HR transformation requires clarifying the strategy and structure of the HR department, then focusing on enhancing their work. In this chapter, we offer a road map for HR Transformation practices based on two dimensions:
- Content: What is the work of HR?
- Process: How can HR work be improved or re-engineered?
When combined, these two dimensions layout a blueprint or road map for how to improve HR practices. HR transformation means upgrading all HR practices in aligned, integrated, and innovative ways.
Table of Contents
- Flow of People: People Practices
- Flow of Performance Management: Performance Practices
- Flow of Information
- Flow of Work
- Process: Ways to Enhance HR Practices
- Making the Change: Transforming HR Practices
People talk about the work of human resources as activities, systems, processes, decisions, or initiatives. We have chosen to talk about the work of HR as a set of HR practices because practice is something that is continually being learned (we practice piano or sports).
The practice is also an activity within a profession (the practice of law), and the concept of best practice defines an activity that delivers an outcome better than some other activity. Transforming HR could mean changing as many as 120 separate HR practices.
In the HR Value Proposition, we have synthesized this vast array of HR work into four domains that represent the flows or processes central to organizational success. These are –
People practices refer to the talent within the organization. Talent management is the systematic process of creating and sustaining individual competencies that will help the business deliver the strategy.
A multitude of programs and investments have been made to attract, retain, and upgrade talent. Yet sometimes after stipulating that talent matters, it is easy to get lost in the myriad promises, programs, and processes and lose sight of the basics. Hence, we have broken down the factors that make up Talent.
Talent = Competence + Commitment + Contribution. Let’s look at each of these in detail.
Competence means that individuals have the knowledge, skills, and values required for today’s jobs — and tomorrow’s. Transforming HR practices related to competence means the following four steps:
- Articulate a theory or set a standard – Developing competence begins by identifying the required competencies to deliver future work. Rather than focus on what has worked in the past by comparing low- and high-performing employees, more recent competence standards come from turning future customer expectations into present employee requirements.
- Assess individuals and organizations – With standards in place, employees can be assessed on the extent to which they meet or do not meet those standards. Talented employees deliver results in the right way.
- Invest in talent improvement – Individual and organizational gaps can be filled by investing in talent.
- Follow up and track competence – Individual employees can be tracked on their understanding of their next career step and their capacity to do it. Organizations can track the extent to which backups are in place for key positions. Leaders who are measured on how much money they contribute to their company can also be assessed on the extent to which they are talent producers rather than talent consumers.
Competence is not enough. Commitment means that employees are willing to devote their discretionary energy to the firm’s success, responding to the basic employee value proposition the firm needs to offer: employees who give value to their organization should get value back from the organization.
Generally, these instruments suggest that employees are more committed when their organization offers them the following:
- Vision: A sense of direction or purpose
- Opportunity: An ability to grow, develop, and learn
- Incentives: A fair wage or salary for work done
- Impact: An ability to see the outcome or effect of work done
- Community: Peers, bosses, and leaders who build a sense of shared purpose, identity, and experience
- Communication: Knowing what is going on and why
- Entrepreneurship or flexibility: A range of choices about terms and conditions of work
The next generation of employees may be competent (able to do the work) and committed (willing to do the work), but unless they are making a real contribution through the work (finding meaning and purpose in their work), then their interest in what they are doing diminishes and their talent wanes.
In recent years, many people are finding that the organizations where people’s needs have traditionally been met (families, neighborhoods, hobby groups, churches) are faltering. As employees work longer hours and use technology that removes many work-life boundaries, companies need to learn how to help employees meet their needs.
Performance practices turn desired outcomes into measurable goals and incentives that motivate people to reach those goals. Accountability means that performance management practices should tie individual and team behavior and outcomes to clear goals.
Completeness means that performance management practices cover the full range of behaviors and goals required for overall business success. Equity means that those who produce more receive more.
Transformation of performance management practices can be done in four steps.
Step 1. Clarify Strategy and Priorities: Be Clear About What Is Wanted
The first step in performance management is to be clear about an organization’s strategy, performance priorities, and what it is trying to accomplish. Before getting into HR practices to implement strategy, we needed to create strategic clarity.
Step 2. Set Standards: Define What to Measure
Once a strategy has been clarified, standards and measures can be created that match the strategy. A simple test of the right performance management standards is to test them with customers or investors, or both.
Step 3. Design Rewards: Build-in Welcome and Unwelcome Consequences
When someone meets your standards, both financial and nonfinancial rewards should follow. Transforming financial rewards means making choices about these five types of income:
- Short-term cash – Base salary or on-the-spot cash compensation helps employees create and maintain a lifestyle. Base salary generally reflects tenure with the organization, job title, and performance.
- Incentive-based cash – These incentives are variable cash bonuses based on short-term or significant one-time performance contributions.
- Long-term equity – Long-term equity in the form of stock options (the right to buy shares at a fixed price regardless of current market value) enables employees to gain wealth as the firm gains market value.
Step 4. Follow up: Make Sure that Performance Management Endures
Follow-up — both feedback on prior activities and what Marshall Goldsmith admirably calls “feedforward” on what’s needed — is critical to performance. Here are some of the choices in providing follow-up:
- Chat informally
- Supply data
- Let people draw their own conclusions.
- Explain why, not the what.
- Do it
Organizations must manage the inward flow of customer, shareholder, economic and regulatory, technological, and demographic information to make sure that employees recognize and adapt to external realities.
Information flow focuses on how you will communicate both inside and outside the organization. In transforming communication strategies, you will need to address five questions:
- What is the message? Be clear about the message that you want to communicate, which means keeping the message simple and focused.
- Who should share the message? Choose the most effective voice for the message, whether senior or local leaders or both.
- Who should receive the message? Decide who needs to hear the message: employees at various levels of the organization, external stakeholders (customers, investors, communities, families of employees), or both.
- When should the message be shared? Timing matters; when employees read major announcements about the company in the press instead of directly from management, they feel disconnected from the company and tend to lose both morale and commitment.
- How should we share the message? Decide whether it’s best to convey the ideas personally (in one-to-one interviews or small or large meetings) or impersonally (via the company website or video broadcasts).
Organizations must manage the flow of work from product or service demand through order, fulfillment to make sure their obligations are met. HR professionals are ideally suited to assist in all aspects of this process as well. The first challenge involves organizational design.
Besides organizational design, HR transformation can focus on work processes, governance, and physical setting. Process improvements mean that HR can help re-engineer business processes.
Governance refers to how decisions are made and implemented within the organization. This can involve issues related to top-down versus bottom-up patterns of decision making. It also refers to the speed of decision making and whether decisions are made with a short- or long-term focus.
There are three ways to transform HR practices so that they have the maximum impact: align, integrate, and innovate.
For HR practices to have an impact, they need to be aligned with the organization’s strategy. Revisit the capabilities your organization needs to excel at. One way to improve HR practices is to align the practices to the same criteria to make sure that they drive strategy through capability.
When HR systems work together with a unified strategic focus to achieve the same outcomes, they have a substantial impact on business results. Integration means that your performance management practices, talent practices, compensation practices, communication practices, organizational design practices, and other HR practices present a consistent point of view and focus on how and why your organization manages its human assets.
HR will have resources available to intervene in organizations that are struggling to meet performance expectations to help them develop skills or redesign structures or processes so that they will be able to meet those expectations.
In influencing the contribution of the organization’s human assets, HR practice results are based on synergy: the whole must be more than the parts. Transforming HR practices is about more than simply making incremental improvements to each one.
To innovate, you need to keep abreast of the most recent HR practice innovations in your industry and in the broader HR community. Both practical and theoretical innovations should be examined against the capabilities you are trying to drive.
In an HR transformation effort, it is important to identify which practices and processes will contribute most to achieving the desired outcomes of the initiative. To transform HR practices, engage your internal organization, your process redesign group, and your HR leadership team.
Many companies have found it useful to identify and retain an external consultant to focus on the planning process so that the HR team can focus on content related to the plan.
Map the core HR practices, create a master HR systems design plan, create design recommendations for each practice, establish desired outcomes and measures for each affected practice, create breakthrough practice design concepts, align the practice with other HR and corporate practices, consolidate the design recommendations and create implementation plans, and implement the changes in concert with people and department changes.
Hope this chapter has brought with it clarity on how to go about doing HR Transformation. HR leaders can identify and improve by upgrading all HR practices in aligned, integrated, and innovative ways.
DAVE ULRICH, JUSTIN ALLEN, WAYNE BROCKBANK, JON YOUNGER MARK NYMAN