The human capital vision creates a concrete and measurable definition of success; the strategic components are plans that describe how to achieve that vision. Achieving the vision requires excellence in four components. (See Table 2-2.) If all four are well-executed, it is likely that your organization will have a sustained competitive advantage through people. The first three strategic components are critical roles - roles that are most important for customer and shareholder satisfaction. The fourth component enables the first three.
Effective Executive Teams
The key question to ask about the first critical role—effective executive teams—is: Are our executive teams more effective this year than last year? The executive teams may include the corporate top team, business unit teams, region/country-level teams, and functional leadership teams. Without a high-performing executive team at the top, little will happen below. Executive teams set the end-state vision and business strategies, and invest time and money to ensure that aspirations turn to business results.
Just as human capital growth requires a top-down, comprehensive, and integrated improvement plan, so do executive teams. (However, that’s not the way many internal and external consultants approach ex- ecutive teaming today.) An effective executive team improvement plan begins when executive team members agree on the team’s value-add to the business and define specific activities and measures for realizing that value-add.
Leaders Who Deliver Results
What is the single most important decision a corporation can make? Arguably, it is choosing the CEO. What about the most important de- cision for a company’s China subsidiary? It’s probably choosing the general manager for the subsidiary. At each level, starting from the top and working down, great leaders build the strategy, choose the leader- ship team, and align the organization.
At McDonald’s, except for location, every restaurant is essentially the same—same menu, same prices, same training material, and same store layout. The difference between high-performing and low-performing McDonald’s restaurants is almost exclusively a function of the restaurant manager. Take a failing store, import a successful manager, and even with essentially the same crew, the restaurant will recover within thirty days. Great restaurant managers create a culture that delivers the oxymoron of discipline and fun. And when McDonald’s restaurant managers are excellent, district and area managers are largely unnecessary. Great managers generally don’t need or want HR field support, local marketing support, etc.— they prefer to stand on their own. Not only do great managers grow unit profits, they also reduce system-wide costs. Despite the obvious im- portance of unit managers at retail organizations, how many companies report year-over-year leadership performance changes of their unit managers?
Twenty-five years of Gallup research concludes that how long em- ployees stay and how productive employees are is determined by their relationship with the immediate supervisor.5 The world’s best recruit- ing, development, and appraisal processes are useless if managers are not top quality. But what is “top quality,” and how do you get from here to there?
Key Position Excellence
The most important question to answer here is: Are those in key positions outperforming their peers in competitor organizations? Too often today, people programs and policies are rolled out system-wide, with programs and policies applying to everyone in the organization.
Making equal investments in all roles seems fair and equitable, but it’s bad for the business. Some roles are more important to customers and shareholders than others. The most important roles should be paid well over industry standards, the moderately important ones at or be- low standards, and the least important ones below standards or out- sourced. Training investments should also vary. When we follow the key position approach, we attempt to increase the performance of the 20 percent of positions that produce 80 percent of customer and shareholder value. Think in terms of your own finances: When you allocate your personal investment dollars, do you invest the same amount in every mutual fund, or do your dollar amounts differ by expected return?
The ideal performance measure for excellence in a given position is performance relative to competitors. For sales positions, this may be measured by a customer rating of the sales representative or sales team versus sales reps or teams from competitor organizations. For scien- tists, it might measure the number of new patents by a scientist or re- search team that turn into products versus the average of those at competitors. Unfortunately, comparison statistics are not always pos- sible. In these cases, you may choose to use an internal measure of year-over-year performance changes while you continue to search for good comparison measures.
Workforce Performance
The key question to answer here is: Has workforce performance improved since last year? No amount of success in critical role develop- ment is possible until the organization has a clear strategy and organizational capabilities aligned to that strategy. The strategic com- ponent, workforce performance, is actually the first step in any human capital improvement project. We cannot know which roles are critical until the strategy is set and the organization realigned. We need to have a simple and compelling vision, an aligned organization, a high-per- formance culture, and an appropriate appraisal and rewards process.
Simple and Compelling Vision. The organization must try to answer the following questions:
• Where are we going and why?
• What are the steps for getting from here to there?
• How are we doing and what else needs to be done?
Aligned Organization. The second critical success factor is to fully align organizational activities to the strategy and to create a cascade of objectives to ensure that all objectives are delivered. Not only does this focus efforts on the most important tasks; it also exposes tasks that do not directly add business value.
Performance Culture. The two statistically most important drivers of a high-performance culture are:
(1) fairness and accuracy when providing feedback and assessing performance results, and (2) creating a risk-taking culture.
Appraisal and Rewards. The organization must try to answer the fol- lowing questions:
• Which performance improvement methods have the biggest impact on productivity?
• What is the best way to improve focus, accountability and motivation?
Source : Bradley W Hall, PhD. The new human capital strategy : improving the value of your most important investment—year after year.AMACOM. 2008
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