Victory Through Organization PDF

VICTORY THROUGH ORGANIZATION -PROFESSOR DAVE ULRICH- i  PREFACE We are observers, advocates, provocateurs, researchers, and agitators for the HR profession. For over 30 years, Wayne Brockbank and Dave Ulrich have studied, written abo...

VICTORY THROUGH ORGANIZATION -PROFESSOR DAVE ULRICH- i  PREFACE We are observers, advocates, provocateurs, researchers, and agitators for the HR profession. For over 30 years, Wayne Brockbank and Dave Ulrich have studied, written about, and trained HR professionals at the Ross School at the University of Michigan and in their private consulting practice. Dave Kryscynski (DK) and Mike Ulrich have more recently received their PhDs in organization and HR science, bringing rigorous theory and research to improvement of HR. As seasoned and emerging HR promoters, we have come to share some assumptions about the state of HR today. The following six assumptions form much of the basis and context for our book: 1. HR matters. We firmly believe through personal experience and empirical data that HR matters to a business. Wayne’s in-depth advisory work with leading global companies has shown that HR work today shapes business strategy and helps the business to deliver results. His current work on information and culture highlights some of the emerging ways for HR to deliver real value. Dave’s recent work on leadership capital shows that quality of leadership impacts shareholder value, thus giving HR professionals a line of sight to market valuation of their work. DK and Mike’s work shows the empirical impact of HR on desired firm outcomes. 2. HR research is imperative. We strongly believe in empirical and qualitative information. We see the recent push in HR for more analytics as a good sign as long as the analytics focus is on information that will improve the business. Too often HR analytics are about HR for HR, not HR for the business. DK and Mike bring exceptional rigor to the information that provides valid insight to how HR decisions impact business results. Academic studies on HR, human capital, and strategic HR are emerging in the HR, strategic, and organization literatures. These studies are helpful when they connect to HR phenomenon and deliver insights with rigor. DK and Dave’s paper on the importance of timely and rigorous HR research won the Academy of Management Perspectives Best Article award in 2016. 3. HR professionals are changing. After having trained tens of thousands of HR professionals, we are coming to realize that progress is being made in quality of HR departments, professionals, and practices -- albeit slower than we would hope. We continue to see the 20-60-20 distribution of HR professionals. 20 percent are exceptional and deliver real value. We need to stay out of their way and learn from them. 20 percent are laggards, not able or willing to use HR to drive business results. We need to not let them deter us. 60 percent are open to learning and making progress towards more impactful HR. We are committed to these aspiring HR professionals who want to learn and make a difference. 4. HR departments and practices are becoming more important. We have worked on the transformation of HR departments and HR practices for many years. We have been advocates for HR structure matching the business structure and for HR practices offering integrated solutions to business problems. Just as HR departments combine individual HR professional competencies ii  into a stronger HR function, we have also advocated that an organization’s capability (or culture) is more important than the competencies of individuals. 5. HR colleagues are incredibly gifted. We have been privileged to work with outstanding HR colleagues in over 70 countries in the world. Some of these colleagues are among the 22 partner associations in the Human Resources Competency Study (HRCS) who have partnered with us before. Other colleagues are thought leaders whose insights continually inform us. We hope that as we absorb their work into ours, we give adequate credit and build on their insights and ideas. 6. HR is a dynamic and innovative discipline. We are continually amazed at the ever changing twists in the HR profession. Over the 30 years of our research on HR competencies, we have seen many topics emerge which are now foundational parts of HR (e.g., business partner, strategic HR, HR strategy, HR transformation, HR value added). We continue to be excited about what’s next for how HR adds value. We all were fortunate to participate in HRCI’s book The Rise of HR where thought leaders provoked and anticipated some emerging themes. We hope that we can continue to anticipate future trends and push boundaries. We often call this future focus “planting the grass” for what comes next. With these six assumptions under our belts, we muddle forward. Some of our movement forward comes from intense consulting assignments where we are invited to solve previously unsolvable business problems through HR insights. Some of our learning comes from listening to thoughtful HR leaders wrestle with ways they can have more impact. Some of our insights come when we have to present to small and large groups on topics which stretch us to discover new insights. We try to combine these personal experiences into more rigorous research. Over the last 30 years, we have done seven rounds of the HR Competency Study. This study has explored the competencies of HR professionals that drive individual and business performance. Doing empirical research requires asking the right questions, getting a great response rate and sample, and analyzing data to see trends. In this seventh round, we hope we have asked some innovative questions about both competencies for HR professionals and activities for HR departments to be effective. In this present work, we have taken an important step forward from prior rounds of our research by examining both individual HR competencies and the practices of the HR department as a whole. In other words, we explore both how the individual contributes to performance as well as how the HR department as a unit contributes to performance. We found that the organization has three to four times more impact than the individual (that is, the whole is more than the parts). This finding leads to the primary title of this book, “Victory Through Organization”. The subtitle, “Why the War for Talent is Failing Your Company and What You Can Do about It” reveals our opinion that the oft cited “War for Talent” may have gone too far and may be leading us astray in our modern business environment. Having great people is critical and wonderful, but if we are not organized appropriately to do something with them then we are missing a major opportunity. iii As we have analyzed the data, we already realize questions we could or should have asked. With the help of 22 regional partners, we believe we have a remarkable data set, one of the best we have seen in the HR space. Our analyses now highlight findings that may continue to shape the HR profession. We are enormously grateful for the many sponsors and supporters of this work. The Ross School of Business Executive Education (in particular Melanie Barnett) and RBL Group (in particular Norm Smallwood) have financially sponsored this work for 30 years. None of the principal investigators have even taken a salary or stipend for this research, donating now thousands of hours to the improvement of the profession. In this round, we are particularly indebted to:  Jacqueline Vinci – project management  Dave Gutzman – Custom Insight We hope you take away a strong sense of our primary mission of Victory Through Organization: to further establish HR as a prominent strategic partner of the business, and to embrace HR’s role in creating an organization that is greater – and performs greater – than the sum of its “employee” parts. iv  VTO, ch. 1, Why HR Why Now CHAPTER 1: WHY HR AND WHY NOW? In our quest to discover the role HR plays in business strategy and success, and to identify the role it should play, we have been personally involved with a wide variety of specific business challenges in recent years. These challenges (and successes) have helped us enormously to focus and apply our research. Business Challenge and Success Models The business situations we have looked at and investigated include (but are not limited to) the following: Leaders at a consumer electronics company look to the future and see emerging trends in an aging population who will require increased health care. They decide to shift their business from consumer products to health care services. Leaders at a leading retailer recognize that technology has changed when and how consumers shop. They realize that the “box” store will be supplemented by online purchasing. As they move into the online space, they realize they have to manage a dual organization, one focused on traditional retail through stores and another focused on internet-driven distribution. A consumer products company has had outstanding financial performance compared to competitors. Their costs are lower and innovation revenues are higher. But, their stock price lags. They are trying to figure out how to increase investor confidence in their future earnings and get full market value for their economic success. The founder of a conglomerate has had enormous success, growing to become one of the largest firms in the region. The average age of his management team is in the 60’s and he realizes that he has to prepare the next generation of leaders who will manage the company after he is gone. An Asian organization has achieved remarkable success in its market. It has moved from being a country success to a regional success and now has aspirations to become the global leader in its industry. It looks to expand to North and South America, Europe, and Africa in the next few years. Leaders are wondering if this expansion should be through acquisition or organic? A retail store has grown through geographic expansion to where its footprint now reaches over 80 percent of those who live in its served market. It now needs to focus on increasing revenue per square foot rather than simply adding more square footage. A private equity fund has now become a private equity firm. As a fund, it bought, fixed, and sold businesses. Now it is holding those businesses in its portfolio for a much longer period and has to transform them before divesting them. 1  VTO, ch. 1, Why HR Why Now A consumer products firm has very successful products. But, many of the products are nearing the end of their life cycle. The firm does not have a good track record of reinventing its existing products or coming up with new ones, and is worried about responding to future opportunities. Small, agile competitors seem to be taking away share at some key accounts. What these business cases mean for HR HR is not about HR. HR begins and ends with the business. Every business is a product of its context. Business success comes when the internal strategy anticipates or responds to external conditions. When business leaders are asked about their most difficult challenges in responding to external challenges, they often refer to executing with discipline, deploying talent, ensuring, leadership, managing change, using information, and transforming culture. These are all HR-related issues, are they often the hardest aspects of responding to evolving business challenges. In each of the above business settings, the “solution” to the business challenge was centered on wisely investing in individual talent, organization capability, and leadership. These most importantly, are the outcomes of good HR work. Business leaders increasingly recognize that much of their success ultimately comes from wise and well-directed HR efforts. The evidence for why HR matters for business outcomes comes from many diverse sources. Over time and through our research, we have found that …  Only 61 of the original Fortune 500 firms still exist as independent firms;  Successful CEOs have the same skills set of successful CHRO’s (more than the CMO, CIO, or even CFO);  Approximately 30 to 40 percent of board of director time is spent on organization and people issues;  Investors are increasingly aware of leadership capital as part of their investment decision making. Bottom line: These days, business leaders care about HR because these HR issues are now business issues. An integral part of excellence Now because HR is primarily about the business, the HR profession is undergoing major transformation. When HR leaders are asked to define their “customers” they are increasingly referring to the customers of their business, not just the employees inside their organization. HR practices are increasingly being aligned to an “outside-in” focus where staffing, training, performance management, and culture deliver value to these “real” customers. 2  VTO, ch. 1, Why HR Why Now An employee “brand” is increasingly linked to the firm brand whereby those employees focus on delivering on brand promises to outside customers. Market value is as much about intangibles and leadership as financial results. In fact, those intangibles and leadership excellence are leading indicators of those financial results; intangibles are the cause, financials are the effect. HR professionals are not only invited to the table where strategy is discussed, they are increasingly expected to add value to the discussions and to be part of intangible and leadership “excellence.” An “organization focus” The scope of HR has also expanded. For decades “human resources” has primarily referred to talent and all the ways in which people are managed, including bringing the right people into an organization, moving them through the organization, administering their benefits and other “hygiene” issues, and appropriately moving them out of the organization (Ulrich & Allen, 2014). In recent years, “HR” has expanded from a nearly exclusive focus on people and how individuals think, behave, and act to an additional emphasis on organization. What does this “organization focus” entail? An organization focus examines workplace as much as workforce, work processes as much as people; organization capabilities as well as individual competencies. Organization culture (as way to describe the organization) has become a complementary outcome of good HR work, in addition to individual competence. This means that responses to the business challenges listed above include getting the right talent (people, individual skills, and workforce) and the right organization capabilities (culture, work and processes). At the end of the day, HR delivers both individual competence and organization capability to solve business problems. Evolving to new competencies To respond to these HR expectations and opportunities, HR professionals must acquire new competencies and HR departments must focus on the right activities. This book offers HR professionals tools to better respond to emerging opportunities. It also offers guidance for how to build more effective HR departments to deliver real value. The ideas in this book are based on 30 years (7 rounds) of studying HR professionals, with a focus on the results of the latest (2016) round of research with over 30,000 global respondents both inside and outside HR. In addition to these research findings, we offer a number of insights, frameworks, tools, actions, and cases where HR has delivered business value. We envision the ideas in this book being used by multiple audiences who shape the HR profession. The over 2 million HR professionals worldwide will discover the competencies they must master to be personally effective, to serve key stakeholders, and to deliver business results. Those senior HR leaders charged with creating value added HR functions will find unique insights on how to build a more effective HR department. Business leaders who want to respond to business challenges through HR practices will learn how to make more informed and tailored HR investments. 3  VTO, ch. 1, Why HR Why Now The Four Forces reshaping HR impact on business success We see four reasons why HR matters more now than ever for business success: business context, pace of change, stakeholder expectations, and personal context (see Figure 1.1). For HR professionals and business leaders to fully understand the increased expectations on HR, it is useful to recognize and adapt to these four forces. We’ll refer to the Four Forces throughout the book Figure 1: Four forces for emergence of HR Increased Pace of Change: Stakeholder VUCA Expectations: Inside and outside Business Context: HR matters: Personal Context – STEPED Conditions HR professionals The”6 I’s” HR department 4  VTO, ch. 1, Why HR Why Now Force 1: Emerging Business Context: STEPED and the content of change A business leader whose firm operated in over 80 countries asked us how he could make sense of and respond to the changes happening within countries he visited. Another colleague asked us how to organize the complex world in which we live into a relatively simple framework that might help her anticipate industry changes. While there are many frameworks capturing the relevant trends in the business context1, we prefer a typology of six categories (known as “STEPED”) that leaders can use to understand how contextual changes affect how businesses operate:  Social (expectations, values, lifestyle, have/have-nots),  Technological (information access and frequency),  Environmental (public policy, social responsibility, care for the planet),  Political (regulatory shifts),  Economic (industry evolution, industry consolidation), and  Demographic (age, education, and background of people). Using this framework, leaders can better diagnose geographic or industry trends. Because of trends in these six categories, HR professionals are asked to do more to help businesses position themselves to win. When our colleague would visit a country where they did business, he would ask for trends in these six areas to help him understand the context of his company’s strategic choices. This STEPED framework can also be used to review industry trends. For example, an HR leader in a beverage company facilitated a team discussion about how the environment would shape their business in the future (see Table 1): Table 1: External Content Trends, Strategic Opportunities and Threats, and HR Implications Trend Strategic Opportunities Strategic Threats HR Implications Source talent in emerging Healthy eating trends Emerging economies eager markets; Social reduce soda consumption for Western products Consider talent for adjacent by 25% in US/W Europe businesses Increased threat of hackers Build a culture of Mobile computing offers Technological or other corporate information privacy and new marketing opportunities piracy/threat access information talent 1 Our work is certainly not the first to create a simplified framework for the business context. Other models such as the PEST framework and the PESTEL framework cover identical concepts in slightly different ways. We use the STEPED model because it fits conceptually with the challenges we regularly encounter in HR. 5  VTO, ch. 1, Why HR Why Now Create a change plan to New middle class in Recession has impacted Economic adapt to changing market emerging economies sales conditions; move quickly Emerging economies More pressure to eliminate Prepare an organization Political increasingly open to trade unhealthy drinks e.g., NYC innovation strategy for new and investment recent sugary beverage tax business opportunities Reaction against Ensure that corporate social Reduced cost of environmentally difficult responsibility is embedded Environmental packaging/garbage by packaging e.g., plastic, into culture and key increasing package size metal cans decisions Aging population in most Build a country strategy of Growth markets in LATAM, Demographic mature markets reduces % how to do business in India, China and SE Asia of target customers emerging geographies These six (STEPED) trends increase the relevance of HR as responding to these factors requires high sensitivity to HR issues in the organization. You can see the HR emphasis in the last column of Table 1. Force 2: Increased Pace of Change: Volatility, uncertainty, complexity, and ambiguity In addition to these business context areas, HR has grown in business importance because of the dramatically increased pace of change in business today. As a model, we look to the VUCA model from the Cold War, during that time the U.S. military leaders recognized that military engagements were dramatically changing. They began to capture these changes with the acronym VUCA standing for:  Volatility. The nature and dynamics of change, and the nature and speed of change forces and change catalysts.  Uncertainty. The lack of predictability, the prospects for surprise, and the sense of awareness and understanding of issues and events.  Complexity. The multiplex of forces, the confounding of issues, no cause-and-effect chain and confusion that surround an organization.  Ambiguity. The haziness of reality, the potential for misreads, and the mixed meanings of conditions; cause-and-effect confusion. These four processes require that organizations become agile and responsive (e.g., in the military this assessment led to an emphasis on special forces who could move quickly in military assignments). HR professionals can help business teams feel less threatened by and more able to respond to external changes by facilitating structured dialogues around these external trends. Table 2 following applies VUCA to the beverage example described above: 6  VTO, ch. 1, Why HR Why Now Table 2: External Process Trends: Creating Organizations to Respond to VUCA Trend/ Organization Beverage example HR Implications for HR practices Definition response and culture  We have to create an The following implications apply to innovation cycle for new all four elements of VUCA: Volatility products (half life of products is Pace of Respond to … shortening) change  We have to create a faster  Create more agility throughout response time to market the organization opportunities  We don’t know which products  Bring discipline and precision Uncertainty will be successful in the future to the management of change Can not  We don’t know for sure who Manage … predict the our competitors will be nor  Have decentralized execution future which countries we should of centralized operations compete in  We have to manage the  Teach employees how to think increasing complex global and act, not what to think and Complexity supply to commercialization do Chess on five Simplify … process levels  We have to build a matrix  Empower people to apply organization with business, ideas and innovate geography, and function  Focus less on plans and more Ambiguity  We don’t know how technology on planning Unclear and information will shape where future Resolve … consumer choices treats will  We are not clear about who our come from future competitors might be We have found in our research that under conditions of increased change, investments in HR matter more for business success. The challenges of VUCA elicit more attention to human resource issues than some of the other “forces” we’ve examined. Teach your organization to deal effectively with VUCA, and you’ve accomplished a lot. 7  VTO, ch. 1, Why HR Why Now Force 3: Key Stakeholder Expectations The context (STEPED) defines opportunities and threats in the business environment; the processes (VUCA) define the intensity and pace of change, and understanding stakeholder expectations defines who HR must satisfy in order to help the firm succeed. Because of contextual and intensity changes, stakeholder expectations are dramatically changing too, again increasing the relevance for HR. Figure 2 captures many of the stakeholders for a company and what they likely expect from their interactions with a company. These stakeholder expectations set the criteria for effective HR. More and more, HR stakeholders are external (above the line in Figure 2) customers, investors, communities/regulators, and partners. HR is increasingly being asked to help deliver customer share, investor intangibles, community reputation, and partnership cooperation. As these external stakeholder expectations increase, HR plays a significant role in delivering these outcomes. In addition, more traditional HR focuses on the excellence of internal stakeholders including employees and leaders, helping employees become more productive and leaders become more strategic. Figure 2: Key Stakeholders to HR and their Needs and Expectations Investor/owners Community/Regulators  Financial performance  Social responsibility  Intangibles  Regulatory oversight  Risk Customers Partners/Alliances  Target key customers HUMAN  Outsourcing  Customer intimacy or RESOURCE  Joint ventures share IMPLICATIONS  Collaborations Employees/Productivity Line Managers  Competence  Shaping strategy  Commitment  Creating organization  Contribution traction 8  VTO, ch. 1, Why HR Why Now Force 4: The Personal Context of Today’s Work STEPED defines the playing field; VUCA defines the pace at which a game is played, and stakeholders define for whom we create value. But all these changes in external context also affect how people respond when playing the game. Their responses to workplace change – and workplace behavior itself -- is in turn influenced by six societal shifts (Six “I’s”) that put enormous pressure on shaping the emotional impact of how we live and work. Here are the “Six I’s”: Intensity. We often live with a reality TV mindset where intensity and insults replace insight and civility, emotional outbursts matter more than reasoned dialogued, and individuals are motived to “win” (e.g., television shows like Survivor, Apprentice, American Idol) generally at the expense of others. Television snippets and internet news report and magnify the sound bites that demean and demoralize. In this world, 140 character Twitter comments are forwarded when they capture a clever phrase or insult. While most of our normal lives are not as emotionally intense as those we see in social media, we become inured to emotional outbursts and come to expect them. Individuation. We live in a world of hyper free-agency, where individuals win by taking control of their careers, maximizing their self-interests, and eschewing long term commitment to a community or organization. Career mobility is a given as one Silicon Valley executive said, “My people go to lunch and come back with a job offer.” Relatively few have expectations of long term employment with one company or team. We are encouraged to be authentic by taking charge of our lives and becoming our own brand. Isolation. We act increasingly in personal cocoons that require less interaction with others. SOHO (small office, home office) is becoming a dominant organizational setting. Students are encouraged to and can get a degree through technology without ever attending a class or having the social experience of a university. Digital natives are spending up to 7.5+ hours a day in front of a screen (TV, phone, computer). With this group, process addictions are as prevalent as substance addictions. When we have personal contact, these personal touches are frequently through Twitter, Facebook, and Linkedin which capture activity more than social connection. We are connected, but not connecting. It is not a surprise that feelings of anomie and isolation are increasing. Indifference. Throughout the world, the next generation has learned to moderate expectations. For generations, a primary goal of parenting is to provide children opportunities to live better than their parents with each generation building on the previous. Now, this is less likely. Maturing adults get an education, but not a job and even less often a career. Increasingly voters are cynical about politicians having the voters’ interest in mind. While people are busy, they are not sure they are being fulfilled. Immediacy. A sense of time and duration has also shifted. Many seek immediate gratification without investing in long term preparation. Long term feels like next week (when watches, phones, computers, 9  VTO, ch. 1, Why HR Why Now clothing, and, unfortunately, the next episode of our reality TV show is on, or what the next political debate occurs). We have disposable relationships. People are far less likely to get married. In-group (labels). We see a world with increasing subgroups. The gap between the rich and the poor; the have’s and the have-not’s has increased. With statistics, we can quickly find patterns that label people into a subgroup. Managing information from cookies reinforces these labels and becomes the focus for tailored advertising, customized products and services, and unique offerings. Cloud data is designed to create customized insights. Most people chose to live in neighborhoods with like-minded and socially similar individuals. Political polarization exist where neighborhoods have a singular political focus, resulting in increasing political extremism. These six societal affective trends are discouraging, yet they define how individuals live and have the potential to undermine and destabilize organizations. Employees who are demoralized by these factors create organizations without capacity to respond to STEPED or VUCA conditions and without ability to serve key stakeholders. It is not a surprise the employee engagement scores on most surveys are at an all-time low. HR professionals have the challenge to shift these seemingly negative trends into positive opportunities to enable their organization become communities of action where:  employees channel intensity to create value for others,  individual self-interest is replaced by shared purpose,  isolation is overcome with personal connection,  indifference shifts to renewal,  immediacy for today’s results becomes the pathway for a longer term vision or strategy,  labels are replaced with valuing differences that make teams stronger than individuals. When these six contextual trends turn positive, HR professionals help individuals replace cynicism with commitment and isolation with community. HR professionals must be aware of these trends and influences and be prepared to deal with the effects of them. So again, why HR why now? (Why is Victory Through Organization relevant?) Businesses are shaped by the context in which they operate (STEPED); they have to respond to the velocity of the changes they face (VUCA); they have to serve external and internal stakeholders, and organizations are more successful when employees have positive personal affect. Each of these four forces requires new thinking and action from HR professionals to create organizations that will survive and thrive. HR matters because it is not about HR, but is about the business. Going further, that business is not about what we do today, but how we prepare for tomorrow; to prepare for tomorrow requires understanding of context, process, stakeholders, and personal affect; that by managing these forces, organizations will become competitive; and that competitive organizations are the outcomes of HR. 10  VTO, ch. 1, Why HR Why Now The ideas in this book will help shape the HR profession. In Part 1 (HR Matters) we have laid out societal forces that increase HR relevance (Chapter 1) and we overview the research (Chapter 2) that will help HR departments and HR professionals deliver more value. In Part 2 (Organization), we discuss the importance of the organization for business success (Chapter 3) and introduce high priority HR practices. Chapter 4 reviews how organizations can better leverage HR in the organization’s overall information agenda as well as building stronger integration among the HR practices. Chapter 5 offers insights on delivers HR practices for employees and uses HR analytics for HR. In Part 3 (Individual) we go into depth on the competencies that will help HR professionals be more personally effective as credible activists (Chapter 6), deliver value to key stakeholders as strategic positioners (Chapter 7), and impact business results as paradox navigators (Chapter 8). We also highlight enabling strategic HR competences of culture and as change champion, human capital curator, and total rewards steward (Chapter 9) and foundation enablers of compliance manager, technology and media integrator, and analytics designer and interpreter (Chapter 10). Finally, in Part 4 we lay out and summarize implications of these ideas for business leaders, senior HR leaders, and HR professionals (Chapter 11). In sum, our ultimate hope in doing this research and writing Victory through Organization is to make HR less about HR and more about the business. 11  VTO, chapter 2, Determining HR Effectiveness CHAPTER 2: THE EMPIRICAL BASIS OF HR EFFECTIVENESS If the expectations and opportunities are rising for HR (as defined in chapter 1), then what does HR have to do to respond? Many thoughtful HR leaders have imparted their personal views about what HR must do to be effective. Opinions and anecdotes are easy and cheap; we realized thirty years ago that these thoughtful personal cases needed more rigorous research across organizations to establish a more robust view of what HR professionals must be, know, and do to be effective. To pivot from anecdotes to sustained insights, we have engaged in extensive y data collection and empirical analysis. As a fair warning to you as a reader, this chapter is highly technical and presents a great deal of conceptual and analytical rigor. If you would like to deeply understand the empirical underpinnings of our arguments then this chapter will give you many details. If, however, heavy empirical discussions are not to your liking you may prefer to skim this chapter and move quickly to chapter 3. We have made an intentional choice to report detailed methodology, data, and results so that you can evaluate the quality of our work and the robustness of the insights we draw from the data. We also believe that the rigorous empirical work differentiates this study from many other HR competency studies we encounter, and want to help you appreciate the difference. For 30 years, we have studied the competencies of HR professionals, in an attempt to identify what competencies HR professionals must master to deliver value. We have also been intensely involved in the transformation of HR departments and HR practices.i We believe that while case studies and personal experiences offer great insights, to move the profession forward requires more comprehensive research. This chapter, in 5 sections, accomplishes the following: highlights our previous work, summarizes the state of the art on HR competencies, reviews design choices for the current 7th (2016) round of the Human Resources Competency Study, reports characteristics of the sample as a view on the state of the profession and overviews high level findings of this round of research focused on the impact of both personal HR competencies and well-functioning HR departments on various business outcomes. Each of these five chapter goals is summarized in the Sections 1 through 5 which follow. Section 1: Highlights of our previous work Over our thirty years of doing the HR Competency research, we have been able to frame many core ideas and concepts that have shaped the HR profession. We are clearly not alone in evolving HR, but we have helped shape ideas for the HR profession around several core concepts that have emerged:ii  HR as business partner: HR professionals should be business partners of the line managers.  HR value added: HR exists to deliver value to key stakeholders.  Strategic HR: There is a logical process and sequence starting with business environment, then on to strategy, then organization, then finally to HR priorities. 1  VTO, chapter 2, Determining HR Effectiveness  HR strategy: HR departments should have a mission to deliver talent, leadership, and organization capabilities to increase business performance  HR governance structure: HR departments should be organized to match the business organization, which in many cases requires the “three pillar” model for HR (shared services, centers of expertise, and corporate HR)  HR transformation: HR transformation comes through four phases: why transform, what are the outcomes of transformation, how to transform HR work, and who is involved in HR transformation  HR deliverables: HR should focus on outcomes delivered in talent, leadership, and organization more than administrative activities or HR practices like staffing, training, compensation. The outcomes of HR become the goals for the HR department, capabilities an organization requires to win in the marketplace, and intangibles for investors.  Organization capabilities: Organizations can be defined by their capabilities, which include information, culture change, speed or agility, collaboration, innovation, customer service, or efficiency.  HR outside in: HR delivers value to external customers, investors, and communities Much of this work revolves around building better HR professionals through competency models and building better HR departments through focusing on the right HR practices. Section 2: State of the art of HR competency models In recent years, many HR associations, organizations, and thought leaders have worked to create HR competency models. We have synthesized this work in Table 2.1 into six domains for HR competenciesiii. For a more detailed examination of each of the competency models the reader may benefit from connecting with the referenced HR association directly. This enormous body of work indicates the relevance of the Four Forces for the increasing attention to HR laid out in Chapter 1. This work has been used to certify, staff, develop, and reward HR professionals. Our assumptions and approach for the seven rounds of HR research and competency work indicate how we have uniquely contributed to the HR competency discussion. 2  VTO, chapter 2, Determining HR Effectiveness Table 2.1: Integration of HR competencies into 6 HR domains Core HR domains HR Association Business Personal HR Tools, HR Information Change Organization Practices & System & Analytics and Culture Processes Society for  Business  Ethical  HR expertise  Communication  Relationship  Global Human acumen practice   Critical Evaluation management and Cultural Resource  Leadership  Consultation Effectiveness Management & (SHRMiv) Navigation CIPD  Resourcing Service delivery Information  Organization and talent design planning  Organization  Learning and development talent development  Performance and rewards  Employee engagement  Employee relations Australian  Business  Ethical and  Workforce  Change  Organization Human driven credible designer leader al capability Resources  Strategic activist  Expert  Influencer  Culture Institute architect  Critical practitioner  Collaborative leader (AHRI)  Future thinker  Solutions  Resolver of (model of oriented  Courageous driven issues excellence)  Understand and care 3  VTO, chapter 2, Determining HR Effectiveness National  Strategic  Personal  Functional:  Execution Managing Human thinking credibility  Recruitment excellence culture and Resource and  Service  Performance  Change design Development alignment orientation management orientation (NHRD)  Business  Talent  Networking (HR compass) knowledge management management  Financial  Compensatio perspective n & benefits  ER and labor law Asociación  Self-  Collaboration Innovative Mexicana en awareness  Knowledge culture Dirección de  Synthesis management Recursos  Formulatio Humanos n AMEDIRHv  coaching Boston HR business  Managing Restructuring Consulting partner talent organization Group  Improving leadership  Recruiting  HR processes Deloitte  Commercia Trusted  HR expertise Influence l awareness advisor  Employee  Business relations acumen Section 3: Design choices for HRCS Round 7 (2016) In conducting the seventh round of the Human Resources Competency Survey for 2016, seven key design choices illustrate our approach to defining the competencies that make effective HR professionals and the practices that make effective HR departments. 1. Collaboration. We have consistently collaborated with the leading HR professional associations around the world. The Ross School of Business at the University of Michigan and the RBL Group (our consulting firm) have been the primary sponsors for this 30 year research agenda. In this 7th round we have worked with 22 HR associations which cover the entire world (see Figure 2.1). Each of these 22 global partners conducted focus groups within their respective geographies where members addressed three questions: a. What are the major challenges facing your industry and company? 4  VTO, chapter 2, Determining HR Effectiveness b. What are implications of these challenges for organizations? c. What are HR professionals undertaking to address greater business value in the future than they have in the past? We believe that such collaboration enhances perspectives and offers scale and scope for the work. Figure 2.1 Regional Partners for HR Competency Study 2. HR competencies and results. HR competencies models generally answer the question: “What are the competencies of the HR professional”? These are descriptive statements which describe the current state of HR competencies, but not the impact of those competencies on key outcomes. Our research links HR competencies to personal individual effectiveness, key stakeholder outcomes, and business results so that competences deliver value. 3. Beyond self-report. We recognize the dangers of self-reporting about one’s competencies (we judge ourselves by our intent; others judge us by our behaviors). We use a “360 methodology” to overcome self-bias. In this round we have about 4,000 HR professionals who responded to the study. They provided self-reported data on their individual competencies. Their data were augmented by about 28,000 HR and non-HR associates who provided additional 360 degree data. With this 360 degree data, we have a more complete image of the competencies and their impact. 4. Global sample. We have worked to determine common HR competencies for HR professionals worldwide and unique competencies for specific regions. Our book Global HR highlights these differences. In this round we worked with the 22 regional partners to identify HR participants and Associate respondents from around the world. We find that while there are common domains of HR competencies, they are applied differently around the globe. 5  VTO, chapter 2, Determining HR Effectiveness 5. State of the art and evolution of HR competencies. From the first round (1987) of the Human Resource Competency Study, we have carefully ensured that the issues that were covered in the survey represented the present and the future of the HR field. We have done this study in waves, every 4 to 5 years. We find that the competencies vary about 25% to 33% each wave. In this round we had 123 competency items, about 60% were carried over from the 2012 study because they were high predictors of key outcomes from previous rounds. 6. Variance and similarity of competencies. We have worked to see how HR competencies vary by the demographics of the HR professional (gender, age, career stage, title, time in job) and by the organization setting (industry, firm size, company culture, strategy, capabilities required to win, country). In this round, we have results by these demographic categories (not all reported in this book, but available from authors). 7. HR competencies vs. HR departments. For the previous six research rounds, we have focused primarily on the competencies of HR professionals. In this round, we also wanted to identity the practices of HR departments and how they would impact key stakeholders and overall business performance. There is an ongoing debate about the relative impact of individuals (talent) vs. culture (organization). In this round we were able to create HR department level results by asking questions about the HR department and by aggregating those scores into about 1,200 organization units. We believe that these seven design choices allow us to integrate and build on the previous work and confidently use this research as a way to continue to better use HR to solve business challenges and to evolve the profession. Section 4: Characteristics of the sample and the state of the HR profession And now, as we forewarned, we are going to dive into the detailed data. As noted in Table 2.2, this 7th round of the HRCS has data from about 32,000 overall respondents in 1,400 businesses, with about 4,000 HR self-reporting (HR Participants) and 28,000 Associate reports.2 This is the largest sample of the seven rounds, thanks to our exceptional regional partners. 2 In determining the final sample size, we had to account for missing data. We received over 38,000 surveys, but unless the respondent answered 50% of the questions, we were not able to use the information. 6  VTO, chapter 2, Determining HR Effectiveness Table 2.2 Overview of Participation from Seven Rounds of Research Round Round Round Round Round Round Round 1 2 3 4 5 6 7 -1987- -1992- -1997- -2002- -2007- -2012- -2016- Total 10,291 4,556 3,229 7,082 10,063 20,023 31,868 Respondents Business Units 1,200 441 678 692 413 635 1,395 Associate Raters 8,884 3,805 2,565 5,890 8,414 17,353 27,904 HR Participants 1,407 751 664 1,192 1,671 2,638 3,964 Table 2.3 reports the demographics of the seven rounds of study. Given the size of the sample, we believe these insights capture some of the shifts in the makeup of the HR profession. There are some interesting insights from Table 2.3: 1. Gender. The gender has shifted dramatically in the profession over the last 30 years from 77% to 36% male, but this gender shift seems to have stabilized. This finding may indicate that the rate at which females are entering the HR profession has slowed or plateaued. 2. Years’ Experience in HR. Over the three prior studies, we found that approximately 25% of participants had been in HR positions less than 5 years, which we suggested could be attributed to growth in the profession or a trend of organizations moving people across functions. In the 2016 study, we see that the HR professionals with less than 5 years of experience only make up 16% of the survey participants. The decrease in less experienced HR professionals was offset by an increase in experienced professionals, where nearly half of the participants (47%) had 15 or more years in HR. While there is not a definitive explanation for this shift, one plausible explanation would be that it has become difficult in recent years to enter the HR profession. 3. Role of HR Professionals. Since the 2012 study, we have seen resurgence in the percentage of HR professionals working in generalist positions (from 40% to 53%). With the exception of the HR planning, strategy, and affirmative action roles, all specialist groups experienced a slight drop in representation in the 2016 study. Generalists making up 53% of the survey participants is actually consistent with our pre-2012 data. Table 2.3 7  VTO, chapter 2, Determining HR Effectiveness Personal Characteristics of HR Professionals over Thirty Years Round Round Round Round Round Round Round 1 2 3 4 5 6 7 -1987- -1992- -1997- -2002- -2007- -2012- -2016- Gender of HR Participant Male 77% 78% 70% 57% 46% 38% 36% Female 23 22 30 43 54 62 64 Years in HR for HR Participant 5 years or less 10 14 13 25 24 25 19 6-9 years 14 19 15 18 20 18 19 10-14 years 26 24 21 22 23 25 23 15 or more years 50 43 51 35 32 32 39 Primary Role of HR Participant Benefits/medical/safety 6% 5% 5% 4% 3% 3% 2% Compensation 5 4 4 6 6 7 6 HR planning/strategy / 6 8 5 8 14 14 affirmative action 10 Labor relations 6 8 5 6 5 4 4 Org. development / 2 5 3 13 7 9 effectiveness / research 5 Recruiting 3 6 4 4 6 11 8 Training 7 14 6 12 9 11 10 Generalist 61 45 60 48 49 40 55 Table 2.4 shows the respondents by region. Simply stated, thanks to our regional partners, this study offers a truly global perspective of the HR profession. 8  VTO, chapter 2, Determining HR Effectiveness Table 2.4: 2016 Respondents by Region HR Participants per Total Respondents % of Total Region per Region Respondents North America (US & Canada) 1153 9767 30.8 China 568 4442 14.0 Africa 456 3209 10.1 Turkey 323 3112 9.8 Latin America 336 2813 8.9 Other Countries in Asia 328 2469 7.8 Europe 258 2222 7.0 Australia & New Zealand 168 1540 4.9 Japan 166 1024 3.2 India 116 718 2.3 Middle East 73 421 1.3 Tables 2.2 to 2.4 indicate the breadth of this sample. We believe it represents the largest global comprehensive assessment of HR professionals and HR departments.vi Section 5: Overview of key findings This research answers six questions about how HR can add value: 1. What are the competencies of HR professionals and how do they differ by individual and organizational context? 2. What competencies do HR professionals require to be personally effective (i.e., to be invited “to the table”)? 3. When engaged “at the table” (in business discussions), what competencies do individual HR professionals bring that add value to key stakeholders? 4. When engaged “at the table” (in business discussions), how do HR professionals represent the HR department’s practices and policies to add value to key stakeholders? 5. What competences are required of HR professionals to drive business results? 9  VTO, chapter 2, Determining HR Effectiveness 6. What is the relative importance of the competencies of HR professionals versus HR department practices in driving business results? Questions 1-3 above focus on the competencies of the individual HR professional and how those competencies affect individual outcomes that matter for the business. To address Question 1 we perform a factor analysis to see how individual competency items load together into HR competency domains and then we report average competencies by different demographic cuts. Research and methodological choices For Question 1 we performed a factor analysis that allowed the data to reveal to us the nine competency domains that make up the competency model we present in this book. Those domains are presented shortly. To address Question 2, we examine how an individual’s HR competencies relate to that individual’s overall effectiveness in the eyes of the raters in the 360 degree survey design. Individual effectiveness is the general sense from others that this particular HR professional is highly effective in his/her job. An HR professional’s personal effectiveness is determined by the question: Overall, compared with the other human resource professionals whom you have known, how does (HR PROFESSIONAL) compare? The score on this question indicates the overall personal effectiveness of the individual HR professional. Question 3 refers to the value that an individual HR professional brings once involved in business discussions. We wanted to know which personal HR competencies impacted an HR professional’s ability to create value for a host of stakeholders including: external customers, investors, communities, regulators, employees and line managers. To determine the value an HR professional brings to different stakeholders we asked six questions, one for each stakeholder: Overall, compared with the other human resource professionals whom you have known, how does (HR PROFESSIONAL) compare in creating value for ( external customers, investors/owners, communities, regulators, line managers, employees)? 10  VTO, chapter 2, Determining HR Effectiveness The results of these survey questions help identify how personal HR competencies deliver value to different stakeholders. We have about 4,000 HR professionals in this analysis. Questions 4, 5, and 6 shift our focus from purely individual HR competencies and individual results to the HR department and organizational level. For this work, we combine the 4,000 HR professionals into about 1200 organization units where they work. Some of these 1200 organization units have 1 HR professional, some might have up to 10 or more. So, we have the average HR competencies for all HR professionals within that organization unit. At the department, or organization level, we wanted to know the impact of how the HR department designs and delivers HR practices that add value to key stakeholders as measured this with the question: Please indicate the extent to which you agree that your HR department designs and delivers HR practices that add value to the following stakeholders of your business: Disagree Disagree Strongly Strongly Neutral Agree Agree External customers Investors or owners Communities where you operate Government regulators Line managers in your organization Your employees So, for 1200 organization units, we know the average competencies of all the HR professionals in that unit and the extent to which the HR department’s HR practices add value to key stakeholders. Assessing individual and collective (combined) HR competences and their impact on stakeholders provides some interesting implications (see Table 2.5) 11  VTO, chapter 2, Determining HR Effectiveness Table 2.5 HR Value for Stakeholders as determined by Individual HR professional or Department’s HR practices Individual HR Professional Adds Value to Key Stakeholders Low High HR department designs and delivers HR practices that add value to key high 2 4 stakeholders low 1 3 In cells 1 and 4, the HR professionals represents him/herself and the HR department HR practices in consistent ways (low or high). In cell 2, the HR professionals’ personal competencies are not adding personal value to key stakeholders, but the HR department is doing so. In this case, the HR professional represents the HR department’s HR practices once invited to the business dialogue. In cell 3, the individual HR professional’s competencies are adding value to key stakeholders, but the HR department’s HR practices are not. In this case, the HR professional represents his or her personal expertise once invited to the business dialogue. Thus, in question 4, we explore the relationship between collective HR competencies in the HR department and the extent to which the departments’ HR practices create value for a host of stakeholders including: external customers, investors, communities, regulators, line managers and employees. Questions 5 then shifts our focus from the intangible value that the HR department creates for stakeholders to the prior business performance of the organization. Table 2.6 summarizes the differences between our prior business performance measure and our intangible value for stakeholder measures. 12  VTO, chapter 2, Determining HR Effectiveness Table 2.6 Business Performance versus Stakeholder Value findings Prior Business Performance Findings Intangible Value for Stakeholders  Looks more backward and reports financial  Looks more forward to serve stakeholders to results of what has happened anticipate what may happen  Emphasizes a more internal perspective on  Considers stakeholders both outside and how the firm performs inside the organization (HR outside in)  Focuses on more tactical and transactional HR  Focuses more on high impact systemic HR practices to drive results solutions  Captures more the legacy and historical  Moves HR into the future (information age) reputation  Not much variance explained  Substantial variance explained  Offers more answers for what HR can do to  Challenges HR to think much more broadly in deliver business results terms of value creation. Exploring the business performance in the past is somewhat straightforward using well-established measures in business research. In our case we adopted a validated business performance scale that asks survey participants to rate the performance of the organization in the last three years to the performance of competitors on the following dimensions: profitability, labor productivity, developing new products, customer satisfaction, employee attraction, and regulatory compliance. This approach gives us multiple respondents to multiple performance items. Prior work shows that informed survey respondents are able to assess the relative performance of their organizations and provide reliable proxies for the performance of the organization in the recent past. Projecting potential business performance is more challenging, however. Recent research suggests that one key to sustainable business performance over time is creating value for the many stakeholders of the business. Creating value for stakeholders creates a sense of partnership with stakeholders. As long as the business consistently creates value for them, they contribute their resources and energy to support the business. One manifestation of this is customer loyalty, but employees, investors, communities and regulators all have important implications for the effective operation of the business day to day. Thus, one way to approximate the potential business performance in the future is through measuring the intangible value the organization creates for its critical stakeholders. This may indicate the extent to which stakeholders are deeply invested in helping the organization perform into the future Finally, with Question 6, we compare the relative impact of individual HR competences versus the quality of the HR department in determining both prior business and stakeholder intangible results. Figure 2.2 below visually depicts these key explanatory and dependent variables for the HRCS study and highlights which tables report the relevant findings.. 13  VTO, chapter 2, Determining HR Effectiveness Below we offer a high level overview of the findings of the study and then in subsequent chapters we provide additional details, insights and interpretations related to these results. Figure 2.2 Visually Depicting the Key Independent and Dependent Variables in Round 7 of the HRCS Individual level of analysis Individual Effectiveness: Perceived individual performance of Table 2.10 HR professional relative to all other HR Competencies of the HR professionals individual HR professional Figure 2.3 Tables 2.7 to 2.9 Intangible Value for Stakeholders: 2.10 Perceived value created for Table 2.11 stakeholders by the individual HR professional Organization level of analysis Collective HR competencies of Intangible Value for Stakeholders: all HR professionals in Perceived value created for Table 2.12 stakeholders by design and delivery organization of department HR practices professional Table 2.12 Prior Business Performance: Performance compared to rivals Quality of the HR department Table 2.12 over prior three years 14  VTO, chapter 2, Determining HR Effectiveness Question 1: What are the competencies of HR professionals and how do they differ by individual and organizational context? In the research, we examined 123 specific items (or questions) that define what HR professionals should be, know, or do. We performed factor analyses on these items to determine domains of HR competence.3 Our research resulted in nine domains (or factors) for HR competencies (see Figure 2.3 below). Because of the results reported below, we clustered the nine domains into three general categories: core competencies, strategic enablers, and tactical support elements. Three of these competencies were core drivers (explained more below):  Strategic positioner: Able to position a business to win in its market  Credible activist: Able to build relationships of trust by having a proactive point of view  Paradox navigator: Able to manage tensions inherent in making change happen (e.g., be both long and short term, be both top down and bottom up) We categorized three domains of HR competence as strategic enablers, helping position HR to deliver strategic value:  Culture and change champion: Able to make change happen and to weave change initiatives into culture change.  Human capital curator: Able to manage the flow of talent by developing people and leaders, driving individual performance, and building technical talent.  Total rewards steward: Able to manage employee wellbeing through financial and non-financial rewards. We categorized the final three enablers as tactical or foundational elements of HR:  Technology and media integrator: Able to use technology and social media to drive create high performing organizations  Analytics designer and interpreter: Able to use analytics to improve decision making  Compliance manager: Able to manage the processes related to compliance by following regulatory guidelines. 3 We worked to make sure that the 123 items were accurately clustered into key domains by doing factor analysis. The choices in factor analysis were complicated (e.g., do we do analysis on 32,000 overall respondents or on the 28,000 associate respondents or the 4,000 HR participants?). We also worked to make sure that the 123 items were “cleanly” factored into a single domain. We tested the best fit of these items for 5, 6, 7 ,8, 9, or 10 domains. After over 200 factor analyses, we made a judgment that 9 domains best characterized the 123 items. Specific factor loadings and assumptions are available from the authors. 15  VTO, chapter 2, Determining HR Effectiveness Each of these nine HR competencies is important for the performance of HR professionals. We will report the overall results by rater type, gender, and region.4 Figure 2.3: 2016 HR Competency Model: Round 7 Strategic enablers Core Drivers Foundational Enablers Like the “Four Forces” reshaping HR impact presented in Chapter 1, these nine domains (and this chart) will be referred to throughout the book. 4 We have the results of these 9 competencies by many demographic breakdowns (e.g., tenure of HR professional, size of firm, industry, role of HR professional and so forth). These additional specific results are available from authors. 16  VTO, chapter 2, Determining HR Effectiveness Table 2.7 below shows the mean (1=low to 5=high) scores for each of the nine HR competence domains by different respondent groups. The nine competence domains represent the rows and the five columns represent different respondent groups to the 360 degree exercise. The pattern among the nine competence domains are quite similar (see scores in each column). As the data will show, HR professionals are seen by their raters (in Column 1) as having more competence as Credible Activists (4.33/5) and Compliance Manager (4.32/5) and less competence in Total Rewards Steward (3.88/5) and Technology and Media Integrator (3.92/5). This same pattern holds regardless of who is rating the HR professional (self rating, Column 2; supervisor rating Column 3; HR associate Column 4; and non HR associate Column 5). These results make sense in that HR professionals have traditionally been known for their personal credibility and their compliance roles. We should note that we use 0.15 as a threshold for meaningful differences.5 The results by columns are quite interesting. HR professionals self assessment (Column 2) are somewhat higher than supervisor ratings (Column 3), but lower than ratings by HR Associates (Column 4) and lower more than ratings by non-HR Associates (Column 5). Supervisors who observe HR professionals doing their work may expect them to live up to higher expectations. HR associates see their HR colleagues as having more skills than the HR professionals themselves, and non-HR associates have even higher ratings of HR professionals. Perhaps HR professionals (Column 2) recognize their limitations more than those who rate them, perhaps they have limited self confidence in their own skills versus how others see them, or perhaps Associate raters assume that HR professionals can do more. We tend towards the third explanation and see these findings as a license for HR professionals to do more in these nine competency domains. Their HR and non-HR associates already observe them as better than they rate themselves. HR professionals sometimes lament how they are perceived by their peers, but their self-image and self- confidence may be a larger liability to their effectiveness. 5 We are often asked about “statistical significance” of these findings. With a sample of this size, almost all findings are “statistically” significant. We are more interested in “meaningfully significant” which implies information insights that are worthy of attention. 17  VTO, chapter 2, Determining HR Effectiveness Table 2.7 Round 7 Competency Domain Averages by Rater Type 4 5 3 HR Non-HR 1 2 Supervisor Associate Associate All Raters* Self-Ratings Ratings Ratings Ratings Number of raters 27904 3964 3738 13168 10998 Strategic Positioner 4.13 4.05 3.94 4.13 4.21 Credible Activist 4.33 4.35 4.27 4.29 4.42 Paradox Navigator 3.99 3.87 3.86 3.98 4.08 Culture and Change Champion 4.03 3.96 3.88 4.02 4.11 Human Capital Curator 4.01 3.90 3.88 4.01 4.08 Analytics Designer and Interpreter 4.01 3.89 3.78 4.04 4.06 Total Rewards Steward 3.88 3.76 3.81 3.86 3.95 Technology and Media Integrator 3.92 3.77 3.78 3.93 3.96 Compliance Manager 4.32 4.34 4.31 4.30 4.38 Overall Averages 4.07 3.99 3.94 4.06 4.14 * Non-self ratings 18  VTO, chapter 2, Determining HR Effectiveness Tables 2.8 shows that female HR professionals generally score higher than males across the nine HR competence domains, although the specific domain scores are only slightly different, the pattern holds. This finding is consistent with gender differences in other 360 surveys. As HR has become a more female profession (see Table 2.3), it may be a setting for women to demonstrate more competence than men. Table 2.8 Competencies by Participant Gender on 9 domains Female Male Strategic positioner 4.14 4.11 Credible activist 4.34 4.29 Paradox navigator 4.01 3.94 Culture and change champion 4.04 3.99 Human capital curator 4.02 3.97 Analytics designer and interpreter 4.01 3.98 Total rewards steward 3.90 3.84 Technology and social media 3.94 3.85 Compliance manager 4.34 4.29 Overall average 4.08 4.03 19  VTO, chapter 2, Determining HR Effectiveness Table 2.9 reports results by geography. Again, the pattern exists across regions of HR professionals being more effective as Credible Activists and Compliance Managers and less effective as Total Rewards Stewards and Technology and Social Media Integrators. Overall, HR professionals have higher scores in North America (4.18), Oceana (Australia and New Zealand) (4.11) and China (4.11) and lower overall scores in Japan (3.74) and Latin America (3.92). These results may reflect the maturation of the HR profession in each of the regions. We should add a personal observation that as we have visited multiple regions, we find competent and committed HR professionals in each of the regions. We also see emerging innovative HR practices from each region. For example, Japanese HR professionals have leading edge practices in engaging employees in decision making, gaining credibility for senior HR leaders, and making HR decisions based on rigorous data. Table 2.9 Competencies by region on the 9 domains* North Americ LATA Ocean Europ Mid- Asia a M a e Turkey East Africa China Japan India Other Strategic positione r 4.25 4.00 4.16 4.06 4.11 4.12 4.18 4.09 3.85 4.07 4.06 Credible activist 4.45 4.18 4.40 4.22 4.31 4.29 4.36 4.35 4.09 4.25 4.25 Paradox navigator 4.11 3.87 4.02 3.91 4.04 3.98 3.93 4.01 3.58 3.96 3.91 Culture and change champion 4.14 3.86 4.09 3.93 4.01 4.01 4.06 4.04 3.74 4.03 3.94 Human capital curator 4.09 3.84 4.08 3.89 4.00 4.01 3.98 4.12 3.71 3.99 3.92 Analytics designer and interpret er 4.09 3.94 4.01 3.90 4.10 3.98 3.98 4.04 3.67 4.01 3.92 Total rewards steward 3.98 3.66 3.90 3.72 3.97 3.84 3.78 4.00 3.63 3.89 3.83 20  VTO, chapter 2, Determining HR Effectiveness Technolo gy and social media 4.06 3.75 3.90 3.71 4.03 3.97 3.84 4.01 3.34 3.95 3.84 Complian ce manager 4.47 4.20 4.39 4.24 4.30 4.18 4.27 4.32 4.09 4.19 4.22 Overall Average 4.18 3.92 4.11 3.95 4.10 4.04 4.04 4.11 3.74 4.04 3.99 * Non-self rating 21  VTO, chapter 2, Determining HR Effectiveness Question 2: What competencies do HR professionals require to be personally effective (i.e., to be invited “to the table”)? As discussed above, we did not want to merely describe what HR competences exist and the extent to which they exist, but their impact on important outcomes. One outcome is the overall personal effectiveness of about 4,000 HR professionals. We assume that being seen as effective enables the HR professional to be “invited to the table” or given access to business discussions. We analyzed the relationship between the nine HR competency domains (independent variables) to determine which HR competencies helped HR professionals be seen as more effective and get invited to business discussions.vii Table 2.10 scales these findings to 100% to help illustrate the relative importance of each of the nine competencies for explaining individual effectiveness. These nine HR competency domains explain a remarkable 83% (overall R 2 ) of the individual HR effectiveness score. While all nine competence domains impact HR’s personal effectiveness, Table 2.10 also reports that credible activist was by far the most important competence in determining HR overall personal effectiveness (19.3%). These data suggest that HR professionals need to have a minimum competency in many domains, but their overall effectiveness comes mostly from their being a Credible Activist because they meet commitments, have political savvy, and take positions. In Chapter 6, we review the underlying factors of being a Credible Activist and offer specific actions for being more personally credible. It is also interesting that Total Rewards Steward and Technology and Media Integrator are negative scores, which will be discussed in Chapters 9 and 10. Table 2.10: Independent Impact of Each HR Competency on Overall Individual Effectiveness* Percentage of Overall Effectiveness Explained by each Competency Domain (adds up to 100%) Strategic Positioner 14.5 Credible Activist 19.3 Paradox Navigator 11.7 Culture and Change Champion 14.2 Human Capital Curator 13.1 Analytics Designer and Interpreter 8.2 Total Rewards Steward 6.2 Technology and Media Integrator 4.9 Compliance Manager 7.9 Percentage of effectiveness R2 explained by competencies 83.4 Note: In all tables, green scores are statistically significant at.05 level; red scores are negative. 22  VTO, chapter 2, Determining HR Effectiveness Question 3: When engaged “at the table” (in business discussions), what competencies do individual HR professionals bring that add value to key stakeholders? As noted in Chapter 1, stakeholders have increasing and differing expectations of businesses and HR. In this research round, we measured the extent to which the HR professionals are seen as delivering value to each of six stakeholders, 4 outside the organization (customer, investor, community, regulator) and 2 inside the organization (line manager and employee). We analyzed the relationship between each of the nine competency domains and the extent to which the individual HR professional creates value for each of the stakeholders. As in table 2.10 above, we scale the results to 100% to show the relative importance of each of the 9 HR competencies on each of these stakeholders. Table 2.11 shows that the competencies for HR professionals should vary depending on who they personally represent when engaged in business discussions. These results show that once invited to the business discussion (because of being a credible activist), an individual HR professional needs to thoughtfully determine who they represent in those discussions. While all the nine competence domains matter, if they represent employees or line managers (internal stakeholders), they must continue to be Credible Activists. But, if they represent customer and investor interests, they need to become Strategic Positioners. To represent regulators, they also need skills as a compliance manager. It is also interesting to see that HR competencies in Culture and Change Champion have relatively consistent and high impact for all stakeholders while competences in Technology and Social Media and Total Rewards have less impact on stakeholders. Traditionally, HR professionals are employee advocates, but today they also serve line managers to deliver strategy and they also serve the business by representing external customers, investors, and the community. The competencies that are required to add value on the inside are fundamentally different from those that are required to add value on the outside. Firms don’t exist to make managers and employees happy; they exist to make customers and shareholders happy. If HR wants to contribute to purpose of the firm, the Strategic Positioner (followed by Culture and Change Champion) competences are mandatory. Specific actions and tools for being a Strategic Positioner will be discussed in greater detail in Chapter 7. 23  VTO, chapter 2, Determining HR Effectiveness Table 2.11: Independent Impact of Each HR Competency on the Value Created for Stakeholders by the HR Participant (columns add to 100%) External Investors / Line Communities Regulators Employees Customers Owners Managers Strategic 19.2 20.5 16.1 18.1 13.6 12.9 Positioner Credible Activist 11.7 10.2 12.9 7.7 19 20.3 Paradox 11.3 11.1 11.9 9.6 12 11.3 Navigator Culture and Change 14.2 13.7 15.2 9.3 13.6 14.4 Champion Human Capital 12.5 13.1 12.5 9.2 14.9 12.2 Curator Analytics Designer and 10 11.4 7.6 12.8 8.4 6.8 Interpreter Total Rewards 7 6.4 10.2 8.8 5.3 8.3 Steward Technology and Media 7.4 6.6 6.5 6.2 4.6 5.3 Integrator Compliance 6.7 7.1 7.2 18.3 8.5 8.5 Manager Percent of R2 explained by competencies 82.4 78.1 83.4 72.3 83.6 82.7 The purpose of Table 2.11 is to show how much of the value created for different stakeholders can be explained by each competency domain when we account for the other competency domains at the same time. These results show the percentage of variance in stakeholder value creation explained by each of the competency domains (scaled to 100%). 24  VTO, chapter 2, Determining HR Effectiveness Question 4 When engaged “at the table” (in business discussions), how do HR professionals represent the HR department’s practices and policies to add value to key stakeholders? AND Question 5 What competencies do HR professionals require to drive business results? (Note that we are addressing questions 4 and 5 together) To further determine what an HR professional should be, know, and do, we examined which HR competencies in the HR department had the strongest relationship with the organization’s past and potential performance. As mentioned above, prior business performance was a six item scale (profitability, labor productivity, development of new products, customer satisfaction, attraction of new employees, regulatory compliance) and potential business performance was a scale determine the value created for different stakeholders Table 2.12 shows results for about 1200 units where individual HR competence scores are combined. This table reveals interesting patterns about how HR competencies create value created for key stakeholders. We recognize that this is a complicated table. For each stakeholder we show two columns. The first column under each stakeholder represents the value than an individual HR professional creates for the stakeholder and the second column under each stakeholder represents the value the HR department creates for that stakeholder. Thus, Table 2.12 allows us to see how different competencies have different stakeholder outcomes depending on the level of analysis (individual or department). First, the Paradox Navigator competency seems to have the strongest relationship with prior business performance (column 13) followed by Strategic Positioner and Technology and Media Integrator. This is a fascinating and new finding. Our explanation: given the dramatic changes in the four external forces reviewed in Chapter 1, organizations also have to change to survive. To create agile organizations requires navigating paradox which in turn encourages “and/also” thinking. For example, paradox means that organizations should be top down and bottom up; focused on customers outside and employees inside; being divergent and convergent; and encouraging freedom and control. Navigating these conflicts and tensions enables dialogue that encourages organization agility. Chapter 8 will review the ideas and tools for navigating paradox. Second, in most cases, the relative importance of the individual HR competencies on external stakeholders matches the relative importance of the averages for all HR professionals in an organization of how HR practices impact stakeholders (the even columns). (Note that the odd columns for the six stakeholders shows the impact of the individual HR professional’s competence on each stakeholder and are similar to Table 2.11.) These similar scores indicate that in most cases individual level competencies and department level competencies have similar effects on stakeholders. In these cases, individual HR professionals represent the HR practices of the HR department. Third, there are a few cases when the competencies of the individual HR professional has more impact on the stakeholders than the competencies of the HR department (e.g., Strategic Positioner impact on line manager; Credible Activist on regulator;