 Before I go on to explore core competencies it probably makes sense to finish my discussion on value chains. As I explained, Porter’s value chain is a tool to describe the competitive basis for a business. But it’s not the only value chain around.
The best evidence, or at least the best thinking, behind this is probably Kaplan and Norton’s strategy map, based on their business scorecard. This suggests businesses benefit from setting objectives within their planning that relate to each of four perspectives – learning and growth, business processes, customer and financial. Each of the four sections of Kaplan and Norton’s business strategy map is actually a value chain in its own right:
Learning and growth is all about HR. In fact it’s interesting to look at Kaplan and Norton’s original Harvard Business Review article on the balanced business scorecard in which they mentioned people within learning and growth but all of their examples were about technology. These days, even though technology is even more important now than it was then, most organisations using the business strategy map and / or scorecard simply title learning and growth as people. It’s yet another indication of the move to a new S curve, or from competitive positioning to organisational capabilities, which I’ll be coming back to again shortly. Each of these value chains focuses on undertaking activities to create outcomes. For example Porter’s financial value chain focuses on making and selling products or services to create financial outcomes ie revenues and profits. We’ll have a look at the other value chains over the next few articles.  Porter offers a couple of useful tools to develop competitive positioning – e.g the value chain which is pictured here for a traditional, manufacturing type of business (you know this one as well, right?)
Basically this value chain suggests that businesses buy things in, transform them in some way, send them out and deliver a bit of services for customers. All sectors and each organisation, to a greater or lesser degree, have their own value chains. You should know what yours looks like! All of these activities, the primary activities of the business, are how the business develops its margin and profitability, the key need being to align them around its differentiation or cost leadership position. This is how it develops and retains its competitive advantage. But there are also a couple of secondary, or support, activities which don’t play a direct role in creating margin or competitive advantage, but support the primary activities to do this. And, as you’ll know or will have noticed, one of these is HR. i.e in a business competing via competitive positioning, HR is a support function – by definition. So a lot of the stuff which is discussed in HR conferences and publications is just gumph because HR can’t be strategic in this model. I think a lot of what we’re really talking about when we use the word strategic is just being proactive, i.e we can either be proactive – at the metaphorical table when the big business issues are discussed, so that we can immediately start working on doing what we need to do in HR to support the business. Or, we can be reactive – staying behind our locked rooms at the end of the long corridor in the basement until the FD remembers to tell us what was decided three months ago. Being proactive is obviously a good thing, but it’s not the same as being strategic. And in the example I’ve given here, the focus of the business is all about the business = nobody wants any neat ideas from HR thank you very much, because it’s not one of the primary activities. So it’s a big disadvantage for a business trying to use competitive positioning that they can’t use the potential benefits of competing on people, via HR. And it’s means that HR becomes a bit of a back water because we are, by definition, a support function. The good news is that the alternative forms of business strategy are increasingly becoming more popular and these offer greater opportunities to contribute strategically to the business, and therefore to make working in HR a more valued activity too…  I’m going to be spending quite a bit of time explaining organisation capabilities but I wanted to review competitive positioning and core competencies a bit more first.
So – competitive positioning. This is all about what firms do with their products and services in the marketplace, and why customers buy them. As you’ll all know (with everyone being so focused on the business these days) the core thinking comes from Michael Porter at Harvard and his concept of generic strategies – that businesses can only compete in two or three ways: · Through differentiation (or niche focus) – adding something unique to the product and/or service meaning that not everyone will want to buy it but that enough people will, and when they do they will be prepared to pay a premium price to get this unique feature that they value. This means the firm gains more margin, becomes more profitable, grows faster and can eventually become a monopoly and life will be rosy. · By cost leadership – producing the same goods or services as everyone else but doing so more cheaply so that everytime they make a sale they make more margin and so they get the same benefits as above. This business strategy is probably still the most popular in use today (though it probably shouldn’t be) and has been repromoted recently in Kim and Mauborgne book, Blue Ocean Strategy. This basically promotes the same idea as Porter’s Competitive Positioning, brought up to date and in less academic language etc. Basically it says don’t compete in the choppy, turbulent red ocean where everyone else is competing but go and find some nice, calm blue ocean where you don’t have competition – i.e differentiation. Photo credit: Sanchezn  The way I like to describe HR's strategic opportunity is by looking at changes in strategic management over the last fifty years. Over this time, there's been a marked shift in our perspectives from an external basis for competitive success to a much more internally oriented one.
We now understand that strategic, sustainable success comes from organisational capabilities - the value provided by our people and culture - and not just what we do with our products and services (competitive positioning) or core competencies (internal resource based strategy.) In the private sector, it's our people and culture / organisational capabilities which now provide the greatest opportunity to outperform our competition. In the public and voluntary sectors its these same capabilities which provide the basis to build and transform an organisations' services and to really achieve its mission. Note that the arrow diagram that I'm going on to explain fits best in the private sector, but does sort of work in the public and third sectors too - and in fact this is increasingly the case and these sectors continue to take on a more private sector way of thinking and operating (which isn't always a good thing.) By the way, I have previously lectured on executive MBA courses on strategic business management, and this analysis is the result of reading a few hundred strategic management books. Also, as I'll go on to show, I'm not the only person making the argument I'm presenting here - though I do think I'm the person who presents it best! However, my purpose in explaining it here is so that you can explain it too - i.e take this argument to your CEO and other business leaders and argue the case for your business to put people management and hence HR at the centre of what you do. It's still not an easy argument to win but I truly do believe that this perspective needs to be there if you're going to gain full benefit from the various approaches I'll be outlining here for you.  It's that need to find this sweet spot, and the difficulty in doing it, which today puts HR at the centre of business competitive advantage.
There are a number of ways of describing this change - one is to simply refer back to CEOs' favourite adage that people are our most important asset. Yes - but that has to have consequences too. If people are the most important asset then we need to build our business and our processes around these assets, not just use them as resources (hence our people centric approach.) It means our HR processes are our most important business processes, and our HR function are most important business function too. It's why I sometimes get irritated by our tendency to try to disguise what we do - to get Finance to head up our new performance management approach to ensure it's sponsored by the business or to refer to our key deliverable as a business programme not an HR initiative etc. This may be a good short-term fix, but at some point we've got to address the fundamental problem that our businesses often don't see HR as important as it is. We should be able to hold our heads up high, explain that something is HR, and have everyone understand that means it's important. Until we get to this point we're always going to be on our back foot.  The third of the CIPD's changes behind the new S curve is change in the workplace. We're looking at new ways to organise our new workforces to undertake the new work, including the use of new types of location and technology to enable them.
Again there often seems to be some positively serendipitous factors connecting all of these changes - we need work to be done more flexibly by more flexible workers and at the same time cost and environmental pressures are making our inflexible office spaces look so anachronistic. We often don't need these huge head office buildings anymore, and if we do, we don't need long corridors of individual offices, or fields of open plan desks. We need much more flexible, creatively designed workplaces (physical facilities) and workspaces (virtual technology) which enable work to be performed more intelligently, and provide a compelling 'splace' for the new workers to get this new work done. I often think some of the most exciting work in HR is currently being undertaken in Facilities Management and IT, so we need to be linked to these functions (as well as Finance, Procurement and Marketing) much more closely than we are. and I'll be writing about changes in the workplace and workspaces here as well. But probably most importantly, do also note that when put together, the linked changes in work, the workforce and the workplace absolutely provide a perfect storm. And the need is often to find that integrated approach which links them all together - creating a sweet spot at the eye of the storm.  One of the changes which is driving synergy between work and the workforce is feminisation.
Work is becoming more feminine in nature - the shifts towards service work, customer focus, knowledge work and team work which I've already covered here tend to require skills, capabilities and interests which are perhaps more traditionally associated with women rather then men. Even management and leadership are shifting towards emphasising more traditionally feminine approaches (caring and empowering rather than commanding and controlling.) And as yet another example of what I was discussing in my previous post, the workforce is rapidly becoming more feminine as well, though not yet at senior levels. Though I don't think we need to worry too much about the remaining difficulties with glass ceilings and pay gaps as these issues will take care of themselves - businesses will increasingly want to employe people with more traditionally feminine skills and perspectives and a high proportion of these people are going to be women. Of course, as I've also been suggesting, it is important to recognise stereotypes for what they are. So although neuroscience does suggest that there are differences in the brains of men and women, and research suggests that women are more sensitive to social situations, these differences are typically quite small (I think this recent article makes this point quite well.) But it does mean another aspect of many organisations is quite important too. We know that HR is predominantly female (though CHROs and certain areas like HR technology and analytics still tend to be much more male.) We tend not to be that representative of our workforces in the way they are today, but I do think we are much more typical of the workforces most of our organisations will become. This is important because it reinforces why we are often seen as being different by our business colleagues but why we should celebrate and reinforce this difference and not obscure or downplay it (see my recent post over at Strategic HCM - Finance are from Mars, HR are from Venus.) Photo: Churchill's Pendleton Women at Work 1916  One of the things I think is quite interesting about changes in work and the workforce is how many of these are aligned - for example we need work to be cut up differently from the old 9 to 5, 40 hours per week approach, and increasingly people want to fit work in to their lives in smaller, more flexible chunks as well.
Of course, this doesn't always apply and even when it does, matching demand and supply when both are much more complicated than they were before is quite tough to do - but at least the potential is there. For example the typical middle level manager that you might want to send abroad or have commuting to two of three countries every week may not want this sort of experience given their links and responsibilities at home, but a younger manager without these responsibilities might relish the challenge this type of working would provide (again as I've just been posting, these are just stereotypes and what's really important is to personalise our people management approaches, understanding each individual's engagement drivers and offering them an individual employment deal.) That's why, whilst I was an HR Director at Ernst & Young, we tried to articulate the pyschological contract between the firm and our employees (see the picture, taken from Michael Wellin's book, Managing the Pyschological Contract, at the organisation and team level but also to try to get our employees to think about it too - what do they give to the firm, and what do they receive back? The more that we could do this, the greater our ability to personalise the deal and provide what the employee wanted, and the higher the likelihood the employee would feel rationally as well as emotionally engaged and therefore have greater likelihood to stay in the organisation. It implies risk as well though - once you start to articulate the deal like this it becomes even more important to deliver upon the articulated expectations. If you're not going to deliver it's much more effective just not to talk about it. Which is, I think, a large part of the reason why most organisations don't do it. But also why if you really do want to be people centric, that it's a very good reason why you should.  There are also certainly a number of significant shifts in expectations, which again apply to the whole workforce, not just generation Y. The biggest one of these is the fall in trust, and particularly trust in traditional, hierarchical, status and authority based relationships. The bank managers, accountants, solicitors, judges, politicians, newspaper editors, CEOs and maybe even consultants. All those people we used to look upwards to and be deferential to basically - and whom we don’t do so to anymore. This is partly a Western trait but whenever I’m away in Asia, Africa and South America I make a point of asking about this and the answer’s basically the same - deference is falling - maybe from a higher starting point, but it’s still falling. I’ve not seen this work its way through into any surveys of national culture, eg to Hofstede’s or Trompenaars’ power distance scales, but I’m sure in time we will. The survey which does capture the trend is Edelman’s global Trust Barometer which firstly shows the decline in trust, and particularly in authority based trust over the last decade and beyond. And which suggests that one of the relationships which has become most important during this period is what Edelman call a PLY - a Person Like Yourself. The good news about this is that becoming a PLY is a pretty easy thing to do - you just need to find some connection that brings you together as people and reminds you that the other person is a human being too. This can be as simple as having come from the same home town or having been to the same place on holiday, or both supporting the same football team or having the same taste in music, or, or, or… Importantly, it’s not about cloning - you could have two people as different as they could be who can still find PLY factors that bring them together as people. (That’s not to say that cloning doesn’t happen, in fact a couple of days before posting this advice I was reading about research findings suggesting that close friends tend to share relatively close DNA.)
This PLY based trust is the basis for so much of what is required in today’s world of work - social communication, social learning, social anything at all really. And it means that everyone needs to communicate in the new social way. Ie a CEO can’t rely on influencing his or her organisation by simply getting the Internal Comms person to include scripted, bland messages inside the monthly company magazine (partly because nobody reads it and also because it they do they won’t believe it anyway.) So instead smart executives will blog and vlog, unscripted and unrehearsed, and will sometimes write or talk about what they’ve been doing as people, not just as CEOs (so they’re helping present themselves as PLYs as well.) There’s more to it than this of course, and we’ll come to some of these other factors later on.  One of the biggest changes in the workforce, or at least the one which is brought up most, is generational change. This usually relates to
People tend to have their own opinions on this and to believe that generations are different, or that they aren’t, but actually there is neuroscience evidence to show that brains of younger people are developing in a different way to those in the older generations. (Though I do think the recession muted some of gen Y’s wildest expectations about employment!) This isn’t just about age. A 20 year old today will have a very different way of thinking to a generation X’er was when they were 20. The theory is that generational change occurs because of the different experiences they have when they are teenagers. But actually I don’t think it’s just teen years that are important now. The effect of the economic shocks experienced during the last few years will have been profound and will probably impact the behaviour of a mid-20s millennial more than the things which were happening when they were a teenager. But we’ve all experienced this recent turbulence so this may also mean the differences between generations are now somewhat less than they were up to 2008. I certainly think generation y is largely a mindset not an age bracket. Technological savvy comes with experienced regardless of whether you've been bathed in or grown up with bits. And the demands for involvement, ethical behaviour and the ability to progress are things I think most employees of all generations would want from their employment. It’s also important to note that, as I described in my last post, both age and generation are only two of the factors that lead to different behaviour. Plus generational differences will be impacted by these other factors too, eg a Saudi woman will have very different experiences in their teenage years from an American man (although there is probably some truth in the suggestion that millennials are more similar in nature globally than past generations have been). I sat through a presentation on generations from a Saudi HR professional at a Dubai conference I was speaking at a few years back and he had clearly just lifted a USA based presentation which made no sense in the UAE never mind Saudi Arabia. It’ this sort of nonsense which gives the whole topic the ‘generation blah’ description but then that’s not fair either. We just need to use research and employment models sensibly and with a bit of thought. And again, all of this means that that things are now very complex and that what we really need to do is to treat each individual, not just each generation, differently.  There are probably as many changes underway in the workforce as there are in work itself.
Global workers, tele-commuters, immigrants, part timers, flexi-timers, home workers, the list goes on… In many countries the working population is ageing too but is often being complemented by younger immigrants. In summary, most workplaces are generally becoming more diverse and I think this increased complexity is making it increasingly difficult to segment the workforce and to compare these segments in traditional ways. Firstly, we should always recognise that the differences between different groups are almost always less than the differences within groups. Americans may be generally more individualistic than Brits, but the difference between a higher and a lower individualism American or a Brit will be greater than the difference between the averages for the two countries. But secondly, we can’t really just compare one single difference anymore. What are the differences between a male German Christian full-time graduate from a lower socio-economic group with 5 years experience and a female Indian Hind part-time school leaver from a high caste with 10 years tenure likely to be? No idea? - me neither. So increasingly we just need to accept that everyone is different to everyone else and treat each person working for us separately. I think Accenture’s workforce of one and Deloitte’s mass career customisation provide some good examples for how you can do this, and I’ll be providing more guidance here as well. |
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