Three Questions "Living Organisation" s            of the to ask yourHR Leader in Uncertain TimesThe challenges are       ...
Facing the challengeThere are ways of answering these questions. They relate to the way in which we do ourcapability plann...
‘Boom times” reflects an extremely favourable outcome for the industry, with highlevels of economic growth coupled with low...
necessarily hold senior management positions. We call these Pathfinder groups,and they are specially convened for this purp...
These key principles include:          a) Culture shapes organisational capability and strategy. We’re not suggesting that...
Once the four teams had worked out the details of the alternative future scenarios,          they outlined the winning str...
What does this all mean for people leadership?To answer this, it is best to return to the three questions at the outset.  ...
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Three Questions to ask your HR leader in Uncertain Times

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There are tough challenges for HR Leaders in these uncertain times. The key questions relate to how we understand the future and plan our capabilities. By understanding how the future can unfold, we can build an agile organisation and supportive culture

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Three Questions to ask your HR leader in Uncertain Times

  1. 1. Three Questions "Living Organisation" s of the to ask yourHR Leader in Uncertain TimesThe challenges are Plutough for HR leaders in s ca se sthese uncertain times. tud yThe key questions relateto how we understandthe future and plan ourcapabilities.By understanding howthe future will unfold, wecan build an agileorganisation andsupportive culture.Dr Norman Chorn | norman.chorn@centstrat.com | www.normanchorn.comWho’d want to be an HR Leader today?These are tough times for executives who lead people! If you’re having difficulty in figuringout where the market and your business is going - can you imagine how difficult it must befor your people who may not have the benefit of your perspective and understanding?It’s not an easy gig to be the leader of people or the HR leader right now. You face threeimportant challenges that have to be addressed in order to take the organisation forward: 1. how will you plan the organisation’s future capabilities in these uncertain times? 2. what are you doing to develop an innovative and agile organisation? 3. how will you shape a culture that supports the business strategy moving forward?These are some of the questions that we have to answer to move our organisation forwardin these tough and uncertain times. 1
  2. 2. Facing the challengeThere are ways of answering these questions. They relate to the way in which we do ourcapability planning; how we can increase agility and innovation in our organisation; andhow to shape culture so that it aligns with the future business strategy. We’ll deal with eachin turn. 1. How to plan forward in uncertain times? It’s clear that conventional planning doesn’t work in times of great uncertainty. Most conventional planning regimes are based on a series of assumptions that are made at the outset of the process - these assumptions effectively try to predict the future. As soon as the assumptions prove invalid (as they often do in changing markets and conditions), the plans become irrelevant and are usually ignored. An alternative approach is to build a series of alternative futures facing the business (we call this FutureBuilding), and then to identify the capabilities required in each of these futures. Once these capabilities have been identified, we backcast to the present - and here we notice an important feature of this approach. Notwithstanding the divergent nature of the alternative futures, there is usually some 25 - 40% overlap (commonality) in the capabilities required for the different futures. These common capabilities will be required in any of the alternative futures. Accordingly, we can now commence building these capabilities immediately, since we will require them in any of the alternative futures facing our organisation. Our case of a major building and construction materials business illustrates the FutureBuilding approach. The high Australian dollar made imported product cheaper for their customers, and the uncertainty surrounding economic activity made it difficult to predict building and construction activity. Accordingly, the business was struggling to understand future market conditions and the source of future growth. Through an exercise of FutureBuilding, four alternative futures were identified over a five-year horizon. These related to the relative strength of the Australian dollar and the different levels of economic activity. A simplified version of the four futures is outlined below: High A$ (high imports) ‘Dog% ‘Choice% fight’% fruit’% Low economic High economic activity activity ‘Building% ‘Boom% basics’% 9mes’% Figure 1 Low A$ (low imports) 2
  3. 3. ‘Boom times” reflects an extremely favourable outcome for the industry, with highlevels of economic growth coupled with low levels of imports. Local producers farereally well in this scenario.‘Choice fruit’, on the other hand, represents a situation where the attractiveness oflower cost imports means that only the premium end of the market is available forlocal producers.‘Dog fight’ is a market where high imports are combined with low levels ofeconomic activity. The local producers are effectively involved in a dog fight forsurvival.‘Building basics’ is a market where imported product is too expensive, and the lowlevel of economic activity means that the local producers operate to provide lowcost solutions for the basic requirements of the building and construction industry.Faced with these alternative futures, the business identified a ‘winning’ strategy anddistinctive capabilities under each scenario. The capabilities were then ‘back-casted’ to the present, and the common capabilities were identified. These thenformed the basis for the capability plan moving forward. (Choice%fruit)% (Boom%1mes)% •  Winning% •  Winning% strategy% strategy% •  Required% •  Required% capabili1es% capabili1es% (Dog%fight)% (Building%basics)% •  Winning% •  Winning% strategy% strategy% •  Required% Common% •  Required% capabili1es% capabili1es% future% capabili1es%Figure 22. How to develop an innovative and agile organisation?In general, innovation and agility are strongly related to the way in which leadersare able to engage staff in the thinking about the future. This is not to say that theorganisation’s systems and processes cannot shape the innovation ecology of theorganisation (see my earlier article “How to drive innovation through yourorganisation”), but there are ways in which we can stimulate innovation and agilityeven though the formal organisational systems and processes have not beenspecifically designed to support it.When using a process such as FutureBuilding, it is important to recognise thatmonarchies seldom foment their own overthrow - ie: leaders don’t often envisage afuture in which they play no role within the organisation. And so, it is more useful touse groups of staff who are close to the customers and technology, and who do not 3
  4. 4. necessarily hold senior management positions. We call these Pathfinder groups,and they are specially convened for this purpose.The Pathfinders are engaged in a structured process of developing the alternativefutures faced by the organisation. By drawing on a broad cross-section of staff, weget a richly diverse set of perspectives that can then be crafted into a series of quitedivergent scenarios for the future. We have found that once an individual has beeninvolved in a scenario planning process such as FutureBuilding, they develop newperspectives and insights. Apart from learning much about the organisation and itsbusiness, they forge new perspectives and insights from the interactions they havewith other members of the group.These new perspectives and insights develop greater innovation and agility in theirthinking and the way they see the future of the business. Importantly, they now havea ‘picture’ of the alternative futures and some of the key features for each of thesescenarios. These key features might be likened to a set of leading indicators -indicators that allow them to understand which of the alternative futures areunfolding before them. An example might be an astronomer who is able torecognise different constellations in our heavens - whereas to the untrained eye itappears just as a random pattern of stars.Our experience is that involvement in a FutureBuilding exercise produces a seriesof benefits such as higher levels of innovation, more thinking agility, and a betterlevel of understanding about the environment and how the organisation needs torespond.In our case study, the initial Pathfinder group was divided into four teams, eachfocused on understanding and developing one of the four scenarios. Over a seriesof workshop, the four Pathfinder teams: • generated a model that represented four alternative futures faced by the business (see the model in fig 1 above) • developed a particular scenario of the future and presented this to management • devised the ‘winning’ strategy for that alternative future • together with management, developed a set of capabilities to successfully implement the winning strategy.This has resulted in significant benefits for the business. Management reportsmuch higher levels of understanding of the market and strategy. Importantly, thebusiness has developed increased responsiveness to changing customerrequirements and changes in market conditions. As the CEO said, “..its almost as ifwe had practiced this in a dress rehearsal! ”3. How to build a supportive cultureBuilding a culture to support business strategy has been a long sought after goal forleaders and their organisations. It depends, in part, on recognising some keyprinciples about culture and its relationship with strategy. 4
  5. 5. These key principles include: a) Culture shapes organisational capability and strategy. We’re not suggesting that culture is the only driver of capability and strategy, but rather that it shapes a significant portion of it, particularly in knowledge-based organisations. b) Each strategy has a corresponding culture. This suggests that certain cultures fit certain strategies, and not others. So, a culture that supports one strategy will not necessarily support another. There is no single universally “best” culture - as there is no universally best strategy 1. c) Some aspects of culture don’t mix well with others. Culture is made up of a series of “behavioural and psychological opposites” that don’t mix well within the same part of the organisation. In these cases, they are best separated by a purposeful organisation design2 . d) Organisations seldom have ONE culture - they are usually made up of several cross-cutting cultures. This is contentious, as leaders often desire a single culture running through the organisation3 . However, as culture shapes capability, it makes sense to recognise that the organisation may need different cultures to support different strategies in different parts of the environment. Given these principles, culture is linked with strategy in the following way: The environment and conditions within which the Scenario / future organisation operates The strategic response to this environment - ie Value proposition how does the organisation add value to its environment What the organisation does particularly well that Distinctive capability delivers the required value proposition into the market The patterns of behaviour, values and assumptions Culture that shape the particular organisational capability Once we have identified the value proposition and distinctive capabilities that are required, we can then determine the appropriate culture(s). If there are different sets of distinctive capability and strategy required, we will need to accommodate the correspondingly different cultures within the organisation design. The relationship between value proposition, distinctive capability and culture is illustrated in our case study.1 See Strategic Alignment, N Chorn, Woodslane Publishing, Australia, 20102 See my earlier article, A question of focus, not balance.3 Our research shows that a single culture is not only very difficult to achieve, it isn’t necessarily desirable.Culture is NOT the glue that binds the organisation together. It is the strategic vision and common purposethat holds the different parts of an organisation together. 5
  6. 6. Once the four teams had worked out the details of the alternative future scenarios, they outlined the winning strategy for that scenario. The winning strategy was represented in each case by an underlying value proposition, ie - the core value add offered to the market in that competitive environment. From there, we worked with each team to identify the distinctive capabilities that delivered these value propositions, and finally, the supportive cultures. Scenario ‘Dog fight’ ‘Choice fruit’ ‘Building basics’ ‘Boom times’ Strategy / We take your risk We work closely with We offer low cost We provide a suite of value away and keep you to add value in solutions and are solutions for your low proposition the costs down the important parts easy to deal with cost as well as your of your project specialist, high value projects Distinctive • Lowest cost • Strategic • Lowest cost Two business units capabilities supplier partnerships with supplier with different • Standard range customers • Web-enabled capabilities: with short • Specialist designs ordering for a) Low cost, delivery times and products ease of ordering standardised • Standard range solutions with short b) Premium solutions delivery times with specialised products and designs Culture • emphasis on • focus on creativity, • explicit Two cultures to be action, innovation and processes and accommodated in the responsiveness entrepreneurial operating organisation design: and speed behaviour procedures • emphasis on action, • willingness to go • proactive approach • measurement responsiveness and the extra mile to identifying and and systems speed • explicit solving customer orientation • explicit processes processes and problems • focus on people and operating operating • focus on people and teamwork procedures, and: procedures and teamwork • participative, ---------- • measurement • participative, consensus based • focus on creativity and systems consensus based decision making and proactive orientation decision making approach to solving customer problems The final piece was to identify the common capabilities and cultural requirements across the four scenarios. In summary, these were4: “A” “B” Capabilities lowest cost supplier; small, premium design capability; specialised standard range solutions and products Culture explicit processes and standard proactive approach to customers; procedures; systems orientation participative and consensus decision making4 The solution pointed clearly to (at least) two separate units - each focused on a different value proposition 6
  7. 7. What does this all mean for people leadership?To answer this, it is best to return to the three questions at the outset. 1. How can we plan forward in uncertain times? We need different approaches to strategy and planning in uncertain times. Rather than pursuing conventional business planning (SWOT analysis, setting objectives etc), our approach should embrace uncertainty and recognise that the future can unfold in different ways. By defining our winning strategy in these alternative futures, we are well placed to consider our future capability requirements. 2. How to develop an innovative and agile organisation? By deploying a wide range of staff in a FutureBuilding process, new perspectives and insights are developed. These new ways of looking at the business and the environment foster greater innovation and thinking agility. Once someone has been involved in scenario planning, they seldom view the organisation in the same way. And the creativity spawned by the diversity in thinking has its own benefits! 3. How to build a supportive culture? Recognising the clear linkages between strategy and culture helps us to understand that one size does NOT fit all. The culture should be designed to support the specific capabilities and value propositions delivered by the organisation. Organisations are made up a several cross-cutting cultures and these differences should be accommodated by purposeful organisation design. Furthermore, a clear common purpose and vision is the best integrator of a diverse organisation.These are important guidelines for leaders and organisations in these difficult anduncertain times. As difficult and complex as these approaches might be, they pale intoinsignificance when compared with doing more of the same.Norman conducts workshops and mentoring in planning and buildingcapabilities for the future.Contact: norman.chorn@centstrat.com Special eventSubscribe to my monthly ½ day workshop for HR newsletter and blogs Leaders 7

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