Practical HR

HR’s function has become more process-oriented, and various studies have revealed that more than 60 per cent of HR personnel’s time is spent on processes. HR is increasingly being branded as a necessary evil. Rather than brandishing a function, it is important to determine if a function is value-adding or value-protecting. This information should then be used to identify which activities of HR can be outsourced. This information should be compared with role complexity and replacement cost to determine what functions can be outsourced and what functions would help HR become more strategic.

SAP is the recognised leader in providing collaborative business solutions for all types of industries in every major market. SAP solutions were once seen as the sole preserve of large companies but it has recently launched SAP B1, which caters to requirements of medium and small business too. They offer bespoke SAP B1 solutions for organisations’ HR initiatives and have SAP consultants who can help with all branches of SAP. Technology should be used to help people, not the other way around. It is important to invest time to understand an organisation’s requirements to develop solutions that will reflect reliable, specific, user- friendly measures and processes to guide the HR department to new heights.

The HR function around the world continues to change as it shifts its focus from enhancing internal operations to maximising contributions to the corporation’s business performance. According to the 2006 Global HR Transformation Study by Mercer Human Resource Consulting, half (50 per cent) of organisations are in the midst of transforming their HR functions, while 12 per cent have completed a transformation within the past year and another 10 per cent plan to begin the process within the next year. HR transformation is the process of recreating or reinventing the HR function with the specific intent of enhancing HR’s contribution to the business.

Despite all this, HR function and HR managers are not seen to be strategic actors. In FTSE 350, there are only three HR managers on board level. This clearly indicates that HR managers have to increase their support to be seen as strategic contributors. Many organisations see their HR managers as process personnel. They do not believe that HR can move to the strategic level. Traditionally, most senior HR managers have taken the known CIPD route, and as a result, their colleagues believe that they do not, and cannot, have a complete view of the business.

In order to break the mould of a traditional support function, HR has to take an active role in the day-to-day business and should increase its solutions and delivery based on the business needs rather than acting as a stand-alone function. In that context, they need to understand individual and collective capability from a value perspective. By understanding the value generated and/or protected, an organisation can decide on its outsourcing policies. Practical HR helps HR personnel to become more visible and increase their business experience by working in different roles. This approach to HR helps them earn respect and strengthen their position and voice in the organisation.

Value addition and value protection

Many researchers have attempted to define human capital. Some see it only as an individual level construct (Lepak and Snell, 1999 Bontis, 1998 Pennings et al., 1998 Zucker et al., 2001 Walker, 2002 Walker, 2002 Davenport, 1999) comprising knowledge, skills, intellect and talent of individuals (regardless of the context of the firm). Davenport (1999) argues that employees take a rent on time, energy and intelligence invested in the form of compensation, development and an enjoyable work environment. However, we see that it does not encompass all forms of value that employees contribute. Value is always associated with tangibility. However, in the context of human capital, value has multiple perspectives. Value can be tangible or intangible and it can either be created and/or protected. At the micro-level, value has an individual context, and an organisational context. This chapter will look at the concept of value from an individual and organisational perspective and discuss the challenges that emerge as a result.

An organisation can achieve its goals only when its employees contribute. Employees, by nature of their roles, either protect and/or add (create) value. Value addition refers to the extent to which an individual contributes to the team/organisation in terms of skills and experience to create products and services (Gopika, 2002). Value employees add could essentially be through their role or through their individual personality. There are more factors that influence the value employees add, and the literature increasingly propagates adopting a multi-method and multi-dimensional approach to identify them.

Perez et al. (2001) classify the value generated by employees into ‘idiosyncratic’ (low value, high uniqueness), ‘ancillary’ (low value, low uniqueness), ‘core’ (high value, high uniqueness) and ‘compulsory’ (high value, low uniqueness). Organisations seldom differentiate between value generation and protection. In most cases, value protection is taken as given.

Value protection forms the essence of support functions. However, any role in an organisation has to have an element of creation and protection. The reality is that the balance between creation and protection varies from role to role. There seems to be a taboo associated with value protection. As a result, many organisations and individuals like to brand themselves as value generators rather than protectors. The prime reason for that stems from measurement. Organisations associate any form of value that can be measured or quantified as value generation and elements of value that cannot be quantified as value protection.

If we are to look at value from an individual context, decisions on the kind of work–life balance the employees want to have determine the value that they are willing to generate. This is influenced by individual motivations, drive and values. These elements could influence employees in different ways. Becker (1975) points out that no discussion of human capital can ignore the influence that families have on the knowledge, skills, values, and habits of their children. Parents affect educational achievement, marital stability, propensity to smoke, etc. So from an individual perspective, Gianelli (2000) has shown that family plays a crucial role in shaping young adults’ decisions to invest in human capital development.

Data from the interviews demonstrate that people’s upbringing and the values they imbibed when they were young influence the perceived value that employees think they generate. Despite believing that there was such an influence, they were not able to articulate a way to measure it. The influence of an organisation and individual context shape the value an employee can generate. Participants see the value employees contribute as influenced by three factors. They are:

Individual value describes the traits that help an individual to make a contribution. It does not include the tools that the individual uses to generate value, nor does it include the processes that help the individuals add value (excluding the structural capital). In other words, individuals can generate value using their knowledge, skills and experience. Human capital generates value through investments in increasing individuals’ knowledge, skills, talents and know-how (Roos et al., 1997). Individual work orientation preferences determine people’s approach to work and account for variation in attitudes. The personality structure described by instrumental and expressive work orientations capture these individual differences. These two orientations describe two fundamentally different types of work perceptions (Kahn, 1978) and motivation (Sandelands et al., 1983). They differentiate between people ‘who perceive work instrumentally, or as a means to another end, and those with expressive orientations who rank high in their needs for achievement and self-actualization through on the job activities’ (O’Reilly, 1977).

Human capital is influenced by individual capabilities, knowledge, skills, experience and problem-solving skills that reside in people in an organisation, behaviour, effort and time, competence, commitment, education, individual attitudes about life and business (OECD, 1996; Dess et al., 1999; Davenport, 1999 Ulrich, 1997 Hudson, 1993). The individual employee’s competence comprises knowledge as information; skills as a capacity to act; and soft capabilities to develop skills or knowledge and motivation, e.g. loyalty, morale and support (Nordhaug, 1998).

Social value depends on an individual ability to network and occupy a central position. Centrality within the social network represents an individual’s involvement in exchanging assistance with co-workers and engaging in mutual problem-solving. Moreover, Baldwin et al. (1997) have indicated that an individual who is central in the social network is, over time, able to accumulate knowledge about task-related problems and workable solutions. This expertise not only enables the central individual to solve problems readily, but also serves as a valued resource for future exchanges with co-workers. As others become dependent on a central individual for significant advice, they gain an advantage that can be used in future exchanges for valued resources (Cook and Emerson, 1978), and therefore it makes it possible to be given promotion. Different people have different networking abilities, and as a result, add or protect value.

Societal value: Peter Drucker goes so far as to describe society in any developed country as a collection of organisations, meaning that most, if not all, tasks are done in organisations, whether public or private (Drucker, 1992). This implies the interdependency between organisations and society that is largely ignored in management and business models. Addressing social issues has only recently evolved to being considered as vital to corporate success and not as ‘interference’ with the business agenda. In that context, societal value is defined as the value it can confer to the brand or organisation as a result of individuals doing the right things in society. It is the value that individuals bring to their work life from their collective experience in the society. Alee (2000) introduces the concept of social citizenship being defined as the quality and value of relationships enjoyed with the larger society through the exercise of corporate citizenship as a member of local, regional and global communities.

Directors who were interviewed believe that these three forms of value were influenced to a great extent by individual conduct. One manager said that ‘the employee has already decided to add or protect and in some cases erode a certain amount of value even before they walk through the doors of the organisation’. As human capital cannot be owned by organisations, they felt that it was the organisation’s responsibility to extract the maximum value from the employees.

If value generation is as complicated and if individuals have the capability to add value in various forms, the challenges it poses to organisations and specifically HR departments is immense. In an effort to simplify such a complex scenario, leaders of many organisations equate measurable performance objectives to tangible value and behaviours and competencies to intangible value. While this perception appears logical from one perspective, it is fundamentally flawed. In reality, both tangible and intangible value generated from employees influences shareholder perceptions and increases the overall organisation’s value.

Although it is quite difficult to measure intangible value, some organisations that were interviewed acknowledged that their organisation was attempting to quantify the intangible value generated. They had measures in place to measure ‘what’ was achieved and the intangible dimension was measured by evaluating ‘how’ it was achieved. They acknowledge that these measures are not exact, but it is unquestionably a step in the right direction. They believe that these measures would be refined over time to measure intangible value generated.

In order to measure the value generated by its employees, an organisation has to know what needs to be measured. Researchers and organisations have tried to identify the elements that the organisations value but have not been successful so far. They have only managed to generate a long list of competencies. The challenge that they face is twofold:

Therefore, having identical elements that might be measured across various constructs becomes difficult.

Hygiene factors can influence the value employees generate. Whereas superior systems may have a neutral effect, poor systems will have a negative effect on personnel. It is essential to enabling factors without which the addition of value by employees would be limited, but it is not a true source of differentiated value.

In that context, treating organisational culture as a clear antecedent or hygiene factor would not make sense. Barney (1986b) argued that organisations that have a culture that supports and encourages cooperative innovation can attempt to understand what it is about their culture that gives them an actual competitive advantage, and they can then develop and nurture those cultural attributes. Culture constitutes the beliefs, values and attitudes pervasive in the organisation and results in their language, symbols, habits and thinking. Increasingly it is recognised as the conscious or unconscious product of the senior management’s belief system (Hall, 1992). Barney (1986b) discussed the potential for organisational culture to serve as a source of sustained competitive advantage. He concluded that ‘firms that do not have the required cultures cannot engage in activities that will modify their cultures and generate sustained superior performance, because their modified cultures typically will be neither rare nor imperfectly imitable’ (1986).

The motivation to exert effort is partially a function of one’s reward valence – the level of importance an employee places on a particular reward (Vroom, 1964). According to Walker et al. (1979), rewards can be dichotomised into extrinsic (lower-order) or intrinsic (higher-order) rewards. Extrinsic rewards are those that are externally mediated and thus bestowed on the individual by the firm (e.g. compensation, fringe benefits); they essentially satisfy lower-order needs (e.g. physiological, safety). Intrinsic rewards are those that are generated internally, such as one’s personal feelings and perceptions about the job situation. They satisfy higher-order needs (e.g. esteem, competence, and self-actualisation). HR directors who were interviewed strongly believe that poor recognition and rewards resulted in poor performance.

It is, therefore, crucial that HR professionals have a well-rounded understanding of the business. They have to understand the business and the roles that exist in it through the value lens. That insight would help them to develop the right talent management strategy for the business. They also have to have this understanding to help other departments develop performance measures. Any HR department or HR professional has to understand the concept of value, understand its relevance to the business and integrate it into the solutions and strategies they devise, to be taken seriously.

Only then will HR departments and HR personnel be able to educate leaders in organisations. Their business insights into value would enable them to work in conjunction with the leaders to devise measures to have insight into various forms of value discussed. It is also clear that intangible measures that work in one organisation would not work in another setting. There are various tools that could help organisations construct intangible measures.

Measures can be developed using cognitive mapping techniques. The Self Q questionnaire is a cognitive mapping technique used to capture the belief systems of strategic actors. It is a causal mapping technique that allows respondents to define the questions relevant to their organisational experience. This technique looks at organisations as a dynamic system and helps to establish the interconnectivity of intangible constructs to develop a relational scale.

The questionnaire has three parts. In the context of developing metrics to measure the value, in the first part respondents are asked to list up to 15 criteria that they used to evaluate their employees and colleagues. Value could be defined as the value that the employees added to a task, to the work that they did, or the role they performed. In the second part, the self-generated constructs are ranked in a number of ways. In the third part, those criteria ranked as being the most notable would be assessed in terms of how they were perceived to influence each other. A template to help HR personnel develop measures for intangible value is provided at the end of this book. Having completed this exercise, organisations would be able to identify its value and measure it to demonstrate the cumulative value added and/or protected by individuals. This understanding can be used to refine the organisation’s talent management strategy effectively.

Outsource or retain

HR as seen by the majority of managers is more tactical than strategic. Successful organisations have always looked beyond the process perspective. Companies like TATA or Infosys have trend-setting HR policies in place. However, a majority of HR departments do not have the ability to look beyond the remit of the day-to-day operations of HR. No wonder it has been described as a necessary evil, process bank and so on.

A recent study conducted by McKinsey found that 58 per cent of all line managers believe that the HR function lacks the wherewithal to develop talent strategies in line with a company’s business objectives while 25 per cent of HR managers disagreed with it. Despite the perceived evolution of HR’s role as a business partner, and the optimism expressed by some of the findings in a global survey conducted by Mercer, a look at the day-to-day operations of HR presents a different story.

Senior managers in many organisations currently view HR managers more as administrators than strategic actors. Managers feel that HR managers lack accountability and/or visibility and are obsessed with processes. Administration and compliance still represent a significant portion (more than 40 per cent) of HR’s daily work. A further 31 per cent is spent on supporting and delivering HR services. Only 16 per cent of HR activity is focused on strategic partnering, which clearly indicates that HR is more involved in fire-fighting and tactical activity than being more strategic.

In order to break the process mould, HR personnel have to seriously start evaluating the value of their role, and the elements of their role that could be outsourced. Any role has elements of value addition, creation and protection. In general, value could be transactional and transformational. Any form of value that can be replicated should be a potential candidate for outsourcing. Although the prime driver for outsourcing has been cost, that alone should not be influencing the outsourcing decision. Ulrich (1997) stated that the key success factor lies in productivity and costs savings achieved through the standardisation of process consolidated at a single location. Sparrow (2005) supports this view and advocates looking at HR synergies that could arise as a result.

Markham and Hopkins (2004) classify human resource outsourcing into three categories. They are business process outsourcing (BPO), shared services, and application service providers (ASP). Andersen consulting (1994) presents five approaches to outsourcing:

Generally, it is the support services that initially get outsourced. It helps HR personnel to use their resources by thinking more strategically. HR outsourcing when done effectively increases internal customer satisfaction. Advancement in technology has made some tasks redundant and some more transactional. For example, a performance appraisal can be conducted online, eliminating any paper transactions and, more importantly, HR interventions. Current performance appraisal software uses the inputs from the appraiser and appraisee and generates a training- needs document for individual advancement. SAP HR and ERM software helps HR personnel manage routine tasks effectively.

Self-service concepts like these shift the onus from HR to respective individuals and line managers. They can even use technology to remind and escalate the episodes to ensure that a transaction occurs. All this could happen without any intervention from HR. Some organisations have extended the self-service process to track and manage employee absenteeism and other days off work.

Shared services (SS), as per Ulrich (1995), could be divided into transactional and transformational activities. As discussed earlier, a shared service centre was primarily used to handle the transactional activities of the parent organisation. Transformational activities in the HR domain focus on the strategic alignment and enables HR personnel to operate human capital management interventions that are futuristic. Hewitt (2005) presents ten steps that could be used to evaluate outsourcing:

While outsourcing enables companies and HR personnel to focus on their core competencies, it could result in partial knowledge accumulation and/or excessive transaction costs that could spiral out of control. Sparrow (2005) warns that over-reliance on the service provider could be detrimental for the organisation. In order to ensure that this does not happen companies have to have clear guidelines for selecting outsourcing firms. Sparrow advocates instituting measures to initiate knowledge-transfer to the organisation from the provider. Initiating learning and such knowledge management interventions would reduce the risks involved, in case the contract dissolved.

An outsourcing initiative can be a source of competitive advantage from an HR perspective only when the impact of such interventions translates into bottom line contribution and allows HR personnel to grow. If the organisation offers its resources to an outsourcing company, they would still be able to exercise control over their employees and the provider. However, if they outsource the function to a provider, they need to ensure that they do not lose control over final delivery. They need to have an effective process to evaluate the delivery mechanisms in place to maintain the quality of service.

Outsourcing initiatives should start with an HR audit. HR personnel should list the key performance indicators they need to achieve, namely their responsibilities. They should be able to create a compelling business case for the outsourcing initiatives by demonstrating the tangible and intangible benefits to the organisation. From a process perspective, they could start apportioning the time they spend in a week to each of the tasks identified.

This initial exercise will give them a clear indication of how they are investing their time. It would also enable them to spot transactional activities across the department. Having done this, they should then start evaluating each activity through the value lens. They should initially classify it based on the value it adds, creates or protects and then obtain a cumulative score for each value of each activity.

Although it is easier to demonstrate the potential time and cost savings, that alone should not influence the case for outsourcing. HR personnel should be able to demonstrate the value they have been able to add as a result of the free time generated by such outsourcing interventions. Disconnection between HR and actual business needs could be bridged as a result of this time saving. That knowledge could then be used to develop policies and/or strategies that facilitate progress.

Stress and ‘toxic’ behaviours

Individuals have stress inducers and reducers. If they can understand what causes stress or how they cause stress in others, they could develop some coping mechanisms to manage stress. Stress at the elementary level is influenced by individual behaviour, which is determined by how they have been conditioned. Left uncontrolled it can manifest in negative (toxic) behaviour which can have a detrimental effect on the individual’s and organisation’s effectiveness. HR plays a vital role in identifying and managing stress in the workplace. If they fail to curb employees’ hostile behaviour, it can result in a negative culture that is harmful to the organisation’s existence.

‘Toxic’ behaviour is defined as ‘any behaviour that causes harm, damages relationships or generates endless adverse feelings in other people’. Studies indicate that toxic behaviour is on the rise, both in society and in the workplace. The effects can be detrimental to both individuals and businesses. In 2008, the UK Health and Safety Executive (HSE) reported that in 2007, the number of workers who sought medical advice for work-related stress increased by over 110,000. Work-related stress, anxiety and depression (just some of the symptoms of toxic behaviour), caused the loss of 14 million working days, costing the economy £3.5 billion. The same report estimates that one in six workers suffers from work-related stress and warned that the figures for the next few years will show a further increase. Other common symptoms of such negative attitudes are high staff turnover, absenteeism, sickness, lateness, high levels of stress, grievances, disciplinary action, burnout, early retirement, customer complaints about quality, constant reorganisation, poor management, physical damage both to people and property.

Many would be able to identify bullying as a form of toxic or destructive behaviour. There are, of course, different styles of bullying, all of which can have equally adverse consequences. Probably the two best-known manifestations would be intimidation and aggression. These styles appear not only in young children in the playground, but also all the way up to senior management in the boardroom. But two other styles also exist, and are more often common in the workplace. ‘Control freakery’ and ‘perfectionism’. At first glance, these seem less harmful, but the effects can be just as deadly as intimidation and aggression. Control freaks assume an authoritative style and micro-manage people and leave no room for their colleagues to manoeuvre. In short, such people epitomise the ‘my way or the highway’ syndrome. Perfectionists set high standards for trivial details and demand perfection by finding fault and nitpicking. These two forms of bullying go unnoticed in most organisations.

Manipulation is another form of bullying which can cause the same toxicity in the organisation. Many organisations and individuals are not aware of this subtle form of bullying. Victims generally do not realise the malice immediately but on reflection suffer the same consequences as with external bullying. Like its cousin, manipulation manifests in four forms: equivocation, flippancy, dissimulation and toadyism.

The first two styles are typically adopted by people seen to be successful. They love to be the centre of attention and would use duplicitous behaviour or sarcastic humour to do what they want. They try to charm people or play the emotional note to manipulate others. People who embrace the following two styles could easily be passed of as welfare patrons. Dissimulators exercise democracy as a tool to manipulate people by insisting on obtaining a consensus, whereas in fact they are incapable of taking a decision and use democracy to conceal that. Toadyism, also known as bootlicking, is more visible as they shamelessly praise people even for little things, massage their egos and get what they want. They are adept at playing the emotional card and can drain organisations’ energy shamelessly for personal gains. Watch out for the manipulators as they are equally toxic.

In business, toxic behaviour results in declining performance, high staff turnover, absenteeism, sickness, increases in stress, grievances, disciplinary actions, early retirement and burnout, while in individuals, it causes feelings of inadequacy, low self-esteem, anxiety, anger, frustration, guilt, fear and hopelessness. All of this tend to cause ongoing health problems but the reasons can be exceedingly difficult to detect.

The Andrea Adams Trust (the first charity in the world dedicated to tackling workplace bullying), reported that one in four people gets bullied at work and nearly 19 million days are lost each year as a direct result of workplace bullying. Their report went on to suggest that 43.5 per cent of employers do not have a policy to deal with workplace bullying and yet 93.1 per cent of all personnel practitioners questioned say that bullying is occurring in their own organisations. Although no definite conclusions were drawn, the report did indicate that 82.2 per cent of those practitioners questioned also suggested that weaknesses in management were the principal reason for bullying. Poor communication skills displayed by managers aggravate toxic situations.

The impact of such behaviour is immense as it can disrupt the effectiveness and efficiency of the workforce. If employees are bullied constantly at work, their survival instinct kicks in, which could be disastrous for the individual as well the organisation. The increased stress levels can result in irresponsible behaviour involving wrong decisions, costing a fortune to the organisation and eventually resulting in reduction in staff numbers. Power play, on the other hand, has similar effects but on a grander scale. Harmful behaviour of two power players can lead to loss of talent which could have been retained otherwise.

There is a legal angle that organisations need to consider when they choose to ignore such destructive behaviour. In a recent judgment, Abbey had to award close to £2 million to an investment banker who had been bullied at work in the UK. When there are emotional scars that run deep it stunts confidence and paralyses the individual’s ability to perform better. In addition to a huge payout, the organisation’s reputation then deters talented people because of the negative publicity that is associated with it.

Ignorance of the law is not acceptable and cases brought by employees can have damaging consequences: financial loss, harm to reputation and termination of trading licences. Even criminal charges can be initiated. When the conduct of individuals is extremely polarised they tend to become toxic. Any extreme form of behaviour can become harmful.

In addition to negative behaviours, there are ‘pseudo-toxic’ behaviours that can have a detrimental effect on an organisation. However, every negative form of behaviour has a balancing positive, which one can call nourishing behaviour. In most cases, individuals could be perceived as toxic (hostile) whereas in reality they are not, and in most cases these individuals are not even aware of the consequences of their actions or inactions.

The human brain has a remarkable ability to learn and link multiple levels of abstract information to reach a logical conclusion. However, this innate ability also becomes the Achilles’ heel when it comes to understanding people. An individual who is extremely delivery-focused, highly detail-oriented in executing a plan and highly pursuant in motivating a team to deliver can be wrongly categorised as an intimidator or as being aggressive. If the individual gets an opportunity to understand or visualise how his/her actions can be perceived, it would help them to alter their behaviour or in extreme cases communicate with the other parties to explain why they are not being aggressive. Figure 5.1 is a negative behaviour matrix generated on how others are likely to perceive our actions.

We now know the adverse effects of toxic behaviour on businesses and individuals. To avoid unanticipated and unexpected business problems resulting from this, organisations have to perform regular ‘toxic health checks’. People have annual health checks. They have their cars serviced annually. Businesses have equipment serviced annually. In a society that believes in prevention rather than cure, early diagnosis over surgery, should not organisations also go through a routine health check? Negativity can very easily be detected using the proper diagnostic tools by performing a ‘toxic health check’.

Pain is part of organisational life. Pain by itself is not toxic. The way pain is handled (harmful vs the healing process) over an extended period of time results in emotional toxicity. Toxicity in the workplace occurs due to ineffective leadership, culture or managers. It is pain that strips people of their self-esteem and that disconnects them from their work (Stark, 2003). A ‘toxic health check’ can help identify early signs of stress. HR departments have the responsibility to conduct these checks regularly. The organisation can then effectively deal with it to create a healthy environment which nurtures, nourishes and celebrates talent and uses it effectively to achieve its objectives.

Three-dimensional approach to measurement

Management consultants can suggest, or help leaders develop strategy but cannot guarantee that the strategy will be implemented successfully. Even if they can identify problems, they cannot specifically identify people and processes that can cause the strategy to fail.

The reason for the lack of understanding stems from the fact that the frameworks and tools used by consultants or industry are two-dimensional. As human beings, we do not think and act in two dimensions but operate in three dimensions. Using a two-dimensional structure for a three- dimensional problem would always contain elements of uncertainty as it can provide only a surface-level view and it lacks the necessary depth.

When we are forced to use a ‘two-by-two’ framework, or a two- dimensional structure, the options that an organisation or an individual has add up to only four. As a result, we end up pigeonholing people and/or strategies. For example, the cost value framework used in strategy is used to establish whether the organisation has to pursue a differentiation strategy as opposed to costing control. Consultants and the two-by-two frameworks they use dictate that the organisations pursue only one of the four strategies. However, in fact, organisations can and do pursue both forms of strategy simultaneously. They focus on cost-control and as a result, stretch their resources to serve the customer better. They attempt to differentiate their offerings through the value they add. They use value as the differentiator.

In fact, pursuing one aspect and ignoring the other would not lead to profitable, sustainable organisations. The low-cost airline business model clearly demonstrates that it is certainly possible to pursue both forms of strategy. Companies like Reliance in India have shown that achieving the balance between different forms of strategy helps the organisation grow stronger. Reliance started manufacturing PTFE as the decision that it would be cheaper to produce than import it was driven by cost-focus strategy. The plant not only catered to Reliance’s requirement but to other organisations across the globe. As a result, their global footprint grew rapidly, and they became the leading manufacturers of PTFE. This example clearly demonstrates that two-by-two frameworks are useless when it comes to evaluating organisations or people.

Combining value and innovation where value focuses on creating value for customers and where innovation focuses on reducing costs to create that value, is seen as a cornerstone in strategy by the proponent of blue ocean strategy. Blue ocean strategy is a way to make competition irrelevant by creating a leap in value for both customers and the company. They say that successful, sustainable organisations are able to combine these two aspects effectively.

If, for a moment, we consider a three-dimensional framework then we end up having eight instead of four options. Two-by-two frameworks can be split into six or nine options if the frameworks are divided equally among the X and Y axis. The five options indicated by the plus sign in Figure 5.1 is used to represent the cusp of two strategies. There are some frameworks in strategy and behaviour that allow this sort of construction. If we apply the same rule to a three-dimensional framework, the number of options goes up from eight to 27, which is three times the number of options provided by a two-by-two framework.

Using the same analogy of cost-value framework, we can demonstrate how a three-dimensional system can be used to understand multiple perceptions. There are numerous occasions when the organisation and the customer seem to be aligned from a value and cost perspective, but the customers still do not invest in that product. If we introduce the third dimension as a service, the customer perception of service could be different from that of the organisation and as a result, they choose not to invest in the product. A two-dimensional approach lacks depth and, as a result, cannot identify the variance in perceptions. A three-dimensional model has three aspects to every option, and it would be easier to understand the impact of all these aspects. For example, an organisation might perceive its product as high-value, low-cost and high-service, whereas the same product could be perceived as high-value, medium-cost and low-service by the customer. Using a three-dimensional perspective, therefore, helps us understand perceived and predicted perspectives for a strategy or behaviour.

We could extend that philosophy to a behaviour or strategy framework. If we look at the human brain we can metaphorically say that the front brain is about taking risks and the back brain is about avoidance. The left brain is about logic, and the right brain is about creativity. A two-by-two framework like DISC captures the four aspects. In that case, front- brainers driven by logic are dominant, back-brainers driven by logic are introvert, back-brainers driven by relationships are submissive and front- brainers influenced by relationships are compliant. A simple representation like this can cause people to say that they behave differently on different occasions, and they cannot be stereotyped.

Now, if we extend our knowledge to include the cusp, we can generate a two-by-two framework with nine options. The MBTI uses this to illustrate different styles of working for individuals. If we look at, say, implementers, who are driven by logic but balanced between pursuance and avoidance, we cannot explain whether the implementer is able to succeed because of their planning ability or because of their drive to achieve more. They could also be adept at implementing because they are capable of evaluating information critically or have the ability to think strategically about the pitfalls beforehand.

Let us introduce the third dimension where we say the top brain is about rational thinking and the bottom brain is about emotional feeling. Superimposing this dimension on the existing two-by-two now gives us 27 options. This knowledge can be used to overcome the limitations posed by a two-by-two framework. For example, an implementer operates rationally, which indicates they are logical, take calculative risks and are rational. Combining these three aspects indicates that an implementer should be an excellent planner. If the implementer is feelings-driven their desire to win or achieve drives them to be accomplished in this role.

This model helps us to understand the limitations of two-dimensional frameworks. It also demonstrates that it would be better to capture richer insights about the individual’s or organisation’s behaviour by moving to a three-dimensional framework. Talengene has developed a three- dimensional model based on the human brain to explain individual behaviour and strategy. By incorporating these perspectives, HR personnel can help their staff and leaders maximise their potential. HR personnel should use this knowledge to develop organisation-specific frameworks that add more value.

Train, retrain, retain

The effectiveness of any training intervention comes from an organisation’s ability to measure the impact of such interventions. Any training intervention can add value only when the individual gets an opportunity to imbibe and apply what has been learnt. The line managers are responsible for creating opportunities for their team members to apply that learning. However, not many managers consciously invest their time to ensure that it happens. This is an area where HR professionals can help. They need to develop measures to quantify the impact of such training interventions.

A performance management system would be the natural starting point that allows individuals to identify their training needs. These needs are predominantly influenced by the individual’s key performance indicators (KPIs). It is crucial to then come up with relevant measures to demonstrate progress. HR managers have to think like solution providers while conducting this exercise. Many HR personnel believe that it is a challenge quantifying an HR intervention. They need to ask what the problem is they are trying to solve or what the training intervention is supposed to achieve.

For example, if the performance review identifies ‘communication’ as the training need, HR personnel need to understand the impact such training would have. In other words, understanding why an individual needs to be trained to communicate could arise out of the individual’s ability to communicate effectively. Communication in this case could be written and/or oral communication. Poor communication could result in customer attrition or tension amongst team members or could manifest as the individual being perceived to be a flyweight contributor to the team. The impact it has as a result is poor performance, increased stress levels, attrition and low self-esteem. These are the outcomes that would be influenced by the training intervention. Individuals who undergo training therefore have to be assessed on these four or five constructs. Rather than view communication as the end objective, it has to be treated as a symptom for a much deeper problem at the individual, team and organisation level.

To assess the impact of a training intervention, it is essential to establish a benchmark. In this case, the impact of poor communication has to be established by evaluating the current skill level of the employee. Customers could simply be asked to rate the oral communication of the individual who needs to be trained on a scale of one to five and use that information to establish the benchmark. Colleagues at work could be asked to evaluate the ability of the individuals to understand and deliver what is expected. On completion of the training, the individuals could be assessed by the same group of customers and peer group employees to evaluate their progress. If there is a definite improvement, the impact it has on their performance could be measured. For example, a one point increase in customer score could be linked to X per cent reduction in customer attrition. By adopting a solutions-driven approach, it is therefore possible to quantify the value of any training intervention. It is also possible to link it to individual employee contribution.

Although managers realise the importance of training, they are unable to see the value of such interventions. As a result, most training interventions are not reinforced over a period of time. HR personnel should start quantifying the value captured, created and/or protected as a result of training interventions to the top-line or bottom-line profitability. Such measures would immediately capture the attention of managers and would motivate them to ensure that the employee reinforces the skill-sets acquired through training. This is one area where HR personnel can help teams imbibe all that they have learnt.

At the macro-level, every role has to have a set of key competencies that individuals need to have to perform in the role. In addition to that, there are a couple of competencies that are desirable and there are certain competencies that are irrelevant or not required. HR personnel can start identifying the training needs of individuals at the time of recruitment. They could do that by creating a benchmark for each role.

For example, a manager, the HR person, a subordinate and a peer group member could make a list of competencies that are critical for the role. They could also create a list of unwanted, preferred, irrelevant and desirable competencies. The combination of such a list could be used to create a CUPID benchmark, which is used to evaluate candidates initially. (Figure 6.1 (p. 100) is an example of one such benchmark used for recruitment.) However, this benchmark uses behaviours instead of competencies to construct the benchmark. At the end of each set, the sum of each behaviour as demonstrated by the individual is compared with the behaviours expected and the decision of individual suitability to the role assessed. HR personnel can create such benchmarks for key positions in the organisation and use it to manage their talent pool. It also provides a standardised way to evaluate progress. Factor analysis can then be conducted to identify key factors and the relevant constructs to evaluate tangible/intangible constructs. This can then be used as a benchmark for evaluation.

Any training intervention will add value only when it is behaviourally reinforced. If individuals do not want to apply what they have learnt, the resultant value of such an intervention will be zero. However, getting individuals to maintain a high level of competence without ongoing costly behavioural reinforcement is always a challenge. HR personnel need to realise that they can overcome the paradox once they identify how behavioural styles naturally reinforce the development of some competencies and, at the same time, the same styles naturally hinder the development and/or application of other competencies. They need to start identifying the link between competence and behaviour in order to do that. The process starts with mapping the skill-sets required to achieve those competencies. In other words, each competence is broken into a group of skill sets.

However, individual behaviour influences their ability to learn and, importantly, apply their skill-sets. In a broader perspective, it is the mindset, attitude or personality, or a combination of all three, that determines individual behaviour. The second level of analysis has to be conducted by identifying specific behaviours for each skill set. As a result, the organisation can break the competences required to clusters of behaviours. A cognitive mapping exercise enclosed in Appendix X should be used to identify linkages between the competencies, skill-sets and behaviours.

This helps HR personnel identify key behaviours that run across skill-sets for each competence or across competences (if the individual is to be trained for more than one competence). These behaviours can then be measured prior to training, to understand the competence potential of individuals. Such an analysis would help the trainer and the trainee to focus on a specific level of progress that needs to be made for each competence, skill-set or behaviour.

If individuals are aware of the areas of behaviour that need to be strengthened, and if they are trained to reinforce that behaviour it will, as a natural consequence, result in self-reinforcement of the skill-set or competence. Although it appears to be a rather tedious process to construct such maps for each training intervention, the insight such an exercise can provide far outweighs the value captured as a result. Doing so would enhance the self-reinforcement capability of trainees, which would translate into fewer reinforcement initiatives or even fewer training sessions. HR personnel have to work at this level before starting the training interventions to add value.

I shall use an example to explain how this could be done. Let us look at selling as the skill that an individual needs to be trained in. There are various skills that a talented sales person has to have. For example, they should have the ability to listen, ability to understand the problem and solve it for the customer, etc. These skill-sets can be gleaned from the job specification. Analysis reveals that empathy is one of the traits that influences individuals’ ability to listen and also helps them to understand a problem faced by the customer. An inventory of such key behaviours is then drawn up by evaluating all the skill-sets for each competence. The Self Q cognitive map technique can once again be used to identify the key behaviours that run across various skill-sets. These are the key behaviours that need to be reinforced prior to training.

HR personnel can use these techniques to create a business case and demonstrate the value of any training intervention. In addition to that, by working on reinforcing behaviours prior to a competence training, they can reduce the number of training interventions required. They could also use the insights obtained out of creating benchmarks, as a result, to identify talented people and create strategies to fast-track talented individuals. They can analyse, quantify and assess team competency and demonstrate a positive impact on the bottom line.

A new breed

Research and commentators identified greed and a lack of understanding as the causes of the global financial meltdown. Numerous leaders in different financial institutions became beguiled and enthralled by blinkered opportunism that relegated prudent risk management. In ‘market terms’ they chased after short-term gains and suffered long-term pain. In ‘behavioural terms’ they allowed their emotional ‘desires’ (e.g. avarice and ego) to overrule their rational ‘values’. Even now, many remain in denial, saying that it was ‘unavoidable’, since ‘everybody was doing it’. Such remarks reinforce the real cause: irresponsible leadership.

The global financial meltdown shows that this behaviour transcends culture, nationalities, education, levels of experience and different sectors. A majority of leaders ‘across the board’ manifested extremely similar sets of behaviours, almost identical patterns in some cases. In an effort to simplify the ‘trigger’ to the current financial crisis, it is not unreasonable to say that the herd followed the decision of a couple of exceptionally bright ‘inventive’ bankers to package sub-prime debt in a way that was acceptable to borrowers. The mindset seems to have been based on an epistemological rationalisation that beliefs can determine truth, and therefore, people can accept anything as true unless and/or until it is disproved.

We have in the earlier chapters looked at behaviour and strategy and demonstrated the interconnectivity that exists. This chapter amplifies the argument further and advocates the need to look at behaviour and strategy as interconnected, and introduces the reader to brain-based epistemology. In order to proceed further, there has to be a clear-cut definition of values and beliefs. Many leaders talk about values and beliefs, and they constantly substitute values for beliefs and vice versa, so much so that remarkably few can distinguish between values and beliefs.

Beliefs are the product of the conscious mind. In a belief scenario, there is always room for anticipation. Any belief could and would have at least alternative views. The decision to market sub-prime debt as ‘valuable’ could be quoted as an example of how belief systems operate. The sub-prime debt had a market value (i.e. it could bought and sold for a price). The error was the belief that the ‘market value’ of the underlying security could not fall dramatically and, conversely, that it was likely to rise in ‘value’ and, therefore, sub-prime debt was ‘valuable’. When individuals believed that it was valuable, everyone wanted to have a share of the profits, which strengthened the belief that these debt instruments were valuable. When everything worked in tandem, these beliefs got strengthened, but a small blip or default in the market proved that this strategy based on beliefs was wrong. Beliefs get altered when they are proven otherwise.

Values exist in absolutes and have no shades of grey. If an individual believes in honesty, then they do not believe in dishonesty. Value is something that individuals or organisations believe in and beliefs are something that they accept. Beliefs can be altered, while values can not be altered. If one were to advocate the belief that stealing from elderly women is wrong, that does not prevent people stealing from a handicapped person. Whereas, if one were to work from the value perspective, they would start with the premise that stealing is wrong, which requires a change in beliefs.

Beliefs-directed mindsets (i.e. a vision of the outcome) and feelings-driven mindsets (i.e. a desire for an outcome) are neither responsible, nor are they proper yardsticks to use for making decisions. Values-governed mindsets (i.e. wise and congruent principles) do provide responsible platforms for decisions. To achieve sustainable business growth in a global economy, business leaders will have to cultivate a synergic ‘values- governed’ (VG) approach to replace the now discredited ‘beliefs-directed’ styles (BD) that caused the global financial meltdown. Perceived knowledge is not the same as understanding. Beliefs and feelings are not a justification for action that impacts ‘society’. Decisions that impact society should be based on objective fact and analysis and, therefore, ‘values-governed’.

Values are influenced by consciousness. Dr. Edelman defines consciousness as primary and secondary consciousness. Primary consciousness stands for the perceptual awareness that humans share with many animals. Secondary consciousness is the type of consciousness that comprises an awareness of the past, the future and the self. Edelman links this type of consciousness closely, though not exclusively, to an individual’s command of language and their capability to associate semantic and/or symbolic capabilities.

He also argues that neuronal complexity can best be understood in terms of the simultaneous compartmentalisation and integration of brain function. The movement in Edelman’s exposition from basic to sophisticated forms of consciousness indicates that his theory is conceived ‘bottom-up’ (that primary consciousness influences higher consciousness, e.g. awareness of past or future or of self). This is in contrast to the ‘top- down’ theories proposed by psychologists such as Julian Jaynes and Nicholas Humphrey, who propose that normal human consciousness is post-language and is a relatively recent arrival on the biological scene.

In attempting to explain consciousness, Dr. Edelman recommends that we should attempt to construct models of functioning brains, rather than models of minds. He believes that brains, through interactions with their surroundings, can develop minds. In contrast with the views of philosopher Daniel Dennett, Edelman accepts the existence of qualia (that each individual has a different perspective of things) and incorporates them into his brain-based theory of mind. Edelman proposes a biological theory of consciousness, which he explicitly considers to be an integral part of Darwin’s theory of natural selection and theories of population dynamics. Thus, he believes that the standard Darwinian theory satisfactorily explains the development of human consciousness and intelligence.

A brain-based epistemology advocates that no one can have a mind without a brain and a brain cannot function without a body. This chapter discusses the practical benefits of a biology-based epistemology plus a brain-based ontology (with a definitive set of values) rather than a mind- based psychology (with a variable set of beliefs). Human beings have brains ‘embodied’ physically in a frame (a physical body) that is itself embedded in an environment that provides a location for a society. We believe in an objective reality. We hold (as a given fact or truth) that we exist ontologically as individuals and simultaneously as members of a society. Therefore, although we have rights as individuals, we have responsibilities as members of any society in which we seek to participate and belong. And therein lies the fundamental linchpin of the brain-based epistemology.

Which part of an individual has priority? Is it the individual ‘directed by beliefs’ and ‘driven by feelings’ or member of a society that expects (or requires) all of its members to behave in a responsible way when making and implementing decisions that affect other members of the society? No society can impose sanctions unless all the members undertake to be ‘governed by its values’.

The human brain has an ability to learn and patternate (i.e. assemble random bits of data into patterns and transform them into perceptions and information in less than seven nanoseconds). Neuroscience can prove that the human brain has patternated a perception before the individual is aware that it has done so. Once individuals accept and assimilate that neuroscientific fact, it follows, ineluctably, that if they then discover and learn how the patternation process operates, they will be able to change their behaviour.

The human brain talks to itself recursively all day long; comparing new patterns with old patterns, enhancing its own non-conscious understanding, then ‘informing’ the conscious mind so that the human (as a biological being) can gain ever-increasing insights about the environment, and gain an ever-increasing empathic awareness about other people, provided that the individual has decided to be governed by a congruent set of values. If they elect not to be governed by a set of values, then they have elected to live their life under the thrall of their emotions or their beliefs. Without values, the metaphorical ‘keep in your castle’ has no sentinels and no guards to protect individuals from irresponsible and/or malevolent behaviour. Either way, individuals might believe that they are (ontologically) free to choose when, where and how to do what they want to do. In reality, they are at the mercy of intelligent ‘fools’ who happen to believe that they can take advantage of others and that they will not have to pay the price for doing so.

Dissimulation is a bulls-eye term that perfectly describes a specific behaviour pattern for two reasons. First, it embraces a number of characteristics. Second, it conveys precisely the inevitable destructive effect of combining seemingly innocuous behaviours. Sadly, the commentators will hijack it. Academic psychologists and sociologists use it to describe the behaviour of manipulative individuals who:

Some (left-brain) psychologists would argue that most dissimulators lack common sense. They cite as examples the people who advocate that the best way to cure drug addicts is to provide them with an ever-increasing supply until they (the drug addicts) come to realise that drug-taking has consequences, most of them harmful, and will stop because it is the ‘right’ thing to do. Dissimulators confuse beliefs with values. Calamity occurs whenever rights take lasting precedence over responsibilities. Dissimulation is an apt descriptor for those who peddle the notion that rights always rank ahead of responsibilities. Such individuals, however well-meaning their aims, belong to an old FOGI society styled ‘full of good intentions’ although they would argue for ‘right’ intentions.

Until people realise that the biological engineering that underpins the right hemisphere (the location of all right brain thinking) is speed before accuracy, they will not accept that, at best, all perceptions and expectations originating in the right hemisphere are only 80 per cent accurate. The same people need to learn that the biological engineering that underpins the left hemisphere (the location of all left brain thinking) is accuracy over speed. Expressed more elegantly: on which do you prefer to rely: subjective feelings or objective facts? Buyer’s remorse occurs because subjective feelings prompted the decision to buy and 24 hours later the internal voice of objective reality asked the question, what possessed you to buy that?

The human brain has a dynamic core that has a remarkable ability to discriminate between right and wrong and, therefore, to prompt and enable individuals to act with responsibility. On the other hand, the dynamic core operates under the sanctions endowed by and constraints imposed by an individual’s installed set of value systems. Responsibility to lead a value-governed life rests only with the individuals. As a leader, individuals have an additional responsibility. They can decide to educate, liberate and enable their staff and teams to discover, learn and apply what they themselves have possibly discovered, learned and applied.

The world we live in is going through a major transition. Technology has integrated communities and information flow is almost instantaneous. The world needs responsible, synergic organisations that emphasise value governance and value-governed leadership. Organisations should eliminate those Machiavellian manipulators who tarnish an organisation’s reputation and seek to replace traditional values with claptrap ideas that reward them with power and money but have no value for shareholders in the long term. Some senior bank managers, for example, rewarded themselves with large bonuses and took no responsibility when the banks suffered a setback.

We deal with an ever-changing market place where the consumer is king. Consequently, businesses need to have flexible strategies in place in order to respond to change. Some managers do not accept the principle that strategy must shape structure to ensure business growth. Our research indicates that, in businesses where managers prefer structure to strategy, the management incrementally imposes structural limitations on the business. In practice, management demands increased profits rather than gradual and sustainable performance improvements. The result: an ever-increasing demand for more efficiency and standardisation. Contemporaneous with the imposition of this enlarged structure, the talented individuals (who thrive in strategy-led businesses) seek alternative employment. Eventually (perhaps a decade or more later) the businesses shaped by structure begin to decline as they lose market share.

Strategy, as discussed earlier, is the combined response of individuals to an opportunity, situation or problem. An individual is influenced by their values; similarly an organisation is influenced by its values. The value of the organisation manifests through its culture. Culture influences all forms of strategy and the individual’s behaviour as a result. While many corporations have a vision and mission statement, their sense of purpose and values is what differentiates then from being good to great corporations.

A mission statement is about output and impact while a vision statement is about a company’s future, and is amoral. Conventional wisdom leads us to believe that if we achieve the mission we can achieve the vision, which means a quasi-moral mission is justified by amoral vision rather than the other way around. This can result in a lot of cynicism, and mission statements start sounding cynical. Mission and vision operate on the premise that doing ‘x’ would result in ‘y’. This appeals to the rational and emotional faculty of individuals. An organisation’s values are generally an amalgamation of the founders’ and leaders’ values to motivate individuals to act responsibly. If there is a conflict between individual and corporate values, the strain could lead to employee attrition or irresponsible behaviour.

Values-governed behaviour leads to responsible, values-governed leadership. Strategy is not about doing the right thing, but about doing the responsible thing. Strategy is about achieving the purpose of the organisation by living the organisation’s values. An organisation’s purpose can be compared to an individual’s consciousness. An organisation’s purpose is to help, innovate, excel or create effective solutions for the market. It is not a tool for maximising profits but is pursued for its own sake without further justification. This is similar to the primary consciousness of individuals. When organisations are able to link the purpose with their strategy using their values they move on to achieve bigger and better things.

A biology-based approach to an organisation’s strategy and employees could then be linked to their values and behaviour. The majority of organisations have beliefs-directed and feelings-driven leaders at the top. Beliefs-directed leadership is rationality gone awry. It works on a self-regulating premise: ‘unless there is tangible evidence that disproves something, I can accept it as true’. On first hearing, the premise sounds reasonable, but look beneath the surface at the consequences, and one will probably recoil in horror. The current financial meltdown is purely the result of rationalised beliefs-driven leadership. History has once again proved that individual behaviour can and does influence organisational behaviour.

In light of the above discussions, the challenges that exist for leaders and for HR professionals do not differ much. It is, therefore, vital for organisations to look at HR with more respect and give it its due position in the organisation. This discussion reveals the complex nature of managing people and strategy. It warrants that HR personnel should be able to think strategically and behaviourally at the same time. They need to have a thorough knowledge of the environment they operate in and at the same time be able to understand the impact such a climate will have on individual and collective behaviour, which would in turn influence their strategy.

They then have the challenge of instituting policies and processes that will motivate responsible behaviour. They also face the challenge of developing measures to ensure that the individual, as well as the organisation, are purpose-driven and act responsibly. This no doubt provides the platform for HR professionals to prove their critics wrong and cement their place in the upper echelons of power. To do that, HR departments have to reinvent themselves. Individuals who survive this transition would spawn a new breed of professionals that everyone would aspire to become.