Look beyond your HR strategies
Creating, maintaining and developing the most suitable human capital for an organisation is a tough challenge to deal with. The top management continuously invests loads of time and money on developing HR strategies, with the hope of efficiently meeting the short and long term HR goals.
However, in reality, is it all about developing the strategies? Isn’t it high time look beyond strategy development and focus on the execution aspect too? How could an organisation align its strategy with human capital?
Prof. Scott Snell, an international expert in Strategic HR Management (SHRM) from Darden school of Business and a visiting faculty of PwC's Academy Sri Lanka, recently conducted a successful workshop on ‘Aligning strategy with human capital’. During the session, he proposed thought-starting steps and ingredients to effectively execute HR strategies. In this article, we share some of his ideas and proven methodologies extracted from his advanced researches.
THE 4A MODEL
The performance of organisations depends on building an architecture that supports the collective abilities of individuals aligned toward achieving strategic outcomes. There are many important elements underlying execution excellence, but in this case, the focus is on four: Alignment, Ability, Architecture and Activation.
Alignment: Focusing Energy towards Breakthrough Performance
The sine qua non of execution capability is alignment. Organisations only exist because people can achieve more together than on their own. Alignment provides coherence, focus, energy and resilience in the face of change. And, not surprisingly, lack of alignment is a key source of divergent interests, conflict, dispersion and decay.
Ability: Building Human Potential
People are an organisation’s greatest asset (there, we’ve promulgated the cliché). But the truth is that many organisations have faltered while burgeoning with talented people. And, if we were brutally honest, we’d admit that organisations traditionally have worked to take people out of the production equation in order to improve execution, preferring to substitute technologies for humans. But in the contemporary setting, where knowledge is a vital ingredient for both efficiency and effectiveness, that would be a mistake.
Architecture: Designing Organisational Capability
The design of organisations makes a big difference in terms of reliability, scalability and continuity of performance. So in terms of strategy execution, the organizational architecture is critical for managing resource flows, information availability, decision-making and process.
Activation: Channeling Value-Added Effort
Will Rogers, the famous humorist, used to quip, “Even if you’re on the right track, you’ll get run over if you just sit there.” The same is true of strategy execution. In contrast to the common conception of strategy implementation, whereby someone says ‘go,’ world-class execution is nearly impossible to achieve from a standing start.
THE THREE STEPS TOWARDS HR STRATEGY EXECUTION:
- Business Assessment
The first step is making a realistic assessment of current and desired financial performance for each business unit. Typically, we focus on two primary financial drivers (growth and margin) and a secondary driver (performance variability) of firm valuation and share price. The assessment of current and desired state has as much to do with strategic goals as it does with firm performance, and much of the decision has to do with positioning within the competitive set. Top-quartile performance may not be the goal, and/or it may not be feasible in the current time period. Often, this assessment leads to a robust discussion among the management team, which is necessary for establishing priorities for strategy execution.
- Analysis of Underlying Metrics
The second step, analysis of key metrics that operationalise the 4A model (Alignment, ability, architecture and activation) helps us establish a predictive execution index for each line of business. Each component of the model is composed of three more specific ‘enablers’ of execution performance. Each enabler, in turn, is operationalised by a set of common internal metrics. Aggregating across these metrics, each line of business receives a rating that is then conveyed as a predictive execution index. The value of this approach is that it provides a summary indicator of organisational health, but more prescriptively it also provides a set of lenses with which to probe more deeply into the root causes of any performance gaps.
As a byproduct of this analysis, it is also useful to present the predictive execution index data graphically to show the execution profile of a business unit.
This figure, for example, illustrates (using a radar graph) a business unit with considerable strengths and some debilitating weaknesses. Specifically, the alignment and ability factors are rated within the zone of ‘exceptional’ performance. The architecture factor is supporting at a ‘qualified’ level, meaning that although improvements are needed, concerns are not urgent. However, this business has a rating for activation that is in the ‘disqualified’ zone and needs immediate attention. Without targeted interventions to improve capability on this dimension, the impact of the other three will likely be compromised.
These three rating zones — exceptional, qualified and disqualified — reinforce the evidence we have found that even superior capability in one area cannot make up for excessive problems in another. If there is a ‘disqualified’ rating on one or more factors, nothing else much matters; execution will be deficient. On the other hand, once execution capability falls within an acceptable zone across all four factors, the model actually becomes ‘compensatory,’ in that strengths in one area can actually substitute for (some) weaknesses in another.
3. Action Plan for Targeted Intervention
This discussion leads to the third step in the process: establishing an action plan for targeted remedies to execution gaps. When done right, these action plans build on information from the predictive execution index and essentially serve as a ‘playbook’ that allows others within the organisation to act on the information. To achieve this, four conditions have to be met at this stage: (1) Establish clear priorities for action (2) Identify owners of each intervention or initiative, (3) Budget for all the required resources [financial, human, information] (4) Agree on timelines for action and review.
About Prof. Scott A. Snell
Thayer Bigelow Research Professor of Business Administration
Prof. Snell is an expert in Strategic human resource management — helping organisations compete better through people. He specialises in Talent management, Human capital strategy and Organisational capability.
His research focuses on the mechanisms by which organisations generate, transfer and integrate new knowledge for competitive advantage. He is co-author of four books: Managing People and Knowledge in Professional Service Firms; Management: Leading and Collaborating in a Competitive World; M: Management; and Managing Human Resources.
Prof. Snell has worked with companies including AstraZeneca, Deutsche Telekom, Shell and United Technologies to help employees maximize their talents in order to drive firm performance. He recently co-authored “Intellectual Capital Configurations and Organisational Capability: An Empirical Examination of Human Resource Subunits in the Multinational Enterprise,” published in the Journal of International Business Studies.
B.A., Miami University; MBA, Ph.D., Michigan State University
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Subject area: Human Resources