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 Business Execution and Strategic HR

The purpose of strategic HR is to get employees to do what the company needs them to do to achieve its business objectives. The term used to describe this is business execution. This chap- ter discusses how to use strategic HR to drive business execution. Section 3.1 discusses the role business execution plays in com- pany performance and how it ties to strategic HR at a general level. Section 3.2 explains how to assess a company’s business execution capability and requirements. Sections 3.3 and 3.4 discuss how to link business execution needs to strategic HR processes and how to use different strategic HR processes to support a company’s specific business execution needs. Sections 3.5 and 3.6 address key con- cepts related to increasing strategic HR process maturity and build- ing integrated strategic HR processes tied to business execution requirements.

3.1 DEFINING BUSINESS EXECUTION Running a business requires doing three things:

1. Defining strategy. Figuring out what you need to do to succeed

T H R E E c h a p t e r

Hunt, Steven T.. Common Sense Talent Management : Using Strategic Human Resources to Improve Company Performance, Center for Creative Leadership, 2014. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=827115. Created from ashford-ebooks on 2020-03-31 02:40:48.

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2. Managing assets. Securing the capital and resources required to support the strategy

3. Driving business execution. Building and managing the workforce so you effectively leverage company assets to deliver strategic objectives

Defining strategies is about determining your business objectives and devel- oping plans to achieve them. Managing assets is about getting the tools, money, materials, technology, and other resources needed to carry out your plans. Business execution is about actually carrying out the plan to achieve your goals. An analogy can be made to weight loss that helps illustrate these three things. My strategy is to lose ten pounds before December by exercising more and eat- ing right. My assets include a membership to a health club and joining a vegeta- ble co-op. Business execution in this case is about actually exercising at the gym and eating more vegetables in order to lose the weight. Which of these three is the hardest?

The CEO typically has a lead role in defining strategy with considerable sup- port from business operations, product development, and marketing. Managing assets is often owned by finance and supply chain. Driving business execution is ultimately the responsibility of line leaders, but because it is about having the right people doing the right things, it is directly supported by HR. Due to advances in HR technology, HR leaders now have both the knowledge and tools to play a central role in driving business execution. The next step is for HR lead- ers to take ownership of this role, which often includes convincing other busi- ness leaders of the value of strategic HR.

Many business leaders have historically viewed HR as an administrative func- tion that is necessary but relatively uninteresting to business operations. HR pro- cesses in some companies might be likened to electrical wiring in a house. A house without good electrical wiring is unsafe, inefficient, and potentially unlivable, but most people don’t buy houses because they have superior electrical wiring. The same might be said about the way many companies use strategic HR pro- cesses such as performance management, staffing, or learning and development. Operations leaders appreciate the importance of these processes for running a sta- ble company, but they do not see them as tools for increasing business execution.

When operations leaders tell me, “I don’t care a lot about HR processes,” my response is, “Do you care about people doing what you need them to do to sup- port your business strategies?” If their answer is yes, then they do care about

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Business Execution and Strategic HR 29

strategic HR. The problem is they do not appreciate the impact that strategic HR has on business execution and do not know how to use strategic HR processes to drive business results. Many business leaders also do not appreciate how advances in HR technology make it possible to use strategic HR processes far more effectively now compared to how they have been used in the past (see the discussion: “Technology and the Evolution of Strategic HR”). These mispercep- tions must be addressed in order to effectively use strategic HR methods in an organization. This is done by clearly articulating how different HR methods can help the company achieve its business objectives.

T E C H N O L O G Y A N D T H E E V O L U T I O N O F S T R A T E G I C H R

An HR department needs two things in order to use strategic HR pro-

cesses to drive business execution:

• Expertise. The HR department must have expertise in methods for

predicting and changing employee behavior. For example, under-

standing how to use goals to motivate employee performance,

or being able to measure employee performance in a manner that

enables the company to predict an employee’s future potential.

• Implementation. The HR organization must be able to efficiently

deploy its business execution expertise across the organization.

It does not matter if the HR department knows how to increase

employee performance if it cannot effectively share this knowledge

with the line leaders who actually manage employees.

Technology plays a pivotal role in enabling HR to support business

execution. Its impact has been twofold. First, by increasing adminis-

trative efficiency, technology has enabled HR professionals to focus

more time on building methods for increasing workforce productivity.

Second, technology provides a medium for getting HR expertise into

the hands of managers so it can be applied across the organization. To

illustrate how technology has affected the role of HR, let’s take a look

at four different generations of HR that have emerged over the past

twenty or so years:

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• Pre-1990: Generation “personnel administration.” Prior to 1990,

many HR organizations were almost entirely focused on personnel

administration. This was due in part to the sheer amount of time

required to manually administer HR processes before the wide-

spread use of computers. Prior to 1990, many HR organizations were

not even called “human resources.” Instead, they had titles such as

Office of Personnel Administration or Personnel Department. The

main focus of HR in this generation was how to process employee

paperwork efficiently.

• 1990 to 2000: Generation “human resources.” Two things happened

in the 1990s that led to personnel management being redefined as

“human resources.” First, implementation of HR process automation

technology significantly reduced the time needed to perform admin-

istrative HR tasks, which freed up HR organizations to focus more

on topics related to strategic HR. This led to significant advances

in the expertise found within HR related to predicting and chang-

ing employee behavior. Many of the talent management techniques

that are now widely used were largely developed in the 1990s (e.g.,

competency models, structured interviews, goal setting). Second,

the widespread adoption of personal computers made it possible

for HR organizations to use more sophisticated techniques to sup-

port key talent decisions related to hiring, promotions, and pay (e.g.,

using computer-based tools to evaluate employee performance and

assess job candidates). Throughout the 1990s, the focus of HR shifted

beyond simple personnel management to include processes designed

to improve the quality of workforce decisions (e.g., selecting high-

performing employees, proactively managing employee turnover,

and using job goals to drive employee development).

• 2001 to 2010: Generation “talent management.” Widespread adop-

tion of Internet systems in the 2000s allowed HR organization to

share data across what had previously been independent HR processes—

for example, automatically importing data collected during the

hiring process into systems used to support ongoing employee devel-

opment. Greater access to data enabled HR to shift from focusing on

specific employee decisions to creating more integrated methods to

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3.2 ASSESSING BUSINESS EXECUTION NEEDS To be successful, a company must identify the right strategies to achieve its busi- ness goals and then execute these strategies better, faster, and more efficiently than the competition can. There can be little doubt about the value of good strat- egies, but execution makes the difference between having good strategies and achieving great results. As the pace of market change increases, it is even more critical to evaluate and manage a company’s ability to rapidly execute business strategies to meet unforeseen opportunities and challenges.

Business execution is defined as the ability to use company assets to achieve busi- ness results (see figure 3.1). Because employees represent the largest asset cost for most companies, the major issue affecting business execution capability is utilization of talent. Despite the importance of business execution, most companies have little insight into their ability to meet business execution needs. This includes their abil- ity to redeploy their assets to meet future business challenges. Many companies have elaborate systems to define strategies and monitor assets, but few put equal emphasis into the methods used to manage and measure business execution capability.

increase workforce productivity. No longer was HR limited to being a

series of isolated silos focusing on staffing, training, compensation,

and succession. Now HR could function as a set of integrated pro-

cesses designed to ensure a steady supply of high-performing talent

in critical job roles.

• 2011–. Generation “business execution.” As companies adopt more

efficient and easy-to-use computing applications, HR organizations are

spending less time administering HR processes and more time figur-

ing out how to use these processes to increase workforce productivity.

HR is focusing less on simply keeping track of who employees are and

more on ensuring that these employees are being used effectively to

support the company’s short- and long-term business strategies.

Improvements in HR technology over the past twenty years have

enabled the role of HR to move beyond providing administrative sup-

port to enabling execution of business strategies. The result is HR

departments are now in a position where they can significantly improve

how line-of-business leaders manage their workforces.

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No single process or set of metrics fully captures the concept of business exe- cution. Companies must develop multiple processes to support different types of business execution needs. These needs can be broken into six general categories of business execution drivers: alignment, productivity, efficiency, sustainability, scalability, and governance. These drivers were identified through examining the underlying business challenges that led companies to make significant invest- ments in strategic HR processes:1

• Alignment: Are people focusing on the things that matter for delivering our strategy? Alignment requires the ability to rapidly and systematically commu- nicate business goals to employees throughout the organization so they see the connection between high-level strategies and how they spend their time at work. Does everyone in your company know what goals they are expected to accom- plish? Do they understand why their goals are important to the company’s over- all strategy? Achieving alignment requires effective communication between senior leaders and employees about the company’s strategy and what each indi- vidual employee can do to support it. I once saw a great example of increasing alignment in a global manufacturing company. This company was facing bank- ruptcy unless it radically shifted its focus to more profitable projects. It used strategic HR processes centered on goal setting and performance management to ensure that employees across the organization were working on projects that could be tied directly back to key strategic initiatives. The increased visibility and accountability created by these processes motivated employees to do what was necessary to return the organization to profitability.

• Productivity: Are people doing what we asked them to do? It is important to differentiate between alignment and productivity in any examination of

Strategy Business Execution

Capability × × =Assets Business Results

Figure 3.1 Business Execution Capability

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Business Execution and Strategic HR 33

business execution. Alignment is fundamentally about strategic communica- tion. Productivity is about defining, evaluating, and improving performance. The difference between alignment and productivity is the difference between know- ing what you should do and actually doing it. Productivity depends on leaders’ holding employees accountable for results and employees being given the incen- tives and resources required to create these results. I once worked with a tech- nology company that used strategic HR processes to increase the productivity of its research and development divisions. It was critical that the company develop and get new products to market as fast as possible, and that depended on the performance of highly expensive engineers. The company could not afford to lose good engineers, but it could not afford to employ engineers who were not pulling their weight. The company turned to strategic HR methods to evaluate the performance of engineers on a regular basis and held senior leaders account- able for rewarding and retaining high-performing engineers and developing or managing out engineers who were performing poorly.

• Efficiency: Are we efficiently using the people in our company? It is one thing to achieve results. It is another to achieve these results using the minimal pos- sible resources. Efficiency comes from having people with the right skills in the right positions, recognizing and retaining superior performers, appropri- ately managing poor performers, and allocating rewards and resources in a way that maximizes productivity. I have worked with many companies that have increased efficiency by using strategic HR methods that ensure compensation is allocated to employees based on how much they contribute to the organization. By creating a tighter link between pay and performance, these companies were able to increase the retention of high-performing employees, and some even decreased the total amount spent on compensation because they no longer gave the same increase across the entire employee population. Another example of increasing efficiency comes from a sales organization that studied relationships between manager span of control and sales performance.2 They discovered that managers whose teams had more than ten employees performed more poorly due to the inability of the manager to provide effective coaching to all the team members. They also found that teams with fewer than five employees performed at about the same level as teams with six to ten employees, so there was no value paying for two managers from a team of ten when one manager would be just as effective. The most efficient span of control came from having teams with six to ten employees.

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• Sustainability: Are we able to maintain stable, consistent performance over time? One of the biggest threats to business execution is the unplanned loss of critical tal- ent required to achieve key strategic goals. Managing this risk requires developing processes to manage employee turnover and knowledge transfer effectively. Ensuring a company’s results are sustainable over time also requires understanding whether key people in the company are engaged and fully committed to the organization. An energy company I worked with addressed sustainability issues by using strategic HR methods to forecast the number of skilled line workers predicted to retire over the next fifteen years. They then built highly focused recruitment and development pro- grams to ensure they had employees available to quickly fill these future vacancies as they occurred. Their goal was not to reduce turnover overall but to eliminate unex- pected and unmanaged turnover.

• Scalability: Do we have processes in place to ensure a steady supply of the tal- ent needed to execute our strategies? Scalability is a key element of business exe- cution when companies are in growth mode. It is also important for being able to efficiently reduce or reallocate the workforce based on shifting business needs. Businesses must be able to scale their workforces to manage changes in business demands and strategic focus. This requires creating processes to attract, develop, and retain the people needed to support the company’s evolving business needs. It also means having methods to reduce or reallocate head count in an efficient, fair, and productive manner. A US-based financial company used strategic HR methods to address its ability to scale operations in Asia. The company forecast the level and number of skilled employees needed to support its Asian business growth targets. It then developed an integrated set of staffing, development, and succession management programs to ensure having the talent needed to support its Asian growth plans.

• Governance (security, compliance, and risk management): Is anyone in the company doing something that could create significant liabilities for our busi- ness? There are many stories of highly successful companies that suffered significant financial losses or even ruination due to inappropriate behavior by a few employees. Governance is about creating methods that reduce the likelihood that employees will do something that will put the company at significant risk or long-term disadvantage. This includes creating processes to reduce the risk of excluding certain demographic groups of employees from career benefits and opportunities, achieving short-term results through

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inappropriate methods, or tolerating negligent, unethical, or unsafe behavior. A global retail organization I worked with faced issues of governance when it discovered that store managers in certain regions were favoring men over women when making promotion decisions. To address this issue, the lead- ers implemented strategic HR processes to ensure promotion decisions were made using consistent, transparent, and job-relevant criteria. This both decreased bias in promotions overall and made it more apparent if certain managers were making decisions based on factors that were not job relevant.

The relative importance of these six business execution drivers changes depending on a company’s strategy, external market demands, current work- force capabilities, and existing talent management practices. The most important drivers for companies undergoing rapid growth are likely to be quite different from companies whose growth is relatively slow or even declining. The drivers that matter the most to technology companies might be different from those that matter most to health care organizations. (See the discussion: “Six Questions for Assessing Business Execution Capability” for a simple diagnostic way to evaluate your organization’s current business execution drivers.)

S I X Q U E S T I O N S F O R A S S E S S I N G B U S I N E S S E X E C U T I O N C A P A B I L I T Y

Business execution capability is defined as a company’s ability to align

and use its assets to achieve strategic objectives. In most companies, the

most expensive asset is its workforce. Salary, benefits, and other employee-

related expenses represent over 60 percent of the operating costs for most

organizations. For this reason, business execution capability depends heav-

ily on a company’s ability to optimize the productivity of its workforce.

The following six questions can be used to estimate your company’s

business execution capability. Discuss these with your operations leaders

to assess the relative strengths and weaknesses of business execution in

your company. Ask leaders to respond to each question using a 1 to 5

scale, where 1 means, “No, I have little confidence in our ability to do

this if required,” and 5 means, “Yes, I am extremely confident we could

do this if required.”

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Question 1: Alignment. Can our company significantly change its

strategic direction in nine months or less? This is the sort of change

many companies faced during the peak of the 2008 recession. Quite

a few companies have discovered too late that they were not up

to the challenge. Could you refocus your workforce around a new

set of goals quickly? This requires more than just communicating

the change. It requires ensuring that employees understand their

individual role in the change and that they know what activities

they need to stop doing and what things they need to start doing

that they were not doing before. Answering a confident yes to

this question requires having methods that allow you to quickly

clarify how changes in the overall company strategy affect the indi-

vidual goals and job responsibilities of each employee across the

organization.

Question 2: Productivity. Can our company agree on who the

top 20 percent performing employees are, and explain this to the

other 80 percent in a way that doesn't make them feel that they

should be pursuing opportunities elsewhere? One of the common

traits found across high-performance work environments is a clear

understanding of what success and failure look like. Employees

in a high-performance environment do not have to ask some-

one whether they are doing well. Constant feedback allows them

to self-evaluate whether they are performing above or below

expected levels. They also trust that performance evaluations are

consistently and fairly applied. Even if their performance is below

average this year, they know what they need to do to become a top

performer next year. There is no guesswork around the question,

“What does it take to succeed here?” Performance is not a function

of who you know or work for; it is a function of what you do and

accomplish. Answering a confident yes to this question requires

having processes that clearly define, communicate, and consis-

tently measure the performance expectations set for employees.

Question 3: Efficiency. Can our company determine the return on

investment we receive from investing in employees' salary, bonus,

and development? It is appropriate and intelligent for companies

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Business Execution and Strategic HR 37

to invest more resources in the employees who make the great-

est contributions to organizational profit and growth. This includes

pay, promotions, and access to career development resources and

opportunities. Companies invest resources in employees with the

assumption that this will lead to increased revenue and decreased

operating costs. Yet few companies rigorously test to ensure they

are investing resources in the employees who provide the greatest

returns to the company. Many do not even know if they have hired

an optimal number of people in different roles, or if they are under-

or overstaffing positions. Achieving peak efficiency requires having

processes that establish clear links between operational profitabil-

ity and growth, workforce head count, employee performance, and

costs associated with employee pay and development. Answering a

confident “yes” to this question requires having data that enable

you to determine how investments in the workforce affect company

performance and having processes to shift workforce resources so

they provide the greatest returns with the least costs.

Question 4: Sustainability. Can our company effectively sustain

our current level of performance over the next three years? It is one

thing to achieve performance goals in the short term. It is another

to consistently achieve performance targets year after year. Sustained

performance is one of the differences between good companies and

great ones. When it comes to business execution, the biggest risk to

sustainability is unexpected and unmanaged employee turnover. At

some point, every employee who works for you will leave your com-

pany. What processes do you have to avoid preventable turnover, man-

age unpreventable turnover, and ensure consistent operations in the

face of workforce change? Answering a confident yes to this question

requires having clear strategies and methods for predicting and man-

aging turnover, maintaining employee engagement levels, and trans-

ferring knowledge across different segments of the workforce.

Question 5: Scalability: Can our company adapt the size of its

workforce to meet projected business growth demands over the

next three years? Companies often hope for aggressive growth,

but many struggle with the demands it creates. If necessary, could

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you increase the size of your workforce by 50 percent in under

twelve months to support increased market demand for your prod-

ucts and services? This kind of explosive growth is happening in

emerging markets, but few companies can manage it effectively.

Conversely, if you were hit by a sudden drop in business revenue,

are you well equipped to respond? Could you reduce workforce

costs by 20 percent and still maintain critical productivity, quality,

and customer service levels? It is one thing to grow efficiently, but

quite another to scale back operations gracefully when necessary.

Answering a confident yes to this question requires having meth-

ods to accurately project future workforce requirements and pro-

cesses to smoothly increase, decrease, or reallocate the workforce

based on changing business needs.

Question 6: Governance (security and compliance). Can our

company ensure no one is creating inappropriate levels of legal

or financial risk for the organization? The CEO of one of the larg-

est companies in the world once told me, “In a company this big,

there is probably somebody somewhere doing something they

should not be doing.” He then said that although there is no way

to absolutely prevent employees from engaging in inappropriate,

illegal, or unethical activities, companies can create processes that

reinforce norms and beliefs around legal and ethical behavior.

Establishing hiring, promotion, pay, and performance processes

that reinforce consistent beliefs around appropriate behavior sig-

nificantly reduces the chance of hiring and tolerating employees

who intentionally or inadvertently put a company at significant

risk. Companies can also collect measures to determine whether

people in the company are intentionally or unintentionally making

decisions around pay, promotions, and hiring that might unfairly

disadvantage certain employee populations. It is difficult to ever

answer a totally confident “yes” to this particular question, but a

reasonable level of confidence can be obtained by instituting clear

hiring, performance, pay, and promotion processes that reinforce

a commitment to core company values and tracking data to ensure

these processes are being followed across the organization.

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3.3 USING STRATEGIC HR PROCESSES TO SUPPORT BUSINESS EXECUTION Strategic HR processes support business execution by changing the workforce either through bringing new employees into the organization or getting exist- ing employees to do things in the future that they were not doing in the past.3 The challenge to HR professionals is figuring out what workforce changes are most relevant to the company’s strategic needs. To be strategic, HR leaders must understand which business execution drivers (alignment, productivity, effi- ciency, sustainability, scalability, or governance) are most critical to business leaders and build HR processes that link to these drivers. Linking business strat- egies to specific HR processes is basically a three-step process.

Step 1. Understand the company's business strategy. What must the company achieve to fulfill the commitments it has made to its shareholders?

Step 2. Define what business execution drivers are most critical to achieving this strategy. Engage line leaders in a discussion around two questions: “What do we need employees to do in the future?” and, “What people do we need to add to the workforce?” Answering these questions will determine which of the six business execution drivers are most critical to achieving the company’s business strategy. It can also be useful to ask business leaders to rank-order the six business execution drivers based on criticality to the business. Asking line leaders to explain why certain drivers are more important than others provides significant insight into where to focus strategic HR efforts.

Step 3. Implement appropriate strategic HR processes to support key business execution drivers. All of the 4R strategic HR processes have some effect on each of the six business execution drivers. But certain processes will be more relevant to business operations depending on which business execution driv- ers are most critical to achieving a company’s strategic objectives.

To illustrate how this three-step process works, consider this hypothetical conversation between a chief human resource officer (CHRO) and a CEO:

CEO: I just got back from our annual board meeting.

CHRO: What are our really big strategic commitments for next year? [Step 1]

CEO: There are several, but the most challenging is to achieve 25 percent mar- ket growth in the Asia-Pacific region. It is a highly competitive market.

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CHRO: I can imagine there must be a lot of business challenges associated with this strategy. What about the people aspect? Do you think we can do this with our existing workforce and how it is structured? [Step 2]

CEO: To be honest, I hadn’t thought about it from that perspective. But I don’t see how we can achieve 25 percent growth unless we hire a lot more sales and services people and help our leadership team in the region keep them focused on these aggressive growth targets.

CHRO: So we need to focus on scaling the talent in that region and aligning them around these growth goals? [The alignment and scalability busi- ness execution drivers]

CEO: Yes, although I’m not sure how we’re going to do that in less than twelve months.

CHRO: This seems as if it is largely a matter of getting the right people in the right jobs and focusing them on the right things. The HR department has a lot of expertise and some pretty powerful tools in this area. Would you like me to set up a meeting next week to provide you with a road map setting out actions to build the Asia-Pacific team you need to meet these growth targets? [Step 3]

CEO: That would be great! I look forward to seeing what your team puts together.

It will probably take a bit more than a short conversation to define your com- pany’s strategic HR needs, but the logic you use should still follow these same three basic steps because they establish a link between HR processes and specific business needs. Failure to define business execution drivers can result in focus- ing on less valuable HR processes and may leave line leaders confused about the business relevance of HR activities.

Finally, remember that the relative importance of business execution drivers often changes over time and within companies. For example, scalability is critical when a company is growing, but as it matures, emphasis may shift to efficiency and sustainability. Different drivers may also be more or less important for cer- tain parts of the company depending on their size, business goals, and the nature of their workforces. This can create challenges for HR departments tasked with supporting multiple functions. As an example, I once worked with a global man- ufacturing company that had a wide range of products. One of the more mature product divisions was completely focused on efficiency and increasing margins. In contrast, a new product area was struggling with scaling to meet growth demands.

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The first department wanted HR to build processes to increase performance and productivity of existing employees, while the second department cared only about building processes to hire and train new employees. The challenge the HR depart- ment had to solve was how to balance the needs of both areas.

3.4 LINKING SPECIFIC BUSINESS EXECUTION DRIVERS TO DIFFERENT HR PROCESSES The business value of different HR processes depends on which business execu- tion drivers are most critical to achieving a company’s strategic goals. Figure 3.2 illustrates how the six business execution drivers of alignment, productiv- ity, efficiency, sustainability, scalability, and governance link to the 4R strategic HR processes of right people, right things, right way, and right development. The typical relationships between business execution drivers and HR processes are described below. The most relevant HR processes are listed in parentheses in the rough order of their influence on each business execution driver:

Alignment

Productivity

Efficiency

Sustainability

Scalability

Governance

Right People

Right Way

Right Things

Right Development

Figure 3.2 Relationship of Strategic HR Processes to

Business Execution Drivers

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1. Creating alignment (right things, right way). Alignment is primar- ily about employees knowing what goals they should focus on and why these are important to the company’s overall strategy. The best way to increase alignment is to implement goal management processes that ensure employees are focusing on the right things. This includes making sure employees understand how their actions influence the success of the organization as a whole. Performance management processes that evalu- ate whether employees are doing things the right way may also be relevant for alignment. This is particularly true if a company is focusing on align- ing employees around cultural behaviors and values as opposed to specific tactical goals.

2. Increasing productivity (right way, right things, right people, right develop- ment). Productivity is directly influenced by performance management processes that communicate, encourage, and hold employees accountable for meeting performance expectations (doing the right things the right way). It is also indirectly influenced by ensuring that employees are placed in jobs that leverage their strengths and are given tools and resources to increase their performance levels.

3. Improving efficiency (right people, right things, right way, right develop- ment). A variety of methods can increase efficiency. First, ensure the com- pany has optimal staffing levels in all jobs. Nothing undermines efficiency more than under- or overstaffing positions. Second, ensure people are working in the most productive manner possible. This requires focusing people on goals that are critical to business success and consistently mea- suring and improving their performance. Efficiency can also be improved by increasing internal hiring and promotion of existing employees and avoiding costs associated with external staffing.

4. Ensuring sustainability (right development, right people). Sustainability is primarily about managing turnover in key positions through effective staffing, workforce planning, and succession management. The ability to forecast and plan for turnover is particularly critical to sustaining consis- tent performance. This includes hiring and developing people to manage job transitions, as well as managing current employees in a manner that decreases the risk of unplanned, regrettable turnover.

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5. Creating scalability (right people, right development, right way). There are two basic types of scalability: growth to support expanding busi- ness demands and cutting back the workforce to manage shifts in busi- ness needs. Scaling to support growth requires having methods to rapidly recruit external talent and get them up to speed to take on new roles. Scaling to meet shifts in business needs requires having methods to real- locate staff based on changing workforce requirements and, if neces- sary, having tools to guide intelligent downsizing decisions that take into account employee performance contributions.

6. Governance (right way, right people). There are two primary types of gover- nance: governance focused on complying with government or contractual laws and regulations and governance focused on discouraging employees from taking excessive risks or engaging in counterproductive activities. The former tends to emphasize the use of fair and appropriate methods for staffing posi- tions and evaluating performance. The latter tends to emphasize methods to communicate and measure core performance expectations and standards.

The relationship between business execution drivers and strategic HR pro- cesses is more complex than how it is illustrated in figure 3.2. But having a general sense of the relationship between strategic HR processes and the busi- ness execution drivers they have an impact on is critical to effective design and deployment of strategic HR methods. Experience shows that many HR organi- zations fail to clearly articulate the business execution reasons for implementing HR methods. Many HR practitioners do not fully understand how the pro- cesses they support bear on their company’s business strategies. Even if the links between HR processes and business drivers are well understood in HR, they may not be apparent to non-HR line leaders. If the relationship between HR processes and business needs is not identified and communicated, then these processes are likely to be viewed as administrative activities with little relevance to day-to-day business operations.

3.5 INCREASING STRATEGIC HR PROCESS MATURITY Using HR to drive business execution begins with understanding which business execution drivers are most critical to supporting business needs. The next action

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is to build HR processes to support these drivers. Figure 3.3 illustrates five levels of maturity associated with the four core strategic HR processes of right people, right things, right way, and right development. Higher levels of maturity increase business execution capability but also require more resources and effort to achieve. Companies do not need or necessarily want to be at the highest levels of maturity for each of the 4R strategic HR processes. Understanding a company’s current maturity levels and how these relate to its business execution provides a framework for prioritizing the development and integration of HR methods.

3.5.1 Right People Maturity Levels Ensuring you have the right people begins with creating processes to efficiently fill open positions. Level 2 focuses on building assessments to ensure you are hiring high performers. Level 3 shifts the emphasis from screening candidates to building internal and external talent pools of qualified applicants. Level 4 moves from building general talent pools to making specific forecasts around the num- ber of people you need to hire to fill different positions and when you will need them. This sets the stage for level 5: building talent pipelines to efficiently and effectively put the right people in the right jobs at the right time.

Figure 3.3 Levels of Strategic HR Process Maturity

Level 5 Building talent pipelines

Operational Influential Maintaining

talent pipelines Level 4 Forecasting

future talent needs

Coordinated effort

Calibrated Carreer growth

Level 3 Building talent pools

Meaningful goals

High impact Business-driven development

Level 2 Selecting high performers

Aligned goals

Well defined Targeted

development Level 1 Filling open

positions Tangible

goals Consistent

Individual devel- opment planning

Right People Right Things

Right Way Right

Development

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3.5.2 Right Things Maturity Levels Making sure employees are focused on the right things begins with ensuring that employees have well-defined goals. Do not underestimate the business value of achieving this level. Simply getting managers to sit down with their employees and map out clear goals and expectations is a major leap forward for many orga- nizations. Level 2 focuses on ensuring that employees’ goals are aligned with the company’s overall strategy. This is typically done through some form of goal- cascading process. Level 3 shifts the focus from setting goals that are important to the company to setting goals that are meaningful to employees. This requires using methods to ensure that employees see goals as relevant to their personal career aspirations. Level 4 focuses on building collaboration within the company around common types of goals. It is about breaking down silos and coordinat- ing efforts across peers and departments. Level 5 emphasizes getting business leaders to use goal processes as tools for running and managing the business. As one operations leader put it, “You are using goal management correctly when it ceases to become a tool for personnel administration and becomes a tool for strategy communication.”

3.5.3 Right Way Maturity Levels Ensuring employees are doing things the right way requires defining, commu- nicating, and measuring their performance. Performance evaluations are then used to inform development discussions and staffing and pay decisions. The basis of accurate measurement is consistency, the lowest level of maturity. It requires making sure employee performance is evaluated using consistent, stan- dardized methods. Level 2 emphasizes creating clear performance definitions, competency models, and goal criteria to guide performance evaluations. Level 3 focuses on using performance data so it affects decisions related to employee pay, development, and staffing. Level 4 emphasizes the use of calibration pro- cesses that get managers across the organization to agree on common levels of performance expectations and employee evaluations. At level 5, business lead- ers leverage performance management data to gain insight into the workforce itself—for example, determining what competencies are most relevant to success in different roles, assessing the overall strengths and weaknesses of the work- force, and identifying actions that can be used to increase overall workforce productivity.

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3.5.4 Right Development Right development emphasizes the use of career and succession management to build the overall capabilities of the workforce. The lowest level is simply making sure employees have discussed development needs with their managers and have some form of development plan. Level 2 focuses on guiding employee develop- ment to build specific organizational capabilities or prepare employees for cer- tain job roles. This requires guiding employee development based on future business needs. Level 3 emphasizes having managers staff jobs and assign goals in a way that stretches employees to develop new skills and capabilities. Level 4 shifts the time horizon into the future by providing employees with guidance on identifying and achieving long-term career objectives within the organization. Level 5 is about actively integrating employee development with workforce plan- ning and staffing to maintain a steady supply of high-performing talent in key jobs across the company.



Organizations do not necessarily need to master lower levels of maturity to achieve higher levels. But maturity levels do tend to build on one another some- what like the stories of a building. The stronger the foundation of the lower sto- ries is, the more stable the higher levels will be. For example, it is difficult to make influential decisions using performance management data (level 5 of “right way”) if your company does not have well-defined performance definitions and consistent processes for evaluating employee performance (levels 1 and 2).

3.6 INTEGRATING STRATEGIC HR PROCESSES I have now explained the fundamental 4R strategic HR processes and discussed their relationship to business execution drivers. I have also outlined different levels of HR process maturity that companies may strive for based on their busi- ness execution needs. But I have not specifically addressed the issue of HR pro- cess integration. The phrase integrated HR is often bandied about as something every company should aspire for, but it is rarely defined.

Integrated HR requires coordinating the 4R processes of right people, right things, right way, and right development. Examples include blending right things

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and right development by assigning employees business goals that enable them to develop new capabilities or blending right people and right way by using perfor- mance management evaluations to guide internal staffing decisions. Integrating HR processes is important for at least three reasons:

• Optimization. Increasing the maturity level of one HR process often requires leveraging techniques or data from other HR processes. You cannot fully optimize any of the four strategic HR process without incorporating ele- ments from other processes. For example, level 3 of right development is called “business-driven development.” This level is achieved by using business goals (right things) and job assignments (right people) to support employee development.

• Coordination. Employees become frustrated when they experience uncoordi- nated HR processes within the same company. As one vice president of oper- ations memorably told me, “The only thing that integrates our HR processes is the poor victim, I mean employee, subjected to them.” Different strategic HR processes should use common tools, models, and terminology so man- agers and employees can transfer knowledge learned from one process to another—for example, using the same competency model to support staffing, performance management, and succession management.

• Efficiency. Integrating HR processes enables companies to be more efficient in collecting talent management data, developing and supporting HR tech- nology, and training employees. It allows companies to reuse elements of one process to support other processes. Examples are having goal management data (right things) feed into the processes used for performance management (right way) and succession management (right people and right develop- ment), or using the same technology platform to support setting goals, eval- uating performance, rewarding and compensating employees, and creating development plans.

Figures 3.4 and 3.5 illustrate how the four core strategic HR processes integrate with one another. Figure 3.4 uses a pyramid to illustrate that as tal- ent management processes become more mature, they also become more integrated. You cannot get to the top of a pyramid by building just one side. Similarly, you cannot achieve the highest levels of strategic HR process maturity

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by focusing on a single process. This is why it is important to draw on multiple strategic HR functions when developing long-term HR strategies. For example, if you are focusing on increasing staffing effectiveness maturity (right people), be sure to include the people who manage development and succession manage- ment (right development) because the work they do will either enable or con- strain the ability of the company to attract high-quality candidates and build talent pools.

Figure 3.5 illustrates the notion of process integration in more detail by com- paring the maturity levels associated with right people and right development. At the lowest level of maturity, these two processes are independent. Methods used to ensure that employees have individual development plans may have little to do with the methods used to efficiently fill open positions. This changes as process maturity increases. At level 2, both processes focus on hiring or devel- oping people based on well-defined job performance requirements. Level 3 for right people and right development emphasizes building talent pools within the organization to support future business needs. Level 4 requires the devel- opment of long-term models that forecast future workforce needs and career opportunities. And at level 5, the two processes blend into a single process that orchestrates staffing and development activities to maintain a steady supply of high-performing talent in critical job roles.

Ri gh

t Th

in gs

→

R ig

h t

W a y →

← Right People

← R

ig h

t D e v e lo

p m

e n

Figure 3.4 Integrated Talent Management

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Business Execution and Strategic HR 49

When building a strategic HR road map or vision, it is important to think about long-term structural integration points between different HR processes. Otherwise you can inadvertently create incompatible processes that prevent achieving higher levels of HR maturity. Following are six critical integration points to consider when developing a strategic HR road map. These are certainly not the only points of integration, but they are major ones to keep in mind:

1. A single system for employee record keeping. As you build out HR systems, focus on creating a single system that incorporates data from each of the 4R strategic HR processes. This will make it much easier to collect data in one process and then use these data to support other processes.

2. Common definitions of job performance. Build job descriptions, compe- tency models, and goal plans that can effectively support multiple strate- gic HR functions. Think how job performance data will be used to provide employees with developmental feedback, determine pay increases, and guide staffing and promotion decisions. Emphasize the use of standard

Integrated

Talent Pipelines

Career Paths

Talent Forecasts

Business-Driven Development

Building Talent Pools

Targeted Development

Individual Development Plans

Filling Open Positions

SiloedSiloed

Selecting High Performers

Ri gh

t D ev

el op

m en

t → ←

Right People

Figure 3.5 Integrated Talent Management Example: Right Development

and Right People

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Commonsense Talent Management50

competency frameworks and skill taxonomies that can be used for staffing, performance evaluation, and development.

3. Integrated personnel decision-making processes. Review information col- lected across all four strategic HR processes and think about the role it should play in pay, staffing, and development decisions. For example, you may want to consider an employee’s past record of career development when evaluating his or her potential for future job roles. Similarly, there is value in examining the kinds of goals employees have achieved when deciding their pay level. Always strive to collect information once and use it multiple ways.

4. Shared talent databases. Develop databases that can be accessed by multiple people to answer a variety of questions related to maximizing workforce productivity. Examples are tools that give recruiters access to succession data so they can find internal employees to fill open positions or combin- ing performance management data, staffing data, and career develop- ment data to identify what competencies and development interventions are associated with promotions. The most effective talent databases inte- grate administrative HR data with strategic HR data (see the discussion: “HRIS Platforms and Workforce Analytic Applications: The Gas and Oil of Integrated Strategic HR Technology”). When building these databases, it is also important to develop guidelines around data access and security.

H R I S P L A T F O R M S A N D W O R K F O R C E A N A L Y T I C A P P L I C A T I O N S : T H E G A S A N D O I L O F I N T E G R A T E D S T R A T E G I C H R T E C H N O L O G Y

Strategic HR involves developing processes to ensure a company hires the

right people, gets them doing the right things the right way, and pro-

vides them with the right development. Each of these processes benefits

from using different types of specialized HR technology—for example:

• Right people: Search engines and staffing tools that help companies

find and hire employees with the attributes needed to succeed in

different jobs

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Business Execution and Strategic HR 51

• Right things: Goal management systems that allow companies to

quickly communicate and coordinate job objectives across the orga-

nization to ensure people are focused on the right things

• Right way: Performance management systems that enable managers

to accurately evaluate employees and provide feedback and rewards

to increase their effectiveness

• Right development: Learning management and development systems

that help employees acquire the knowledge, skills, and experiences

to perform their jobs and advance to positions with increasing levels

of responsibility

These four core areas of strategic HR can be thought of as the sides

of a pyramid. At low levels of process maturity, the processes are rel-

atively independent. But at high levels these processes become highly

intertwined. Figure 3.6 illustrates this concept.

HRIS Platform Data

Ri gh

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→ R

ig h

t W

a y →

← Right People

Workforce Analytics

← R

ig h

t D e v e lo

p m

e n

Figure 3.6 The Relationship of Strategic HR Technology, Workforce

Analytics Technology, and HRIS Technology Platforms

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Strategic HR technology plays a crucial role integrating different HR

processes as they reach higher levels of maturity. For example, HR tech-

nology makes it possible to enroll newly hired employees automatically

into training programs needed to perform their jobs. The technology

also makes it possible to link performance management assessments to

career development systems so employees are directed to specific learn-

ing resources based on their performance strengths and weaknesses.

These data can then be fed into succession management systems used

to identify and track potential future leaders within the organization.

Figure 3.6 also shows how two additional technology systems, HRIS

(human resource information system) platforms and workforce analyt-

ics systems, affect the four main areas of strategic HR. These additional

systems are not always focused on strategic HR, but they have an influ-

ence on strategic HR processes similar to how gas and oil influence the

performance of an engine.

HRIS platforms are a form of computer technology used to sup-

port administrative HR tasks such as processing compensation, storing

employee records (e.g., name, address), and tracking organizational

data about employees such as job title and reporting relationships.

These systems contain critical information—employee names, job titles,

and salaries, for example—but tend to contain little information about

what these employees actually do, how effectively they do it, or what

potential they have to do other things in the future.

Because HRISs are tied to ongoing operations such as payroll and

benefits, many of the data in these systems undergo considerable qual-

ity control to ensure they are accurate. HRISs usually contain the most

up-to-date information about who is working in the company, where

they live, and how much they are paid. But these data are relatively

uninteresting in terms of telling us about employee productivity or

potential. In contrast, strategic HR systems contain significant informa-

tion about employee performance and potential. But data in strategic

HR technology systems tends to be less current and accurate than data

in HRISs. This is because most strategic HR processes like performance

management occur less frequently and do not have the near-term oper-

ational impact of administrative HR tasks like payroll processing.

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Historically, HRIS and strategic HR systems operated independently

with limited data transfer. But companies are increasingly using tech-

nology platforms that support both HRIS and strategic HR functions.

This is helping to create the best of both worlds by giving companies

detailed workforce data that are administratively accurate and strategi-

cally informative.

Workforce analytics systems are technology applications that access,

manipulate, and analyze data about employees to gain insights into

workforce productivity, staffing levels, and other factors affecting work-

force quality. These applications act as pipelines and dashboards that

integrate data from several locations to create different pictures of an

organization. Workforce analytics systems, for example, integrate HRIS

and strategic HR data to generate reports showing level of turnover

based on job function, employee performance, and salary or run models

that show projected future staffing demands based on historic turnover

rates taking into account the depth of internal talent pools and talent

levels found in external labor markets.

Many of the data used by workforce analytics applications come

from strategic HR technology and HRIS. Linking workforce analytics

applications, HRIS and strategic HR technology allow companies to fully

leverage the insights that can be gained from analyzing HR data. This

increases the value, visibility, and use of strategic HR processes overall.

For example, imagine a company used workforce analytics applications

to track turnover levels of high-performing employees participating in

high-potential development programs. If the company discovered that

participation decreased turnover, they could leverage the strategic HR

processes that provided these data to enroll more employees in the

programs.

HRIS data can be thought of as the gas that fuels strategic HR pro-

cesses by providing more complete and up-to-date information about

employees. Workforce analytics applications can be thought of as the

oil that makes strategic HR methods run in more efficient and inte-

grated fashion. Linking these three types of systems together creates a

sum that is greater than its parts.

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5. Single operational dashboards. Determine what sort of HR data will provide the most value to business leaders and present them on a single data display or dashboard. HR data are usually more interest- ing when presented in combination with financial or operational data. Think through what data will be most interesting to business leaders and how to display them so they lead to meaningful insights. This is critical to achieving the highest levels of talent management maturity. Having this end in mind is also important for ensuring that you collect the necessary data in the right format. For example, rather than show- ing overall turnover rate or the percentage of employees rated as high performers, it is more informative to show the turnover rate of employ- ees who are rated as high performers. Rather than showing average performance ratings in different divisions, present a comparison of the financial performance of divisions with average performance ratings in each division.

6. Integrated compensation and staffing strategies. The most visible actions companies make related to workforce management are those around hir- ing, promotions, terminations, and pay (see the discussion: “Pay and Promotions: The Ultimate Expression of Company Values”). Think about how your company makes pay and staffing decisions. Is it about being in the right job, achieving the right things, doing things the right way, focus- ing on the right development, or some balance of all four? Does it balance elements of what jobs people are in, what they have accomplished, how they act, and what they are doing to develop their capabilities? Or does it disproportionately emphasize one of the four aspects of strategic HR? For example, some companies base promotions almost entirely on past perfor- mance with little emphasis on using staffing to support employee develop- ment. Many companies base pay primarily on goal accomplishment, with much less attention paid to how these goals were achieved. Overly empha- sizing some elements of talent management while underemphasizing oth- ers is not necessarily bad. In fact, it may make sense for many jobs. But whether good or bad, the highly visible nature of compensation and staff- ing decisions will either reinforce or undermine a company’s commitment to integrating different elements of strategic HR for building and reward- ing the workforce.

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Business Execution and Strategic HR 55

Paying attention to these integration points reduces the risk of creating HR processes that are overly siloed and potentially incompatible or that contradict one another. Always ask, “How could the process I’m designing influence or benefit from integrating with other processes?” Creating an integrated HR steer- ing committee and establishing a single strategic HR coordinator can also help to create processes that employees and operations leaders will see as seamless, well-coordinated, and coherent.

P A Y A N D P R O M O T I O N S : T H E U L T I M A T E E X P R E S S I O N O F C O M P A N Y V A L U E S

Nothing says more about what a company truly values than the deci-

sions it makes around hiring, promoting, and financially rewarding. These

represent concrete actions to invest in some people over others based

on their perceived value to the company. When a company promotes or

compensates an employee, it is implicitly saying, “We value this person so

much that we have decided to give him more money, responsibility, and

power regardless of what shortcomings he may have.” Ideally promotions

and pay are based on a systematic and careful review of what the per-

son has accomplished, how he acts within the company, and his progress

against business objectives. In these cases, promotions and pay under-

score the company’s commitment toward its stated values and strategies.

But all too often promotion and pay decisions are made hastily, focus on

short-term operational needs, or are used to prevent people from quit-

ting rather than rewarding their contributions to the company. Frequently

they overemphasize one aspect of performance while ignoring others.

Promotions and pay decisions made in these situations often result in

sending a message to employees that the company may say it values cer-

tain behaviors but what it truly rewards is something else entirely.

Promotion decisions probably have the most impact because they are

highly visible to everyone in the organization. When employees see one

of their peers get promoted, they immediately draw conclusions about

why this person was rewarded. They will view it as an implied endorse-

ment that all of the things this person did, both good and bad, are val-

ued, accepted, or tolerated by the company. It does not matter if these

conclusions are accurate because perception is reality.

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3.7 CONCLUSION Companies are most likely to achieve their business objectives when they do the following things well:

• Get the right people in the right jobs. Staff positions with employees whose attributes match the demands and requirements associated with job goals and competencies. This is the primary focus of recruiting and succession planning.

• Focus them on the right things. Clearly identify and communicate the goals they want employees to achieve; then measure and reward employees against these goals. This is the focus of goal management and variable pay.

• Ensure they do things the right way. Define the competencies employees must have to achieve their job goals and evaluate and reward employees based on the degree to which they demonstrate these competencies. This is the primary focus of performance management and merit pay.

• Provide them with the right development. Create a work environment that helps employees develop attributes that support the competencies that drive goal accomplishment. This is the primary focus of career development and succession management.

Effective strategic HR develops these four fundamental processes to support the company’s most important business execution drivers, basically a three-step process:

1. Understand your company's business objectives. What are the most criti- cal commitments the company must fulfill to meet the expectations of its

Nothing says more about what a company truly cares about than pay

and promotion decisions. What systems does your company have in place

to ensure these decisions reflect its stated values? Do people understand

how pay and promotion decisions are made? Is the process transparent,

or are employees left to make up their own reasons for why some people

were rewarded while others went unrecognized? Are you certain that

your company is honestly putting its money where its mouth is?

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shareholders? The only way to answer this question is to spend time talk- ing with operations leaders about what business goals are top of mind for them.

2. Define how these business objectives tie back to key business execution drivers. Engage line leaders in a discussion around the following ques- tions: “To achieve our business objectives, what sort of employees do we need, and what must they accomplish?” and, “What do we need people to do tomorrow that they are not doing today?” How will the company need to change its workforce in order to meet its strategic commitments? What will people need to do in the future that they are not doing now? Will the company need to add talent to the workforce that it does not cur- rently have? Answering these questions will help determine which of the six business execution drivers are most critical to achieving the company’s business strategy.

3. Implement the appropriate strategic HR processes to support the key business execution drivers. Determine which of the 4R processes will have the most impact on the business execution drivers that are critical to your company. Assess the current maturity level of these processes, and determine what improvements will have the greatest influence on your company’s ability to execute its strategies. Do not be afraid to drive change, but limit change to things that will make a significant difference to the company’s strategic success. Emphasize the use of integrated, efficient processes and technol- ogy to ensure you achieve the maximum value with the least disruption to ongoing business operations. Finally, communicate the business reasons for adopting more effective strategic HR processes. Make sure HR pro- cesses are viewed as tools to drive business execution and are not merely seen as additional administrative tasks.

The remainder of this book discusses critical design questions related to using the four fundamental HR processes to support your company’s unique business execution needs. The emphasis is on using HR processes as tools for business exe- cution as opposed to administrative compliance. We have the knowledge and tools needed to use strategic HR processes to drive business execution. It is up to us to make it happen.

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NOTES 1. Starting in 2008, SuccessFactors began investigating the underlying busi-

ness reasons that led to decisions to invest in strategic HR technology. This involved asking companies to explain what had led them to invest time, money, and other resources to deploy technology-enabled strategic HR processes. This work led to the identification of the six business execution drivers presented here.

2. Span of control refers to the number of employees reporting in to a manager. A manager who has five employees reporting to her has a span of control of five.

3. This includes continuing to work for the company. Increasing retention and managing turnover are major issues related to business execution, particu- larly the business execution drivers productivity, sustainability, and scalability.

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