further up the triangle towards the human resource management level. These added value activities are those they need to tailor and specify themselves, each working with their own divisional HR director, depending upon their particular business needs. Finally, there is clear positioning of the role of group HR in taking the lead on the ‘created value’ activities, at the apex of the triangle. While the transformation of HR is an ongoing and ever evolving process, the group executive team is now fully supportive of the strategy.”


    Contact me if you want to create the same air of excitement in your business!





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  • Friday 7 August 2009

    Blog nose job?


          Steve commented on my last post to say he assumed I was giving the blog site a 'nose job'.

    Mmm.  Good idea – to share the pain if nothing else.

    Thing is, I’m pretty happy with the look of my blog at the moment.  But if you think it needs a bit of a nip / tuck, let me know…

    One thing I have done, since I don’t think anyone is experiencing ‘operation aborted’ problems anymore?,  is to re-incorporate the Google Friend Connect widget.  So you now once again have the opportunity to follow this blog and join its community.

    You’ll find the widget half-way down the first of the two columns on the right – just above the widget for the Human Capital ning community, which you could join at the same time (the first community is linked to this blog, the second is simply a group of people interested in HCM, but not specifically my view about what this means).

    And please comment below if you’ve got any further suggestions for plastic surgery…


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  • Nose job time


          It’s funny how things change as time goes by.

    I never thought I’d use Twitter for example, but now am a quite active user – even if I tend to use it as an information source, rather than being a great tweeter myself.

    And I used to think I’d never do anything about my nose.  It was only slightly off-centre after all.

    But then I didn’t know about research which suggests people find symmetrical faces more attractive (an evolutionary preference for healthy genes).

    This isn’t about attracting a mate you’ll understand – I’ve been happily married for nearly 15 years.

    But I do a lot of training and presentations these days.  And whether it’s a one-on-one, or a session with a couple of thousand people that I’ve done a few times too, I want to present myself at my best – and to be perceived at my best as well.

    So I’ve just been in for a rhinoplasty operation.  Apologies if I’m a bit snuffly if we talk at all by phone.



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  • Thursday 6 August 2009

    HR Carnival 5 August 2009


       Prem Rao  at People at Work & Play is hosting the new HR carnival.

    My favourite posts are Louise Barnfield at Talented Apps writing about deliberate practice (in the first cluster), Susan Burns at Talent Synchronicity asking about your branding as an employer (in the second), Ann Mares at Compensation Force writing about scenario planning  (in the third cluster) and Wally Bock at Three Star Leadership on the importance of caring for your people in the sixth cluster.

    You’ll find my contribution in the second cluster - I’m not sure what ‘the veteran’ means though!


    Photo credit: alan light


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  • Wednesday 5 August 2009

    HRM Today and Paris Hilton on eBay


       As well as sharing some thoughts on HCM, HR 2.0 and associated fields, one of the things I try to do on this blog is to keep you posted on latest developments in HR support.  I don’t often manage to say very much, so major things like the formation of Towers Watson can easily get passed by.

    But I thought I would note a rather smaller, but I think still quite interesting transaction.  This is the auctioning on eBay of social networking site HRM Today by YourHRGuy, Lance Haun and Punk Rock HRer, Laurie Ruettimann.

    A few hours after opening, the auction of 1,200 member site is currently attracting bids of just over $300, and I’m sure this will go a lot higher – as it’s a fairly low valuation even just for a list of current HR practitioner email addresses, never mind the networking functionality on top.

    So, why do I think this is interesting?


    Community on sale?

    Well, firstly, it will be interesting to see what happens to the community after this transaction, and how the community responds to being sold off (perhaps making it feel a little less communal?).  Assuming, of course, that the new owner manages it as a going concern.

    My interest here is mainly academic.  I am a member of HRM Today but haven’t participated it in since its very earliest days, when I was one of the first people to join Laurie on HR Bloggers, which was then subsumed by the HRM Today site (in fact, I was briefly offered the role of co-administrator of HR Bloggers, so I suppose if I’d hung on, I’d be in line for a nice $100 fee right now!).

    However, I do host two other, much smaller and currently much less active communities: Human Capital, and Moon Shots.  And although I have no interest in selling these (in fact, I’ve just taken over Moon Shots at no cost), I am trying to draw lessons I can use for these from watching other communities develop and change over time.


    Consulting time at auction?

    The second reason I think this is interesting is that it provides further evidence of the growing use of eBay.  I’m not much a eBay user myself, although my wife does dabble from time to time.  But I have noticed it’s ongoing extension into new fields.  For example, Jet Blue uses it auction off unused flight tickets.  And during my last trip to Dubai, I noticed the Monarch hotel on the Sheikh Zayed Road was auctioning off the suite where Paris Hilton had stayed recently.

    I’ve even thought about whether I should think about using it to auction off my time when I’ve got a block of spare time.

    Most of my work tends to involve ongoing series of meetings spread over several months interspersed with workshops and some travel – so I do often end up with blocks of unutilised time.  But then this is my business model too – I keep my day rates quite high because I think this is justified by what I know is the high value I can bring.  And I accept (and appreciate!) that this means I’m not going to be running off to clients every day of the week.

    So it’s really only when a unutilised block starts to run into several weeks (like it did this May), that using something like eBay to fill up excess slack might be useful enough to justify what would bound to be some tarnishing of my brand and the ability to charge what I normally do for typical project work.  And even then, I’d need to maintain a decent reserve price.  So I’ve not been tempted yet – but watch this space – it would certainly be interesting to see what might happen if I did.

    Until then, keep an eye on HRM Today’s auction too (it’s just gone up from $305 to $315 while I’ve been writing this post)…





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  • Tuesday 4 August 2009

    Organisation capability and strategy


        Thanks (Jo, Andy) for your further comments on my post on Ulrich’s new HR Transformation book, and also your comments on those left by one of Ulrich’s co-authors.

    Here are some further thoughts justifying my perspective and emphasising why I think readers should use my approach to HCM Strategy as the basis for their HR Transformations.


    Outcomes vs activities

    Firstly, I do agree with the books’ author that one of the problems with HR for the last 40 or 50 years is that it has focused from the inside/out – or rather, more specifically than this, the problem has been that the function has been focused on activities – on doing recruitment, performance management, development etc.

    I believe one of the highest value interventions Ulrich has provided the HR profession (and I agree there have been a few) has been to help us refocus on outcomes, or organisational capabilities.  But I don’t think this has gone far enough.  Particularly because I disagree with Ulrich (in his David Creelman interview) that almost every company with a good HR plan designs it around capabilities.  I don’t see this happening – at least if we think about capabilities as strategic differentiators – so the Google, Apple and Pfizer, rather than the Rockwell type.

    By the way, I do understand organisational capability includes much more than just human capital and especially talent.  But I think it’s useful to think of capability split into its three constituent parts – human, organisational and social capital – as each of these need to be developed in very different ways.  Even if this means that HR needs to think about the development of organisational, human and social capital elements to support one particular capability eg for innovation.


    Creating vs adding value

    The problem I think is Ulrich’s insistence on measuring value by the receiver, not the giver.  I think this is an out-of-date distinction.  For any level of value, HR and the business need to work together to identify and deliver value.  And much of the value that HR provides is going to be opaque to customers and investors.

    But value is certainly the key concept.  And in particular, the distinction between creating, and adding value.   Adding value is about HR providing value through what is does in HR terms.  And about using people as resources to help achieve existing business objectives.  This is where I think Ulrich’s outside-in perspective leads.

    But I think that people are much more important than this.  They deserve, and to maximise value, require, being seen as providers of human capital, and other organisational capabilities (rather than resources), and also to be treated in a way that recognises the way they provide the basis for competitive success.

    This is about creating value – HR providing value for the business by going beyond current objectives and looking at how people can help transform organisations in new and imaginative ways.  And how people can be the basis for organisational capabilities which lead directly to competitive advantage.


    Inside-out vs outside-in

    This perspective comes from looking inside-out.  By looking at the existing capabilities or potential capabilities inside the organisation, and only then, checking on the external market conditions to identify those capabilities that can provide the basis for competitive advantage.  True organisational capabilities have to be based on strengths that already exist, or other attributes of the organisation that can be developed into strengths.  Organisational capabilities can’t be developed quickly if they don’t already exist.  And this is the reason that an inside-out rather than outside-in approach is required for capabilities’ identification and development.

    I don’t think Andy’s challenge on GM is helpful either.  I don’t think GM did have any differentiated capabilities – this is what led if to continue building unprofitable cars.  If they had identified capabilities that existed in the organisation that would have enabled them to do things differently, I still think their future could have been very different for them than it has.

    So, as the HCM value chain shows, in an HCM approach, the focus moves from business impacts (outside-in) to organisational outcomes – or capabilities (inside-out).


    HR driving competitive success

    This, by the way, does much more than just ensures “HR is not just an afterthought of business” (which I would suggest corresponds to my value for money level in the HCM value matrix), and that  it is also more than “part of business” (adding value) as well.  Ensuring that HR creates as well as adds value, ensures HR is a driver for business success, a business player rather than a business partner, and a key source of competitive advantage.

    And this, I believe, is the future of HR for the next 40 or 50 years.





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  • Monday 3 August 2009

    HR and asset management


       One of my readers asks:

    “Working in HR in an Investment Management company, I had the opportunity to share some of the posts of your blog with some people working in our Responsible Investment team (managing some funds with one dedicated to Human Capital). Following various discussions with some of them and having no feedback from some others, I have the impression that the gap between financials and HR is quite big. Though I have a feeling that the influence of asset management in the HCM approach could be key to promote HC.

    I would be interested in having your view on the following topics:

    - Do you think the asset management world could participate significantly to the promotion of HCM? What could be their real influence?

    - Do you know HR managers interacting externally to promote and defend their approach in front of Investment analysts?

    - According to you, how these two worlds could communicate more, especially at the research level?

    - Are you aware of initiatives where a combined reflexion is done, emphasising the practice (more than the theory)?”


    Asset management’s role in promoting HCM

    I’d like to think that the asset management world will progressively become more interested in human capital management.  I think the move has probably suffered a set-back this year, with financial capital once again becoming more important than human capital.  But I think it will swing back.  And even if it’s not the major factor, human capital certainly remains a major factor in informing organisational success.  So asset managers are going to want to understand it better.

    But I still think the lead has to lie with the asset owners themselves, and in particular with those who are most responsible for managing these organisations’ human capital, ie their HR functions.  Investment analysts are only going to see it worth talking to HR if these HR people can describe for them a clear idea of what they trying to do, ie how they’re trying to accumulate human capital, and why they expect this to be useful for them.


    HR managers interacting with investment analysts

    Secondly, yes, some Heads of HR definitely do met with investment analysts on their company visits to present what they’re doing in HCM.  I’ve not had any conversations with any of my clients or other contacts about this recently, simply as it’s not been a major area of concern, so I don’t have any quantitative or qualitative evidence for this, but I do know it’s happening.  And If I were one of your analysts, particularly if I was associated with your HC fund, I would personally want to meet the person in the organisation responsible for this.

    It would tell me something if the organisation didn’t suggest this themselves (maybe that they don’t have an advanced view of HCM) or if they didn’t want me to meet the person responsible for developing it (that they’re not investing sufficiently in this theoretically, but perhaps not for them, practically important area.


    Improving communication, particularly at the research level

    As I noted before, I think to make communication possible, HR needs a clear idea, or a model, to explain how it intends to provide competitive advantage for the organisation through its management of people, and the accumulation of human capital.  Conversations between HR and investment analysts can then focus on how well this model is doing in generating the desired outcomes, as well as its predictions for the future.

    I suppose the alternative is that asset management firms develop their own models for HCM, and seeks to apply these to companies in their portfolios (see for example, Bassi Investments’ approach).  However, I believe each organisations’ and external commentators’ models tend to be so different (just look for example, at the debate between Ulrich’s RBL and myself over their HR Transformation book) that a bespoke approach to each organisation will be most appropriate and useful.  So I’m not a big supporter of investment analysts trying to compare metrics across different organisations either – as I don’t think these comparisons tend to mean very much without an understanding of what a particular organisation is trying to do.


    Initiative for combined reflection

    Again, I don’t have any good examples of combined reflection, although in my book, I suggest that there perhaps some better examples within multi-divisional corporations, and other large organisations (eg the capability reviews taking place across UK government departments).  It’s also something I think some private equity firms do quite well, although from a very short-term perspective.

    However, it is something I could see becoming more prevalent, as investment firms seek to understand the true drivers for the success of the firms in their portfolios.


    I hope this helps!




    Photo credit: Bukk



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