How do you gain competitive advantage in the war for talent? Is it through new software, a larger human resources budget, process improvement or paying above market? Peter Drucker gave us a clue when he said advantage doesn’t come from managing change—it comes from inventing the future. Change the game in your favor.
How to Change the Game
There is a direct relationship between the magnitude of a desired change and the amount of thought required. The only silver bullets belong to the Lone Ranger, and he is not passing them around. If you really want an edge in attracting, developing and retaining talent, you have to rethink the total system of Human Capital Management (HCM).
Over the past year, 20 companies shared their expertise around a new approach to managing the human side of the organization. It produced a strategic model that we titled: HCM: 21™, Human Capital Management for the 21st Century. This is a management model and operating system that starts before workforce planning and ends with predicting value added through leading indicators and intangible metrics. Exhibit 1 is an outline of the steps in the model.
A Strategic Scan
Because there has been and continues to be massive, rapid and continual change in the global market since 2000, we have to recalibrate ourselves. The truths of the 1990s no longer apply. Technology, economics, competitors and many other external forces are shaping the new market. To be competitive we have to acknowledge and plan for how we will cope with each of them because they drive HCM. Next, because so much has changed externally, we have to review our internal responses and capabilities. Starting with vision, culture and brand, we consider the strategic business plan and initiatives. These assessments give us a thorough, up-to-date picture of what the likely effects will be on our structural, relational and human capital. Only then are we ready to develop our HCM plan.
Given what we know from the antecedents above, we can put together a workforce plan that is much more than a position-filling outline. Now we have a complete idea of new types of skills (technology advances), competitive attacks (disruptive forces), management style and new hire fit (culture), growth goals (employee opportunities), among other imperatives. Human resources today is a game of human capital maximization driven by risk mitigation. As they say, this is not your father’s personnel department.
What evidence do we have regarding the utility of our human resources processes? How long has it been since we ran a source analysis? What combination of sources and selection methods yields the top performers, high potential hires and long tenured associates? What about a learning system audit? It is easy to go along without ever testing the effectiveness of our processes.
The central question today is how do we gain an edge in attracting, developing and retaining talent? Do we ask for more budget or staff or new software? If we do, what data do we have that predicts the return on the investment? Simple statistical techniques will tell us what brings in the best people and helps us grow and keep them.
It is clear that organizations get out of alignment and that business units often operate out of silos. In human resources it is common to see staffing not talking to development, compensation keeping to itself, employee relations ignoring HRIS. Separation encourages dysfunctional performance.
Wells Fargo Bank sells two to three times as many services to its customers than its competing banks. CEO Dick Kovacevich states that the secret is focusing on the customer, not on the product. When human resources brings together all functions to focus on the employee-customer-profit chain its value will be proven. This can be accomplished when the proper strategic scan data is shared and everyone understands how to synchronize their delivery.
In 1978, I introduced quantitative measurement to human resources. After a slow start, metrics are now a central part of many human resources departments. The bad news is that, for the most part, they have not moved past the cost and quantity side of benchmarking. Today, with the massive changes in every industry, benchmarks are of little use. We can no longer make valid comparisons across companies. It is time to move to the next level of analysis—which is prediction.
Most data that comes out of companies is about the past. Lagging indicators don’t predict. If you want to know what the weather will be like next week—you don’t look at last week. You go to the weather forecast. Human resources can also forecast by turning to leading indicators. Examples are engagement that predicts performance and turnover, leadership that predicts employee productivity and commitment, succession planning that predicts readiness, employee brand awareness that predicts customer service, and so on. These intangibles are the difference between market value and book value; in short, people value.
In the End
Working harder in old ways only keeps us up with the middle of the pack. To break out we have to change the game to give ourselves an advantage in Human Capital Management. Over the past year the 20 companies mentioned have laid out the rules, processes and tools of the new game. If you are ready to be a winner this is the way to play the game.