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Five Principles of Transformative HR

Strategic practice is achieved not through systems and processes but by transforming the mental models of leaders through evidence-based management, argues John Boudreau.

October 6, 2011
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An unprecedented number of tools are available to HR departments. Yet despite all that technological sophistication, there’s still a long way to go in transforming the company of today into the kind of high performing, highly adaptable and smart organization needed for the future.

The problem, as it turns out, isn’t a technological one, John Boudreau told the audience at the HR Tech conference, which took place from Oct. 3-5 in Las Vegas. It’s a human one.

“Strategic HR is achieved beyond the HR function, beyond HR technology,” Boudreau said in his opening keynote speech. “It’s achieved between the ears of the people who make decisions about human capital.”

Boudreau, professor and research director at the Center for Effective Organizations at the University of Southern California, said leaders need a new mental model for thinking about their organizations derived from evidence-based management.

Too often, short-sighted decisions about people investment create a long-term problem. In the analysis, short-term savings are minimal when compared to the long-term cost of failure to invest in people and HR systems.

In addition, many organizations accept what Boudreau called received wisdom about management practices, such as the idea that good leader and co-worker relationships lead to better outcomes. Boudreau said Amy Edmondson, a professor at Harvard, actually found the opposite. According to her work, teams where colleagues said they had good relationships with one another actually made 10 times more errors than less harmonious teams. Teams with “complainers” were better at raising issues and confronting them.

Based on his new book, Transformative HR, co-authored with Ravin Jesuthasan of Towers Watson, Boudreau proposed five principles for HR leaders to look closely and deeply at their management practices with the goal of creating transformative results in their organizations. They include:

Logic-driven analytics: Define talent metrics and scorecards to measure the impact of talent management investments on business performance. For example, consider retooling talent management using a supply chain model familiar to business leaders.

Optimization: Invest selectively in areas that can make the biggest difference, such as pivotal talent segments where a small targeted investment will create an outsized return.

“Do you know what instruments will attract pivotal talent? Do you know what investments will most affect performance?” Boudreau asked.

Segmentation: Take a cue from marketing: Create a differentiated approach to different talent segments within the workforce. Starbucks identified five employee segments — the social student (single, no kids), practical individualist (work is just a job to support other pursuits), transitional college graduate, community builder (inspired by Starbucks charitable work) and the career enthusiast (a lifelong Starbucks employee). Segmenting employees allows Starbucks HR leaders to adjust talent management tactics and processes to deliver the best results.

“This is not about defining talent by generations or stage of work life,” Boudreau said. “It’s using deep marketing tools to understand their employees.”

Risk leverage: Understand the spectrum of human capital risk. HR leaders need to develop a more sophisticated approach to risk management, Boudreau said.

“Even for all the attention given risk, it is still defined as stopping something bad from happening,” Boudreau said.

There are good risks and bad risks. Most HR systems tend to plan for the future based on existing talent gaps and business conditions and avoid the bad risks. To capitalize on good risks, such as emerging business opportunities, HR leaders need to be able to think through and plan for varying scenarios, Boudreau said.

Integration and synergy: Take an integrated view across talent management programs, functions and organizations. In some cases, individual HR programs are good, but the overall function is underperforming. Boudreau recommended HR leaders start with understanding what a business needs and redirect efforts to create integration rather than adding new programs.

“Less is more sometimes,” he said.

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