A practical way to help your HR managers become better strategic partners to their business

HR managers cannot be more strategic than the business leaders they serve.

But busy with a million practical tasks and overwhelmed by hyper-bureaucratic processes, they can be less, and very much so.

A much more important reason, however, is the need for a language and a framework that can link the company's HR strategy and the local market’s bottom line results.

Organizations as living, capable beings

One of the reasons we HR resorted to technology was that it was easier to sell to the business the idea that people and organization are a necessary cost, on which we offered a feeling of control, rather than the idea that people and organization are strategic investments as much as product and brand.

As long as organizations are still envisioned through org charts, which is nothing else than a production-line floor plan with people instead of the machines, and coherently people are represented by job descriptions and RACI, we couldn’t do otherwise.

Abandoning the classic Tayloristic, production-line interpretation of organizations and acknowledging that achieving results is no longer the expected outcome of a well designed blueprint, allow to realise that instead performance is an emerging phenomenon.

An emerging phenomenon is something that happens not out of a linear chain of events (if…, then…) but out of the inter-relations and inter-actions of different, individual components.

It is easier to conceive that, as human beings, our own abilities to achieve something (prepare lunch, having sex, conduct a meeting) are the result of very different elements, internal (mental and physical) and external (contextual and environmental). For the same reason, organizations are complex entities way more similar to a person than to a machine.

To explain a person, we don’t list her organs and fluids and draw a flow chart of the processes that allow her body to stay alive. To explain a person we describe what she does, what she is capable of doing, and whether she is good at doing it. He is a father, she is a teacher, you are my best friend, they are top managers in a multinational company.

In the same way organizations can be, or not, capable of engaging consumer, managing customers, delivering orders on time, building brands. We can explain organizations based on their capabilities.

The opportunity for HR

Explaining organizations through their capabilities offers to HR a language and a framework that can link the local market’s business plan to the company's HR strategy.

The common problem for a local HR manager is that the market company’s business plan and the company’s HR strategy tend to exist on different conceptual plans and thus are difficult to reconcile.

A market business plan typically unfolds from strategic objectives into strategic tasks, investments and costs and expected top and bottom line results. An HR strategy focuses on attracting, engaging and developing people and building organizations? to support the business strategy. Although the two strategies are namely converging, the second serving the first, they are not designed to have a shared step with an exchange of inputs and outputs.

Identifying the capabilities required to achieve the strategic tasks, which translates into a structured plan to make the market company capable to achieve those objectives, is that missing shared step. It introduces in the business planning process a unified view of how the separate functional agendas converge to achieve the market business objectives in terms of the necessary talent, competencies, organization and infrastructure.

Traditionally these strategic elements are part of each separate functional strategy, creating a competition among functions for the resources available and inducing the classic silos mindset.

By introducing and leading this unified view, the HR manager can

• Acquire a seat at the market business planning table
• Support the market General Manager in spotting synergies, ranking priorities, tracking the readiness of the organization and evaluating the need for leadership and succession planning
• Contain the unhealthy competition for resources and the silos mindset among local functions? ?

The four elements of a capability

There are a number of capabilities models available on the market and different industries and different stages of evolution of the business might require to analyse some aspects at greater detail.

In general I suggest you to keep things simple and to focus on talent, competencies, organization and infrastructure.

1. Talent

The manpower and the right profiles, with the right background, attitude and potential.

Obvious as it sounds, for an organization to be able to do anything it requires first the headcount to execute it. The simple lack of manpower can be a very good reason why things don’t get done.

At the same time, talent means people with the “right talents”, those personal characteristics, innate or acquired, that make a person more effective than another, to the point of making the difference between good and great.

For example, say your business goal is to develop the luxury segment and you need your organization to become able to engage, recruit and manage High Net Worth Individuals (HNWI), you need the people to do it and these people need to have a very specific background, experience and attitude to understand, support and sell a luxury brand.

2. Competencies

The ability, knowledge and skills required to perform a capability to a certain level of proficiency.

The expire date of competencies nowadays is shorter than yoghurt, so this is an element you want to keep a constant eye on. You might have a team in place, but in need for re-skilling. You might have been able to perform this capability at a level of proficiency that until today was acceptable thanks to some generalist roles, but a higher level of delivery now requires a different level of competence.

In the HNWI example, so far you have been managing these clients in some way through a collaboration between your account managers and your distributor, but to develop these accounts further you want to invest on a new hire (talent) who can bring in specific competencies and experience and develop new practices, transferring these competences to the organization.

3. Organization

The roles and responsibilities, the workflow, the processes, the KPIs, how resources are deployed and organised to activate the capability. ? ?

Thinking in terms of its capabilities when designing the organisation helps to keep the design focused on the purpose of the organisational unit and to put the functional agendas at the service of the capability. The complexities and negotiations of inter-functional collaboration in this framework become less necessary because all parties are contributing to a clear and shared outcome, measured in a single way that is meaningful for all parties.

In the HNWI example, consumer marketing will focus on building the brand experience, customer marketing on the activations and sales on closing a sale, each measuring their success in different and separate ways. If instead the aim is to make the organization capable to engage, recruit and manage these clients, success looks only like one.

4. Infrastructure

The tools, systems, intelligence, the investments in CAPEX that are necessary to activate and elevate the delivery of the capability.

Another advantage of thinking in terms of the capabilities a market company needs to acquire to pursue a new strategic objective is, it provides a very pragmatic framework, built around the market’s business priorities and not only around a ROI that is often difficult to calculate, in order to evaluate and choose among different investment options.

In the same way, it allows to evaluate different investment options to build the same capability, simply aiming at different level of proficiency.

Last, it allows to allocate the investment cost to one or multiple capabilities, providing a framework that allows to appreciate the full cost picture of achieving a strategic objective.

In the HNWI example, thinking in terms of “making the organization capable of engaging and recruiting these clients” rather that “having someone in the organization being able to do it” can make a big difference in terms of investment decisions. Our Managing Director, thanks to his experience, knew that to distill this capability involving the whole organization. We invested in rebuilding completely the best corner of the office into a luxury corner, a proper environment where these clients could be invited in and these luxury brands could be discussed, and by changing the very environment we were all working in it pushed everyone to think in terms of the new luxury paradigms the capability required.

How you can introduce capability planning in your markets

Capability planning follows the same timeframe as the different business planning processes.

In 3-5 years strategic planning, it translates the strategic tasks into the new or enhanced capabilities needed to achieve these long term goals.

Rather than rush our recruitment and talent development functions only after the HC have been budgeted at the last moment, the development of each of these new capabilities require to formulate and execute a similar plan to have the right amount and kind of talent in place.

In the same way, knowing what are the competencies the organization will need to have in place in 3-5 years time allows time to actually develop those competencies. Knowing their purpose in advance, resources can be deployed gradually and investments managed in time to maximise their ROI.

In annual business planning, it allows to review the readiness of the different components of each capabilities and identify the areas of intervention and fine tuning during the year.

While HR can take the lead to coordinate what so becomes an important part of the business planning process, this is not an HR exercise but a business planning one, involving the market leadership team and including each head of function.

The advantages in terms of visibility and tracking of the market GMs need to be clarified to get their buy-in. Since this process disrupts how resources are allocated among the functions, expects some resistance from those member of the leadership team who previously were successful in bringing their agenda forward.? ?

The capability planning process

1. Translate the business objectives into the required capabilities

The strategic capability planning process starts when the strategic objectives of the market have been identified, asking and answering for each objective the question “what our organization will need to be able to do in 3-5 years time to deliver the strategic tasks we are planning to execute?”

As a simplified example, the strategic objective “trading up the sales mix increasing revenues from the luxury segment from 5% to 20% in 3 years” require:

• the creation from scratch of the capability to engage, recruit and manage the HNWI client segment
• the creation of the capability of building and activating luxury brands in the market, building on the current brand building capability
• the upgrade of the capability of managing distributors, as managing this new segment of clients require a level of service from the distributors much higher than before

2. Identify each function’s contribution to each capability, by breaking them down into the four components

The best way to build something complex is to start from what you already have. Analyse what are the talent, resources and investments already deployed and the competencies already in place that are being used today to deliver this capability today.

For example, to manage distributors you have talent, competencies and systems already involved from finance, accounting, demand planning, logistics, sales and customer service. How can upgrading the capability and delivering an enhanced performance from the distributors affect each of the involved functions, what do they need to do more or differently? Do we need new competencies? New investments? More people? A new manager in one of the functions?

To be clear, this is nothing new from what most organizations do today, except that this is not done separately by each function but in a concerted effort to improve the final level of delivery of the organization as a whole.

3. Aggregate the list of interventions for each component into separate HR plans

By analysing the requirement of talent, competencies, organization and infrastructure for all capabilities you can then aggregate each component into a separate plans.

The Talent plan, which in many organizations is already in place as Workforce plan, is the list of needs for new HC, new managers and specific profiles that feed the long term view of labour cost, recruitment and people development

The Competencies plan allow to develop and start training in advance your workforce in order to have the competencies in place when you need them

The Organisation plan, today typically owned separately by each function and managed by functional business partners, can finally become a clear map in the hands of the local HR manager to foresee the needs and the evolution of the market company and proactively put forward needs and instances to the global functional organizations.

Similarly, the Infrastructure plan is today fully owned and guided by the global functional teams, who direct and impose investments on the market companies, usually not without conflict. The infrastructure plan gives to the local functional head and the GM a well thought basis to justify why in the specific market certain investments are more priority than others.

4. Following the standard business planning processes, periodically review and update the capability plans

Including capability planning in the business planning process facilitate the recognition that people, training, organization and systems are not a cost but an investment that don’t just “enable” the business but ARE the business.

Local HR managers can take the lead in coordinating this process. By doing this, in the local market company they can become full partners, as local Finance director already are, to the market GM. With the support of the regional HR, they acquire the ability to interact with the global functional organizations on even ground, strong of their own plans they are formulating and executing.

Thanks to:

Dave Ulrich Giorgio Pivetta David Souperbiet 麦肯锡