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Delivering Business Change 2012

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In an economic sense, it really is a ‘new world’; the pressures and challenges of a floundering global economy have forced organisations and individuals to change. Looking back to the years and decades before the recession, it seems clear that the vast majority of the organisational problems we are experiencing now were always there, but hidden by the strength of consumer demand and the ready availability of finance. When that came to a sharp halt in 2008, organisational and individual failings became simultaneously more obvious and more pernicious. The impact on the economy was unexpected, devastating and wide reaching.

So, where to next?

Our new world demands a new set of skills, a new way of approaching challenges, and a new appreciation of the so called ‘big picture’. But while we’re thinking of the big picture, we’ll increasingly be under the microscope. All functions are expected to contribute to the recovery, and HR has the challenge – and opportunity – of leading the way. The HR ‘renaissance’ of the last 20-30 years has, to a large extent, been model-driven. Best practice has been defined by well-publicised ways of doing things and the widespread application of accepted functional norms that span sectors and industries. Now, there is the potential that over-reliance on those popular models will impair our ability to show the flexibility, adaptability and entrepreneurialism required in a more exacting environment.

Together, the HR profession needs to re-examine practices and models in the new economic context. There is a clear need for pragmatism, and a move away from ‘straight line’ ways of thinking and working that are often ingrained in the way we do things. The function needs to ascend to the strategic engine
room, offering ‘organisation-level’ solutions, rather than piecemeal strategies. However, at the same time as broadening our focus, we need to narrow and refine our measurement paradigm to ensure that we are more regularly and effectively analysing – and promoting – the impact and effectiveness of everything we do. Of course, many principles remain valid and applicable: getting the vital basics right is the crucial foundation to HR effectiveness, and will set the platform for the function to move away from a process focus, concentrating on outcome driven thinking.

Our world changed so fast, and moved so far, that it’s hard to plan for the future. In the coming weeks, months and years, the new skills we’ll need to acquire and deploy will have a ‘macro’ focus. We’ll need to demonstrate judgement, guiding our own activities with no one telling us what to do. We’ll need to tolerate – and even embrace – ambiguity and constant change, since the economy is no longer running in a straight line. We’ll need to be flexible and adaptable to internal and external drivers alike, as they manifest themselves with increased frequency.

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Delivering Business Change 2012

  1. 1. Delivering Business Change in a New World Published by Henley Business School In association with Green Park | April 2012
  2. 2. Published by Henley Business School In association with Green Park | April 2012 Delivering Business Change in a New World Executive Summary from Raj Tulsiani, Green Park Interim & Executive Search In an economic sense, it really is a ‘new world’; the pressures and challenges of a floundering global economy have forced organisations and individuals to change. Looking back to the years and decades before the recession, it seems clear that the vast majority of the organisational problems we are experiencing now were always there, but hidden by the strength of consumer demand and the ready availability of finance. When that came to a sharp halt in 2008, organisational and individual failings became simultaneously more obvious and more pernicious. The impact on the economy was unexpected, devastating and wide reaching. So, where to next? Our new world demands a new set of skills, a new way of approaching challenges, and a new appreciation of the so called ‘big picture’. But while we’re thinking of the big picture, we’ll increasingly be under the microscope. All functions are expected to contribute to the recovery, and HR has the challenge – and opportunity – of leading the way. The HR ‘renaissance’ of the last 20-30 years has, to a large extent, been model-driven. Best practice has been defined by well-publicised ways of doing things and the widespread application of accepted functional norms that span sectors and industries. Now, there is the potential that over-reliance on those popular models will impair our ability to show the flexibility, adaptability and entrepreneurialism required in a more exacting environment. Together, the HR profession needs to re-examine practices and models in the new economic context. There is a clear need for pragmatism, and a move away from ‘straight line’ ways of thinking and working that are often ingrained in the way we do things. The function needs to ascend to the strategic engine room, offering ‘organisation-level’ solutions, rather than piecemeal strategies. However, at the same time as broadening our focus, we need to narrow and refine our measurement paradigm to ensure that we are more regularly and effectively analysing – and promoting – the impact and effectiveness of everything we do. Of course, many principles remain valid and applicable: getting the vital basics right is the crucial foundation to HR effectiveness, and will set the platform for the function to move away from a process focus, concentrating on outcome- driven thinking. Our world changed so fast, and moved so far, that it’s hard to plan for the future. In the coming weeks, months and years, the new skills we’ll need to acquire and deploy will have a ‘macro’ focus. We’ll need to demonstrate judgement, guiding our own activities with no one telling us what to do. We’ll need to tolerate – and even embrace – ambiguity and constant change, since the economy is no longer running in a straight line. We’ll need to be flexible and adaptable to internal and external drivers alike, as they manifest themselves with increased frequency. Finally, we will need to build our functions, and their everyday actions, around ‘pragmatic commercialism’, where best practice is an ever-shifting, ever-evolving ambition. It’s not just our greatest challenge, but also our most compelling opportunity to proactively engage and deliver at a strategic level. 2 Published by Henley Business School In association with Green Park | April 2012
  3. 3. Delivering Business Change in a New World 3 Published by Henley Business School In association with Green Park | April 2012 Delivering Business Change in a New World Nick Kemsley, Co-Director of the Henley Business School Centre for HR Excellence The new economic climate is exposing fundamental gaps in the capability of individuals and functions, in both skillsets and approach, and also in structure and process. This is especially true for functions like HR, but also increasingly relevant to other divisions such as Finance, Change Management, and Risk & Compliance. These capability gaps are by no means ‘new to science’. However, with the change in the global economic landscape, they are suddenly centre- stage, ultimately critical to converting value. That new pressure means that individuals – and functions – are finding it difficult to bend the resources and capabilities they have to meet this need in the exacting timescales required. As well as offering a view on what these ‘leverage capabilities’ might be, this paper will also suggest that, where there is an over-industrialisation of popular models relating to ‘functional value delivery’, our ability to develop and apply these skills can be hindered. Finding a way of ‘flexing to fit’, without losing what we have built along the way will challenge us to fundamentally re- examine some established practices. Some of the comments in the opening paragraph are strong statements, and require both context and justification. Some of that justification comes from my own background and experiences, having spent much of the last two decades working to develop the capability of organisations and the individuals within them. Over my career I have worked across six distinct sectors and have direct experience working with and within supply, demand and business support functions along the way. To add to that, I have spent the last ten years running Organisational Development, Effectiveness or Capability functions within large global businesses. Having left corporate life proper in 2010, I have spent the time since working alongside a large number of businesses as they try to come to terms with what they need to do organisationally to put the wheels on the strategy, whilst staying productive and profitable at the same time. My second lens comes through my work at Henley Business School, where my friend and fellow director Nick Holley and I run the Centre for HR Excellence. This platform allows me a research and evidence- based assessment of the economic environment in relation to HR, in addition to the opportunity to work with HR functions and individuals in scores of organisations all over the world. Lastly, my experience talking to and collaborating with ‘on the ground’ executive search and services business such as Green Park has helped bring to light intelligence from a wide network of businesses and senior leaders within HR and the wider leadership group. Through these three channels, I found that there were several very strongly recurring themes that were not limited by sector or geography. The more we explored it, the more this view was reinforced through research, through the work we were asked to do, and through on-going engagement with the people who were dealing with the evolving situation on a day to day basis. Although this view first felt relevant to the HR space, it has developed relevance over time to other functions and to development and career- pathing as we have explored it further.
  4. 4. Delivering Business Change in a New World 4 Published by Henley Business School In association with Green Park | April 2012 So, what changed to suddenly create this need? The answer to this lies in the extreme forces that came to bear on the world’s economy in 2008. It’s fair to say that nobody expected things to happen so fast, or be quite so drastic. I recall talking to the European General Manager of a well-known car manufacturer at the time. Over a period of just six weeks in early 2009, their dealerships went from selling forty cars a month to having completely empty showrooms where no one was even visiting, let alone buying. When businesses are faced with a situation that changes as quickly and as dangerously as this, they naturally turn to their front line and support functions with some pretty steep requests relating more to survival than incremental improvement. These pressures and challenges, although they were extreme, were not new in themselves. What was new was the way in which they were presented to functions like HR. They were not presented as nice clean questions which had nice, neat, black and white answers. Due to their sudden urgency, they were presented as a series of paradoxes or dilemmas, issues for which there was no luxury of time and space to think them through in detail or implement them carefully and deliberately. Grey had become the new black. Almost overnight, businesses were facing enterprise-level organisational dilemmas such as: • ‘We must massively cut costs to survive in the present, but also develop ourselves for the future.’ • ‘We must implement big changes to our organisation, but we need benefits in 3 months, not 2 years.’ • ‘We need people to quickly adapt to work in leaner, more flexible and more matrixed structures when they have been brought up to work very differently through their careers and in our cultures.’ • ‘We need to find a better way for the centre and outside of our organisations to work together around more flexible governance models, recognising that too much of one or the other won’t work.’ So, there we all sat in our functions, having spent the last few years getting to the position where we felt we were adding value. Suddenly, the meaning of ‘value’ changed. Now it felt much more urgent, more financially-driven, more knee-jerk, more unforgiving of failure, and less tolerant of anything which looked like it was around the corner rather than lying at our feet. What does this mean and why does it give us a problem? To understand this, you need to look at some of the things which were driving the structure and capability of functions like HR up to this point. Here was a function moving from ‘Personnel’ to ‘Strategic Partner’ spurred on by the Ulrich Model, from a ‘one size fits all’ structure to a ‘3 Box’ structure through a distinct separation of business-facing HR, Centres of Expertise and Shared Services Administration etc. Now don’t get me wrong, these role/structure/ approach models were not wrong in themselves: in fact they have been pivotal in getting support functions like HR to find effective ways to work with business, and in creating credibility and driving value. Without their provocation, functions like HR would have found it close to impossible to survive wholesale outsourcing and to do what it needed to do with the resources it had. However, the way in which we have implemented these models, and the way in which we have ‘concreted them in’ subsequently has, when presented with the need for a sudden shift in how we operate, presented us with some issues which we couldn’t really have planned for. We are now faced with dealing with them. Business Partners Centres of Expertise Shared Services
  5. 5. Delivering Business Change in a New World 5 Published by Henley Business School In association with Green Park | April 2012 For instance, Henley’s research shows that one of the issues being experienced in the current climate is that the lines between Business Partner, Centre of Expertise and Shared Service have blurred in the way in which business expects to interact with HR. In ever-leaner structures, Business Partners are expected to be local points of contact for talent, performance and recruitment processes designed in the centre but locally-activated; and Shared Service solutions are sometimes finding it hard to embed since managers are clinging to their trusted local HR Partner/Manager relationship as their only face-to-face HR contact. At the same time, a move to more ‘federated’ business operating models is requiring a new kind of principle-based relationship between Centres of Expertise and local business unit HR where market needs must be traded off against enterprise needs in a flexible way, which can’t be reflected in job descriptions. Business is asking more and more for support in the area of productivity and efficiency improvement in addition to the current offer of short-term operational and longer-term developmental solutions. Along with this is coming an impatience with anything which is not instantly recognisable as commercially-relevant and with any imperfections in what business would call the basics of HR – the hire, fire, pay, train and keep legal elements. For functions like HR, Henley’s research and experience has found that this sudden shift in the wind has translated into four generic capability challenges which we have gone on to validate through further research and work with HR functions around the world: 1. A need to offer organisational-level solutions – managing horizontally and in an integrated way across the vertical process areas such as talent, resourcing, reward, LD, as examples, to create the ‘Organisational Strategies’ which will put the wheels on the wider business strategy. 2. More relevant activity with shorter, more measureable ROIs – needing to demonstrate the connection with that month’s Board agenda in the context of what’s needed for the future. Trading short-term need against longer-term desires, being much more prioritised and commercial in a strategic context, and moving into the productivity and data insight space. 3. Getting the ‘Vital Basics’ right – mending holes below the waterline on the engine-room processes before talking about strategic partnership and future investment in capability, making what we have work rather than continually asking for more money to ‘embed’ things like talent and performance management, which the business considers a staple that should have been working properly years ago. 4. A much more pragmatic approach – an end to ‘process-polishing’ and engaging more with being ‘good enough at the fewest, most important things’, from ‘gold-plating’ to ‘80/20 percentage plays’ and ‘quick and acceptably dirty’. Flexibility with process and policy design and implementation and the ability to work better with ambiguity and shades of grey. Better balancing the complexity of solutions to the risk or outcome they are trying to manage and a move to outcome rather than process measures. Future / Strategic Day to day / Operational Process People Strategic Partner Admin Expert Change Agent Employee Champion The Ulrich HR Model
  6. 6. Delivering Business Change in a New World 6 Published by Henley Business School In association with Green Park | April 2012 When you look at these four challenges, there are some implied capabilities to progressing in this environment. At Henley, we have boiled these down to the following four core capabilities, surrounded by some other important ones. The wake-up call is that they are not necessarily technical, and they are not things which can be fixed by sending people on a one-day course. The four are: 1. Judgement – to manage paradox we have to work out what to do when nobody is telling us what to do. Having a more system-thinking perspective to drive our context. We need to make decisions when we do not have all the data we would like to have, trade off conflicting needs and do it as close to source as possible. 2. Tolerance of ambiguity – we need to be comfortable working with shades of grey and an absence of certainty, to engage with macro data and to act when needed, not when convenient. 3. Flexibility – we need to balance governance with necessary uniqueness, consider exceptions in a more directional way and understand and resolve conflicting points of view from the standpoint of the business rather than our own role. 4. Pragmatic commercialism – being less perfectionistic, always using an impact-versus- effort mindset, managing risk where risk needs to be managed most, and being comfortable that achieving and evidencing a reasonable result quickly may be better than driving for a perfect result that never happens. And this is where some of the flip side of the work we have done up to this point kicks in. The way in which we have sometimes implemented the structural models referred to earlier has meant that these capabilities are often in short supply and hard to find quickly, and that we can find it hard to react to some of the challenges outlined above. Even the use of external contingent leadership cannot always deal with the internal adaptation required. How might this cause problems in an organisation? Take the Ulrich Model, for example. Despite the model implying that contribution in the strategy and change space must sit upon a foundation of the basics of administrative excellence and good old- fashioned employee-centric HR, the fact is that in many HR functions (and other enabling functions), this headlong rush to what they perceive as higher value offerings has resulted in some cases in us taking our eye of the basics, or in extreme examples, letting them fall into disrepair. In the career market, these basic offers are often seen as un-sexy and there is a trend for everyone to see themselves as a ‘partner’ working at the very core of ‘strategic value creation’. The fact is that not much of the work in HR is truly strategic – the function comprises a number of operational processes, policies, pieces of paper, meetings and conversations. However, these need to be strategically-aligned. Now that we need to re-focus on these areas we can find it hard to find people who have the expertise and aspiration to do so. In the current climate, it is only when these hygiene factors are working consistently well that business is willing to open up to a more proactive partnership for the future. Ironically, where we have roles which are truly working in the strategic space, either facilitating business strategy creation or translating this to organisational strategies, we often find it hard to match the role with an individual with the capability to carry it off for the money we want to spend to get them. Ask any recruitment agency, and they will happily tell you how hard it is to attract top HR people who meet these high level criteria for the pay-points proposed. Equally, we are not developing them easily from within our own organisation, since this requires a level of perspective, judgement, pragmatism and genuine commerciality which is not being well-supported by an approach to career development which is often siloed and inward-facing. This creates an imbalance between company and individual. In a recent piece of research Henley found that business’ number one development
  7. 7. Delivering Business Change in a New World 7 Published by Henley Business School In association with Green Park | April 2012 ‘want’ for HR people was a broad career base which included experience outside of HR. And yet, the same research showed that of all the development options available, bringing people in from outside HR or sending them on assignments outside of HR was the least used of all of them. Sure, there are some reasons why this might be hard to do currently (such as needing to keep what functional expertise we have where it is in the current climate) but we didn’t do it when we could have done it, therefore giving ourselves an issue now since those people we are asking to manage the paradoxes which the past 3 or 4 years have dished up are struggling to bring to bear the right skills to drive value in this climate. Take the productivity challenge. Through the implementation of Ulrich and the 3 Box Model, we have often created ‘camps’ in HR, notably an ‘operational’ one working on a 0-3 month time horizon, and a ‘developmental’ one operating on a 18-36 month timeline. We have developed people behind these camps to the point where we refer to them as ‘specialists’ or ‘generalists’. Productivity falls neatly between these two chairs since it requires elements of both, and a blended skillset to be able to trade them off in the middle. It requires strong data skills, but at the same time a capability to work at ‘system’ level with cause and effect. It asks people to be ‘tact-egic’, balancing what needs to be achieved to support quarter-end EBITDA with the capability needs of the organisation two years out. Many organisations are struggling to bend their structural and skills model to address the business needs in this space. Resource planning is another victim. Our businesses want us to be more on the front foot in terms of creating a ready supply of the skills we need to be successful into the future at an affordable cost, yet we find it really difficult to do this well. Our love of certainty can see us waiting for our business to tell us exactly how many of which people it needs, and when and where it needs them, rather than working with the ambiguity and macro level data and making judgements about where to place our bets in time to do something about it. Not doing this means that we are forced to use more training and last-minute external recruitment. External recruitment will always be an important part of the game, but the more we are able to be in control of it and steer it to deliver the right things for our business, the better the return on our money will be. Talent and performance management is another area where we see issues. As our businesses move away from being either global or local, to a more balanced operating model which requires more pragmatic governance and working with freedom within multiple frameworks, this throws a curve ball into the relationship between local HR and Centres of Expertise/Group functions and ultimately customer relationships. No longer can we say ‘that’s your responsibility’ or ‘you have to do it like this’. Now there is the realisation that they have to work with shades of grey in interpreting global and local needs, creating flexible approaches where benefit flows both ways, and applying pragmatic implementation approaches which maximise revenues and efficiencies. Yet our people have often been brought up in a world of black and white, or have a transactional comfort zone, meaning that working in this way is unnatural. I could go on, but if you think about it, these four capabilities are at the heart (in one way or another) of so many of the things we talk about as being current or future issues in HR. In fact they can potentially relate to other business support or partnership roles. I have found myself dealing with similar issues in Finance, in Risk functions and in Programme Management Offices.
  8. 8. Delivering Business Change in a New World 8 Published by Henley Business School In association with Green Park | April 2012 How does this inform capability models? But it isn’t all about these things. These ‘big four’ sit on a foundation of needs which we will already recognise – commercial, political and technical skills, and capabilities specific to sector or industry context – like the cap on a pyramid. I like to call these ‘Leverage Capabilities’ – ones which determine the degree to which other key capabilities are translated into value in the context of an organisation. For HR, for example, Henley has worked with Green Park to translate the cap of the pyramid capabilities into a ‘checklist’ for functions and individuals which creates a framework to assess any gaps and their importance to that HR function’s role and ability to influence in their specific organisation. These are represented in the two tables below which, along with other tools and approaches, help support functions such as HR engage with their ability to adapt to the challenges being thrown at them. Industry-specific capabilities Functional - Technical capabilities Leverage capabilities HR Capability - functional Structure makes sense to business The basics work and are cost-effective Processes are minimum to get the job done Operating a pragmatic governance model – flexible, balancing central local needs Working with data earlier and better to create intelligence for the business Measuring impact more than process Piloting or implementing in key benefit areas Looking at the organisation in an holistic ‘system’ not vertical process way Immediate and visible connection to long and short term needs of business – being tactical in a strategic context Providing opportunities for people to develop commerciality and perspective HR Capability – individuals Can work with uncertainty Can use judgement, not wait for answer Can create flexible solutions of minimum complexity to get the job done Can work co-operatively in areas of grey Can balance local and global needs to come up with balanced solutions Are confident with data analysis and presenting statistically valid evidence Have a level of perspective across business Have commercial acumen - understands the business and sector economic models Can navigate the politics and create the credibility to be listened to Can communicate effectively powerfully Know their staff and can interpret expertise to the context of a given situation
  9. 9. Delivering Business Change in a New World 9 Published by Henley Business School In association with Green Park | April 2012 So what? What is being proposed here is not a re-invention of the capability frameworks organisations are currently using to develop people in HR and other enabling functions, nor is it proposing a wholesale re-structuring of functions. What it is saying is the following: 1. Consider these ‘Leverage Capabilities’ alongside what you currently do and think about whether they might represent ‘the difference that makes the difference’ in translating the systems, processes and skills which you already have into the value that business is looking for in the current climate. Where are the gaps and how important do you think they are in the context of your business? 2. Explore how these translate to the structure, systems, processes, skills and behaviours which currently exist and understand how they might need to be tweaked or better exploited to close these gaps. This might mean some work on process simplification, ways of working between different functional groups, changes to career development or recruitment approaches, evolving the approach to data insight and measurement, structural tweaks or combinations of some or all of these things. 3. Apply the philosophy of the four challenges listed to what you find. How can you close 80% of the gap with 20% of the effort? How can you make changes only where they matter most instead of everywhere? How can you design solutions which are simple, pragmatic and flexible - using internal and external resources to maximise sustainable benefits? 4. Consider the degree to which these leverage capabilities are relevant across different functions, so as to allow economies of scale and a common language around providing value in a new economic landscape. If would like to find out more about any of the points raised in this paper or would like to join the Green Park HR Leadership Community or explore and utilise this framework of assessment in your business, please contact: Raj Tulsiani, CEO E. businesschange@green-park.co.uk T. 0207 399 4300 Jo Sweetland, Partner - Head of HR Practice E. businesschange@green-park.co.uk www.green-park.co.uk If you would like to find out more about the work of the Centre for HR Excellence at Henley, please contact nick.kemsley@henley.com

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