Delivering Strategy Execution Through Human Capital Architecture
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Transcript of Delivering Strategy Execution Through Human Capital Architecture
Leading Change in Turbulent TimesExecutive Education Seminar
DELIVERING STRATEGY EXECUTION THROUGH HUMAN CAPITAL ARCHITECTURE
Edward B. Yost, Ph. D., SPHR November 2013
Step #1
Determine the Critical
Components of Strategy Execution
Strategic Success Hierarchy
Industry
Firm/Company
Business Unit/Function
Position
Person
Defining the Business Strategy
Strategy is:The central, integrated, and
externally oriented concept of how we will achieve our objectives. (Hambrick & Fredrickson)
Strategic Success
Looking for operational, financial customer, workforce success through…
Betting on the incompetence of competitors Acquiring and utilizing the resources &
competencies of othersUsing existing resources & competencies
differently
Organizational Resources and Competencies
• Tangible and intangible resources and capabilities that enable the organization to develop, choose and, implement value enhancing STRATEGIES through resource deployments, systems and processes that cannot be imitated.
Strategy Simplified
Resources
Capabilities
Distinctive Competence
Cost Advantage
Differentiation Advantage
Value Creation
What is Strategic Success?
Delivering high value results to significant stakeholders
Financial Success = Market Value; ROIOperational Success = Costs; QualityCustomer Success = Value AddedWorkforce Success = Q.W.L.; Performance
What is “Strategic Competitive Advantage?”
Enacted or Utilized Distinctive Competency that: 1. Allows the organization to differentiate itself
from competitors
2. Cannot be readily duplicated or imitated
3. Provides a positive economic benefit(s)
Action Item #1 Building the Strategy
1. What Resources does your organization have?
2. What are your organization’s Key Capabilities and Competency?
3. How are the resources, capabilities and competencies used to create value (the strategy)?
Strategic Success Chain
The Ultimate Goal is SurvivalSustainability
Goes beyond the traditional financial measures of firm performance and
shareholder value - focused on achieving high levels of success in the short term
without compromising the future
Strategy Execution
Competitive Advantage
Sustainability
Strategic Success Chain
Strategy Execution
• Enacted responses (behaviors) to internal requirements and external constraints by individuals and teams based on the existing capabilities in the workforce moderated by the underlying culture of the organization that drives organizational performance
We will see this again later!
Pivotal Talent Pools
Pivotal Positions
Human Capital ComponentsStrategy
Execution
Competitive Advantage
Sustainability
Human Capital Capabilities
Human Capital Behaviors
Workforce Culture
(Performance Drivers)
Strategy Execution
Pivotal Talent Pool(s)
Pivotal Role Challenges
CapabilitiesBehaviors
CultureCongruence and Consistency of HCA
Components
Implement & Adjust HCA
Constructing Human Capital ArchitecturePivotal
PositionStrategic Direction
Step #2
Effectively Managing, Talent Pools, Human Capital and Pivotal Positions
The Secret Revealed!
What is the SECRET of obtaining a Strategic Competitive Advantage?
Not just having a strategy but executing the strategy
All depends on the Human Capital Architecture to enhance the exploitation
of these resources and capabilities.
Human Capital & Strategy Execution
A. Resources + Capabilities = Human Capital
B. Systems + Processes + Practices = Human Capital Architecture
C. Human Capital X Human Capital Architecture = Strategy Execution
Talent Segmentation• Talent segmentation involves identifying
pivotal talent pools where human capital makes the biggest difference to strategy execution
• Where would a significant improvement in quality or availability make the BIGGEST difference to strategy execution?
Pivotal Talent Pools
• Talent segmentation is as vital as customer segmentation
• Pivotal Talent Pools are embedded in the Primary and Support activities of the Value Chain
The Value Chain
Research & Development Group
Critical Outcomes for Strategy Execution at Big Pharma1. New Product Applications 2. Reduce Time to Market
Strategy ExecutionEnables the Value Proposition for Stakeholders
Focus on a Strategic Business Unit at Big Pharma
Operations
Marketing
Research & Development
Human Resources
Pivotal Talent Pools
• Identify two pivotal talent pools in your organization using the “Value Chain Model”
Strategy Execution
Pivotal Talent Pool(s)
Pivotal Role Challenges
CapabilitiesBehaviors
CultureCongruence and Consistency of HCA
Components
Implement & Adjust HCA
Constructing Human Capital ArchitecturePivotal
PositionStrategic Direction
Action Item #2Pivotal Talent Pools and Critical
Outcomes (from item #1)
Pivotal Talent Pool Critical Outcome A?Critical Outcome B?
The Importance of Human Capital
Pivotal Talent Pools
Pivotal PositionsDetermine the Pivotal Positions
to Deliver Strategy Execution
What is Human Capital?
Talents and abilitiesKnowledge and skillsSocial networks (capital)Desire and visions
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 Has Value
“People are our most valuable asset INVESTORS!”
PROVE IT! Must be demonstrated by management practices and actions that compose the Human Capital Architecture
Human Capital and The Bottom Line
• To create value through Human Capital requires a fundamental change in how it is recognized and managed in most organizations.
• The firm’s human assets have a value that corresponds to the present value of future net cash flows and are derived from the skills, motivation and adaptability of the firm’s workforce.
Strategy Execution
Pivotal Talent Pool(s)
Pivotal Role Challenges
CapabilitiesBehaviors
CultureCongruence and Consistency of HCA
Components
Implement & Adjust HCA
Constructing Human Capital ArchitecturePivotal
PositionStrategic Direction
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
Talent Segmentation
• Talent segmentation is as vital to strategic success as customer segmentation.
• Talent segmentation involves identifying pivotal positions where human capital makes the biggest difference to strategy execution
Pivotal Positions
• Positions in the organization where quality or availability of human capital makes the biggest difference to strategy execution
• Positions that leverage the strategy execution
Pivotal Positions
• Those talent pools that with a 20% improvement in quality or availability (quantity) would make the biggest difference in strategy execution and organizational success
Drill Down More
• What are the Pivotal Positions for executing strategy?
• Provides the most significant (relative to others) improvement in strategy execution– Leveraged by the HCA
• Research Scientist
Talent – Performance Yield
Yield Curve - understanding where differences in quality or quantity of talent and organization have the greatest impact on strategy execution (steepness, elasticity, D, slope)
Find the Pivotal Position
Yield Curve Big Pharma
Best Sales RepWorst Sales Rep
Stra
tegi
c Val
ue
Performance
Best RS
Worst RS
Sales Representative
Research Scientist
20%
Finding Pivotal Positions
Clearly understanding where differences in quality or quantity of the talent pool will have the greatest strategic impact (steepness, elasticity, D, slope)
Action Item # 3 - Finding YOUR Pivotal Positions
Identify a Pivotal Position from within the Pivotal Talent Pool.
Provide a rationale for this selection based on the critical outcome for strategy execution from Action Item #1
Step #3
Pivotal Role Challenges: The Performance Drivers of Strategy Execution
Strategy Execution
Pivotal Talent Pool(s)
Pivotal Role Challenges
CapabilitiesBehaviors
CultureCongruence and Consistency of HCA
Components
Implement & Adjust HCA
Constructing Human Capital ArchitecturePivotal
PositionStrategic Direction
Talentship
• Talentship requires a redefinition of the traditional service role of HR managers in organizations.
• This involves a process of "talent segmentation" and the need to focus managerial attention on "pivotal positions".
Research & Development Group
Critical Outcomes for Strategy Execution at Big Pharma1. New Product Applications 2. Reduce Time to Market
Pivotal Role Challenges – Research Scientist
• New Product Applications– Discovery of unique and patentable uses of
existing products– Identify new markets for existing applications– Seek and process information from diverse
sources
Performance Drivers
Pivotal Role Challenges
Culture
BehaviorCapability
Finding Performance Drivers
• Starting with the critical talent pools focus down to pivotal positions
• Within that position look for the pivotal role challenges
• Identify the specific capabilities, behaviors and culture necessary to succeed at the pivotal role challenge.
Beha
vior
Strategy Execution
Cultu
re
Capa
bilit
y
Identify the required Culture & Mix of Capabilities & Behaviors
Enables the Value Proposition for Stakeholders
Determine the most critical Capabilities, Behaviors, and Culture to support
Strategy Execution for the Pivotal Position
Constructing the Factors of Strategy Execution
• Capability = knowledge, skill, ability or competency inherent in a unit of human capital
• Behavior = Actions, reactions, interactions exhibited by a unit of human capital
• Culture = a system of shared values, understandings and affect that distinguishes the unit that contains human capital
Finding Performance Drivers
• Capabilities – Nouns; • Capabilities are either resident in the
human capital or can be acquired through knowledge management interventions
• Capabilities can be bought or they can be made.
Finding Performance Drivers
• Behaviors – Verbs; • Behaviors are conscious and sub
conscious actions of human capital units • Behaviors originate at the individual
level and have intensity, direction and persistence
Finding Performance Drivers
• Culture Prototypes– Innovation, Risk Taking– Attention to Detail– Outcome Orientation– People Oriented– Team Oriented– Aggressive– Stability
Beha
vior
Strategy Execution
Cultu
re
Capa
bilit
y
Creates a Culture & Mix of Capabilities & Behaviors
Enables the Value Proposition for Stakeholders
Determine the most critical Capabilities, Behaviors, and Culture to support
Strategy Execution for the Pivotal Position
Example: New Product Applications • Capabilities: 1. Deep knowledge of specific
products, 2. Creativity and Innovation Skills, • Behaviors: 1. Scans multiple sources for
potential applications beyond present uses, 2. Share tacit knowledge with the team
• Culture: 1. Innovation and risk taking, 2. Team orientation
Action Item #4 Critical Challenges & Performance Drivers
• Role Challenge to deliver the critical outcome for pivotal position
• Performance Drivers–Capability–Behavior–Culture
Step #4
Understanding the Human
Capital Architecture and Strategic
Alignment
Human Capital Architecture
The unique combination of practices, policies, and procedures that the organization uses to procure talent, develop talent, manage performance and reward performance of the human capital employed to deliver strategy execution.
Strategy Execution
Pivotal Talent Pool(s)
Pivotal Role Challenges
CapabilitiesBehaviors
CultureCongruence
and Consistency of
HCA Components
Implement & Adjust HCA
Constructing Human Capital ArchitecturePivotal
PositionStrategic Direction
Procurement & Retention
Human Capital Architecture
Procurement & Retention
• Buying Human Capital• A procurement function• An inventory management and valuation
function• Matches human capital resources to needs• Provides for retention and divesting of human
capital
Procurement & Retention
Knowledge Management
Human Capital Architecture
Knowledge Management
• Creating Human Capital• Matching competencies and skills to
strategic needs• Capturing, maintaining, allocating and
protecting knowledge• Preparing for the future
Procurement & Retention
Knowledge Management
Performance Management
Human Capital Architecture
Performance Management
• Measuring the critical behaviors that support strategic success
• Evaluates the effectiveness of staffing• Identifies training & development needs• Evaluates the effectiveness of training &
development• Provides a basis for allocation of rewards
Procurement & Retention
Compensation & Rewards
Knowledge Management
Performance Management
Human Capital Architecture
Compensation & Rewards
• Provides a culture and mind-set to support strategic execution
• Encourages critical behaviors• Attracts critical and capable human
capital• Retains effective and removes ineffective
human capital
Why is Human Capital Architecture Critical?
• Provide a basis for a sustained competitive advantage
• Things like financial structure operational processes and technology can be easily copied or purchased
The Key Question is…
What is the appropriate Human Capital Architecture required to
support pivotal positions to successfully execute strategy?
Beha
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Strategy Execution
Cultu
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Capa
bilit
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Proc
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&
Reta
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Know
ledg
e M
gmt.
Com
p. &
Re
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Perf
orm
. M
gmt
Human Capital Architecture is the Unique Differentiated Mix for Pivotal Positions
Creates a Culture & Mix of Capabilities & Behaviors
Enables the Value Proposition for Stakeholders
Enables Strategy Execution by Creating and Supporting Performance Drivers
Action Item # 5 HCA Components
• Identify 3 or 4 Components of Human Capital Architecture for each of the pivotal positions in your organization
Procurement & Retention
Compensation & Rewards
Knowledge Management
Performance Management
Step #5
Designing the New Human Capital Architecture – Vertical Alignment & Congruence
Align HC Architecture with HR Deliverables
• Congruence is the causal linkages between the HR systems and the realization of the strategic competitive advantage
• Consistency is the extent to which the HR policies and practices interact and support the other HR policies and practices
Strategy Execution
Pivotal Talent Pool(s)
Pivotal Role Challenges
CapabilitiesBehaviors
CultureCongruence
and Consistency of
HCA Components
Implement & Adjust HCA
Constructing Human Capital ArchitecturePivotal
PositionStrategic Direction
Congruent & Differentiated
Vertical Alignment:
Differentially Constructed for the Pivotal Position
Human Capital Architecture
Performance Drivers
Strategy Execution
Beha
vior
Strategy Execution
Cultu
re
Capa
bilit
y
Proc
ure
&
Reta
in
Know
ledg
e M
gmt.
Com
p. &
Re
war
d
Perf
orm
. M
gmt
Human Capital Architecture is the Unique Differentiated Mix for Pivotal Positions
Creates a Culture & Mix of Capabilities & Behaviors
Enables the Value Proposition for Stakeholders
Verti
cal;
Cong
ruen
ce w
ith
Stra
tegy
Exe
cutio
n
Vertical Alignment - Congruence1. Retain practices that have the most
significant impact on strategy execution.
2. Remove or modify practices that have a negative impact on strategy execution
3. Ignore or modify practices that have no impact on strategy execution
Beha
vior
Strategy Execution
Cultu
re
Capa
bilit
y
Proc
ure
&
Reta
in
Know
ledg
e M
gmt.
Com
p. &
Re
war
d
Perf
orm
. M
gmt
Human Capital Architecture is the Unique Differentiated Mix for Pivotal Positions
Creates a Culture & Mix of Capabilities & Behaviors
Enables the Value Proposition for Stakeholders
Verti
cal;
Cong
ruen
ce w
ith
Stra
tegy
Exe
cutio
n
Horizontal; Consistency across HCA Components
Designing an Effective Human Capital Architecture
Remember the prize ! Develop an integrated mix of human capital
architecture components that is differentiated to deliver the performance drivers for the pivotal positions to execute strategy
Vertical Alignment; CongruenceHorizontal Alignment; Consistency