5472 HR in tough times (WEB)

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1 TOMORROWS ADAPTIVE ORGANISATION

ADAPTING TO A CHANGING WORLD

HR IN TOUGH TIMES

TOMORROWS ADAPTIVE ORGANISATION


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By Philip Sadler, CBE

The rst decade o the twenty-rst century brought with it a whole new

series o challenges or organisations and their leaders. These challenges in

turn have important implications or the role o HR.

The main issues to be aced include:

The impact on all kinds o organisations o the near collapse o the global

banking system savings and pension unds have been seriously eroded.

A loss o morale and the erosion o traditional loyalties in the workorce,resulting rom a combination o a substantial number o plant closures

and redundancies and the closure o nal salary pension schemes, all in

the context o rapidly infating top management reward packages and

golden parachute payos.

Growing public concern about the social and environmental impact

o the actions and policies o business organisations, particularly large

global enterprises in those cases where individual companies have beencriticised, there are negative consequences both or the morale o existing

employees and or the rms ability to attract resh talent.

Very considerable perormance and morale problems in the UK public

sector and in the elds o health, education and crime prevention

in particular these problems stem rom ailures o leadership and

organisation design as much as rom resource problems.

In acing up to these issues senior HR people need to think through very

careully what implications they have or their roles and or the policies they

are able to infuence. There is a need or them to revisit some undamental

questions to do with the HR unction and its relation to questions o the

purpose and governance o the organisation.

ADAPTING TO A CHANGING WORLD

HR IN TOUGH TIMES


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3TOMORROWS ADAPTIVE ORGANISATION

Next Generation HR

The picture presented here is one o what good HR looks like today. The

CIPDs ongoing Next Generation HR research is a more uture-ocusedresearch programme looking at what the role o HR will be in ve to ten

years, and what HR people, including those leading HR unctions, will need

to do dierently to support sustainable perormance in organisations. Themes

emerging include the need or HR to be more insight driven, or HR to be

an applied business discipline and or HR leaders to be both partners and

provocateurs. For urther details about this research, see cipd.co.uk/nextgen

There are particular implications or HR specialists who are also members

o boards or top executive teams. They are not only responsible or the

ormulation and implementation o HR strategy but also share the collective

responsibility or the governance o the organisation, its conormity with the

law and its obligations o stewardship, to its investors and other stakeholders.

The pursuit o shareholder value

In businesses that ocus exclusively on shareholder value, the process ohuman resource management oten involves little more than carrying

out the basic administrative unctions that are necessary recruiting and

inducting employees, remuneration, compliance with employment law, and

so on. There is oten a complete absence o understanding o the role that

progressive HR policies can play in building employee commitment and,

through this, establishing a sustainable competitive advantage. Where this

state o aairs exists, it refects a remarkable lack o knowledge on the part

o top management o the impressive array o research ndings that showhow critical gaining the commitment and loyalty o the workorce is in

achieving sustainable competitive success.

The point is oten made that i a company declares the creation o

shareholder value as its sole purpose, this is hardly likely to be inspiring and

motivational or the shop foor or graduate entrants. Even a statement o

purpose that is about meeting the needs o all the stakeholders is unlikely

to call orth exceptional commitment and eort. For this to happen the

purpose needs to be inspiring or challenging, seen as worthwhile, as

serving society in some higher way than the purely material interests o the

stakeholders. It also needs to be capable o being clearly articulated in very

ew words and suciently tangible that the extent o its achievement is

capable o verication.


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Shared purpose

This resonates with one o the eight themes in the CIPD Shaping the Future

research looking at the drivers o sustainable, long-term perormance (2011).

This theme is shared purpose. Our research identied that organisations cant

impose a sense o shared purpose. Rather, employees need to be encouraged

to nd their own meaning at work, so they can connect and create a true

sense o what they are at work to do, thats beyond prots or short-termeciency measures and regardless o the sector they operate in. See

cipd.co.uk/shapingtheuture or urther details o this.

A company that, rom a modest start in a garage rose to be one o the

worlds most rapidly growing and successul businesses o all time Hewlett

Packard was guided rom the beginning by Dave Packards thinking on

purpose:

I want to discuss why a company exists in the frst place. I think many

people assume, wrongly, that a company exists simply to make money.

While this is an important result o a companys existence, we have to go

deeper and fnd the real reasons or our being. We inevitably come to

the conclusion that a group o people get together and exist as an

institution that we calla company so that they are able to accomplish

something collectively that they could not accomplish separately they make

a contribution to society.1

A similar point is made by Arie de Geus:

There is accumulating evidence that corporations ail because the prevailing

thinking and language o management are too narrowly based on the

prevailing thinking and language o economics. To put it another way,

companies die because their managers ocus on the economic activity o

producing goods and services, and they orget that their organisations truenature is that o a community o humans. The legal establishment, business

educators and the fnancial community all join them in this mistake.2

His point is well made, but does not go ar enough. In many companies it is

not even any longer the case that top management ocuses on producing

goods and services; they ocus instead on nancial transactions such as

capital restructuring, acquisitions and rights issues. Had their top teams

ocused to a greater extent on customers needs and the quality o their

goods or services, many ailed companies might well have avoided disaster.


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CIPD HR Proession Map

The CIPD launched its HR Proession Map in 2009, setting out what great

HR looks like and what HR needs to do to deliver sustainable perormance

now and in the uture. The Map recognises that it is not just about what you

know and do (proessional areas) but what is equally important is how you

do it, that is, the underlying behaviour. The Map identies eight behaviours

o relevance or HR proessionals. Two o the behaviours that resonateparticularly with HRs stewardship role are courage to challenge and role

model. For urther details see cipd.co.uk/HR-Proession-Map/behaviours

Business success and employee commitment

Many top managers are either ignorant o the research ndings which

demonstrate the link between employee commitment and competitive

success or, due to in-built mindsets, are highly sceptical o their validity. In a

survey conducted by IBM in association with Towers Perrin UK, HR executives

were asked to list the capabilities HR specialists would require in the twenty-

rst century. Top o the list, scoring 90%, was the ability to educate and

infuence the line. They were also asked to state whether they believed they

possessed that ability. Only 8% replied in the armative.3

A vitally important role at the strategic level or HR is precisely this ability to

convince the top team (and the nance director in particular) that the humanactor is critical to success and to present the research ndings orceully and

with conviction.

A good example to take would be the work o Frederick Reichheld who, in

his book The Loyalty Eect, showed the strength o the relationship between

business success and the ability to build customer loyalty, and how this, in

turn, is a unction o employee loyalty.4

Another is the research carried out by Peer, which demonstrated that

the combination o a number o powerul tools and policies o human

resource management, acting as a total system, produce the highest levels o

employee commitment and sustained company business success.5

He extracted rom various studies, related literature and personal

observation and experience a set o seven dimensions that characterise

most i not all o the human resources practices o companies producing

prots through people.


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These are:

security o employment

selective hiring

training

reduction in status dierences

sharing inormation

sel-managed teams pay or perormance.

Peer goes on to argue that the real sources o competitive leverage

are the culture and capabilities o the organisation that are derived

rom the way people are managed. This, he asserts, is a much more

important source o sustained success than things such as having a large

market share or a distinctive brand because it is much more dicult to

understand capability and systems o management practice than it is to

copy strategy, technology or even global presence.

Ian Wilson identied eight elements in what he calls the new social

contract between employees and the corporation:

a vision and sense o shared purpose, beyond prot and shareholder

value

inspiring leadership

empowerment o the workorce the customisation o work tailoring job content, hours and

compensation packages to meet individuals needs

a climate o equity, respect and due process

reduced volatility in employment patterns

increasing employability

rst-rate on-site amenities and services.6

Shaping the Future

The CIPD has just completed a two-year action research and engagement

programme, Shaping the Future, looking at the drivers o sustainable,

long-term perormance (Shaping the Future: What really makes the

dierence, 2011). Tracking the progress o six organisations undertaking

change programmes, as well as drawing insight rom the 11,000

practitioners in the dedicated network through round-table events,

polls and online discussions, the research uncovered eight themes or

organisations to ocus on in order to successully implement change and

achieve sustainability. These include shared purpose, leadership, locus o

engagement, agility and capability-building. The report also presents ten

new insights that will really make a dierence to long-term perormance.

See cipd.co.uk/shapingtheuture or urther details on this programme.


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A leadership vacuum?

Today there are two reasons to be concerned about the quality o leadership

in large organisations, both private and public. On the one hand there are

concerns about competence in the sense o the ability to create a clear vision

and to articulate it in such a way as to inspire and motivate. On the other

hand, ollowing recent cases o raud and suspect share dealings, there

are severe doubts about the integrity o leadership. All too oten the topmanagers held up as role models or our young leaders o the uture turn out

to allible.

Chickenless heads

Where top managers ocus their attention primarily on nancial transactions

and relations with City institutions, they inevitably lose touch with the

grassroots o the organisations they control. The result is the opposite o

the term headless chickens; instead, we have chickenless heads. The term

headless chickens implies that, without clear leadership rom the top, the

organisations employees run around in circles, accomplishing very little.

The concept o the chickenless head tells a story that is more common

today. The organisations rank and le employees may carry on doing a

reasonably good job o pleasing its customers and producing quality goods

and services, unhampered by the remoteness o top management, until,

because o mismanagement o its nancial aairs, it becomes bankrupt

or is taken over. Companies rarely destroy shareholder value because theiremployees at all levels below the very top are not doing their jobs. When the

same chickenless heads who have brought about the companys collapse

walk away with payos that represent huge sums in the eyes o the average

worker, any remaining vestige o morale or loyalty is nally destroyed.

Stewardship

At Tomorrows Company theconcept ostewardship has been

developed in recent years. Members

o the board o a company and the

public sector equivalents have a

duty o stewardship in respect o the

assets human as well as nancial

that have been entrusted to them.

Similarly, the institutions which invest on behal o pension unds and savers

have a stewardship role one which reaches back to the beneciaries and

orward to the companies in which the unds are invested.

What is implied by this role? The key element is trust; a steward is one who can be

trusted. Another is service; a steward is servant o those o whose assets they are

custodian; service is placed above sel-interest. Third, by its nature, the stewardship

role is one which implies commitment over time and to the long-term well-being o

the assets concerned; it is not, thereore, to be undertaken lightly.

Tomorrows Company defnesstewardship as the active and

responsible management o entrusted

resources now and in the longer

term, so as to hand them on in better

condition.


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In todays uncertain and depressed economic climate, one vital stewardship

role that HR can play is to persuade top management to abstain rom short-

term knee-jerk reactions which can only damage the organisations long-

term prospects o success. Such reactions include large-scale redundancy

programmes that result in loss o talent and experience as well as the erosion

o morale, reducing employers contributions to pension schemes, slashing

training budgets, suspending graduate recruitment and other cost-cuttingmeasures.

Actions such as downsizing cannot

x deep-seated problems o product

acceptability, quality, service, process

design or management style. The

damage is compounded when the

wrong people start leaving, and too

much experience and expertise is lost

(corporate Alzheimers) or when the

cut is too deep and those who remain

suer stress due to heavy workloads

(corporate anorexia).

In such cases a downward

perormance cycle can be triggered. Perormance problems lead to

downsizing, which in turn leads to employees reducing their eorts, spinningwork out to make it last or leaving to nd more secure employment. This in

turn lowers perormance urther, leading to yet more redundancies and so

the cycle continues.

Governance

A narrow view o corporate governance is that it is about board

structures and procedures, compliance with company law, accountabilityto shareholders, correct reporting procedures, audit and remuneration

committees and the conduct o annual general meetings. A broader

perspective is that it is also about being clear about the companys purpose,

taking into consideration the ull set o relationships between a company

and all its stakeholders and the issues that arise in the context o these

relationships.

In cases where HR specialists are board members or trustees, they share

ully in the duciary and other responsibilities o such bodies. This means

in practice that they share responsibility or all aspects o the organisations

perormance. Similarly, where HR directors are members o the top

executive team they should acquire the broad range o knowledge in such

areas as nance and strategy, which will enable them to discharge these

responsibilities eectively:

We argue that the CEO needs to be the

Chie Talent Ofcer putting talent at

the top o the corporate agenda and

devoting signifcant amounts o time

and energy to understanding talent-

related issues. Successul leaders willbe also mindul that they are simply

looking ater the business or a stage

o its journey as stewards o the

company and its people.7


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Theymustbefullyawareoftheenvironmentalissuesassociatedwiththe

companys operations and the companys track record in dealing with

these. This is particularly important with regard to any environmental

issues that carry health and saety risks or employees or members o

local communities.

Theymustalsobefullyawareofthemoralandlegalaspectsofthe

companys relationships with its customers or clients. For example, in pastcases o mis-selling o pensions and other investments, to what extent

were senior HR people aware o the practices being employed by their

companies?

Inrelationtoanyissuethatcausesdoubtstoberaisedastothelegality

or morality o the companys operations, the HR director must be

prepared to challenge those responsible.

Theymust,bytheiractionsandwords,makeitcleartoothermembers

o top management that their role is not to be conned to specically HR

policies and practices.

Lastly,andcritically,theymustusetheirexpertiseinmattersofleadership,

behaviour and culture to support the board in setting the tone or the

organisation.

Building adaptive organisations

At the time o writing, given the uncertain global economic environment,

the ocus o business leaders is on relatively short-term measures relatedto maintaining levels o protability or, in many cases, sheer survival.

Some organisations will indeed ail, including some household names. The

survivors, however, will need to reocus on longer-term issues and adapt to

changes which are in act more powerul and lasting than the recent collapse

o the market system.

Increasingly, as concerns about the

economy ade, the ocus will be on theimpact o organisations on society and

on the environment. Organisations,

in adapting to the challenges o the

centurys second decade, will need

to redene success, to question the

values which underpin their actions

and to accept new rameworks,

whether based on regulatory action

by governments or on sel-regulation.

This will lead to new challenges or

business leaders, challenges which will

test both their competence and their

integrity. Old patterns o thinking and traditional mindsets will need to change.

HR directors have a vital part to play in bringing this about.

Global companies can be a orce or

good and are uniquely placed todeliver the practical solutions that

are urgently required to address

these issues. We believe that the

purpose o tomorrows global

company is to provide ever better

goods and services in a way that is

proftable, ethical and respects the

environment, individuals and the

communities in which it operates.8


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The adaptive organisation is the theme or a

series o articles that will be published by the

CIPD and Tomorrows Company during the course

o the year.

Tom

orrows

AdaptiveLeadership

Tomo

rrowsAdaptiveHR

TomorrowsBusinessModels

TomorrowsAdaptive

Organisation

TomorrowsWorking

TomorrowsPeople

TomorrowsPerformance


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1 COLLINS, J. and PORRAS, J. (1998) Building your companys vision. InKOTTER, J. et al. (eds) Harvard Business Review on change. Boston:Harvard Business School Press. p30.

2 DE GEUS, A. (1997) The living company. London: Nicholas Brealey.

3 IBM/TOWERS PERRIN. (1999) Priorities or competitive advantage, a 21st

century vision: a worldwide human resources study. New York: TowersPerrin.

4 REICHHELD, F. and TEAL, T. (1996) The loyalty eect. Boston: HarvardBusiness School.

5 PFEFFER, J. (1998) The human equation. Boston: Harvard Business School.

6 WILSON, I. (2000) The new rules o corporate conduct. Westport, CT:Quorum Books.

7 TOMORROWS COMPANY. (2009) Tomorrows global talent: how willleading companies create value through people? London: TomorrowsCompany.

8 TOMORROWS COMPANY. (2007) Tomorrows global company: challengesand choices. London: Tomorrows Company.


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Chartered Institute o Personnel and Development

151 The Broadway London SW19 1JQ

Tel: 020 8612 6200 Fax: 020 8612 6201

Email: [email protected] Website: cipd.co.uk

I d b R l Ch R i d h i 1079797

Tomorrows Company

Centre or Tomorrows Company

Charity registration number 1055908.

Registered oice: Samuel House6 St Albans Street, London SW1Y 4SQ

ued:March2011Reference:5472

CharteredInstituteofPersonnelandDevelopment2011

5472 HR in tough times (WEB)

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