MANAGING HUMAN CAPITAL IN CHANGING TIMES

Leading Change in Turbulent TimesExecutive Education Seminar

MANAGING HUMAN CAPITAL IN CHANGING TIMES

Edward B. Yost, PhD, SPHR October 2013

BEM VINDO A OHIO UNIVERSITY

Our Task Today – Three Levels of Analysis and Human Capital

#1 MACRO: Sustainability, Strategy, and the Business Model – Competent managers understand how value is created

#2 MESO: Talent Management, maximizing returns through human capital architectures – Talent pools, pivotal positions, differentiated human capital architecture that adds value

#3 MICRO: Employee Engagement – Crafting and leading for individual performance

Level 1 MACRO: Sustainability, Strategy, and

the Business Model

What is Strategic Success?

Delivering high value results to significant stakeholders

Financial SuccessOperational SuccessCustomer Success Workforce (People) Success

Strategic Success Hierarchy

Industry

Firm/Company

Business Unit/Function

Position

Person

Strategy Execution

Competitive Advantage

Sustainability

Strategic Success Chain

Defining the Business Strategy

Strategy is:The central, integrated,

externally oriented concept of how we will achieve our objectives. (Hambrick & Fredrickson)

Sharing our ExperiencesWhat is your

organization’s “STRATEGY”?


Pharmaceuticals

Firm/Business


Position

Person


Pharmaceuticals

Ach’e


Position

Person

Strategy Execution


Sustainability


What is “Strategic Competitive Advantage?”

Enacted or Utilized Distinctive Competency that:

1. Allows the organization to differentiate itself from competitors

2. Cannot be readily duplicated or imitated

3. Provides a positive economic benefit(s) – KPIs

3 Roads to Strategy Execution & Competitive Advantage

Managers can select a path to follow1. Betting on the incompetence of competitors

– blind ambition2. Acquiring and utilizing the competencies of

others – merger, acquisition3. Using existing resources & competencies

efficiently, effectively and differently – resource based

The Secret Revealed!

What is the SECRET of obtaining a Strategic Competitive Advantage?

Not just having a strategy and competencies but

executing the strategy.

Strategy Execution


Sustainability


Sustainability

Pursuit of LONG TERM business success focusing on a triple bottom line:1. Economics - Profits2. Social - People3. Environmental - Planet

Sustainability Defined

“The commitment by an organization to balance financial performance with contributions to the quality of life of their employees, the society at large and environmentally sensitive initiatives” SHRM

Top 5 positive ($) outcomes from sustainability initiatives for stakeholders

1) Improved employee morale, 2) More efficient business processes, 3) Stronger public image, 4) Increased employee loyalty, 5) Increased brand recognition.Source: Advancing Sustainability: HR’s Role (SHRM, 2011)

WHAT IS HUMAN CAPITAL?

Developing Human Capital in Changing

Times

Human Capital Defined

The collective sum of the attributes, life experience, knowledge, inventiveness, energy, and enthusiasm that people choose to invest in their work. Weatherly 2003

Human Capital Defined

The collective sum multiplicative product of the attributes, life experience, knowledge, inventiveness, energy, and enthusiasm that people choose to invest in their work. Weatherly 2003 with a little help from Ed

Attributes of Human Capital Markets

Various levels of valueAppreciates and depreciatesMarkets are shifting from Closed

(balance sheet talent) to Open System (crowd sourcing)

Individually owned but collectively realized

Human Capital: The Invisible Resource

• It is vested in the human resources often in the form of intellectual and social capital.

• It is acquired, developed, utilized, and sustained through the management practices.

• Being invisible it is harder to duplicate.

Human Capital

Value inherent in the form of individuals collectively interacting in the context of formal and informal systems

Individuals are the repository for human capital

Systems, process, culture and context extract the value of individuals

Human Capital Has Value“People are our most valuable asset”

PROVE IT! Must be demonstrated by management practices and actions that compose the Human Capital Architecture

Sharing our Experiences

What do organizations you know value?

Expectativas de Todos que Possuem Interesse Direto ou Indireto na Organização

• Acionistas(proprietários) desejam um retorno que consideram justo no investimento feito.

• Clientes desejam um alto valor agregado ao produto ou serviço que consomem, e uma manutenção(garantia) que mantenha seu valor.

• Empregados desejam uma relação de emprego que forneça compensações intrínsicas e extrínsicas em contrapartida às contribuiçoes que fazem.

• Publico espera que a organização tenha responsabilidade social e se preocupe também com o bem estar dos cidadãos (cidadania corporative)

Escolher as partes interessadas em cada par que a sua organização iria considerar como a mais importante em termos de tempo e outras atribuições de recursos. 1. Cliente ___ Proprietário(acionista) ____ 2. Empregado ___ Cliente ___ 3. Empregado ___ Publico ___ 4. Proprietário(Acionista) ___ Empregado___ 5. Cliente ___ Publico ___ 6. Proprietário(Acionista) ___ Publico ___

Instruções para o preenchimento das questões

Pense em uma organização com a qual você está familiarizado. Talvez a organização que você trabalha agora. Para cada par de partes interessadas selecionar o que você sente é mais importante para a organização que você escolheu. Pense sobre os recursos dedicados ou as políticas que afetam o grupo de partes interessadas. Quando você completar você irá gravar o número de vezes que você selecionou o grupo de partes interessadas e escrever o número no espaço fornecido.

Stakeholder Importance

Vamos Compartilhar - Qual dos 4 stakeholders (clientes, proprietários, público e empregados) a sua organização seria mais provável em atender:Em primeiro lugar?Última?

Importância das partes interessadas

Stakeholder Pesquisa

Em primeiro lugar Última

proprietários

clientes

público

empregados

Knowing – Doing Gap

How Big is the Gap?“Only 1 in 10 of the 88,000 respondents in our Global Workforce Study agreed that their organization’s senior leaders treat employees as vital corporate assets. A larger percentage reported that their leaders act as if employees don’t matter.” Gebauer ad Lowman, 2008

Level 2 #2 MESO: Talent management,

maximizing returns through human capital architectures

MANAGING TALENT FOR STRATEGIC SUCCESS

Developing Human Capital in Changing

Times

The Challenge for Managers

Human Capital IMPACTS the Bottom Line

To create value through Human Capital requires a fundamental change in how it is recognized and managed in most organizations.

What is Strategy Execution?

• Value Creation – Enables the Value Proposition for all stakeholders

• The aggregated combination of the firm’s resources applied by the strategic business units

• Results from managerial decisions for resource allocations and tradeoffs

Strategy ExecutionEnables the Value Proposition for Stakeholders

Application: Focus on a Strategic Business Unit -Primary Pharmaceutical Industry

Production

Marketing

Research & Development

Human Resources


Pharmaceuticals

Ach’e

Research/Development

Position

Person

Critical Outcomes for Strategy Execution

Research & Development Group in Primary Pharmaceuticals

1. New Product Applications 2. Reduce Time to Market

Talent Management

• Talentship requires a redefinition of the traditional service role of HR managers in organizations.

• This involves a managerial focus on the process of "talent segmentation" and the need to focus managerial attention on "pivotal talent pools".

Human Capital (Pivotal Talent Pools)

Strategy Execution


Sustainability

Talent Segmentation

• Talent segmentation is as vital to strategic success as customer segmentation.

• Talent segmentation involves identifying pivotal talent pools where human capital makes the biggest difference to strategy execution


How do organizations you know use segmentation?

Customer Segmentation

1. Does your organization segment customers?

2. What are these customer segments?

3. How are they treated differently?

Talent Segmentation

1. Does your organization identify specific talent pools?

2. What are these talent pools?3. How are the management practices

different for these talent pools?

The Question Is….Why is customer

segmentation more common than talent

segmentation?

Drilling Down in Human Capital

Pivotal Talent Pools

Pivotal PositionsDetermine the Pivotal Positions

to Deliver Strategy Execution

Cast Members at Disney


Which position, Characters or Sweepers

are most pivotal?

Finding the Pivotal Position

Yield Curve - understanding where differences in quality or quantity of talent and organization have the greatest impact on strategy execution (steepness, elasticity, D, slope)

Yield Curves = Pivotal Positions

Providing a Delightful

Guest Experience

Being The Happiest Place on

Earth!

What is a Pivotal Position?

• Not necessarily the highest paid/ranked position

• Not necessarily most critical• Not necessarily the most common/number• Not necessarily the most visible• Not necessarily the most obvious• Not ever a person

Pivotal Positions in the R & D Talent Pool of Primary Pharmaceuticals

• What is the Pivotal Position for executing strategy?

• Provides the most significant (relative to others in the pivotal talent pool – R&D) improvement in strategy execution

• Research Scientist


Pharmaceuticals

Ach’e


Research Scientist

Person

Yield Curve Primary Pharmaceuticals

Best Sales Rep

Worst Sales Rep

Stra

tegy

Exe

cutio

n

Investment in Human Capital

Best RS

Worst RS

Sales Representative

Research Scientist



Research Scientist

Best Sales RepWorst Sales Rep

Stra

tegy

Exe

cutio

n Best RS

Worst RS


20%



Research Scientist

Best Sales RepWorst Sales Rep

Stra

tegy

Exe

cutio

n

Best RS

Worst RS


20%

Same Industry - Different Business Model

Primary• High Margins• Sell to Physicians• Time to Market• New

Applications

Generic• Low Margins• Sell in Bulk• Low Cost• Manage

Distribution Channels

Yield Curve Generic Pharmaceuticals



Best RSWorst RS

Stra

tegy

Exe

cutio

n Best Sales Rep

Worst Sales Rep

Research Scientist

20%

Break Time

http://vimeo.com/6958741

http://vimeo.com/6958741

Level 3 #3 MICRO: Individual differentiation

and Employee engagement

MANAGING THE INDIVIDUAL DIFFERENTIATION AND

ENGAGEMENT

Developing Human Capital in Changing Times

There are only three measurements that tell you nearly everything you need to know about your organization’s overall

performance:

1. Employee engagement2. Customer satisfaction3. and Cash flowJack Welch, Business Week 2006AND - Ed says order is important

The NEW Normal

“Employees are our most important asset

INVESTOR!”Requires an Employee Value

Proposition

Managing Human Capital the Person

While the human capital architecture is designed to support the highest level of performance for pivotal positions it must ultimately be differentiated at the level of the person


Pharmaceuticals

Ach’e


Research Scientist

Richard or Mary

Three Challenges to Leaders

1. The changing Employment Relationship (contract)

2. Individual positions in the Employment Lifecycle

3. Developing and supporting Employee Engagement

Shifting Employment Relationship

• The employer/employee relationship is shifting to a contractual relationship that is more a partnership than economic exchange.

• Larger spans of control, fewer employees delivering more output.

• Decline in traditional communications increase in cyber communications.

The Employee Lifecycle

1. Recruitment2. Hiring3. Onboarding4. Training5. Career development

6. Compensation7. Retention8. Promotion9. Separation

Savitz, 2013

Employee Engagement: Examples in Practice

• “Engagement describes how an employee thinks and feels about, and acts toward his or her job, the work experience and the company.” Intuit

• “Employee engagement is the involvement with and enthusiasm for work.” Gallup

Employee Engagement: Examples in Practice

• “Engagement is the extent of employees’ commitment, work effort, and desire to stay in an organization.” Caterpillar

• “Engagement: To compete today, companies need to win over the MINDS (rational commitment) and the HEARTS (emotional commitment) of employees in ways that lead to extraordinary effort.” Dell

Three Levels of Engagement

1. Cognitive Engagement – Employee beliefs about the company the leaders and the culture

2. Emotional Engagement – Employee affect for the organization, leaders, colleagues

3. Behavioral Engagement – the value added component of effort exerted above required minimum.

Three Key Behaviors of Engagement

1. Say: Employees speak positively about the Company to coworkers,potential coworkers, and current and future customers.

2. Stay: Employees strongly desire to continue working for the Company.

3. Serve: Employees exert extra effort and are dedicated to doing the best job to contribute to business success.

Impacts of Employee Engagement

• The extent to which employees are committed to something or someone in the organization, how hard they work and how long they stay as a result of that commitment.

• Employees with high level of engagement are 87% less likely to leave and 20% more productive.

Levels of Employee Engagement

• Engaged Employees (28%) – work with passion and exuberance, feel a profound connection to the organization can’t wait to contribute more – OCB organizational citizenship behaviors


• Not Engaged (53%) – “checked out” of the organization, effort put forth is minimal and barely acceptable, lack passion and do not identify with the organization – often the majority of employees


• Actively Disengaged (19%) – not just disconnect but unhappy, the behaviors are counterproductive and at times destructive, degenerates the culture and based on cognitive dissonance Fosters TIMJ and DGMGE

Global Survey ResultsOnly 1 in 5 Workers are delivering their

full potential!The other 79%:41% are “enrolled” - capable and ready but not inspired30% are disenchanted 8% are disengaged Graber & Lowman, 2008

What is your organization's ratio?

• In world-class organizations, the ratio of engaged to actively disengaged employees is 9.57 engaged to 1 actively disengaged.

• In average organizations, the ratio of engaged to actively disengaged employees is 1.83 to 1.

A Model of Employee Engagement

Serve

Stay

Say

EmployeeEngagement

OrganizationCulture/Purpose

TotalCompensation

Relationships

Quality of Work Life

CareerOpportunity

OrganizationLeadership

WorkActivities

Model used consistently over time to assess and track engagement

Um Modelo de Obrigação d0 Funcionário

Serve

Fica

Diz

Obrigação do Funcionário

Organização Cultura / Objetivo

Total da remuneração

Relacionamentos

Qualidade de vida no trabalho

Oportunidade de carreira

Organização liderança

Atividades de Trabalho

Modelo usado de forma consistente ao longo do tempo para avaliar e acompanhar o engajamento


Is Your Job Engaging?Take the Gallup survey

Engagement Survey Respond Yes or No

1. Do you know what is expected of you at work?

2. At work do you have the opportunity to do what you do best every day?

3. In the past month have you received recognition or praise for doing good work?

4. Does your supervisor or someone in authority seem to care about you as a person?

5. At work do your opinions seem to count?

1. Voce sabe o que é esperado de voce no trabalho?

2. No trabalho lhe é dada a oportunidade de fazer o seu melhor todo dia?

3. No mês passado você recebeu reconhecimento ou elogios por fazer um bom trabalho?

4. O seu supervisor, ou alguém a quem se reporta, parece se importar com voce como pessoa?

5. No trabalho as suas opiniões parecem contar?

On Flip chart tally scores5

4

3

2

1

0

Practicing & Managing Employee Engagement

How Mary sees Mary

How Richard

sees Richard

Richard and Mary: The “Real” Story

How Would Mary Respond?How Would Richard Respond?

1. Do you know what is expected of you at work?

2. At work do you have the opportunity to do what you do best every day?

3. In the past month have you received recognition or praise for doing good work?

4. Does your supervisor or someone in authority seem to care about you as a person?

5. At work do your opinions seem to count?

1. Voce sabe o que é esperado de voce no trabalho?

2. No trabalho lhe é dada a oportunidade de fazer o seu melhor todo dia?

3. No mês passado você recebeu reconhecimento ou elogios por fazer um bom trabalho?

4. O seu supervisor, ou alguém a quem se reporta, parece se importar com voce como pessoa?

5. No trabalho as suas opiniões parecem contar?

Richard and Mary:Engagement Scorecard

Engagement Score# Yes Richard Mary

1

2

3

4

5

Richard and Mary “Engaged???”

3 Most Important for Richard? For Mary?

Serve

Stay

Say

EmployeeEngagement

1. OrganizationCulture/Purpose

7. TotalCompensation

2. Relationships

4. Quality of Work Life

5. CareerOpportunity

6. OrganizationLeadership

3. WorkActivities

Quais são os três mais importantes para Richard? Para Mary?

Serve

Fica

Diz

Obrigação do Funcionário

1. Organização Cultura / Objetivo

7. Total da remuneração

2. Relacionamentos

4. Qualidade de vida no trabalho

5. Oportunidade de carreira

6. Organização liderança

3. Atividades de Trabalho

Richard and Mary:Differentiators for Engagement

Rated in the top 3 itemsITEM Richard Mary1 Organization Culture 2 Relationships 3 Work Activities 4 Quality Work Life 5 Career Opportunity 6 Organizational Leadership 7 Total Compensation

Performance Feedback

Mary, What do you want to tell Richard?

Richard, What do you want to tell Mary?

“BAD” Bosses Impact Engagement

• 40% of workers in the business world think they work for bad bosses.

• 39% said their managers failed to keep promises.

• 37% said their bosses did not give them the credit they deserved.

• 31% indicated their supervisor gave them "the silent treatment."

“BAD” Bosses Impact Engagement

• 27 % reported negative comments from their management.

• 24% claimed their bosses invaded their privacy.

• 23% stated that their supervisor blamed them or other workers to cover up personal mistakes.

A Matter of RESPECT

To have sustained engagement, there has to be an environment of respectRespect impacts our emotional state and behaviors because of biological reactions

Menshanko, 2012

Chemistry of Engagement

Respect• Positive and respectful

environments• Serotonin, Oxytocin and

Dopamine• Satisfaction and

willingness to perform

Disrespect• Domineering,

threatening, intimidating

• Cortisol and Adrenalin• Fight or flight responses

translated into workplace behaviors

How Richard sees Mary

How Mary sees Richard

Your Team’s Creation Please

Employee Engagement – 3 Challenges for Managers

1. Recognize the significance of the employment relationship.

2. Understand and adjust to the individual in their employee life cycle

3. Design & implement systems to fully engage the human capital (individuals) in the organization.

Isn’t it COMMON SENSE?

Managers know that they should create functional Human Capital

Architecturesbut

They have elaborate excuses why they can’t

Its Only Common Sense!

Half will never see the connection between Human Capital and Profits

Half will embrace the potential of the connection between Human Capital and Profit



Half will engage minimal change

Half will engage comprehensive change



Half will engage minimal change

Half won’t stay the course

Half will succeed

J

It is Difficult to ImitateOnly about 1 in 8 even come close!Implementation of a viable human capital

architecture requires deep change and a commitment to “stay the course”.

It is often slow and paybacks are a long time coming

Most of the requirements defy “Conventional Wisdom”

Your AssignmentWhen you return to Brazil:

A. Identify at least one pivotal talent pool, and then at least one pivotal position in your immediate work environment

B. Identify at least one human capital architecture component that is ineffective for required performance drivers for the position

C. Suggest a change to the current process and justify it to your superiors in “REAL” terms

Just Do It?

Managers to succeed in the new normal must rely on a human

capital architecture that defies traditional practices and

conventional wisdom

Obrigado pela sua atenção amável

Documents

MANAGING HUMAN CAPITAL IN CHANGING TIMES