Thursday, 27 March 2008

Talent Management in China

Rather than India, I'm using a case study of some Chinese companies for part of my talent management workshop tomorrow.

I'm hoping doing this will emphasise and reinforce some of the points I've been making today, because my understanding is that the talent challenges there are actually fairly similar to those experienced elsewhere, just even more so.

In fact, the Talent in China blog has just quoted some research by Dr Jos Gamble of Royal Holloway, University of London:

"He essentially says that China is much like any other market, and that adjustments should really only be made for institutional features, like the labor market. Other than that it is business as usual. You operate as you do overseas, except when there is a specific reason why you can’t, like a law or a deeply ingrained practice."

These 'institutional features' are of course fairly significant for HR though.

This is why, at the CIPD's conference last year, Geraldine Hayley at Standard Chartered explained that "China is different from everywhere else" and therefore that they "do quite different things there".

She explained that the bank are growing their 3000 employee workforce by 50% this year. No mean feat given that they have 30% turnover with over 50% of employees having been with the bank for less than a year and 20% departing within their first year of employment for more money and better prospects.

And the challenge isn't helped by the fact that there are not experienced bankers in China. So they are having to create a new 'talent infrastructure': finding people who have never thought about doing banking, selecting them for their talents, training them up and hoping that they will hit the ground running.

They do a lot more development in China than anywhere else - partly to engage them and partly to provide the required capabilities.

And they're engaging people from all around the world to go to China - it doesn't matter about language skills - they just need "bodies on the ground".

China Business also did a good podcast on some of these challenges.

And in my VIEW webinar last year, I referred to some of McKinsey's research on global talent management challenges in China and elsewhere.

In an earlier 2005 article, the firm looked at the example of engineers:

"China has 1.6 million young ones, more than any other country we examined. Indeed, 33 percent of the university students in China study engineering, compared with 20 percent in Germany and just 4 percent in India. But the main drawback of Chinese applicants for engineering jobs, our interviewees said, is the educational system's bias towards theory. Compared with engineering graduates in Europe and North America, who works in teams to achieve practical solutions, Chinese students get little practical experience in projects or teamwork. The result of these differences is that China's pool of young engineers considered suitable for work in multinationals is just 160,000 - no larger than the United Kingdom's. Hence the paradox of shortages amid plenty."

The Economist comes to a slightly different conclusion:

"China's biggest problem is a culture of deference - a culture that was refined by the mandarin tradition and then reinforced by the Communist party. For many Chinese it is bad form to question superiors. So far, China has been much more adept at borrowing other people's ideas than producing its own, particularly when it comes to high-level innovation. But there are plenty of other problems, ranging from poor English-language skills to week intellectual-property rights. Many Western companies are rightly nervous about developing new products in a country where ideas are routinely stolen."

Whether it's skills or culture that are behind the talent challenge, this does mean companies need to think about talent management a little bit differently.

In a Sloan Management Review article, Making People Decisions in the New Global Environment, Claudio Fernandez-Araoz, author of Great People Decisions suggests companies (particularly those in China and India) need to:

  • Adopt a new mind-set, responding to the dramatic challenges of hiring in one year the number of knowledge workers they used to hire in a decade

  • Cut the red tape to attract the best candidates who are in very low supply and in high demand

  • Implement best practices such as over-hiring talent.

It's this new mind set that I think is key to coping with the talent challenge in China (and elsewhere).

I'm looking forward to have a good conversation about this tomorrow - and learning more about the issues from some of the delegates based in, and with business operations in China (as well as similar challenges from those based in Singapore, Malaysia, Indonesia, Thailand, Sri Lanka...)

Wednesday, 26 March 2008

More on the language of people

I've previously encouraged HR functions not just to learn the language of business, but to help the business learn the language of HR, or the language of people.

Well, I'm in Singapore to deliver a workshop on talent management and I've been looking at a couple of Asian case studies I might use.

One of the best is a Stanford case study on Indian outsourcing firm, Infosys: 'Building a Talent Engine to Sustan Growth'.

This outlines Infosys' sophisticated approach to human capital management and describes the role of Mohan Pai as head of HR. Pai was previously CFO and describes the quick shift in mindset he made in moving to HR:

"As CFO, he had regarded employees as economic assets. In his new role, he also had to view them as emotional humans. He noted the difference in perspective, saying, "For me, the big shift happened because every time a person walked into my room, I looked at the person's net present value. Now, I'm head of HR, and the next person who walked into the room, I see that person as a bundle of emotions, as a person with aspirations, as a person whom I hired and who has to deliver value.' "

Now Infosys is a hugely successful and well led organisation which Pai likens to a human capital supply chain company. But wouldn't it be even more successful if its CFO and line managers had Pai's approach to people (a willingness to engage with their emotions and aspirations), not just the folks in HR?

Just a thought.

Monday, 24 March 2008

HCM Room 101

I hope you've found my posts on measurement interesting. Before I move on, I want to refer to what I think are the two main myths concerning measurement in HCM.

As regular readers of this blog know, I think measurement has an important role in HCM, and that's why I devote so much attention to it. But it's only ONE important area, not THE important area. And you don't need to do much or I guess any measurement to achieve great improvements in human capital from better management of people.

So these three statements really annoy me:

1. What you measure is what you'll get.

Actually, you'll get (or are more likely to get) what you pay attention to. Measuring something helps you pay attention to it, but you don't need to measure it. Just talking about it, putting it as a regular agenda item in meetings, and taking action about it when necessary will work just fine.

Of course, in some organisations (particularly those with a strong financial focus), it is difficult to get things attended to unless they are measured. But then so many things in HCM can never be measured that well, that at some point, further improvements can only be made by educating the business to be more comfortable with ambiguity (this is part of encouraging the growth of language of people).

2. If you can't measure it (human capital), you can't manage it.

Why? Of course you can. Yes, the more intangible an element of human capital is (and probably the more important), the harder it is to both measure and manage. But measuring it (remembering that it is inherently unmeasurable) isn't necessarily going to help you manage it. And in fact, an increased focus on measurement in recent years doesn't seem to have resulted n many improvements in the way that people are being managed.

Much more than measurement, the strategic management of human capital depends on a strong people focus (around a clear organisational capability), best fit people management practices, competent and motivated managers etc. If you don't provide these, then you can't manage human capital.

3. ROI is the holy grail.

No, most often it's not, it's a distraction from what's important. Why?

  • Because more often return on expectations is a more appropriate measure

  • Because when the business asks for a ROI it mostly indicates they don't think there is one. HR would do much better to improve the strategic impact of their work, than bother calculating a ROI which will probably be dismissed anyway.

What are your pet hates you would like to put in HCM's room 101? (suggestions will be condemned to room 101 at your host's discretion).

Saturday, 22 March 2008

ROI on coaching

One of the main ongoing debates in measurement / business benefits / ROI is in connection to coaching.

The CIPD's 2008 Learning and Development survey finds that 71% of organisations use coaching in their organisation (up from 63% in the 2007 survey).

There are so many different levels and approaches to coaching (for example, between line managers using coaching as one approach to supporting employees, internal coaches working with those identified as talent, and executive coaches working with senior leaders) that it is hard to comment on these findings.

But perhaps the most important difference between these approaches is between transactional and transformational levels of coaching.

At a transactional approach, providing coaching to achieve a certain objective, measurement and ROI may be relatively easy to calculate (the difficulty may be identifying investment cost if this is provided internally, but the benefit is likely to be expressed in fairly definite and financial terms).

I think ROI is a lot harder to calculate for transformational coaching - helping someone achieve their potential. Yes, the business' objectives provide an important context for the coaching, but this is provided to deliver a certain improvement in human capital, not to achieve a certain financial result.

Businesses can use a value chain to predict the financial impact of particular human capital outputs, but there are likely to be so many estimates and assumptions involved in doing this, that these numbers cannot be used with any level of confidence.

In particular, coaching is unlikely to be the single source of any improvements in business results, so organisations are often encouraged to calculate a "percentage impact of coaching".

"Calculate the likely impact of coaching, taking into consideration other organisational variables. For example, if other initiatives for increasing profit are to introduce better IT systems, recruit more sales staff and improve distribution, then look at the likely impact that coaching could have on these. Is it 33% for each one or is it 20% for one, 30% for another and 50% for the other? Use this data to define an overall 'percentage impact' of coaching. (It is important to point out that this is an art and not an exact science, so it is best to get all parties involved in a discussion to decide on this figure.) Generally, the percentage impact of coaching can be anywhere between 20% and 100%. The fewer organisational variables involved, the bigger impact the
coaching will have."

Some organisations also try to identify a degree of confidence in this estimate, and work this into their ROI calculations, but people are generally so poor at estimating either of these figures, that it doesn't really make much sense to try to do so.

In a Training Zone article earlier this year, coaching is a fast way to loose money than burning it, Gary Platt suggested that organisations need significant evidence of coaching if they are going to ensure that investment is effective:

"Would you be happy going to the garage and asking for an oil change, pay for it and then discover the oil hasn't been changed? No. Then why pay for a coaching initiative that doesn't deliver? The coaching fraternity is awash with grandiose claims for the benefits of its product so this challenge shouldn't be a problem, provided of course clear goals and targets are agreed up front and a clear and equitable system for tracking progress is installed.

Corporate coaching is not the bad boy of the developmental world but it is an expensive and fairly new approach. It would be highly beneficial to organisations and coaches if there was more clarity about what its purpose and contribution will be within the business, and in that way prove it is a financially viable and responsible approach."

The problem with this is that the analogy doesn't actually work that well. Coaching people isn't the same as giving a car an oil change. You can put oil in a car and nothing much is going to happen other than the car continuing to go. If you coach your employees, you can gain many different, often unexpected and intangible results.

Given these issues, return on expectations (using the output - human capital, rather than the impact - business results) is often going to be a better measure than ROI.

This shouldn't be taken to mean that organisations can't or shouldn't do formal evaluation of their coaching. It is a worry that the CIPD's survey suggests only 8% of organisations evaluate the results of coaching via a regular formal process at an organisation-wide level. Organisations would benefit from doing more.

But this formal evaluation should be a process of conversation, not a number.

HR Carnival 29

The latest carnival is back at Wally Bock's Three Star Leadership blog.

Do check it out.

Thursday, 20 March 2008

The Impact of Reward in the NHS

We know that reward has a relatively minor effect on employee performance, and might therefore expect to see a limited impact on business performance too.

This is certainly what the Institute of Work Psychology (IWP) has found. Their study of 308 UK manufacturing companies over 22 years has shown that "empowerment, teamwork and intensive training and development at an operational level had a far more significant impact on productivity than payment systems".

Another study looking at the impact of reward has recently been conducted by the Centre for Economic Performance. It's an important study that I've only seen reviewed in The Economist and focused on the world's third largest employer, the UK's National Health Service (NHS).

The study looked at the impact of imposing virtually uniform pay rates in the NHS meaning that it competes for nurses with private sector organisations / jobs where pay rates vary widely across regions.

"Its rigid pay policy makes it easy for the NHS to recruit and keep good nurses in poorer northern regions but hard to hire and retain them in the richer south. Hospitals in the north gain from a more stable pool of nurses. Southern ones have to lean on temporary agency nurses, who can be paid more but tend to be less experienced, less familiar with the hospital and less productive. Do southern patients suffer as a result?

The economists look at the proportion of patients aged 55 or more, admitted to hospital after a heart attack, who die within 30 days. They find a strong link between this ratio and local private-sector wages. The higher the private wage, making it harder to get good nurses in the NHS, the higher the death rate: to be precise, if the private wage is 10% higher in one area than another, the death rate is 4-5% higher."

The main focus of the research is to show the problems the government faces in assuming the UK is economically uniform when it sets wage deals, but more broadly, it also indicates the consequences all organisations face if they don't sent pay levels appropriately.

And this is just reward. The IWP and other research would suggest even greater consequences await poor management of other HR practices.

This was in fact what was found in earlier research looking at the NHS.

This research found strong associations between the extent and sophistication of appraisals, training and teamworking and lower patient mortality. A hospital that appraises around 20 per cent more staff and trains around 20 per cent more appraisers is likely to have 1000 fewer deaths per 100,000 admissions or a decrease in over 12 per cent of the expected total.

Best Companies and business performance

As I move towards the end of this short series of posts on HR metrics, I want to note some of the other recent research and reports which support making a positive conclusion about people management and its link to the bottom line (a fuller review or earlier research is included in my book).

These range from 'pop research' to more thorough analysis.

In the former category, you've got things like the significant positive difference between the Sunday Times / Fortune best companies to work for and the FTSE / S&P indices. These look at employee's satisfaction with different elements of their experience at work, and so do provide evidence of a correlation between people management practices and business results.

I can't find the graph that was included in the Sunday Times best 100 companies supplement this year (the graphic here is from 2007) but the 31 of these companies which are listed in the UK have performed twice as well as their FTSE 100 rivals during the last five years.

I'd find this quite convincing if I hadn't worked for one of these companies recently, and know just how little they really value the human capital provided by their people.
Anyway. Looking at the 2008 graphic, the performance of best companies and FTSE companies don't seem to be that different during this last year.
This supports the findings of a 2008 study conducted by UBS into the share (stock) price performance of the Fortune best companies (confusingly, these are the equivalent of the the UK's FT best workplaces) which are covered by the firm. This study noted that over the medium term, employee satisfaction does seem to drive a higher company share price. But over the last two years, UBS found the best companies performed negatively relatively to the general index.
UBS think that over the last two years, share prices "were driven more by sentiment than by fundamentals".
They explain:
"Employee satisfaction is a long term driver of value. In the short run, the dominant driver of share price volatility is more likely to be increased uncertainty and risk aversion from the credit crunch, and uncertainty surrounding financial markets and economies, as well as increased political risk in some regions. In current market conditions, long term drivers of intangible value may be taking a back seat."
So employee satisfaction / human capital performance are still driving value; they're just not being recognised in companies' share prices at the moment (and therefore , now should be a good time to invest in 'best companies' combining strong human capital performance with sound financials).
Anyone up for forming an investment club?

Sunday, 16 March 2008

People and the Bottom Line

While I'm on the metrics theme, I may as well catch up my reporting on some other recent research and suggestions for HR metrics. Let's begin with the new study, People and the Bottom Line, produced by the Work Foundation and the Institute for Employment Studies (IES), supported by Investors in People UK.

This research developed in-part out of the Human Capital Standards Group, set up by FT journalist, Richard Donkin to take forward the work of Denise Kinsgmill's Accounting for People taskforce. I was briefly associated with this group, although I made clear that my own interests focused (and still focus) on how organisations can measure their own bespoke strategy (and even more so, raise the level of value created in this strategy) rather than basic minimum standards of management and measurement that could apply for all organisations.

The group put out a tender to provide 'recommendations of agreed measures and indicative relationships to organisational performance'. I tendered for this but didn't win the work and I'm not sure that it ever took place, but the group did produce 36 metrics they felt were important in addition to 40 that had previously been identified by the IES. It is these 76 metrics which have been reviewed in the current research that involved a survey of almost 3,000 employers.

The table shows the 12 metrics which were found to have the greatest impact on organisational performance (using the categories from the IES' '4A' model: access, ability, attitudes and application).

I agree that these are generally sound metrics, that organisations may want to consider using when thinking about value for money /efficiency metrics (at least for internal use). However, like just about any metrics associated with something as broad as people management, they do suffer from impreciseness, and therefore inability to compare like with like (which is important when thinking about external benchmarking or reporting - which after all was the driver for this research).

For instance, if you take the metric: 'Proportion of new appointees tested on recruitment' (in the 'access' category of the table), how do you know there is any consistency in the type or appropriateness of testing used? Even if you refine this further, for example by using the question asked in the actual research: 'How many of the new appointments were subject to a test on recruitment ie the use of some kind of psychometric or written or practical test to help determine candidates' suitability for the job?', it is still not possible to understand how extensive this testing was, or whether the actual test or the way it was used was appropriate.

Another important problem with the list is highlighted by Richard Donkin himself:

"The list of measures is limited in this respect: it does not include measures where employers had no supporting data or where there was hardly any variation in responses, giving little scope for differentiating employers. There was little that the researchers could do about this. It is important, however, to stress that the exercise was being carried out where some aspects of workforce development are exposed to very little in the way of effective performance measuring. Most companies would agree, for example, that leadership is vital for their success but very few companies have any useful measures of leadership. That is not to say it does not matter."

This the main issue. One major areas of agreements in the HR metrics movement over the last couple of years has been that organisations need to measure what's important, rather then what's easy to measure. The list of metrics produced as an output of this research is in many ways therefore, a rather unfortunate step backwards.

I feel rather more positive about the other outputs of the research, and in particular, the correlations (and they were correlations, not causations) found between performance in the metrics and performance of the organisation. I don't believe these conclusions are substantially impacted by questions over the metrics used. After all, if metrics on leadership or other higher value measures had been used, we would expect higher rather than lower correlations with business performance.

One conclusion of the research was that businesses with good people management practices enjoy higher profit margins and productivity than those without. And according to the research, there is no levelling off in this - good companies obtain the same benefit from increasing their investment as bad (although this obviously can't be true for ever). The study concluded that if an organisation increased its investment in people management by just 10% it would boost gross profits by £1,500 per employee per year.

The research also found that it is the intensity of the people management practice that makes a difference - "for example, not just whether companies do employee engagement, but how much and how often".

A further conclusion was that there is no one-size-fits-all approach to investment in people management. Organisations need to create bundles of people management practices that meet their own business strategies and contexts (or even better, their organisational capabilities). As Richard Donkin explains:

"The IES found very little evidence to link any single human resources practice to overall business success. When a number of practices were taken together to create an index, however, researchers found that they were capable of making a measurable impact on performance... this supports the theory that applying bundles of HR practices is more effective than focusing on specific practices."

The research doesn't seem to have had much coverage, other than a front page story, 100% proof: Good human resources will boost your company profits, in Personnel Today and some rather more critical pieces by the usual suspects: Paul Kearns and Nick Higgins.

To me, this new study is a good piece of research (and is certainly much more robust than what I proposed to do!) which although far from being conclusive (certainly not 100% proof), when put together with all the other reports on this subject (see my book for a summary of these - and of course, much more!), which all say broadly the same thing, amounts to substantial evidence of the impact of effective people management.

More on the same theme in my next post...

Friday, 14 March 2008

I4CP: HR Metrics

I've just attended I4CP's webinar on HR metrics.

There was some good stuff in here. I agree with a lot of it. I agree that measurement needs to be contextualised and interpreted:

"It's not about the numbers, but the story they tell. In fact, I tell a lot of people: just because you can measure it, doesn't mean you should be. Satisfaction / engagement surveys: one of the companies we studied: they weren't really executing the strategy. The department that was blocking them had the biggest satisfaction and engagement scores. They were satisfied but not engaged in the right thing - they were engaged in the wrong strategy. So it's about the story it tells... numbers only provide you with a common language."

I agree that measurement needs to focus on impact rather than efficiency, although, as I've previously posted, I think Boudreau's analysis of efficiency, effectiveness and impact measures (also referred to by Chris Parkinson at American Express during his presentation at the CIPD's talent management conference recently), whilst being one of the best measurement models around, is still intellectually flawed.

I agree that an outside in approach (focused on the business strategy) is better than an inside out approach (focused on HR activities) although I think we tend to go too far on this. So, for example, I prefer a lot of Ulrich's earlier work on organisational capabilities (based upon a inside-approach to strategy) to his latest thinking on leadership brand, where I think he overstates the need to focus from the outside-in. I reconcile these two approaches by explaining that to create value, organisations need to focus not on activities nor just the business strategy but on human capital.

The most interesting slide in the presentation to me was this one looking at the alignment of strategy, people and process, simply because it is very similar to one I've posted on myself, which I use to explain that organisational capability is an emergent property arising from the effective alignment strategy, people and HR / management processes. But I like I4CP's build on this, comparing the time perspective of the three constituent elements.

I4CP note:

"Change is happening so fast and product lifecycle is so fast. This is where HR can have the biggest impact - I think - is on really getting people in organisation more aligned to executing strategy fast. If HR can show everything HR does is improving that alignment and speed of execution, you've got a home."

I draw additional inferences to this. To me, the main issues arising from these different time perspectives (also highlighted by Lynda Gratton in Living Strategy), emphasise that we need to treat people in a different way from the rest of the business. HR's constituents are very different to those of Finance - and this is why we can't deal with numbers the same way.

Wednesday, 12 March 2008

Jack Welch: Companies are so Impersonal

I did think about posting on the UK's budget, our not particularly inspiring Chancellor (who read the budget 'with all the excitement of a man reading out a telephone directory', and the fate of non-doms tonight, but I think I'll keep clear of UK politics.

Better to comment on the US elections instead. Whilst the choice of candidates doesn't seem to have inspired all US commentators, I've found it quite gripping. And I'm envious of the choice in political directions that the US' population is being given.

Having said that, and perhaps it's just that we're receiving more coverage of the Democrats' contest, I'm surprised at the strength of anti-capitalist sentiment that has been expressed at times -for example, Hilary Clinton's questioning whether theories underpinning free trade still hold true in the era of globalisation.

It's the sort of comment you wouldn't get from any major political party in the UK and I guess there are pluses and minuses to this.
Anyway, I just want to go back to this anti-capitalist sentiment again.

In his Business Week podcast, The Welch Way, Jack Welch has been talking about why capitalism and business gets such bad press from politicians and others, particularly during the primary season:

"A corporation is so impersonal. It conjures up in your mind bricks and mortar, big skyscrapers, guys in suits. Every negative image you can think of comes up. This gives people free range to go at it."

In Welch's view, this isn't fair (as my daughter would say). After all, corporations are people:

"In big oil - think of people finding it, in the oil rigs, fighting like hell the rough seas. In big pharma - thousands of people working to cure AIDS, cure cancer, working late in the labs. The people writing about evil corporations - they work for corporations!"

Welch's diagnosis of this is that writers have disengaged from the corporations they work for when they write out corporations. After all, "most people working in organisations love their corporations".

I'm not so sure. Certainly engagement surveys don't generally suggest this level of affiliation.

I think a lot of writers write about evil corporations because they're thinking about their own experience working in them as they write, and they know that the way they're writing about corporations will resonate with their readers too.

So I'd agree with Welch that the solution isn't better PR. But don't think it's just about waiting till the end of the primaries either.

I think corporations need to think about how to make their organisations more personal. To give their people a working experience that's meaningful and energising. After all we don't think of corporations like Virgin or Starbucks as evil. They trust their employees and this trust comes over positively to us. I think that when a few more corporations start to act like this then general perceptions about business and capitalism will start to change too.

Tuesday, 11 March 2008

CK Prahalad at HCI Human Capital Summit

I didn't manage to get to the Human Capital Institute's annual summit again this year (I very rarely get the time to go to conferences these days unless I'm speaking).

But I've been checking out the HCI's live blog and it seems to be going well. The highlight for me would have been CK Prahalad's speach on strategy and the centrality of the individual, a theme close to my heart:

"People and employers are changing their relationships to meet the new economy. Human beings are the new form of currency and valuation in companies."

If I've interpreted the blog post correctly, Prahalad seems to have talked about applying his ideas on 'botom of the pyramid thinking' to innovation in business and talent management.

"Innovation has changed": it's about co-creation between different parties: businesses and consumers, employers and employees etc. Assisted by social networking, it's also often about
micro-producers and micro consumers (in Chris Anderson's Long Tail).

To encourage innovation to take place, organisations need to:

Ensure Aspiration > Resources

"Entrepreneurial talent is attracted where your resources are low and enthusiasm is high. When resources are high, but enthusiasm is low, innovation becomes hard to find. Satisfied employees don’t mean anything. Excitement is what creates energy and innovation. Democratize information, change the game, and leverage the resources."

Fold the Future In

Start from the future looking backwards rather than the present looking forwards - this is the way to create value.

Focus on Next Practices

Use best fit, differentiated HR and management practices that support this future vision, rather than the best practices everyone else uses today:

"True growth occurs by focusing on next practices instead of best practice. Best practices leads to agreement on mediocrity."

Provide an Innovation Sandbox

Provide people with the opportunity to play, experiment and make mistakes - but make the boundaries of this clear to them:

"Innovation can be constrained. Embrace constraints allows people to recognize the sandbox they have to play in."

Innovation in Talent Management

I think Prahalad made a great case for linking together soft and hard perspectives on talent management:

"Talent management connects social and technical business processes. You need IT and analytics to achieve data management. Without understanding who is doing what, without having the business processes in place to understand the social aspects and focus on the individual, talent management cannot occur."

But Prahalad is also clear that businesses need to transform - and his requirements for transformation are all about the soft:

  • imagination
  • passion
  • courage
  • humanity
  • humility
  • intellect
  • luck!

This is why I've been posting recently on my concern that we're overemphasising the hard by trying to be too much like other business functions, when too create value, we need to be in touch with our people's needs, which are soft, and that means we need to be confident to be unique.

Monday, 10 March 2008

Peter Cappelli: Talent on Demand

I've posted quite a bit on talent management recently (on DDI'survey, McKinsey's survey and HCI's survey. My guest blogger, Jo Jordan, has also posted on the CIPD's Talent Management conference which I chaired. And I've also asked, I believe rather provocatively, whether Talent is pink?).

And I've just read Peter Cappelli's Harvard Business Review article, Talent Management for the Twenty-First Century, which summarises his new book, Talent On Demand.

Unfortunately, I don't think these offer much to deal with McKinsey's 'talent problem'.

Firstly, Cappelli's approach assumes, I think, that everyone is talent (rather than being a result of segmentating the most valuable employees). This leads him to make proposals which would be less than great if we are talking about talent as the most valuable - for example asking them to share in the costs of their training - bye bye talent!

Linked to this, I think Cappelli undervalues the contribution that talent (and HR) can make. Whether or not you agree with me that people management strategy should inform the business strategy as well as vice versa, you'll hopefully agree that the two should be tightly integrated. So Cappelli's suggestion that "operating executives give talent planners their best guess as to what business demands will be over the next few years" ignores the contributions that both talent and talent planners can provide. Predicting demand for talent should not depend purely on current operating forecasts, but also on what the business will be capable of achieving with the right talent in place.

Most seriously, the supply chain management analogy used by Cappelli over-simplifies HCM / talent management to such an extent that the analogy becomes largely valueless. Cappelli says that "the issues and challenges in managing an internal talent pipeline - how employees advance through development jobs and experience - are remarkable similar to how products move through a supply chain: reducing bottlenecks that block advancement, speeding up processing time, improving forecasts to avoid mismatches." Yeah, right.

I'm not saying the analogy is completely useless, in fact five or so years ago, I used to use it to describe some elements of HCM myself (see this report - p11). But if you think about talent as the most important people in your organisation, then it's not useful. Treating, or even thinking about these people as 'products' is unlikely to be useful in helping you achieve your objectives.

A similar point applies to 'talent on demand'. I do think organisations need to be more innovative in using different sources of human capital, but again, I have reservations about applying this requirement to talent. McKinsey notes a major reason for high rates of failure in talent management programmes is short term thinking. Assuming that you can get your talent on tap is more likely to magnify this problem than it is to solve it.

I think at the heart of my issue with Cappelli is that "his theory, he suggests, addresses a major complaint about the field of human resources -- that it is 'touchy-feely, squishy stuff with little applicability to business problems. HR practices have typically been about meeting individuals' needs, figuring out what psychological profile they fit and what should be done to help them grow and advance. But if you're an employer who is worried about issues like the finances of the company, you would like HR to think about personnel from the perspective of money and costs, and what happens if you don't have the right people in place to do the necessary jobs."

Would you? Then perhaps that's why a decade after McKinsey's War for Talent report, you've still got problems. My bet is that Cappelli's way of managing isn't going to get you out of them.

Saturday, 8 March 2008

International Women's / Ladies' Day

HR Circles noted earlier this week that today is International Women's Day:

"Since 1908,International Women's Day that takes place on 8 March has been a day to reflect on and celebrate the role of women in countries around the world. It is designed to inspire and recognise the many achievements made by women. However, 100 years after the initial marches in New York demanded shorter working hours and improved pay for women, a recent study has highlighted that women in London typically get paid 25% less than male colleagues and one in six companies who undertook an equal pay survey found that there was a gender based pay differential."

Britain's gender pay gap is the largest of all 27 EU countries, according to Eurostat. The Office for National Statistics says it is most marked at senior management level, where women earn 27% less than men. And a recent study by the Institute of Directors shows that the divide goes all the way up to the board - the pay gap between male and female directors widened over the past year from 19% to 22%.

Management Today note that:

"The gender pay gap can no longer be blamed on overt sex discrimination, although shamefully, this does still go on in some pockets of the private sector. Instead, it’s a complicated tangle of the type and level of work women do, unconscious bias within the workplace, and the tug of war between work and family life. It’s also partly to do with the fact that women don’t ask for as many pay rises as men. A recent study by Carnegie Mellon University demonstrated an early gender difference in attitudes when it comes to accepting job offers, with 57% of men thinking to negotiate their pay offer upwards, compared to only 7% of women."

There's more good analysis of the problem here - a complicated tangle is right. But none of these issues are unsolvable if enough intent and effort is there. We need to get past what Alison Maitland calls manonomics:

“It’s not nasty or deliberate, but codes of working were simply developed in a different age, with a different family model, when there were no women in the room... Men simply aren’t recognising a female colleague’s potential because years of conditioning have taught them to look for someone in their own image."

And it's a serious problem. For women themselves (Gill Corkindale has a good discussion on this) and for countries and businesses. For example, FT journalist, Richard Donkin notes:

"The case is supported by sound research. Goldman Sachs, for example, has suggested that gender equality in the labour force could increase gross domestic product by as much as 9 per cent in the US, 13 per cent in the eurozone and 16 per cent in Japan.

Research published in 2004 by Catalyst, a US think-tank, found that the Fortune 500 companies with the highest representation of women in their top management teams significantly outperformed those with the lowest averages. Return on equity was 35 per cent higher while the total return to shareholders was 34 per cent."

I like Richard's summary too:

"The real issue, I believe, is not that women need to change, but that business needs to change. Senior careers for women should not be about women fitting the demands of the job, but about work changing to meet the needs of women."

But let's not get too downcast. Things have improved - there's no doubt about that - have a look at HR Lori's post on 1943's Guide to Hiring Women if you're not convinced.

So I think both because we've come along way, and because we've got a long way to go, today is a day worth 'reflecting and celebrating'.

Mind you, in our house, we celebrate Ladies Day. We picked up this way of marking the day when we lived in Russia, which you might have thought would focus on the political significance of the day, ie on women's rights. Well, you'd be dead wrong. There the day is completely devoted to the 'gorgeous ladies in mens lives'.

And it's a big thing. Much bigger than Valentine's Day, and probably bigger than Christmas.

Assuming it's a work day, all women are given roses when they enter the office, and more from the men they work alongside. I remember one year, I left doing this a bit late, and given that this was HR, I had quite a bit of flower shopping to do. I left the office mid-morning with Vlad, the other only other man in the team, stopping at all the kiosks we could find. It wasn't until about half an hour and three subways later that we found enough roses for the team.

And at home, all housework and chores are done by the men.

I'm not sure this is helping deal with Russian 'manonomics' but it's a custom very few women there would want to loose. And I think you can probably see why my wife wanted to keep the custom on!

So, putting pay inequality aside for now, for all my women readers:

"С 8 Марта тебя поздравляю,
Сердечно желаем:
Счастья, здоровья, yдач, красоты!"

Thursday, 6 March 2008

Talent management is broken

Readers of my recent posts on HR's and the line's role in talent management, may be interested in a new DDI / Economist study, 'Growing Global Executive Talent: High Priority, Little Progress'.

The study finds that senior leaders are setting talent management as a high priority, but aren't dedicating enough effort or being hands-on enough to do it (and this time commitment seems to have fallen since DDI's previous report, 'The CEO's Role in Talent Management').

In fact, while 85% of CEOs said that talent management is as important as or more important than other business priorities, only 20% say they often spend time managing talent and just 10% review it with their boards. DDI:

"Leaders see the opportunity, they talk about it, they invest in it, but this is a job that requires their direct involvement, and most just aren't skilled or experienced at doing it themselves. It's astounding given the fact that they recognize the business impact of having the right people - yet they're outsourcing accountability for it."

More than half of the leaders surveyed said their organizations are only fair or poor at identifying talent and half said they are doing sub-par work in developing their leaders. 60% of executives are not satisfied that talent is growing fast enough to meet their most critical business needs.

The consequence of this disconnect is that more than half of senior leaders anticipate their companies' performance will soon suffer because they don't have the right people in the right jobs. Executives identified this need to get the right talent in place as the greatest obstacle to executing their business strategies.

DDI's findings aren't particularly new - they very much echo previous research conducted by other consultancies, for example Hay and McKinsey. But they do show that there's a growing need to get serious about the issue. DDI:

"Many leaders don't recognize that their involvement in talent management initiatives could turn the tide for the organization. It's a missed opportunity for those leadership teams."

As was highlighted at the recent CIPD conference, HR can't step in for leaders and directly manage their talent. But they can orchestrate their programmes around the relevant business conditions. And they can challenge their CEOs on the way they are managing, and help them reflect on the gap between what they say and what they do.

As Management Issues notes:

"Business leaders love to rant and rage at how poor HR is at identifying and grooming future talent. But according to a new study, the heart of the problem might be closer to home – staring them in the mirror, in fact."

HR Carnival 28

Check out the latest carnival on Gautam Ghosh's blog - lots of other great postings on people management in India and around the world too.

Wednesday, 5 March 2008

Best fit with emotional intelligence

The other point I make on EI, is that it’s not enough for organisations to be generically emotionally intelligent. You have to have the right kind of EI.

This may be based upon the products or services that you are selling, and the emotions you’re looking to create in your customers to drive their purchase decisions. These emotions are likely to be based more on the emotional signature of your particular organisation than they are on your product’s or service’s features. So, for example, if you’re in financial services, selling ‘peace of mind’, then your employees need to come across as open, honest and trustworthy.

One of the case studies on the useful EI Consortium site is American Express. This demonstrates, firstly, the sorts of gains that can be produced from a focus on EI:

“Financial advisors at American Express whose managers completed the Emotional Competence training program were compared to an equal number whose managers had not. During the year following training, the advisors of trained managers grew their businesses by 18.1% compared to 16.2% for those whose managers were untrained.”

Secondly, this case shows the need for best fit in EI development:

“It grew out of an effort to discover why more clients who needed life insurance were not buying it. Research suggested that a major barrier was the financial advisors’ emotional reactions to the process. Consequently, the company developed and tested a training program designed to help the advisors cope more effectively with the emotional conflicts that they sometimes encountered in working with clients around life insurance matters.”

This shouldn’t really be a surprise – EI is really just a useful way of collecting together and presenting a set of intra and inter-personal skills. We know that the competencies that are most useful vary by organisation so it’s fairly clear that the precise form of EI that is required will vary too.

Tuesday, 4 March 2008

The need for emotional intelligence

Even if they’re not valued by CEOs people skills are the basis of the new world of management.

But despite increasing focus in this area, many line managers aren’t using any more skilled interventions with their people that they were a decade or more ago.

I think one insight into this comes from Emotional Intelligence.

The slide is from a workshop on EI that I delivered last week and comes from one of
Daniel Goleman's articles.

It suggests that the basis for emotional intelligence is self awareness. This deals with how people perceive, appraise and express their own emotions. And how they use emotions to facilitate and prioritise thinking, employing the emotions to aid in judgement (using the information that emotions provide). In the workshop, we looked at labelling and allocating their emotions to different parts of their bodies, for example someone said they got ‘butterflies in their stomach’ before they did a presentation.

Other common emotions which have become associated with parts of the body include a heaviness in the chest, a lump in the throat and a weight on the shoulders. Being able to distinguish between these many different emotions and feelings is a prerequisite for the other areas of EI.

The second requirement is self management which is about how people control their emotions rather than being at their whim – using feelings as a ‘resource’. And we did a short exercise using NLP’s resource anchoring to show how participants could use an emotional state they had experience in one context and apply it in another where it would be more useful than the state they normally experienced here. I think I managed to convince them that this is a ‘tool’ not a ‘trick’, and like any other tools isn’t intrinsically good or bad but can be useful.

The third is social awareness – being tuned into others’ emotions, and the organisational climate. They key here is about being able to read other people and getting some external validation of this ability to be able to fine tune it. We used a couple of great tests which are freely available in the internet: Simon Baron Cohen’s Reading the Mind in the Eyes quiz, and Paul Ekman’s Subtle Expression Training Tool and Micro Expression Training Tool.

Fourth comes social skills, things like 'visionary leadership, influence, developing others, communication, change catalysis, conflict management, building bonds, teamwork and collaboration.
But actually unless people have good self awareness, self management and social awareness, these social skills are unlikely to have much impact. Perhaps the reason CEOs discount social skills is that they don’t see them improving – and perhaps the reason for this is that organisations have put too much focus on social skills themselves, and not enough on the other underpinning abilities.

Monday, 3 March 2008

HR Strateges in Dubai / UAE

I'm chairing and presenting at Fleming Gulf's Annual HR Strategies in Banking & Finance conference at the end of March.

I'll also be staying for meetings in Dubai and Abu Dhabi on Wednesday 2nd and Thursday 3rd April, so if you would like to meet while I am there, let me know.