Creating the HR function that your company's strategy requires - Part 2

Speaker A What I want to point out here, ed or age along the bottom 25 to about 60. And you'll see these Roman numerals up the side. What in the world are those? We call it stratum, or level one through seven. If you have a newsstand on the corner or a business, a maintenance business out of your garage, that's level one. There's no manager, right? If you have a Monpa store or a small, very small business, a grocery, and they have a few employees, that's level two. If you might have a consulting business, a financial services business, or maybe a real estate office, you might have the owner boss their managers and then people working for them. That's level three. Each of these have something called a time horizon. I won't go into that. That's explained in the theory the time span of discretion is the variable. And it is like a thermometer. It's like a thermometer. It helps you do very fine work. My friend who has been in Nepal, he brings back this piece, and we were working on a paper mill. He had this Nepali's made paper. It's very rough. It has a lot of imperfections. It has fibers going through it. It's really tough paper. And he held it up and he said, look at this. And then he held up a piece of paper made by this paper company. Very fine, glossy paper. What's the difference? The invention of the thermometer. It allows you to cook the pulp and to get a fine paper. If you don't have a thermometer, you can't do it. We feel that this measure of the level of work and our measures of the changes in human cognitive capability is like a thermometer. Now, you can make a fine product and if you can match that level of the job to the level of the capability of the person, you can make fine paper or fine anything. That's the secret. So let me go through here and look. This is Rich Morgan. He's the guy whose marriage was saved because he went through a stratum change here. He was in this job. He went to Canadian Tire Financial and they started doing requisite organization. And look at him cross that line. What happens? It's like a teenager growing, and their bones and they're awkward. They bump into things. They can't use their body. They're growing too fast. Their clothes don't. Nothing works right. When you go through a stratum change, there's a confusion as your reasoning processes become more complex. It's just like an adolescent awkwardness. And his wife was experiencing this, but then he started integrating. And when they call it a career path appreciation counselor coached him and his wife at a management retreat. He said, oh, that's what that was about. And everything got better because he said, oh, that's what happened. There was a change from level three. Anyway, this one here was from five. From three to four is the development of systems thinking and general management. And this to five is up to a capability of the CEO of a business unit. And the way you think and the way you express things, you can hear it in the language. So let's say it it's documented here. Harold teaches courses of it here in Buenos Aires. And it's quite an interesting occupation. Many personnel departments are interested in it. But I wanted you to look at his being hired in here at the age of 25 in a high level two job. He got promoted, but when he wanted to go to Toronto, he got demoted, was bored in that job. It was too low a job for his capability, and he switched to another bank here's to canadian tire financial. Wait a minute, there's a mistake in that title, but you can see the progression of the career and how he's now able to consult two CEOs at stratum five, and he's now in his mid 50s. Makes sense. Let's go to the next one. I had the opportunity to interview John hoffmeister. I don't know if anybody's heard of him. Have you heard of him? He spoke at human resource planners association in Florida. You were at Alex Sigma. Oh, they were a client. Okay. With Larry Bossity. Okay. Well, he's now retired. He retired as a CEO of shell america. And I got to fly down, and I went with Jay galbraith, another. He's written 15 books on structure and so forth. And we have four and a half hours video on tape to understand the HR career of a very successful HR person. How many of you know presidents who became CEOs of a business unit or corporation out of HR? Finance? Yes. Marketing? Yes. Engineering? Yes. How many out of HR? Not many. He's one. He's one. But he started with GE at the out of university with a political science degree, I think. Here he is 23. Here he is in a mid two job. And this shows his career projection at general electric. He got involved with jack welsh in restructuring a business, went to crotonville, got exposed to Jay galbraith, and the jack's work was taught at crotonville at that time. And then you can see his career progressed. And about here, here was a light signal about here. He was recruited by royal Dutch shell as a stratum five HR person. There aren't many stratum five HR people in the world. There aren't that many. And there were 140 different individual country companies. They couldn't even roll up a financial statement. It took them months and months, because nothing fit worldwide in shell for ten years. He said I used Elliot Jackson's work and Jay Galbraith's work together. They're very complementary. So that shell in 2005 was an integrated company, and they used the levels to say that Bolivia shell in Bolivia was a level three country. They were distribution in the United States. They were a level six company, and they could go through every country in the world and say what level the business was at before every president got the same car and the same office size. They had no way of distinguishing what level of a country president they were with this. They knew exactly the level of complexity of the work. They adjusted the pay. They adjusted the perks. The only reason they changed the perks is because the country president of the country, the political president, wanted to meet with the president of the oil company. So they gave him a few perks for that so that he would look good when they met. Other than that, so that's what this career looks like. Let's go to the next one. This is for you. We don't have a lot of time here, but if you would what I asked each of these VPHR to do before the interview, I gave them a sheet and had them track their career and say, how old were you when you got each of these HR jobs? How did you move? And then I asked them to talk about it, how it felt, how they felt in their job. I would invite you let me say this. We've worked in large companies. I've interviewed several hundred managers, and they wanted us to do it. I wouldn't advise it. It's very expensive to spend a couple of hours with each of their managers at level three and above. These are directors and above to review their career. And we called it career path appreciation. About their life, the things they did, their promotions, how they felt in their work. And at the end of it, they would say, this is one of the most satisfying conversations. I have never looked at my career that way. But when you do this, we ask them to estimate where their boss was and how close they hovered. Sometimes their boss was too far away and they felt lost. Other times the boss was too close and micromanaging them and all that can be mapped in the jack system. So we asked them to go through that experience. They said, wow, I see my career for the first time. No wonder I was in so much pain. No wonder I felt so good. I was in flow state here. No wonder each of these things so it's a very releasing thing. I would invite you to reflect on your career and actually map it. Read if you want to download the Blue book from the site, read about talent appreciation, high potentials, and plot your own career. See where you are, and then see who you're trying to talk to. And it'll talk about how many levels you can go across, how many levels can you talk up? Not many. Okay. Any questions on this? I want to stop here. Anybody have a reaction or question? None? Okay. Let me see these curves. Some of them say, what are those curves? I don't want to be put someplace at an age and I don't want to be boxed in. Isn't that with this system? I just want to say that when managers as a group calibrate or discuss the capability, they do it and review each six months and people have a chance to appeal. And in fact, people do are in a job and they may have an explosion, they may go to the next. It doesn't contain people. It's just a rough arc that if I know I'm tracking down here and I'm tracking here, I might end my career at the end of the interviews. I would actually map their career on this progression chart. And at the end I'd say, look, let's draw a curve. How does that feel? How old are you when you want to retire? You'd tell me. I said, if you ended your career at this level, how would you feel about that? Are you disappointed? Is it too high? Is it about right? Most of them said I'd be fine, but I didn't find people finding it constraining. In fact, many people have capability they're not using. And the idea is, how can I get engaged? How can I use it? That's the trick. So it's just a reflection on your own career. It's very revealing and it's a wonderful way to relate to your clients. If you're a coach. We're going to have a conference. We've got several people coming. One guy is head of mike J. Is head of Coach University out of Alaska is coming. They always use this jack's cognitive approach to help people release energy. They're trying to say, you're not using it. You've got it, but you're not using it. That's the problem. Okay, step two, reflecting on your organization. What level organization? We talked about some before. We have here a standard. It's called a business unit. These are vice presidents like operations, manufacturing, finance, marketing, HR at level four and a president at level five. Now, how many people consult or work in organizations that have many business units? How many? Raise your hand. How many business units in Clarine? 15. Yeah. Some are smaller than others. Some may be level three, some level four, some level five. Do you have any level six business units? Yes. You do? Okay. So it helps you see. Yeah, you'll puerto and tender. 15 kinse. Okay, so this is the concept of felt fair pay. You'll see how it goes up here are the time spans associated with the levels here elliot Jackson, others did some estimates. In the general population, every thousand people, about 700 are currently at level one. Look, how many out of a thousand have the capability generally to work at level five. I'm going to show one more slide about IQ. This is the population. It's a normal curve. IQ is pretty good at saying that people down here will be doing simple jobs and people in here will be police chiefs, machinists, teachers and accountants fall in here and above 125, you get into executives and high level professionals. IQ is not very good at measuring above 125. It's very messy and not very predictive. That's why we use these interviewing career Path Appreciation Jax's method of assessing cognitive potential, because that works very well in those upper reaches. Please do not depend on IQ tests for executive testing at director level and above. It should, you know, just not very accurate. Doesn't help you much, but these other things do. But I just wanted to point out, training style, when you get here, many people go back for executive education. Yes, that overlaps. But they begin at this level to really gather their own information. They begin to learn for themselves. Right. I just wanted to point out why talent pool mark is at the top of the list. These people are very scarce. Now, this is for a level five organization. What happens if you get into level six and seven? They say GE was a level eight under Jack Welsh. What happens? Very scarce. Talent is very okay. Okay. That's reflecting on the organization. So some of you I just want to say before we leave that some of you consult. I have friends and I think here in Buenos Aires. Atelio pena consults to PMIs. Small businesses at level three, level four, and very helpful because they need to grow. Right. Other consultants specialize at level four and five. Generally, those who work at four and five don't work at six and seven to work at six and seven. There are very few senior consultants who can do that. So it helps you see where you're consulting, who you're talking to, and you can learn to listen for their cognitive maps and you know who your good clients are. Now, this is reflecting on industrial structure. This uses the levels starting with level three up to level seven, saying that over time, the management literature basically was talking about how to have an efficient factory. Back in 1850, that's what they were doing. McKinsey is a very old company. They focused on profitability. Here comes the Boston Consulting Group with relative competitive position. And you notice that happens about the time of all the mergers and acquisitions during the so you had holding companies and they had to assess what to buy and sell, what to divest of. Right. And that's when that came in. Now, Porter came in with industry structure, and here we get a new wave, which is a worldwide corporation, very, very complex, serving many, many cultural areas, and the cognitive ability to manage as our organizations get larger and Microsoft operates around the world, you need to have people of seven and eight capability, and they're quite rare. How do you find them? How do you develop them? How do you retain them? Six, sevens and eights. And what we're doing now is finding everything is being bought up in Canada. Oh, sorry, I just hit my chest. In Canada, our Canadian owned companies have been bought out. Three of our steel companies are gone. Alcoa was sold to Rio Tinto. Algoma was sold just like here in Argentina. Your steel companies have been sold. Brazil bought a bunch of stuff. What does that do to the talent pool of a company of a country in Canada? Consultants who used to consult for these level five, six and seven executives, those jobs have all moved offshore. We have had the top levels cut out. There's no more R D going to be done in Canada. This slide is the slide that a true, truly capable CEO. When we put on the wall, he said, that's the slide I want to talk about. Why is that? It's because this is what's in a CEO's head. They have to be aware of the competitive structure of their business and where they are. He said, this is interesting. This was a Stratum seven executive of a large Canadian paper company. It was Timbec paper. We had all these slides. Of all the theories said, that one I want. Okay, let me tell you where this came from. Julian Fairfield, back in the late 70s, he had run many plants. He was a McKinsey, a very good McKinsey consultant, went to Australia. McKinsey used to have a joke that any consultant that went to Australia was lost to the voodoo doctors. That's the Jacksene approach, because a whole bunch of them in Australia started doing it. And sir, Roderick Carnegie was with McKinsey. He was recruited as head of CRA Rio Tinto, and he put it in 25 business units over 25 years. So Australia is a big center for requisite. Their biggest companies used it. Their biggest bank, commonwealth bank. It's spreading through New Zealand and Australia. Okay, now what is this chart about? It basically says that any function okay, here's quality control. We're all familiar with quality. At level two used to be they would inspect the car at the end of the assembly line, right? As you move up. Then you get in process. Now you get six sigma starting in. That's the deming work, right? And it took a long time, that's level four capability needed. Total quality management is higher, and value bounds quality. You can see over a period of 50 or 60 years. The evolution of management of the quality sector. The same in terms of marketing. After World War II, it was largely mass marketing. We got into consumer segmentation value equivalency analysis. Some of us don't even know what some of these terms are. But the very biggest firms are doing very high level, sophisticated marketing. Now, much of the consulting I did was trying to move marketing done here to segmented marketing. That just happened to be my consulting practice. But when I started seeing this now, I'll give you an example. I don't think sales is there. I'm going to show you an example. Julian Fairfield developed a method, when, I think with McKinsey and then his own firm, and this is by Julian Fairfield of Bot Consulting in Australia. It's in his book levels of Excellence. Before he went to a CEO client, he would go to the library and check the industrial reports, and he would do an assessment of where the firm's competitors were actually operating, whether their marketing was here or here, whether it was here. And he would then pick out those one two functions, one or two functions where he would advise that company to lift the level of their function in order to compete. He says, Lift the level of your function to compete. Now, I'm going to show you the next slide. This is understanding the business over here. This was an example of a bank selling mortgages. You could see that the people selling were basically, I think, a number at level one. Over time, he moved it to this. He upgraded the sales to level two. They did another upgrading to level three. They absolutely swamped the competition. They took market share, their profitability. Everything went up. They were hiring many fewer, but more expensive people. So HR was able to say, let's look at the competitive structure. What kind of people are they hiring? What capability? What are their systems? We can build a better system. So HR has to know how to design and lift the function. So in the book, you will see in the blue book his method, and we have video where he explains at our conferences how you lift levels. It's a very interesting process, but that's what an HR person can do. They can look at the competition. We did that at a big drugstore. I worked for a company that had 1500 drugstores in Canada, and we were competing against shoppers, drug mart who had better strategic planning. They had big box stores. They were doing very, very well. We went and analyzed their functions, and they said, we're operating below them on most functions, including they had warehousing, and we were buying from suppliers. I mean, they were killing us. And we saw exactly why. And we decided one or two where we were going to improve, and we started taking market share. But that's how a consultant working with HR says, we need different people here. We need to upgrade our people. Okay, I just wanted to okay, what kind of payoff? What's the ROI? So these are a bunch of projects that came from Julian's Consulting. But look, administrative overhead, your HR costs. You can run your HR with many fewer people, higher level people, more strategic people. You can run almost all the functions more efficiently. And look at the kind of savings you get. I won't go through them in detail. The ROI in redesigning is amazing. I was amazed at that Boston Consulting chart on restructuring. They're saying, that's not very important. We're good at it, and it's not very important. I said, they got to be crazy. They don't even know what it is. They don't even know what it is. So here we go now. I want to go back one. Let me just say something. Why don't MBAs and human resource people know how to design organizations? Who's got an answer? Anybody have an answer? Why don't we know how to design organization? Yeah. You call it structuring. Let me ask you a question. In the MBA program, what do people specialize in? If you get an MBA, what do you specialize in? Do you specialize in HR? No. How many specialize in HR? We called Wharton. We called several big schools. 1% to 5% are even interested in HR. Why is that? What are starting salaries of HR people compared to starting salaries in finance or marketing? Now we'll go to the MBA. Why don't MBAs know how to design? Anybody in the room got an MBA? Okay. What they teach you about organization design in your MBA? Zip. The answer is zip. Zip. I had a doctorate at UCLA. I had one course pulling together stuff from England from the 1950s and 60s. Zip. They don't teach it. So I asked Jay Galbraith because I had a chance. He's this guy who wrote 15 books on design out of USC. He's not at USC anymore. I said, Jay, how'd you get into this field, and why do you have it all to yourself? He said, Anybody who chose as a doctorate as a professor to have organization design as their specialty would not get tenure. You have to have something flashy. You wouldn't get tenure if you were interested in how to design organizations. He did, and he left. He's a consultant to the biggest companies. Why don't they teach? I just talked to Monica Belcourt. She has got one of the first doctorates in just human resource management in Canada. She's got a doctorate, a master's, an undergraduate degree, and a certificate program in HR management. Just in HR management. It's brand new. And I said, Monica, what do you teach about organization design? She says zip. And she said, it's wrong. She said, I studied. Monica studied with Henry Minsberg of McGill, who's a wonderful thinker in management. He taught us strategy, structure. She said, I know we ought to teach that to our HR people. We teach them zip. So that's why these glasses is your short course. This is your short course. How do people learn to be really good? Level four HR Manager. They go to a lot of short courses, executive courses at the big universities. They go to Harvard. That's where they get some of this stuff. But it's not in our schools. It's not in our academic programs. And I'll talk about professional associations in a few minutes.