by Gene Tange, Featured Contributor
A SENIOR LINE EXECUTIVE in a leading $4B technology company needed to accelerate new product development and commercialization to stay ahead of a much larger competitor. He called a meeting of cross functional leaders, including HR and their Organization Effectiveness expert, to brainstorm ideas. The expert’s suggestion? Run team building exercises to increase the effectiveness of the teams chartered to deliver business outcomes. When challenged by several team leaders to be more specific, the expert suggested using Myers-Briggs and other instruments to address team alignment. The senior line executive interrupted the discussion and spoke with the expert offline. “Listen,” he said “if you think we can improve in a material way I will support you. However, if we act on your recommendation and it delivers only incremental change at best, then I will hold you accountable.”
The senior executive left the discussion with no confidence that the HR function would help solve his business problem. The Great Divide had just expanded.
So what is the Great Divide?
The Great Divide is the gap between the desires of senior line leadership to get ahead of and drive superior business outcomes and their belief that HR is unable to provide meaningful solutions to their critical needs. Recently, that gap has driven senior thought leaders to write high profile articles (It is Time to Split HR, Ram Charan, HBR 7/1/14, Why we No Longer need HR Departments, Bernard Marr, CEO, Advanced Performance Institute 11/2013). An increasing industry trend is to replace CHROs that have risen through the HR ranks with business leaders rotating into the top HR role for a period of time to both strengthen the function and gain valuable experience. For example, KeySight Technology, the $2.9B spin off of Agilent Technology appointed as their new SVP HR, Ingrid Estrada, who is the former SVP GM Global Sourcing from Agilent. At HP, Tracy Keogh is a former Business Leader (SVP) with Hewitt. At Yahoo, Jacqueline Reses, Chief Development Officer, heads up HR among other responsibilities and spent most of her earlier career as a leader in the Private Equity industry and with Goldman Sachs. Even General Motors had Mary Barra, their current CEO, lead the HR function for two years during a very challenging time – bankruptcy and restructuring.
But, will these new approaches to the HR function have a material business impact? I believe these decisions are reactions to the Great Divide rather than optimal solutions. Once we learn more about the causes of the Great Divide, we will see better solutions emerge to drive the desired outcomes.
What causes the Great Divide?
First, and foremost, our business environment has changed significantly in the last five years and HR has not kept pace. Technology has played a large role in this change as increasing complexity demands more flexibility and iterative speed. One only has to look at the current number of mobile devices, the number of tweets conducted daily, or the growth in cloud-based companies( $77B 2010, $181B, 2015, Gartner, to see the speed at which large companies are being disrupted by more nimble upstarts.
Competition as a Driver
As a result of technological advances, competition has grown and the speed of change has accelerated. The turnover timeframe of Fortune 500 companies has shrunk. In 1960 1/3 of the Fortune 500 list turned over. It took two decades for this to occur. In 2000 this same change took only 4 years. (Fortune 500 Extinction). Cloud based solutions that are nimble and accessible with very little infrastructure are available to much smaller companies equalizing the playing field (How the Cloud enables rapid growth in SMB’s, Deloitte 9/2014). Additionally, these companies are growing at rates that are hard to imagine (41.3% CAGR) with Facebook, Google, Workday, LinkedIn, and Salesforce.com typifying the global impact of such new companies.
Increased Complexity drives extreme collaboration and growth in teams
The complexities of business, some of which have been identified above, are not just growing they are accelerating. One wrong move can take a large player out of a leading position. In a short time period, Yahoo, HP, and others have fallen from top leadership positions and now must reinvent themselves to claw their way back to the top of a fierce business landscape. This level of complexity has changed the way products and services are built. Today, teams come together from across the globe, often working virtually, to achieve the best possible business outcomes. Collaboration has risen to new levels because of the diverse factors that are required to lead in a dynamic marketplace. Organization charts and rigid, multi-layer hierarchies are a relic of the past. Now, cross-functional and distributed teams made up of employees, consultants and supply chain partners drive business outcomes.
HR’s role in the Great Divide
Some revealing research conducted by PearlHPS Inc., provides both a glimpse and a possible solution to close the Great Divide. When we look at the critical business goals of a company, it is difficult to find one that is not a product of teams diligently working on a solution. In fact, our research found 80-90% of all business outcomes are products of teams (functional, cross-functional or virtual)—not individuals.
If, on the other hand, we look at the levers of HR (see figure 1), we see that a large percentage of these levers, represented by the grey arrows, (organizational performance, talent acquisition, talent management, employee relations, rewards, systems, etc.) are focused on individuals. In fact, through our 2 year,12,000 hour research effort, the percentage seems to hover around 80-90%. Just the inverse of the percentage of team based business outcomes!
This lack of enabling teams and focusing on individuals is a major contributor to the Great Divide. The current approaches used by the HR function are not optimized to drive achievement of business outcomes in today’s business environment. HR leaders are increasingly being asked to justify the ROI of these programs and for good reason.
Most HR programs were developed at a time when organizations were more hierarchical and individual decision making was more normative. Examples of this populate the levers of HR. In Talent Acquisition (ATS), for example, HR gives nearly every approved requisition at the same grade level identical priority. Even though ATS systems with technological advances have greatly improved efficiencies and transparency, HR still treats a requisition as an individual item, disconnected from the team and the critical business outcomes they support. For example, if a team focused on a critical business objective has an opening and a team working on a lower priority has a similar opening, should both requisitions be worked with the same priority? Any reasonable leader would allocate their resources to whatever moves the business ahead the furthest.
In Talent Development, an example of a suboptimal program would be the classic nine-box process. This flawed process was developed three decades ago. The fact that it’s still in wide use is a testament to its perceived value. However, when the program was developed, identifying organizations’ most talented individuals was the primary goal. The problem is that identifying top talent does not go far enough today. Knowing who is most talented is only the first step in closing the Great Divide. Knowing how the talent is deployed in a team driving critical business initiatives answers the question most critical to line managers… Do we have enough capability on that team to achieve or exceed the desired business outcome 12 months from now?
More broadly, can we look at teams assigned to critical business initiatives across the enterprise and accurately predict whether or not they will be successful in the coming year? Fortunately, the answer today is yes! A new tool called Predictive Execution Analytics® enables this forward-looking visibility.
Closing the Great Divide – Where to start?
Today you have a critical business strategy to launch a new, innovative product and raise the average gross profit margins of your company. You assemble team(s) to design, build, and market the product. You also set outcomes and key milestones that can be measured and tracked.
The first critical question is, “How do you know, today, those teams have the capability to drive critical outcomes up to 12 months out?” Predictive Execution Analytics® answers this question. At the same time these Analytics create the opportunity to bridge the gap between team based business outcomes and individually focused HR levers.
The first dimension of Predictive Execution Analytics is, Team Leadership Capability (TLC). It has the ability to measure success probability up to a year into the future with great accuracy. Our research found that when 35% of the team scores high against measures of TLC, the team met the minimum threshold to achieve the desired outcome up to 12 months out.
However, if we stopped here, we would underestimate the complexity of teams, since many teams are cross functional or virtual and deployments of these resources are controlled by functional leaders rather than team leaders. Functional leaders may pull team members off a team and redeploy them. This impacts the success probability of the team. This second dimension, Team Continuity (TC), predicts the ability to retain the team for the duration of the business objective, is a determinant of Team Leadership Capability. When measured and combined with TLC it increases the predictive accuracy.
Lastly, Team Goal Load can affect both the Capability of the team and its Continuity. Let’s assume in the example above you hand-picked the best resources – Your Team Leadership Capability percentage exceeds 35% (you are on the success side of the chart above) and the commitments you have from functional leaders to retain resources (TC) for the duration of the cross-functional project are high. However, after speaking with your team members, you find they are on 10-12 different projects in addition to yours. In effect, their average goal load is so high that, it reduces the Team Leadership Capability score. In fact, it reduces the capability of all teams they participate on. Some in HR call this burn out, which is the behavioral implication. From a business perspective, the business outcomes are put in jeopardy because Goal Load impacts both Capability and Continuity of the team when the load exceeds the optimal level.
So, how does Predictive Execution Analytics close the Great Divide? When the variables of teams are measured and aggregated, they paint a picture of future business success and or the gap that needs to be closed to achieve future business results. This is critical because only now can HR levers be realigned to drive business outcomes.
HR Lever(s) Realignment
Business Partners, imagine being realigned to critical business goals and teams rather than an organization chart or geography. Understanding Execution Analytics and gaps, partnering with the team leaders and traditional functional HR departments will drive business results rather than HR outcomes.
Talent Acquisition (TA), Contemplate being able to prioritize all the TA systems and capability by first understanding the priorities of team efforts tied to critical business outcomes. The current measures, time to fill, cost of hire, quality of hire would have a completely different meaning since they would be in the context of business outcomes critical to the company’s success. Just more talent will not be enough to win in this new business environment.
Talent Management (TM) Instead of developing masses of talent across the business landscape the question could be asked and answered, Have we increased the Team Leadership Capability tied to business outcomes? Additionally how much have we improved the business outcomes as a result? This would take the current $164.2B spent on “low ROI” Learning and Development in the U.S. ( ASTD 12/13 release http://www.astd.org/Publications/Magazines/TD/TD-Archive/2012/11/ASTD-2012-State-of-the-Industry-Report ) and reposition the total spend into a very high ROI.
Rewards Do we believe the current rewards systems really drive business outcomes? or Are we satisfied with using expensive and time consuming programs for retention only? Rewards when tied to specific team based achievement have been shown to enable desired outcomes and retain top talent. So why do most of the programs reflect individual rewards?
Human Capital Analytics, move from reporting on HR to impacting critical business outcomes as viewed by senior line executives.