Ohio University College of Business Executive Education Managing Human Capital in Changing Times Edward B. Yost Ph.D., SPHR August, 2013 Ohio University

Ohio University College of Business Executive Education

Managing Human Capital in Changing Times

Edward B. Yost Ph.D., SPHR

August, 2013Ohio University


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


Executive Education College of Business Ohio Universaity

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 depreciatesTraded in markets and regulatedIndividually 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 Execution

Enables 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


SustainabilityOhio University College of Business

Executive Education

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?



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?Ohio University College of Business

Executive Education

Finding the Pivotal PositionYield 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

Str

ate

gy

Exe

cu

tio

n

Investment in Human Capital

Best RS

Worst RS

Sales Representative

Research Scientist




Research Scientist

Best Sales RepWorst Sales

Rep

Str

ate

gy

Exe

cu

tio

n

Best RS

Worst RS


20%




Research Scientist

Best Sales RepWorst Sales

Rep

Str

ate

gy

Exe

cu

tio

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

Str

ate

gy

Exe

cu

tio

n

Best Sales Rep

Worst Sales Rep

Research Scientist

20%


ROLE CHALLENGES AND PERFORMANCE DRIVERS

Developing Human Capital in Changing Times


Critical Outcomes for Strategy Execution – Pivotal Position

Research Scientist in R&D Primary Pharmaceuticals

1. New Product Applications 2. Reduce Time to Market


Performance Drivers Support Critical Outcomes

Performance Drivers identify the most critical capabilities, the required behaviors and define the culture necessary for support of strategy execution by pivotal positions


Research Scientist

New Applications & Reduced Time

Culture

BehaviorCapability


Definitions of Performance Drivers

Capability = knowledge, skill, ability or competency inherent in a unit of human capital

Behavior = Actions, reactions, interactions exhibited by a unit of human capital

Culture = a system of shared values, understandings and affect that distinguishes the unit that contains human capital


New Product Applications; Research Scientist at Primary Pharmaceuticals

Capabilities: 1. Deep knowledge of specific products, 2. Creativity and Innovation Skills,

Behaviors: 1. Scans multiple sources for potential applications beyond present uses, 2. Share tacit knowledge with the team

Culture: 1. Innovation and risk taking, 2. Team orientation


Reduce Time to Market; Research Scientist at Primary Pharmaceuticals

Capabilities: 1. Project management skills, 2. Current on regulatory requirements

Behaviors: 1. Deal with regulatory agencies effectively, 2. Design efficient processes

Culture: 1. Outcome oriented, 2. Attention to detail


Human Capital (Pivotal Positions)

Strategy Execution


Sustainability

Human Capital Capabilities

Human Capital Behaviors

Workforce Culture

(Performance Drivers)


Finding Performance Drivers

1. Starting with the critical talent pools focus down to pivotal positions

2. Within that position look for the pivotal role challenges

3. Identify the performance drivers; specific capabilities, behaviors and culture necessary to succeed at the pivotal role challenge.

Pools Positions Challenges Drivers


CREATING AND MANAGING HUMAN CAPITAL ARCHITECTURE



Human Capital Architecture

• Depicted in the “Blue Print” of the combined human resource practices of the organization (portfolio of practices).

• To be effective and efficient in delivering strategy execution the HCA must be designed, implemented and maintained specifically for pivotal positions (Just like promotion, pricing and distribution channels for customer segments)


Procurement & Retention

Compensation & Rewards

Knowledge Management

Performance Management




Why is Human Capital Architecture Critical for Success?

• Provide a basis for strategy execution and sustained competitive advantage

• Things like financial structure operational processes and technology can be easily copied or purchased


Why Support a Human Capital Oriented Strategy?

Because…...The organization can leverage

human capital by managing the architecture to achieve a higher return for owners


The Power Of Human Capital Architecture

Share Holder Returns

Invested Resources & Capital



The Power Of Human Capital Architecture

Share Holder Returns

Invested Resources & Capital


Human Capital (Pivotal Positions)

Human Capital Architecture components (Enablers)

Human Capital Architecture components alignment (Vertical & Horizontal)

Strategy Execution


Sustainability

Human Capital Capabilities

Human Capital Behaviors

Workforce Culture

(Performance Drivers)



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



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?


Engagement Drivers by Country

Brazil1. Organization rewards outstanding customer service2. Improved my skills over last year3. Senior management sincerely interested in employee well being

USA1. Senior management sincerely interested in employee well being2. Improved my skills over last year3. Organization’s reputation for social responsibility


Engagement Drivers by Country

Brazil4. Enjoy challenging work assignments that broaden skills5. Organization invests in innovative products and services

USA4. Input into decision making in my department5. Organization quickly resolves customer concerns


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

“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.


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?


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 Imitate

Only 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

The Question Is….

Why is customer segmentation more common than talent

segmentation?Ohio University College of Business

Executive Education

Documents

Ohio University College of Business Executive Education Managing Human Capital in Changing Times Edward B. Yost Ph.D., SPHR August, 2013 Ohio University