Reengineering the Corporation

A Manifesto for Business Revolution
(13500)

Reengineering means to disregard all the assumptions and traditions of the way business has always been done, and instead develop a new, process-centered business organization that achieves a quantum leap forward in performance.

To achieve reengineering success, a fresh perspective and approach is required. A clean sheet of paper is taken and, given what is currently known about customers and their preferences, a new organization is developed which will optimize the process of creating satisfied customers. Reengineering is the process by which the organization that exists today is retired and the optimal version of the new organization is constructed.

Reengineering is the opportunity to develop the rules by which business in the future will be conducted rather than being forced to operate by the rules imposed by someone else. As such, reengineering underpins every attempt to seize and maintain a true competitive advantage.

Business reengineering isn’t about fixing anything. Business reengineering means starting all over, starting from scratch.

–Michael Hammer & James Champy

A Checklist for Success

(13604)

Workforce Scorecard

1.Workforce mind-set & culture
2.Workforce competencies
3.Leadership & workforce behavior
4.Workforce success

Organizations that have successfully adopted the workforce scorecard have passed the three challenges of development:

Challenge #1—The perspective challenges

The CEO expects the firm’s senior executives, line managers and HR leaders to be able to articulate and explain the influence of workforce success on the firm’s ability to successfully execute its strategy.

The CEO designates specific measures of workforce success and then holds senior managers accountable for these performance measures.

The CEO and the senior executives will understand the importantance of a differentiated workforce strategy and will be able to explain how it is implemented and how the results will be measured.

The firm’s senior managers and line managers will form a partnership with HR leaders. Both will work together to attract, hire, develop and then retain top talent that is consistent with the firm’s strategy.

Senior executives, line managers and HR leaders will have shared accountability for workforce success and strategic performance drivers.

HR leaders will focus more on leading indicators of future success and less on lagging indicators of past business performance.

Challenge #2—The metrics challenges

Senior managers will focus on just a small number of key workforce metrics, and everyone in the entire organization will understand why they are important to track.

These metrics will be measured and then managed in real time rather than on a delayed basis.

The firm’s workforce measures will be personalized and based on its own unique requirements rather than external benchmarks like best practices.

The firm’s metrics will be constantly evolving—so that the workforce measures managers are focusing on today will be very much different from those were in common use five years ago.

The value of each workforce metric will be determined by the actual relationship between workforce success and business outcomes rather than the expected relationship.

The organization’s metrics will reflect whether or not differential investments are made on the firm’s “A” players in “A” positions or not.

Challenge #3—The execution challenges

HR will spend less time dealing with employee performance problems and devote more time and energy to distinguishing between potential “A” and “C” players at the point of hire.

HR will start measuring its success using the same metrics as the company as a whole rather than on the strength of HR initiatives.

HR will work continuously to create a shared mind-set around execution of the strategy rather than taking this for granted.

HR will put in place a staffing structure which will enable it to balance being a strategic partner and delivering HR services efficiently.

The firm’s strategic workforce measures will be owned and coordinated by a group of people rather than being assigned in an ad-hoc fashion.

Senior executives, line managers and HR leaders will consider the results of the measurement system are well worth the effort of implementation.

As previously noted, workforce success is both the most important and most underutilized asset in many businesses. As a consequence, most firms have the potential to considerably improve the effectiveness of their strategy execution and subsequently firm performance, and the management lever offering the greatest return is improved workforce success. This is the good news. The bad news is there is very little low-hanging fruit. If it were easy to diagnose and implement these changes, they would already have happened in most organizations.

–Mark Huselid, Brian Becker & Richard Beatty

The workforce scorecard is a crucial lever in the strategy execution process. Workforce success is often the key performance driver, directly or indirectly, for all other elements of strategic success. Unfortunately, senior executives usually have very limited tools for measuring workforce success or holding line managers accountable for workforce performance. In fact, many of the same firms that have highly detailed information about their inventories and physical plant have almost no information about their own workforces—presumably one of the key drivers of their strategic success. The workforce scorecard is designed to solve that problem.

–Mark Huselid, Brian Becker & Richard Beatty

We believe that many firms approach workforce management from the wrong perspective, and their financial performance suffers as a result. Instead of focusing on how to execute strategy through the performance of the workforce, in many firms the first priority is cost control, and the focus often begins with the HR function. In many firms, HR operating expenses. The dollars involved in a firm’s total workforce expenditures are considerably greater, typically accounting for 60 to 70 percent of a firm’s operating costs. The strategic benefits of improved workforce performance represents a significant opportunity for improvement in most firms. Simply think of what it would mean to your firm’s overall performance if you could improve the extent to which the workforce had the skills, motivation and focus necessary to execute your strategy by 25 percent or more. The workforce scorecard is intended to provide a road map for that journey.

–Mark Huselid, Brian Becker & Richard Beatty

The Metrics Challenge

(13602)

Pure and simple a workforce scorecard measures how successful the firm’s workforce has been in creating value using the company’s designated commercial strategy. It has to align the workforce’s competencies, behavior, mind-set and culture with its performance. A practical and worthwhile workforce scorecard will flow directly from a firm’s strategy rather than being imposed artificially from the outside. Workforce measures are always from the outside-in customer perspective and are never built up from the inside-out using an HR perspective.

The key question is: “Have we correctly identified and then correlated the best measures of workforce success—specifically workforce competencies, behavior, mind-set and culture?

There are quite literally an overwhelming number o workforce elements that can be measured.

For a workforce scorecard to be of any practical value, the metrics which are gathered and than evaluated must meet four different criteria:

1.The scorecard must be practical: it must have data that can actually be measured and collected rather than being guessed at.

2.The scorecard must be easily understood through out the firm: so that employees can understand what’s happening and change their individual actions.

3.The scorecard must be actionable: that is, managers must be able to use the scorecard to improve key business processes.

4.The scorecard must be grounded research and then cascaded: in such a way that success at the lower levels flows on to corresponding success at higher levels.

Conceptually, an effective workforce scorecard will have four key elements, each of which will provide the answer to a key question of particular relevance as shown below:

The four key elements of a workforce scorecard

1.Workforce mind-set and culture
Does the workforce understand and embrace the strategy and do we have the culture we need for execution?

2.Workforce competencies
Does the workforce—especially those in the key “A” positions—have the skills required to execute strategy?

3.Leadership and workforce behavior
Are both the leadership team and the workforce behaving in ways that will consistently lead to the achievement of strategic objectives? Are we identifying and nurturing our “A” players?

4.Workforce success
Has the workforce accomplished the business’s key strategic objectives?

The four key elements of the workforce scorecard are:

1.Workforce mind-set and culture: which are important because they influence how everyone behaves. To be able to execute the firm’s preferred strategy, everyone must understand what they are expected to do. You need measures here that show how well everyone understands the firm’s business model and the role of the workforce.

2.Workforce competencies: which shows what people are capable of doing. Competencies without motivation will get you nowhere. Similarly, if your people re highly motivated but lack the basic competencies required, nothing much will happen either. You need both the right competencies and the right motivation to succeed and ideally excel.

3.Leadership and workforce behavior: which measures whether or not workforce is behaving in a way which is consistent with achieving the key objectives. Managers especially have to be clear about what the workforce should be doing or there will be significant negative impact on results actually achieved.

4.Workforce success: which focuses specifically on whether or not the workforce have executed the firm’s strategy. In practical terms, your biggest and most profitable customers will determine whether or not your workforce is a success. If you deliver on the factors they value the most highly, you’re executed your strategy adequately. Fail to deliver in those key areas and nothing else will compensate.

Note that to systematically win in the marketplace, a firm must achieve excellence in all four areas. Doing well in just one or two isn’t enough. Instead, firms have to have the right culture and mind-set, develop and keep fresh the appropriate competencies, elicit the most productive behavior form those in “A” positions and achieve the right business outcomes. In addition, there is a set order in this process. Business leaders can’t manage results directly, but instead need to identify and then nurture the drivers of the firm’s success.

Note also that there are a great many metrics which can be incorporated into a workforce scorecard. The trick, however, is to select metrics which are useful from the perspective of your firm’s specific business strategy.

Sample Workforce Scorecard

1.Workforce mind-set and culture

% of the workforce that understand the firm’s business model and underlying commercial strategy

% of the workforce that have demonstrated their commitment to the firm’s strategy

% of the workforce that currently have the skills required to execute the strategy

of the workforce currently undergoing training in order to gain the requisite skill sets

of the workforce that feels the firm’s culture supports strategy execution

The degree of consistency and clarity which is associated with messages provided by top management and HR

The extent to which the firm’s culture supports “A” players and makes it possible for superior performance to be delivered by talented individuals

The extent to which all necessary business information (including real-time performance data) is made available to the workforce in order to facilitate better decision making and performance tracking

2.Workforce competencies

Total % of workforce who are recognized as “A” players

%of workforce who are currently “B” players with the potential to grow and evolve into “A” players

Average % of total remuneration packages that are performance based for “A” players

% of “A” players who have the opportunity to earn share options

% of “A” players who earned their bonuses in the least financial year

% of the overall training and development budget spent on “A” players

Average ranking for executives on the standardized skills and proficiency test

Determination of how many qualified people would be eligible to fill any executive openings that arise

% exit rate for “A”, “B” and “C” players

Extent to which people have the opportunity to be exposed to assignments that will enhance skills

3.Leadership and workforce behavior

Average score on a consistently applied leadership survey

% of executives who are actively engaged in knowledge sharing and training programs

Changes in the team performance index that measures the effectiveness of teams

Estimates of how effective the firm is in retaining its best “A” players

Estimated exit rate of “C” players

Average changes in performance appraisal ratings over an extended period of time

% of employees who have met goals for customer satisfaction

% of employees who have skills and experience outside those used in their current job functions

% of improvement in key indicators of customer satisfaction

Number of requests submitted for transfers

4.Workforce success

Average market share period-to-period

Price premium achieved versus the competition

Customer complaints as a% of sales

Customer repurchase intent

Number of new products offered this financial period unlike anything sold by the competition

% of customers who have indicated they are satisfied with our products and services

% of new shareholders added this financial period

% of orders which are shipped on time

% of orders which are returned

% of revenues derived from new as opposed to existing customers

Estimated brand awareness

% reduction in new product development time from conception to first order shipped

Share of wallet achieved for “A” customers

Measurement of the workforce scorecard alone won’t generate improved business performance. Instead, there need to be close linkages between the workforce scorecard and the HR scorecard. In other words, the HR department needs to be actively involved in setting targets for improvement and in developing and delivering initiatives that will enhance performance. HR does this in practice by using the workforce scorecard as the basis and foundation for its own HR scorecard.

To achieve results, what gets measured on the workforce scorecard needs to be closely coordinated with specific HR measures and initiatives that will help ensure the achievement of the firm’s preferred commercial strategy. HR people are responsible for the development of the specific HR practices but implementation is shared evenly between HR and line managers. Unless both are closely involved, nothing worthwhile will happen.

The HR management policies and practices that a firm adopts represents one of the key levers it can use to execute its strategy and to achieve its desired financial results. Our evidence shows the firms that survive and prosper over the long run develop internally consistent systems of HR policies and practices that are specifically designed to execute strategy. Firms don’t win by blindly adopting a series of ‘best practices’ taken from other companies. Lower-performing firms tend to use more generic HR management practices, and they tend to use the same HR practice for all employees throughout the business.

–Mark Huselid, Brian Becker & Richard Beatty

For alignment to work, the HR practices need to be strategically redundant. That is, it is not enough for the recruiting or the selection or the compensation practices to be aligned with the desired workforce outcomes—all of the HR programs and initiatives need to work together to shape the desired employee behaviors. The HR practices, as well as the message to the workforce, need to be internally consistent and supportive of the desired outcomes.

–Mark Huselid, Brian Becker & Richard Beatty

The number of different elements of the workforce that could potentially be measured in any organization is overwhelming. There are literally hundreds of different metrics that can be collected—some useful, some irrelevant, and some actually counterproductive to effective strategy execution. To identify the ‘critical few’ measures that really matter, managers need two frameworks—the first to help them understand the categories of workforce measures that really make a difference in the execution of strategy and a second framework to help them understand the process through which these measures are developed and implemented throughout the business. Such frameworks are important, because without really understanding what it is we are measuring—without developing models that show ‘what causes what’ throughout the business—we’ll end up with a series of unrelated metrics, not a holistic system of metrics designed to help execute strategy. A workforce scorecard provides the management team with a tool to describe the process of strategy execution.

–Mark Huselid, Brian Becker & Richard Beatty

The 5 elements of a sample HR scorecard

The Workforce Scorecard

Managing Human Capital to Execute Strategy
(13600)

Corporate success today is fueled more and more by the performance of intangible assets. The most important of these intangibles is usually a firm’s workforce. Many times, the workforce is a businesses’s largest under performing asset and the area where the greatest gains in competitive performance can be generated.

To maximize the contribution of its workforce, a firm must meet three challenges:

1.The Perspective Challenge—To view the workforce in terms of potential contribution rather than as a cost to be minimized.
2.The Metrics Challenge—To replace conventional benchmarking metrics with measures that will differentiate improvement.
3.The Execution Challenge—To hold both line managers and HR staff jointly responsible for workforce quality and performance.

In practical terms, this means companies don’t just need one strategy but actually require three strategies and three corresponding scorecards to measure the success of each of those strategies:

Strategy for the business

Balanced Scorecard
1. Operational success
2. Financial success
3. Customer success

Strategy for the workforce

Workforce Scorecard
1. Workforce success
2. Competencies
3. Behavior
4. Mind-set and culture

Strategy for the HR function

HR Scorecard
1. HR practices
2. HR systems
3. HR staff competencies

Of all the factors affecting firm performance that CEOs and senior managers can directly influence, workforce success—or the extent to which a firm can generate a work force with the culture, mindset competencies, and strategic behaviors needed to execute its strategy—is both the most important and most underperforming asset in most businesses. In an economic environment marked by hyper competition, anything less than optimal workforce success is a direct threat to the very survival of the firm.

–Mark Huselid, Brian Becker and Richard Beatty

Give something back to the community. Return the favors

(14709)

Both companies and individuals are under obligation to put back into the community more than they take out. Don’t wait until you’re a billionaire. Start giving something back right now, even if it’s just your time.

Nobody is a totally self-made man or woman. Along our way, we all receive help from others and have an opportunity to take advantage of some lucky breaks. The only genuine way you can show appreciation for the help you’ve received along the way is by sharing your good fortune with others.

For example, Jon Huntsman’s family couldn’t afford to send him to college. During his senior year at high school, Harold Zellerbach, the head of the second-largest paper company in the United States, came to his school seeking a scholar to be the recipient of the Zellerbach family scholarship to the Wharton School of Business at the University of Pennsylvania. Jon Huntsman received a scholarship to Wharton that turned out to be an experience that launched his career and set him on the path to becoming a self-made billionaire. When he went to pay the Zellerbach family back later in life, they refused to accept any money, and simply said pass it on to others.

So what are the keys to reawakening and renewing value-based behavior in the marketplace of today? There are many, but four simple suggestions are:

1. Whenever you or your company are about to do something, pause and ask yourself: “Is this right?” and “Would I like to be treated this way?

2. Take your values to with you. Don’t think there needs be any difference between what you’d do at home and how you behave at work. In particular, there should be no tension between what you do make a profit and your personal sense of decency and fairness.

3. Consider yourself to be your brother’s keeper when it comes to setting an example of ethical behavior.

4. Make the foundation of your life your family, faith, fortitude, fairness fidelity, friendship and philanthropy.

Monetarily, the most satisfying moments of my life have not been the excitement of closing a great deal or the reaping of handsome profits from it. They have been when I was able to help others in need–especially ‘the least of these, thy brethren,’ There’s no denying I am a deal junkie, but I also have developed an addiction for giving. The more one gives, the better one feels; and the better one feels about it, the easier it becomes to give. It is a wonderfully warm, slippery slope. If you require a less altruistic reason to give, try this: Philanthropy is plain good business. It energizes a company.

–Jon Huntsman

Many wealthy people are under the erroneous belief that the true measure of financial success is not what you make but what you keep. They spend lifetimes working tax dodges and accounting schemes to pass along their good fortune to their children. No question about it, one gauge of success is how much one acquires. The more meaningful measurement, though, is how much one gives away. My message is not just for the fraternity of the rich. Nobody gets off the hook. If just the rich give, little changes.

–Jon Huntsman

True giving is doing something for somebody who can never repay you.

–Jon Huntsman

Forget about who finishes first and who finishes last. Decent, honorable people finish races–and their lives–in grand style and with respect.

–Jon Huntsman

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