We Read For You: Talent - Making People Your Competitive Advantage


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Organisations can gain a powerful competitive advantage by tapping into their talent and learning how to organise and lead it effectively. In this session of We Read For You, Jessie Whitehouse presents "Talent: Making People Your Competitive Advantage", a book by Edward E Lawler, that provides a comprehensive framework for helping human resource professionals, senior executives, CEOs and corporate boards structure their organisation in order to attract, retain and manage their talent effectively.

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We Read For You: Talent - Making People Your Competitive Advantage

  1. 1. Talent: Making People Your <br />Competitive Advantage<br />By Edward E Lawler<br />Presented by:<br />JESSIE WHITEHOUSE<br />Date: 10 June 2011<br />
  2. 2. Background to book<br />Edward E Lawler III is distinguished professor of Business and Director of the Centre for Effective Organisations in the Marshall School of Business at the University of Southern California.<br />He has been honoured as a top contributor to the fields of organisational development, HR management, Organisational Behaviour and Compensation.<br />He is the author of more than 350 articles and 43 books.<br />
  3. 3. Chapters<br />Chapter 1: Talent Matters<br />Chapter2: Making The Right Management Choice<br />Chapter 3: Designing Organisations<br />Chapter 4: Managing Talent<br />Chapter 5: Managing Performance<br />Chapter 6: Information & Decision Making<br />Chapter 7: Reinventing Human Resources<br />Chapter 8: Governing Corporations<br />Chapter 9: Leading<br />Chapter 10: Managing Change<br />
  4. 4. Chapter 1: Talent Matters<br />In the last several decades an avalanche of business books, articles and seminars have stressed the importance of human capital- people-in gaining competitive advantage.<br />Executives seem to be paying attention.<br />According to a recent survey of senior executives the two most important management challenges are:<br />- Recruitment of high quality peopleacross multiple territories<br />- Improving the appeal of company culture and work environment<br />
  5. 5. Ed Lawler wrote this book detailing what he believes organisations need to do in order to gain competitive advantage as a result of their ability to organise and manage talent.<br />What is needed are organisations that are designed from the boardroom to the frontline in ways that optimise talent.<br />He calls this type of organisation Human Capital- centric (HC-centric)<br />
  6. 6. I’ve been saying for years that employees are our most valuable asset. It turns out I was wrong. Money is our most valuable asset.<br />Employees are 9th.<br />When asked what came in 8th, he says: Carbon paper!<br />Dilbert<br />
  7. 7. How do you tell whether an organisation should be HC-centric or not?<br />Multiple factors have contributed to the creation of the knowledge economy and the rise of talent as a potential source of competitive advantage.<br /><ul><li>Access to financial capital
  8. 8. Information technology that has been created in the last decade
  9. 9. Growing need for technical knowledge
  10. 10. More flexible work practices
  11. 11. Creation of a new competitive landscape as a result of the change-becoming increasingly service-driven</li></ul>Because of the amount of change that has taken place the source of competitive advantage in many industries shifted from execution and reliable processes to the ability to innovate and change.<br />
  12. 12. What does a HC-centric organisation look like?<br />An organisation that aligns its features towards the creation of working relationships that attract talented individuals and enable them to work together in an effective manner.<br />Major features of a HC-centric organisation:<br /><ul><li>Business strategy is determined by talent considerations and this in turn drives human capital management practices
  13. 13. Every aspect of the organisation is obsessed with talent management
  14. 14. Performance Management is one of the most important activities
  15. 15. The I.T. system gives the same amount of attention to measures of talent costs, performance as it does to measures of financial assets
  16. 16. The HR department is the most important staff group
  17. 17. The corporate board has the expertise and information it needs to advise on talent issues
  18. 18. Leadership is shared and managers are highly skilled in talent management</li></li></ul><li>Chapter 2: Making the right management choice<br />Which is the right management approach?<br />Structure- centric or HC-centric<br />In the case of a structure- centric approach a company can organise either as a hierarchical bureaucracy or as a low cost operator<br />Hierarchical Bureaucracy: This approach was used by leading corporations such as IBM, AT+T, Exxon and was used by most of the large US and European corporations. It is still used in government and non-profit organisations but has lost favour due to high cost and inflexible performance<br />Low Cost Operator: <br /><ul><li>Jobs not stimulating with low pay and few prospects
  19. 19. Minimum fringe benefits
  20. 20. Little training and development
  21. 21. Tight job descriptions
  22. 22. Top down decision making
  23. 23. Low job security
  24. 24. Use of part-time and temporary employees</li></ul>The defining feature is a focus on gaining competitive advantage through low wages and benefits rather than through the performance of talent.<br />The most visible low cost operators are Walmart,McDonalds and Burger King<br />
  25. 25.
  26. 26. HC-Centric Management<br />Lawler identifies 2 HC-Centric approaches:High – Involvement approach<br />Global competitor approach<br />The characteristics of high involvement organisations<br /><ul><li>Enriched work designs
  27. 27. Participative decision-making structures
  28. 28. Shared business information
  29. 29. Committed to education and development of people
  30. 30. Career Orientated
  31. 31. Rewards for organisation performance
  32. 32. Community
  33. 33. Shared Leadership
  34. 34. Committed to Talent Management</li></ul>Leading examples are Harley Davidson, Whole Foods, Proctor and Gamble, South West Airlines & Starbucks<br />
  35. 35. Global Competitor Approach:<br />(Glamour companies of current era)<br /><ul><li>Interesting work
  36. 36. Global talent pool
  37. 37. Offshoring
  38. 38. Outsourcing
  39. 39. Employment depend on performance & skills
  40. 40. Pay for performance
  41. 41. Just in time training
  42. 42. Career self management
  43. 43. Willing to buy talent rather than build it</li></ul> Examples of organisations: Apple ,Microsoft , Intel , IBM, Cisco, Citi Corp, Merrill Lynch<br />
  44. 44. Chapter 3: Designing Organisations<br />Strategy<br />People<br />Structure<br />Rewards<br />Processes<br />
  45. 45. Chapter 4: Managing Talent<br />HC-centric organisations excel only when they have outstanding talent. To have outstanding talent they need to have an outstanding talent management system- one that attracts the right talent and helps them understand what to expect from their work experience from the company.<br />Jack Walsh is quoted to say “ talent management deserves at least as much focus as financial capital management”. This commitment to talent is a big part of what has made General Electric so successful and it continues to be strong. <br />GE is famous for its session meetings where senior management discuss the development of their teams talent. The same process is replicated at lower levels in GE.<br />HC-centric organisations always face tough competition for the talent they want.<br />
  46. 46. No-one argues with the focus on talent when the organisation is a professional sports team.<br />In sports, different approaches can be successful.<br />New York Yankees are classic global competitors who buy talent, whereas teams such as the Oakland A’s have championed the build strategy and pay lower wages and still win – although not as frequently as the Yankees.<br />The Oakland A’s with a low budget win because they do an excellent job at talent management<br />
  47. 47. Talent Management is the most important process in HC-centric organisations. The most important features are:<br /><ul><li>How well talent is managed, measured and managers are held accountable for their talent management performance
  48. 48. A strong employer brand clearly identifies the organisation as an attractive place to work
  49. 49. The employment contract differs for a high involvement organisation and a global competitor organisation. For the former it emphasises long term employment and for the latter it emphasises the employee’s responsibility for personal growth
  50. 50. Rewards package that individual receives fits their preferences and needs
  51. 51. Critical skills for a competitive advantage are identified and individuals with those skills are hired regardless of costs
  52. 52. The selection process is used to identify who has or can learn the skills the organisation needs
  53. 53. Development opportunities are carefully planned and made available
  54. 54. Career self management is enabled through information systems
  55. 55. Major emphasis on retaining high performance talent</li></li></ul><li>Chapter 5: Managing Performance<br />The key features of a performance management system in HC-centric organisations are:<br /><ul><li>Senior management commitment to the importance of performance management
  56. 56. Goals that are cascaded down the organisation and based on business strategy
  57. 57. Timely assessment of performance against goals
  58. 58. Measures of the skills individuals have
  59. 59. Pay based on market value of the skills individuals have
  60. 60. Separate discussion of pay and development needs
  61. 61. On-going feedback
  62. 62. Rewards tied to performance measures
  63. 63. Appropriate mix of rewards for individual, group & organisational performance</li></li></ul><li>Chapter 6: Information & Decision Making <br />What are the decision practices to be present in all HC-centric organisations?<br /><ul><li>Sophisticated human capital information systems that focus on talent
  64. 64. Analytical models that assess the impact of human capital
  65. 65. Measures of the condition of an organisation’s core competencies and capabilities
  66. 66. Effective communication program for sharing business results with all employees
  67. 67. Public reporting of the condition of an organisation’s human capital
  68. 68. Decision processes that involve individuals in key decisions of human capital management </li></li></ul><li>Chapter 7: Reinventing Human Resources<br />Enormous opportunity exists for leaders of HR functions to enhance their role in the business.<br />HC-Centric organisations have no choice – someone must take responsibility for organising and managing talent.<br />3 approaches are possible:<br /><ul><li>Transform existing HR function and become go to unit for human capital issues
  69. 69. Company leaders can replace existing HR staff with individuals who are up to the challenge
  70. 70. Outsource administrative tasks of HR department</li></li></ul><li>Current state of HR<br /><ul><li>Considered unimportant in organisations
  71. 71. Execution of basic HR administration diverts HR from addressing issues like talent, organisational design and effectiveness
  72. 72. HR tends to be comfortable in dealing with administration
  73. 73. Gets power when dealing with union and labour law issues
  74. 74. Acting as a watchdog leads to HR being seen as a hindrance to effective talent management</li></ul>HR Staffing:<br /><ul><li>Quality of HR staff
  75. 75. Career dead end
  76. 76. Silo department – best individuals progress up HR hierarchy, but seldom end up as CEO
  77. 77. No business exposure and training</li></li></ul><li>How can HR add value to HC-centric organisations?<br /><ul><li>Handle transactional/administrative side effectively
  78. 78. Provide business support in Human capital management and organisational effectiveness
  79. 79. Play active role in establishment and implementation of business strategy
  80. 80. Provide key data and services to corporate board
  81. 81. Support business strategy with appropriate metrics and analytics
  82. 82. Deep expertise in HR function and understand relationship between HR and business effectiveness
  83. 83. HR should be a mandatory key career stop for senior executives
  84. 84. Talent in HR should equal or exceed that in other parts of the organisation</li></li></ul><li>IBM Re-invents HR<br /><ul><li>IBM excelled as structure- centric organisation but transformed into a HC-centric organisation
  85. 85. Credit for transformation goes to HR
  86. 86. Up to 1990’s IBM seen as leading employer with an attractive brand as a high-tech company
  87. 87. 1993 Lou Gerstner became CEO and reinvented IBM with most changes involving HR:
  88. 88. Changed benefits
  89. 89. Job security and life time employment disappeared
  90. 90. Management development programs focused on performance
  91. 91. HR outsourced transactional work
  92. 92. Company sponsored savings account introduced for training and education
  93. 93. Employees took ownership for own development
  94. 94. Employment contracts ensured that employees own their careers
  95. 95. Climate where people can enhance their skills and become more competitive</li></li></ul><li>Chapter 8: Governing Corporations<br />What does a board need in order to deal with organisational effectiveness issues?<br /><ul><li>They need enough power to have a significant influence on the way talent is managed
  96. 96. They need extensive knowledge of the principles governing behaviour and a good understanding of talent management systems
  97. 97. They should be rewarded based on the long term effectiveness of the organisation
  98. 98. They need to make time available to discuss talent management and the condition of an organisation’s competencies and capabilities
  99. 99. They need access to a number of metrics concerning the talent of the organisation
  100. 100. They need to ensure that executive packages support management and reward human capital</li></li></ul><li>Chapter 9: Leading<br />What should all managers do?<br /><ul><li>Become experts on performance management
  101. 101. Effective coachesand committed to enabling people to perform
  102. 102. Expertise in talent management and organisational effectiveness
  103. 103. Ability to look into the future and develop future challenges
  104. 104. Ability to create truth telling and open communication with individuals
  105. 105. Ability to develop leaders
  106. 106. Know how to’ walk the talk’</li></li></ul><li>Chapter 10: Managing Change<br />How do most of today’s organisations stack up against the characteristics that are needed to be an effective HC-centric organisation? Most fall short<br />Most look and act more like structure -centric organisations than HC-centric organisations<br />Why don’t many leaders take a HC-centric approach:<br /><ul><li>Inability:</li></ul> most senior managers today are not familiar with it and business schools focus on managing of financial assets<br /><ul><li>Unwillingness:</li></ul> many senior managers are in their roles because of their ability to operate effectively in traditional organisations and they have made a major commitment because they want the rewards that go along with their positions<br /> They also have the wrong skills, wrong motives and the wrong values for managing in a HC-centric organisation<br />
  107. 107. Before going too far in making existing executives the villains, it is important to acknowledge that changing from a structured-centric to a HC-Centric approach is very difficult.<br />In recent years major US corporations like Polaroid, Kodak, US steel, Ford, Chrysler and General Motors have declined substantially or disappeared because they couldn’t or did not try hard enough to change.<br />Recall the star model. All points on the star need to change as well as the behaviour of leaders and corporate boards<br />Today’s large corporations have experienced years of success using a structured centric approach.<br />
  108. 108. In Conclusion:<br />It is one thing to say people are our most important asset, it is another to act on it.<br />Those individuals, organisations, and countries that do the best job of acting on it will be the winners.<br />Much of what needs to be done is clear, it is time to do it.<br />The future of HC-Centric management is now<br />