Enhancing HR Value to the CEO: Strategies for Matching Strategy to Capability Laske and Associates, LLC Otto Laske, PhD PsyD, Manager Medford, MA, USA

Enhancing HR Value to the CEO:

Strategies for Matching Strategy to Capability

Laske and Associates, LLC

Otto Laske, PhD PsyD, Manager

Medford, MA, USA

781.391.2361

[email protected]

This seminar takes a comprehensive, systemic view of the organization and its readiness for

intervention.

It addresses the ‘people power paradox’: most companies seek their future outside of themselves,

not in their own people.

Copyright © Laske and Associates, LLC, 2002

Workshop Objectives• At the conclusion of this workshop, participants will be

able to:

– better understand the relationship of strategy and capability

– see their own role as HR Director in a new, proactive light, as

guarantors of a balance between strategy and capability

– advise the CEO on how to expand current HR evaluation levels to

measuring capability underlying performance

– advise the CEO on how to improve asssessing the realism of

company strategy in light of existing capability

– discuss the allotment of capability resources needed for fully

realizing present strategic objectives.


Assumptions of this Workshop• Achieving strategic objectives is more than ever dependent

on the capability of individuals and teams

• Much more in-depth knowledge about human capability is

available in social psychology than has so far been

appreciated by CEO’s and HR Directors

• We need to open a window on new and highly stratetgic

data sources that heighten the realism of strategic decision

making at the highest level of management (in particular, a

Capability Metric)

• We address CEOs and HR Directors alike, focusing on

human capability.Copyright © Laske and Associates, LLC, 2002

Workshop Topics• Part I: The Relation of Company Strategy and

Work Capability– Performance is based on Capability– Relevance of Capability in the Strategy Map

• Part II: Building and Using a Capability Metric– Opening a Time Window on Capability– How CDREM™ works– What a Capability Metric Tells Management

• Part III: Wrap Up– Benefits of CDREM™– New Tasks of the HR Director– Case Study Deliverables


Part I

Company Strategy andWork Capability


Performance is Based on Capability


Human Strategy Regards Work Capability


Vision

Business Strategy

Organizational Strategy

Human Strategy: Capability

Your Human Strategy Should be Guided by Insight into Work Capability


When you need a high-level view of human resources available to meet strategic

objectives, you need to understand current and future work capability

Performance Is Analyzed In Terms of Work Capability

• Actual work performance is based on personal capability to work, and differs from person to person, team to team

• Following Elliott Jaques (1994), we distinguish and measure three kinds of work capability: – current applied capability– current potential capability– future potential capability

• Research shows that potential capability grows over the life span along predictable maturational pathways of self- and complexity awareness (Loevinger, 1976; Kegan, 1982; Laske, 1999)

• Limits of (current and future) potential capability set limits to training effectiveness, and require long-term remediation, re-structuring, or outsourcing decisions.

opyright © Laske and Associates, LLCC, 2002

Relevance of Capability in the Strategy Map

• Any business may be seen as composed of four layers:– financial– customer relations– internal business process– learning and growth, or human capital

• Strategic objectives in the first three layers, when mapped into Learning and Growth, appear as ‘HR deliverables’

• Requisite HR deliverables regard capability, not just performance

• HR or “Learning and Growth” comprises two sublayers:– ‘enablers’ such as competence, team synergy, etc., that execute

strategy

– capabilities that underly enablers (sometimes called ‘meta-enablers’) and measure capability.

opyright © Laske and Associates, LLCC, 2002

Five Dimensions of a Strategy Map(adapted from BCS Collaborative, Inc., 2001)

Human Capital Effectiveness

Human Resource Efficiency

Shareholder Value

Financial Perspective

Customer Perspective

Internal Process Perspective

Learning & Growth Perspective

Customer Satisfaction Employee Satisfaction

Manage Operating Efficiency

Two Tiers of Learning and Growth

CompetenciesStrategic

Alignment / Motivation

Cultural Climate Team Integration

Leadership

Deliver World Class services

Manage Customer Relationships

WORK CAPABILITYCopyright © Laske and Associates, LLC, 2002

Enablers

“Meta-Enablers”

Impact of Capability on Performance

“Meta-Enablers” Measure Capability

Competence Leadership Alignment Culture Team Synergy

Internal Business Process

[short-term]

Customer Relations[short-term]

Financials[long-term]


CAPABILITY

To improve the short- as well as long-term realism of company strategy, we need to expand the

number of HR evaluation levels.

By doing so, we take into account a company’s actual work capabilities that determine its level of

current and future performance.


Expanding HR Evaluation Levels


Evaluation Level Brief Description ofMeasurement/Evaluation

Reaction Participants’ reaction to an HRinitiative

Learning Motivation, knowledge, orattitude changes

Implementation Changes in behavior on the jobthrough HR initiative

Enablers Survey answers regardingLeadership, competence,personal alignment, teamsynergy, cultural climate, etc.

Work Capability Measured in terms of threekinds of meta-enablers(current applied, currentpotential, future potential)

Business Impact Business impact of thecompany’s meta-enablerprofile

Financials (ROI) Monetary value of interventionresults against cost of the HRinitiative

Part II:

Building and Using a Capability Metric

Opening a Time Window on Work Capability


To analyze and measure work capability in sufficient depth means to open a time

window through which to view capability now, in the near future, and the far future.

Capability Evolves in Time


Current Applied Capability

Current Potential Capability

Future Potential Capability

Now Near Future (0.5 to 2 years)

Far Future (2-5 years)

Assessing Work Capability with CDREM™

CAPABILITY METRIC

Strategic

Objectives

Current Applied

Current Potential

Future Potential

WHO: Repr. Sample

Index Variables

WHAT: Enablers

Copyright © Laske and Associates LLC, 2002

2.

3a. 3b.

4a.

HR Deliverables

1.

4b.

5a-c

6.

Three Kinds of Work Capability (adapted from E. Jaques, 1994, p. 7)

• Now: Current Applied Capability (CAP): the level of capability a person is actually applying at a given moment in some specific work

• Near Future: Current Potential Capability (CPC): the maximum level of work a person could carry out at any given point in time, in a domain of work they value and given environmental support

• Far Future: Future Potential Capability (FPC): the predicted level of potential capability that a person will possess at some specific time in the (near or far) future– FPC grows throughout the life span along predictable maturational

pathways, and therefore can be reliably predicted.

• CDREM™ measures all three kinds of work capability. Copyright © Laske and Associates, LLC, 2002

Definition of Different Kinds of Capability

(researched by Jaques, Kegan, Basseches, Laske, 1955-2000)

• Current Applied Capability = Systemic grasp &

developmental level & *personal need & energy sinks

• Current Potential Capability = Balance of critical vs.

constructive thinking (“complexity of processing”) &

developmental level & *personal aspiration

• Future Potential Capability = Developmental level &

potential, & systemic grasp & balance of critical vs.

constructive thinking (“complexity of processing”).

• * comprising self conduct, task focus, and interpersonal perspective.


Index Variables, Current Applied Capability


CAC

Systemic Thinking Developm. Level Personal Need Energy Sinks

Critical Constructive Risk Potential Self Task Interpersonal

Thinking Thinking Clarity Conduct Focus Perspective

Self concept Autonomy Affiliation

Risk taking Drive to achieve Empathy

Change Flexibility Resourcefulness Helpfulness

Need for power Endurance Dependency

Need for visibility Quality of Planning Bias

Confrontationalism Need to Self Protect Relationship to Power

Change Relationship

Structure Structure under transformation

Capability Potential Detailed

• Future Potential Capability (determined by developmental level)– developmental level (level of self awareness)

– developmental potential (for reaching subsequent level)

– developmental risk (for regressing to lower level)

– systems thinking capacity (critical, constructive, systemic thinking)

• Current Potential Capability (determined by personal aspirations and developmental level)– task focus (autonomy, endurance, risk taking, drive to achieve,

motivation, quality of planning, follow-through, etc.)

– self conduct (self confidence, flexibility regarding change, need to control and direct, need for visibility, etc.)

– interpersonal perspective (capacity for affiliation, bias, dependency on others, etc.)


Capability Is Measured in Three Time Dimensions

• Capability is measured in terms of variables defining

people properties (sometimes called ‘meta-enablers’)

• In CDREM™, variables together form an index

• An index is specific to a particular enabler, such as

leadership or team synergy

• Each enabler is measured in three different but

interrelated time dimensions of capability: current

applied, current potential, and future potential.


Capability Index for Leadership


Leadership

Enabler Index Variables

1. Current and future potential, Developmental level (maturity)

2. Future potential, Developmental risk vs. potential

3. Current and future, Systems thinking capacity

4. Current and future, Change flexibility

5. Current, near future, and far future interpersonal perspective

6. Current, near future, and far future self-conduct

7. Current, near future, and far future approach to tasks (task focus).

How CDREM™ Works


Steps Toward Building a Capability Metric

Company Strategy Map

HR Deliverables, from Strategy

Define Target Population

Define Representative Sample

Define Index(es) based on Capability Standards

Copyright Laske and Associates LLC, 2002

Measurement Objectives

Definitions

• Representative samples comprise individuals or teams who, as groups, have certain work capability levels critical to company performance

• An index comprises a set of variables used to measure the work capability of a repr. sample

• Indexes measure a sample’s work capability levels against validated normative standards

• Standards stipulate current and future work capability levels defined in harmony with requisite HR deliverables.


Steps in Building a Capability Metric


HR CONCERNS

Indexes WORK CAPABILITY

HR DELIVERABLES

Representative Sample

CORPORATESTRATEGY

Assessment ofCapability in

terms of IndexVariables

How to Define a Representative Sample

The Company

Division A

Division B

Division C

Target Population

SampleCopyright Laske and Associates LLC, 2002

Note: Divisions can also be cross-functional groups

Structuring a Representative Sample


TYPES OF SAMPLEA. Pure Samples B. Mixed Samples1. Executive team only (=E) 1. Balanced sample (E, M, T,

I=25%)2. Middle management [groupleaders] only (=M)

2. Management sample (E=10%,M=50%, T=20%, I=20%)

3. Critical teams [and teammanagers] only (=T)

3. Team sample (E=0%, M=30%,T=70%, I=0%)

4. Individual contributors only (=I) 4. Workforce sample (E=0%,M=30, T=0%, I=70)

Indexes and Their Capability Standards

• A CDREM™ ‘Index’ is entirely customizable; it refers to any aspect of capability HR decides to measure

• An index measures capability levels with a focus on a particular enabler (e.g. leadership)

• An index is composed of a set of pertinent variables each of which is associated with a standard (customized to company strategy and HR concerns flowing therefrom)

• CDREM™ capability standards derive from current social science research

• Each index measures all three time dimensions of work capability: current applied, current potential, and future potential capability.


Capability Indexes are Composed of Meta-Enablers Measuring Capability Levels

Six Classes of of Meta-Enablers

Any number of customized

indexes

25 Capability Criteria

Future

Capability

Current Capability


Customized to

Company Strategy

Example: Variables of a Leadership and Change Flexibility Index

• Developmental level (16 levels)• Developmental potential and risk• Strength of complexity awareness (transformational capacity)• Strength of systems thinking• Self conduct

– self concept– flexibility for change– need for power and control

• Task focus– autonomy– resourcefulness under stress– quality of planning and order

• Interpersonal perspective– empathy– helpfulness/supportiveness– capacity for affiliation

• Energy sinks (gaps between personal needs and aspirations)• Culture climate index (gaps between Personal aspirations and actual

organizational experience)


Future potential capability

Current potential and applied capability

Current and Near-Future Capability Standards


Dimensions of Current CapabilityFactors ofCurrent Capability Personal Need Aspirations Org.

ExperienceSelf Conduct: how

people perceivethemselves

Task Focus: howpeople perceive their

workInterpersonal

Perspective: howpeople perceive their

co-workersEnergy Sinks: gapsbetween need and

aspirationsCulture Climate

Index: gaps betweenaspirations and org.

experience

Validatedmanagerialstandards ofpersonal andethical needs tobe satisfied bywork(e.g., drive toachieve)

Validatedmanagerialstandards ofaspirations heldfor ownorganizationalfunctioning(e.g., aspired-toachievement)

Validatedmanagerialstandards ofactual ex-perience ofthe organ-ization(e.g., ex-perience ofmanagement’sachievementorientation)

Far-Future Capability Standards


Factors ofFuture Potential Capability

Manifestation

Level of developmental maturity 16 levels between ages 20-100, eachassociated with a different degree ofleadership capability

Near-future developmental risk andpotential

Likelihood of advancing frompresent level, getting stuck at presentlevel, or regressing from level

Strength of systems thinking Overall capability to see theorganization systemically, ratherthan by personalization

Strength of critical vs. constructivetools (transformational capacity)

Balance of multiple perspectives inorganizational situations

What a Capability Metric Tells Management


CDREM™ outcomes are stated in the format of a Capability Metric

The metric reveals the hidden work capability of a representative sample.

Results are stated in terms of potential-to-risk ratios for all variables included

in the index measured.

Format of the Capability Metric


Index Variable StandardChosen

Risk(Proportion

MissingStandard)*

Potential(ProportionExceedingStandard)*

Risk-to-PotentialRatio

Future Potential CapabilityVariable 1…Variable nDevelopmentalMedian

Current Applied and Potential CapabilityVariable 1…Variable nBehavioralMedian

Capability Mean* Those adhering to standard are implicitly represented by ‘1.0’.

Important Link

Example 1


Leadership Capability Metric of an e-business firm lacking current and future capability potential

Leadership Capability MetricAdherence/

STANDARDMissing/

RISK

Exceeding/POTENTIAL

(Future Potential Capability)

(Current Applied Capability)

Dev. Level

Dev. Potential

Change Flexibility

Systemic Thinking

Self Conduct

Task Focus

Interpers. Perspective

Energy Sinks


-1.0 +1.0

CDREM™Index

Present State

Future State

Unused current potential

High-Level Summary for Leadership


Negative Findings Positive FindingsOverall: Risk Outweighs Potential

Risk 1: There is a large deficit in far-future potential capability (developmentallevel and systemic grasp) that cannot bealleviated by training

Potential 1: There are ‘pockets’ of samplemembers exceeding the standard set fordevelopmental potential, but they are notsufficient to offset the overall lack of far-future developmental capability

Risk 2:a. Whatever current potential capabilitythere is, is presently not used (energysink)b. The area of greatest current deficit isself conduct (i.e., self concept, risktaking, change flexibility, need for powerand visibility); this reflects a lack of far-future potential capability

Potential 2: There are ‘pockets’ of samplemembers exceeding the standard set forinterpersonal perspective (emotionalintelligence), but they not sufficient tooffset the overall lack of far-futurecapability

Actionable Detail, Example

Index Criterion ProportionMissing

Standard

ProportionAdhering to

Standard

ProportionExceedingStandard

Prognostic FindingsDegree ofsystemsthinking

33% 50% 17%

Diagnostic FindingsConduct (selfconcept,flexibility forchange, need forpower)

45% 37% 18%


Reaction of a Manufacturing Firm

• Repr. sample regards the middle management level

• High future potential capability is too long-term to be actionable

• High energy sinks require immediate harnessing of current potential in all ways possible (e.g., reward structure)

• Available options:– start a massive management development effort geared to harnessing

existing behavioral and developmental potential

– diminish unused potentials

• by wide-scoped job re-assignment and work place restructuring

• by firing parts of middle management, and either rehiring or outsorcing managers showing high current & future potential capability


Reaction of an Accounting Partnership

• Repr. sample regards managing partners (some of whom reside on the executive committee)

• High future potential capability points to a need for comprehensive succession planning

• High energy sinks speak to need of redefining partner responsibility in terms of existing individual work capability

• Available options:

– demote present managing partners whose current and future work

capability does not measure up to newly defined standards

– initiate a follow-up assessment focused on a target population of

partners with potential to become managing partners.


Example 2

Team Synergy Metric of a pharmaceutical company with good capability potential

Team Synergy Capability MetricAdherence/

STANDARDMissing/

RISK

Exceeding/POTENTIAL

(Future Potential Capability)

(Current Applied Capability)

Dev. Level

Dev. Potential

Change Flexibility

Systemic Thinking

Self Conduct

Task Focus

Interpers. Perspective

Energy Sinks


-1.0 +1.0

CDREM™Index

Present State

Future State

Unused current potential

High-Level Summary for Team Synergy


Negative Findings Positive FindingsOverall: Potentials Outweigh Risks

Risk 1: Lack of maturity level andresultant systems thinking deficit of teammembers presently pose the greatest riskto team synergy; risk is not outweighedby potential

Potential 1: There are large potentials fordevelopmental advance and changeflexibility that need program support(coaching, mentoring, team restructuring)

Risk 2:Self conduct risks –exaggerated or lowself concept, lack of flexibility forchange, need for power and visibility—are considerable, but outweighed byadherance to, and exceeding of, standard

Potential 2: There is a huge potential fordeveloping interpersonal perspective(emotional intelligence), and a morebalanced self concept.

Risk 3: Existing potentials of teamsynergy are currently unused.

Potential 3: future potential (far future)solidly supports current potential (nearfuture),

A Capability Metric Facilitates:


1. Applications for Venture Capital

2. Merger and Acquisition Decisions

3. Re-Visioning of Organizational Strategy

4. Change Management Initiatives

5. Human Capital Readiness Reports

6. Restructuring of Reward Systems

7. Outsourcing Decisions

8. Automation and Web Transfer Decisions

9. Management Development Programs

10. Employee Development Programs

11. Culture Climate Enhancement

12. Internal Business Process Enhancement

13. Customer Relations Enhancement.

Following-Up Capability Assessments

• Results:

– Following up assessments enables comparisons against a base line

established by the initial capability metric

– Follow up delivers insight into the effectiveness of developmental

programs for all three aspects of capability

• Timing:

– Current and future potential is followed up annually

– Current applied capability can be followed up in periods shorter

than a year.


Part III


Wrap Up

What CDREM™ Delivers

• CDREM™ is a tool for calibrating the quality of human

capital in organizations in terms of work capability

• CDREM™ provides a Capability Metric detailing present,

near-future, and far-future work capability

• A capability metric reveals the hidden potential of a

company’s workforce

• Findings in a Capability Metric heighten the realism of

strategic decision making at the highest level of

management.


A Capability Metric Scores Hidden ‘Company Intelligence’


CompetenciesStrategic

Alignment / Motivation

Cultural ClimateTeam

IntegrationLeadership

Developmental (long-term)

Potential

Behavioral (short-term) Potential

Financial Perspective

Customer PerspectiveInternal Process

Perspective

Work Capability

Enabler Intelligence

Selected Benefits of Capability Assessment

• A Capability Metric:

– is based on objective (social-science) standards of work capability in organizations

– is customized to current company strategy

– extends the time window on capability into the future

– strengthens and broadens the role of the HR Director at the strategy table

– introduces a heightened realism into HR program design and intervention, including e-HR (personalization of information).


New Tasks of the HR Director


The Principal Task of the HR DirectorIs To Answer to Work Capability Concerns

Strategic Company Objectives

Insight into Work

Capability

CONCERNSAssessment

of Work Capability

CDREM™

HR Solutions

and Deliverables


The Need for Integrating Two Approaches to Human Capital Management


Ad hoc & situational:

Opinion-survey based Best Practices

Grounded in social science:

Assessment-based Capability

Metrics

State of Human Capital

The old way The new way

The best way to explore the utility of a Capability Metric is to carry out a

CDREM™case study targeting some high-level company concern.


Case Study Deliverables

• A CDREM™ case study by Laske and Associates accomplishes:

– translating HR capability concerns into measurable indexes

– structuring and sizing one or more representative samples

– defining capability standards appropriate to the company’s

present strategic objectives and cultural climate

– carrying out the assessment proper (developmental interviewing,

behavioral questionnaire)

– calibrating the Capability Metric for one or more indexes

– interpreting capability findings with attention to actionable

insight

– suggesting appropriate CDREM™ follow up assessments.


How to Learn More


ReferencesBecker, B. E., M.A. Huselid, & D. Ulrich (2001). The HR scorecard. Boston, MA: Harvard BusinssSchool Press.Fitz-enz, J . & Phillips, J .J . (1998). A new vision for human resources. Menlo Park, CA: Crisp.Kaplan, R. & D.P. Norton (2001). The strategy-focused organization. Boston, MA: HarvardBusiness School Press.J aques, E. (1994). Human Capability. Falls Church, VA: Cason Hall & Co.Kaplan, R. & D. P. Norton (1996). The Balanced Scorecard. Boston, MA: Harvard Business SchoolPress.Laske, O. (2002a). How will you deliver strategic human resources beyond domain competence?Human Capital Online, Delhi, India.Laske, O. (2002b). After ‘competence,’ ‘emotional intelligence,’ and ‘learning and growth’:What’s the next step? HR.com, February.Laske, O. (2002c). The place where work happens. Submitted to The OD Practitioner.Laske, O. & B. Maynes (2002). Growing the top management team. A. & N. Korac-Kakabadse (Eds.),Journal of Management Development, 21. Cranfield, Bedfordshire, U.K.Laske, O. (2001a). Linking two lines of adult development: The Developmental Structure/ ProcessTool. Bulletin of the Society for Research in Adult Development (SRAD), 10.1, 8-11.Laske, O. (2001b). A learning and growth metric for strategy-focused organizations(http:/ / www.balancedscorecard.org/ wpapers.html).Laske, O. (2001c). The CDREM readiness report™

(http:/ / www.balancedscorecard.org/ wpapers.html).Laske, O. (2001d). CDREM for managers™ (http:/ / www.balancedscorecard.org/ wpapers.html).Laske, O. (2001e). What lies beyond alignment with strategy and other HR enablers? HR.com,Nov. 16, 01.Laske, O. (2001f). What do meta-enablers add to your insight into the workforce? HR.com, Nov.30, 01.Laske, O. (2001g). How do you access and assess intangible human-resource assets? HR.com,Dec. 14, 01.Laske, O. (2000a). Foundations of scholarly consulting. Consulting Psychology J ournal, 52.3,178-200.Laske, O. (1999a). Tranformative effects of coaching on executives’ professional agenda. AnnArbor, MI: Bell & Howell Company (www.bellhowell.infolearning.com; order no. 9930438)Laske, O. (1999b). An integral model of developmental coaching. Consulting Psychology J ournal,51.3, 139-159.

Laske and Associates, LLCSpecialists in Human Capital MeasurementOtto E. Laske PhD PsyDFounder & Manager

51 Mystic St.West Medford, MA 02155, U.S.A.(781) [email protected]

• Consultation on strategic human-resources management, including web-based systems

• Design of Capability Metrics

What gets measured, gets managed

Documents

Enhancing HR Value to the CEO: Strategies for Matching Strategy to Capability Laske and Associates, LLC Otto Laske, PhD PsyD, Manager Medford, MA, USA