Creating the HR function that your company's strategy requires - Part 3

- At level four, you're able to do systems thinking. If you don't have a systems mind, you can't do it. 85% of the VP's HR holding a position supposedly at four couldn't do system thinking. How do you be strategic?
- A level three company operates at level three, a level four company and a level five. The only way to get that in is to convince the owner. There's not much in the literature to support hiring a full time HR person. It's unusual.
- HR is often designed too low. People don't want to spend the money. Who can you let go? HR people, they don't do anything right. That's who gets cut. The ROI in HR is not understood. This approach, how you change an organization, is primarily a structural. and systems approach.
- A level four Vphor has these four major ways of adding strategic value to the organization. This first one is really helping the team, designing, lifting the structure, the talent pool, and doing all the cross functional stuff. The CEO should say to them, work in a collegial way.
- The best way for someone at high level three, level four HR to learn about designing and managing organizations is to study requisite organization. Vphrs abandoned. Everything was organized for the twos and threes. We have a world conference here in Buenos Aires.
- Many of them know a lot about this. It's very unusual to go to a conference where people are at four and above and understand something like this. Jax is a way to what do you do it? You will learn to use them in a new way.

Speaker A Now let's reflect on the HR function. What is level one work? Well, anything where somebody can work without supervision up to about three months, from eight to three months, all kinds of da..

Speaker A Now let's reflect on the HR function. What is level one work? Well, anything where somebody can work without supervision up to about three months, from eight to three months, all kinds of data entry, clerks, helping, service frontline. Okay. At level two, oh, that's up to a year. And there is something they can do. They tend to get trainers at that level. You get OD people, organization development consultants who do team building various things. At level two, at level three, the first three levels are the operational levels. Level four and above are general management. But at level three, that's where continuous improvement, the responsibility is really lodged so that they can really put in much more efficient systems if they're well guided. At level four, you're able to do systems thinking. We can hear the thought pattern. You can go down a causal chain, you can go down a second causal chain, you can length the causal chains, you can evaluate, you can do systems thinking, you can draw systems maps. You're very good. The metaphor is the orchestra conductor. You can be working on a lot of projects, you know which ones to speed up, which ones to slow down, how to allocate resources. It's like an orchestra, a conductor, keeping things. That is general management. And if you don't have a systems mind, you can't do it. You literally cannot do it. So we found out that, I would say 85% of the VP's HR holding a position supposedly at four, couldn't do systems thinking. That's pretty scary. So why would they be invited to be at the senior team? Why would the CEO want their advice? They're going to be service providers. They're going to run all the services. Right? So how do you be strategic? One is you may well have the capability and you don't have support under you. You don't have, let's say you have a level four Bphr job, but if you don't have strong threes underneath you and strong twos, and you're not adequately resourced, you're going to be pulled into the weeds every day. And the CEO is going to say, where's my strategic advice? If he knew how to ask, she knew how to ask for it from HR. If they knew what HR could do, a good HR department, they wouldn't have time. They'd be pulled into the weeds. Does that make sense? So now we can assess. We could come in and take an HR structure, let's say in a large company. We could interview. We could draw a map of where each person supposedly was supposed to be working, and then we could tell you where they were really working. And you would see these big gaps and you'd say, here's the role, and here's where they're working, or here's the role, and they're actually better than the role, and they're actually stretching it and causing some damage because they're going around in everybody else's turf. They have too much free time. They're too good. Let's promote them. Okay, but you get a map of that. So then at four, this is where you get innovation. This is where benchmarking really comes in. You can benchmark at three. That's good. But for innovation, you're at four. That's where you're looking at competitive structure. The CEO says we have to reposition in the marketplace. We need to increase this function, and you have to be at level four to be able to organize and do that. So we're going to have a discussion later. I'm going to ask you, how certain are you that your business leaders were at level four or five? Could they have been at level three business? I mean, it depends. I'm sorry, I'm showering you that's. That fanaticism coming up. Okay. Now, at five, there are very few at five that would be in corporate. And what we understand there is you almost have to separate the policy advice to the CEO from the service delivery. And I think Ulrich may talk about that, but Ulrich does not distinguish levels in his writing. When I read Ulrich, I say, what level is he talking to? Can you tell? Is his advice right for level three? Oh, I can see it's right for level five, but it's where is he talking? And if you don't have these glasses, it's confusing. So you say, we don't know how to implement it. What if you're in a Stratum Five company? Oh, sorry. What if you're in a Stratum Five company and you're reading Ulrich, who's writing at seven, and you're trying to implement his stuff? It's not appropriate, some of the ideas, but they have to be translated. So what you need is what's needed at five. And we read the literature, and it's confusing. If you go to the bookstore and look at the management books, where is the market? The management literature market is at level two and three. There are more level two and three managers out buying books than anybody else. The number of books written for CEOs is very small. The number of books Dave Ulrich has managed to write in a popular way, so he is attractive to the top, but others read, but they don't know what it and that's what we're getting at. They don't know what it is. Okay, so now we're going to move ahead. I've talked about level three companies. Just to test, give me an example of a level three company, a type of company that might be a level three, just to check your memory or what size company or what type. Just testing. Here what I'm going to show you. A level three company that operates at level three, a level four company and a level five company. So I'm going to get in our minds, what is a level three company? What which is the measure for the level well, it's the number of levels of management. That's one way you could look at it. There's an owner. He has some managers and frontline. What you'll put in tinder and poker, espanol contra mando meringcia. Okay. Exactly. Okay, so I did some interviewing of HR people. This is not very well drawn. I'll clean it up. But many companies, there's the owner or the president or whatever, they've got an office manager. The office manager does a whole bunch of stuff. He orders supplies, takes care of office space. HR is a fraction of their work and they have a clerk sitting down there. How much energy are they getting? Okay, what would they have to pay someone? So here's a company also at level three, but what have they done? They have actually hired a very experienced level two HR person. They're certified, they've been trained. They know how to train people. They may have a master's in OD organization development. They know things, right? They can do things. Now, how much does that person cost? Well, I'm from Canada. I can tell you that a high level two, they're probably paying $80,000. Okay, so how much were they paying the office manager? Not very much. 45. Did he have any training? Not much. They probably used some kind of a low level consultant to keep him out of trouble. But not much going on there. This has a chance. The only way to get that in is to convince the owner. They have to have enough margin that there is return on investment in doing it better. There's not much in the literature to support hiring that full time person supported by staff in a level three organization. Anybody know level three organizations that have that in place? It's unusual. I'd say the top 10%. Okay, does that make sense to you? I just want to check. Does that make sense to you? Okay, let's move to level four. What is a level four company? Okay, this could be mid size manufacturing, a couple of hundred people, a service company. I know my friend had been, I think he was CEO of no, he's HR manager of British Gas, big gas distribution company. They sold off their service business. Well, he became CEO, level four business. And they did all the service for the gas company. Well, look at this. They generally have a CFO who's got a lot of other things to do, right? And HR reports in. Have you seen that before? Who do they have? They have an HR manager. They may be experienced or not. They're understaffed. What's happening? There nothing in HR, I'll tell you straight service, and it's not even very good service. Look over here. If you have a true VP of HR in this size, now you're paying in the Canadian market $130,000 US, 125,000 US. You get a pretty good person for that, do you not? Pretty good person. And they're staffed they have managers who are also of this quality, and they're making 80 or $90,000. And now you have them supported by clerks. Now you can do something. You can actually shift, improve a function. You can actually do something. Sorry, when you're talking about at what level is the HR work? Where were the programs designed? What's the level of the HR person designing the program? It's often designed too low. Why? People don't want to spend the money. Heck, we're downsizing. Who can you let go? HR people, they don't do anything right. That's who gets cut. I went to a conference board. It was just for the VPs of HR. That was the last big cut. This was the 80, last of the early ninety s the amounts of cuts in HR. They just went around this circle. They were crying. There were two people saying, I just asked them for my expenses to come tell you guys goodbye. I really value this group. But he was being fired. They were just being laid off en masse. The ROI in HR is not understood. So that's what you can down. Let's go to five, and then we'll look at something else. This is true systems capability. The yellow up there is they often have an external HR consultant capable at six. Capable at six. They're scarce, they're very good. They save you a lot of time and to well, I don't know if we'll sabrina Hamilton, you saw in the she's the woman who spoke very dramatically at the beginning. She is a level five HR person, and her consultant for 18 years is capable it's high six. That's the kind of scope you get when you're there. Okay. And that's when you get the return on investment. And every plant has a manager at two. So how to lift whenever you lift the HR function with Ro, you're going to be paying higher salaries. However, you don't need as many people, so in the end, your salaries actually go down. The number of people go down when you use our method, we don't have the clip in there where sabrina says that since they started using Ro, their legal expenses related to employee claims has gone to nearly zero. All claims, first of all, most incidents are prevented by good management, and anything that happens, they're very quick to handle, because they have very good management and very good communications, and the employees know they're trying to do the right thing. So legal costs go to almost nothing. She has the compensation system, she says the amount of money, if you know, how much does it cost to get one position sized up by an external consultant and the pay rated one position, what's the cost? They do it occasionally, but she said their costs are a fraction. So her SNA overheads for consultants and legal for HR function shrank drastically. Her HR complement is small, and they do more strategic work. The systems are in place. That's what I wanted to show you. This approach, in the variety of approaches to how you change an organization, is primarily a structural. It's a design and systems approach. It tends to be more rational. I just wanted all the approaches you could take. If you're doing culture vision, it's over here. If you're doing a lot of participation, it's here. Does that mean that our approach doesn't have vision and participation? No, it means that the primary core, but we have extremely good and appropriate participation. That's not how we lead. We lead with a structural analysis. Now, a level four Vphor we think has these four major ways of adding strategic value to the organization. This first one is really helping the team, designing, lifting the structure, the talent pool, and doing all the cross functional stuff. And I'm going to show a couple of these examples and here's why. The VPHR, what percent can they spend 30 or 40% of their time advising the President and working with the senior team and making the senior team effective? That's a question. If they're not doing that, they're not getting the leverage. Okay, so these are the three responsibilities to the President, to the team, and to their own group. Let me show you one more. This is the president. The VPHR in some of the requisite organizations that I know about help the President to assess and make sure that he's got the right people on the top team. Colin says get the right people in the boat. Right? Get the right people in the bus. VPHR can do that if they have a system for doing it. So it helps the CEO run better meetings. The leadership style, these are key strategic upward advice. Right? This is what a strategic and it's 30% to 40% of the time that they're doing it. Let's go. Here the second one. What are they doing with the senior team? Okay, I'm looking there, and I realize it's English. It doesn't help you, many of you. Okay? What? Yes, because laterally, there's no direct power. So the CEO should say to them, work in a collegial way. Work as if I were in the room, behave together, aligned under my context and my vision. That's how the CEO directs this work. So they have a mutual advisory accountability. That's exactly what it is. Okay? And this is an intact team. But it's very important to operate as a collegium, as a real team leader is very important. I mean, a team member is very important. And this is within the function itself, and it requires so let's just say that you have a strategic objective. We know that. Well, in one of the I was working with a big lumber company, and they were competing against Warehouser. Warehouser, they have marketing really in good shape. And if our company didn't get our marketing in shape, we were getting it killed. So we had to do the segmentation, the channel analysis, and we had to hire new people. And the HR function lifted the marketing function in that company because Warehouser was clobbering us it's the ability to analyze your competition and to know how to lift functions. There are stories in the industry which many of you may know, but when you get mark and dominance, it's generally because you have taken one function and done it better than anybody else. The story about American Airlines is they invented the Sabre reservation system for tickets. They became so powerful, the federal government and the states forced them to sell it. Walmart bought the computers to handle inventory, so that when you buy something at Walmart, the cash register is forming the manufacturer to make another one and ship it. Nobody else had that. They raised it to a level no one else could match. We can go through almost any industry and say, what did they do to smash the competition? What did Toyota do to smash the competition? Their cars roll off there. Perfect. They know how to build cars so that they last for a very long time. So they raise that function and really work it okay, you compete on levels, and you have to get now this is the comment. Raise your hands again. The people in professional associations. Okay, lots of you. Eight. Here's the thing. I did a strategic planning job for the Ontario Human Resource Association. They had 10,000 members. We did a strategic plan. It took about ten days in residence. Their board members, all volunteers over six months. And we decided their board members were at two junior level. They had regional representation, and they had many people at three. You cannot grow an organization with board members at three. They had to have fours. The board reduced from 33 to twelve. No longer did we have representatives. Now you ran for election, and there was a nominating committee that you had to be at level four to even run. You had to have the cognitive ability to do systems thinking. You can't be on the board of that association without being able to function at level four. So they implemented their plans, and they grew from 10,000 to 16,000 in a few years. Didn't take long. The executive director had been hired before the plan. He was not up to it, he had to go. The executive director was not at the right level. Probably a low four, it should have been a high four. So I wanted to show you, we did an analysis. The organization development group, which I used to belong to, has a lot of twos and threes. They're team builders. They have very few senior consultants at four. The strategy organization had more analytical and more executives in it. You can see that they had more people at four and five. Here's. The HR organization. They would certify people at level two. They were trying to get a second certification to certified three. By the time you were a VPHR, you left the organization and you started attending the human resource planners in the states. You started going to other conventions. You didn't go to HR association professional association meetings. Vphrs abandoned. We had to redesign programs to engage them because there was nothing there for them. Everything was organized for the twos and threes. How many here would you say your current HR professional association is? Primarily twos and threes. How many would say that? Anybody owning up? Okay, somebody say something. Where are your associations? Where would you put your membership? One's gone, right? What around three? Three cent. You have four. You're good. That's good, very good. Any more? Three and four. How many? Fours. Great. How do you do it? How do you retain them? How do you attract them? Okay, they can become advisors, they can be trainers. This is huge. We're not really attracting force, we're not developing force. Sherm in the States, they have 170,000 members. They do have a senior program. They've gone global. They actually, when we analyze the competition who was the competition for Ontario? Human resource planners? It was sherm. It was the Society for Human Resource. In the States, they had 170,000 members. They had this web services, international law, and our fours were going to the States, to the Sherm conventions. So that's how we analyze by level right. So it's reflecting on how they're trained. I think executive short courses are pretty good. There's a dearth. This is your question about what you can do now. This is how you can learn. My suggestion, if any of this is of interest, the best way for someone at high level three, level four HR to learn about designing and managing organizations. The most effective short course is to study requisite organization. Go to our website, read a few things, download the book, read a bit. We have a world conference here in Buenos Aires. I know you're from many places. We have one every two years. It's now in Buenos Aires because this is a big center for requisite organization. It's going to be October 26 to 29th, and there's going to be a track for new people. And Feedog is a sponsor, so there is a discount for anybody. We'll also arrange a discount for World Federation members too, so I don't need to left out. And we will make if you want to come and you're interested, we'll try to make it possible for you to come, but that is a time to meet people. What's different about this conference? Most conferences I don't know, at your IDRA conference tomorrow, what level most of the people are at our conferences, it basically is four and above. And you get people who understand general management. They're systems thinkers. Many of them know a lot about this. And it's very unusual to go to a conference where people are at four and above and understand something like this. So I would look at the website, I would look at the book. I invite you to say, does any of this make sense? You can put there are 100 theories out there. None of them relate. I have found, as a well, my background is eclectic. I was an OD. I learned all the theories in my doctoral program. When I heard Jax, my life changed. And the reason it changed is before, I thought participation was good with Jax. I know when and what kind of participation, for what purpose, and I knew how to design the questions. That's the difference. I knew at what level I was talking. It gave me a diagnostic frame. And I would say, I have 100 tools. They're all good. I just didn't know how to diagnose when to use them. So I would say Jax is a way to what do you do it? You're polishing up your tools because you've learned a lot of wonderful things, but you will learn to use them in a new way and you'll know when to use them and how they fit together. And that's, I think, the promise of this approach that we're talking about. Does that make sense?

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