Tag Archives: Business Strategy

Nature’s Principles: Cycles and how their understanding aids our HR efforts

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As mentioned in “Human Resources, How can we add Value?” we can apply the knowledge of nature’s principles to an organization and learn about its dynamics and how they can impact our HR Strategy and programs.

Let’s look at the second principle: Cycles.

Organizations, like nature, have their own cycles. As Giles Hutchins mentions in “The Nature of Business: Redesigning for Resilience“:

Small, medium or large systems of all shapes and sizes dynamically adapt in the same way. For example, cycles within an economy – boom to bust to boom again. Also, cycles at a product level: a new product release following a new, innovative breakthrough, leading to growth in market share, followed by a period of slower growth, eventual stagnation and decline in market share, then to product expiration and new innovation.”

From a Human Resources perspective, cycles can provide knowledge we can use in different aspects of our strategy. Lets look at some in more detail:

Talent

From the perspective of our talent, looking at what has happened during past cycles can help us identify actions that have been successful and those where we have lost talent we would have preferred to retain. During the last economic crisis, when we had to downsize or restructure, did we lose any talented or high potential employees? Were we able to retain the expertise we needed for when the economy rebounded? Did we panic and laid off employees or closed plants only to find that we needed to hire new ones very soon because the dire predictions ended up not being so bad?

If we analyze how we answered the questions above, we might decide to do things differently. We might want to carefully identify the experts and high potential employees and redeploy them to different areas or assign them to special projects. In our factories, we might decide to go to a reduced hours workweek instead of laying off employees that know the job well. This has many benefits: employees will tend to be grateful because they still have income and benefits and as soon as we need to start producing again all we need to do is to let people know and get the production plan running. In addition, we forego the loss of time and the expense of having to hire new employees and train them.

Recipe for a Successful Business

By Opensourceway

Workforce Planning

Analyzing past cycles can also help with our workforce planning. Although no two cycles will necessarily impact the organizational needs in the exact same way, we can have better projections based on how things worked out in the past. For example, if we look at the workforce requirements when we introduced a new technology, it might provide us with important insight as to which questions to ask and how to plan for the next technology development.

If during the past economic crisis we reduced the workforce and then found that we had to scramble to find the right people to hire because we had gone too far, this is important information to bear in mind and challenge the organization on how to tackle the crisis. The short term savings of reducing our organization might be overshadowed by the cost of rehiring and loss of productivity.

An analysis of how employees nearing retirement age reacted during an upward cycle in the past might raise a red flag if they tended to retire early. If we are again in an upward trend and have a significant number of key employees that could take early retirement, we need to start planning what to do.

Organizational Design

How did we redesign the organization to tackle a downward trend? Did it work? If it did, then we want to pay attention to why and see if this time there are similar factors in play. If it didn’t, we need to figure out what went wrong and learn from it.

What did we do when we were in a growth cycle? Are we sure we were able to achieve the most out of the opportunity or did the design of the organization somehow create roadblocks to the innovation or cross business unit potential?

I guess you can see what I mean with these examples.  Although we need to look towards the future and make sure that our HR Strategy is aligned with the Business Strategy, looking back and reviewing how the organization reacted during each cycle can provide us with valuable information that we can use to make sure our efforts will help the business achieve the best results possible.

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Why do HR Strategies Fail?

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We put a lot of effort in designing what is supposed to be a great HR Strategy. A couple of years later we look back and have not achieved what we envisioned. What went wrong?

It is very frequent that we find ourselves implementing a great program (a new Talent Management process, a better Leadership Development program, an on-line Performance Appraisal system, etc.), we invest time and effort, and frequently a lot of money, and a few years later we find that we need to change it because it doesn’t work. Then we start looking for the next best program, we convince the organization that it is the perfect solution, we roll it out and a couple of years later we are again thinking of the next best thing. Where are we failing?

If we want to prove to the business that Human Resources can add value to the bottom line, we need to define a robust strategy that will strengthen the organization and help develop the engagement and talent that we will need to deliver the business strategy. Easy to say … but not so easy to do!

Gary Hamel: Open source is one of the greatest management innovations of the 21st century

By opensourceway

In my post “We need an HR Strategy – What about the Business Strategy?” I touched on the point that it was necessary to have all functions represented when defining the business strategy, including HR. If we are at the table with the business, we understand where the company is headed, what the challenges are and what will be required in order to achieve the business strategy, then we can start to work on our own strategy.

Are we growing? If so, how? Is it through mergers or acquisitions or is it through the introduction of new products or technologies? Is there a change in the business that will require different skill sets than what we have today? Are there economic threats that we need to prepare for? There is no specific set of questions, the only way to know what the gaps are is to be immersed in the business, know it in detail and work with your leaders to figure out the human aspects of what will be needed to sustain it.

We have to be careful not to fall into the trap of stating the HR Strategy as what it should not be. James W. Walker in his book Human Resource Strategy states the following:

“Some company statements of human resource issues are so broad that they could apply to any company and imply directional plans, challenges, or goals rather than the business-related issues. For example:

  • More effective utilization of our human resources
  • A more risk-oriented, high-performance organization
  • Managing a more diverse work force
  • Skills obsolescence”

He goes on to say that many times we define our “strategy” more like assumptions, and therefore miss the point which is to focus clearly on the issues that matter the most, the ones that will help drive the business strategy. 

In his book “The Nature of Business“, Giles Hutchins looks at the business of the future in the following terms:

“What could a firm of the future’s business vision look like? It could consist of the following aspects:

  • Strategic objectives where value and values are understood and interrelated.
  • Organizational culture rooted in well-being, diversity and clarity of purpose. One where individual and collective potential is encouraged through empowerment, local ownership and shared responsibility.
  • A business ecosystem where there is a sense of belonging to a community of stakeholders, each having clearly understood win-win synergistic relations within the diverse ecosystem.
  • Nature-inspired people, processes, products and places (infrastructure).
  • Reaching to attain positive holistic value (social, environmental and economic) for all stakeholders.”

I am not saying that all companies can relate to these, although more and more many organizations are including some of these aspects into their business strategy. If Human Resources is an active participant in the design of the business strategy, then we will be able to not only influence our leaders to think about these issues, but certainly it will be much easier to identify the components of our HR Strategy that will drive business results.

If you look at the list proposed by Hutchins, you can see that all of those are things that will help drive employee engagement. If we can develop the organization to think and act in those terms the only natural result will be a motivated and engaged workforce that will strive to achieve. And this can only deliver positive bottom line results.

So the key factor in ensuring that we develop a great HR Strategy is to carefully analyze the business strategy and extrapolate all the people aspects that we can influence. Then we need to assess where we are today and figure out the gaps. Only then are we in a good position to start defining what we will do to help drive the business.

 

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We need an HR Strategy – What about the Business Strategy?

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We all know that in order for the HR Strategy to be successful it is key that it is aligned with the Business Strategy. Now, what about the Business Strategy … How can we, from Human Resources, help in the process of defining the business strategy to make sure it is successful as well?

Have you found yourself in a situation where the Business Strategy was defined in a vacuum? A group of very senior leaders get together and decide “this is what our Company should look like by 2020 or 2025, or whatever. It might also be that they contract some very expensive consultants to help them with the process and bring in a key note speaker to talk about trends and predictions, how the industry is changing and what to expect regarding economic indicators, etc.

I am not saying that this is not a good process, it is … but it is not enough. The issue is that these leaders tend to be far removed from the people who are actually in close contact with customers, the people who know what is required in order to close a sale, in order to remain competitive. Their views tend to be tainted with the input received from a few of the people that surround them. The problem here, I might add, is that these people normally say what they think the leader wants to hear so, in many cases, leaders are oblivious to what is really going on.

What do we need to develop a great Strategy?

For me it is when you combine a good view of what trends and market dynamics are showing, with the values and vision of the company and you mix it with what the customer facing employees, your R&D team and  operations people know about what is going on and what might be possible. I know, you will probably say that I forgot about “Shareholder Value”, we can’t forget our Shareholders. Although I agree that the people that invest in our company are very important, I find that when you give them prevalence you end up missing the opportunity to deliver even more value. I find that cutting costs and showing better short-term profits is a short-sighted way of defining your future. The value will come, if you work on your Strategy well.

As Giles Hutchins‘ states in The Nature of Business:

 “The firm of the past is resolute in its goal – ‘to maximize shareholder return’. Over the last few decades, shareholders (and the investment market) have in the main become more interested in short-term returns. The goal of the firm of the past has thus increasingly become one of short-term profit, utilizing two main levers: cost reduction (bottom-line management) and value enhancement (top line growth).”

This is definitely not the way to define a long-term strategy and unless we want to be a “firm of the past” we need to change our approach.

My preferred method for working on the Business Strategy is to involve an eclectic group of people, from all geographies, functions and levels (yes … HR as well!). Get a group of people from Senior Leadership levels, Mid Level Management and Individual Contributors from every functional area in the same room and create the right environment for open interaction.

According to Steven Johnson in his TED video “Where ideas come from“, you get the most out of people when the environment is like a fluid network or a coffee house.

Everyone has the right to talk and express their ideas and the open and unstructured exchange will enable a better understanding of where we are, what we can do, and where we can go. Although we need to provide structure to achieve the goal of defining the strategy, ensuring that there are many opportunities for participants to interact fluidly is essential.

Giles Hutchins included the following quote in his book:

“Popular wisdom holds that the fittest survive, the strongest, leanest, largest, perhaps meanest – whatever beats the competition. But in healthy, thriving natural systems it is actually the ‘fitting-est’ who thrive. Fitting-est implies an energetic and material engagement with place, and an interdependent relationship to it.’  – Cradle to Cradle : Re-making the Way We Make Things, Michael Braungart and William McDonough.

It brings to the forefront the issues of engagement and interdependence, which are essential to developing a successful strategy. We need to ensure we engage employees from all over our organization and truly consider their opinions, and embrace the fact that to be sustainable we need to be interdependent. By involving all areas and levels of the organization in this process, we not only ensure that we have all the information we need. If we handle the process well, the participants will help drive the strategy because they own it and they will be able to translate the strategy into their everyday work helping the organization understand where “we” are headed and why.

This is also a way to nurture the organization or, as my husband Herminio puts it, “pastoral leadership”. If you take care of each employee, you provide them with an environment that fosters their growth and encourages empowerment and engagement, the result can only be one … success.

 

 

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