The Human Capitalist

GE's Growth Approach - Developing Talent & Leadership

I read a great article recently titled, "Growth through the eyes of GE's Immelt". The Cliff notes version of the article basically states how Immelt, GE's CEO, is..."now trying to build and innovation engine that is equal to GE's vaulted productivity process."  Its interesting to note GE's unique view of six key areas of success...

• Great Technology.  "If you don't have a good product, you are not going to sell much".


• The Customer.  GE uses a "Net-Promoter Score" adapted from metrics developed by a noted HBS professor


• Innovation.  They use "Customer Dreaming Sessions" in which they bring industry thought leaders together to provoke change and a practice called "Imagination Breakthroughs" focused on the most promising ideas


• Globalization.  Focus on developing markets and making the products accessible and affordable


• Commercial Excellence.  A noted weakness of GE, focused on developing a world-class sales and marketing organization focused on "one-GE"


• Growth Leaders. Developing leadership traits that drive innovation and growth and including external focus, imagination & creativity, decisive, clear thinking, inclusiveness, and deep domain expertise.

What is your growth strategy?

Talent Management Vendors Should Play Fantasy Sports

I was at a talent management vendors' user conference a few months ago when the CTO used an analogy of their solution with fantasy sports applications.  The first thing that came to mind was..."I wonder if these fantasy sports applications make better corporate managers?" (it should be noted by fantasy record is mixed...I have won my football and basketball leagues recently but am currently in last place in my baseball league). 

My second thought was..."why aren't the talent management vendors using consumer application techniques in the feature, function and usability design and development of their products?" (it should be noted that I think many of them have started to look at incorporating consumer concepts but many others still resist the convergence of enterprise and consumer technology/functionality).

Back to my point...wouldn't it be nice to have all employee "stats" in one easy-to-read page including...

- The employees "back of the baseball card" data including years at the company, previous employers, total years experience, current role, skills, etc.

- A snapshot summary of the employee performance including recent accomplishments and/or managers analysis

-Current year-to-date stats such as the most recent performance review data

- Graphical charts on how the employees ranks against his/her peers and including ranking against the company "top performer" and company average ranking for the respective position

- Historical performance review data over the employees life at the company

- The ability to "compare" against specific individuals within the company

And the list goes on and on....

What's HP Play in HRO? - Don't Believe What You Read

My friend Jessica Marquez over at Workforce Magazine published an article last week about HP recent entry into HRO with the signing of Nestle as an HRO client. The article basically suggests that HP may be poised to make a big play in HRO, especially according to my counterparts at IDC and Everest.

Contrary to my colleagues viewpoints, I don't believe HP will not make a huge play in HRO. Here are the reasons why...

1. HP has already missed out on the early adopter phase.  Although most service providers still have along way to go, most of them have already gone through a significant learning curve over the past 5 years
2. Mark Hurd, HP's boss, is a fiscally conservative CEO and will not invest in a expensive, money-losing business
3. For HRO to be successful, the vendors must continue to build out domain expertise in more strategic towers such as recruitment, performance management, compensation, learning, succession planning, etc.  Unlike HP and Accenture, HP does not have any of these existing capabilities available today
4. HP will focus on BPO businesses where they can leverage internal expertise and best practices, and extended areas where they are playing today, particularly finance & accounting and procurement

Not to say HP won't participate in HRO, I just think it will be only those transactional processes that compliment their other existing BPO business with the respective client.  I would consider the Nestle deal more of an extension of their HP's existing FAO relationship than an actual "HRO deal".

Guest Post: Thomas Otter - Putting Capital in Human Capital Management

The accountants are coming….

I recently joined a team at SAP that provides advisory services to CFO's and finance executives at major multinationals in here in Europe. Part of my job is to expand this offering to senior HR types.  For the 12 years or so, I have worked in the HR technology space, mainly at SAP.

This year I've learned a lot more about finance than I ever thought I wanted to (mainly through osmosis) and also about the issues that are worrying the finance types at the moment. My colleagues and our customers tell me that finance is under going a huge transformation, with administrative processes like accounts payable being moved to offshore service centres, major companies like Shell, BP, Bayer, Philips, Henkel, Nestle, Diageo and SAP ourselves have either completed or are in the middle of a major finance transformation. CFO's see SAP as key in this relationship, so my colleagues are really busy.

Finance departments are ridding themselves of the bureaucratic baggage of bookkeeping, and busying themselves being business partners and the trusted advisor of the line managers and the CEO.  (sounds a lot like what HR is up to, but the finance guys seem to build the business case better…) One of the things that keeps coming up is how do we source the best people to run the service centres, and how can we make sure that we have the right skills for becoming business partners. This transformation process has got the finance guys asking some real HR type questions. I hope they are getting the right answers.

We are also seeing a much greater interest from finance in intangibles accounting. As less and less of a companies market capitalisation is reflected in fixed tangible assets, then measuring intangibles becomes increasingly important. Brand, Intellectual Property and Human Capital are the happy trio. My colleague Jürgen Daum is a boffin on this stuff.

So accountants are starting to ask some serious questions about how to measure the value of people and their performance. I spoke with a CFO of a pharma company, who said that his last investor analyst meeting was all about the strength of the talent in the R&D team, and what the company was doing to stop them leaving, not about new drugs. This CFO is demanding a much clearer picture of the workforce strengths and weaknesses because investors demand this information. He is expecting the same level of data quality that he gets from finance data.

I came across this quote, and it sums up the challenge rather well...

Though your balance-sheet’s a model of what balance-sheet should be,
Typed and ruled with great precision in a type that all can see;
Though the grouping of the assets is commendable and clear,
And the details which are given more than usually appear;
Though investments have been valued at the sale price of the day,
And the auditor’s certificate shows everything O.K.;
One asset is omitted - and its worth I want to know,
The asset is the value of the men who run the show.

Apologies about "the men" bit, but it was written By Archibald Bowman in 1938 ("Reporting on the Corporate Investment" Journal of Accountancy, May 1938 p. 399.)  I became interested in this topic because my Father is an accountant, and some years ago he did some work on valuing the worth of football (soccer) players.

Actually, there is quite a lot of older theory in this human asset accounting space, Flamholtz and so on is still worth a look at. We are seeing two changes that will make this research more relevant again.

1. the relative value of intangible assets
2. the availability of internal and external data for the application of the models into reality.

I'm sensing that this greater focus on intangible reporting will have a bigger impact on HR practices that many of us imagine. It will be interesting to see whether the standards and implementation emerge from the accounting community. (as an extension of IFRS, for instance) or if the HR community manages to get its act together. I'm impressed with the stuff I've seen from valuentis in the UK, but I wonder about the appetite of the HR function to get stuck into accounting type concepts.  I think the HR executive that is able to articulate a human asset accounting story, or what ever trendy term we use today for this, is much more likely to have that "seat at the table" than those that can't. There is some HR reporting in several Scandinavian countries, and I see this trend growing in tandem with the focus on Corporate Social Responsibility reporting.

I'd like to see the HR people and the Accounting people sit down together and see what they can come up with, rather than a siloed approach. If the value people bring to organisations can be more effectively represented in financial instruments, then it would do us all a lot of good. If HR sits in the corner and mumbles and grumbles about "people aren't numbers" then I think they will soon be shown the door. I think if we are to talk about Human Capital, as a function we need to get a lot stronger at the Capital bit.

There are a lot of tools in the finance kit bag that we can apply to HR data. I recently met with a senior guy from an automotive manufacturer. He explained how he exacts data out of his HR system, and models skills, costs and aging profiles against those of his competitors, combines this with demographic data from government statistics, and throws in some production data and forecasts about the cost and future of robotics. He then models out scenarios for his CEO to decide help the board where best to locate new plants, and the mix of robotics and human labour required to deliver a profit at an acceptable level of risk.  He applies risk methods from statistics build the models. (Monte Carlo and so on). I remember Tom Davenport going on about analytics as a competitive weapon, but this is it in action.

I'd like to see a lot more HR departments doing this sort of thing. Most of you have the data. If you are unsure how to use it, then talk to people like Peter Howes at infohrm. The data you hold in your HR systems is a powerful asset, you can use it to make better decisions, and to help convince others to invest and support your ideas.  Accountants have been doing this sort of with the general ledger since day dot. 

Until a few months ago, I knew nothing about risk analysis. I now know a little, and I reckon it is a toolset that HR executives need to make much greater use of. It is a great way to remove inertia, because it helps you quantify the cost of doing nothing, and compare HR initiatives with other investment demands.

Finance doesn't have a monopoly on mathematical tools, they just borrowed them from physics and other unlikely places and applied them to the world of investment. I'm suggesting we HR folks do the same. It is time to put the capital into human capital.

This post was provided by Thomas Otter Thomas is the Chief Business Solution Architect at SAP.  Thomas writes a blog at Vendorprisey and can be reached at thomas.otter@sap.com.

Guest Post: Dave Haas - Look Inside Before Going Outside

As a sales executive in the Talent Management space, I speak with prospects every week who have been tasked to go out and find a technology solution that will help them develop and retain their talent base.

Oh, if it were that easy.  Any organization seeking to streamline and automate their performance and development initiatives must first answer a few questions to gauge their preparedness to begin such a game-changing undertaking.  Here are five questions to get the molecules flowing:

1. Do you have total executive buy-in?
2. Are you going to involve the employee in the process?
3. Have you defined job accountabilities and descriptions?
4. Have you developed competencies to support #3?
5. Have you developed the learning criteria to support #3 and #4?

Without any of the above questions answered in complete honesty, your project is set to fail, or at best languish with minimal user adoption.  The goal of any development and retention initiative is to challenge, motivate and hold accountable those within your talent community.  It is your responsibility to provide the tools necessary to achieve the stated goals.

Since executives will be users of the technology, they must buy into the project.  Nothing short of 100% user adoption is the goal.  In order to achieve that success, expectations must be managed for total employee involvement.  Expectations must be clearly identified and sources of information made available for easy access and use.  Once you have mapped out your processes and defined
objectives, you are well on your way to implementing a solution that will add value to your organization by growing, retaining and developing your talent base.

This post has been provided by Dave Haas.  Dave is a Sales Executive with HRsmart and can be reached at dhaas@hrsmart.com.

Google "Office" - A Talent Management Differentiator?

An office environment can do alot with employee satisfaction and retention.  It can be used as a recruiting tool.  It can encourage creativity and innovation.  It can even cultivate collaboration and teamwork. 

SiliconBeat writes about Google's architecture as a competitive advantage and links to a recent news article about this recent undertaking.  It is interesting that they are also using the office design to create an employee brand of secrecy and exclusivity.  According to the article...

"At entry level the Googleplex—where the core of the engineering group is housed along with (or so it is rumored) the cofounders’ top secret offices—feels like another signature space for creative types."

This may be a bit out there for most companies and many employees but definitely a unique, creative concept that definitely caters to their target employee.

New URL for The Human Capitalist

In an effort to simplify and streamline access to the blog, I have created a new URL to access the blog...

www.humancapitalist.com

Please make sure to bookmark the new URL.  I am hoping to move away from TypePad over the next month or so.  Any suggestions or help to move onto another applications would be helpful.

Coors CEO Charged with DUI

What irony...the CEO of Coors was arrested last month and charged with DUI.  Yes...this is the same guy that tell you to drink responsibility when are are watching that baseball or football game. 

Drunk driving is never a laughing matter but I always love hearing about the excuses from the excused, especially those of celebrities or other notable citizen status.  According to Pete Coors..."he had consumed a beer about 30 minutes before leaving a wedding".  I'm not sure if I am buying the plea that the same guy who has a brewer of the same name gets drunk off of one beer.

How Many Managers Do You Need To Build a Semiconductor?

Apparently not as many as you used to according to Intel.  Last wee, Intel announced the decision to scrap 1,000 managers.  Upon recent internal review....

"...[Chief Executive Paul Otellini] added that the analysis showed that Intel's management grew faster than its overall employee base in the past five years. Upon analyzing other companies, Intel decided that it had too many layers of management between employees and top management.

In a memo to employees sent Thursday, Otellini said the action was necessary to address ``slow and ineffective decision-making, resulting, in part, from too many management layers.'' 

It would be ashamed if they laid off talented manager for layoff and cost-cutting sake. 

Guest Post: Phil Fersht - The Great Outsourcing Divide: Where HRO Has Been Challenged, FAO is Blossoming

Having spent the last twelve years with a foot in both the HR and F&A (finance & accounting) worlds, I have been staggered by not only how different the issues and attitudes are among both sets of buyers, but also the strategies that are being pursued by the service providers.  However, when we look at the current health and state of both industries, it is plainly apparent that FAO (finance & accounting outsourcing) is beginning to enjoy a high percentage of deal successes, vendors are finding the experience more clean-cut, deals are more profitable and the industry is becoming very attractive to investors.

To cut to the chase, the HRO industry has been unfortunate:  when you are dealing with a company-wide outsourcing initiative that impacts the lives of all employees and managers across the whole organization, bringing new challenges and significant change, you are already fighting an uphill battle to win the hearts and minds of the early buyers. The FAO market’s growth has been slower – in total dollar terms - than that of HRO in recent years, and is only now reaching its rapid growth phase; set to outperform the HRO market this year, with an estimated 49 new multi-process FAO contracts expected to be signed this year.

The reality is stark:  FAO buyers and suppliers simply are not suffering from the transitional and financial issues being endured by the HRO industry at present.  This is due to a number of factors:

• Most Tier 1 FAO Service Providers are targeting both the Mid-market and high-end buyer. 
• Barriers to entry are lower in FAO
• FAO is industry-specific, whereas HRO is a Horizontal Solution. 

There is no doubting the fact that most HRO engagements are considerably more complex and sensitive than those in FAO.  However, there are some simple lessons HRO buyers and suppliers can learn from the current success of FAO, in order to set expectations with buyers:

Keep it simple from the outset.  HRO has been positioned as a major strategic game-changer for companies.  Focus on the transactional processes first – namely payroll and benefits administration -  where buyers can take advantage of cost savings through labor arbitrage, and there are technology platforms available which can facilitate an HRO engagement without enormous complexity.  Once the first transitional phases of HRO have been accomplished, the buyer can focus more heavily on aligning its retained HR organization with the corporate goals.  FAO is positioned primarily as a cost-reduction play, with the issue of achieving quality service a differentiator between suppliers. 

Define stakeholders effectively and execute early transition phases with extreme diligence.  HRO can negatively impact an entire organization if the relationships between the service provider and the buyer’s governance team are not well defined.  This is particularly the case during the early transition phases post-transaction.  Areas of impact, for example the introduction of self service tools and high-touch offshore employee care representatives, need to be managed and communicated extremely diligently.  HRO service providers need to work harder with their clients to help them through these early transition issues of HRO.  Third party advisors can help, but the service provider should expect to invest more attention and resources in ensuring the early transition phases are effected with excellence.

Get the economics right.  The industry has seen close to 140 multi-process HRO deals to date, yet we are still witnessing many leading suppliers struggle to achieve positive returns from HRO contracts, coupled with the poor publicity of trying to manage highly complex operational issues.  There have been enough test cases out there for suppliers to start getting the balance right.  The FAO industry has experienced a similar number of contracts, but has got its act together much more quickly, largely as a result of the contracts being smaller, and less complex.  That said, there are enough benchmarks to get the economic fundamentals of HRO correctly balanced.  Encouraging signs are there that the leading providers are taking a more cautious approach to taking on new business.  Let’s hope the industry has turned the corner.

This post is an excerpt from a forthcoming whitepaper by Phil Fersht.  Phil Fersht is a Vice President, Everest Research Institute, and can be reached at pfersht@everestgrp.com.