The One Question Every HR Professional Must Ask
How effective is the organization at leveraging talent to drive high market performance?
It's a simple question, but not one easily answered.
A common HR-centric approach to answering this question is to respond with initiatives such as revamping recruiting processes, investing in new HCM software to find synergies and improve analytical capabilities, or restructuring performance management reviews. While these may be defaults for organizations aiming to improve efficacy in driving high market performance, these responses can also diminish the function's perceived (and potential) influence on the business as they do not speak directly to key organizational issues.
A less common, but much more impactful response is to take a business-centric approach in which HR initiatives are simply tools or enablers to key organizational objectives.
The opportunity for HR and related functions is to clearly and purposefully connect the dots between what the business seeks to accomplish and what it will require from a people perspective in order to achieve those objectives. In this regard, the strategic role of HR shifts to one that focuses on two areas that should rank high on the priority list of any business unit leader:
- Risk mitigation (i.e. will we have the talent we need to enter a new market and execute the strategy in a timely and effective manner?); and
- Opportunity identification (i.e. do our leaders ensure an engaged and aligned workforce, and do we have the people, processes and programs in place to drive innovation, collaboration and agility?).
If all this sounds a little daunting, you're not alone, but i4cp member organizations such as EMD Serono and Choice Hotels International have successfully integrated this outside-in approach into both their workforce and business strategies and are seeing results. The key, just like any other project or strategy, is prioritization.
So, how do you get started?
Both these companies--and others--are using i4cp's model, the People-Profit Chain™ (download the free report), as their guide to achieve greater market performance. The human capital field is rife with models, business equations and more to explain how people tie into the overall business strategy, and on the surface, the People-Profit Chain isn't much different. What sets it apart from other models--and makes it more actionable--is that it is backed by empirical data and highlights the 25 key performance indicators (KPIs) most correlated with market performance.
These benchmarks, organized into five domains representing the HCM elements of the People-Profit Chain (Market, Strategy, Culture, Leadership and Talent), provide guidance on where to invest time and resources to have the greatest impact on market performance. In fact, i4cp research has found that organizations that address shortcomings in these areas can see up to 3x higher performance.
Once you identify gaps and weaknesses against the KPIs (i4cp has a powerful organizational assessment that can help), you can create a workforce strategy to fill in the holes. EMD Serono, a leading biopharmaceutical company and subsidiary of Merck KGaA, assembled a consulting model to train its HR business partners--a filter through which to look at the organization based on the five domains of the People-Profit Chain. With HR business partners and field managers viewing the organization through this lens, HR can repeatedly pose the question, "What does the business need based on how they're performing in relation to the five domains?"
The People-Profit Chain report includes summaries of how leading companies have taken specific strategic actions to build customer-oriented, agile workforces, from Choice Hotels' adoption of the People-Profit Chain to underscore fundamental change to its culture, leaders and strategy, to less drastic yet equally powerful changes. A few examples:
Developing both internal and external brand alignment (Market)
Managing the customer-facing brand is most often associated with marketing, but an organization with a brand that accurately reflects how it operates externally speaks to its authenticity and the culture of the organization internally. Outdoor clothing and equipment retailer Patagonia, for example, has built its brand around love of the outdoors and environmental sustainability. It hires employees who live these values and provides a workplace that enables pursuit of them.
Establishing understanding of strategy throughout the organization (Strategy)
Not only must the strategy be clear and well thought-out, high-performance organizations are 2.5x more likely to ensure that everyone understands and buys into the strategy. Involving employees at all levels and locations in developing goals and plans that align to the strategy creates a sense of ownership to the strategic direction and plan.
FirstEnergy designed a program to help all employees better understand the changing utility industry, FirstEnergy's strategies, and each employee's contribution to its future success. The diversified energy company created a big picture marketplace overview to set context for the company's strategic direction and a strategy map that explored FirstEnergy's response. The strategy map enabled employees at all levels to understand their role in executing goals and work in concert toward a common goal (Root Inc).
Developing a culture that can adapt to change (Culture)
High-performance organizations are 3.2x more likely to have cultures that support change. Top companies are ready to seize new opportunities and take on new challenges, even if it means significant change to the current organizational processes and operating methods. Unfortunately, while many organizations strive to be agile, it is easier said than done. High-tech firms such as Facebook and Google are known for conducting "hackathons" and other methods to produce fast, game-changing products.
Hiring and developing leaders who communicate effectively (Leadership)
Leaders in high-performance organizations are 2x more likely to be seen as good communicators. i4cp's research on effective leadership reveals that communication, clarity, and consistency are critical to effective strategy execution, employee engagement and more. i4cp member company 3M, for example, builds trust and therefore employee engagement by expecting all its leaders to engage their workers by keeping their promises, involve people in decision-making, distribute work equitably, communicate openly and demonstrate concern.
Maximizing employee productivity (Talent)
High-performance organizations are 4.3x more focused on maximizing employee productivity, especially those in critical positions. i4cp's analysis of the talent-related KPIs with the strongest correlation to market performance shows that talent achieves peak performance in a workplace environment that enables workers to maximize their productivity. While this may seem obvious, many organizations neither understand what talent practices drive productivity or how to create an environment that fully enables it.
Global electronics company Flextronics--another i4cp member company--identified ten critical jobs in the organization and the necessary skills and competencies. It then engaged frontline management in helping to determine how to apply those skills on the job. Frontline managers also determine the best ways to develop those skills--whether through online learning, classroom learning, or projects and assignments.
Conclusion
Each of the examples above illustrates specific actions taken by firms to positively affect one of the key performance indicators most correlated with market performance. None of these actions were completed in a vacuum or overnight, and presumably required the support of multiple functions and business leaders. Regardless, these actions came as a result of holistic workforce strategies that, consciously or not, derived from the question, "How effective is your organization at leveraging talent to drive high market performance?"
That's your cue to tell us in the comments area below.
