Restructuring HR: Where are we going

Posted on October 26, 2008. Filed under: Enterprise Learning, HR Systems, Talent Management | Tags: , , , , , |

In the last year many of our research members and clients have come to us for help in restructuring their HR or Learning & Development organizations.  There have been three major forces at play here.

1.  Reducing costs:  In nearly every industry organizations are going through restructuring, mergers, or other cost-cutting efforts.  The HR department plays a major role in these changes – both by facilitating these changes and by eliminating duplication in its own operations.  Consider the merger of two regional Banks we just worked with:  both had talent management teams, both had compensation, diversity, and compliance organizations.  

Well the decision about what to cut and how to reorganize were not easy:  one of these banks focused on high net-worth individuals and small businesses, so it had a large workforce of account and portfolio managers providing customized services.  The other was a more traditional retail bank, staffed largely by people dealing with retail clients.

Bottom line:  the combined organization design required a sharp and focused look at the new workforce strategy, the key competencies and capabilities in place, and which of the HR teams had the expertise and understanding to execute the new combined bank’s strategies.  Some of the operations went to the traditional retail banking HR leaders, others (talent management, for example) went to the HR leaders from the smaller, acquired organization.

Advice:  consider your new workforce strategy and look for the most valuable HR skills and capabilities in dealing with the new workforce, and use this to guide your reorganization.

2.  Implementing new Talent and Capability Management Solutions:  The second major driver behind new HR organizations is a need to implement talent and capability management strategies.  Consider one of our clients who is a large, well known consumer packaged goods company.  This particular company has a well established talent management strategy which moves people across functional organizations (e.g. marketing, sales, manufacturing) from product line to product line.  These people rise through the organization in these functional roles and eventually have the opportunity to become general managers of consumer products.

This is a very traditional talent strategy, pioneered by Procter & Gamble and now used by Unilever, Clorox, Kraft/Altria, and many other consumer goods companies.

But how does this type of organization work when the company enters a major economic slowdown, an acquisition, or divestiture of an entire product category?  It builds functional skills which are supposedly transferrable into a new product.  But in reality, what our research has shown, is that many such CPG (consumer packaged goods) companies have old, long-established techniques for marketing which may or may not fit into such a new market.

Clorox, for example, creates entirely new marketing and product teams to enter new markets.  The highly successful “Green Works” product line from Clorox was incubated and developed outside of the company’s traditional marketing organization.

Bottom line:  as we find in almost every industry, the “magic” to a newly combined talent management organization is not to simply squash together all the organizational development roles, but rather to stitch them together with a strong focus on the company’s strategic business needs.  In our High Impact Talent Management research we find organizations which succeed with integrated talent management create talent “pools” which are treated in special ways based on their demographic, skills, and strategic role.  Oil companies, for example, must create special “talent pools” for exploration and production engineers, because they provide such high value and are in such short supply.

3.  Adoption and Integration of New HR and Learning 2.0 Technologies:  The third major change which is causing HR to change is the rapid adoption of new HR and Learning 2.0 (read “social networking“) technologies.  It is now possible to purchase an HRMS system which includes integrated functionality for goal alignment, performance management, succession planning, talent pooling, career management, and more.  And in the area of enterprise learning, today’s new learning management systems (LMS) now have social networking, collaboration, messaging, and content management embedded.

In addition, as our latest High Impact Learning Organization research shows, more and more of an organization’s capability-building expertise now lies in its ability to create internal collaboration and communities of practices — and less relies on traditional competency management and training. 

Consider a large pharmaceutical company.  We are working with three such companies right now and each are looking for ways to reduce L&D costs by implementing integrated technologies and organization structures to share knowledge, collaboration, tools, and infrastructure across sales, research, manufacturing, and other large business functions.   The traditional HR and L&D organization which may have decentralized groups must be changed to take advantage of these new integrated technologies.

Bottom line:  new technologies can be transformational, but make sure you consider how they will force and enable your HR and L&D organization to collaborate as well.  If you want to understand how these changes are occurring, read our new Social Software 2009 research or our just-published report The Essential Guide to Performance and Talent Management Systems.

In 2008 and 2009 we expect many organizations to grapple with these challenges:  what is the “new role” for corporate training?  What do we do with the HR generalists located in our business units?  How does the talent management team create strategies which can be customized for critical roles?  And what parts of HR should be globalized vs. decentralized?

While the traditional approach to outsourcing HR transactions continues to drive cost reduction, I believe it is these higher level issues which are really going to drive HR’s value in the next 12-24 months.  With the economy slowing and more than 30% of organizations going through some type of restructure or leadership change, we must think about how we will reorganize ourselves to provide cost reduction, integrated talent solutions, and enable new technologies all at once.

(We have a variety of tools and assessments to help organizations work through these issues – please contact us if you would like to learn more.)

Comments welcome…

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Performance Management Creates Agility in Copper Mining

Posted on February 28, 2008. Filed under: HR Systems, Performance Management | Tags: , , , |

Last week I spoke with some of the business and HR leaders at Freeport McMoRan, one of the nation’s largest producers of copper, gold, and molybdinum.  This company, which recently acquired Phelps Dodge, produces over 4 billion lbs. of copper each year, from its mines in North America, Indonesia, Chile, and Peru.  The company generates over $16 billion per year in total revenues with over $1 Billion per year in net income.

Large Decentralized Operations

As one can imagine, this is a very big business.  The mines owned by Freeport McMoRan are enormous, and the equipment used for digging and trucking are among the largest pieces of equipment in the world.   Each of their global facilities uses slightly different technologies for the mining and production of ore, and must also deal with vastly different political, climate, and transportation networks.  As a result, each mine is like a seperate company, with its own general manager and staff organization.

Dramatic Business Changes over the Last Five Years

Over the last five years the market for copper has changed dramatically.  In fact, one could say it completely changed.  As the chart below shows, copper prices have increased from about 75 cents a pound to almost $4.00 in a very precipitous rise.

Copper Price Changes over Last Five Years

Fig 1:  Change in Copper Prices

This means that Freeport’s entire business strategy has changed.  In the late 1990s and early 2000s the company focused on reducing cost to optimize profits.  Operations personnel were trained to negotiate deep discounts on transportation and equipment costs, maintain equipment at the lowest possible cost (often incurring downtimes), and borrow or transfer heavy equipment from other locations to keep manufacturing costs low.  When it was expensive to fill a truck to the brim because a loader was overworked, they filled a half-truck and waited for the next run.  The overriding business goal was low cost production, not total production volume.

Today, however, the entire business strategy has shifted.  With prices so high, the company is now motivated to ship the maximum volume at the fastest possible speed.  Rather than negotiate low cost contracts for suppliers, the mines want expedited delivery of services, maximum uptime, and operations designed to maximize the production pipeline.  Every pound of copper which a mine produces now delivers a very high margin to the company.

Mining Equipment
Fig 2:  Large mining loaders and trucks

Performance Management Process to the Rescue

Since each mine is run seperately, when these dramatic changes took place over the last 3-4 years, it was difficult for top management to direct and monitor changes in these operational procedures.  In fact, because of the decentralized operational structure, there was no way for anyone at the corporate level to see how people were organized at each mine and what particular metrics or goals they were using to manage operations.

Around the middle of 2007 the company realized that in order to speed the transition to a high-price commodity market, they needed a process to help managers at all levels direct and monitor changes in operational goals and procedures.  They decided to implement a new, corporate-wide performance management process.

This problem, that of a major change in business and operations strategy, is very common in business today.  Consider the problem of auto manufacturers as they retool plants and marketing programs to focus on fuel efficient cars and hybrids.  Consider the changes which insurance companies have gone through as the insurance industry has restructured itself in the face of new global risks.  Or consider the massive changes going in mortgage, banking, and construction industries in the face of falling housing prices and mortgage failures.

Each time an organization goes through such a shift, there are needs to change operational targets, realign goals, and even reorganize job functions.  Such changes force managers and directors to change targets and goals.  A well implemented performance management process provides this agility.  And just as importantly, it gives directors and other top managers visilbility into operational goals and targets to make sure people are well aligned.

As Freeport McMoRan found, a highly decentralized organization can create accountability and efficiency – but makes alignment difficult.  Implementing a well adopted, transparent goal management process can create business agility which translates into direct revenue and profit impact.

Importance of Performance Management Systems

In this case, the company selected Taleo’s new online performance management system.  This system includes a very easy-to-use interface to allow employees and managers to establish well aligned goals.  Most performance management systems provide this capability – but in this case the company chose Taleo because of the company’s existing relationship with Taleo and the product’s extremely easy to use interface.  Since many of the workers in the mines only have occasional access to computers, they needed a system which required a minimum of training.

Freeport is now in their pilot phase of rollout, and the results have already been excellent.  For the first time in decades the company has visibility into the goals and operational targets of more than 500 mine employees (the pilot group).   As with all implementations, they had to focus initially on building a set of core competencies for their employees and establishing clear guidelines for goal development, but in a period of only a few months the company put the pilot system into production.

Bottom Line:  Performance Management is a Business Process, not an HR Process

My point of this article is simple:  we have to remember that tools like performance management, as important as they may seem to HR, are really business tools.   In addition to providing support for your succession management and compensation process, performance management is one of the most valuable ways to create agility and alignment.  Consider Freeport’s business changes over the last few years:  their entire operational strategy has taken a 180 degree shift.  How can an organization manage such changes?  Through the use of a well implemented performance management process, such strategic business changes can be implemented in a fast, consistent, and measurable way.

We will stay in touch with Freeport McMoRan, and update you with progress as their rollout continues.

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Wow. Performance Management Really Matters in Retail.

Posted on December 13, 2007. Filed under: Performance Management, Succession Planning | Tags: , , , , , , , , |

As we continue to study best-practices in talent management and talk with many organizations, we see more and more evidence that top-down goal alignment and transparency truly do drive business results. 

For example, we recently had an in-depth discussion with the Vice-President of HR at Bon-Ton Stores, a highly-successful mid-sized retailer which operates among the higher performing retailers in financial performance.  Bon-Ton has grown from 35 to 287 stores with more than $3.7 Billion in revenues in the last five years.  The company acquired several set of high-end stores from Saks and has integrated the merchandising, distribution, and retail operations with great success.

As we discussed the organization’s keys to success, the VP of HR told us that the CEO has always paid very close attention to the development of its people.  In fact, the company has developed a comprehensive, competency-based approach to recruiting, management, leadership development, and succession planning which is far more integrated than any other retailer we have spoken with. 

The company prides itself on transparency (the 16 core competencies are broadly available), goal alignment, and training.  Each year a set of “critical roles” are identified (there are 87 as of now), and succession plans are scrutinized for these positions.  (Research members can read more about Bon-Ton and its competency model in our research library.)

After this detailed discussion I went back to our High Impact Talent Management benchmarking database and reviewed our findings about retailers.  Some astounding facts came up:

Retail organizations with enterprise-wide performance management processes which are standardized and open (transparent) (approximately 21% of organizations in our database) are 47% more effective at delivering a high-performance culture than those without formal programs, and 71% more effective than those with no performance management processes at all.

All I can say is “wow.”   The retail industry is one of the most difficult of all to manage:  high turnover, rapid product cycles, and low margins.  Yet here, as in other industries, sound people-management processes really pay off.  When we refer to “transparency,” we refer to the process of clearly communicating company values, goals, and individual sales objectives across all employees, stores, districts, regions, and divisions.  This is what drives Bon-Ton’s success – and many other retailers as well.

If you have not yet figured out why performance management should be a transparent, organization-wide process, you should.  Read our High Impact Talent Management® research for more details.

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Performance and Recruiting Management Shootout – Who Won?

Posted on October 24, 2007. Filed under: HR Systems, Performance Management, Sourcing and Recruiting | Tags: , , , , , |

Industry’s First Integrated Performance and Recruiting Shootout

This year’s shootout focused on the powerful integration (but not well understood or adopted) between performance management and recruiting including the coveted, and often elusive measure of “quality of hire. Four leading talent management suite vendors were included; Authoria, HRsmart, SuccessFactors, and Vurv had 75 minutes to demonstrate how their products support meaningful integration using the same three scenarios.   Our principal analyst in Talent Management Systems, Leighanne Levensaler had the great pleasure of assisting Conference Co-Chair Bill Kutik in the development of these scenarios which served as the script for the vendor to demonstrate:

(Note, these are important scripts for you to consider in your talent management systems strategy.  Read more in our talent management suites research.  For more details on the HR Technology Conference, read our in-depth review of the show.)

1. How an HR generalist identifies the attributes of a top performer (experience, competencies, and performance feedback) to create a position description/job profile, initiates a requisition for a new position, and communicates it to the recruiter;

2. How a recruiting specialist reviews a pool of internal and external candidates, determines which sources provide the best talent (as measured by performance ratings and quality-of-hire metrics), and conducts a search for additional candidates; and

3. How a hiring manager creates a personalized development plan for a new employee, based on the valuable candidate information captured during the recruiting process, and how the talent management solution tracks and provides analytics on the employee’s performance to drive ongoing recruiting of high-quality talent.

Participants in the audience voted after all four vendors demonstrated a scenario. At the end of the third scenario, the votes were tallied and Bill announced that Authoria captured the most votes in all three scenarios and was named the overall winner.

Why did Authoria Win? 
Process Understanding and Excellent User Interface Design.

Is Authoria’s solution that much better than their formidable opponents? As much as we respect and admire the Authoria team and consider their solution to be a leading talent management suite, the other vendors participating in the Shootout also have strong solutions for this integration. From Leighanne Levensaler’s perspective, Authoria won for two reasons.

First, Tod Loofbourrow, their CEO is a fantastic presenter and storyteller. The “story” is important because he told a story of the frustrations HR specialists have today and a story of opportunities that we have with integrated solutions. Tod was easy to follow, particularly if you could not follow what was happening at the speed of light on the jumbo screens.

The second, and more significant reason for their clean sweep, was Authoria’s “sexy, value-add” not “sexy-gratuitous” user interface (available in the new Authoria Talent Management release). Tod and team used the scenarios to showcase how Authoria’s user experience supports meaningful information experiences and decision support including, easy wizards, intuitive visual indicators, embedded analytics, one-click options, drill down options, embedded and contextual performance support, enhanced search, and side-by-side comparisons.

What Can You Learn from this Process?

First, there are many advanced capabilities now becoming available in talent management suites.  Our research details these capabilities across each vendor in the market.  Rather than try to cost-justify your system based on savings in time or paper, we urge you to think about these “cross-functional” capabilities which drive much greater impact.

Second, the user experience is now paramount.  HR systems are used by line managers and employees – often on an occasional basis.  If they are not easy and intuitive to use, they are not used.  Vendors which have not yet focused on easy-to-use, simple user interfaces (it is far harder to make a user-experience simple than it is to make it functional) deliver higher value solutions for you.

Third, the functionality required in these applications is quite complex and continually changing.  Authoria’s acquisition of Hire.com (the source of the company’s recruiting product) brought the company a rich and complete product offering.  Kenexa, Oracle, PeopleSoft, SuccessFactors, Taleo, Vurv (formerly Recruitmax) and many other companies now offer integrated performance and recruiting systems – so you, as a buyer, should shop carefully and evaluate the level of integration, ease of use, and experience of your selected vendor.

Congratulations to each of the vendors that participated in the Shootout.  We look forward to a more exciting contest in 2008!

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Best Practices in Performance Management at Kimberly Clark

Posted on April 7, 2006. Filed under: Performance Management | Tags: , , , |

I just completed a detailed interview with Gary Short, Kimberly Clark’s director of Talent Management.  The company has had a legacy performance management process for 20 years which had limited adoption but a very long term history.  The old process grouped employees into only three levels:  meets expectations, exceeds, or does not meet expectations.  As one can imagine, most employees were rated in the “meet” category and since there were very few guidelines for establishing these categories (objectives and competency management were not required), employees also felt the ratings were somewhat arbitrary.

 In 2003 they decided to revamp the process and build an entirely new process which allowed greater granularity, clear guidelines for objectives, and a new competency model for every employee in the company.  After studying many competency models the company decided to create six major competencies:  Decisiveness, Innovative, Inspiration, Visionary, Collaborative, Building Talent. 

Each of these competencies is applied toward employees with different “behaviors” depending on whether they are an executive, first line manager, or individual contributor.  For example, “building talent” to an individual contributor means increasing your own skills in your job.  The company developed an innovative 9-box rating scale which rates competency assessment on the vertical axis and goal attainmnent on the horizontal axis.  This way Kimberly Clark can clearly see how people compare between behavioral development and business goal attainment.  We will write much more on this topic in the Performance Management: What Works report coming out in May. 

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