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HR Optimization From Personnel Administration to Human and Organizational Capital Development Rick Bellingham, Ed.D. with Russell J. Campanello, Contributing Editor HRD Press, Inc. Amherst, Massachusetts

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Page 1: HR Optimization

HR OOptimization

From Personnel Administration to Human and

Organizational Capital Development

Rick BBellingham, EEd.D.with

Russell JJ. CCampanello,Contributing EEditor

HRD Press, Inc.Amherst, Massachusetts

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Copyright © 2004, HRD Press

All rights reserved. It is a violation of the law to reproduce, store in a retrievalsystem or transmit, in any form or by any means, electronic, mechanical, pho-tocopying, recording or otherwise, any part of this publication without the priorwritten permission of HRD Press, Inc.

Published by HRD Press, Inc.22 Amherst RoadAmherst, Massachusetts 010021-800-822-2801 (U.S. and Canada)1-413-253-34881-413-253-3490 (fax)http://www.hrdpress.com

ISBN 0-87425-762-X

Typeset by Pracharak Technologies (P) Ltd, Madras, IndiaCover design by Eileen KlockarsEditorial services by Suzanne Bay

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Other books by Rick Bellingham:

Ethical Leadership, Second Edition

The Manager’s Pocket Guide to Spiritual Leadership

The Manager’s Pocket Guide to Corporate Culture Change

The Manager’s Pocket Guide to Virtual Teams

The Complete Guide to Wellness

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Dedication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .vii

Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .ix

Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .xi

Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .xiii

Section I Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Section II Core Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

1. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

2. Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

3. Human Capital Management System (HCMS) . . . . . . . . . . . . . . 29

4. Learning and Development. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

5. Staffing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

6. Leadership Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

7. Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

8. Process Excellence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79

Contents

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Section III Account Management . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

9. Business Consulting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

10. Employee Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99

11. Change Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

12. Performance Management . . . . . . . . . . . . . . . . . . . . . . . . . . . 115

13. Diversity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129

14. Measuring Human and Organizational Capital . . . . . . . . . . . 139

Appendices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147

Appendix A: Customer Satisfaction Survey . . . . . . . . . . . . . . . 149

Appendix B: Critical Consulting Skills (Positioning, Contracting, Productive Dialogue) . . . . . . . . . . . . . . . . . . . . . 157

About the Author . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187

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We would like to dedicate this book to our children, Emily, Nina, and Rebecca.It is for them that we have the passion to create healthy, innovative, and productive work environments.

Dedication

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First and foremost, we want to acknowledge Robert Carkhuff, Ph.D., whoseperspectives, constructs, and technologies made this book possible. Dr. Carkhuffis the originator of the terms Human and Organizational Capital Development,which he service marked in the 1980s.

We would also like to acknowledge people who contributed significantly to thecontent in this book: April Hendrick, Bill O’Brien, Doug Nufer, Ed Raine,Evelyn Flaherty, Greg Friedman, James Fuller, Jen Kahler, JoAnn Nikka, LauraMoorehead, Lisa Wales, Maria Van Parys, Maritzie Rudden, Matt Cohen,Michael Serino, Michele Giametti, Neal Bruce, Nicol Pitchon, Theresa Daniels.We could not have written this book without their input and feedback.

Finally, we want to express our gratitude to our clients who have helped shapeour ideas. We have worked with over 200 companies over the past 25 years, andit is our learning in those organizations that provided the material for this book.

Acknowledgments

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This book represents a blueprint for human resource transformation. It not onlycontains action steps and tasks, but also provides the vision for the future ofhuman resources.

It is obvious in this book that Bellingham and Campanello have not only livedin the organizational trenches for many years, but also have done their research.It is scholarly, pragmatic, and easily accessible. Bellingham and Campanello pos-sess an incredible track record for innovation and results.

Implementing the recommendations in this book should result in a great com-pany in which great people have great jobs. It explains how to align the businessand people strategies to achieve profitable growth. It successfully outlines thelevels that exist between a company’s present state and the end game. Thus, oneis never too far away from an orientation point.

The beauty of this book is that it stimulates thought and provides a process fordiscussion. Each chapter is written to engage readers in a thought process thatcan be applied to their unique situation. The book encourages readers to assesstheir current situation, think about organizational readiness for change, andthen develop action strategies to elevate the function. This book succinctly out-lines critical success factors and invites readers to add their own success factorsand their reasons to change.

Some of the most compelling ideas of each chapter are contained in the Lessons Learned section. The authors derive these lessons from over 40 years ofwork with more than 200 companies. As such, they constitute a rich source ofguidelines for successful transformation.

Perhaps the most unique contribution this book makes is to organize all 14human resource functions into their respective components, functions,processes, conditions, and standards. Based on the work of Dr. RobertCarkhuff, no other book has taken such a systematic and deductive approach to

Foreword

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HR optimization. Again, the experience of the authors comes through in theconclusions of each chapter. Their multidimensional thinking provides frame-works and models that are invaluable for guiding transformation efforts.

As a business leader, I am continually implored to take into account the humanand organizational factors that account for sustainable growth. This bookshows how to do just that.

Barry Cohen, Ph.D.Executive Vice President PTC

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We believe that many contemporary HR organizations have unique and sub-stantive capabilities—it is our responsibility as an HR community to share ourthinking and our models with the wider HR community in the hopes that morecompanies will invest significant resources in people and culture.

This book is not meant to be a cure-all for all HR departments within allcompanies. Each company and each HR department has unique needs thatrequire thoughtful tailoring. We hope that this book will be a stimulus tohelp you think through your particular challenges and distinguish yourself asan HR professional independent of organizational support for HR. As such,this book is incomplete; it will be completed by your participation. In eachchapter there will be opportunities for you to assess the current level of func-tioning of your organization, to identify reasons for you to change, to reflectupon the critical success factors in your organization, and to summarize thelessons you have learned in your efforts to implement initiatives in each function.

Your organization may only want or demand personnel administration fromHR. This book provides guidelines and strategies for optimizing that role. Onthe other hand, many organizations are demanding more from HR. In a serviceeconomy, compliance and reporting are necessary but insufficient requirementsfor HR. Many businesses are asking HR to add value, to act as strategic part-ners, and to develop individual and organizational capabilities. Whatever yourorganizational reality is, this book will help you and your colleagues grow asHR professionals.

We would like you to see this book as an invitation to change because it repre-sents the tone with which we would like to see the book received. It imposes nei-ther participation nor use. We see the writing of this book as a dynamic processthat will encourage you to journal your experience in transformation. We

Preface

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believe that every one of you will have a different perspective on and experiencewith the changes you are making.

The book is divided into three sections: Introduction, Core Solutions, andAccount Management. The Introduction describes the purpose of transforma-tion: for organizations to evolve from good companies (or bad companies, ifthat is the case) to great companies; and for people to be able to describe theirjobs as a great experience. Sections II and III discuss how HR can contribute tothe creation of great jobs in great companies.

The 14 chapters in this book each discuss one HR function—each chapter hasseven parts:

1. Introduction

2. Scale

3. Why Change

4. Critical Success Factors

5. Reality

6. Lessons Learned

7. Conclusions

The Introduction describes the function and discusses why the function is anessential element in a great job. The Scale enables us to assess where we are andwhere we want to be in the function. Why Change addresses the reasons we needto look at things differently and to elevate our thinking. It should be noted thatexamples in this section represent a composite of over 200 companies. CriticalSuccess Factors summarizes our strategy for change and incorporates theoreticalconstructs that support the change. The Reality is a place for all of us to describeour journey along the way—it’s a place for sharing the human-interest stories thatwill bring this book alive and make it real for the reader. It’s also the place todescribe the organizational realities and context in which the implementation willtake place. Lessons Learned encourages us to identify potential pitfalls and to cap-ture and share our insights about transformation and the evolution of people andfunctions. Conclusions organizes the key points from the chapter into compo-nents, functions, processes, conditions, and standards. We used this organizingconstruct so that by the end of the book you will not only have a path for transforming your function, but also a framework for ongoing analysis and development.

As you will see, everyone has an opportunity to contribute to this book. Youmay have a strong feeling about why change is required. Write it down. You mayhave an interesting story to tell that helps the reader understand the barriers and

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obstacles to change. Share it. Your experience may have led to a real epiphanyfor the Lessons Learned section. Pass it along.

In fact, we encourage you to write your own story. This book simply providesexamples and perspectives we have acquired along our own journey. To makethis book really work for you, you’ll need to personalize each section to yourown situation. You may have different reasons for change than we describe here.Your critical success factors may be different from what we have found to besuccessful. This book is a road map, not a recipe. Create your own stew.

PREFACE

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Section I

Introduction

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How would you rate your job? Great? Good? OK? Bad? Depressing? What measures did you use to arrive at your rating?In the United States, a common measure of a great job is one that pays a lot ofmoney. This book asks, “At what price?” Clearly, there are quantitative meas-ures of success that need to be taken into account, but what about the qualita-tive side?One of our clients was a man who had just sold his company for $30 million.As it turns out, we had helped him structure the company in a way that madethe sale possible. The terms of the sale included a clause for him to continue asCEO of this company for two years. After the deal closed, we asked him whatsuccess looked like for him at the end of those two years. When he started spout-ing quantitative measures, we interrupted him and said, “You’ve already wonthat game beyond your wildest dreams, what about the personal measures ofsuccess, like being able to spend more time with your grandchildren?” He wasvisibly startled, but to his credit, responded, “You’re right. I do need to changemy measures of success.”Unfortunately, few of us are able to achieve the quantitative level of success thisclient attained. This book suggests a re-framing of our measures of success andencourages both individuals and organizations to take more responsibility forthe qualitative side of the equation. Most people spend a large portion of their lives working. It is not uncommonfor a person to work 50 hours per week for 40 years or more. This equates to100,000 hours of work in a typical lifetime. This book explores the impact ofthat huge investment of time on the quality of our lives. Sadly, in many cases,the most significant investment of our time has a negative return. In our work as HR professionals, it is important for us to remember that we can have a significant impact on the quality of life for our colleagues in our

Introduction

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respective organizational communities. As Dave Ulrich, a leading HR strategist,would say, our work is more than becoming administrative experts, we need tobe employee champions, change agents, and strategic partners. In doing so,however, we need to keep in mind the desired outcomes of all our efforts: toimprove the quality of life of our colleagues and to add measures of success thatgive people real meaning. As Jim Collins, a noted author and consultant, wouldsay, our organizational goal is to transform our organizations from Good toGreat. Our goal at the human level is to enable all employees in our companyto respond to the question “How would you rate your job?” with a resounding“Great!”

It may be helpful to start this journey with an assessment of how you would rate your job. Simply complete the following survey to determine if your workexperience is for better or for worse.

Job Satisfaction Survey

1. I look forward to going to work on Monday morning.

2. I feel positive and up most of the time I am working.

3. I have energy at the end of each work day to attend to the people I careabout.

4. I have energy at the end of each work day to engage in personal interests.

5. I have the time and energy in my life to read books that interest me.

6. Most interactions at work are positive.

7. I have good friends at work.

8. I feel valued and affirmed at work.

9. I feel recognized and appreciated at work.

10. Work is a real plus in my life.

11. I’m engaged in meaningful work.

12. I feel free to be who I am at work.

13. I feel free to do things the way I like at work.

14. My values fit with the organizational values.

15. I am aligned with the organizational mission.

16. I trust our leadership team.

17. I respect the work of my peers.

18. I have opportunities to learn what I want to learn.

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19. I feel involved in decisions that affect our organizational community.

20. Creativity and innovation are supported.

21. I feel informed about what’s going on.

22. I know what is expected of me at work.

23. I have the materials and equipment that I need in order to do my workright.

24. I have the opportunity to do what I do best every day at work.

25. My manager cares about me as a person.

26. I know someone at work who encourages my development.

27. My opinions count.

28. My co-workers are committed to doing quality work.

29. My manager reviews my progress.

30. I am fairly compensated.

Give yourself 2 points for each statement you answered positively. Use the fol-lowing scale to evaluate your job:

50–60 points: Great Job40–49 points: Good Job30–39 points: OK Job20–29 points: Bad Job0–19 points: Depressing Job

Now that you have an assessment of where you are on this scale, we can beginour discussion of how to create the conditions and standards that will enableyou to answer more of the questions positively. Before we begin the process ofassessing where you are on all of the HR functions, it is critical to get a sense ofthe context in which we are trying to make changes as individuals and as organ-izations. This introduction will help you evaluate not only how you are feelingabout your current job, but also how you view your organizational culture. Aswe mentioned earlier, our organizational goal is to transform our organizationsfrom good to great. Jim Collins conducted extensive research on this subject andwrote a book about the findings, Good to Great.

What follows is an adaptation of the timeless characteristics that Collins discov-ered in his research:

1. Undaunted curiosity

2. Rigorous not ruthless

INTRODUCTION

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3. Culture of discipline:

Disciplined people

Disciplined thought

Disciplined action

4. Leadership humility

5. Professional determination

6. Right people in the right jobs

7. Unwavering faith

8. Honesty about the brutal facts of the current reality

9. Carefully selected technology accelerators

10. Core values

11. Understanding of differentiating competencies (what we are best at in theworld)

12. Piercing insight into economic drivers

13. Focused passion

14. Goals based on understanding vs. bravado

15. Executive decisions based on

Dialogue and debate

Autopsies and analysis

You may want to ask yourself how many of those characteristics would describethe organizational culture in which you work. Which of the 15 characteristicswould you consider to be strengths in your organizational culture; and whichwould be weaknesses?

The results give you an indicator of context and organizational readiness. Oneof the central challenges of HR professionals is to continually calibrate the workwith organizational reality.

This book contains ideas for transformation in 14 critical Human Resourceareas that will result in employees pronouncing that they have a great job in agreat company. Focus on all of the following 14 areas will result in significantcontributions to human and organizational capital:

1. Compensation

2. Benefits

3. Human Capital Management System (HCMS)

4. Learning and Development

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5. Staffing

6. Leadership Development

7. Communications

8. Process Excellence

9. Business Consulting

10. Employee Relations

11. Change Management

12. Performance Management

13. Diversity

14. Measuring Human and Organizational Capital Development

Each chapter contains principles for improving the delivery of services. As youread each chapter, remember the goal: to elevate the human and organizationalcapabilities of the company from good to great. At the beginning of any inter-vention or transformation effort, the first question that needs to be addressed is“What are the desired outcomes of this investment?” For an HR Optimizationproject, we answer that question as follows:

The compensation system rewards desired behaviors and core values.The benefits package promotes and encourages wellness and wise medicalconsumerism.The HR information system is user-friendly and serves as the foundationfor capturing, maintaining, and reporting on all employee data worldwide.Learning and development programs have real business and personalimpact.Staffing processes result in attracting, hiring, and retaining the right talentin a short amount of time at low cost per hire.HR business partners add value to all discussions related to strategy, struc-ture, and business issues.Great talent stays with the company and employee satisfaction ratings arehigh.HR leads change management initiatives and helps to define desired endstates.Leaders are promoted from within and are extremely successful in achiev-ing business results.All employees have contribution and capability plans written andreviewed.

INTRODUCTION

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Employees are inspired by the company vision and direction; everyone iscertified to tell the story.

HR is easy to do business with; processes are smooth and efficient.

The company acts as one team and leverages its collaborative processingcapabilities.

There is significant diversity of talent in all organizations at all levels.

At the beginning of each chapter, there is a scale that outlines the range of pos-sible outcomes for each of the items listed above. For example, while the idealoutcome of changing the compensation system is to reward desired behaviorsand values fairly and appropriately, there is no guarantee that the ideal will beachieved. There may be too much resistance to change or too much attachmentto old ways of rewarding performance. Some people will prefer reward systemsthat are based solely on revenue production and that compensate them forachieving the ends independent of the means. Rewarding people based on a bal-anced scorecard and company performance may represent a dramatic shift inphilosophy and threaten people. Therefore, it is critical to construct a range ofpossible outcomes, assess the gap between the current reality and the future pos-sibility, and determine the amount of resources required to achieve the goalgiven the level of resistance. Each of the scales presented was built on a genericconstruct that can be represented as follows:

5: Ideal End State.

4: Very Positive, but Less Than Optimal End State.

3: Acceptable End State.

2: Less Than Acceptable End State.

1: Totally Unacceptable End State.

The key to all change is seeing possibilities against the backdrop of reality. It isjust as important to envision the possibility as it is to assess the reality. Havinga broad range of outcome measures with specific indices for measuring successguides the transformation efforts and enables change leaders to determinedynamically what additional resources or shocks will be required to achieve thedesired end-state—the scales simply facilitate that process. In reading the scales,it is important to understand that the scales are cumulative from level 3 up tolevel 5, i.e., a level 5 outcome incorporates the positive aspects of level 3 andlevel 4 outcomes.Each chapter in this book is designed to help HR departments achieve successin each of the 14 solutions addressed herein. If you are using this book to engageyour team in the work of transforming HR, we suggest you welcome contribu-

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tions from any source. When people contribute ideas for transforming your HRorganization, acknowledge their input. With your team, you can establish amodel for your own HR transformation. When you complete the journey, yourwhole team will own it.

If you are able to “move up the scale” in the 14 functional HR areas, you will be contributing to human and organizational capital development. The lastchapter of this book, “Measuring Human and Organizational CapitalDevelopment,” explores ways to measure the business impact of yourprogress—a new way for assessing the strength of your strategy and for measuring human and organizational capital.

INTRODUCTION

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Section II

Core Solutions

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IInnttrroodduuccttiioonn

How people are compensated for their work in regard to base salary, bonuses,and stock grants has a large bearing on how they feel about their job and theircompany. People need to feel they are being compensated fairly and competi-tively. Most importantly, people need to believe that their compensation isdirectly linked to their personal performance, as well as corporate performance,and is in line with their contribution. Fairness is the operative word.

Compensation strategy needs to be linked to corporate strategy. Decisions onthe richness and mix of compensation depend on “who” the company is andwhat it is trying to achieve. For example, a company that positions itself as adependable, steady organization may not want or need a compensation strategywith a high variable component. It is a mistake for companies to promote some-thing that is not real. HR professionals need to make sure that the compensa-tion strategy is consistent with the organizational reality. While we all aspire todoing great things (at least that is our assumption about the reader of this book),“great” needs to be defined relative to the organizational context in which youare working.

SSccaallee

There is a range of possible outcomes in any effort to change the compensationsystem. Here is a scale to envision possibilities and assess current realities:

Compensation

Chapter

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5: Reward systems tied to desired behaviors and core values.

4: Reward systems tied to company performance.

3: Rewards tied to individual performance.

2: Rewards in line with market/no internal equity issues.

1: Rewards not tied to performance or to market. System lacks integrity andis not perceived as equitable.

Where are you on the scale now? ______

Where do you want to be on this scale in one year? ______

WWhhyy CChhaannggee

Company A grew very rapidly as a result of superior engineering technology.As a high-flying, high-tech company, Company A was able to attract and retaingreat talent with relatively low cash compensation and rich option packages.As competition became more intense and the economic climate deteriorated(i.e., devaluation of high-tech stocks), stock options became a less importantcomponent of the compensation package. Whereas in the past, Company Acould easily attract and retain people by offering base pay and total cash com-pensation at the 50th percentile with a great deal of upside potential on stockoptions, conditions have changed. The company now needs to take a hard lookat each component of the mix. Company A needs to move toward the 75th per-centile on total cash compensation and reduce its reliance on and use of stockoptions. In order to attract and retain key talent, it needs to design a compen-sation system that drives a high-performance culture and that is intimatelylinked to the performance management system. In short, Company A’s reasonsto change are the need for greater flexibility, fairness, and attractiveness as anemployer.

YYoouurr RReeaassoonnss ffoorr CChhaannggee

CCrriittiiccaall SSuucccceessss FFaaccttoorrss

The two essential ingredients in transforming a corporate culture are leader-ship role modeling behaviors and the reward system. People take their cues

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from their leaders. Thus, leadership behaviors must be consistent with thevalues and philosophy of the compensation system. If behaviors that supportthe desired and required norms and values of the new culture are rewarded,then people will get the message that compensation is tied to cultural leader-ship. If the compensation system continues to reward old ways of doing busi-ness, then cultural proclamations and business imperatives will ring emptyand employees will become increasingly cynical. In order to create an envi-ronment in which people feel great about their jobs, the compensation system must be aligned with stated values and operating principles. Leadersmust be clear about performance expectations and how associates will berewarded.

At the foundation level, rewards need to be in line with the market and sup-port the business strategy. Organizations need to make a policy decision topay at the 50th percentile, the 75th percentile, or whatever is appropriate.If a company pays less than the 50th percentile, there will need to be multi-ple factors in the culture to “compensate” for a lack of compensation or itwill be impossible to attract great talent or star performers. On the otherhand, the strategy may not be to hire stars. The compensation strategy maybe to attract solid performers by paying fair wages in exchange for securityand growth opportunities. In essence, the compensation strategy shouldreflect the needs of the business strategy in attracting the most appropriatetalent.

Once a company decides the strategy and the corresponding pay percentile,benchmarking analyses are required to determine the comparability of each jobin relation to market rates. In order to execute business strategy, it is usually nec-essary to compete for appropriate talent. Business strategy drives decisionsrelated to compensation because it specifies requirements for critical talent thatcan only be acquired and retained through competitive compensation programs.The corporate culture also influences compensation decisions because it eitherconsists of a number of compelling reasons for joining or staying with a com-pany (for example, a winning company, great branding, quality of life, careerdevelopment, or any of the Great Job/Great Company indicators listed in theIntroduction) . . . or it doesn’t. If there are few compelling reasons for joiningor staying with a company other than compensation, then the compensationpackage will need to be very rich. A good compensation system does not keeppeople focused on their compensation, it keeps them focused on other com-pelling aspects of the organization because pay is not a distraction. Again, theoperative word is fairness. Employees will always ask, “Am I being paid fairlyand rewarded appropriately for my contributions to what the company says isimportant?”

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Decisions surrounding compensation present a terrific opportunity for HR busi-ness partners to take a leadership role with their clients. Since compensationusually tops the list of what’s most important to corporate clients, businesspartners can add real value to their clients through their consultation oncompensation issues. In any company, the way compensation issues are handledis critical to the perceived effectiveness of HR.

It is also important to minimize inequities within departments. Over a period oftime, because market rates vary according to supply and demand curves, theremay be several people in a department doing very similar jobs but who are paidat significantly different rates. For example, one person may have been hired asa computer programmer in 1997 when the market value for such jobs was$50,000. Another programmer could have been hired in 2000 when the marketrate for the same job was $75,000. Thus, while appropriate market measureswere used to determine salary, the changing rates create inequity issues withinthe department. These issues are compounded when gender and race come intoplay. Salary offers, merit increases, and other compensation decisions must takeinto account both comparability and equity considerations. These issues typicallyconsume a large share of compensation specialists’ time.

While it seems to be common sense to tie rewards to individual performance,this practice is far too uncommon. We have worked in multiple corporations inwhich the compensation team and performance management team did not talkto each other. Unfortunately, very few organizations are satisfied with their per-formance management system and even fewer believe that performance is linkedfairly and accurately to compensation. In too many cases, employees perceivethat rewards are tied more to who you know than to what you deliver. This per-ception violates one of the primary characteristics of a “great job”: I am fairlycompensated. While performance management will be discussed in more detailin Chapter 12, it is important to make the connection here. The other commonfactor that causes employees to rate a job as “depressing” is to have an opinion-ated boss who uses only one source of input to make compensation decisions—his or her own perception. Not only are managers often not in the best positionto evaluate performance, they may also suffer from biases that could taint theirevaluations. In the worst of cases, the manager may be a golfing buddy of anemployee who is of the same age, race, sex, background, and sexual orientation.This employee may benefit from a “halo effect,” while another employee froma different set of circumstances may be unjustly compensated. These situationsfeed the negative perception among employees that compensation decisions arebased more on “how you dance vs. what you do.” In single-rater situations,quiet contributors are also often ignored unless the manager is finely attuned toeach employee’s various levels of contribution. When compensation is linked

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closely to performance and employees feel that evaluation decisions are donefairly and accurately, employees are much more likely to proclaim, “I’ve got agreat job!”

Assuming that a company has addressed internal equity and market comparabil-ity issues and that compensation is linked intimately to performance, the nextlevel of achievement is to tie compensation to organizational performance. Thislinkage is typically accomplished through incentive programs. When bonuses aregiven every year independent of the financial performance of the firm, thenemployees begin to see this form of compensation as an entitlement. If bonusesare tied to company performance, employees are more likely to think interde-pendently and the company has a greater chance of survival in tough economictimes. If employees know that they will be compensated based on how well thecompany achieves its revenue and profitability goals, then everyone will activelyseek ways to help each other succeed. A one-team mentality starts to take formin which all members of the community work collaboratively for the greatergood. This phenomenon is what makes people experience their everyday workexperience as a great job. Feeling part of a community in which all members arefocused on common goals leads to greater satisfaction than simply working inde-pendently to collect a pay check each week. It is important to point out, however,that variable compensation can only be leveraged so far. Base salary needs to befair enough for employees to “hang in” during tough times. The perception offairness is based on both structural fairness and reward fairness. Structural fair-ness relates to how the job fits into the career path framework; reward fairnessrelates to the amount and timing of incremental increases.

At level 5 on our compensation scale, reward systems are tied to desired behav-iors and values. Stock option grants are the most common way of making astatement that particular behaviors are valued and that the organization wantsthe person to remain in the community. When stock option grants are awardedto people who achieve financial goals at the expense of all other stated values in the culture, employees rightly conclude that they are simply a member of amercenary community with one value—money—not a growth community inwhich several values are rewarded and recognized. Linking rewards to desiredbehaviors and values requires three key elements: (1) a clear articulation of whatthe desired behaviors and values are; (2) a commitment to tie compensation tothose behaviors; and (3) a reward system that takes into account the contribu-tion that individuals make to the desired culture. Articulating the desired valuesis not an event that the executive committee performs; it is a process in whichemployees at all levels of the organization participate. If employees are involvedin the process of stating desired behaviors and values, they will be much morelikely to own them. When values are clear, they can become a vital part of the

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performance management system, so employees get regular feedback on howwell they are contributing to the values or detracting from them. That feedbackshould influence compensation adjustments.

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While the theoretical constructs of compensation appear logical, the realityoften presents many challenges. Here are some examples from our experience.

Tenured vs. new employees. With changing economic conditions, it is notunusual for people to be recruited into the organization in boom times withinflated salaries. When this happens, loyal employees who have served manyyears may find themselves with far smaller salaries than new employees with lessexperience. These situations, which are difficult to avoid, are even more difficultto resolve when the economy slows and profit margins come under pressure. Doyou always pay market value for new jobs? Do you always limit pay raises forexisting employees to a certain amount? What happens when you refuse to payinflated market values or if you start making exceptions for certain employees?If rigid adherence to a philosophy of limiting pay raises to a certain percentageresults in a situation in which employees have to quit and return to get signifi-cant bumps in compensation, how do you deal with those employees and theones who stayed with you and came up short?

Legacy products vs. new technologies. Supply and demand curves sometimescreate bidding wars for people who have skills in hot products. For example,when SAP first emerged, consulting companies were paying “hot skills” bonusesto attract people who had SAP implementation skills. The problem occurs whenthe supply and demand curve shifts and the hot skills cool off. What happens ifthe bonuses for these skills are baked into base salary? Do you take away thebonus? Should you use variable compensation to deal with “hot skill” pressureson compensation?

Transfers between organizations. In many organizations, some departmentsfollow the compensation rules, while other departments don’t. When an individ-ual transfers from a department that doesn’t follow the rules into a departmentthat does, what do you do if the person’s compensation is far above his or her

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colleagues in the new organization because he or she benefited from exceptions?For example, a Web designer in marketing with essentially the same job as aWeb designer in IT makes much more money because the marketing departmenttended to pay higher wages and regularly made exceptions to the rules. Inaddition, the person in marketing has an incentive plan and the person in ITdoes not. What do you do when the marketing person gets transferred to IT?What do you do when exceptions become the rule?

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1. It is important to start with a guiding philosophy and stick to it.

2. HR business partners can have a tremendous impact on the business byoptimizing the compensation value proposition.

3. Effective compensation policy requires a balanced approach with thought-ful consideration for how compensation is configured among base, variable,and stock incentives.

4. As the business climate changes and business strategy changes, compen-sation must adjust policies to be aligned with the changes.

5. The leadership team must own and believe in the compensation strategy.

6. It is critical to be able to accommodate exemplars and star performerswithout destroying internal equity.

7. Compensation is as much art as science.

8. Compensation decisions need to take into account performance, equity,and market conditions.

9. Structured flexibility is the best policy. There is always a need for discretion.

10. Compensation must be interdependent with other initiatives such asperformance management, career development, etc.

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CCoonncclluussiioonnss

The components that need to be taken into account in any comprehensivecompensation program are base salary, bonuses, incentives, and stock grants.The right levels and mix of these components should result in improvedperformance and motivation. The three critical processes of compensation arebenchmarking, performance management, and continuous calibration. Clearly,economic conditions play a major role in compensation decisions, but the stan-dard of fairness should remain constant.

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IInnttrroodduuccttiioonn

The benefits package is an essential part of the employment agreement. Employeesneed to feel that they are financially protected from catastrophic loss or dis-abling disease. In the United States, this level of coverage is necessary to meetthe social service threshold—the level at which basic health care needs are met.Many benefits address fundamental needs for safety and security (which accord-ing to Maslow’s hierarchy must be met first). Other benefits, such as tuitionreimbursement, address higher-order needs. If people do not feel safe and secure,they cannot move up the transformational ladder to feel belongingness, esteem,and self-actualization (a great job provides all of these). A comprehensivebenefits package should address the full range of needs of a diverse workforce:financial, social, emotional, physical, and intellectual.

SSccaallee

There is a range of possible outcomes in any effort to change a benefits package.The following scale helps to envision possibilities and assess current realities:

5: Benefits package attracts the right talent and promotes and supports totalemployee well-being for a diverse population.

4: Benefits package promotes wise consumerism and employee well-beingand engages people as healthy partners.

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3: Benefits package is competitive with market in comprehensiveness and iscost-effective.

2: Benefits package is competitive with market in comprehensiveness, butmore costly than most.

1: Benefits package is not competitive with market and promotes unwiseconsumerism; policies promote sickness behaviors.

Where are you now on this scale? _____

Where do you want to be on this scale in one year? _____

WWhhyy CChhaannggee

Historically, Company B offered one of the richest benefits packages of any high-tech company. Company B was one of a few companies that provided 100percent medical coverage. When health care costs were rising at 5 to 7 percentper year and profit margins were robust, Company B was able to afford a com-paratively rich benefits package. Now health care costs are rising at 15 to 20percent per year and company profit margins are declining. It is prohibitivelyexpensive to continue to offer the same benefits package. In 2002, Company Bpaid approximately $17 million in U.S. health care costs. With no changes in thebenefits package or economic conditions, those costs would exceed $50 millionin 2008. In addition, the benefits package was designed to address the needs ofa male, family-oriented employee base. As the workforce becomes more diverse,benefits packages need to change to take into account different demographicsand life style orientations. There is also a growing body of research that sup-ports the idea that partnering with employees on health care management andfocusing on prevention can lead to significant cost savings and to healthieremployees. By targeting high-risk employees, promoting positive health practice,and educating employees on wise medical consumerism, health risks and theirassociated costs can be reduced. In short, the reasons to change are lower costs,more flexibility, and better health care.

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Benefits can be a compelling part of the great job equation. Some of the funda-mental benefits employees expect in their benefits package are health, dental,

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and life insurance. In today’s environment, an enhanced level of benefits usuallyincludes an employee stock purchase plan (ESPP), a 401(K) plan, dental care,Employee Assistance Programs (EAPs), and vision care in addition to the stan-dards mentioned above. Many progressive companies offer elder care, childcare, paternity and maternity leaves, as well as provide comprehensive wellnessprograms, encourage work-life balance, and take seriously the idea of creatinga healthy work environment. Transforming benefits requires an elevated perspective of health. Benefits shouldaddress the physical, emotional, intellectual, and financial issues that are impor-tant to employees. For example, particularly in this economic climate, the401(K) plan is a very important component of the benefits package. Employeeswant to have flexibility in how they access their retirement accounts. With medical care costs rising at 15 to 20 percent per year, it is cost prohibitivefor companies to pay 100 percent of all health-related claims. Companies need toform healthy partnerships with employees in which both parties actively seek waysto keep the other healthy and whole. Since benefits make up a significant portionof the overall rewards program, employees need to be educated about the eco-nomic value and true cost of health care. Most employees do not appreciate thereal value of the benefits provided because there has been little or no communica-tion to the employees about the benefits and there are typically few educationalprograms to increase awareness and to promote behavioral change. Providingemployees with total compensation statements that detail both pay and benefitshelps educate employees about the economic value of their benefits package.Ongoing communications about benefits programs reinforce the mutual nature ofthe healthy partnership and keep employees informed of changes and options. Essentially, benefits programs need to be dynamic and sustainable for the longterm. HR professionals need to engage employees in productive dialogue aboutthe economics of benefits and their role in the dual goals of increasing healthand decreasing costs. This dialogue also makes it possible to design benefits thatfit the needs of employees so that they realize the value of what is provided. Theoverall theme of benefits programs should be to promote the wellness ofemployees and their families. Employees are more apt to embrace change if they understand the context, reasons, and benefits of the change. When a company makes the decision toredesign benefits programs to reduce costs, it must also find creative ways to offermore choice and greater flexibility so that selected programs can be enhanced tobalance those programs that are being reduced. Changing behavior takes time andrequires a great deal of communication and education in order to be successful. Communication campaigns should incorporate both Web-based and print media.The benefits program needs to be branded in order to promote recognition and

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consistency. Ongoing communications are needed to announce open enrollmentchoices and to educate employees about their options. One extremely usefulcommunication tool is to send annual benefits statements to employees that explain the financial value of benefits provided in the total compensationpackage.

Medical premium plans may be converted to self-insured plans in order toreduce fixed administrative costs, eliminate state premium taxes, and allow fora uniform plan design. In self-insured plans, the company pays for all coveredhealth care costs (e.g., dental, vision, medical, etc.), but carries insurance tocover catastrophic events. Self-insured plans allow for more flexibility, betterfinancial management, and gain sharing. Full flexibility programs can then beexplored to increase employee choice. Full flexibility programs mean that bene-fits are assigned price tags and employees are given credits to purchase benefitsto meet their individual needs. It should be noted, however, that the transitionto self-insurance and to self-service requires robust systems and consistent com-munications. All of these elements—self-service, communications, systems, andeducation—are intimately connected and interdependent and constitute an inte-grated health management system. Shifting to self-insured, full flex programs requires benefits professionals tokeep a constant watch on cost drivers to insure that spikes in certain areasdon’t undermine the economic viability of the programs. These cost driversmay come from mandated legislative changes, new coverage and procedurerequirements, medical price inflation, or changes in utilization of services,e.g., increases in the frequency of claims driven by improved diagnostic pro-cedures, an aging workforce, and so forth. Advancements in technology canalso drive costs because they result in new medical equipment, procedures,and medications that impact the intensity of care. Also, the trend towardreduction in Medicare reimbursement generally results in cost shifts to theprivate sector. One critical advantage of self-insured plans is that they enable gain sharing withemployees. Gain sharing means giving back a percentage of cost reductionsachieved through healthy lifestyles and wise medical consumerism to theemployees who practice positive health practices and use health care resourceswisely. Additional cost savings, not distributed to employees, can be used tofund wellness activities and programs. It is a win-win solution. In addition to all the fundamental components of a comprehensive benefits program, there are additional perks to consider such as fitness centers, freebreakfasts and drinks, cafeteria subsidies, and concierge services. The challenge is to figure out not only what benefits to offer to employees but alsohow to make them connected and integrated with the organization.

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Whether one views health care from a national perspective or an organizationalperspective, the same six factors need to be taken into account:

Quality

Cost

Access

Choice

Simplicity

Responsibility

The reason the health care problem is so difficult to solve is because any solution requires a trade-off among those six values. It is impossible to provideuniversal access and freedom of choice to the highest quality care in a simpleway at low cost. The only way to achieve a win-win solution is for all parties totake responsibility for wise medical provision and consumerism and for healthychoices. Forming healthy partnerships appears to be the most promising avenuefor change, but it will take a great deal of work to create an interdependent atti-tude in which both employer and employee look for ways to help each othergrow.

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While the theoretical constructs underlying benefits packages appear logical, reality often presents many challenges. Here are some examples from our experience.

Entitlement vs. empowerment. Theoretically, one would think that communi-cating to employees about the economic value of their benefits package andeducating them about the options and choices they have would lead to a senseof empowerment. Unfortunately, in many cases, employees view benefits assomething HR does to them and they take the benefits for granted. It’s hard toeducate employees about economic value and the marriage of compensation andbenefits. Particularly in paternalistic cultures, employees don’t understand thatbenefits need to change in response to changing economic and competitive

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conditions. Therefore, any changes in benefits packages need to take intoconsideration the sense of entitlement employees have and how strongly pater-nalistic the culture is.

Competitive differentiator vs. cost drain. A competitive benefits package notonly has value to the employee but also to the company. Excellent benefits area critical component of a compelling employment offer. Smart candidates com-pare the benefits packages of competing offers as well as the salary component.In many cases, a benefits package that meets the particular needs of a candidatecan offset a lower salary offer. Benefits can be a powerful differentiator, partic-ularly when an individual puts a heavy weight on vacation, wellness, or evencoverage for fertility treatments. In times when competition for talent is severe,having flexibility in the benefits package can make a difference. Flexible cafete-ria plans, however, require more work to implement.

Emotional vs. intellectual factors. While some changes in benefit plans makegood sense from an intellectual point of view, they can meet with strong emo-tional resistance. People don’t like to change benefits, particularly on coveragethat is personal. A change in plans may mean a change in relationship with ahealth provider with whom an employee has close ties. Therefore, any changesin plans need to consider emotional as well as economic factors.

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1. It’s important to ensure that management understands how benefits aretied to organizational strategy.

2. Employees deal better with open, honest, direct communications thanwith surprises.

3. Before making any changes, ask for input and feedback from multiplegroups.

4. It’s important to stay close to and manage health care providers.

5. Education of employees is crucial, particularly as it relates to the economic value of benefits.

6. Employees need accurate decision support information to help themchoose among their options.

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7. Wise medical consumerism can result in significant cost savings.

8. Organizational culture is a major factor in the success or failure of anyprogram—we must understand what people value.

9. Timing is everything—changes must be introduced at a time when thereare few competing announcements.

10. A dynamic and sustainable benefits plan requires a dynamic and sustain-able relationship with employees.

CCoonncclluussiioonnss

Level 5 benefits programs promote wellness, encourage partnerships, and enablewise medical consumerism. A comprehensive benefits program should take intoaccount the physical, emotional, and intellectual dimensions of a person’s lifethrough all life stages. Physical factors might encompass medical coverage andhealth insurance. Emotional factors might include an EAP program. Intellectualfactors might involve financial planning or legal assistance. The functions of abenefits program are to reduce costs, increase flexibility, and improve care. Thesefunctions are discharged by facilitating enrollment, partnering for health, andcommunicating effectively. Clearly, the age and diversity of the workforce mayaffect the range of benefits programs offered, but the standards of protection andsupport should remain constant.

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IInnttrroodduuccttiioonn

Having access to the information you need to do your work is a fundamentalrequirement for a great job. Effective information systems and infrastructuremake it easier for people to acquire meaningful decision support information.Clearly, that decision support information needs to be accurate so that businessleaders can make intelligent and informed business decisions about investmentsin human capital—the combination of commitment and capability that gener-ates new sources of gain.

Without sufficient information, decision making and individual/organizationaldevelopment are made more difficult, if not impossible. Systems need to supportour ability to develop individual and organizational capabilities. As such,HCMS is different from HRIS (Human Resource Information System) to theextent that it provides knowledge vs. data. Data are simply discreet facts.Knowledge is processed information which means it requires human analysis.Therefore, an HCMS is the output of information technology and human pro-cessing. The information technology component may include learning manage-ment systems (for example, THINQ and SABA), staffing systems (for example,WebHire and Brass Ring), and human resource systems (for example,PeopleSoft, Oracle, and Lawson).

An efficient HCMS fully integrates all component systems, reduces the hasslefactor in a job, and provides the knowledge platform on which a great com-pany can be built. Above all, it ensures data accuracy and protects employee

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confidentiality. Employees need to know that their personal data are strictlyconfidential. Managers need to know that the information they are being pro-vided is trustworthy. And organizations need to know that confidentiality safe-guards are government mandated. HR earns the right to engage in higher levelwork only when it is able to ensure employee confidentiality and data integrity.It should be noted, however, that management and employees own responsibil-ity for accurate data.

SSccaallee

There is a range of possible outcomes in any effort to change the systems relatedto managing human capital. The following scale helps to envision possibilitiesand assess current realities for HCMS in your organization:

5: One global, efficient, best-of-breed, user-friendly, seamless system that isthe foundation for capturing, maintaining, and reporting on all employeeknowledge worldwide.

4: Global, efficient, and integrated enterprise solution for capturing, main-taining, and reporting employee information and competencies world-wide.

3: Adequate and efficient means of centrally capturing and maintaining allemployee information and skills worldwide.

2: Adequate but inefficient means of capturing and maintaining employeeinformation worldwide.

1: Inefficient, inadequate, individual systems for capturing and maintainingemployee data worldwide.

Where are you now on this scale? _____

Where do you want to be on this scale in one year? _____

WWhhyy CChhaannggee

Company C’s current system doesn’t have data integrity, and it is passinginaccurate information to numerous downstream systems. In order to becredible, it needs to be able to provide reports that are reliable andrepeatable. Currently, the lack of reliability and repeatability is damagingcredibility. In order to be cost-effective, Company C needs to reduce redun-dancies. Currently, many of the systems and processes are redundant. Theseredundancies result in unnecessary costs. In short, Company C does not havethe basics in place.

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Company C needs to capture worldwide employee data with high integrity.Business leaders need accurate and timely decision support information to beeffective. Company C has an incompatible and inadequate set of systems andtechnology that makes it difficult and time consuming to ensure informationintegrity. The current HRIS does not have global capabilities and does notenable the company to feed related systems in an efficient way. As a result, dif-ferent countries use different spreadsheets to account for information that couldall be processed with better contextual knowledge with a more robust system.Essentially, Company C is currently at level 1 on the scale and it needs to be atleast at level 3 to be able to respond reliably to business requests.

Finally, new requirements are imposing new demands on HR systems. With theadvent of the Internet, business leaders expect to have access to information theyneed to make informed decisions. Timely, accurate, and meaningful informationis required for intelligent strategic positioning. When HR fails to meet manage-ment requirements and expectations for accessible and accurate information, orif these requirements and expectations are ill-defined, HR’s perceived effective-ness is damaged. In short, Company C’s reasons for change are the need forintegrity, accuracy, timeliness, and efficiency.

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HR typically has an abundance of data. Unfortunately, the data does not usu-ally translate into accurate, timely, and usable information that can facilitateeffective decision making. In addition, the information usually resides in multi-ple locations and there is no easy way to access the information from a singleview. This fragmented amalgamation of data results in redundancies, unin-formed decisions, and an enormous waste of time. Ideally, an information man-agement system should make it easy for decision makers and employees to getthe information they need quickly and easily and in a form that facilitates gooddecision making.

Simply stated, an effective HCMS increases efficiencies and leverages informa-tion. At the foundation level, an HCMS needs to reduce the time it takesemployees to do certain activities, thereby reducing labor costs. Reducing timeand costs associated with routine HR activities can be achieved by enabling

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managers and employees to access a portal or a self-service application insteadof requiring human intervention. These activities can include enrolling in orchanging benefits, registering for training, changing home and mailing addressinformation, applying for a job, making a salary change, checking pay stubs,accessing organizational charts, getting approval for a promotion, or creating ajob requisition. All of these activities normally require a great deal of labor costsand time. An HCMS system can reduce these costs significantly. It should benoted, however, that transitioning to self-service requires a transformation inculture. Moving to self-service means that employees need to own the data andtake more initiative in getting the information they need. In addition, opennesshas risks and rewards. The risk is that giving people access to information thatcan be interpreted in multiple ways could generate more questions and createunfounded angst. The rewards are that employees feel more empowered andself-sufficient and can find information they need to support personal and pro-fessional decisions.

Having acknowledged the cultural requirements and confidentiality risks, the useof self-service applications can reduce many of the costs associated with printing,publishing, and binding manuals as well as distributing forms, letters, reports,statements, etc. An effective HCMS can make it much easier to do business withHR. Self-service applications can make administrative tasks much simpler andmore accessible. This goal requires that processes are well defined and simplifiedand people are trained in how to use the system. By giving employees directaccess to services, HR is relieved of administrative tasks and is freed up to workon higher level issues and change initiatives. Having one portal for all HR-relatedinformation makes it possible to present pertinent information to all employeeson a consistent basis. A self-service application not only enables employees toview their paid time-off balance, benefits elections, or paycheck data, it alsoserves as an excellent vehicle for communicating company information.

At level 1 on the scale, critical information can get buried in an e-mail file orsomehow get lost in a “wall of noise” that arises from multiple communicationchannels bombarding employees from every direction. As a result, there is noway to capture, maintain, and use employee information worldwide.

Since so many employees work remotely and function as virtual teams, an effec-tive self-service application should be accessible through a browser. Making theportal accessible through the Internet allows employees to be connected to criti-cal information wherever they go. Employees should be able to use any Webbrowser to take advantage of a server doing all the processing. Self-service func-tionality enables employees to be empowered and more productive.

Building an effective HCMS starts with defining the requirements for success.The next step is to ensure that there are processes in place to achieve those

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requirements. Then, decisions can be made about how to capture, organize, distribute, and use the information contained within the system. Capturingknowledge means collecting implicit and explicit information from new andexisting sources. Organizing knowledge means categorizing information to facil-itate its use and value. Distributing information means making decisions andaccessibility rules to ensure that information gets to the right people at the righttime in the right format. Using knowledge means leveraging information bothinternally and externally to continually achieve better results. An effectiveHCMS drives knowledge to people who can use it.

Thus, in essence, an HCMS is a transactional-based knowledge managementsystem. Knowledge management is the process of getting the right informationfrom the right source to the right person using the right vehicle at the right timein the right format so that people can make the best decision or take the wisestcourse of action. The decision or action may require different levels of knowl-edge. Data consist of basic facts. Information is contextualized data or conceptsand ideas made up of related facts. Knowledge is processed information orcausal relationships between interrelated elements of information. Wisdom isapplied and tested knowledge. It results in the ability to forecast and control situational outcomes within a particular domain.

An effective HCMS needs to provide accurate information capital and manageour human capital accurately throughout the employee life cycle. A global sys-tem is required to support worldwide initiatives and processes. In addition, suc-cess requires leadership and cultural support. It is a mistake to assume that allleaders want information that an HCMS can provide and that the culture is onethat values openness, responsibility, initiative, and ownership. It is also a mis-take to underestimate the amount of planning, process development, and ITsupport required to implement any new system. Successful implementation of anHCMS involves a thoughtful consideration of leadership needs, cultural resist-ance, IT requirements, and data ownership.

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While HCMS theory appears logical, reality often presents many challenges.Here are some examples from our experience.

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Manual vs. electronic. While there is clearly a rapid evolution to electronic processing, there is still a lot of paperwork to be completed manually. HR is frequently asked to fill out employee change forms and performance manage-ment documents. And no matter how sophisticated the system, there are alwaysrequests for information that require manual effort. For example, headcountreporting may take into account temps, contractors, or part-time employees.Without a full understanding of FTEs (full-time equivalents) in the organization,it is difficult to manage expenses and achieve profitability goals.

HR vs. management responsibility. Even though there is a clear trend for employees to own responsibility for data input and processing, accountability fordata integrity is typically assigned to HR. When management gets inaccurate data,HR gets blamed. In many cases, management will often talk about the need foradequate infrastructure and information systems, but investments do not alwaysmatch the rhetoric. It is always a challenge to put responsibility for data audits,common review, or performance management in the hands of management.

Independent systems vs. integrated systems. In global companies, it is fairly typ-ical for each company or geographic region to use home-grown spreadsheets tohandle reporting and compensation responsibilities. When it becomes necessaryto roll up data into company statistics, it becomes a nightmare to piece togetherall the disparate data and processes. A variety of independent systems causes a great deal of frustration not only for corporate leaders but also for newemployees who might be accustomed to more integrated, enterprise solutions.

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1. Providing integrated sources of information elevates the role of HR.

2. Distribute and use knowledge instead of burying management with data.

3. Don’t build in silos (for example: learning management, staffing, HRIS,performance management) without an integration plan.

4. Leverage small improvements—demonstrate that systems work. Million dol-lar investments are not always required to improve the way work gets done.

5. Engineer processes before buying systems, but recognize the fact thatsometimes new systems provide a catalyst for developing new processes.

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6. Educate management on the value of effective HCMS.

7. Use process improvement to change the culture.

8. Invest in training people in the tools—it must be a process, not an event.

9. Conduct training in new technology for all HR staff—it’s the foundationof HR.

10. Ensure that the HR system is integral to and connected with other systems.

CCoonncclluussiioonnss

An effective HCMS takes into account the business needs for data, information,and knowledge. Data needs might relate to headcount or demographic numbers.Information might address trends in each organization and geography overtime. Knowledge might include an expert resource network and/or skills bankthat enables employees to leverage the experience of subject matter experts togain competitive advantage. The functions of an HCMS are to develop informa-tion capital, human capital, and organizational capital. The processes requiredto optimize capital development are defining requirements, capturing relevanttacit and explicit information, organizing the information into meaningful cate-gories, distributing the information to the right people in the right way, andleveraging knowledge to achieve results. Clearly, cultural conditions such asopenness and risk taking influence the effectiveness of an HCMS, but the stan-dard of trustworthiness remains constant.

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IInnttrroodduuccttiioonn

One of the defining characteristics of a great job is the opportunity for growth.In many ways, the purpose of life is to grow. Learning and development providemultidimensional opportunities for growth at work. If individuals are learningand growing, the company has a much greater chance to grow also. Withoutindividual growth, there is rarely organizational growth. Given the dynamicnature of today’s marketplace, there is no chance for sustained company growthunless individuals are learning and growing. In order for individuals to sustaingrowth, the organizational culture must support growth and recognize progresson learning and development goals. In order for organizations to sustaingrowth, learning activities must be aligned to performance improvement andbusiness results. In a great company, learning and development support bothindividual (personal and professional) and organizational growth.

SSccaallee

There is a range of possible outcomes in any effort to change learning and devel-opment programs. Here is a scale to envision possibilities and assess currentrealities regarding learning and development:

5: Employees average 10 days per year of business impact development; mul-tiple learning options are leveraged and zero latency exists.

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4: Employees average 7 days per year of business-related development; mul-tiple learning options exist, and there are minimal time lags between skillrequirements and skill availability.

3: Employees average 5 days per year of excellent development; several learn-ing options exist, and time lags between skill requirements and skill avail-ability do not disrupt performance.

2: Employees average 3 days per year of random development; a few learningoptions exist, and time lags between skill requirements and skill availabil-ity cause performance problems.

1: Employees average less than 3 days per year of out-dated development;very few learning options exist, and skill availability never meets skillrequirements.

Where are you now on this scale? _____

Where do you want to be on this scale in one year? _____

WWhhyy CChhaannggee

Building relationships has not been as important to Company D as generatingrevenue. Company D now realizes that growing revenues is dependent onimproving relationships internally and externally. While Company D rankshighest among its customers on the most comprehensive solution in its marketspace, it ranks lowest among its competitors on customer satisfaction. Thebiggest reason for the low customer satisfaction rating is the fact that customersdon’t trust Company D. Since organizational growth is dependent on people,Company D needs to teach people how to become trusted advisors with cus-tomers and with employees. Unfortunately, many managers not only discouragedevelopment as trusted advisors, they enable and permit destructive behaviors.In addition, Company D has been an “on your own” culture. Employees learnedwhat they needed to know through their own initiative, peer networks, andInternet searches—there was no development culture at Company D. In order torealize its mission, Company D needs to provide employees at all levels with theknowledge, skills, and experience to be helpful to customers. It also needs to beseen as the first choice for helping employees win in their careers. In short,Company D needs to make relationships as important as revenue.

Company D offers a variety of disparate programs, but they are all random andinductive. Even though the programs are well designed, they do not relate to cor-porate objectives. There is no consistent process to register employees in classes,track progress, or estimate a return on investment. The company culture does notsupport learning and development—it is viewed more as a cost than an investment.

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CCrriittiiccaall SSuucccceessss FFaaccttoorrss

The functional test of learning and development is whether or not the programsand activities make any impact on the business. Having said that, it is importantto set an organizational standard for development in order to send the messagethat employee learning and growth are important. The scale in this chapter isdefined in both quantitative and qualitative terms so that both impact andexpectations are taken into account. The best way to ensure that learning and development will have a business impactis to design all interventions around the competencies required for success in par-ticular jobs. Involving client groups (e.g., Sales, Services, Marketing, R&D) in thedevelopment of job models and related competencies is critical for accuracy andsuccess. The organization is responsible for defining competencies required formaximum business impact in each job, and the individual is responsible for assess-ing himself or herself on those competencies and then acquiring the skills relatedto those competencies. Again, this type of disciplined process requires cultural sup-port in order to sustain the system. The key is to create simple, empowering, think-ing tools that enable managers to improve business processes. One critical success factor is a clear learning strategy. A learning strategy isdesigned to address all of the learning demands created by the business strategy,organizational needs, and cultural requirements. A learning strategy is an imple-mentation road map for the competency, skill, and knowledge requirements andtakes into account system needs and cultural support. Developing and imple-menting a learning strategy is critical to the business because it ensures that indi-vidual and organizational capabilities are aligned behind its marketplacepositioning and organizational needs. A learning strategy is designed to achieve four major goals:

1. To enable colleagues to acquire the skills and knowledge they need to per-form optimally on their jobs and to fulfill their personal development goalsby providing easy access to the right content delivered in the right way atthe right time.

2. To develop and/or acquire programs, processes, systems, and technologies thatsupport the business strategy, the cultural requirements, and the competencymodel and that meet organizational needs for learning and development.

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3. To create an environment that supports innovative thinking, organizationallearning, personal development, and high performance. Learning needs tobe a part of the greater organizational change management plan.

4. To link knowledge management and people development strategies tofinancial success, i.e., to demonstrate positive return on investment.

Finally, with the strategic context and competency requirements in mind, thelearning strategy must take into account three critical learning processes thatwill enable the improvement of individual and organizational performance:

1. How to improve access to learning.

2. How to develop and deliver learning opportunities.

3. How to manage learning and realize value.

Another critical success factor is the belief employees have in the culture. Peopleneed to believe that corporate-sponsored learning will be useful to them and thattheir efforts will be rewarded. In addition, learning and development cannot bedelivered in isolation from other organizational initiatives. Success depends notonly on an integrated approach, but also on other systems, processes, guidelines,and procedures.

On an individual level, there are two primary reasons to grow: to improve per-formance on current job realities and to improve positioning for future job pos-sibilities. It is important for individuals to understand both the economic andpersonal value of development. On an economic level, competency-based incen-tive plans reward individuals for acquiring and applying certain skills. On a per-sonal level, the acquisition of new skills usually translates into heightenedconfidence and a sense of empowerment.

On the organizational level, there are multiple objectives for a long-term learn-ing strategy:

1. Align learning investments to performance needs and business requirements.

2. Ensure fair access to learning.

3. Develop the right learning options and opportunities.

4. Deliver learning in the right way at the right time to the right people.

5. Create an environment that supports learning and development.

6. Install the right systems to manage the learning process most cost-effectively.

7. Maximize return on investment.

8. Achieve zero latency (ensure that people get the skills and knowledge theyneed to meet project deliverables just in time).

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9. Reduce turnover.

10. Improve performance.

11. Improve the attractiveness of the organization.

12. Leverage opportunities for collaboration.

These objectives can be summarized by level in the organization and by process,impact, and outcome variables.

One of the biggest challenges in HR is to sell the value proposition of programsit offers. The chart above is a helpful tool for thinking about what the valueproposition is for clients at different levels in the organization. A project man-ager simply wants to ensure that he or she has the right skills available at theright time to do the job so that performance can be improved. The value propo-sition for executives focuses on capital development: organizational capital, cus-tomer capital, cultural capital, and financial capital. This chart helps the HRprofessional personalize the value proposition to the audience, i.e., becomemore thoughtful about what value is responsive to whom.

In the five-point scale described in the second section of this chapter, there ismention of how many learning options are being offered and how well they arebeing leveraged. The list on the following page provides a stimulus for thinkingabout the various learning options that might be considered in a comprehensivelearning and development strategy.

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Process Impact Outcome

Executive CulturalManagement

OrganizationalDevelopment

ReducedturnoverAchievement ofbusiness goals

Manager PerformanceManagement

HumanDevelopment

Zero latencyImproved performance

HR LearningManagement

CompetencyDevelopment

Improved cost-effectivenessImproved quality

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LLeeaarrnniinngg OOppttiioonnss

1. Classroom learning

Internal coursesExternal coursesTechnical training

2. Interactions

PeersCustomers

3. Benchmarking

4. Cross-functional teams

5. Mentor

6. Self-Study

7. Online learning/Web-based training8. Knowledge sharing

Central repositoryExpert resource networkNetworkingCommunities of practiceProfessional associations

9. OJT (on-the-job training)

10. New hire training

11. Corporate University

12. Web site surfing

13. Modeling

14. Coaching

15. Road shows

16. Reading

17. Laboratory

18. Lunch and learn

19. Application success sharing

20. After action reviews

21. Product demos by experts

22. Webinars

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23. Seminars

24. Workshops

25. Webcasts

26. Conferences

27. Conference calls

28. Intranet connector

29. Town meetings

30. VP forums

31. Action learning interventions

32. Virtual teaming

33. Multiple rater assessments

34. Customer satisfaction surveys

Access to most of this learning is a function of cultural support for thinking andlearning. Leaders are the primary gateway to learning access, i.e., if leaders sup-port and encourage participation in many of the activities listed above, col-leagues will have continuous access to learning. Beyond cultural and leadershipsupport, however, access involves connecting learners to learning options out-side day-to-day activities at the workplace. Access to classroom training, onlinecourses, educational materials, expert and knowledge resources—both inter-nally and externally—requires assistance beyond what can be expected fromleaders. The chart below is a thinking tool for helping you consider a variety ofways to improve cultural and leadership support for learning:

This chart will help you think through what needs to happen before, during, andafter any learning opportunity in order to maximize its impact.

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Before During After

LearningProvider

Participant

Sponsor

Manager

Leader

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There are several critical decisions that need to be made concerning access tolearning opportunities. Here are a few of the key questions that need to beanswered:

1. What is the right blend of learning options, i.e., what percentage of learningshould be done online, what percentage should be in the classroom, etc.?

2. How much freedom do you give your employees to select learning options?What is the spending authority of each employee?

3. What level of support will be required to institutionalize continuous learn-ing? For example, what policies need to be created to support learning anddevelopment?

Question #1: What is the right blend of learning options, i.e., what percentage oflearning should be done online, what percentage should be in the classroom, etc.?

We recommend converting as much compliance-level training as possible to e-learning delivery and developing the technological capacity to make it easy foremployees to access Web-based training at home and at work. We also stronglyrecommend that selected training, such as leadership development and teamdevelopment, be done in a classroom setting. Most important, however, is toensure that all employees have access to a multitude of the informal learningopportunities listed earlier. The reason for providing multiple learning optionsis that learning delivery needs to match the learning style of the participant. Andit is critical to apply adult learning principles to guide decisions regarding learn-ing options.

Question #2: How much freedom do you give your employees to select learningoptions? What is the spending authority of each employee?

We recommend giving colleagues freedom in pursuing learning objectives.Respect and trust are key values in a learning culture. The decision on this issuewill send a loud message about how we walk that talk. In addition, we believethat personal development of any type has transfer power to the business. Aspeople grow, the business benefits from their increased insight, creativity, andwisdom. In order for this policy to work, however, employees need to knowhow their jobs fit into the big picture, what competencies are required for theirjobs, and how any learning is aligned with business objectives.

Question #3: What level of support will be required to institutionalize continu-ous learning? For example, what policies need to be created to support learningand development?

While we don’t recommend creating a raft of policies that would dizzy even themost bureaucratic of organizations, we do recommend developing policiesrelated to:

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Tuition reimbursement

Dollar limits for classroom and online learning

Approval process

Line item allocations and charge backs

A critical success factor is to list all the questions that will need to be addressedin order for learning and development to realize its potential. The three ques-tions discussed above may trigger additional questions for you. The most impor-tant outcome of answering these questions is to institutionalize learning in theculture. This will not happen with a random, event-based approach to learning.

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TThhee RReeaalliittyy

Implementing a learning strategy requires several critical decisions concerningthe development and delivery of learning opportunities. Here are a few of thekey questions that need to be answered.

1. What programs best support your performance needs, competency require-ments, culture, and business strategy?

2. Should you develop your own programs or buy programs that are alreadydeveloped?

3. Should you build an internal staff for learning and development or out-source most of the programs?

4. How should you deliver your learning opportunities: online, self-paced, orin a classroom?

5. How can you customize all learning opportunities so that they reflect yourway?

Question #1: What programs best support your performance needs, compe-tency requirements, culture and business strategy?

All skills need to be mapped against the business strategy, the cultural require-ments, and competency model to ensure that you are linking all of your courseofferings to business needs. You also need to link the learning options to thecompetency requirements. Development and delivery must take into account not

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only what courses should be offered, but also who teaches them and how theyare best delivered. Start by identifying the company’s business goals. Next, alignperformance requirements to those business goals. If there is a gap, investigate.The gap may exist because of non-skill and knowledge issues (i.e., a processneeds to be modified). On the flip side, you may find that the gap exists becausethe majority of the performers do not have the right skills and knowledge. Atthis point, seek out the highest performers. Interview these performers (internalor external) and use their help to identify the skills and knowledge used to per-form the process. Next, determine if the majority of performers truly do not pos-sess the required skills and knowledge (you may do this via surveys,observations, assessment reviews, leadership insight, etc.). If they do not, youwill be much more inclined to buy or create the learning program.

Question #2: Should you develop your own programs or buy programs that arealready developed?

We recommend that, whenever possible, you should buy programs that arealready developed. There are a multitude of courses available to teach mostrequired skills and it is very expensive and time intensive to develop coursesfrom scratch. However, there may be certain courses that can only be developedinternally because of the uniqueness of your culture, products, methodologies,and leadership style. Another dimension of this question is whether to provideprograms electronically or in live classrooms. The answer to this question musttake into account costs and learning styles, but one factor is to ask how resultswill be measured. A simple rule of thumb is if it can be tested on the Web, it canbe delivered on the Web. For example, teaching swimming might be hard tomeasure on the Web, but spreadsheet mastery could be tested on the Web.

Question #3: Should you build an internal staff for learning and developmentor outsource most of the programs?

We recommend an outsourced model. Hiring internal staff is not only expensive,it tends to be ineffective over time because skill requirements are constantlychanging. However, most companies need a driver and sponsor of learning aswell as a core infrastructure to coordinate the customization of all content bysubject matter experts and to develop and oversee all internally developed pro-grams listed in the development recommendations. The roles of the internallearning and development organizations need to be clearly defined and collabo-rative opportunities agreed upon. We suggest that the learning and developmentorganizations (Learning Council) should have the following roles:

Develop and implement the learning strategy.

Select and administer the appropriate systems and technologies for imple-menting the strategy.

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Help develop cultural support for thinking and learning.

Orchestrate and manage the delivery of internal and external courses.

Question #4: How should you deliver your learning opportunities: online, self-paced, or in a classroom?

Overall, it usually makes sense to deliver most of the technical courses online,whereas the leadership, marketing, sales, and professional development coursesare better taught in a classroom situation. You will need to continually evaluatethe blend of high-tech and high-touch delivery. You should also continue to lookat how you can convert some of the course content you now deliver in class-rooms into online versions, particularly as you grow globally.

Question #5: How can you customize all learning opportunities so that theyreflect your way?

Your company surely has some “secret sauce” it doesn’t want to share with theoutside world. You need to ensure that your sauce gets mixed into the learningrecipe without compromising its integrity. We recommend forming a close rela-tionship with an outside training provider with whom there is a high degree oftrust and who can help to customize some of the courses. We also recommendthat associates participate in the development and delivery of courses where itmakes sense. Some courses, particularly in leadership development and opera-tions, should be home grown so that you can continue to differentiate your com-pany in the marketplace by your leadership style, corporate culture, andintellectual capital. Most important, all learning opportunities need to be builtaround the core competencies.

The underlying dynamic in most of these questions is whether programs are beingoffered to justify HR existence and survival or are being offered to enable busi-ness growth. To the extent that HR gets caught up in its own survival needs, itwill continue to miss opportunities to partner effectively with its business clients.

TThhee WWoorrkk CCoonnttrraacctt HHaass CChhaannggeedd.. DDiidd WWee TTeellll AAnnyyoonnee??

The work contract used to be: Loyalty for Security. Now it is Commitment forDevelopment in a safe and secure environment.

For most of the 20th century, workers felt that as long as they remained loyal tothe company, they could expect job security and health coverage. Even thoughthere were always issues about pay inequity, market comparability, benefitsdesign, and work environment, workers did not typically feel anxious about los-ing their jobs through restructuring, downsizing, or re-layering. While therehave always been fairness issues, lack of security was not a predominant con-cern. As a result of that psychological contract, many workers never worried

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about their market value, i.e., what their current skills were worth in the mar-ketplace. In essence, these workers engaged in planned obsolescence. When lay-offs became more common toward the end of the century, these workers foundthemselves scrambling for jobs at significantly reduced wages.

The old contract is dead. Very few companies are now willing to guarantee jobsecurity for any length of time, so it is a bit unrealistic to think that employeesshould be totally loyal. On the other hand, most companies provide develop-mental opportunities for employees that make it easier for employees to findnew jobs if economic conditions require significant cost and headcount reduc-tions. In exchange for the ability to learn new skills, it is reasonable for organi-zations to expect that employees demonstrate high commitment while they areemployed. The new contract can be graphically depicted by the following grid:

Expecting high commitment in Europe and Asia, however, can be problematic.The reaction is, “How do you know what my commitment is?” More accept-able language in Europe and Asia is “personal accountability and support.”

Development has to include consideration for expatriate assignments as well. Ina global economy, one of the most critical skill-sets a person can learn is how toconduct business in multiple cultures.

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TToopp TTeenn LLeessssoonnss LLeeaarrnneedd

1. Educate people about possibilities for growth.

2. Demonstrate the impact of programs through ROI analysis.

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Responsibility Expectation

Organization Provide developmentalopportunities

High commitment while employed

Individual Learn the skillsrequired to increasemarket value

Respect, fairness, andintegrity during time of employment

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3. Be more concerned with quality than quantity.

4. Understand what it will take to be successful in the organizational culture.

5. Map learning to performance needs and business results.

6. Create a value proposition and reasons to change.

7. Don’t forget the basics: Skills + Support = Success.

8. Leverage the power of sponsorship.

9. Involve stakeholders.

10. Solve business problems through networking, relationship building, andcollaboration.

CCoonncclluussiioonnss

A comprehensive learning and development program encompasses the compo-nents of professional development, sales development, technical training, andproduct training. The functions of learning and development are individualgrowth, organizational growth, and company growth. Multiple processes areemployed to discharge these functions: self-paced learning, e-learning, andinstructor-led training. Clearly, the extent to which the company embraces thenotion of organizational learning impacts the effectiveness of learning anddevelopment initiatives, but the standard of positive and sustainable perform-ance remains constant.

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IInnttrroodduuccttiioonn

A great company is built by great people. The search for world-class talent is anongoing priority for a great company. One critical requirement for a great job isto be able to work with great people. Exceptional talent attracts exceptional talent. All of these principles underscore the importance of staffing.

SSccaallee

There is a range of possible outcomes in any effort to change the staffing process.The following scale helps envision possibilities and assess current realities:

5: World-class talent attracted, hired, retained, and aligned behind corporateobjectives. Staffing is measured on the performance of people hired.

4: Great talent attracted, hired, and retained. Staffing is measured on reten-tion of mission critical/highly capable talent.

3: Adequate talent attracted, hired, and retained. Staffing is measured on costper hire, time of open requisitions.

2: Fair talent attracted and hired. Staffing is measured on number of positionsfilled.

1: Poor talent attracted and hired. Staffing effectiveness and efficiency are notmeasured.

Staffing

Chapter

5

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Where are you now on this scale? _____

Where do you want to be on this scale in one year? _____

WWhhyy CChhaannggee

Historically, Company E relied heavily on outside agencies to conduct a high per-centage of searches. While the agencies were able to source excellent candidates,the costs were very high. In fact, average cost per hire in some departmentsexceeded $15,000. While a reasonable standard for agency usage is around 10percent of hires, several groups had agency usage in the 35 to 40 percent range.In addition, Company E sourced a large number of employees from personal con-tacts. While employee referrals can be a rich source of candidates for a company,it can also lead to an extremely homogeneous workforce. For Company E, thesourcing pool consisted predominantly of white, male, military athletes. ThisDNA (organizational gene pool) served Company E well when the sales strategywas to be the most aggressive player in the market and when the primary clientswere white male engineers. But in the new competitive, relationship-orientedmarketplace, this strategy no longer makes sense. Company E needs to attract adiverse workforce through a more cost-effective mix of sourcing strategies. Itneeds to not only recruit a more heterogeneous workforce, but also to encourageits diverse workforce to recruit from diverse talent pools. To compound the prob-lem, managers within the company perceive HR as résumé finders instead ofstaffing consultants who could add value to the entire staffing process. In short,Company E needs staffing to attract and retain the right talent.

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CCrriittiiccaall SSuucccceessss FFaaccttoorrss

One of the most critical factors of a great job is working with great people.Waging the war for talent requires real commitment from senior leadership andprocesses that result in excellent choices. There are five phases within a StaffingMethodology or Process: Planning, Sourcing, Assessing, Closing, and Engaging.People, culture, and technology support and enable these five phases. The people enabler includes interviewers, managers, business partners, etc. The

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cultural enabler refers to the norms and values in the organization that eitherenhance or impede a systematic process. The technology enabler makes it possible to conduct the staffing process more efficiently and effectively.

11.. PPllaannnniinngg PPhhaassee

The planning process begins with the creation of a workforce plan and endswith a clearly defined approach to filling jobs. This plan includes the roles thateach person will play within the staffing process.

Workforce planning brings together business executives, finance leaders, HRleaders, and hiring managers for the purpose of creating a top-down and bot-tom-up view of the human capital requirements to achieve business objectives.Hiring managers identify ideal start dates and the staffing organization rollsup all the requirements (competencies, experience, knowledge, skills, and atti-tudes) and start dates into a comprehensive plan. The workforce plan is usedto create a hiring plan. This plan takes into account turnover and internaltransfer expectations. With the workforce plan and hiring plan in place,staffing consultants facilitate a conversation with business executives andfinance leaders that results in a staffing budget. Based on the budget, staffingleaders define and implement a collateral strategy to attract talent. Also afterbudget approval, hiring managers create job requisitions and secure approval.Staffing consultants verify that the job requisition content is accurate andcomplete. Once the requisition is approved, the manager and staffing consultant meet to commit to a staffing strategy that is documented in a serv-ice-level agreement. In this document, the staffing consultant and hiring man-ager create a staffing strategy for each of the remaining steps of themethodology and reach agreement on start dates, assessment procedures,interview teams, and the communication strategy. After role expectations aredefined, the staffing consultant moves the approved requisition to open statusin the staffing system. Entering the requisition into the system enables thestaffing organization to track the time and costs associated with each position.

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53

Planning Sourcing Assessing Closing Engaging

People, Culture, and Technology

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22.. SSoouurrcciinngg PPhhaassee

The goal of the sourcing phase is to attract talented individuals for opportuni-ties on a global basis. During this phase, candidates become aware of andexcited about career opportunities. During the planning phase, the staffing con-sultant and hiring manager defined a sourcing strategy. Now the strategy will beverified and updated to reflect any changes. The staffing consultant verifies thejob description, prioritizes job requirements, ensures that the approved recruit-ing budget is appropriate for the job, uses internal and external resources avail-able to source the best candidates, and updates the service-level agreement asnecessary. The hiring manager identifies target companies or candidates for thejob, gains approval for additional sourcing costs as necessary, participates insourcing efforts, and solicits candidate referrals from colleagues.

33.. AAsssseessssiinngg PPhhaassee

The assessment phase is designed to measure the fit between the candidate andthe job. The assessment includes measuring a candidate’s capabilities, motiva-tions, and cultural fit with the organization. The goal is to find candidates whofit well with the corporate culture and who demonstrate how their skills andvalues are aligned with business needs. In this phase, candidates also assess the organization and decide if the company meets their expectations for a rewarding career opportunity.

During this phase, the staffing consultant meets with the other members of thequalifying team to review and update the staffing strategy, determines if the candidate meets the minimum requirements as defined by the hiring manager,conducts the initial candidate interview, provides an introduction to the company, and facilitates a structured feedback discussion with members of thequalifying interviewing team.

44.. CClloossiinngg PPhhaassee

The goals of the closing phase are to acquire candidates who are the best fit forthe jobs available, to notify candidates who were not selected, and to have candidates who, regardless of the outcome, feel better about the company afterparticipating in the staffing process. During this phase, the staffing consultantverifies the candidate’s current compensation and expectations, identifies outstanding issues, and defines the compensation package within the compensa-tion range. Then the staffing consultant and hiring manager work together tocreate a compelling offer, including salary, bonus, stock, relocation (if necessary)benefits, and development/career opportunities. The hiring manager gains

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additional offer/contract approval if the final compensation package is outsidethe range approved in the requisition.

After all these details are covered, the appropriate leader communicates the verbal offer to the selected candidate and communicates his or her decision toother members of the hiring team. As a person transitions from “candidate” to“new hire,” it’s the responsibility of staffing to complete the appropriate paperwork.

55.. EEnnggaaggiinngg PPhhaassee

The goals of the engaging phase are to help orient new colleagues to their newcompany and fully assimilate into the culture, to ensure that they have the toolsand relationships necessary to start their new jobs, and to facilitate a rapidlearning curve. During this phase, the staffing consultant and hiring managerwork together to ensure that new hires have office space with computer equip-ment, are set up in payroll, and have signed up for benefits. The hiring managershould also introduce the new hires to other colleagues inside the group and cre-ate a support network outside the group, possibly including mentors. As a resultof the engagement phase, new colleagues not only understand job expectationsand how their jobs relate to the overall business strategy, but also feel connectedto their teams.

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While staffing theory appears logical, reality often presents many challenges.Here are some examples from our experience.

Good times vs. bad times. Staffing issues change dramatically in different eco-nomic conditions. During good times, getting the right people presents a majorchallenge. The emphasis is on creating the most compelling offer in order tocompete with multiple offers the candidate brings to the table. Sourcing goodcandidates is a continuous challenge because the demand for talent far exceedssupply. During bad times, getting a requisition approved presents the major

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challenge. The supply and demand curve shifts, so the supply of candidates farexceeds demand and the caseload and the nature of work in staffing changes.It’s difficult to maintain excitement and motivation in the staffing organizationduring tough times because there are always stops and starts, and the interview-ing process is typically drawn out. In short, sourcing presents the biggest chal-lenge during good times, and selection (assessing and closing) presents thebiggest challenge during bad times.

Quality vs. quantity. Staffing is typically assessed on the number of jobs it ismanaging, the number of candidates that are presented, the number of peoplehired, and the cost per hire. Unfortunately, these quantitative measures do notreflect the quality of the hire. The most important measure of staffing is reten-tion and performance, i.e., does the person stay and does he or she demonstratethe level of contribution and commitment expected. While cost is fairly easy tocompute, the effectiveness part of the equation is usually ignored. Effectivenesscan be measured by the time it takes the person to reach peak performance onthe job, how long the person stays with the company, and whether or not theperson is promoted or advances in the organization. These measures are morequalitative and take more time to track. The real issue is whether or not staffingis able to get the right person in the right job at the right time. These are all qualitative measures that rarely get the attention they deserve.

Recruiters vs. consultants. Changing the way people think about staffing is anongoing challenge. Most business leaders have an image of people in staffing asrecruiters—people who source candidates and get them hired. The staffing con-sultant is a person who adds value to each phase of the staffing process: plan-ning, sourcing, assessing, closing, and engaging. An effective staffing consultantis much more than a recruiter. A staffing consultant is engaged in workforceplanning, performance assessments, and ongoing dialogue with clients aboutgetting the right resources working on the most important tasks. Changing theimage of staffing with clients and positioning staffing appropriately in theorganization as a value-added service is a reality that staffing consultants confront on a daily basis.

The people in the role of recruiting talent into the organization are perceived bycandidates as the “face” of the company; the representatives who embody theculture and character of the company. In many cases, this face is the only con-tact a candidate has with the company. The impression the staffing consultantleaves with a candidate has significant impact on the company’s brand image inthe marketplace.

The impact the staffing function has on the perception of the marketplaceshould not be underestimated. A number of factors make up this impact: thequality of the staffing consultants’ work, their personal character, their broad

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and in-depth knowledge of the company they represent, and their personal com-mitment to the company and its mission. The reality is that this value is rarelyrecognized or appreciated.

Manual vs. electronic. Managing changes in realistic time frames is difficultwith manual procedures. There are client demands for weekly reports as wellas daily requests. Trying to respond to all the requests for information andfor people is practically impossible without an electronic system. Staffing sys-tems, e.g., Brass Ring or WebHire, enable the staffing process and make itmore efficient and effective. Spreadsheet accuracy is critical for managers tocontrol their expenses and make informed decisions. Providing that accuracy and ensuring data integrity is much easier with electronic tools andsystems.

YYoouurr RReeaalliittyy

TToopp TTeenn LLeessssoonnss LLeeaarrnneedd

1. You can’t fix what you don’t measure.

2. The recruiting system is a critical enabler.

3. Choosing the most important metrics is critical.

4. It takes years to establish/inculcate great processes.

5. Leadership changes dramatically affect the ability to move from one levelto another.

6. You must align staffing strategy with competencies required for today andtomorrow.

7. The requisition process is necessary to focus on what matters, e.g., competencies, cultural fit, level of commitment.

8. Focus on hiring the “right” people vs. world-class talent.

9. Every company says it wants to hire top talent—very few want to investthe time, money, and resources to do it.

10. Employer of choice may be the wrong strategy; you want the right peoplein the right jobs.

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CCoonncclluussiioonnss

The components of a comprehensive staffing program are planning, sourcing,assessing, closing, and engaging. The functions of staffing are to recruit a diverseand talented workforce that meets business needs and to retain the most criticaland capable people. Several processes are used to discharge these functions:direct hiring, Internet recruiting, employee referrals, agency assignment, andassimilation. Clearly, the abundance or scarcity of talent in the labor marketaffects staffing programs, but the standard of getting the right person in theright job at the right time remains constant.

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IInnttrroodduuccttiioonn

There is no possibility of creating great jobs in a great company without effec-tive leadership. A person’s relationship with her or his boss is a major factor inhow the person views the job. A positive and productive relationship is essen-tial. But many managers are promoted to leadership positions without havingthe skills to build relationships and mobilize commitment to the organizationalgoals and objectives. Leaders need to be continually assessed for performanceand potential: performance is a combination of the contribution the leadermakes as well as the leadership role he or she plays; potential is a combinationof capability and commitment. An effective leader contributes to the company’sstrategic direction, to the bottom line, and to the organizational culture. In thischapter, we will discuss the competencies required for great leadership as well asthe process used to optimize talent.

SSccaallee

There is a range of possible outcomes in any effort to improve leadership devel-opment. Here is a scale to help envision possibilities and assess current realities:

5: Most promotions from within are extremely successful.

4: Most promotions from within are very successful.

3: Many promotions from within are successful.

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2: Some promotions from within have limited success.

1: Almost no promotions from within; rare success.*

*It should be noted that many companies promote from within, but those pro-motions turn out to be unsuccessful because the promotions are based on inap-propriate criteria and/or nothing is done to help the person acquire thecompetencies required for success in the new position. This scale does not reflectthat option, but if that is the case for your company, you should assign yourselfa level 1 rating.

Where are you now on this scale? _____

Where do you want to be on this scale in one year? _____

WWhhyy CChhaannggee

Leadership development needs to change because marketplace and organiza-tional requirements have changed. In the past, Company F needed its managersto drive for results, control costs, and monitor work. In response to that need,HR provided a series of supervisory and management-level courses that taughtmanagers the fundamentals of supervision. These courses focused on tacticalconsiderations and helped managers comply with internal policies and externallaws. They were designed to enable managers to do their jobs and relate to peo-ple in reasonable ways. In the marketplace today, there is a need for continuousgeneration of new ideas to help customers win with superior products, services,solutions, and partnerships. In the organization today, there is a need for lead-ers to inspire people to think creatively about new ways of working, to motivatepeople to perform at their highest levels, and to align all work behind corporategoals and priorities. Whereas in the past most decisions were made by a smallgroup of executives, there is now an attempt to push decision making lower inthe organization and to hold managers accountable for the results to which theycommit. These new requirements mean that leaders have to think strategicallyand relate collaboratively in order to be successful. It is no longer sufficient toperform well as a supervisor or manager by monitoring tasks and controllingcosts. In today’s world, every employee needs to think and act as a leader byidentifying priorities, building programs and teams, and driving results. If weare going to provide opportunities for people to grow, we need to provide themwith the skills and support they need to be successful. Company F needed tochange because the predominant leadership style was resulting in poor moraleand turnover of key talent. In order to improve morale, productivity, and prof-itability, Company F now requires leaders who are competent, empowered, andcollaborative.

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CCrriittiiccaall SSuucccceessss FFaaccttoorrss

The functional tests of leadership development involve asking the followingquestions:

1. Are we promoting from within?

2. Are our leaders successful in their jobs?

If our leadership development efforts are effective, then we should be growing suf-ficient talent internally to fill new leadership roles as they open up. It is not suffi-cient, however, to provide leadership opportunities to internal candidates. Thepeople who are promoted must succeed in their new jobs. The challenge is todetermine what makes a good leader in different cultural contexts. A leader couldbe extremely effective in North America and fail miserably in Japan. Similarly, aleader could perform well in marketing and not do well in engineering. There arecertain truths about leaders, however, that hold constant in any context: integrity,the ability to identify strategic opportunities, the ability to build teams, and thepersistence to drive results. One important factor in the success of any leader is tobe clear about the measures of success at the beginning of the job.

In order to be effective, leaders need to be able to know and grow:

Their own commitment and capabilitiesOthers’ commitment and capabilitiesTheir organization’s capabilitiesTheir customers’ capabilities and satisfaction

These are the four components of leadership. Leaders need to focus on knowledgeand growth for themselves, others, their organizations, and their customers.

There are well-defined meta competencies that enable leaders to discharge theirresponsibilities in all four components of leadership:

Envision possibilities.

Assess realities.

Think creatively and analytically.

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Relate inclusively and interdependently.

Plan dynamically.

Act rigorously and relentlessly.

Learn continually.

The grid on the next page provides examples of competencies that are directlyrelated to success in each cell. Thus, if the primary component of a leader’s jobis to know and grow the customer, and the primary functions are to think creatively and relate interdependently, then the competency in that cell willindicate what the leader needs to know in order to be successful. The assign-ment of competencies to each cell is not meant to be exclusive. For example,the competency of motivating others could be critical in multiple cells. Sincethis book is an invitation to transformation, the cell assignments should beseen as stimuli for you to think through what competencies are required inyour organization.

As mentioned earlier, the challenge was to identify required competencies for a leader whose primary job responsibility was to know and grow cus-tomers and whose primary functions were to think creatively and think inter-dependently.

Thus, in this example, the competencies required for success for this leaderwould be:

Essentially, good leaders need to be able to envision, assess, think, relate,plan, act, and learn. These are the metacompetencies of leadership. Leadersneed to be able to size up people and situations, analyze organizationaldynamics, and diagnose accurately what it takes to motivate people. Theyneed to generate new responses to changing conditions and apply innovationto customers’ needs. They need to be able to engage people in meaningfuldialogue and create an environment of trust. They need to be able to plan,organize, manage, and measure work in efficient and effective ways. Andfinally, they need to be able to hire the right people, get work done, and drivefor results. All of these competencies can be summarized by Identify, Build,and Drive. The effective leader identifies strengths, weaknesses, opportuni-ties, and threats; builds individual and organizational capabilities; and drivesfor results.

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Business acumen, Intellectual horsepower, Problem solving, Customer focus,Integrity and trust, Presentation skills, Written communications

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LEADERSHIP DEVELOPMENT

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While leadership theory appears logical, the reality usually presents many chal-lenges. Here are some examples from our experience.

Company F’s CEO issued a challenge to his management team: “We need tooptimize our resources throughout the organization. That means we need toensure that

We have our best people in our most important jobs.

We have development plans for our high performance/high potential people.

We no longer accept or ignore poor performance.”

His bold and demanding challenge raised several questions:

1. How do we evaluate objectively what our most important jobs are?

2. How do we evaluate objectively who our highest performing/high poten-tial people are?

3. How do we ensure that we are providing the right developmental opportu-nities to the right people?

4. How do we deal fairly with poor performers?

HR took on the task of providing substantive responses to all these questions.

Question 1: How do we evaluate objectively what our most important jobs are?

In order to answer this question, we needed to develop criteria for evaluatingeach vice president (VP) job. These criteria were designed to evaluate if the jobreally merited a VP or senior vice president (SVP) title. Company F had 186 VPsfor an employee population of 4,200, which meant that about 4.4 percent of itsemployees had a VP title. A benchmarking study indicated that in comparablehigh-tech companies, about 3 percent of all employees were VPs. That meantthat Company F had about 60 more VPs than what one might find in a bench-mark company. That statistic posed a problem because the intent of this processwas not to demote 60 VPs, but to ensure that the highest performing peoplewere in the most important jobs. Thus, one of the first challenges of this processwas to keep the discussion laser focused on optimization vs. demotion.

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We established a set of criteria to facilitate the analysis and dialogue. Here arethe criteria we used to evaluate the jobs and the people.

SSeenniioorr MMaannaaggeemmeenntt JJoobb RRaattiinngg SSccaalleess

Instructions: Refer to the standard criteria below to evaluate each VP titled posi-tion in your organization. Do not evaluate the person in the role today—this isa job evaluation only. Total the points associated with each job you evaluate.

Job Title: __________________________________Name of Person Currently in Job __________________________________Strategic Nature of Job/Liability Potential _______

5: Extremely Strategic and/or great liability potential in the case of inaccuracy4: Very Strategic or high liability potential in the case of inaccuracy3: Strategic or liability potential in the case of inaccuracy2: Somewhat Strategic or liability potential in the case of inaccuracy1: Tactical or no real liability potential in the case of inaccuracy

Size and Scope of Job _______

5: >100 employees4: 51–100 employees3: 25–50 employees2: 15–24 employees1: <15 employees

Revenue/Cost Responsibility _______

5: Responsible for > $50 million in sales or >$18 million in costs4: Responsible for $30–50 million in sales or $12–18 million in costs3: Responsible for $20–29 million in sales or $6–12 million in costs2: Responsible for $10–19 million in sales or $1–6 million in costs1: Responsible for < $10 million in sales, <$1 million in costs

Relationship Responsibility (internal and external) _______

5: World-wide responsibility for 2 or more functions, reports to executive VP4: World-wide responsibility for entire function3: International responsibility for entire function2: Responsibility for function within United States, Europe, or Asia1: Responsibility for a function within a particular country or geography

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Technical/Professional Requirements ________

5: Very High technical/professional requirements, broad company knowledge4: High technical/professional requirements3: Technical/professional requirements2: Some technical/professional requirements1: Very few technical/professional requirements

TOTAL: _______SVP = >20; VP = 15–20

SSeenniioorr MMaannaaggeemmeenntt PPeerrssoonnaall RRaattiinnggss

Instructions: Refer to the standard criteria below to assess each of your senior man-agers (VPs and above). Total the points associated with each person you assess.

Name: _____________________________________________ Performance: (How is this person doing on current job?)

Contribution: _______

5: Far exceeding expectations on current job4: Exceeding expectations on current job3: Meeting expectations on current job2: Falling short of expectations on current job1: Falling far short of expectations on current job

Leadership: _______

5: Inspires others in people development and core values4: Promotes people development and impacts core values3: Actively develops people and supports core values2: Sometimes engages in people development and supports the values1: Doesn’t engage in people development and/or distracts from the core values

Potential (Can this person do more?)

Capability: _______

5: Has the knowledge, skills, and experience to do much more

4: Has the knowledge, skills, and experience to do more

3: Has the knowledge, skills, and experience to do more with development

2: Lacks the knowledge, skills, or experience to do more

1: Does not have the knowledge, skills, and experience to do more

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Commitment: _______

5: Extremely committed to the company, personally accountable for companygrowth

4: Very committed to the company, personally accountable for organizationalgrowth

3: Committed to the company, personally accountable for departmentalgrowth

2: Lacks commitment to the company, accountable for personal growth1: Not at all committed to the company, not accountable

Question 2: How do we evaluate objectively who our highest performing/highpotential people are?

The senior management teams of each organization reviewed each job on theJob Rating Scales and each VP on the Person Rating Scales. If a VP job fellbelow a total of 15 points on the five scales, that job was tagged in case theperson in the job were to leave for any reason. The person was not demoted,but the job was designated as one that would not be replaced as a VP. In aseparate exercise, each VP was rated on the Person Rating Scales. Since therewere two scales for Performance and two scales for Potential, it was possibleto map the totals into an optimization model (see page 68) using the followingguidelines:

Performance:

High: Exceeds expectations/Inspirational leader (8–10)Med: Meets expectations/Impact player (5–7)Low: Falls short of expectations/Detracts from core values (<5)

Potential:

High: Has capability and commitment to do more (8–10)Med: Has capability and commitment to do more with development (5–7)Low: Lacks capability and commitment to do more (<5)

Readiness:

Green: Ready nowYellow: Ready within 1 year with developmentRed: Ready within 2 years with development

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Criticality of Job:

3: Mission Critical

2: Very Important

1: Important

Leadership Competencies

In addition to mapping all VPs into the optimization model and indicating the criticality of the current job and the readiness of the person to move, theexecutive staff also agreed on organizational principles to ensure that theprocess reinforced core values in the culture.

OOrrggaanniizzaattiioonnaall PPrriinncciipplleess

Evaluation:

All VP jobs will be evaluated whenever there is significant organizational changeor every 2 years.

All VPs should be evaluated on an annual basis.

VP jobs are reviewed independent of the person.

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Performance

High

Med

Low

Low Medium High

• Map In People• Assess Readiness• Assess

Job-Person Gaps

Potential

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Authority to hire:

Proposed VP jobs need to be approved by the executive committee and the deci-sion must be unanimous.

SVPs have authority to hire who they want as long as the position has beenapproved as a VP job.

Guidelines for hiring, promoting, and rating:

Whenever VP jobs open up, we should make every effort to fill them withdiverse cultural backgrounds.

When senior management positions open up, we will use our designated talentpool as a viable source for candidates.

SVPs can assign designations independent of the numerical ratings, e.g., the“person” ratings should only be seen as decision support information.

If a person reports to an SVP, it does not necessarily follow that she/he shouldhave a VP title.

Question #3: How do we ensure that we are providing the right developmentalopportunities to the right people?

In many organizations, “one off” decisions are made on who gets to go to devel-opment programs whether they be executive MBA programs or two-week inten-sive programs. Even more common are organizations that provide random,inductive leadership training. This means that the training is not tied to the com-petencies required for success in the current job or future job. The outline belowillustrates how one company leveraged its optimization process to ensure that thecompany provided the right developmental opportunities to the right people.

OOppttiimmiizzaattiioonn PPrroocceessss

Phase I: VP Job Evaluation

1. Meet with the executive team to review the criteria and the process.

2. Once we agree on criteria, we will make no promotions to SVP or VP with-out going through the criteria in the executive committee.

3. Reach agreement on how to integrate with Performance Management.

4. Build evaluation tools and support documents.

5. Evaluate all VP jobs on the criteria.

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6. Based on the data, each executive VP in collaboration with the HRBusiness Partners will identify key positions within their respectiveorganization.

7. Executive committee will review all positions and identify the most impor-tant positions.

Phase II: Succession Planning and Performance Management

1. Executive VPs will assess all VPs in their respective organizations using the“person” criteria (performance and potential) and assign a red, yellow, orgreen readiness rating to each VP.

2. Executive VPs will identify top talent in their organization and develop-ment plans for each.

3. CEO will present results of analysis and the optimization plan to board ofdirectors.

Phase III: Optimization

1. Each executive VP will meet with CEO and SVP of HR to

Review organizational structure.

Review current list of key positions in order of priority and criticality tothe business.

Present “talent pool” of high-potential, high-performing leaders withinthe organization who are ready to move into high-impact jobs.

Present a succession plan based on key positions and leaders with poten-tial and readiness for immediate and future growth.

Discuss development plan for those included in succession plan withemphasis on assignment management.

Identify minorities, women, and employees with unique/critical skill sets.

Invite high-performing, high-potential leaders to apply for educationalgrants to continue their development on the competencies required forsuccess in their next job.

Review steps to operationalize the optimization plan.

2. Each executive VP will implement optimization plan.

Question 4: How do we deal fairly with poor performers?

It is just as important to deal fairly and effectively with people in the lower leftquadrants of the optimization grid as it is to provide developmental opportunities for people in the upper right quadrant of the grid. The optimiza-

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tion process not only uses specific criteria on which all managers are evaluated,it also incorporates multiple-rater assessment as a critical part of the process.Poor performers must be dealt with directly, fairly, and quickly. Too often, poorperformers are permitted to hide in the organization and continue to collecttheir pay checks with no accountability. The key ingredients of fair dealing areto evaluate everyone on the same criteria, to enlist multiple sources of input onpotential and performance, to provide constructive feedback, and to give a per-son a reasonable amount of time to improve. If performance on specific objec-tives does not improve in a reasonable amount of time, then action needs to betaken. While some executives believe that the lower 10 percent needs to be elimi-nated each year, we do not subscribe to that notion. Cutting by percentages is alosing strategy. The more effective strategy is to hold everyone accountable toperformance goals and to deal honestly and directly with those who fall shortof meeting expectations.

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1. Development needs to be based in the reality of the leader’s job and orga-nizational culture.

2. Senior leadership role modeling and support are critical.

3. Raising awareness of the need for development is half the battle.

4. Flexibility and a variety of development options are important.

5. Rewarding for development sends a clear message that personal learningand growth is valued in the culture.

6. Development needs to be built into every activity—point out developmentopportunities.

7. Debriefing doesn’t mean assigning blame—it means learning.

8. Provide thinking tools and methodologies: Identify-Build-Drive; Analysis-Dialogue-Discipline.

9. Create environments in which people can learn.

10. Leadership is not a program—it is a commitment, a process, and a belief.

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CCoonncclluussiioonnss

The components of a comprehensive leadership development program includeopportunities for knowing and growing self, others, the organization, and cus-tomers. The functions of leadership development are to increase the ability ofleaders to identify opportunities and threats, to build partnerships, and to driveaccountability and results. Several processes can be employed to develop lead-ers: promotions into more challenging jobs, leadership training, and educationalassistance. Clearly, the extent to which a company supports development andsuccession planning impacts the success of leadership development efforts, butthe standard of continuous learning remains constant.

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IInnttrroodduuccttiioonn

In the thousands of organizational studies conducted by consultants over thepast several decades, one major theme appears constantly: the need to improvecommunication. It’s hard for anyone to feel as if they have a great job when theydon’t feel informed of what’s happening in the organization nor involved inmaking decisions. Quite simply, people need to know what’s going on in theirwork environment to be successful. When people are uninformed, they feel out-of-sync. When they are not involved in decisions that affect them, they donot feel aligned with the organization’s strategic direction. In companies thatcommunicate extraordinarily well, people are aligned with corporate and organizational goals and objectives. The test of communications is alignment.

SSccaallee

There is a range of possible outcomes in any effort to improve workplace com-munications. The following scale will help you envision possibilities and assesscurrent realities in your organization:

5: Employees are inspired by the organization’s vision and direction; everyonefeels like they are part of the action. People are aligned with the vision.

4: Employees feel incorporated in the business and are aligned with the mission.

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3: Employees feel involved in organizational decisions and direction and arealigned with organizational goals.

2: Employees feel informed of organizational decisions and direction and arealigned with departmental objectives.

1: Employees feel ignored and are not aligned.

Where are you on the scale now? _____

Where do you want to be on this scale in one year? _____

WWhhyy CChhaannggee

Information has not flowed smoothly in Company G. Idiosyncratic decisionsare made frequently that affect other people, but those decisions are commu-nicated tersely, if at all, to those affected by the decision. Company G can becharacterized as having a culture of negotiation. If someone doesn’t like a decision from one source, he or she simply goes to another source to nego-tiate a different deal. Even at the executive level, some decisions are made without informing or involving other senior executives. Company G does nothave a vision statement and there is significant resistance to spending timedeveloping a mission statement that reflects broad-based input. Historically,most decisions have been made by a small team of executives without involve-ment or dialogue with the rest of the senior management team. This commandand control communication style has been changing, but one would notdescribe the Company G culture as empowering or engaging. In short,Company G needs to change in order to create an informed, involved, andinspired workforce.

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At a minimum, people need to be informed of decisions that affect them and ofthe strategic direction of the organization. If there is a commitment to create asupportive community among colleagues and associates, then there needs to beevidence that the commitment translates into open communication. Town meet-ings are an effective way to communicate company news and changes and to

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share openly the progress or lack of progress that is being made on corporateobjectives. At an acceptable level of communication, employees feel involved in decisionsand are clear about the strategic direction of the firm. This may require focusgroups, breakfast meetings, practice communities, etc. While it is rare for anorganizational community to feel that involvement efforts are adequate andreal, it is still important to make genuine attempts to engage people in meaning-ful dialogue when appropriate and possible.

At the highest levels of communications, employees feel inspired by the mes-sages they are receiving. The vision statement should align with employees’deeper aspirations and reflect a higher purpose. It should be phrased in such a way that employees would want to share it proudly with their mostsignificant others. The statement should be one that employees identify withand can internalize. It should be a simple, powerful, and repeatable phrasethat inspires employees to dedicate themselves to furthering the purpose ofthe organization.

Communications cover a wide range of interactions: investor relations,employee newsletters, town meetings, employee suggestion systems, meetings,performance reviews, goal setting, ongoing feedback, coaching, memos, conference calls, Web-casts, etc. Given the abundance of communication channels, it’s surprising to hear the common complaint, “There are no commu-nications around here.”

Why is there such a disconnect between the amount of time managers investin communications (either through meetings or memos) and the lack of clar-ity employees typically experience? The average manager spends a large por-tion of time in meetings. Some studies indicate that managers spend morethan 50 percent of a typical day reading and writing. The average employeespends almost an hour producing each memo. The average document isreviewed four times before it reaches its intended audience. Given the prolif-erate amount of memos circulated in a given day, that’s an enormous invest-ment in time and energy. Yet, according to a Louis Harris study, less thanone-third of employees think that management provides clear goals anddirections. Even though we know that open communication is one of themost important retention factors, it is difficult to satisfy employee expecta-tions for information and involvement. One possible reason for the discon-nect between the high investment in time and the low result in clarity is thatsenior managers rarely do a good job of cascading corporate goals through-out the organization. If goals at the top are not well articulated and commu-nicated, it is unlikely that employees will feel like they know what’s going onand how they fit in.

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There are three critical success factors for effective communication: (1)develop a communication strategy, (2) create a culture of trust, and (3) holdindividual managers accountable for communicating with their employees.Individual managers need to be trained to deliver good news and bad newsabout performance, to provide ongoing coaching, and to present ideascogently and effectively. Creating a culture of trust requires a long-term commitment to open, honest, and direct communications about successes andfailures, financial results, and strategic changes. Multiple channels of com-munication, an ongoing commitment to tell the truth, and leadership authenticity are all essential elements in building trust. A communicationstrategy involves more than developing a technology infrastructure. An effec-tive communication strategy addresses how an organization cascades itsgoals, clarifies expectations, manages change, distributes information,involves people in decisions, incorporates them in the business, and inspiresthem by the vision, mission, and strategy.

The most important success factor is to make conscious decisions about what tocommunicate to whom and to be clear about the purpose of the communication.The table that follows is a helpful thinking tool for making consciouscommunication decisions:

This tool can help you think through the level of communication required foryour various constituencies. Are there situations in which you can ignoreemployees or the board of directors? When do customers need to be involvedin decisions? How do you inspire employees with a particular message? This tool helps you raise questions that can lead to improving communica-tions.

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76Employees Customers Communities Board of

Directors andShareholders

Inspire

Incorporate

Involve

Inform

Ignore

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While communication theory appears logical, the reality usually presents manychallenges. Here are some examples from our experience:

Consistent messages vs. a wall of noise. Some organizations go communicationscrazy. Each department has its own newsletter and disseminates pithy stories tothe whole population. As a result, employees are choked with confusing andirrelevant information. At the other extreme, there is a communication void.Employees have no idea how well the company is progressing on its stated goals.To compound the confusion, messages often conflict with one another—thereare a thousand specks of light instead of a spotlight on critical messages.

Memos vs. meetings. What would happen to corporations if all memos andmeetings were banned? Crafting memos and going to meetings constitute amajor share of an employee’s day. What could be done to improve the quality ofmemos and meetings? Conscious decisions need to be made about the appropri-ate form of communication for a given issue. These issues are compounded whenworking in virtual teams. For more information on how to improve communi-cations in virtual teams, refer to the book Virtual Teams (Bellingham, 2001).

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1. Use good e-mail protocols—not too long, not too often.

2. Use voice mail for a personal touch, but keep messages under 2 minutes.

3. Add face time and reduce travel costs through teleconferences.

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4. Promote interaction with Web-casts—don’t make them all “tell.”

5. Hold town meetings once per quarter to discuss progress against objec-tives.

6. Align all employees behind corporate and organizational goals by cascad-ing them through the organization. Make sure that corporate goals arewell articulated and communicated.

7. Encourage ongoing and constructive performance feedback.

8. Engage in productive dialogue and problem solving during face-to-facemeetings.

9. Use memos to inform people of changes and decisions.

10. Leverage technologies for knowledge sharing and collaboration.

CCoonncclluussiioonnss

The components of a comprehensive communication program are employeecommunications, customer communications, and shareholder/investor commu-nications. The functions of communications are to inform, involve, incorporate,and inspire all stakeholders so that they are aligned with the strategic direction.Several processes can be used to discharge these functions: town meetings, e-mails, voice mails, newsletters, and Web-casts. Clearly, the extent to whichsenior management believes in openness affects communications, but the stan-dard of honesty remains constant.

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IInnttrroodduuccttiioonn

A fundamental requirement for human resource departments is to be easy to dobusiness with and efficient with their processes. Managers and employees wantto be able to request information and conduct transactions with an organizationthat reflects consistency and operational efficiency. Transactional processingneeds to be simple and fast. In order to meet these employee expectations, eachprocess needs to be designed to make interactions efficient and effective. Onceexisting processes are defined, then HR can look for ways to add reliability andefficiency. As an organization, it’s difficult to do great work if you are boggeddown by inefficient processes.

SSccaallee

There is a range of possible outcomes in any effort to improve HR processes.Here is a scale to help you envision possibilities and assess current realities inyour organization:

5: Processes are dependable, repeatable, and efficient. Managers and employ-ees don’t think about transactions after they are sent to HR.

4: Processes are dependable and repeatable. HR is seen as easy to do busi-ness with.

3: Employees can get answers to their questions in a timely fashion.Processes are dependable.

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2: Information access and transaction reliability are dependent upon who inHR initiates them.

1: Information and transactions are unreliable and inefficient.

Where are you on the scale now? _____

Where do you want to be on this scale in one year? _____

WWhhyy CChhaannggee

In Company H, most HR processes were not documented and there was no way to understand what, or how, to improve. Many processes were redundantacross various HR functional groups, and HR owned all aspects of the transac-tions, i.e., HR took responsibility for filling out forms and entering data. Processinconsistencies existed across all business units, resulting in gross process ineffi-ciency. As a result, Company H wasted millions of dollars from incomplete andlate transactions, unclear policies, auditing, tracking, and conflict resolution.Most processes involved manual, paper-intensive steps that often required re-work. The inconsistencies, lack of clarity, and slowness caused communicationbreakdowns among managers, HR, compensation, and benefits. This processshabbiness created confusion and frustration among business clients and led tofeelings of great dissatisfaction with HR. Company H wanted HR to developquality-driven processes that would enable HR, managers, and employees tofocus on adding value to the business. The long-term goal was to develop anorganization that focused on continuous improvement and was flexible enoughto adapt rapidly to changing business needs.

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The key to process excellence is to identify all the critical processes that cur-rently exist in HR and to understand their impact to manager or employee sat-isfaction with HR. To achieve this usually requires the creation of a process mapthat illustrates the interrelationship of all processes and how they flow. All

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processes should then be ranked in order of importance to the client, e.g., theorganization, a manager, or an employee.

Some of the key processes that clients value and that impact the perceived effec-tiveness of HR include the following:

New hire process

Employee change record process

Promotion, demotion, job title changes

Status changes

Incentive and commission changes

Transfers

Salary change

Termination process

After the processes are prioritized, each process needs to be documented sothat it can be used as an instruction set by those employees in the organiza-tion who use the process. Documentation should include recommendationsfor improvement, opportunities for automation, and metrics to measure success. Recommendations should address issues of standardization and localization.

One approach to process improvement is to

Identify, analyze, improve, and document current priority processes.

Identify technology to streamline processes and reporting.

Implement enabling technologies.

Continuously improve processes to meet changing business needs.

This approach could take several months to several years to implement fully.

Each process should have a flow chart. A termination process might look likethis:

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RReeaalliittyy

While process excellence theory appears logical, the reality usually presentsmany challenges. Here are some examples from our experience:

Management ownership vs. HR ownership. In some companies, HR has theresponsibility for social service activities such as event management, buyingflowers for special events, distributing holiday gifts, etc. HR professionals oftenvoice frustration and resentment about doing these services but do them any-way. Distributing ownership for people and organizational responsibilities is anongoing reality in the life of HR professionals. Managers are always inclined topush paperwork and “people issues” to HR when they should be assumingresponsibility themselves. A challenge for HR is to enable managers to fulfilltheir appropriate responsibilities in employee relations and process excellence. HR readiness vs. organizational readiness. It is often the case that HR has a critical need to improve processes, but the organization would prefer slowmethodical change. Changing processes requires that people do things differently,

Manager HR meets HR Generalist HR notifies HR of with coordinates conducts termination employee action list exit

interview

Manager fills Connect to Cobra Benefits HRMS out requisition Staffing andform for Process payrollreplacement

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but history has shown that people are attached to their habits. HR could create anair-tight business case for process improvement that clearly demonstrates gains inefficiency and effectiveness, but without a thoughtful, well-executed roll-out, theorganization could simply say, “No thanks.” Continuous calibration is a mindsetthat needs to dominate HR’s approach to change. Dial tone vs. enhancement. Many organizations just want dial tone service fromHR. If they pick up the phone, they want someone to answer. If they want a cer-tain fact, they want to find it simply. If they want to hire a new person, they should be able to do so without a lot of bureaucracy. When HRwants to change or modify their processes in order to enhance their effectiveness,clients sometimes react negatively because they just want the basics. If the clientwants basic compliance and HR delivers a different standard, client satisfactionmay suffer. When HR tries to deliver what it thinks the client needs instead ofproviding what clients say they want, the end result is frustration for all parties. Policy vs. negotiation. In a culture that lacks standards, it is difficult to imple-ment policies that require people to follow procedures. Many clients resist a dis-ciplined approach to any process because they have been rewarded for not beingdisciplined. If going around the process or not using the process is rewarded,why would someone want to go through the effort of following guidelines?

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1. It’s hard to make change if it requires people to act differently.

2. Initial changes should focus on high-value customer-facing transactions.

3. Keep an open mind and explore processes even if you believe they areworking well.

4. Remember the culture—if it’s fast paced and open, then make yourchanges quickly with lots of information.

5. Make managers owners of the information—provide them with regularreports to audit.

6. HR needs to be ready to deliver quality solutions when the organizationis ready to receive them.

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7. HR needs to fill its own tool box—build its own capabilities.

8. HR needs to respond to client requests with value-added solutions.

9. HR needs to vary the timing of interventions per client group dependingon readiness and capabilities.

10. HR needs to respect the capabilities of the entire HR department toabsorb change and new material.

CCoonncclluussiioonn

The components of process improvement are instructions, data, forms, flowcharts, and employee services. The functions of process improvement are toimprove access, to reduce complexity, and to improve ease of use. Severalprocesses enable HR to discharge these functions: call centers, drop-in centers,self-service, and change management. Clearly, the extent to which peopleembrace change impacts the potential effects of process improvement, but thestandards of reliability and efficiency remain constant.

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Section III

Account Management

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Creating a great company requires effective business consulting on the part ofHR in all customer-facing activities and account management. Jim Collins, aninternationally known business consultant who wrote Built to Last and Goodto Great, suggests that a primary role of a business consultant is to help a com-pany instill some of the timeless characteristics mentioned in the introduction tothis book (e.g., analysis, discipline, and dialogue—add value). If HR businesspartners are going to fulfill that role and add value to the organization, they willneed to address the cultural norms that impact strategy, structure, staffing, systems, skills, and style. This chapter addresses the core requirements of busi-ness consulting. Since the degree of difficulty of business consulting exceeds theother areas and requires more elucidation, we have attached Appendix B as aprimer for critical consulting skills.

SSccaallee

There is a range of possible outcomes in any effort to improve business. Here isa scale to help you envision possibilities and assess current realities in yourorganization:

5: HR adding value (e.g., identifying opportunities and threats) to all strat-egy, structure, and/or business issues.

4: HR adding value to most strategy, structure, and/or business issues.

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3: HR adding value to some strategy, structure, and/or business issues.

2: HR at the table for some strategy and structure issues.

1: HR not at the table for strategy and structure issues.

Where are you on the scale now? _____

Where do you want to be on this scale in one year? _____

WWhhyy CChhaannggee

Company I has not been tuned into the concept of business partnering withHR. Historically, Company I viewed HR as administrative experts and, tosome degree, employee champions. The notion that HR could partner with thebusiness to orchestrate change and to think strategically had not beenaccepted or supported. The shift to account management was an attempt toposition HR not only as administrative experts and employee champions, butalso as change agents and strategic partners. Company I has had a limitedview of what HR can contribute to the business. The primary emphasis inCompany I has been to generate financial capital. There has been little valueplaced on the importance of information capital, human capital, organiza-tional capital, customer capital, or community capital. In order to make thattransition, HR needed to be at the table and add value to business issues thatrelate to these new aspects of capital development. If HR focuses only onfinancial capital, it will always be seen as conserving costs at best and asadding overhead costs at worst.

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Any consulting intervention can be for better or for worse. A critical success factor in a consulting intervention is the skill level of the consultant engaged inthe process. Eight critical consulting skills help HR increase its ability to makea positive business impact with their clients.

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CCoorree SSkkiillllss::

Goal Setting (the ability to clarify direction and specify objectives)

Data gathering and analysis (the ability to collect relevant information andto process and present that information in meaningful ways)

Problem solving (the ability to frame problems, conduct root cause analy-ses, generate options, define criteria, and create action strategies)

Planning and project management (the ability to develop plans and moni-tor progress against objectives)

Delivery and measurement (the ability to facilitate deployment and todemonstrate value realized, e.g., return on investment)

FFuunnccttiioonnaall SSkkiillllss::

Positioning (the ability to elevate your relationship with clients and demon-strate value)

Contracting (the ability to specify who does what by when and for howmuch)

Productive dialogue (the ability to engage in meaningful conversations)

KKeeyy PPrriinncciipplleess::

Authenticity

Learning orientation

Trusting yourself and your experience

An in-depth discussion of the three functional skills is included in Appendix B.

OOvveerrvviieeww

Consulting competency is defined as:

Generating innovative ideas and applying consistent practices to ensurethe impact of key initiatives and their cultural adaptation: providingproductive advice for improving the performance of individuals, teams,and the whole organization.

Desired behaviors are defined for various levels in the HR organization usingthis framework. The objective for the consulting skills intervention is to enableindividual contributors, managers, and executives within HR to improve theirability to do the following:

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HR Individual Contributor:

Gather appropriate information through skillful questioning and listening.

Mobilize resources and provide appropriate advice and expertise to meetcustomer needs.

Use an understanding of change processes to anticipate and plan for theeffects of change initiatives.

Help customers identify the benefits and challenges related to changeinitiatives.

HR Managers and Directors:

Demonstrate change leadership by partnering with the line to initiate andimplement organization changes.

Evaluate change initiatives over time and develop strategies for renewingor deepening their impact.

HR Executives:

Provide innovative advice to business leaders that lead to new and more productive initiatives for the organization.

Initiate major change initiatives required to address current and futurebusiness needs (push senior management to understand and address critical issues).Build broad buy-in and support from key stakeholders for change initia-tives across the whole organization.

In Competence at Work: Models for Superior Performance, Lyle Spencer definescompetency, skill, and behavior as follows:

Competency: A measurable pattern of skills, behaviors, knowledge,beliefs, values, traits, or motives which causes superiorperformance and results within a defined job context.

Skill: A consistently demonstrated ability to perform certainphysical or mental tasks or job responsibilities.

Behavior: An observable sequence of physical actions, verbaliza-tions, or nonverbal cues.

Consulting is helping to conceptualize and achieve desired future states. Itinvolves an interaction between a consultant and a client to design and imple-ment a particular intervention. Three key words need to be defined here:

Consultant: A person in a position to have some influence over an individual, a group, or an organization, but who

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has no direct power to make changes or implementprograms.

Client: A single individual, work group, department, or organ-ization. The client is the person or persons whom theconsultant wants to influence without exercising directcontrol.

Intervention: The goal or end product in any consulting activity—aplanned action in response to an identified need.

Appendix B focuses on the consulting skills required for an effective interven-tion with a defined client. However, there are multiple types of skills required ofconsultants. The most common are as follows:

Content Expertise: Specific skills in an area of expertise.

Interpersonal Skills: The ability to put ideas into words, to listen, to givesupport, to disagree constructively, to influence, and tomaintain a relationship.

Consulting Skills: The ability to start up, execute, and finish the tasksunderlying the consulting relationship.

A consultant can also be expected to play a number of roles in an intervention.Common roles a consultant plays include the following:

Expert: As an expert, the consultant examines the situation,decides what needs to be done, and directs the inter-vention. The client plays an inactive role during theconsulting process, judging and evaluating after thefact.

Pair of Hands: As a pair of hands, the consultant plays a passive roleduring the process. The client knows what needs to bedone, but does not have the time or resources to dealwith the problem. The consultant simply carries outtasks assigned, i.e., serves as a pair of hands for theclient.

Collaborative Partner: As a partner, the consultant enters the relationship with the client with the understanding that her or his specialized knowledge and skills as well as the client’sknowledge of the organization are both required tosolve the problem. Problem solving thus becomes ajoint undertaking. The client is actively involvedthroughout the consulting process.

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Having clarified the key terms related to consulting, the types of skills that are employed in a consulting relationship, and the roles that are played in anintervention, it is important to keep in mind the key principles that should guidethe consulting process.

KKeeyy PPrriinncciipplleess

Authenticity

Peter Block, the author of Flawless Consulting, defines authenticity as follows:

Authentic behavior with a client means you put into words what you areexperiencing with the client as you work. This is the most powerful thingyou can do to have the leverage you are looking for and to build clientcommitment.

There is a tendency for consultants to look for ways of being clever with a client.We agonize over ways of presenting our ideas—of phrasing the project so that itwill get a great reaction. We sometimes get caught in the trap of straining to fig-ure out what will convince the client that we are everything they are looking for.

It is a mistake to assume that clients make decisions to begin projects and useconsultants based on purely rational reasons. More often than not, the client’sprimary question is: “Is this consultant someone I can trust?” Is this someone Ican trust not to hurt me, not to con me; someone who can both help solve theorganizational and technical problems I have, and, at the same time, be consid-erate of my position and person? When we operate in too clever or manipula-tive a way, or lay it on too thick, clients pick up on it, and trust begins to erode.

Low trust leads to lower leverage and lower client commitment. Authenticbehavior leads to higher trust, higher leverage, and higher client commitment.Being authentic literally means that the consultant is genuinely himself or herself. He or she does not present a façade. Authentic behavior also has theadvantage of being incredibly simple. It is literally to put into words what youare experiencing. As Geoffrey Bellman, author of The Consultant Calling,states, “I must have the opportunity to be myself while I work. Work that con-tinually requires me to hide who I am is too burdensome to pursue.”

Gelinas-James, Inc., has a list of behaviors that describe what authenticity isn’tand capture the essence of this point. They say:

You are not being authentic when:

You say only what you believe the client wants to hear.

You ignore the sticky issues.

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You do not pay attention to your own feelings.

You become too “technique-y” or hide behind jargon.

You call on higher authority instead of presenting desires and wants asyour own (“I know your boss wants us to . . .”).

You let innuendoes, cynical remarks, or “red flags” pass by withoutacknowledging them.

You hide what is going on inside you.

Steps for authenticity:

Acknowledge what the client says.

Comment on what you think/feel/see.

Speak for yourself; use the first person (“I believe that . . .” vs. “Peopleoften believe . . .”).

State the feelings you are having (“I’m confused over how this request fitsinto your overall business strategy”).

State what you are seeing and hearing without blame or judgment (“You’vetold me that there won’t be any resistance from your group on this project,but we talked to at least four people on your team who are causing problems. Can you help me reconcile this?”).

Be authentic, but don’t overwhelm your client with your openness.

Speak the unspoken (“Clearly, the retention issue is huge, and it doesn’tsound like either of us is confident of the root cause of the problem”).

If you really want to form a collaborative partnership with your client and havesatisfying consulting engagements, then authenticity is a critical success factor.

Learning Orientation

Consultants who approach their work with a learning orientation maintain aconstant focus and intention to learn from all stakeholders. Consultants with alearning orientation enter every project with an open mind; they do not assumethat they already have the answer. In fact, they realize there may be they do notassume many solutions to the issues, and they invest heavily in asking questionsto clarify their understanding of the presenting situation. They aren’t shy aboutasking questions that they need answered to better understand the situation, andthey are willing to admit that they will need some time to think about possibili-ties. They are not inclined to impress the client with instant answers; rather, theytake a more thoughtful approach. In doing so, they build client trust and com-mitment. After all, how does it make clients feel when the issue with which they

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have been wrestling for a while can be “fixed” immediately by the wise consult-ant! Maintaining a focus on learning rather than “fixing problems” opens thedoor for more collaborative and effective solutions. Here are some helpful stepsto remember:

Hold the intention to learn with the client.

Be careful that you don’t make promises in the moment without takingtime to reflect.

Understand that consulting isn’t getting the right answer once; it is an iterative process to discover what works.

Trusting Yourself and Your Experience

Reaching agreement on the contract confirms that the client believes that youhave the needed expertise and skills to be a partner in solving the client’s problem. You have the technical, interpersonal, and consulting skills necessaryto perform your role. Rely on those skills and your past experiences and trustyour instincts to make the right decisions in difficult situations.

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While the theoretical constructs underlying business consulting appear logical, real-ity usually presents many challenges. Here are some examples from our experience.

Before vs. after. Functioning as a strategic partner and business consultantmeans being invited into conversations with partners before there is a problem.The reality is that most HR business partners are invited in when there is a prob-lem of some kind after the strategy has been set. While the goal for businesspartners is to relate to clients as trusted advisors and thinking partners, the real-ity is that they are asked to do tasks after the fact instead of relating intimatelyand thinking creatively about business issues and possibilities in the early stagesof germination. In short, business partners usually spend more time in fermen-tation than generation (fermentation is defined as the heat caused by organicchange).

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People and culture vs. customer and finance. The goal of a strategic partner isto engage clients in productive dialogue about competitive differentiation. Theseconversations often go beyond people and cultural issues typically reserved forHR professionals. The reality for most business partners, however, is to focusexclusively on the value-add that they can provide as it relates to people andorganizational process interventions and solutions. It is unusual for HR businesspartners to be involved in conversations about a range of capital developmentissues that could lead to business growth.

Partners vs. pairs of hands. A true strategic partnership is recognized by the factthat the client is as anxious to engage the business partner as vice versa. Theclient and the HR professional are partners in the true sense of the word. Thekey to becoming a partner is to have intimate knowledge of the company strat-egy and to be able to provide a valuable perspective to the client. The differencebetween a “pair of hands” and a partner is the quality of perspective. Clients are always eager to hear a fresh perspective that could represent a significantsource of gain. They are almost always not interested in hearing a worn-out perspective that simply results in more work and no gain.

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1. If you are able to understand the limits currently placed on you by a client’s perception of you, then you are better able to break free from thatperception.

2. If you learn as much as possible about the business challenges of yourclient, then you will be able to engage more effectively in active inquiry,proactive advocacy, and collaborative processing.

3. If you are able to describe specifically the range of desired outcomes thatwill most likely occur based on a given intervention, then you will be posi-tioned to assess the current gaps between current state and future stateand to estimate the resources required to close the gap.

4. If you are clear about what you are bringing to the table as a consult-ant, then you will be able to make better choices about what you offer

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the client in terms of products, services, solutions, partnerships, and possibilities.

5. If you clarify who the client is and what exactly they hope to achieve as aresult of the proposed intervention, then you will avoid wasted energy and dissatisfaction and increase your chances for high commitment andultimate success.

6. If you are thorough in your assessment of the situation, then you will beable to do a much better job of defining resources, roles, and responsibili-ties.

7. If you give your client alternative ways for achieving desired outcomes,then the client will be more engaged in the process and assume more ownership for the outcome.

8. If you actively inquire about the clients’ frame of reference, you will get amuch clearer understanding of the problem and the gaps between yourimage and the client’s image.

9. If you proactively advocate for your point of view relative to the situation,cause, and direction, you will be able to influence your client to think differently about problems and possibilities.

10. If you merge images with your client about problem, cause, and direction,you will increase ownership for the solution and ensure that the interven-tion is aligned with business requirements.

CCoonncclluussiioonnss

The components of change within the purview of a strategic business partnerinclude shared values, strategy, structure, staff, systems, skills, and style. Thefunctions of consulting in all seven areas are to improve performance and to serve as the catalysts of capital development. The core processes for dis-charging those functions include positioning, contracting, and productive dia-logue. Clearly, the competence of the business partner and the perception ofvalue from the client affect the outcome of the intervention, but the standardof added value remains constant.

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PPrroojjeecctt IInniittiiaattiioonn FFoorrmm

Purpose: To clarify requests and desired outcomes.

General Project Information

Project Name:

Project Sponsor:

Project Leader:

Business Organization:

Point of Contact:

Expected Start and End Dates:

Date Requested:

Business Request: Define the business problem or opportunity to be addressedby the project. Objectives and expectations need to be clearly defined.

Brief Description: What is the project? What are the major components?What is it going to accomplish? What is excluded from the scope?

Major Deliverables and Outcomes:

Strategic Fit: Does this project meet the market and/or Company L businessstrategy? What is the potential business impact? Why should we do this proj-ect? Why should we do it now? How will success be measured?

Resource Requirements: What skills are required? How many people? Howmuch time?

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Positive relationships with colleagues, managers, and direct reports are anessential element of a great job. When interpersonal relationships are goingpoorly on a job, nothing will counterbalance the negative effects from interper-sonal tension and stress. Employee relations is a traditional but valuable roleof HR account managers. Dealing with conflict, difficult employees, negotiatedsettlements, and simple disagreements are basic skills required of any accountmanager. In addition, the account manager needs to fulfill the role of employeechampion for members of the organizational community. Dealing effectivelywith administrative details and acting as employee champions are prerequisitesfor performing as a strategic business partner and change agent.

SSccaallee

There is a range of possible outcomes in any effort to improve employee rela-tions. Here is a scale to envision possibilities and assess current realities:

5: Retention of right talent >95%*4: Retention of right talent 90–95%

3: Retention of right talent 85–90%

2: Retention of right talent 80–85%

1: Retention of right talent <80%

*Right talent means that you have adequate capabilities in the most critical jobs.

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Turnover data is only meaningful if it is clear who is leaving the organization. Inthe grid above, it is most important to retain talent in the upper right quadrant:

Where are you on the scale now? _____

Where do you want to be on this scale in one year? _____

WWhhyy CChhaannggee

Company J had a corrupt culture. People were promoted based more on whothey knew than how they performed. Nepotism was rampant and favors weredistributed inappropriately. The culture valued relationships over perform-ance. Many managers were arrogant and had huge ego needs. Interactionswith employees tended to be patronizing and condescending. Several seniorexecutives were having affairs with people within the company. As a result ofthese attitudes and behaviors, there was an underlying malaise in whichemployee complaints bubbled up. Company J not only had to address thesymptoms that were manifested, but it also had to take a hard look at thecauses.

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Employee relations focuses on the importance of understanding and mergingcorporate, management, and employee needs to increase efficiency, productivity,and profitability. Employee relations examines the implication of changes taking place in the economy and the workplace and how they affect the management and motivation of people.

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Wrong Capabilities Right Capabilities

Mission Critical Role Retention of right talent iscritical in this box.

Marginal Role

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HR professionals act as liaisons through which the organization communicatespolicies and employees voice concerns. In this role, HR professionals are oftenfaced with difficult and sensitive situations. Employee relations encompasses abroad range of issues including:

Corporate culture

Health and safety

Performance evaluation

Sexual harassment

Diversity

Communications

Conflict resolution

Office policy

Coaching and counseling

Progressive discipline

This chapter will not attempt to address all the issues related to employee rela-tions. We will deal briefly, however, with the three main problems associatedwith poor employee relations and the three primary sources of gain related topositive employee relations. The topics are the same for both: corporate culture,performance management, and management behavior.

1. Corporate culture can either enhance employee relations or destroy them.On the negative side, the norms and values of an organizational culture canbe the most debilitating factor in a person’s life. When the organizationalnorms reinforce rigidity, insensitivity, secrecy, favoritism, and exclusivity,employee relations will be reactionary and primarily focused on negativeissues. On the other hand, when organizational norms reinforce respon-siveness, clarity, support, analysis, dialogue, discipline, openness, fairness,growth, and flexibility, employee relations can be more proactive. In a positive culture, the emphasis on employee relations is on building motiva-tion and commitment vs. defusing crises. For a more complete review ofcorporate culture, please refer to the book Corporate Culture Change(Bellingham, 2001).

2. Performance management can also enhance employee relations or causereal problems. Negative issues related to performance managementrevolve around clarity, fairness, standards, and compensation adjust-ments. Expectations need to be clearly and specifically communicated to employees. Employees need to know what has to be done to keep theirjob, and they need to feel that the requirements are achievable.

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Performance standards may include but are not limited to quality, quan-tity, timeliness, and manner of performance. Performance standards notonly need to be clear, but also need to be fairly evaluated. In order to meetthe fairness standard, managers need to gather information from multiplesources to ensure that they have input from people who are in the bestposition to evaluate the performance. Input gathering can be done infor-mally by soliciting information from customers or other employees whowork closely with the person being evaluated. Or, input gathering can beformalized through 360-degree appraisal methods. Issues usually arisewhen there are disconnects between the employee’s view of the degree towhich performance standards were met and the manager’s view. When themanager believes an employee has not met standards, then the employeetypically expects to have a reasonable amount of time to improve per-formance before termination, demotion, or pay increases/decreases takeeffect. When an employee receives an appraisal that is less than his or herexpectation, he or she will likely want to know specifically what perform-ance standard was not met, what evidence there is for unacceptable per-formance, and what opportunities there are for improvement. If themanager has set unclear expectations and has fuzzy evidence, there willsurely be an employee relation issue.

On the positive side, effective performance management can inspire greatwork. If a manager clearly states expectations and standards, provides regu-lar feedback and coaching to help the employee meet the standards, andreinforces achievement through compensation adjustments, developmentalopportunities, genuine praise, and/or promotions, positive attitudes willsoar. When an employee understands the contribution he or she can maketo the organization and has opportunities to develop capabilities toimprove current performance, then employee relationships can be a posi-tive asset in the organization. For more information on performance man-agement, refer to Chapter 12.

3. Management behavior is the third major source of gain or loss related toemployee relations. Management arrogance and ignorance cause the great-est amount of stress for employees. Managers who think they are above therules and/or are unwilling to check their egos at the door, do untold harmto employee relations. Most employees despise condescending, patronizing,or dismissive behavior. Arrogance is the corporate plague. If arrogance isthe leading cause of employee dissatisfaction, ignorance may be a closesecond. (By ignorance we mean a lack of awareness of commonly acceptedstandards of conduct, e.g., sexual harassment, respect for differences, basicdecency.)

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On the positive side, one of the most powerful reasons people stay in a job andperform well in a job is their relationship with their boss. Employees who feelgood about the relationship they have with their boss are typically motivated todo great work. Managers who have good relationships with their employeestend to be responsive, respectful, supportive, and demanding. Employees gener-ally want to do the best possible work for people who treat them well and pro-vide them with challenging and meaningful work assignments. For moreinformation on leadership behaviors that have a positive impact on motivationand performance, please refer to the books Spiritual Leadership (Bellingham,2002) and Ethical Leadership (Bellingham, 2003).

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While the theory appears logical, the reality usually presents many challenges.Here are some examples from our experience:

Stated values vs. day-to-day behaviors. The discrepancy between what appearson corporate walls as core values and the day-to-day behaviors of managers isat the root of most ER issues. When managers don’t walk the talk, it causes agreat deal of employee angst and consternation. Many companies include innovation, quality, and teamwork among their stated values. When employeessee quality compromised for speed or teamwork violated by individual aggran-dizement, they begin to question the commitment the corporation has to its ownvalues.

Coaching vs. evaluation. Most employees appreciate feedback on how they aredoing. Theoretically, performance reviews are supposed to be positive experiences for employees. After all, people like to know how they are stackingup. Performance reviews that focus on support, direction, and/or coaching yieldpositive results for both the employee and the manager. The reality, however, isthat many performance review sessions are seen as judgmental, demeaning, con-descending, unfair, or negative. These reviews cause a good share of employeerelation issues. One of the challenges of HR professionals is to persuade line

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managers to go to performance management training sessions. Most managersevaluate themselves as very competent in doing performance reviews, but thefact is that most are not.

Old school vs. new school. The reality is that many managers have been verysuccessful (in career and financial measures) in achieving their goals (career andfinancial) even though they behave inappropriately or illegally. Behaviors thatmay have been tolerated in the past are no longer tolerated now. Getting man-agers to acknowledge their inappropriate behaviors and to change them is amajor challenge. In a diverse workforce with a wide range of lifestyle issues, aninsensitive and/or clueless manager can fall into ER pitfalls haplessly. One criti-cal task of HR professional is to keep managers abreast of changes in employ-ment law and to make sure that training programs exist to address complianceissues.

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1. Creating a healthy and safe environment is the first step.

2. Focus on fairness.

3. Identify the values that are jeopardized or violated.

4. Train managers in how to conduct performance reviews.

5. Train managers in interpersonal skills.

6. Mandate compliance training, e.g., sexual harassment.

7. Regularly audit the culture.

8. Take an inventory of employee care programs and ask if they aresufficient.

9. Understand both sides of any conflict in detail before taking any action.

10. Form a “soul committee” with a specific charter to point out gaps betweenstated values and day-to-day behaviors.

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Effective employee relations addresses issues affecting employees, managers, andthe organization. HR professionals need to walk the fine line of balancing allthree of these components. The functions of employee relations are to improveproductivity, morale, and job satisfaction. Several processes play a key role indischarging those functions: health and safety, performance management, con-flict resolution, coaching, progressive discipline, and corporate culture. Clearly,the extent to which organizational leaders are willing to acknowledge the gapsbetween stated values and day-to-day behaviors affects the impact of employeecare programs, but the standard of respect remains constant.

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IInnttrroodduuccttiioonn

Great companies manage change well. In these economic times, people realizethat change is a way of life. That realization, however, does not eliminate theresistance people have to change. At a minimum, employees need to understandwhat changes are occurring and why they are occurring. Beyond the basics, peo-ple also want to know the desired outcome for a change and what’s in it forthem. If people understand the rationale for change, how big the gap is betweenwhere they are and where they need to be, and how they will benefit from thechange, it is easier for them to move to acceptance and commitment. People needtime to process change. It’s unfair and unproductive to announce a change andexpect people to make heroic jumps to the new state. Managers need to processchanges with employees and include them in the thinking. Change means think-ing differently, relating inclusively, and planning dynamically. If people canimprove their thinking, relating, and planning skills, change becomes exciting.

SSccaallee

There is a range of possible outcomes in any effort to improve change manage-ment processes. Here is a scale to envision possibilities and assess current realities:

5: HR adding value to all change management initiatives.

4: HR adding value to most change management initiatives.

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3: HR adding value to some change management initiatives.

2: HR at the table at some change management initiatives.

1: HR in the way of change management.

Where are you on the scale now? _____

Where do you want to be on this scale in one year? _____

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Company K has endured dramatic changes over the past several years: theacquisition of smaller companies, the introduction of new software solutionsinto its suite of products, multiple reorganizations, several reductions in force,and hundreds of new initiatives and programs. In very few instances were thesechanges managed well. Typically, these changes have been imposed with mini-mal communication, involvement, or training. There have been few attempts todefine the desired end state, assess the current state, and then mobilize efforts toclose the gaps. Historically, changes have been announced in the organizationand people have been expected to adapt and move on. This disruptive changehas worn down the workforce. People need to see that new changes will beintroduced with more analysis, dialogue, and discipline. If HR wants to be seenas a critical player at the table, change management represents a great opportu-nity. Business leaders know they need help on this issue. HR is in position toprovide that help.

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There are five essential phases for successful change management: Design,Diagnosis, Development, Delivery, and Determination. Each of these phases willbe discussed below.

Design phase: In the design phase, the most important step is to define thedesired end state. The change sponsor must describe what success will look likeafter the change. One of the most useful ways to define the end state is to use ascale to define the range of possible outcomes that could occur as a result of this

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intervention. The design should result in a model that shows the interrelation-ships of the components, functions, processes, conditions, and standards relatedto the change, as we have done in this book. The key outcome for the designstage is a high-level strategy for getting from where you are to where you needto be, as described in the next two phases:

Diagnosis phase: In this phase, the change agent assesses the current state andestimates the gap between the current state and the desired state. The diagnosisshould include an analysis of the culture, past change efforts, organizationalreadiness for change, and some of the sources of resistance related to the change.One of the most critical success factors in this phase is the extent and depth ofinvolvement of those impacted by the change. Key stakeholders need to be iden-tified and assessed on their ability to serve as sponsors, change agents, and tar-gets. It is also important during this phase to determine the degree of risk andthe cost of the change. Change factors such as culture, history, and resistancealso need to be taken into account. The end result of the diagnostic phase is toestablish a sense of urgency for change. If the analysis does not create a sense ofurgency, then the change sponsor should seriously question whether or not tointroduce the change. In our experience, if there is no urgency, change efforts donot usually succeed. Urgency is essential to gaining needed cooperation.Reinforced complacency can act as a powerful force against change, particularlyif people believe the status quo is acceptable.

Development phase: During this phase, people and programs are developed tobe able to bridge the gap between where the organization is and where it needsto be. Sponsors, change agents, and change targets are all identified and com-mitment secured. Systems and technology are also built or acquired duringthis phase. All of the learning programs, communication plans, and rewardsystems need to be created. This phase is the time to create a guiding coalitionand to develop the vision and strategy for the change. In order to counterbal-ance the forces of complacency, it is necessary to create a more powerful forcefor change. No one individual is likely to be successful in creating organiza-tion-wide change. Putting together a guiding coalition means finding the rightpeople—people with position, power, expertise, credibility, and leadershipskills. It also means creating trust through carefully planned off-site eventsand many joint activities. The size of the coalition depends on the size of theorganization and the scope of the change initiative. The end result of thisphase is a well-defined solution that takes into account the people, cultural,process, technology, and financial variables required for success.

Delivery phase: During this phase, the focus is on implementation. Peopleacquire the skills and support they need to make whatever changes are desired,and processes are reengineered so that the organization can operate more

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efficiently and effectively. One of the most important aspects of the deliveryphase is to communicate continuously to stakeholders and to empower peopleto take action in support of the change. The real power of a change initiative isunleashed only when most of those involved share a common understanding ofgoals and objectives. Communications are required to develop that sharedunderstanding. In the delivery phase, it is critical to generate short-term winsand to consolidate gains in order to show momentum. All change efforts needvisible, unambiguous wins at regular short-term intervals. The role of short-term wins is to provide evidence that the sacrifices are worth it, to rewardchange agents, and to build momentum. A key success factor in this phase is toestablish and monitor milestones for people, process, technology, and culture.

Determination phase: During this phase, it is important to measure progress andto reassess what still needs to happen to achieve the desired end state. In thedetermination phase, inconsistencies between new practices and the old cultureneed to be examined. Change agents must listen for signs of resistance andaddress them directly in the context of the change initiative. Change sponsors andstakeholders need to change their language to reflect the new changes. Based onreviews of progress, this phase may trigger the need to loop back to a previousstep and bolster the people or programs in ways that will enable them to succeed.The end result of this phase is to show clearly the value realized for the client.

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While the theory appears logical, the reality usually presents many challenges.Here are some examples from our experience:

Scaling vs. skating. Scaling is the essential first step in any change effort.Without an agreed upon range of possible outcomes (scaled goals), the accountmanager will only be skating on the surface. A discussion on desired outcomesrequires an in-depth discussion of what success really looks like to the client. Forexample, one client wanted to implement a technical career path process for allengineers in his organization. Instead of launching into a massive developmenteffort to create these paths, the consultant asked instead, “What’s the desired

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outcome of this work?” After an hour of dialogue, the client was able to articu-late that clarity, parity, and strength were the desired outcomes. Those valueswere scaled as follows:

Clarity

5. Technical career paths and roles are competency based, clear, and func-tional, and all employees have direct access to development tools.

4. Technical career paths and the technical career ladder are well defined.

3. Career advancement for all positions is based on clear, objective, and meas-urable criteria within the organization (competency based).

2. Career advancement decisions and opportunities for individuals are basedon discussions of technical prowess (abstract).

1. Career advancement is based on tenure and contacts.

Parity

5. Technical people are fully rewarded and recognized at each step in the careerladder at the same level as management progression within the industry.

4. Technical people are recognized and rewarded appropriately at each step inthe career ladder at the same level as management progression.

3. Technical people are recognized as critical in the organization.

2. Technical people are only recognized and rewarded within their department (small circle).

1. Technical people are not rewarded or recognized adequately or appropri-ately.

Strength

5. Best people in most important jobs. All jobs are optimized (two to threesuccessors identified for each and every position). Complete succession andtalent development plan implemented.

4. Clear successors identified for all mission-critical jobs (for every job above20 points for both technical and management job levels). This includes succession planning and assignment management.

3. Successors identified for many mission critical jobs. Optimization processcompleted on an annual basis.

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2. Able to attract key talent into the organization.

1. No identified bench strength.

Programs vs. Politics. The ugly truth about most corporations is that many indi-viduals invest more time in political positioning than in program changes.Individuals typically resist change either because they have too much to losefrom making the change or because they will have to exert too much effort tomake the change. The reality of corporate life is that many people have carvedout comfortable niches for themselves. They understand where the power is,they understand how to play the game, and they can get through their dayswithout a lot of strain. Asking people to let go of a role they have worked hardto create for themselves is not an easy undertaking. Beyond letting go, otherindividuals just don’t want to do what is necessary to benefit from new ways ofdoing things. It might mean learning new skills, exposing vulnerabilities andweaknesses, or taking risks. Many individuals avoid all three of those chal-lenges. Introducing new programs, therefore, requires more than simply com-munications and training. It requires equipping managers with the skills theyneed to deal with resistance.

Habits and history vs. openness to change. Even if individuals can see thebenefits of change, are willing to let go of the old ways, and take on the chal-lenges of change, the organizational culture can still limit the success of anychange program. How different departments are accustomed to workingtogether might affect progress. For example, the sales organization might con-sider itself immune from many organizational policies. History also plays a role.If the organization has experienced many change initiatives that have not beensustained, then the credibility of new change efforts comes into question. Inaddition, habits are hard to break. If certain behaviors are ingrained in ourapproach to work, these behaviors are difficult to change. First, we need to beable to observe the habits. Second, we need to be motivated to change. Andthird, there needs to be some urgency to change. Without motivation, urgency,skills, and support, there is very little chance for successful change.

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1. Develop a business case as a first step, i.e., what’s the value proposition?

2. Clarify the business change requirements and the desired end state.

3. Conduct an organizational readiness analysis.

4. Create a deployment plan and risk assessment.

5. Develop and deliver an incentive and recognition plan.

6. Develop and deliver a communication plan.

7. Develop and deliver a training plan.

8. Continually engage the senior stakeholders.

9. Measure progress on people, process, technology, and cultural variables.

10. Document learning and value realization.

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Effective change management addresses the current state, the desired end state,and the gap between the two. HR professionals need to clarify all three compo-nents with as much detail as possible. The functions of change management areto improve productivity, reduce deployment risks, and to align all capabilitiesbehind the strategic direction. Several processes play a key role in dischargingthose functions: design, diagnosis, development, delivery, and determination.Clearly, the extent to which organizations either resist or embrace change affectsthe impact of change management, but the standard of meaningful changeremains constant.

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IntroductionOne of the most important aspects of a great job is to be able to perform at yourhighest potential and to contribute to the success of the organization.Performance management is a core business process that enables employees toalign their efforts behind the organization’s strategic direction. An effective per-formance management system also promotes productive dialogue between man-agers and employees and encourages employees to grow and develop.Performance management is not about forms and procedures; it is about align-ment, engagement, and growth. An effective performance management systemclarifies the contribution each employee is expected to make to the business,supports the development of capabilities the organization requires for success,and encourages commitment and accountability.

ScaleThere is a range of possible outcomes in any effort to change the performance man-agement system. Here is a scale to envision possibilities and assess current realities:

5: 100% employees with Contribution and Capability plans written andreviewed; >95% rated participant or above.

4: 90–99% employees with Contribution and Capability plans written andreviewed; 90–95% rated participant or above.

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3: 80–89% employees with Contribution and Capability plans written andreviewed; 85–89% rated participant or above.

2: 70–79% employees with Contribution and Capability plans written andreviewed; 80–84% rated participant or above.

1: <70% employees with Contribution and Capability plans written andreviewed; <80% rated participant or above.

A contribution plan has three to seven SMART goals and objectives.A capability plan has competency-based personal development goals.

Where are you on the scale now? _____

Where do you want to be on the scale in one year? _____

Why ChangeCompany L didn’t communicate corporate goals or expect managers to conductperformance reviews. Since the organization operated in thick silos, each grouphad its own set of goals, but did not hold anyone accountable for achievingthose goals. There was no operating plan and no feedback mechanisms to letmanagers know how well they were doing against the plan. This chaoticapproach to performance achievement worked fine until revenues quit growingand expenses didn’t. When the expense and revenue lines crossed, the companyrealized it needed to apply more discipline to its performance managementprocess. If Company L was going to survive and grow, it needed to have all itsresources aligned behind its strategic direction.

Your Reasons for Change

Critical Success FactorsPerformance management should occur throughout the year as a continuousprocess. An effective performance management process helps managers andemployees plan and review performance periodically to ensure optimum contri-bution, commitment, and capability. Achieving optimal performance requiresongoing communication, coaching, and feedback.

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Performance management is an ongoing business process. When done well, itensures alignment of employee efforts to business goals as well as employeeengagement and performance growth. A performance management system plansand reinforces immediate and long-term development and encourages commu-nication and feedback.Performance management is important to the individual and to the organizationbecause

It links individual and team goals and efforts to organizational priorities.It helps employees understand what is expected of them and how theirwork contributes to the overall success of the organization.It enables organizations to manage change more effectively by providing asystem for planning, communicating, and revising priorities.It results in a performance history that remains with the employee in caseof transfers or organizational changes.

Performance management is process driven and shared by both the employeeand the manager. Both should keep up-to-date copies of the plans. An employeeshould take an active role in his or her own success by

Becoming familiar with the performance management process.Engaging in the process of creating contribution goals and capability devel-opment plans.Reviewing personal performance and understanding management perspective.Developing capabilities.Seeking out feedback and continuing to learn.

A manager should partner with the employee and serve as a coach throughoutthe performance management process. Specifically, the manager’s role in theprocess is to

Cascade goals to employees, making sure that the manager’s goals arealigned with the organization’s goals.Collaborate with the employee as much as possible in planning for contri-bution, commitment, and capability development.Involve the employee and others in reviewing performance and understandtheir perspectives.Empower the employee to drive his or her own development and providecoaching and support.Engage the employee in productive dialogue including accurate, meaning-ful, and fair feedback throughout the year.

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At the beginning of the year, goals should be cascaded throughout the organiza-tion from senior management to the individual level using a balanced scorecardmethod. When the goals have been cascaded, employees build their own contri-bution plans. Throughout the year, contribution goals should be developed withnew employees, transferred employees, or when roles change. After the contri-bution plans are set, capability or development plans are built to encourageongoing learning and growth. Employee performance is a combination of contribution, commitment, andcapability. Successful performance is a function of all three components.Contribution can best be measured through a balanced scorecard. A balancedscorecard is a plan that represents contribution areas such as customer focus,financial accountability, internal business process improvement, and capabil-ity development. Employees should identify into which areas their goals fit.Each department should be encouraged to have goals that are balanced, butit should not be a forced process. The scorecard is simply a thinking tool thatpromotes a multidimensional approach to performance. The example on thefollowing page illustrates department goals and how they fit into a balancedscorecard [customer focus (C), financial (F), internal business process (I), andgrowth (G)].In this example, customer focus pertains to both internal and external cus-tomers; financial goals include profit, revenue, operating margin, expenses, andbusiness development; internal business process relates to operations, utiliza-tion, performance management, revenue recognition, etc.; and growth encom-passes knowledge management, organizational learning, competency modeling,and training. If one goal addresses more than one key contribution area, thereshould be measurement criteria in each area that define success. If an employee is on an incentive plan, the contribution plan serves as docu-mentation for the incentive goals. Some or all of the contribution goals can be applied to the incentive. It is helpful, however, to identify the weighteach goal carries toward the incentive. For example, goal 1 may carry 40 per-cent of the weight in determining the incentive bonus. The manager and the employee who is on the incentive plan should identify those goals thatshould contribute toward the incentive. The selection could be based on thefollowing:

Significantly contributes to organizational and/or corporate goals

Represents a stretch goal for the individual

Highest priority goal

Revenue-generating goal

Customer-focused goal

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Balanced Scorecard

All goals should use the SMART acronym:

Specific: Clear, concise, measurable statements of neededaccomplishment.

Motivational: Meaningful, interesting, and challenging to the employee.Attainable: Realistic based on available resources and reasonable

growth.Results-Oriented: Defined in terms of the outcomes that will be achieved.Time-bound: Clearly defined time frame.

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Department Level Goal AreaC F I G

Measures, Targets, Timelines

Improve responsiveness to level-1customer inquiries

X X 90% resolved within 2 days byMarch 2003Fully implement customer track-ing system according to specs byDec 2003

Increase approval rating oncustomer satisfaction survey

X Mean of 7.3 on customer satis-faction survey by March 2003

Increase operating margin X 15% operating margin eachquarter

Reduce travel expenses by usingonline meetings

X 30% decrease quarter over quarter beginning in Q2 Develop tools and procedures byNov 30

Define and implement a projectmanagement process

X 95% of project using set processby March 2003

Employees can articulate individualgoals aligned to business

X 100% of employees by Dec 1

Implement cross-training programto optimize talent

X 5 cross-training assignments byJune 2003

Create competency models fordepartment jobs

X 10 jobs with identified compe-tencies by March 2003

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As mentioned earlier, commitment is one of the three critical success criteriafor performance. Managers need to ask employees to commit to their jobsand the company because the company will not be successful unless eachemployee takes full responsibility for success. Building commitment, how-ever, requires more than simply asking employees to be responsible.Management must take responsibility for creating the conditions and the culture that make high commitment a possibility. No one can force someoneto be more committed to a job or a company. Commitment cannot beplanned or scheduled. Commitment is a result of meaningful work and pro-ductive dialogue with managers. The emphasis in these discussions needs tobe on the behaviors that demonstrate commitment rather than the subjectivenature of the term. Employees and managers need to engage in honest con-versations about supporting organizational direction and identifying barriersto achieving goals.

Some important discussion questions include:

What prevents the employee from taking full accountability for the work?

What prevents the employee from supporting the organizational direction?

What motivates the employee?

What is important to the employee about the work?

What is de-motivating the employee about the job?

What is in the employee’s and manager’s control to change?

How do the employee’s values fit with organizational values?

Three are several actions a manager can take to increase commitment. Actionswill vary depending on the unique factors impacting an employee’s commitment.Some possible actions include:

Engage the employee in a discussion about strategic direction.

Encourage collaboration with another department or team member.

Work with the employee to identify projects of interest.

Connect the employee with customer issues and concerns.

Exchange information.

Make sure that goals are aligned with the department and organizationaldirection.

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Capability or individual development plans address the competence that isneeded to meet employees’ current job goals and/or to prepare them for theirnext job, or future business needs. Developing capabilities is much easier if com-petency models are in place for each job. If job models are built throughout theorganization with roles, descriptions, and competency requirements welldefined, then coaching sessions are much simpler because the manager and theemployee can have an objective discussion of what’s required for success in aparticular job and how well the employee stacks up on the competencies.Competencies describe the following:

Knowledge, skills, and abilities needed to perform a job successfully

Behaviors and attitudes that differentiate superior performers from aver-age ones

If an employee knows the competency gaps that are either precluding opti-mum performance in the current job or promotional consideration for anotherjob, then he or she can create a development plan to close those gaps.Execution on the development plan, of course, depends on the developmentalresources available and management support for learning and growth. In anideal scenario, a manager would encourage developmental opportunities,identify the business outcomes that were achieved as a result of new learning,and recognize growth either through a merit increase or a promotion. If thatscenario were repeated multiple times in a given organization, a learning cul-ture would emerge.

When discussing an individual development plan, the manager and employeeshould address the following questions:

What is the current level of competency of the employee?

What is the required level of competency to improve performance?

Which gaps are most critical to address?

What skills and knowledge does the employee require now, and in thefuture, to achieve desired results?

Who in the organization would be a good mentor or source of learning?

How will it become clear that the employee has strengthened his or hercapability?

On the following page, there is an example of an individual development plan.

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Individual Development Plan

At the end of the year, the manager evaluates the employee’s performance andschedules time for a productive dialogue with the employee. The purpose of themeeting is to review the contributions made during the year, the commitmentdemonstrated by the employee, and the progress on the individual development

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Capability/Development Goal Development Activity

Present the corporate overview andhandle typical objections successfully

Observe 3 corporate overviewsPractice 2 presentations with teamfeedbackComplete the Web-based training(WBT) on objection handling

Be able to accurately assess critical customer needs and partner with themto address the issue

Shadow a customer service specialiston 2 customer visitsComplete the “Relationship Manage-ment” program

Learn and teach the team about thebest practices and approaches of threemajor competitors

Join and participate in 1 professionalassociationWork with marketing and otherresources to get competitor information Conduct competitive analysis andpresent findings to team

Master advanced level Excel by March 3 Complete Excel training

Become advanced in project management process and procedures to complete complex projects to specifications

Become proficient in collaboration technologies

Involve cross-functional groups early inprojects that impact their business

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(capability) plan that had been jointly developed. In this review session, it is particularly important to understand the employee’s perspective and to provideperformance feedback about the employee’s contribution, commitment, andcapability.

An effective performance review takes into account the employee self-review,others’ feedback, and a mid-year progress discussion. It is critical to conduct thereview in a fair and objective manner. Some tips for evaluating performanceinclude the following:

Evaluate specific, observable, and job-related behavior only.

Recognize positive performance.

Identify areas needing improvement.

Avoid personal bias.

Evaluate the entire year evenly.

Avoid being too strict or lenient or rating all employees as average.

Provide examples and use them in discussion.

Don’t surprise the employee with critical feedback that he or she is hearingfor the first time at the annual performance review.

Contribution, capability, and commitment are each critical to successful per-formance. Each is unique and should be considered separately and each mayimpact the others. Specifically, for an employee to contribute successfully, she orhe needs capability and commitment. Additionally, external factors may also beimpacting the employee’s success. In order to provide accurate and fair ratingsin each of the three areas, it is important to consider what is supporting or hin-dering that employee’s success and plan accordingly. One way of rating perform-ance in each of the areas is the following scale:

Leader

Role Model

Contributor

Needs Development

Unacceptable

While the definitions and descriptions differ for each area, the same scale can beapplied to all three. We believe that using the language of leader, role model,etc., is a more constructive way of rating than using a numerical scale.Qualitative ratings tend to be more motivational than quantitative evaluations.What follows are definitions and descriptions for each level on the scale for con-tribution, commitment, and capability.

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Definitions:

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Contribution Commitment Capability

Leader Demonstrates per-formance beyondexpectations andimproves the waythe work gets done.

Clearly demonstratesaccountability forwork and enhancesorganizationaldirection. Inspirescommitment in others.

Teaches and leadsothers as an expertin job-related competence.

Role Model Demonstrates per-formance beyondexpectations (e.g.,quality, timelines,and results).

Clearly demon-strates accountabil-ity for work andenhances organiza-tional direction.

Demonstrates mastery of compe-tencies beyond thestated scope of thejob.

Contributor Performs at theexpected level forthe job. Contributesto the success of thecompany.

Demonstratesaccountability forhis or her work andsupports businessgoals and culture.Is committed.

Demonstrates theappropriate level ofcompetence for thestated scope of thejob. Is capable.

Needs Development Performs somewhatbelow expectedlevel for the job.Improvement isrequired.

Accountability forhis or her workand/or organiza-tional direction isnot clearly demon-strated. Commit-ment is unclear.

Needs to improvecompetence to besuccessful in currentposition.

Unacceptable Does not meet per-formance expecta-tions for job. Aperformanceimprovement planis required.

Demonstrates alack of accountabil-ity for his or herjob and/or organi-zational direction.Is uncommitted andundermines culture.

Does not demon-strate minimal levelof competence forthe stated scope ofthe job. Unskilled.

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Contribution refers to the results of the employee’s work. Considerations shouldbe given to the employee’s job performance on significant goals, objectives, andprojects that he or she worked on throughout the period. To achieve a certainrating, the employee must consistently perform at that rating level with regardto her or his formal contribution goals, the results of initiatives that were nottied to previously set goals, as well as other job responsibilities. Quality, timeli-ness, and results should all be considered. It should be noted that, regardless ofjob position, any employee can be a leader.

Commitment is evidenced in the actions that demonstrate accountability,pride, and ownership in the work, the team, and the organization.Commitment is also evidenced in the actions the employee takes to advanceor support the group or organizational direction. These actions shouldinclude helping out other team members within or outside the group, takingpersonal responsibility for outcomes, helping to keep others positive andfocused, etc. Three dimensions must be considered: commitment to his or herown work, commitment to the organization, and commitment to supportingthe stated values of the culture. When rating an employee on commitment, itis important to identify examples of how commitment is demonstrated. Amanager should focus on the demonstrated actions that provide evidence ofpotential commitment. Ultimately, only the employee knows her or his levelof true commitment. The manager is simply rating the demonstrated actionsthat impact her or his work, the work of the team, and the organizationalculture.

Capability is evidenced by the extent to which an employee applies and transfers their skills and knowledge. A person who teaches and coaches oth-ers in one or more areas is demonstrating the highest level of capability.Capability is also evidenced by the extent to which a person is the “go-to”resource in the department or organization because of his or her experienceand skills.

All three areas of performance (contribution, commitment, and capability) areunique and important, but one overall summary rating is needed. The purposeof the overall performance rating is to link the performance evaluation to therecommended merit increase or promotion where applicable. The overall ratingis the manager’s summary evaluation of the employee’s total performance.Managers need to use discretion to determine the weight the organization givesto each of the three employee success criteria.

Conducting a performance review requires advance planning and preparation.Open communication is critical. Managers should encourage a dialogue by asking questions and checking for understanding and opinions throughout thediscussion. Some tips for managing the discussion follow:

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Do:

Put the employee at ease.

Show a supportive attitude.

Reinforce the positive.

Be honest and candid.

Encourage conversation.

Actively listen.

Ask about the employee’s opinion.

Discuss specific examples.

Ensure the employee understands areas needing improvement.

Build on strengths.

Stay in control.

Summarize actions to be taken.

Do not:

Discount employee perceptions.

Focus solely on areas needing improvement.

Dominate the discussion.

Assume silence means agreement.

Let the conversation get off course.

Describe the employee’s behavior as better or worse than it is.

Be vague or unclear.

In order for performance management to be effective, people need to feel that their work has a strong connection to corporate goals and understandthe standards of performance on which they are being evaluated. In addition,the performance management system needs to be seen as fair and credible.Performance standards need to be seen as achievable and methods of measurement need to be seen as sound, e.g., a balanced scorecard approach.Managers play a critical role in the performance management process.Constructive managers help employees find solutions to problems at work,attain needed information and resources to do their jobs, and translate strategy into action. Constructive managers also pay attention to the factorsthat have the biggest impact on employee performance: understanding howto complete projects and assignments, enjoying work, having influence on theselection of projects, working on challenging projects that are important to

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their personal development goals. Finally, constructive managers emphasizeperformance and personality strengths. On the other hand, managers whomake frequent changes to projects and assignments undermine the fairnessand credibility of the system.

Your Critical Success Factors

The RealityWhile the theoretical constructs underlying performance management appearlogical, the reality usually presents many challenges. Here are some examplesfrom our experience: HR process vs. business process. Performance management is a businessprocess. It is a process for ensuring that all employees are aligned behind corpo-rate objectives. Many managers see performance management, however, as anHR program—a low-impact process that requires them to fill out forms and dopaperwork.Program vs. behavior. It’s not about the program—it’s about the behavior.Performance management, if done properly, is an excellent vehicle for engagingemployees in dialogue and clarifying direction. The reality, however, is thatmany managers see it as a burdensome program that is pushed on them. HRprofessionals need to focus on the values and the tools, not on the program.Timing. While there is never a good time to conduct performance reviews, sometimes are better than others. If performance reviews are done at the same timeas multiple other programs, they do not get the attention they deserve. Also, wehave found it helpful to separate performance reviews from merit increases, somanagers have time to reflect on the review and ensure that any compensationadjustments are tied directly to performance.

Your Reality

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Top Ten Lessons Learned

1. Start with corporate goals and objectives.

2. Position performance management as a business process.

3. Support managers with training and guidance.

4. Be flexible.

5. Focus on the value proposition, e.g., alignment, engagement, and growth.

6. Trust managers to do what is necessary.

7. Use differential evaluations and differential rewards.

8. Link performance management to compensation and rewards.

9. Don’t make assumptions about a manager’s knowledge, attitude, andskills.

10. Balance needs to fit the culture and shape the culture.

ConclusionsIn summary, performance management is an ongoing business process, not anevent. The purpose of performance management is to facilitate alignment,engagement, and growth. Three important success factors in a comprehensiveperformance management process are contribution, commitment, and capabil-ity. The key processes that make performance management work effectively aregoal setting, productive dialogue, and periodic reviews. Clearly, the extent towhich managers are helpful and supportive, rewards are connected to perform-ance, and people trust the system will affect the impact of a performance man-agement program. The standard of alignment, however, will remain constant.

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IInnttrroodduuccttiioonn

In a great company, people value differences, make decisions with diversity inmind, and act inclusively. These are the three critical ingredients of diversity. Weknow that diversity leads to innovation and improvements in the bottom line,yet we are reluctant to make a full commitment. We know that diversity deep-ens our acceptance and appreciation of differences, yet we hesitate to take boldaction. We know that diversity improves teamwork and productivity, yet wecontinue to gravitate to homogeneity. We know that diversity gives us a chanceto confront our own intolerance, yet we avoid the opportunity to connect har-moniously with persons who have walked a path unlike our own. What keepsus from acting more congruently with stated values? An experience with diver-sity might help us uncover the answer.

SSccaallee

There is a range of possible outcomes in any effort to leverage diversity. Here isa scale to envision possibilities and assess current realities:

5: Diversity principles and practices are widespread throughout the corpora-tion worldwide and are demonstrably linked to revenue growth and for attracting, retaining, and empowering employees. Company is bench-marked for its practices.

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4: Gender, racial, and international diversity practices and policies existthroughout the company. Employees and customers comment on howdiverse the company is.

3: The company takes strong steps to become more diverse through aggres-sive recruitment, staffing, and development of diversity candidates.

2: Lack of diversity is recognized as problematic; plans are being created tomove the corporation to a different situation.

1: The corporation is mostly a homogeneous population of like-minded andlike-thinking executives, managers, and employees. Cultural-, racial-, and gender-based statements are commonplace and have led to lawsuitsand financial settlements. The status quo is unconsciously or consciouslymaintained.

Where are you on the scale now? _____

Where do you want to be on the scale in one year? _____

WWhhyy CChhaannggee

On the one hand, Company N is rich in diversity. Twenty-five percent of itsemployee population is Asian and it has a large number of people on green cardsfrom other countries. Company N also values diversity of thought.

On the other hand, Company N has less than 1 percent African American, 1percent Hispanic, and 18 percent women employees. Its sales organization isparticularly homogeneous. Instead of leveraging its strength in diversity, it is fal-tering from its homogeneous weakness. Sourcing efforts do not tap into diversetalent pools, and there is no advocacy and/or mentoring program for minorityemployees. As a result, innovation, teamwork, productivity, and profitabilitysuffer. In addition, attrition of diverse employees is rising and there have beenrecent charges of sexual harassment. Company N needs to make diversity moreof a strength in its culture.

YYoouurr RReeaassoonnss ttoo CChhaannggee

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CCrriittiiccaall SSuucccceessss FFaaccttoorrss

Benchmarking indicates the trend toward a broad definition, one that goesbeyond the visible differences such as race, ethnicity, age, and gender. Here areseveral definitions used by different organizations:

Company N: “. . . differences that make each of us unique plus the simi-larities that bring us together.”

Hallmark Cards: “. . . about people, respect, and inclusion.”

Covance: “. . . is based on respect for one another and recognition thateach person brings his or her unique attributes to the corporation.”

Fannie Mae: “. . . the varied perspectives and approaches to work thatmembers of different identity groups bring that can positively impact theorganization.”

Oracle: “. . . about expanding the range of opportunities for all our people—employees, owners, suppliers—to freely invest human capital,ideas, energies, expertise, and time.”

McDonald’s: “The governing word is inclusive. We describe it in thecontext of race, gender, physical abilities, sexual orientation, economicstatus, culture, lifestyle, geography, and thought. We don’t leave the subject of equal opportunity and affirmative action but instead expandon both by stepping into the marketplace. Now we have an opportunityto link the commitment to equal opportunity to the success of thebusiness.”

IBM: “We believe that diversity—and fostering an inclusive workforce—isnot only the right thing to do, it is also critical to maintaining a competi-tive advantage in today’s global marketplace. Inclusion is a businessapproach that embraces these diverse characteristics in a way that engagesall employees at all levels, fostering both individual success as well as thesuccess of the company.”

Bell South: “A third of all Americans belong to a minority group. A diverseworkforce is not a luxury but a necessity.”

Servicing and marketing to diverse partners challenges a homogeneous company. Companies and partners make buying and alliance decisions as muchon “who the company is” as well as “what the company offers.” In an increas-ingly diverse workforce, many companies will not look favorably on a companythat doesn’t seem concerned about diversity issues. As Bell South indicates, adiverse workforce is a necessity.

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Litigation and minority turnover occur less frequently in diverse companies.Companies that are not in compliance with EEO and Affirmative Action legis-lation are more vulnerable to legal action than companies that have made seri-ous attempts to diversify.

There is more innovation in diverse companies. Heterogeneous teams have beenproven to generate a greater quantity and quality of ideas than homogeneousteams.

Becoming an employer of choice attracts the best and brightest candidates.These candidates tend to represent diverse backgrounds and ethnicity. A level 3company knows what diversity looks like and knows how to find diverse can-didates. At level 4, the company does not necessarily look for someone who canconform to the culture, but seeks out people who understand differences in cul-ture and can find the right entry points.

We are living in a global economy. Companies need to do business in a multi-cultural world. Good diversity practices allow individuals in the United Statesto interact more successfully with employees in foreign locations. Changingdemographics of employee, partner, and customer bases necessitates the under-standing and utilization of all differences.

Increased productivity comes as a result of leveraging the unique skills and capa-bilities of the global workforce. When there is a demonstrated desire to fully useall the talents of a diverse workforce, then people work harder and smarter.

Diversity is about domestic diversity and about global diversity. Domestic diver-sity starts with recognizable differences in sex, age, race, and physical ability andmoves on to the more subtle differences.

Global diversity has multiple meanings:

Ensuring that we have local representation in countries where businessesreside.

Understanding that for Europe and Asia, diversity is first and foremostunderstood in terms of gender issues, and second, in terms of cultural differences.

Ensuring that every employee works from a global mindset and skill setwith a sensitivity to differences.

Ensuring the HQ culture understands and adapts a global mindset.

Businesses in the United States dominate the global economy. This power demandsa level of cultural sensitivity in which most businesspersons fall short. One of thereasons that Americans have problems doing business in the international arena isbecause we typically are not well informed about cultural differences around the

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world. We also assume that businesses in other countries operate in similar waysto U.S. companies. An effective diversity program results in the capabilities to sailthe Seven “Cs” with skill and grace. Differences in understanding across the globeon each of these business essentials will make the point:

Commitment: Commitment in one country may mean something entirely differ-ent in another country, depending on cultural norms and values. Commitmentin Germany may mean applying your intellectual gifts while you are at work,whereas commitment in the United States is usually translated as the number ofhours you work in a day and how many vacation days you have left over at theend of the year.

Consistency: Consistency in Japan may mean continuing to do things in thesame way for 10 years. In the United States, it may mean meeting a performancegoal for two quarters.

Contribution: Contribution in the United States is roughly translated as perform-ance plus leadership in the pursuit of corporate goals and initiatives. Contributionin Brazil may mean donating time and/or money to a community organization.

Computers: A computer in the United States means a machine that willaccommodate all the recent technologies and provide instant access to theInternet. Computers in Kenya may mean a machine that enables you to type andstore letters.

Competitiveness: Competitiveness in the United States is associated with fierceindividualism and defeating the enemy. Competitiveness in Sweden may meanworking together with colleagues to achieve differentiation in themarketplace.

Confidentiality: Confidentiality in the United States means that your private med-ical records can only be shared among professionals. Confidentiality in Israel maymean that no conversations are shared with anyone without permission.

Confrontation: Confrontation in the United States may mean directly challeng-ing someone in a public forum. In Hong Kong, confrontation may mean politelypointing out incongruence between words and actions in a private setting.

Companies in the United States have had too many shipwrecks on these SevenC’s over the past 20 years. We need to develop better radar screens that pick upclues to potential disaster. We also need to make more effort to understandcultural differences.

Avoiding these shipwrecks means not pushing U.S. corporate programs aroundthe world; it means thinking globally, and acting locally; and it means acknowl-edging functional, geographic, and business differences.

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The three most critical success factors in a diversity program are aggressivesourcing, strong advocacy, and disciplined promotion procedures. Minority can-didates are available to fill key roles if a company takes the time to search fortalent pools that are rich in targeted groups. Assuming a company seeks out andhires a diverse workforce, it is critical to ensure that new hires have someone inthe organization who will advocate for them and provide opportunities for vis-ibility to senior executives. When promotions are being considered, companiesthat value diversity will make every effort to give minority candidates a fair shotat the opportunity. Just as companies need to seek diverse sourcing pools, theyalso need to build and use diverse promotional pools of internal candidates.Good people do not always look the same or talk the same.

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TThhee RReeaalliittyy

While the theoretical constructs underlying diversity appear logical, the realityusually presents many challenges. Here are some examples from our experience:

Affirmative action vs. quotas. The idea of quotas is emotionally charged. Somepeople believe that quotas are arbitrarily imposed and constitute reversediscrimination. Others believe that quotas represent a stake in the ground toestablish a more diverse workforce and to acknowledge the disadvantagescreated by centuries of institutional racism. The principles behind affirmativeaction constitute a common ground for groups with opposing views.

In March l961, less than 2 months after assuming office, President John F. Kennedyissued Executive Order 10925, which established the President’s Committee onEqual Employment Opportunity. Its mission was to end discrimination in employ-ment by the government and its contractors. The order required every federal con-tract to include the pledge that “The Contractor will not discriminate against anyemployee or applicant for employment because of race, creed, color, or national ori-gin. The Contractor will take affirmative action, to ensure that applicants areemployed, and that employees are treated during employment, without regard totheir race, creed, color, or national origin.”

It is here for the first time in the context of civil rights that the government calledfor “affirmative action.” The term meant taking appropriate steps to eradicate

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the then widespread practices of racial, religious, and ethnic discrimination. Thegoal, as the President stated, was “equal opportunity in employment.”

In other words, affirmative action was instituted to ensure that applicants forpositions would be judged without any consideration of their race, religion, ornational origin; these criteria were declared irrelevant and taking them intoaccount was forbidden.

The Civil Rights Act of 1964 restated and broadened the application of thisprinciple. Title VI declared that “No person in the United States shall, on theground of race, color or national origin, be excluded from participation in, bedenied the benefits of, or be subjected to discrimination under any program oractivity receiving federal financial assistance.”

But within one year, President Lyndon B. Johnson argued that fairness requiredmore than a commitment to impartial treatment. In his 1965 commencementaddress at Howard University, he said:

You do not take a person who for years has been hobbled by chainsand liberate him, bring him up to the starting line of a race and thensay, “you’re free to compete with all the others,” and still justly believethat you have been completely fair. Thus it is not enough just to openthe gates of opportunity. All our citizens must have the ability to walkthrough those gates. . . . We seek not . . . just equality as a right and atheory but equality as a fact and equality as a result.

And so several months later, President Johnson issued Executive Order 11246,which stated that “It is the policy of the Government of the United States to pro-vide equal opportunity in federal employment for all qualified persons, to pro-hibit discrimination in employment because of race, creed, color or nationalorigin, and to promote the full realization of equal employment opportunitythrough a positive, continuing program in each department and agency.” Twoyears later, the order was amended to prohibit discrimination on the basis of sex.

While the aim of President Johnson’s order was stated in language similar to thatof President Kennedy’s, President Johnson’s abolished the Committee on EqualEmployment Opportunity, transferred its responsibilities to the Secretary of Labor,and authorized the Secretary to “adopt such rules and regulations and issue suchorders as he deems necessary and appropriate to achieve the purposes thereof.”

Acting on the basis of this mandate, the Department of Labor in December1971, during the administration of President Richard M. Nixon, issuedRevised Order No. 4, requiring all contractors to develop “an acceptableaffirmative action program,” including “an analysis of areas within which thecontractor is deficient in the utilization of minority groups and women, andfurther, goals and timetables to which the contractor’s good faith efforts must

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be directed to correct the deficiencies.” Contractors were instructed to takethe term minority groups to refer to “Negroes, American Indians, Orientals,and Spanish Surnamed Americans.” The concept of “underutilization” meant“having fewer minorities or women in a particular job classification thanwould reasonably be expected by their availability.” “Goals” were not to be“rigid and inflexible quotas” but “targets reasonably attainable by means ofapplying every good faith effort to make all aspects of the entire affirmativeaction program work.”

Such preferential treatment required that attention be paid to the same criteriaof race, sex, and ethnicity that had previously been deemed irrelevant. Couldsuch use of these criteria be morally justified? That is the key question in adebate that has continued for more than two decades.

Quantity vs. quality. The authors believe that affirmative action efforts shouldabide by the principle established in 1971, i.e., that corporations should set tar-gets reasonably attainable by means of applying every good faith effort to makeall aspects of the entire affirmative action program work. Setting these targetsshould not be seen as setting quotas for the number of positions in a particularfunction, but as a meaningful attempt to share power with diverse groups ofpeople. The sharing of power not only passes the real test of affirmative action,but also leads to better business results.

Superficial vs. substantive. While many companies provide lip service to affir-mative action principles, not enough commit to a substantive response.Superficial approaches lead to an entitlement mentality among employees atbest and endless complaints at worst. The real substance of affirmative actionrevolves around opportunity. Not just opportunities for jobs, but opportunitiesto influence and to provide additional opportunities for the communities ofrespective minority groups.

YYoouurr RReeaalliittyy

TToopp TTeenn LLeessssoonnss LLeeaarrnneedd

1. Create a diversity steering committee with broad representation.

2. Don’t focus diversity efforts on any one particular group.

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3. Hire the best and brightest from every community.

4. Base promotions on performance, merit, and support of the diversity strategy.

5. Build a business case by sharing the research on the connection betweendiversity and profitability and performance.

6. Focus on creating a culture of respect and inclusiveness.

7. Configure your training from awareness to skills, and dovetail it with leadership and management development.

8. Develop plans and policies for inclusiveness: seek first to understand.

9. Establish a mentoring program.

10. Offer diversity and sexual harassment training.

CCoonncclluussiioonnss

There are two components to a comprehensive diversity program: systems andculture. Systems include recruitment, talent management, and mentoring.Culture includes the norms and values that surround hiring and promotion. Thefunctions of diversity are team optimization, innovation, and productivity. Theprocesses for discharging those functions are sourcing, advocacy, and promo-tions. The conditions required to realize the full potential of a diversity programare entrepreneurial spirit, respect, inclusiveness, and straight talk. Clearly, theextent to which leaders think inclusively and value differences will impact thesuccess of a diversity program, but the standard of success remains constant.

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IInnttrroodduuccttiioonn

This book is based on the premise that HR can transform itself from personneladministration to human and organizational capital development. That premisebegs the question, How do you measure individual and organizational capabil-ities (human and organizational capital)? In this chapter, we will not onlyexplore different measurement possibilities but also demonstrate how humanand organizational capital are aligned to business needs.

SSccaallee

There is a range of possible outcomes in any attempt to improve business. Hereis a scale to help you envision possibilities and assess current realities in yourorganization.

5: Human and organizational capital metrics used to improve business per-formance.

4: Decision support information used to actively manage human and organi-zational capabilities.

3: Standards set that enable the evaluation of human and organizationalcapabilities relative to peers.

2: Human resource information used to make business decisions.

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1: Personnel data not used effectively for management or performanceimprovement.

Where are you on the scale now? _____

Where do you want to be on the scale in one year? _____

WWhhyy CChhaannggee

In Company O, metrics revolved exclusively around financial indicators. Therewas a lot of talk about people being the most valuable asset, but there were veryfew actions and initiatives that supported those statements. In Company O, thestatement “People are our most important asset” was an empty slogan thatcaused more cynicism than commitment. Similarly, there was a lot of talk inCompany O about the importance of aligning the culture, but few resourceswere allocated toward a systematic approach to make it happen. In short, thewhole idea of human and organizational capabilities was a vague and amor-phous concept that had no substance or credibility associated with it. The com-pany was essentially operating on one cylinder and with one indicator on itsdashboard—financial results. Unfortunately, the indicator was trending towardempty and the one-cylinder engine was sputtering. Company O needed a multi-valve engine and a complete dashboard to measure performance.

YYoouurr RReeaassoonnss ttoo CChhaannggee

CCrriittiiccaall SSuucccceessss FFaaccttoorrss

The purposes of measuring human and organizational capabilities are to iden-tify strengths, weaknesses, and performance gaps and to be able to develop andallocate resources appropriately across competing priorities. In order to deter-mine whether current performance is acceptable, metrics must be compared ontime, cost, quality, and quantity indicators against comparable benchmarks.Metrics can also be used to determine whether human and organizationalresources are most effectively deployed.

Human capital development is the process of improving an employee’s ability toassess, think, relate, plan, and act more efficiently and effectively. Human capi-tal measurement is the ability to link improvements in human capital toincreases in business performance.

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Building organizational capabilities means aligning people, processes, systems,and culture behind the business goals. In order to align people behind organiza-tional goals, it is necessary to identify the individual competencies required forsuccess and then either hire for those competencies or develop them in the work-force. In order to align processes behind organizational goals, it is necessary toidentify the processes required for operational excellence and then either reengi-neer current processes or design and implement new processes to improve effi-ciency and effectiveness. In order to align systems behind organizational goals,it is necessary to understand what systems are required to enable people andprocesses and then either buy or build those systems. First, we understand therelationship between people, processes, and systems and the achievements ofour goals. Then measurements are needed to assess the impact.

Capabilities come in many forms. They not only represent the knowledge, com-petencies, skills, and experience of the workforce, they also encompass our abil-ity to deliver quality products, make timely decisions, manage costs, shareknowledge, respond to marketplace opportunities, optimize performance, andplan for the future. In short, organizational capabilities are the critical factorsrequired to achieve our mission.

Overall, organizational capabilities can be measured through individual andorganizational excellence. Specifically, individual capabilities can be measuredby providing employees with multiple-rater assessments of the competenciesrequired for success in their jobs and through the performance management sys-tem. Organizational capabilities can be measured through an assessment formand through results indicators such as customer satisfaction, market share, rev-enue growth, and profitability. For example, VPs could be surveyed to identifythe organizational capabilities required for successful execution of corporategoals and to assess the current strength of those capabilities. Based on thatinput, the organization can focus on closing whatever performance gaps exist inthose capabilities. This gap analysis helps the organization set priorities forimproving organizational and individual effectiveness.

The overview on the following page lists various ways of measuring human(people) and organizational (process, technology, and cultural) capabilities. Theindicators in each cell are simply examples of measures that could be used toassess how well the “capital development engine” is running.

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MEASURING HUMAN AND ORGANIZATIONAL CAPITAL

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TThhee RReeaalliittyy

While the theoretical constructs underlying human and organizational capitalmeasurement appear logical, the reality usually presents many challenges. Hereare some examples from our experience:

Quantity vs. quality. Most organizations think about measurement in strictlyquantitative terms such as reductions in time or cost or increases in speed or rev-enues. While these are critical elements of measurement, it is also important totake into account qualitative dimensions such as the ability to think creativelyand relate interdependently. Human and organizational capital measurementrequires consideration for both quantitative and qualitative dimensions.According to Watson Wyatt, superior human capital practices are not only cor-related with financial returns, but also increased shareholder value. In theirresearch, Watson Wyatt found key links between human capital and shareholdervalue creation. The key links were in rewards and accountability: a collegial andflexible workplace, recruiting and retention excellence, communicationintegrity, focused HR service technologies, and prudent use of resources.Clearly, each of these links has a quantitative and qualitative dimension. Weneed to make sure that we have an appropriate balance between these two typesof measures. For example, turnover is typically measured by the percent of people who leave a department during a given quarter. That number, by itself,is often misleading. If the turnover consists of world-class talent with mission-critical responsibilities, then it is a real problem even if the number is low. If, onthe other hand, mediocre talent with nonessential responsibilities is leaving, itmay not be such a bad thing.

Limited vs. expansive. The image of human and organizational capital is stilllimited by the “personnel” legacy from which it is evolving. The people factor hasbeen historically measured by headcount, turnover, and costs. This view typicallyassumes that all people are interchangeable and replaceable. It doesn’t take intoaccount the reality of today’s labor market or potential value of those employ-ees taking leadership roles. If everyone is viewed as having leadership potentialin a given moment, independent of position or title, then the potential value-addis dramatically expanded. A limited view of human capital is to measure andtrack what people physically do on their jobs and the tangible results of theirwork. A more expansive view is to measure how well people assess, think, andrelate to others and what they contribute to intangible assets. Similarly, if orga-nizational capital is measured by the independent contributions of each depart-ment, it may miss the contributions generated by interdependent functioning.Having an expansive view of the possibilities helps assess what the appropriatemeasures should be.

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1. Create a broad, multidimensional framework to measure human andorganizational capital.

2. Manage and regularly clarify expectations from the top.

3. Make sure you have adequate resources and infrastructure for measurement.

4. Recognize contributions to human and organizational capital as well asfinancial capital.

5. Facilitate open discussions and the sharing of ideas.

6. Foster trust with key functions across the organization regardless of theirsupport.

7. Support cross-functional teaming and actively involve all levels of theorganization.

8. Always assess the “build versus by trade-off” against the measurement ofprogress. Don’t let the “not invented here” syndrome get in the way ofmaking progress.

9. Develop a set of common terms and definitions.

10. Start with pilot projects in supportive functions.

CCoonncclluussiioonnss

The components of a comprehensive human and organizational capital meas-urement initiative include knowledge capital, people capital, and cultural capi-tal. The functions of capital measurement are to improve return on investmentand to increase market capitalization. Several processes can be employed tomeasure human and organizational capital: define requirements, capture knowl-edge and capabilities, organize information, disseminate information, and lever-age capabilities. Clearly, the extent to which a company understands the valueof capital development affects the measurement efforts, but the standard ofimpact remains constant.

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Appendices

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Dear Colleague,

Now that our new HR management team is in place, we are getting a feel forthe culture and how HR can best serve your needs. We are very excited aboutwhat we have learned so far about the people, the products, the processes, andthe technology that makes our company grow.

In an attempt to provide you with the best possible services, I would like to askyou to give us feedback on what you perceive as the most important and mosteffective services from HR. Over the course of the last year, we have sharpenedour focus on customer satisfaction and defined specifically our priorities. Yourinput will enable us to ensure that we are providing the services that are criticalto you and your business success.

On the following pages is a survey that lists all of the current HR services. Foreach service, there are three columns. In the first column, please indicate howimportant that service is. In the second column, please indicate how effectivelyyou think HR is performing the service. In the third column, please indicate ifyou think the service has been getting better or getting worse over the past 6months. Please use the following 4-point scales for your ratings:

Customer Satisfaction Survey

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Here is an example of how each service might be rated:

Business Consulting: Working with senior managers to think through strategicand tactical priorities for business issues, including strategy, structure, andstaffing.

Thank you very much for providing us the feedback we need to focus andimprove our services. We will share the results of the survey with you as soon asthey are summarized.

Thank you.

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Rating Importance Effectiveness Direction

4 Critical to business success Highly effective Much better

3 Very important Effective Better

2 Important Ineffective About the same

1 Not important Very ineffective Worse

Importance Effectiveness Direction

Business Consulting 4 3 4

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HHuummaann RReessoouurrcceess CCuussttoommeerr SSaattiissffaaccttiioonn SSuurrvveeyy

For these questions, please rate your responses according to the following scale:

Benefits: Designing and delivering noncash compensation, including days off(e.g., vacation, sick days, etc.), health and dental insurance, accident liabilityprotection (e.g., life insurance, disability income continuation), employee assis-tance plan (e.g., alcohol counseling, financial counseling, elder care and childcare referral), tuition reimbursement, and 401(K).

Comments:

Business Consulting: Working with senior managers to think through strategicand tactical priorities for business issues, including strategy, structure, andstaffing.

Comments:

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Rating Importance Effectiveness Direction

4 Critical to business success Highly effective Much better

3 Very important Effective Better

2 Important Ineffective About the same

1 Not important Very ineffective Worse

Importance Effectiveness Direction

Benefits

Business Consulting

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Change Management: Influencing company decisions, activities, and manage-ment practices through the application of HR skills and business knowledge.Diagnosing, developing, delivering, and determining the results of organiza-tional interventions designed to facilitate strategic implementation.

Comments:

Compensation: Ensuring that employees are paid fairly and in line with mar-ket comparables. Also, reducing pay inequities within each organization anddeveloping a rewards philosophy that attracts, motivates, and retains greattalent.

Comments:

Compliance Reporting: Ensuring the adherence of business practices with appli-cable federal, state, and local laws as well as with internal policies and procedures. Also, educating managers and employees about these laws.

Comments:

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Importance Effectiveness Direction

Change Management

Compensation

Compliance Reporting

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Diversity: Achieving diversity of talent at all levels in all organizations. MeetingEEO and AA guidelines.

Comments:

Employee Information: Collecting and maintaining information on employeesthroughout the world, including personal information, job-related history, bene-fits eligibility and enrollment, educational achievements, hiring paperworkincluding offer letters and signed agreements, and compliance-required recordssuch as I-9s. These data need to be maintained with accuracy, timeliness, andappropriate accessibility/confidentiality.

Comments:

Employee Relations: Establishing and maintaining positive and direct commu-nications among employees, working with managers to build and support an environment conducive to open exchange of information. Third-party con-flict resolution/mediation; coaching, counseling and feedback; team building; individual/group awareness and assessments.

Comments:

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Importance Effectiveness Direction

Diversity

Employee Relations

Employee Information/HRMS

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Globalization: Taking cultural and regional differences into account for all decision making and implementation.

Comments:

Leadership Development: Creating, providing, and evaluating learning opportu-nities, either internally or externally delivered, that maximize people manage-ment and leadership effectiveness (e.g., performance management, coaching,delegating, developing direct reports, leading teams, inspiring commitment).

Comments:

Learning and Development: Identifying, providing, and evaluating learningopportunities (e.g., career development, technical training, skills training), eitherinternally or externally delivered, that maximize employee capability and alignwith business objectives.

Comments:

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Importance Effectiveness Direction

Globalization

Leadership Development

Learning and Development

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Performance Management: Aligning individual and organizational capabilitiesbehind the mission. Also, engaging employees in productive dialogue aboutcommitment, contribution, and capability development.

Comments:

Employee Services: Making it easy to do business with HR. Facilitatingemployee transactions and employee changes as efficiently and effectively aspossible.

Comments:

Recruiting and Internal Mobility: Attracting, sourcing, selecting, and hiringquality candidates to fulfill needs in a timely manner, either through directadvertising, recruitment firms, employee referrals, or other means. Maintainingdatabases of applicants and reporting on staffing metrics (e.g., filled/unfilledpositions, source of hire, cost per hire). Facilitating internal career movement foremployees.

Comments:

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Importance Effectiveness Direction

Performance Management

Employee Services

Recruiting and InternalMobility

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The Skill of Positioning

Introduction to Positioning

The role of HR has been evolving over the past several decades.

We need to discriminate where and how we invest our time. If we believe thatthe highest value we can provide to the organization revolves around generatingbest solutions through collaborative processing, we need to find ways to reposi-tion ourselves in the organization and to align our energy behind that goal.

Indeed, HR consulting has changed dramatically in scope and depth over thepast 50 years. These changes can be best understood if we look at major eventsin each decade and how those events shaped our thinking.

In the 1950s, our function was called personnel. We helped to hire people,orient them, pay them, provide them with benefits, and let them go when thetime came. Organizational leadership was of the command and control vari-ety that emerged naturally out of the military experiences of World War II.As long as we kept our leaders out of trouble, we were seen as doing our jobs.

In the 1960s, a new battle cry was heard: “Question Authority.” This mentalitywas born in the Vietnam War era and dominated the thinking of young peoplefor at least a decade. It was also in the 1960s that our work became more commonly referred to as Human Resources. Leaders began to realize thatemployees needed more than to be told what to do while at work; they neededto be heard and have a sense of involvement in their jobs. HR was called on to

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make sure the company was in compliance with its own policies and proceduresand that it was not violating local, state, or national laws.

In the 1970s, organizational leaders began to give more than lip service to theidea that people are our most important asset. Given that recognition, manytraining companies were created to help develop employees to their fullestpotential. HR either developed and delivered its own product or purchased off-the-shelf training programs from a burgeoning supply of vendors. “Train-them-up” became the new demand from corporate leadership, and HRresponded in the best ways it could to satisfy its customers. Primarily, however,HR was still positioned as a “pair of hands” to perform tasks for management.

In the 1980s, the Quality Movement came into being. “Meet commitments inaccordance with requirements” and “Do it right the first time” became thesongs of the day. Leaders started demanding more responsiveness to their needsand asked for customized services to help them meet their business challengesand improve product quality. HR was expected to develop people and to reducethe costs of poor quality. It had elevated its positioning from performing tasksto meeting business objectives and from “pairs of hands” to relationshipbuilders.

In the 1990s, as the global economy imposed new demands for continuousinnovation, HR started playing a more visible and vital role in the organiza-tion. Some leaders perceived HR as business partners and asked their assistancein enhancing organizational and individual effectiveness. In the early years ofthe decade, the term “human capital” came into common parlance as theInformation Age imposed demands on people to process information morequickly and to leverage knowledge more effectively. Leaders started looking toHR for solutions to their human, organizational, and business issues. Theyexpected internal consultants to help them navigate in a world in which ideageneration was more important than patent protection. Human resource devel-opment (HRD) had now positioned itself as providing value-added systems andsolutions to meet business requirements. It was seen as the primary developerof human capital.

As we have entered the new millennium, business leaders are now looking fora new relationship with HR. They are hoping consultants will help themenhance their human and organizational capital and help them refine anddevelop the leadership skills to grow the business in the new economy. They arehoping to develop interdependent relationships in which new possibilities forgrowth are generated. This shift in expectations represents an enormous posi-tioning opportunity for HR.

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These trends can be summarized in the chart below:

* Human Capital Development (HCD)/Organizational Capital Development (OCD)

Based on interviews and focus groups at Company P, there is also a dramaticshift in roles underway. Company P’s HR desires to be positioned and perceivedas a partner for value-added business solutions. It wants to be at the table byhelping business leaders think through issues in multidimensional ways; empow-ering them to develop their talent and their teams through new skills and state-of-the-art technologies; and coaching them to set and reset priorities based onchanging marketplace conditions. Accomplishing this change in positioning willmake HR central to the business. Individual positioning, however, has to be con-ducted in the organizational context. Readiness and receptivity will change ineach organization. Some organizations may embrace elevated positioning,whereas others may reject it.

Positioning OverviewPositioning means creating the perception of serving as a value-added partnerfor business solutions. Positioning is an important functional skill because it getsconsultants “at the table” where they are able to help leaders think throughbusiness issues. There are four key steps in positioning:

Scaling

Assessing

Learning

Elevating

The desired outcome for positioning is to make a SALE to your client thatresults in an intervention that leads to a positive business outcome. The foursteps—scaling, assessing, learning, and elevating—will help make that SALE.

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’70s Personnel Tasks Pair of Hands (P)

’80s HR Objectives P + Emotional/Relationship Issues (E)

’90s HRD Systems P + E + Information Technology andOrganizational Development

’00s HCD/OCD* Solutions P + E + I (I = Interdependence,Innovation, Integrity)

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Step 1: Scaling

The Idea

Scaling is the ability to describe a range of possible outcomes from a given inter-vention. It recognizes the reality that any intervention can be for better or forworse and sets the stage for the consultant to talk intelligently about resourcesrequired to achieve a desired end-state. The generic scale for describing therange of possible outcomes is as follows:

5: Ideal

4: Fully acceptable

3: Minimally acceptable

2: Less than acceptable

1: Destructive

Example

Referring back to the introduction to positioning and how HR has evolved overtime, the following scales could be used to describe a range of outcomes fromour positioning efforts:

Perception of HR

5: Capital Development Engine

4: Human and Organizational Capital Development

3: Human Capital Development

2: Human Resources

1: Personnel

Key Values of HR

5: Leadership

4: Enhancement of people and organizations

3: Conservation of resources

2: Compliance with internal policy and external regulations

1: Keeping out of trouble

Primary Positioning of HR

5: Collaborative processing capabilities

4: Partnerships

3: Solutions

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2: Services

1: Products

Relationship Goals

5: Interdependent partner

4: Collaborative partner

3: Preferred provider

2: Internal provider

1: Vendor

Your Turn

Select one of the scales above and/or create a scale that best represents the rangeof outcomes that could be achieved through the repositioning efforts of HR inCompany P.

5:

4:

3:

2:

1:

Step 2: Assessing

The Idea

Assessing is the ability to determine the gap between current state and desiredfuture state. It enables the consultant to engage the client in a meaningful andauthentic discussion about where the client is and where he or she wants andneeds to be.

Example

Using the scale for HR positioning described above, the executive staff deter-mined that HR had primarily provided products and services in the past andneeded to reposition itself as a partner for value-added solutions.

5: CPC

4: Partnerships (where we need to be)

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3: Solutions

2: Services (where we are now)

1: Products

Please note that moving up the scale to partnerships does not mean that HRwould no longer provide products, services, and solutions. To the contrary, HR’sability to form meaningful partnerships with business leaders is dependent on itsability to deliver high-quality products, services, and solutions. It is simply ele-vated positioning that helps to get HR “at the table.”

Your Turn

Using the scale you created in the previous exercise, assess where you are andwhere you need to be.

5:

4:

3:

2:

1:

Step 3: Learning

The Idea

Learning is the ability to discover as much as you can about your clients’ busi-ness so that you can engage in meaningful dialogue about their needs and chal-lenges. Continuous learning will improve your ability to engage in activeinquiry, strategic visioning, and collaborative processing.

Example

Continuous learning is one of the six guiding principles of consulting, alongwith excellent communication, expectation management, proactive resourcemanagement, commitment to quality, and positive business impact. This appen-dix suggests the following applications of the continuous learning principle:

Understand the client’s developmental objectives and assist the client inattaining those objectives.

Leverage existing templates.

Align staff developmental needs with business needs during project staffing.

Provide stretch opportunities in order to gain experience outside individualcomfort zones.

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Your Turn

Think about a client with whom you are currently working or with whom youmay work in the future. What could you do to learn more about that client’sbusiness opportunities and issues?

Step 4: Elevating

The Idea

Elevating is the ability to demonstrate that you can add value to more businesschallenges at higher levels than others currently believe. This step is criticalbecause it helps you break free from whatever limits your client may believeyou possess. An organization consists of a variety of components, functions,and processes and operates with certain conditions and standards. You may be perceived as being able to function effectively in a limited number of com-ponents, with a particular level of management, under certain restrictive con-ditions. Elevating whatever perception limits you is a critical step inpositioning.

Example

The chart on the following page represents one way to describe an organization.

This chart indicates where one HR consultant is perceived as functioning mosteffectively. This hypothetical consultant is having difficulty breaking free fromthe perception that she is not able to add value to executive-level thinking, par-ticularly outside of R&D. She is looking for ways to elevate her positioning bothupward and outward.

Your Turn

Using the chart on the following page, or one you create yourself, please indi-cate where you believe you are currently “boxed-in” and fill in the cells whereyou believe you could add value.

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Positioning ExerciseNow you will have an opportunity to put all the positioning steps together tomake a SALE.

Background

A Company P vice president states in a meeting that he wants to dramaticallyimprove the cycle time on a key process because it will save money and time plusreposition the company against competitors. He indicates that previous effortshave failed, but he does not know why, nor does he care. He believes that peo-ple lack commitment to divisional goals and thinks it’s high time that peoplestop protecting their turf and start acting more like a team that is accountablefor success.

Your Situation

You were not present at the meeting, but heard about it from a credible source.You were not asked for help, but believe that you understand enough about hisplans that you can add value.

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Marketing Sales G&A R&D Services

Policy(ManagementCommittee)

Executive Grades (2–3)

ManagementGrades (4–5) X

SupervisorGrades (6–7)

IndividualContributor

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Exercise

How could you use the positioning skill to improve your relationship with thisclient? Pair off with another HR business partner and role play what a position-ing conversation might look like. The person role playing the client should beopen to your initiative.

Summary The four most important principles to remember about positioning yourselfeffectively with a client are

1. If you are able to understand the limits currently placed on you by a client’sperception of you, then you are better able to break free from that perception.

2. If you learn as much as possible about the business challenges of yourclient, then you will be able to engage more effectively in active inquiry,proactive advocacy, and collaborative processing.

3. If you are able to describe specifically the range of desired outcomes thatwill most likely occur based on a given intervention, then you will be posi-tioned to assess the current gaps between current state and future state andto estimate the resources required to close the gap.

4. If you are clear about what you are bringing to the table as a consult-ant, then you will be able to make better choices about what you offerthe client in terms of products, services, solutions, partnerships, andpossibilities.

Contracting Skill

Introduction to Contracting

Contracting is making explicit agreements on

Expectations the consultant and the client have of each other.

The results they want to create.

The method they will use to deliver the results.

How they are going to work together.

Contracting is one of the most critical consulting skills. The degree to which youare successful in contracting is the degree to which you will be successful in sat-isfying your clients’ as well as your own needs. There is a simple formula thatsupports the concept of contracting:

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Client Satisfaction = Results

Expectations

The results of your work are only as good as the expectations that your clienthas. Effective contracting is the best way to ensure that results meet expectationsand, thus, that both the consultant and the client are satisfied as a result of hav-ing worked together. Simply stated, contracting is the process by which youmake promises that you can really keep, promises that will give you and yourclient satisfaction.

Contracting is an iterative process. It comes into play in all five phases of theconsulting process: Design, Diagnosis, Development, Delivery, and Determina-tion. The contracting process is never complete because conditions change andbecause the client and consultant continue to gain new insights into the inter-vention model. The contracting process normally mirrors the complexity of theclient request. If the client request is for a long-term project, you can expect thecontracting process to involve multiple conversations with the client and otherstakeholders. If the client request is for a single event or a technical request suchas compensation or benefits information, the contracting process will likely bemuch shorter. (If you are having difficulty finding an issue or intervention thatrequires a contract, you can always default to change management because thereare always new initiatives being introduced that require this service. Every newinitiative requires some level of change management if it is going to realize thevalue intended.)

Contracting OverviewContracting is the ability to define explicitly the components, functions, andprocesses of a consulting intervention. The contracting skill is importantbecause it results in clear statements of opportunities, challenges, objectives,scope, approach, methodology, time frames, roles, resource requirements, deliv-erables, metrics, and confidentiality concerns.

The basic contracting steps are

Clarifying the request and the desired outcomes.

Assessing the situation (gathering data).

Exploring alternatives.

Reaching agreement.

Although these steps generally occur in this order (CARE), you may have torevisit a step based on new information that you uncover in the contractingprocess.

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Just as excellent positioning will increase your chances for a SALE, contractingrequires great CARE if you want to achieve outstanding results.

Step 1: Clarifying the Request and the Desired Outcomes

The Idea

This step begins with understanding who the client is. Although this step seemsobvious, it is frequently missed in the consulting process. The person making therequest may not be the client. In a staff support function such as HR, confusionmay occur when a request is received from a generalist on behalf of the actualclient. In these instances, it becomes critical for the internal staff group to reacha shared understanding of who the client is and how they will work together to deliver the desired results. In the Company l, with its Core Solutions andBusiness Partner functions, confusion may occur regarding who has primaryresponsibility for what as it relates to the 5Ds contained within the consultingprocess: Design, Diagnosis, Development, Delivery, Determination. When theproject involves a long-term commitment or has a high degree of complexity, thepersons who are responsible for the work will almost always need to have directclient contact. It is absolutely essential to define roles and responsibilitiesbetween Core Solutions and Business Partners in all phases of the intervention.The point is simple: Unless you can contract directly with the client, you haveonly marginal hope of achieving the results you or your client wants.

Moving forward before clarifying the request and the desired outcomes ensuresthat you will

Waste energy in conversation and design.

Not deliver client satisfaction due to varied expectations.

Lack the commitment required for success.

End up exhausted and personally dissatisfied.

The second part of this step is to determine the client outcomes. When consult-ants take the presenting request, immediately promise to act on it, and startdesigning an intervention based on the request, clients never have a chance tothink through the results they want to accomplish as a result of the request. Theomission of this step is very likely to lead to disappointment and frustration. Useof the scaling step, presented as part of the positioning skill, will help the clientand consultant clarify what the problems, goals, and desired outcomes really are.

This step can be tiring for both the client and the consultant, but the clearer you are about the outcome, the more effective you can be in all phases of the consulting process. Vague discussions will leave the door open for unmet

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expectations on both sides of the table. When outcomes are written clearly, theycan then be used as guides before, during, and after sessions to check progress.The term outcome is used intentionally here (as opposed to objectives):Outcomes suggests focusing on determining what participants will be able to doas a result of the work you are designing. Using outcome language generallyhelps clients clarify the actions they want and need.

Example

The Project Initiation Form (at the end of Chapter 9) is a good example of whatshould be included in clarifying a request. It suggests an appropriate level ofdetail for defining who the client is, what is being requested, and what thedesired outcomes are.

Your Turn

Use the Project Initiation Form to clarify a request you have recently had froma client.

Step 2: Assessing the Situation

The Idea

Once you have a clear idea of the actual request and have identified the client’s desired outcomes, the next step is to do a brief assessment of the situa-tion. There are several areas you will need to explore in your contracting con-versation:

1. The background of the request in detail and its connection to the businesspriorities

2. The project outcomes and why this request is important to the client

3. The scope of the project, i.e., what are the boundaries (what’s in andwhat’s out)

4. The approach, time frames, and any urgency issues

5. Roles and responsibilities (who needs to be involved and at what level)

6. Resource requirements

7. Potential resistance and current barriers that are or could inhibit progress

8. Deliverables

9. Metrics

10. Confidentiality concerns

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Here are some additional thoughts on selected areas:

Background: It is important for the consultant to have a solid understanding ofthe business situation that has precipitated the request and, equally important,to understand how the request fits with the priorities of the business. By gain-ing this information, the consultant will be better prepared to make recommen-dations that are consistent with the business priorities and provide participantswith a meaningful context for this work.

Objectives and Motivation: By understanding what is important to the clientabout this request, the consultant can be more effective at designing the workplan and at soliciting client input in the areas where they have the most passion.In some cases, you may discover that the client is motivated not so much out ofhis or her desire for the work, but because his or her boss wants it completed.This is an early warning signal for obstacles you may encounter in fulfilling therequest and lets you think about ways to engage the client on a different level.

Scope and Boundaries: Perhaps one of the most frustrating consulting experi-ences is the problem of “Scope Creep.” Whenever you find that your targetgroup has suddenly expanded or that your end product is arbitrarily trans-formed into an interim milestone, you have entered the land of Scope Creep. Itis imperative that you identify from the beginning who the intended group isand what the scope of your work is regarding beginning and end points. Bymaking the boundaries of the project explicit, you eliminate the potential forconfusion when you are midstream in the work. It is useful to state not onlywhat you think the boundaries are, but also what is out-of-bounds based onyour understanding of the project. By having this conversation, you and theclient can reach agreement on what scope for the project will best enable theachievement of desired outcomes. Then, if later on in the project either you orthe client feels that the scope needs to change, you can re-contract for timingand design options.

Time Frame and Urgency Issues: You must get a sense of the client’s timing inyour initial conversation. There is usually more flexibility in the timing thanis initially communicated, and you need to distinguish between what is impor-tant and what is urgent. Some clients have a great sense of urgency about rel-atively unimportant projects. Other clients may have insufficient urgency forvery important projects. In any event, you need to know the time parametersunder which you are working because they will impact the approach you recommend.

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Resistance and Barriers: It is important to know early what issues you may befacing when designing a work plan for a client, particularly if the project spansa longer period of time. This information helps you to know who you may needto spend time with prior to outlining the work plan and tips you off about whatwill be important to consider when designing the work. When the project youare asked to support represents significant organizational change, you canexpect there will be some resistance. Knowing the source of the resistance andthe reasons behind it can be powerful in helping you to be effective.

Sometimes you will even face resistance with the client in the contractingprocess. It is important to understand that resistance is an emotional responseand has little to do with you personally. Resistance takes a number of forms.Here are a few of them:

The client has no time to see you or discuss the project with you.

The client overwhelms you with data.

This is the real world—the client implies that your theory may not apply inher situation.

The client responds to your overtures with silence.

The client acts confused most of the time.

The client is overly critical.

The client exhibits a drive for instant answers.

When you find yourself with a client who is resistant, the following advice maybe helpful:

Don’t take it personally.

Slow down and try to identify what form the resistance is taking.

Listen intently to what is being said and play it back to the client to see ifyou are understanding her or his point.

Engage your curiosity and shift to questions for understanding.

Name the resistance you are sensing and wait for the client to respond.

Provide options for moving forward that address the concerns expressed.

Roles and Responsibilities (Who needs to be involved and at what level?): Inaddition to having a clearly defined project scope, it is also important to knowwho needs to be involved in the project work and in what capacity. Some clientsand other stakeholders want to be extremely involved in the details of projectplanning, while others want to be kept informed of progress. The more peoplewho are involved in the project planning, the more time required to formalize aplan. On the other hand, the more involvement you have on the front end of a

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project, the more commitment you will have to draw on to help ensure a suc-cess. Through this conversation, you and your client can begin to identify whatlevel of involvement makes the most sense given your outcomes and timeframes.

Up to this point, everything we have covered should take place in the initialclient meeting. With an understanding of all the topic areas discussed, it is help-ful to go away and think about what you have read and heard and get back tothe client in a couple of days to talk about options for moving forward. We rec-ommend that you set a date for the follow-up meeting before you leave the firstmeeting. This allows you to spend some time processing what you have heardso that you can generate some alternative approaches. It also lets the clientknow that you have considered the request with thoughtfulness and care. Once you have made explicit the desired outcomes, assumptions, and possibleapproaches, you and the client can determine if you have enough data and infor-mation to move forward. Sometimes—particularly with projects that are complex and span a longer timeframe—there is a need for more investigation about the presenting problem oropportunity the client wants to address. Perhaps the client has asked for helpbecause she or he does not have a good handle on what the real issues are andneeds an objective third party to help sort them out. Gathering additional data before the second client meeting is also helpful whenyou are beginning a project that represents a significant change. It is often bene-ficial to conduct interviews or focus groups with participants before the workbegins to build some rapport with the client group, surface issues and concerns,and answer outstanding questions they may have. This step can be a powerful and productive method for jump-starting your project. Clients and consultants, however, must jointly answer the followingquestions before gathering data:

1. Why are you collecting the data and how will you use it?

2. What method will you use:

Individual interviewsFocus groupsSurveys or questionnairesObservationDocument review and analysis

3. Who will conduct the data analysis? How will they analyze the data?

4. How will you communicate the findings and to whom?

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Once you have collected, analyzed, and given feedback on the findings, you arenow prepared to move to the next step.

Example

Clearly, assessing the situation requires a great deal of steps and a great deal ofthought. Before exploring alternatives, it is important to summarize what youhave discovered by this point, then determine whether or not the discoveryphase should consist of one interview with the client or a thorough data gather-ing and analysis effort.

Your Turn

Take the time to role play an interview with a prospective client and then sum-marize your findings using the 10 sections identified in the template.

Step 3: Exploring Alternatives

The Idea

Now that you and the client have a shared understanding of the outcomes,request, and business situation, you may move on to exploring alternatives. Theconsultant should be prepared to make at least two suggestions of ways of reach-ing the outcomes and should make their recommendations based on their experi-ence and expertise. The consultant will need to discuss the upsides and downsidesto each approach as well as the requirements of each approach. The articulationof both client and consultant needs for each approach is extremely important.

Some negotiation typically occurs during this step. The consultant must be clearabout what is and is not realistic for the time frames and must be able to thinkwith the client about what is most important, providing alternatives and cau-tions along the way. The consultant must know his or her own limitations, thelimitations of any design, and the additional requirements in terms of time,money, and additional resources that will be required to deliver against the out-comes. When this step is completed, the client and the consultant should bothown the outcome.

The following needs should be explicit:

Resources required (people, time, and budget)

How the client and the consultant will participate

How other stakeholders will be involved

Ground rules for working together

Preparation time

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According to Peter Block, there are two things we constantly need to work on:

1. Stating clearly—sometimes at the risk of overstatement—what we needand want from the client to make this project work

2. Being cautious—sometimes at the risk of understatement—about theresults we alone will deliver on this project

One of the most difficult tasks in this step is to get the client to commit tothe necessary time investment to deliver the outcomes. The consultant mustbe clear about how much time is needed and why it is important. The con-sultant needs to have the capability and knowledge to make the time require-ments explicit. If the consultant knows that the time requirement for aproject is a minimum of six days given the deliverables, then he or she mustmake it clear to the client and state why. If, after this discussion, the clientinsists that only two days are possible, then negotiate for what you can prom-ise relative to the objectives for those two days. DO NOT commit to squeezea six-day process into two days by shortening the time frame. Be aware thatevery change you make relative to time dedicated impacts the outcomes youare attempting to deliver.

Always let the client know what you expect in terms of their participation in allphases of the project, and find out from them what successful participation onyour part will look like to them.

The consultant must be able to identify the skills that the group will need tobuild in order to deliver the outcomes. For example, if the group cannot engagein a conversation without blame and hostility, interpersonal skills training maybe required.

If, after clarifying your needs to the client, there is no agreement, consider back-ing away from the project or see if there is another plan that would be bettersuited to deliver the outcomes.

Example

Please refer back to the contract you developed earlier and explore alternativeapproaches, roles, and resources. These are the three areas of the contract thattypically require the most negotiation.

Your Turn

Refer back to the summary you created based on your client interview. Explorealternative approaches, roles, and resources.

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Step 4: Reaching Agreement

The Idea

You are now ready to make agreements with your client. Some conditions mayhave shifted since your initial conversations, so you will need to revisit and agreeon the outcomes and approach.

Next you will need to agree on how you will work together. Identify and gainagreement on ways to operate given the challenges of the project. Specifically,you want to reach agreement on the following:

Overall approach and activities

Milestone dates and time frames

Dealing with resistance

Creating the time and space to conduct the work

Key decision points and the decision-making process

How conflicts and concerns will be addressed

How to assess the impact and evaluate the results (metrics)

The next steps (e.g., who will do what by when)

Example

Please refer to the contract you developed.

Your Turn

Please take the time to reach an agreement with a prospective client.

Contracting ExerciseBackground

Your client is a manager for a department of 100 people. She has been in theposition for three months and is new to the Company P. After assessing her cur-rent organization and the business plan that she has to implement, she recog-nizes the need for a Chief Developer position. This title is consistent withorganizational titles within the department, but she feels this person needs tohave a much higher skill base than any she has observed inside the organization.She is particularly interested in this person’s ability to build collaborative rela-tionships with potential external partners. She needs a person with superiorinterpersonal skills and an ability to think creatively about new business oppor-tunities. She believes that her current employees are very tied to doing businessthe same way they have been doing it for years and are missing opportunities.

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She feels that by putting someone with a different approach on her team, theentire group could develop further.

In her previous company, she had a lot of success working with three recruitingagencies. They did a good job helping her articulate the role requirements andsourcing against them. She plans to call them to help her work on this position.Meanwhile, there are internal processes and postings that need to be completed.

Situation

Your manager has submitted a form to you for the Chief Developer position ata salary of $60,000. You have contacted her and set up a face-to-face meeting.

You believe that $60,000 for a Chief Developer is grossly under-market. Thereare other people in the department with the same title who are making$60,000 per year with much less experience and skill than what you believethis manager may be looking for. You have a lot of concern about findingsomeone to fill the role for that kind of salary, and you are interested in part-nering with her to improve collaboration in her department—a much biggerrole than helping her handle the administrative details associated with thisrecruitment effort.

Exercise

Your objective for this initial meeting is to complete as much as possible of thefirst two steps of the contracting process relevant for the initial meeting. Yourgoal is to have sufficient information to be able to go away from this meetingand create a proposed plan of action that would address the client’s human andorganizational needs. Remember to clarify the next steps with the client beforeclosing the meeting.

SummaryThe basic ingredients of an effective contract are captured in the chart below:

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Who What Where When Why How

Individual Development

Team Development

Organization Development

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When you develop a contract with your client, you need to be clear whether theprimary function of the intervention is individual development, team develop-ment, organizational development, or a combination of the three. Once thefunctions are established, you simply need to reach agreement on the 5W/Hcomponents to accomplish the function. You may want to use this chart as acheck step for the contracts you develop.

Key principles to remember about contracting include the following:

1. If you clarify who the client is and what exactly they hope to achieve as aresult of the proposed intervention, then you will avoid wasted energy anddissatisfaction and increase your chances for high commitment and ulti-mate success.

2. If you are thorough in your assessment of the situation, then you will be ableto do a much better job of defining resources, roles, and responsibilities.

3. If you give your client alternative ways for achieving desired outcomes,then the client will be more engaged in the process and assume more own-ership for the outcome.

Effective contracting may be the most critical skill in the consulting process.When effectively applied, it ensures a satisfied client and positive business impact.There is an abundance of tools available to support you in the contractingprocess, a few of which have been included here. The key to successful contract-ing, however, rests in the principles of being authentic, having a learning orienta-tion, and trusting yourself. If you complete the contracting steps using thoseprinciples, you are well on your way to a positive consulting experience.

Productive Dialogue Skill

Introduction to Productive Dialogue

A consultant must have the capability to engage clients in productive dialoguethrough inquiry, advocacy, mental modeling, and generative thinking:

Inquiry means asking questions and listening to seek understanding and toget the client’s frame of reference.

Advocacy means giving your viewpoint and perspective in a way that iswell received by the client.

Mental modeling means constructing multidimensional frameworks thatcan be used to match images of the problems and solutions.

Generative thinking means creating new and more productive ways of get-ting work done.

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Only through these skills can the consultant get to the essence of the request andunderstand the beliefs and mental models motivating the client. The consultantmust be able to recognize when the client’s request is really masking anotherdesire, a more fundamental desire. Productive dialogue enables the consultant toget to the real issues and opportunities.

Frequently, clients do not know what or how to ask for help, so they ask forwhat they think they need vs. what it is they really want. If the consultantaccepts the request as stated, he or she may design an intervention that complieswith what the client requested, but one in which the client’s fundamental desiresare not being met.

Investing time to understand the “real” request is paramount in delivering thedesired results. These conversations take more time and test the beliefs of boththe consultant and client regarding what good service looks like. Slowing downa conversation to surface assumptions and gain a full understanding of the prob-lems, issues, and opportunities, however, can be a challenge. Therefore, it is criti-cal for the consultant to be able to explain his or her reasoning for pursuing the dialogue at a deeper level and to assess the client’s patience level during the interaction. Client tolerance for probing can be a critical success factor inany intervention. The challenge is not to let our own beliefs get in the way ofhaving a productive dialogue.

Productive Dialogue OverviewThere are multiple forms of conversation. Estimate the relative frequency inyour organization of each of the six examples listed in the chart on the follow-ing page.

Productive dialogue is the ability to discover the real problems that need to besolved or opportunities that need to be maximized. The use of productive dia-logue reduces the chances that an intervention becomes a problem rather than asolution because it raises expectations and doesn’t address underlying issues.

There are four key steps for productive dialogue:

Getting the client’s frame of reference

Giving your own point of view and perspective

Merging images

Generating better ideas

The purpose of these steps is to gain a deeper and clearer understanding of the client’s situation, the causes of the situation, and possible solutions forachieving the greatest business impact.

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Step 1: Getting the Client’s Frame of Reference through Active Inquiry

The Idea

Productive dialogue cannot occur without the willingness and ability of all par-ticipants to understand the other person’s point of view through active inquiry.Inquiry is primarily a function of listening and asking questions.

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Type of Conversation Description Purpose

Monologue One way Share or impose apoint of view

Debate/Discussion Two or morepeople inmonologues

Win the debate or control theoutcome

Vested Discourse People areassigned positionsto hold withoutcompromise

Find importantquestionsembedded in an issue

Productive Conversation Balanced advocacyand inquiry; gooduse of listening

Convergenceand/or surfacemeaning,assumptions, andmental models

Strategic Dialogue Judgment issuspended on aselected topic orquestion. Noconclusions or timelimits.

Divergence and/orraise collectiveintelligence

Productive Dialogue Judgment issuspended. No settopics, set groundrules, time limits,facilitation, orconclusions.

Divergence, unityof spirit, deeperand broaderinquiry

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Listening

The key to effective listening is to hear not only what is said but also how it issaid. When you are listening to what is said, it is important to discipline your-self to hear the whole message. Often a sender will initiate a message by settingthe stage, for example, “The morale here has sunk to new lows.” Then thesender will usually give you the story line, for example, “Work loads havebecome excessive—it seems like the pile on my desk just keeps getting higherand higher and I see no end in sight.” The sender is likely to end the messagewith some key words that help you understand something of importance to himor her for example, “I’m really frustrated by the amount of time I spend prepar-ing for and participating in meetings.” One of the pitfalls of listening is cuttingthe person off mentally before the key words are communicated. This can hap-pen, for instance, if the sender’s statement triggers something in you that youwant to communicate (for example, you may be experiencing signs of fatigueand stress yourself).

To listen how a message is sent, you need to tune in to the volume, pace, andtone of what the person is saying. Sometimes the way a message is sent ismore important than what is said. For example, is the person speakingloudly, rapidly, and with a hostile tone, or at a more moderate volume and pace in a pleasant tone? In listening to the content of a message and howit is sent, try to avoid some of the pitfalls of listening so that you can gather more complete and accurate information. Try following these tips for effec-tive listening:

Resist distractions.

Suspend judgment.

Recall the content.

Reflect on the meaning (why the content is important).

Reflect on the volume, tone, and pace.

Paraphrase the content in your own words.

Asking Questions

Everyone knows how to ask a question: “Where is my report?” “What’s for din-ner?” Productive dialogue, however, requires knowing more about the use ofquestions to advance your inquiry.

Questions come in two basic varieties: open and direct. Open questions encour-age others to talk and to share their understanding of the given topic. Thesequestions cannot usually be answered in a few words; they often require lengthy

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replies. Direct questions, on the other hand, can be answered in a word or ashort phrase. They help you focus the communication and obtain specific infor-mation. A third type of question, the leading question, will be mentioned brieflyin this section. The leading question often causes communication problems bymanipulating people into an agreement.

Examples

Listening

Jane says, “Things around here never change. Every time I ask for help, I getpassed on to the next person. It seems like no one will listen to me. How can Iget my job done when I don’t get support from the others?”

Setting the stage: “Things around here never change.”Story line: “I always get passed on; no one will listen.”Key words: “I can’t always get my job done; I don’t get support.”Paraphrase: Feels discouraged because she can’t achieve her perform-

ance goals.

Jane’s opening sentence introduces the topic and sets the stage for what’s tocome. She then conveys her feeling of discontent by stating that she keeps get-ting passed on to the next person and no one listens. Her use of the words, “getmy job done” and “support” are the listener’s cues to the importance that Janeplaces on achieving her goals. Jane’s overall message is one of discouragementand frustration because she can’t perform at the level she would like and no oneseems willing to help.

Asking Questions

Open: “What do you think about John’s work?”Direct: “Where do you work?”Leading: “You do like working here, don’t you?”

Your Turn

As a consultant, you will be asked to analyze a variety of situations and to proposepossible solutions. The following exercise will help you use the listening and ask-ing question skills to advance your inquiry and get the client’s frame of reference.

Two members of the group will role play an interaction using a situation familiarto most members of the group. The interaction must involve one member of thepair communicating his or her thoughts about a situation in a particular organi-zation. The other member will actively inquire by listening and asking questions.

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Step 2: Giving Your Perspective through Advocacy

The Idea

Giving your perspective means presenting your views in an honest, straightfor-ward, and clear manner. Clients will usually respond well if you show genuineinterest in their frame of reference through listening, asking questions, anddemonstrating understanding. It is much more difficult, however, to get them tolisten to and appreciate your point of view.

There are several key points to remember when you give your perspective and/oradvocate a particular point of view.

When giving your perspective, use the principle of reciprocity: people tendto listen to those who have listened to them.

Think before you speak. Before advocating for your position, decidewhether it should be given. Organize your point of view before you stateit, and then make it clear and brief if you decide to deliver it.

Avoid using words and tones that are antagonizing and that will block yourmessage from getting through. In the same vein, avoid exaggeration andabstract concepts. The goal is not just to give your perspective, but to have it heard; therefore,it is important to assess the reaction to it and to demonstrate understand-ing of both verbal and nonverbal reactions.Be clear about your expectations. Never assume that they are known.When you are reviewing someone’s performance, focus on specific behav-iors and facts.

You should give your perspective when

1. It is important for the client to know where you stand.

2. Your responsibilities require it.

3. You have something you really need to say.

Example

In the following demonstration, notice how the consultant gives his perspectiveto a manager who is having a hard time dealing with a low performingemployee.

Goal: To get the manager to take a stronger stand with an employee.

Perspective: “I know you believe you have done everything you can to getCharles to raise his standards and performance, but it seems to me that you havenot been as clear as you could with him and you have not let him know precisely

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what the consequences of continued poor performance might be. For example,in your last performance review, you gave Charles the highest rating and you didnot indicate any behaviors you expected him to change. In the next conversa-tion you have with him, I hope that you will tell him two or three behaviors heneeds to change if he wants to be successful in your department.”

Evaluation: Language is specific, understandable, and free of “roadblocks.”

Your Turn:

Please write down your viewpoint regarding this manual.

Evaluate your viewpoint. Be

Specific.

Understandable.

Roadblock free.

Now write down your perspective on a client. In your viewpoint, try to includethe following:

How you feel and why you feel that way

An example that helps the other person know exactly what you mean

A statement that communicates how you wish the person would change hisor her behavior and/or how you wish the situation would improve

Step 3: Merging Images

The Idea

Merging images means being sure that you and the client have agreed onproblem definition, root causes, and possible solutions. It is not enough to getthe client’s perspective, give your own perspective, and then move on.Consultants need to assess the gaps between their perspective and the client’sperspective, particularly as it relates to an understanding of problems, oppor-tunities, causes, and solutions. Then, through productive dialogue, the con-sultant and the client need to attempt to come to a common understanding.The following chart may provide a helpful framework for engaging in productive dialogue.

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This chart depicts how a productive dialogue might unfold. The consultant gets theclient’s view of the situation and gives her own. Together they discuss the situationand try to reach a common understanding. Then, the consultant gets the client’sview of the causes for the situation and gives her own. Together they discuss thecauses and try to reach a common understanding of the root causes. Finally, theconsultant gets the client’s view of what solution would best address the root causesand advocates for her idea of the preferred direction or solution. This processresults in productive inquiry, productive advocacy, and productive alignment.

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Get Give MergeSituation (Problemor Opportunity)CauseDirection

Inquiry Advocacy Alignment

Manager View Consultant View Merged View

Situation People aren’t forth-coming with newideas.

There is very littlepush back on doingthings in ways thatno longer makesense.

We need to createan environment thatencourages generat-ing innovativesolutions andchallenging conven-tional ways ofthinking.

Cause People don’t havethe skills andconfidence they needto make theirviewpoints known.

There is a fear thatpushing back mayresult in retribution.

Lack of trust andconfidence arekeeping people fromspeaking up.

Direction We need to trainpeople in presenta-tion skills.

We need to trainmanagers in how tobe more welcoming,attentive, andsupportive.

Let’s figure out howto equip individualsand leaders withthe knowledge,skills, and attitudesthey need to createa safe environmentfor speaking up.

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Example

The table below summarizes a productive dialogue between a manager and aconsultant regarding the results of the Employee Opinion Survey in the man-ager’s department. In this case, the manager is concerned because the resultsindicated that people in her department didn’t feel safe to speak up.

Your Turn

Reflect on a recent dialogue you had with a client. Use this table to summarize whatyou covered well and where there may have been opportunities for improvement.

Step 4: Generating Better Ideas

The Idea

Generating better ideas means continuously learning and being open to newpossibilities for improving performance. Clearly, in the example above, as themanager and consultant continue their dialogue, they will generate new ideasfor creating a safe environment. We need to avoid the trap of getting so lockedinto an agreed upon solution that we close ourselves off to better ideas. In real-ity, the whole idea of productive dialogue is to be able to continuously generatebetter ideas and then implement them in practical ways.

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Get Give Merge

Situation

Cause

Direction

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Example

In the speaking up example summarized above, the manager and the consultantrealized that they had not had sufficient dialogue on the cultural part of thisproblem. They decided they needed to get a better sense of the norms and values that were influencing employees’ willingness to speak up. As a result ofthis dialogue, they decided to construct a simple culture audit to assess learningnorms and values in this particular department.

Your Turn

Please review the table you completed in the last section and engage a colleaguein dialogue about ways you might improve on the solution on which you hadagreed. Write down the ideas that you generate as a result of that dialogue.

Exercise for Productive DialogueBackground

Company Q has conducted a global Employee Opinion Survey. Results of thesurvey indicate there might be some issues around “speaking up.” The manage-ment committee wants to ensure that the Company Q has a safe environmentfor generating innovative ideas and for challenging conventional wisdom. A rig-orous analysis of the data indicates there are individual, leadership, and culturalfactors contributing to the problem. Individuals and leaders need to improvetheir knowledge, skills, and attitudes; and the culture needs to strengthen valuesand norms related to trust.

Situation

Your client has just received the results from the Employee Opinion Survey forhis department. His department scored toward the bottom on “Speaking Up.”He is concerned about these results and wants to take appropriate action.

Exercise

Engage your client in a productive dialogue about what to do about the sur-vey results. Remember to use the productive dialogue grid on page 183 as aguideline for the discussion. Be sure to engage in active inquiry and proactive

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advocacy. When you merge images with your client, make sure you take intoaccount any alignment issues that may be related to your possible solutions.

Productive Dialogue SummaryThere are three key principles to remember when using the skill of productivedialogue:

1. If you actively inquire about the client’s frame of reference, you will get amuch clearer understanding of the problem and the gaps between yourimage and the client’s image.

2. If you proactively advocate for your point of view relative to the situation,cause, and direction, you will be able to influence your client to think dif-ferently about problems and possibilities.

3. If you merge images with your client about problem, cause, and direction,you will increase ownership for the solution and ensure that the interven-tion is aligned with business requirements.

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Richard Bellingham, Ed.D., is the CEO and founder of iobility, a New Jerseybased consulting firm specializing in aligning human and organizational capa-bilities behind the corporate mission, vision, and values. He has more than 25years of experience working in the areas of business transformation, organiza-tional learning, leadership development, team development and ethical leader-ship. Dr. Bellingham has established a solid track record in leading managementteams to align corporate culture with business strategy, accelerating technologydeployment, and coaching executives how to lead change.

Dr. Bellingham has held senior executive positions within major corporationsincluding Northern Telecom, Parametric Technology Corporation and GenzymeCorporation.

Over the past 20 years, Dr. Bellingham has worked with other 200 organizationsworldwide. A representative sample of the clients and the respective initiativesinclude:

AT&T: Managing changes associated with divestiture

IBM: Acquisition of Lotus Development

Merck: Consulting skills training

Westinghouse: Culture change focused on innovation, quality, and teamwork

Lotus Development: Business Leadership Forum

Sears: Integrated health management system

About the Author

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M&M Mars: Employee Involvement

Parametric Technology Corporation: Precision deployment

Groove: Success acceleration

Harvard University: Establishment of Inquiry Group for IntelligentOrganizations

A widely published author, Dr. Bellingham has written over 50 books, articles,manuals, and training guides including:

Leadership Myths and Realities

The Manager’s Pocket Guide to Corporate Culture Change

The Manager’s Pocket Guide to Virtual Teaming

The Manager’s Pocket Guide to Spiritual Leadership

Ethical Leadership, Second Edition

The Complete Guide to Wellness

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