Considering my background, I may raise a few eye brows by saying “HR is dead”. Especially since I, in my latest article predicted that to create strong organizations with motivated employees is going to be the most decisive ability for leaders in the future. But “HR is dead” is merely referring to the more traditional way to run a HR department. HR has become the business worlds answer to the political worlds environment party (Miljöpartiet) – we are responsible for some of the most crucial questions but we have no mandate to make decisions and are often known to back out on promises to our followers. HR as a function has to go through a rebirth to become a respected and important part of every management groups agenda. Some companies already have this in place but far too many do not. For this to happen on a larger scale we as HR-people have to change our focus, our behaviour and our activities.
Being introduced to the organization as the new HR-Director of Stadium in the beginning of 2010 I advocated the change I mentioned above and showed the picture below. I clarified that I was convinced that “if I was successful in making people be good – 95% would feel good as a result”. I ended off by saying that the remaining 5% should look for work elsewhere.
Back at my desk and witnessed the mails come pouring in from upset people at all levels of the company. This was not a proper way for the new HR-Director to talk! Sitting with one of the HR Generalists, hours later, I was shown the development of incoming support errands over time. It was skyrocketing and to my surprise she seemed rather proud about this fact meaning that it showed how popular HR was. When I pointed out and that my goal would be to make the prognosis go the other way, that I aimed to make the HR support become redundant, she was very alarmed. Two things accord to me on my first day; that no one expected me to have anything to do with creating prosperity and that it was going to be a long and lonely journey. The irony for HR everywhere is that we are often evaluated by KPIs where we can´t be held responsible for the outcome, like Employer survey index, staff turnover and sick leave. No wonder, we way too often see HR departments left outside the business to occupy themselves with reactive supporting.
The quote from Einstein below, could very well be a defence speech for HR…
To change this rather dull view of our situation we need to find a way to prove, beyond any doubt, that HR can and should work to increase the profitability. HR´s most important responsibility must be to attract talent, secure a strong corporate culture and optimize the capacity of the organisation. Inspired by the scientist mentioned above, I´ve written this formula of how to make HR become more business driven, using three steps.
Step 1) One of the most trusted (and often overvalued) tools for HR is the employee survey which shows the satisfaction among the staff regarding leadership, environment, salary etc. I read somewhere that if you have top grades on this survey you most likely have a staff that is “fat, lazy and overpaid”. I can´t say if this I accurate or not but I know from experience that the correlation between the result on employee surveys and other KPI´s are often very low. Many employee surveys are based on asking a question twice; how important is this, and how satisfied are you about this? The larger the gap between the two results, the higher the priority of the question. The launch of the survey is often awaited with great enthusiasm and respect from everybody but the result is usually received with a yawn. When it is time to execute the action plans the interest and the accountability can drop to almost zero. Everyone expects HR to execute a survey but not many are eager to change in reference to the result. They just don´t´ believe it´s worth the sweat.
Usually this is due to that we don´t agree on which questions are important. I once checked how the management group (who had the mandate make decisions about action plans) rated different questions in reference to the importance and compared it to the staffs rating. Not surprisingly I found the two camps rating the importance almost 100% conversely, hence the lack of engagement around the action plans… If this is the case for you, your choice is to either cancel the survey or find a way to identify the questions that have real impact on development and prosperity.
Reading the book “The ultimate question”by Fred Reishheld in 2011, I found a, to me, new KPI – Net Promoter Score*. NPS measures the recommendation-willingness, loyalty and motivation. Building an employee survey that can detect the questions that have the highest correlation with NPS will ensure that you find the questions that have the greatest impact on the organizations engagement and therefore give you the most bang for the buck. This way the system controls that every manager gets an action plan based on what his/her group needs to do to get more motivated. This closes the first part of the formula; HR activities-motivated employees.
*NPS is produced from one simple question – How likely it is that you would recommend X to a close friend or colleague? Using a scale from 0-10 you then divide the respondents in three groups; 0-6 are detractors, 7-8 are passives and 9-10 are the promoters. By detracting the share of detractors from the share of promoters you get the your NPS. (If you have 40% promoters and 20% detractors you have a NPS of 20).
Step 2) Does customer satisfaction equal profitability? Most costumer surveys I´ve come across have the same problem as employee surveys, the clients that give their highest credentials are not necessarily the ones that are most profitable. This can create a hesitation in making the clients more satisfied – will they buy less from us if we succeed…? According to Fred Reichhelds (author of The Ultimate Question)studies, using NPS as a metric and comparing it with sales ensures a 100% correlation. From my own experience, studying over 2000 clients, I can confirm this. (The group that bought for 4000 SEK gave double the NPS as the group that bought for 2000 SEK etc etc) Using NPS as a metric for customer satisfaction gives you a trustworthy evaluation and ensures the second part of the formula; happy clients – profitability
Step 3) Last but not least, the most important question – How much does motivated employees affect satisfaction among clients? Most important because this will determine the management groups interest in investing in staff motivation. Depending on what business you´re in, step 3 can either be really easy or very difficult to ensure. Since I was able to see what store the client had purchased their products in, it was easy for me. I just had to compare the correlation between the client-NPS and the employee-NPS for that particular store. We found the correlation to be close to 0,5. This avouched the inspiring conclusion that if you can raise the employee-NPS with 10%, you will raise the customer-NPS with 5%, and as a result, the sales with same percentage! It also concludes the formula…
Some might argue that this is wasting time proving something every sensible person knows, that a motivated and engaged organization is enormously influential to the profitability and the prosperity. They might claim that it´s better to of just conduct the change. But it´s never wise to enforce a change on a team/company that is not ready for the change, nor is it easy.
A company, every company, is a self-filtering system. This means that the wrongs you neglect to adjust will eventually adjust your organization into a group of people who are ok with the wrongs. It has become “home” to them and they are not ready for change. In these situations, focusing on questions that correlate with NPS and systematically taking controlled steps through action plans is a safe way to move into a business-driven HR.
But if and when an organization is ready, HR should change the direction of its work and start with the end in mind. You can do this by taking three steps starting from the vision of where the company wants to go, who and where you want to be in five years. 1) Ask yourself – what are the major differences between the vision and now? What need to happen? What are the big steps?
2) Once you have the answers to that, ask yourself – who can make those changes, what kind of competencies and personalities do these changes require?
3) When you´ve identified that ask – what do they want? What attracts them? What is important to them? Is it salary, leadership, office space, ability to work from home? Most probably you will find it to be simple things like a purpose, influence and mastery. But find out for yourself and then – create that! And the rest will happen by itself!
This is the real HR mission – to create a company that filters its organization according to its vision. To unify what the company wants with what the employees want and create a culture that keeps the organisation engaged and motivated. And once you have that, your company will attract people who naturally fit in to your organization, your culture and your vision. Now there´s a goal worth a business-driven HR departement!
Long live HR.
Senior Consultant, THREAD