MANAGING HUMAN CAPITAL IN CHANGING TIMES Edward B. Yost, PhD, SPHR September 2015 Leadership and Coaching Executive Education Seminar BEM VINDO A OHIO UNIVERSITY Our Learning Objectives for Today 1. Develop an understanding of how to coach executives on the value of effectively managing human capital to improve individual and company performance 2. Understand how coaching as a human capital architecture construct impacts individual and company performance. Our Task Today – Three Levels of Analysis and Human Capital #1 MACRO: Sustainability, Strategy, and the Business Model – Competent managers understand how value is created #2 MESO: Talent Management, extracting value from human capital – Talent pools, pivotal positions, and differentiated human capital architecture that adds value #3 MICRO: Employee Engagement – Crafting and leading for individual performance Level 1 MACRO: Sustainability, Strategy, and the Business Model What is Strategic Success? Delivering high value results to significant stakeholders Financial Success Operational Success Customer Success Workforce (People) Success Strategic Success Hierarchy Industry Firm/Company Business Unit/Function Position Person Strategic Success Chain Strategy Execution Competitive Advantage Sustainability Defining the Business Strategy Strategy is: The central, integrated, externally oriented concept of how we will achieve our objectives. (Hambrick & Fredrickson) Sharing our Experiences What is your organization’s “STRATEGY”? Strategic Success Hierarchy Pharmaceuticals Firm/Business Business Unit/Function Position Person Strategic Success Hierarchy Pharmaceuticals Ach’e Business Unit/Function Position Person Challenges for Strategy Execution in Primary Pharmaceuticals 1. Develop New Products or New Markets for Existing Products 2. Control Costs Coaching: Human Capital Development WHAT IS HUMAN CAPITAL? Human Capital Defined The collective sum of the attributes, life experience, knowledge, inventiveness, energy, and enthusiasm that people choose to invest in their work. Weatherly 2003 Human Capital Defined The collective sum multiplicative product of the attributes, life experience, knowledge, inventiveness, energy, and enthusiasm that people choose to invest in their work. Weatherly 2003 with a little help from Ed Attributes of Human Capital Markets Various levels of value Appreciates and depreciates Markets are shifting from Closed (balance sheet talent, core) to Open System (crowd sourcing ie Uber and Lyft) Individually owned but collectively realized Human Capital: The Invisible Resource • It is vested in the individual human resources in the form of intellectual and social capital. • It is acquired, developed, utilized, and sustained through management practices (includes Coaching). • Being invisible it is harder to duplicate. Human Capital Value Value inherent in the form of individuals collectively interacting in the context of human capital architectures (HCA) Individuals are the repository for human capital HCA, process, culture and context extract the value of individuals Human Capital Has Value “People are our most valuable asset” PROVE IT! Must be demonstrated by management practices and actions that compose the Human Capital Architecture Sharing our Experiences What do organizations you know value? Expectativas de Todos que Possuem Interesse Direto ou Indireto na Organização • Acionistas(proprietários) desejam um retorno que consideram justo no investimento feito. • Clientes desejam um alto valor agregado ao produto ou serviço que consomem, e uma manutenção(garantia) que mantenha seu valor. • Empregados desejam uma relação de emprego que forneça compensações intrínsicas e extrínsicas em contrapartida às contribuiçoes que fazem. • Publico espera que a organização tenha responsabilidade social e se preocupe também com o bem estar dos cidadãos (cidadania corporative) Escolher as partes interessadas em cada par que a sua organização iria considerar como a mais importante em termos de tempo e outras atribuições de recursos. 1. Cliente ___ Proprietário(acionista) ____ 2. Empregado ___ Cliente ___ 3. Empregado ___ Publico ___ 4. Proprietário(Acionista) ___ Empregado___ 5. Cliente ___ Publico ___ 6. Proprietário(Acionista) ___ Publico ___ Instruções para o preenchimento das questões Pense em uma organização com a qual você está familiarizado. Talvez a organização que você trabalha agora. Para cada par de partes interessadas selecionar o que você sente é mais importante para a organização que você escolheu. Pense sobre os recursos dedicados ou as políticas que afetam o grupo de partes interessadas. Quando você completar você irá gravar o número de vezes que você selecionou o grupo de partes interessadas e escrever o número no espaço fornecido. Stakeholder Importance Vamos Compartilhar - Qual dos 4 stakeholders (clientes, proprietários, público e empregados) a sua organização seria mais provável em atender: Em primeiro lugar? Última? Importância das partes interessadas Stakeholder Pesquisa Em primeiro lugar proprietários clientes público empregados Última Knowing – Doing Gap How Big is the Gap? “Only 1 in 10 of the 88,000 respondents in our Global Workforce Study agreed that their organization’s senior leaders treat employees as vital corporate assets. A larger percentage reported that their leaders act as if employees don’t matter.” Gebauer ad Lowman, 2008 Level 2 #2 MESO: Talent Management, Extracting Value from Human Capital Developing Human Capital in Changing Times MANAGING TALENT FOR STRATEGIC SUCCESS The Challenge for Managers Human Capital IMPACTS the Bottom Line To create value through Human Capital requires a fundamental change in how it is recognized and managed in most organizations. Human Capital - Challenges and Responsiveness • Managing Human Capital has always been difficult but even more so going forward • Deloitte: Global Human Capital Trends 2014 – Three Key Areas of Strategic Focus – Lead and Develop – Attract and Engage – Transform and Reinvent Challenge #1 - Lead and Develop “ The need to broaden, deepen, and accelerate leadership development at all levels; build global workforce capabilities; re-energize corporate learning by putting employees in charge, and fix performance management.” Deloitte 2014 Challenge #2 - Attract and Engage “ The need to develop innovative ways to attract, source, recruit, and access talent; drive passion and engagement in the workforce; use diversity and inclusion as a business strategy; and find ways to help the overwhelmed employee deal with the flood of information and distractions in the workplace” Deloitte 2014 Challenge #3 Transform and Reinvent “ The need to create a global HR platform that is robust and flexible enough to adapt to local needs; reskill HR teams; take advantage of cloud based HR technology; and implement HR data analytics to achieve business goals.” Deloitte 2014 Talent Management • Talentship requires a redefinition of the traditional service role of HR managers in organizations. • This involves a managerial focus on the process of "talent segmentation" and the need to focus managerial attention on "pivotal talent pools". Strategic Success Hierarchy Pharmaceuticals Ach’e Research/Development Position Person Primary Pharmaceutical Industry Focus on a Talent Pool Enables the Value Proposition for Stakeholders Strategy Execution Production Marketing Research & Development Human Resources Critical Outcomes for Strategy Execution Research & Development Group in Primary Pharmaceuticals 1. New Product Applications 2. Reduce Time to Market Talent Segmentation • Talent segmentation is as vital to strategic success as customer segmentation. • Talent segmentation involves identifying pivotal talent pools where human capital makes the biggest difference to strategy execution Sharing our Experiences How do organizations you know use segmentation? Customer Segmentation 1. How do organization segment customers? 2. What are these customer segments? 3. How are they treated differently? Talent Segmentation 1. Does your organization identify specific talent pools? 2. What are these talent pools? 3. How are the management practices (HCA) different for these talent pools? Drilling Down in Human Capital Pivotal Talent Pools Pivotal Positions Determine the Pivotal Positions to Deliver Strategy Execution Talent PoolCast Members at Disney Sharing our Experiences Which position, Characters or Sweepers are most pivotal? Finding the Pivotal Position Yield Curve - understanding where differences in quality or quantity of talent and organization have the greatest impact on strategy execution (steepness, elasticity, D, slope) Yield Curves = Pivotal Positions Being The Happiest Place on Earth! Providing a Delightful Guest Experience What is a Pivotal Position? • Not necessarily the highest paid/ranked position • Not necessarily most critical • Not necessarily the most common/number • Not necessarily the most visible • Not necessarily the most obvious • Not ever a person Pivotal Positions in the R & D Talent Pool of Primary Pharmaceuticals • What is the Pivotal Position for executing strategy? • Provides the most significant (relative to others in the pivotal talent pool – R&D) improvement in strategy execution • Research Scientist New Products / Applications Strategic Success Hierarchy Pharmaceuticals Ach’e Research/Development Research Scientist Person Yield Curve Primary Pharmaceuticals Best Sales Rep Worst Sales Rep Strategy Execution Best RS Worst RS Investment in Human Capital Yield Curve Primary Pharmaceuticals Best Sales Rep Strategy Execution Worst Sales Rep Best RS 20% Worst RS Investment in Human Capital Yield Curve Primary Pharmaceuticals Best Sales Rep Strategy Execution Worst Sales Rep Best RS 20% Worst RS Investment in Human Capital Same Industry - Different Business Model Generic Primary • • • • High Margins Sell to Physicians Time to Market New Applications • • • • Low Margins Sell in Bulk Low Cost Manage Distribution Channels Yield Curve Generic Pharmaceuticals Best RS Strategy Execution Worst RS Best Sales Rep Worst Sales Rep 20% Investment in Human Capital Level 3 #3 MICRO: Individual Differentiation and Employee Engagement There are only three measurements that tell you nearly everything you need to know about your organization’s overall performance: 1. Employee engagement 2. Customer satisfaction 3. and Cash flow Jack Welch, Business Week 2006 AND - Ed says order is important The NEW Normal “Employees are our most important asset INVESTOR!” Requires an Employee Value Proposition Managing Human Capital the Person While the human capital architecture is designed to support the highest level of performance for pivotal positions it must ultimately be differentiated at the level of the person Strategic Success Hierarchy Pharmaceuticals Ach’e Research/Development Research Scientist Richard or Mary Shifting Employment Relationship • The employer/employee relationship is shifting to a contractual relationship that is more a partnership than economic exchange. • Larger spans of control, fewer employees delivering more output. • Decline in traditional communications increase in cyber communications. Employee Engagement: Examples in Practice • “Engagement describes how an employee thinks and feels about, and acts toward his or her job, the work experience and the company.” Intuit • “Employee engagement is the involvement with and enthusiasm for work.” Gallup Employee Engagement: Examples in Practice • “Engagement is the extent of employees’ commitment, work effort, and desire to stay in an organization.” Caterpillar • “Engagement: To compete today, companies need to win over the MINDS (rational commitment) and the HEARTS (emotional commitment) of employees in ways that lead to extraordinary effort.” Dell Three Levels of Engagement 1. Cognitive Engagement – Employee beliefs about the company the leaders and the culture 2. Emotional Engagement – Employee affect for the organization, leaders, colleagues 3. Behavioral Engagement – the value added component of effort exerted above required minimum. Three Key Behaviors of Engagement 1. Say: Employees speak positively about the Company to coworkers, potential coworkers, and current and future customers. 2. Stay: Employees strongly desire to continue working for the Company. 3. Serve: Employees exert extra effort and are dedicated to doing the best job to contribute to business success. Impacts of Employee Engagement • The extent to which employees are committed to something or someone in the organization, how hard they work and how long they stay as a result of that commitment. • Employees with high level of engagement are 87% less likely to leave and 20% more productive. Levels of Employee Engagement • Engaged Employees (28%) – work with passion and exuberance, feel a profound connection to the organization can’t wait to contribute more – OCB organizational citizenship behaviors Levels of Employee Engagement • Not Engaged (53%) – “checked out” of the organization, effort put forth is minimal and barely acceptable, lack passion and do not identify with the organization – often the majority of employees Levels of Employee Engagement • Actively Disengaged (19%) – not just disconnect but unhappy, the behaviors are counterproductive and at times destructive, degenerates the culture and based on cognitive dissonance Fosters TIMJ and DGMGE Global Survey Results Only 1 in 5 Workers are delivering their full potential! The other 79%: 41% are “enrolled” - capable and ready but not inspired 30% are disenchanted 8% are disengaged Graber & Lowman, 2008 What is your organization's ratio? • In world-class organizations, the ratio of engaged to actively disengaged employees is 9.57 engaged to 1 actively disengaged. • In average organizations, the ratio of engaged to actively disengaged employees is 1.83 to 1. A Model of Employee Engagement Organization Culture/Purpose Relationships Work Activities Quality of Work Life Say Employee Engagement Career Opportunity Organization Leadership Stay Serve Total Compensation Model used consistently over time to assess and track engagement Um Modelo de Obrigação d0 Funcionário Organização Cultura / Objetivo Relacionamentos Atividades de Trabalho Qualidade de vida no trabalho Diz Obrigação do Funcionário Oportunidade de carreira Organização liderança Fica Serve Total da remuneração Modelo usado de forma consistente ao longo do tempo para avaliar e acompanhar o engajamento Sharing our Experiences Is Your Job Engaging? Take the Gallup survey Engagement Survey Respond Yes or No 1. 2. 3. 4. 5. Do you know what is expected of you at work? At work do you have the opportunity to do what you do best every day? In the past month have you received recognition or praise for doing good work? Does your supervisor or someone in authority seem to care about you as a person? At work do your opinions seem to count? 1. 2. 3. 4. 5. Voce sabe o que é esperado de voce no trabalho? No trabalho lhe é dada a oportunidade de fazer o seu melhor todo dia? No mês passado você recebeu reconhecimento ou elogios por fazer um bom trabalho? O seu supervisor, ou alguém a quem se reporta, parece se importar com voce como pessoa? No trabalho as suas opiniões parecem contar? How Did We Do? Total Number Engagement at This Score score Level of Engagement 5 4 3 2 1 0 Engaged Engaged Not Engaged Not Engaged Actively Disengaged Actively Disengaged 3 Most Important for Executive? For Line? 1. Organization Culture/Purpose 2. Relationships 3. Work Activities 4. Quality of Work Life Say Employee Engagement 5. Career Opportunity 6. Organization Leadership Stay Serve 7. Total Compensation Executive or Line Employee Differentiators for Engagement Rated in the top 3 items ITEM 1 Organization Culture 2 Relationships 3 Work Activities 4 Quality Work Life 5 Career Opportunity 6 Organizational Leadership 7 Total Compensation Executive Line 3 Most Important for Balance Sheet? For Open? 1. Organization Culture/Purpose 2. Relationships 3. Work Activities 4. Quality of Work Life Say Employee Engagement 5. Career Opportunity 6. Organization Leadership Stay Serve 7. Total Compensation Balance Sheet or Open Employment Differentiators for Engagement Rated in the top 3 items ITEM 1 Organization Culture 2 Relationships 3 Work Activities 4 Quality Work Life 5 Career Opportunity 6 Organizational Leadership 7 Total Compensation Balance Sheet Open “BAD” Bosses Impact Engagement • 40% of workers in the business world think they work for bad bosses. • 39% said their managers failed to keep promises. • 37% said their bosses did not give them the credit they deserved. • 31% indicated their supervisor gave them "the silent treatment." “BAD” Bosses Impact Engagement • 27 % reported negative comments from their management. • 24% claimed their bosses invaded their privacy. • 23% stated that their supervisor blamed them or other workers to cover up personal mistakes. A Matter of RESPECT To have sustained engagement, there has to be an environment of respect Respect impacts our emotional state and behaviors because of biological reactions Menshanko, 2012 Chemistry of Engagement Respect Disrespect • Positive and respectful environments • Serotonin, Oxytocin and Dopamine • Satisfaction and willingness to perform • Domineering, threatening, intimidating • Cortisol and Adrenalin • Fight or flight responses translated into workplace behaviors Employee Engagement – 3 Challenges for Managers 1. Recognize the significance of the employment relationship. 2. Understand and adjust to the individual in their employee life cycle 3. Design & implement systems to fully engage the human capital (individuals) in the organization. Isn’t it COMMON SENSE? Managers know that they should create functional Human Capital Architectures but They have elaborate excuses why they can’t Its Only Common Sense! Half will never see the connection between Human Capital and Profits Half will embrace the potential of the connection between Human Capital and Profit Its Only Common Sense! Half will engage minimal change Half will never see the connection between Human Capital and Profits Half will engage comprehensive change Its Only Common Sense! Half will engage minimal change Half will never see the connection between Human Capital and Profits Half won’t stay the course Half will succeed J It is Difficult to Imitate Only about 1 in 8 even come close! Implementation of a viable human capital architecture requires deep change and a commitment to “stay the course”. It is often slow and paybacks are a long time coming Most of the requirements defy “Conventional Wisdom” Just Do It? Managers to succeed in the new normal must rely on a human capital architecture that defies traditional practices and conventional wisdom Obrigado pela sua atenção amável