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Talent VS Organisation

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By Professor Dave Ulrich

In today’s rapidly changing business world, the challenge of building the right organisation complements and supersedes the talent challenge.  For the past 15 to 20 years, leaders have been encouraged by remarkable work captured in the “war for talent.” Many have built systems for bringing people into the organisation (sourcing, having a value proposition), moving them through the organisation (development, performance management, engagement), and removing them from the organisation (outsourcing). The war for talent was a great battle, but we now need to turn to victory through organisation.

Talent is not enough. Individuals may be champions, but teams win championships.

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Professor Dave Ulrich is an internationally acclaimed best selling author, speaker, researcher and consultant to business leaders and the HR Professeion. He is also ranked as the #1 management guru by Business Week, profiled by Fast Company as one of the world’s top 10 creative people in business, recognised as a top 5 coach in Forbes and recognised again (for 8 years) in the top 30 business Thinkers50 annual rankings.

A new framework for managing risk

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By Professor Robert Kaplan

Despite all the rhetoric and money invested in it, risk management is too often treated as a compliance issue that can be solved by drawing up lots of rules and making sure that all employees follow them.  Many such rules, of course, are sensible and do reduce some risks that could severely damage a company. But rules-based risk management will not diminish either the likelihood, or the impact, of a disaster, just as it did not prevent the failure of many financial institutions during the 2007-2008 credit crisis.

So which risks can be managed through a rules-based model and which require alternative approaches?

The first step in creating an effective risk-management system is to understand the qualitative distinctions among the types of risks that organisations face. According to our research, risks fall into one of three categories: preventable risks, strategy risks and external risks.

Preventable risks

Preventable risks are internal risks which are controllable and ought to be eliminated or avoided. Examples include employees’ or managers’ unauthorised, illegal, unethical, incorrect or inappropriate actions and the risks from breakdowns in routine operational process. While companies should have a zone of tolerance for defects or errors that would not cause severe damage and for which achieving complete avoidance would be too costly, in general, companies should seek to eliminate these risks as they get no strategic benefit from taking them on.

This risk category is best managed through active prevention: monitoring operational processes, guiding people’s behaviours and decisions toward desired norms, clear statements of codes of conduct, internal control systems, and a strong, independent internal audit department.

Strategy risks

A company voluntarily accepts some risk in order to generate superior returns from its strategy. A strategy with high expected returns generally requires the company to take on significant risks, and managing those risks is a key driver in capturing the potential gains.

Strategy risks cannot be managed through a rules-based control model. Instead, a risk-management system must be designed to reduce the probability that the assumed risks actually materialise and to improve the company’s ability to manage or contain the risks events should they occur. There are three distinct approaches to managing strategy risks: independent experts, facilitators, and embedded experts.

These risk-management approaches enable companies to take on higher-risk, higher-reward ventures than their competitors with less effective risk management.

External risks

Some risks arise from events outside the company and are beyond its influence or control. Sources of these risks include natural and political disasters and major macroeconomic shifts.

As external risks cannot be prevented, their management must focus on identification and mitigation. There are various tools which can be used by companies to identify their external risks, including stress tests, scenario planning and war-gaming.

Stress-testing helps companies to assess major changes in one or two specific variables whose effects would be major and immediate, although the exact timing is not forecastable.

Scenario planning is suited for long-range analysis – typically five to ten years out. Scenario analysis is a systematic process for defining the plausible boundaries of future states of the world. Participants examine political, economic, technological, social, regulatory and environmental forces, and select a number of drivers – typically four – that would have the biggest impact on the company.

War-gaming assesses a firm’s vulnerability to disruptive technologies or changes in competitors’ strategies. In a war-game, the company assigns three or four teams the task of devising plausible near-term strategies or actions that existing or potential competitors might adopt during the next one or two years – a shorter time horizon than that of scenario analysis.

While companies have no influence over the likelihood of risk events identified through these methods, managers can take specific actions to mitigate their impact. Since moral hazard does not arise for non-preventable events, companies can use insurance or hedging to mitigate some risks, or make investments now to avoid higher costs later.

Organisational biases

Identifying and managing strategy and external risks requires an approach based on open and explicit risk discussions. That, however, is easier said than done. Extensive behavioural and organisational research has shown that individuals have strong cognitive biases that discourage them from thinking about and discussing risk until it is too late.

Individually, people overestimate their ability to influence events and tend to be over-confident about the accuracy of their forecasts and risk assessments. As organisational biases also inhibit our ability to discuss risk and failure, these collective inclinations explain why so many companies overlook or misread ambiguous threats.

Risk management is non-intuitive; it runs counter to many individual and organisational biases. Active and cost-effective risk management requires managers to think systematically about the multiple categories of risks they face so that they can institute appropriate processes for each. These processes will neutralise their managerial bias of seeing the world as they would like it to be, rather than as it actually is or could possibly become.

Professor Robert Kaplan: Marvin Bower Professor of Leadership Development Emeritus at the Harvard Business School.

Honest ‘Conversations’ replace traditional Performance Management

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by Nicola Tyler 

Companies around the world are starting to question the efficacy of what we might term “traditional performance management”. Senior leaders report that they have abolished performance appraisal at their companies because it causes so many problems. It’s clear that performance management faces a substantial paradox.  On the one hand, employees and managers all acknowledge that it is often the most loathed HR practice; research suggests that most current performance appraisal systems do not work well.  On the other hand, accountability does matter.  Research shows that companies with performance evaluation systems have higher shareholder returns than firms without them.  Research also shows that, out of many HR practices, performance management and variable pay have the most significant impact on financial performance of organisations. Without accountability, employees don’t perform as well; they are unlikely to change and unlikely to perform better.

So, performance management faces a conundrum.  If we don’t do any performance management, accountability declines and performance lags.  Yet if we have complicated processes, employees become frustrated and again, performance lags. According to research by global HR guru Professor Dave Ulrich, the paradox of doing or not doing performance management can be (at least partially) resolved by focusing more on positive accountability through conversation more than process.  

Once we focus on dialogue, performance becomes much less about forms to fill out, procedures or policies, and much more about the conversation between a manager and an employee, or among employees on a team. Can a leader have a candid, thorough, positive, and specific performance conversation with their employees? This is where the key to effective performance accountability lies. Affirmative conversations of this type shouldn’t be occasional meetings in the diary but rather an ongoing process of regular interaction.  Over time, the employee gains a “growth mindset”, which means that the employee conversation emphasises learning – what can be improved more than focusing on what has gone wrong.  These conversations all focus on the future, not the past.  For example,

  • They tackle behavioural problems without judging the person.  
  • They validate the person and his or her potential more than casting suspicion.  
  • They focus on learning from both successes and failures rather than critiquing.
  • The conversation is not about the forms, tools, or processes, but about creating a positive relationship between leader and employee.  

Companies like Adobe and Accenture have successfully implemented positive performance accountability systems. At Adobe, employees are evaluated on the basis of what they achieved against their goals, rather than how they compare to their peers. At Accenture, employees focus less on their ranking and more on the value they create. When conversations matter more than processes, the focus is on value created rather than on chasing employees to complete HR forms. When these conversations focus on the positive and what is right, they build positive accountability. When employees take personal responsibility, they create more value.

A good business leader and manager will:

  • Focus more on what’s right than what is wrong.
  • Offer immediate and timely feedback and feed forward to employees.  
  • Help others feel better about themselves.   

In turn, employees who receive positive performance conversations recognise how their personal aspirations can be better realised by delivering organisational outcomes.  

It’s true that most employees do not like bureaucratic appraisal processes that monitor performance, belittle employees, and focus on what is wrong.  But accountability matters. Some trendsetters would go so far as to say that work teams should feel an obligation to act in line with company values, to be more deeply committed to outcomes. Without accountability people don’t improve, they lack a sense of purpose, and organisations miss their targets.  In South Africa we need to focus much less on performance appraisal as a bureaucratic, annual process. Instead, we must focus much more on performance accountability where leaders hold positive conversations with employees, mutually establish expectations, implement accountable reward systems, and follow up on performance. Perhaps we should replace the Performance Appraisal with a Commitment Contract or a Purpose Contract.

Nicola Tyler, is a highly respected strategic thinker. With over 20 years of experience in Strategy, Consulting, Leadership, Development and Coaching, she is an Associate of the Gordon Institute of Business, a Master Trainer in a full range of de Bono Thinking tools. Working both locally and internationally, she delivers her own “Strategic Conversation” methodology to senior teams committed to innovation and driving sustainable results. Nicola has shared the stage with world renowned thought leaders such as Tom Peters, Robert Kaplan, Ricardo Semler, Edward de Bono, Dave Ulrich, Martin Seligman, Richard Koch and Martin Lindstrom. 

 Build your HR teams into core business partners that drives your organisation to achieve strategic results. Click HERE to find out more or contact us at info@brg.co.za to book a needs assessment.

 

Six Keys to Leading Successfully During Transition

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By Professor Dave Ulrich, Ross School of Business

The last few months have seen noteworthy CEO appointments in South Africa and the rest of the world.  At home, MTN announced in June that Rob Shuter will replace Sifiso Dabengwa as chief executive in 2017, and in September it was announced that Sisa Ntshona will take over the reins at South African Tourism.  Internationally, Vicki Hollub became the first woman to lead US independent oil giant Occidental Petroleum, a Fortune 500 company, and Edward Bastian stepped into the corner office at Delta Airlines.

Changing a company’s top leadership can raise a lot of questions about its immediate and long-term future, and may even have a material effect on the company’s value and stock pricing. Many, both inside and outside the company, look to the CEO to set the tone in the immediate aftermath of any major change. Here are a few things that any CEO leading a company through a transition should keep in mind:

  1. Be aware of how the departures look to outsiders: Any leader is made stronger by the leaders he or she creates. Leaders should multiply others and make them better, and talk about “we” more than “I.” When an entire team leaves, it may send a signal to investors and others watching that a leader is not empowering his or her leadership team.
  2. Remind people watching, of your track record of leading people to success: An effective leader delivers results and takes personal responsibility for doing so. In high tech firms, there is often “patient” capital that will provide market value far beyond earnings—as seen in companies like Uber and Amazon—but executives need a track record of building market presence and share in clear and measurable ways. At a time when doubt runs high, a CEO should reassure those watching that he or she has a strong action plan and vision.
  3. Position the departures as an opportunity for growth: An effective leader has insight into industry trends and how to position his or her company to win. In fast-moving social media industries, it is critical to continually reinvest and create a future. For example, Google may not succeed in balloons or driverless cars, but its leaders are constantly positioning themselves to be the innovators and leaders of the future. There’s opportunity for the CEO and other company spokespeople to message the departures as a chance to propel the company forward.
  4. Hire the right talent to replace the people who have left: Good leaders surround themselves with better people. The most confident leaders are able to hire and develop very competent teams; the least confident leaders often try to make themselves look better by bringing in people who are not as effective. Whether someone has left or was asked to leave doesn’t matter, as long as the CEO takes this opportunity to replace them with someone even more closely aligned with the company’s goals. This will help propel the company forward.
  5. Stay true to the company’s mission: Effective leaders should turn customer brand promises into leadership actions in order to build trust. Walmart’s leadership team is dedicated to delivering low cost; Disney leaders are dedicated to guest experience. Twitter’s challenge is to create a clear external brand promise to customers and then use that as criteria for its leadership team.
  6. Above all, put the company and its success first: Effective leaders build cultures and HR systems that institutionalize the leadership. When the company becomes more important than the leader, it is more likely to navigate, and even thrive, through a transition.

Leadership transitions happen, especially when a company is entering a new strategic phase, and the current executive team isn’t the right one to get the company to where it needs to be. But all too often, the transition itself focuses too much on the individual people involved and not enough on the requirements and unique needs of the company. By keeping the focus where it always belongs—on how these developments can serve the greater business goals—a CEO can lead his or her company to an even stronger position.

Dave Ulrich is the Rensis Likert Professor of Business at the University of Michigan’s Ross School of Business and author of Leadership Capital Index. Ulrich is ranked as the #1 management guru by Business Week, has been profiled by Fast Company as one of the world’s top 10 creative people in business, and listed as a Top 5 Coach in Forbes.  Ulrich was in South Africa last week leading an ongoing series of events on Human Capital, hosted by Business Results Group and the Gordon Institute of Business Science.

Five Top Tips for HR Professionals

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In order to manage HR and people strategy, HR leaders need to enjoy working with people first and foremost. However, to really thrive we must be aware of the business as a whole; understanding its goals so that we can adapt people strategy to have a positive impact on the organisation.

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It’s time we rethink HR in a radical way

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Gone are the days when HR was just about salaries and employee benefits.

Human Resources professionals, regularly report a common critical challenge: they feel and experience a lack of credibility from within their business organisations. This finding dovetails with the common perception that, for years, HR has been the ‘least sexy’ end of business, proffering roles that few business science graduates are interested in pursuing. Whilst HR teams have been tasked with attracting and retaining great talent for their organisations, they have themselves struggled to draw talent to their own backyard.

Yet, recent research shows that a transformation is underway. It’s time that we wipe the slate clean and rethink HR functions, careers and value in a radical way. What would you call HR if it wasn’t already known as Human Resources? How differently would leaders and managers meet their “people needs”? Would HR really just be a cost centre, or is there a different kind of value to be added and gleaned? What could your business do differently to address the challenges of people, culture, and performance?

Global human resources guru Professor Dave Ulrich has persuasively demonstrated that HR’s traditional role is a thing of the past. He believes that, going forward, the HR function will increasingly be measured on business value, not people processes and transactions. As customers both inside and outside of the business look to leadership to secure their investment, it is little surprise that human capital is fast finding its way to the balance sheet.

Five years ago, Ulrich embarked on a research project to identify which role within a typical C-suite structure would be best suited to take over from the CEO. Unexpectedly, the HR executive appeared to be the most suitable position to step up to CEO. At that time, however, few if any HR execs were considered as candidates. But five years on, things are changing. A new trend is emerging. The people agenda has finally hit the top job and, in the US in particular, HR execs are not only being shortlisted for CEO roles, but are actually being appointed too. Mary Barra, the CEO of General Motors, for example, served as VP of HR for 18 months. Anne Mulcahy, CEO of Xerox for 8 years, previously ran the company’s HR operations for several years. Today, Chief Human Resource Officers often report directly to the CEO, serve as key advisors, and present regularly to the board. These HR hotshots are no longer filling a support or administrative function, but rather serving as the person who enables business strategy.

Interestingly, all these appointments have had line management experience, and usually experience in other functions too. The HR high-flyer who becomes CEO is not necessarily someone who has only ever been an HR specialist, but quite often more of a generalist who’s spent time in HR.

It’s clear that the time has come for HR to become a more integral part of the business: line and HR need to coalesce. We need to rethink the value of HR as a function, and link HR’s value to organisational performance. If you were to spend the next year securing line management experience for everyone in your HR team, what would you do, and what’s stopping you? In turn, the credibility that HR professionals in South Africa still lack will evolve, not only from their ability to consistently deliver, but because their deliverables will be perceived as strategic and valuable. Furthermore, HR departments will be better positioned to foster a pipeline of dynamic, inspirational, influential leaders for future top jobs.

Nicola Tyler is CEO of Business Results Group, and will be on stage with Professor Dave Ulrich during his two one-day events, in both Jo’burg and Cape Town, on The Future Value of HR, hosted by Business Results Group and the Gordon Institute of Business Science. For more information visit www.brg.co.za/events

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