Tue, Oct 25, 2011
Has push come to shove for HR? Today’s competitive global talent market and highly mercurial business environment means one thing — when it comes to HR transformation, business as usual no longer applies.
One bright side in this shifting landscape: with business hungry for a cutting edge, HR has the opportunity to lead human capital decisions, says Ravin Jesuthasan, co-author with John W. Boudreau of the new book, Transformative HR (Jossey-Bass, 2011.)
Both authors are seasoned veterans in the talent management field – Boudreau is professor of Management and Organization at the Marshall School of Business at the University of Southern California; Jesuthasan is managing director and Global Practice Manager for Towers Watson’s Talent Management Practice.
The book, subtitled How Great Companies Use Evidence-Based Changes for Sustainable Advantage, outlines five principles that drive an evidence-based approach to human capital decisions: analytics, segmentation, risk leverage, synergy and optimization.
MonsterThinking spoke with Jesuthasan about HR transformation strategies that will lead the way.
MonsterThinking: HR has traditionally not played a dynamic a role in helping formulate business strategy. In Transformative HR, you and co-author John Boudreau point out how that model is quickly evolving. What are some of the most dramatic instances of this that your research has uncovered?
Jesuthasan: As we looked at the various organizations that were driving evidence-based change, the talent and HR implications of their business issues were not the fifth or sixth priority for managers, they were the first or second.
The HR leaders were right there with their CEOs and business leaders, not necessarily formulating strategy, but clearly defining and articulating what would be required of the organization’s talent to execute the strategy.
MonsterThinking: The book talks about the forced distribution model of the 1980s that bucketed employees into a top/middle/bottom percentage. What impact has this model had on employee engagement?
Jesuthasan: The concept of a forced distribution is an interesting one that can be effective in the right situations. It is not appropriate for all companies. To be successful, a forced distribution requires an organization to have a deep pool of highly capable talent that is ready to replace those who may be exited.
This in turn requires an organization to have a strong external brand that ensures the attraction of sufficient numbers of high performers and an internal development architecture; this ensures the readiness of this talent to step into roles that may be vacated.
Very few organizations have the enabling systems that allow a forced distribution to be successful. As a result, the impact on employee engagement can be quite negative.
MonsterThinking: Analytics can enable HR to discern where the biggest return on human capital investment is within the organization. What specific metrics can support these findings?
Jesuthasan: There is no single set of metrics that every HR function should be tracking. Rather, the metrics that HR focuses on should be an outgrowth of the business issue they are trying to address. HR’s ability to continually trace a specific people outcome to a business outcome is essential.
MonsterThinking: What is the risk for HR departments that don’t incorporate analytics into their findings?
Jesuthasan: In an uncertain world, organizations are going to continually look for opportunities to reduce their cost structure and earn a high return on all the capital in the business, including human capital.
As labor costs often represents the single largest expense for most organizations, business leaders will increasingly look for evidence of a return. HR’s ability to not just show data but demonstrate how their investments in the workforce are addressing specific business issues will be essential.
Having the right analytics and the ability to use them to tell business leaders a story that motivates action will be critical.
MonsterThinking: Would you agree with author Edward Lawler (Management Reset: Organizing for Sustainable Effectiveness, Jossey-Bass, 2011) when he says, “HR has to decide which is worth more — the person or the job — and recognize situations in which having an exceptional employee will provide a big payoff for the company.”
Jesuthasan: Ed is absolutely right. John and I discuss the concept of demand-side segmentation and draw Return on Improved Performance curves for a couple of alternative roles at an airline in Chapter 2 of our book.
Drawing the curves enables organizations to see where higher levels of performance really do make a difference and where “good enough” is in fact good enough.
MonsterThinking: Any final words of advice for HR leaders who are fighting old notions about the role and capability of HR to innovate and lead?
Jesuthasan: I would encourage them to emulate the three attributes we saw consistently demonstrated by the great HR leaders in the companies we profiled: courage, boundary-lessness and business-mindedness.