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Archive for November, 2011

When the dotcom bubble burst in the early part of the decade, a startling trend was begun in the Information Technology industry. Companies that traditionally focused their staffing efforts on finding and hiring full time employees are shifting that focus to hiring contract resources on a project by project basis. For companies, the continual drive to reduce costs related to the IT functions of the company is resulting in migration to the “on demand” model.

Given this trend, there are many shifts necessary in traditional thinking for IT people to be successful. Workers in the IT industry need to understand the effects of this shift in corporate hiring practices. The days of going to work from 9-5 at a company for 20 years and retiring with benefits are long gone. This requires the IT professional to consider such factors as providing for their own retirement, insurance, personal brand marketing and flexibility in their requirements for IT contracts. Regardless of the decision by the Supreme Court regarding the individual mandate portion of “The Affordable Health Care Act”, businesses in the US are already positioning themselves to reduce insurance benefits offered to employees.

As the average contract term continues to shorten, people will need to learn to market themselves to companies. Success in Personal Brand Marketing is already a key indicator for personal success in the IT market and will only grow more important as the trend continues to develop. Likewise, the duration of individual engagements with a company are forcing a longer term view for contract resources. Rather than the standard 12 month contract that was the norm in 2000, today it is not unusual to see an individual engagement lasting days or even hours. For the traditional contractor, this trend requires a fundamental change in thinking. The person must be prepared to accept shorter duration contracts and rely on their ability to provide service that will cause the company to re-engage them.

For companies, the continual drive to reduce costs related to IT functions will necessarily result in migration to the demand model. In other words, rather than hiring an employee or a long term contractor, companies will look to maximize value for their IT dollar by streamlining their use of IT resources and eliminating waste in the form of costs associated with an IT professional’s idle time. Often one of the biggest inefficiencies within IT is the time spent by employees or long term contract resources while they wait for project dependencies to be completed by other people.

The Demand model is here to stay and is a natural extension of the current cloud model. Companies all over the world are realizing the benefits of reducing their hardware and software costs by moving to the Cloud. Staffing is the largest cost in any IT budget followed closely by Outside Services (contractors). IT leadership is recognizing that the same benefits provided by hardware and software Cloud vendors are available to them in the staffing arena. As the number of providers of demand services increases, more companies are going to take advantage of the ability of these resources to provide real cost relief in basic tasks such as maintaining IT assets. As competition continues to increase, it will drive pricing down, resulting in a continuing cycle of reduced cost to the business.

Human resource management is not always or solely the presentation of gifts. Sometimes bad news has to be delivered. We aren’t thinking here of bad news as in, “You’re fired,” in which the relationship is ended. Think instead of “You didn’t get the promotion” or “We won’t fund that training in your case.” It sometimes helps to be able to layoff at least some of the blame in such instances. Doing so can help preserve cordial relations between a superior and subordinate. In addition, hearing bad news from a third person may help the person getting the bad news to save face, a psychological fact of life that has a lot to do with the persistence of management consulting as an industry.

As for objectivity, it is sadly the case that some general managers are less than paragons of objectivity and virtue. Some are susceptible to corruption, some attend to private agendas, some are prejudiced, and some are simply capricious. To place the administration of human resources practices solely in the hands of such a manager is unlikely to produce good outcomes. Moreover, to place the administration of human resources practices solely in the hands of a virtuous paragon can lead to (incorrect) feelings of caprice, corruption, prejudice, and so forth. Not all paragons have had the time and track record needed to develop the untarnished reputation they deserve, and an employee who is denied a promotion or rise by a paragon can be forgiven for sometimes confusing his own unhappy outcome with managerial discretion exercised unfairly. And when an individual manager is given a lot of authority, even if she is incorruptible, the temptation to try to corrupt her might prove too strong for those whose futures she will influence.

Even a line manager who is a veritable paragon of virtue and who is recognized as such has a lot of concerns to balance. When some of those concerns involve measures of performance that can be influenced quickly (such as product shipping date) and others involve noisier, long-delayed outcomes (such as the manager’s and firm’s reputation with the workforce), line managers might make compromises that are not in the organization’s long-term interests.

Individual line managers may not fully understand or appreciate the organization’s human resources strategy and policies, and the long-term reputation sought with employees. This can be a particular problem in settings characterized by relatively high rates of managerial mobility, which can impede stability, consistency, and “memory” as far as human resources management is concerned. Simplicity, consistency, and clarity must be traded off against the complexities of real life.

For all these reasons, human resources experts in particular specialty areas can play an important role in advising and educating line managers; helping sustain a coherent and consistent human resources philosophy throughout the organization; and even, in some cases, acting as independent authorities or appeal officers, in case employees feel aggrieved by line management decisions.

In-the-field human resources specialists can also help in evaluating and improving the performance of line managers. It is perhaps hardest to evaluate performance in the area of human resources strategy and policy formation, but even evaluating how well policies are implemented is difficult. General Managers have a lot of things to attend to, and it is therefore expected and natural that human resources will be pushed toward the back burner.

The formulation of human resources strategy and policies specialists should act as advisors to and educators of top management. It is important that all of general management, and most especially top management, are human resources literate. But being a general manager usually means being literate about a lot of stuff and an expert on rather little, and unless the CEO or the division (or business unit or regional) chief has a human resources background, she is unlikely to be a working force expert. Some of human resources management is pretty straightforward common sense. Take, for instance, the design and redesign of performance appraisal systems. Given the number of different goals that performance appraisal serves, it is common sense how to achieve an appropriate balance. It’s even harder to anticipate all the feedback effects that a change in performance appraisal practices will bring.

Perhaps most subtle of all is the notion that change in performance appraisal for its own sake may have benefits. Or, to take a somewhat more mundane but still very critical aspect of staffing and recruiting, consider job interviews: Should they be unstructured, so that a skillful interviewer can follow leads that develop in the course of the interview; or should they follow a script, so that there is a firmer basis for the inevitable cross-person comparisons that follow interviews? Should they be conducted one-on-one, which may encourage the candidate to relax; or many-on-one, to reduce interviewer caprice? The general point is that a specialist – someone who follows the literature on human resources management and is educated to appreciate the nuanced conclusions of human resources research – can help find answers to questions that general managers have and, even, to recognize important questions that might not otherwise have occurred to the general manager.

Indeed, even when the CEO or division chief is highly human resources literate, the conflicting demands on that person to pay attention to marketing, finance, operations, and so on are likely to mean that he or she won’t have the time to follow the latest thinking on the subject, or even to devote careful thought to these issues. A staff that concentrates on this matters-not to the exclusion of other matters, but with human resources on the front burner all the time-is important, as long as the chief doesn’t abdicate her decision-making authority (or the authority of the executive committee) on these issues.

A good example of this role being enacted by specialists is provided by the vice president for human resources in a prominent, high-technology global corporation, who recently gave a presentation to a group of managers participating in an internal management development program. The company, which had grown at an astounding rate, was less than two decades old, founded very much along the “engineering” model. The firm had been at the cutting edge of a number of major technological developments in computers and networking, and it had been able to attract extremely talented technical personnel by offering opportunities to work at the technical frontier. The company also offered extremely generous and comprehensive benefits, financial and otherwise. Yet as the company had grown and matured, it had inevitably lost some of its initial “start-up” allure, and its innovations had prompted heightened competition from other leading technology companies. The head of human resources had become increasingly concerned about how the firm would continue to attract and retain the technical elite.

Accordingly, he commissioned a comprehensive and carefully designed survey of current and former employees, as well as information obtained from prospective employees, designed to answer the question: What differentiates this firm in the labor market and what are the dimensions on which it can be the employer of choice in a world of increasingly fierce competition for technical stars? According to the director for human resources, after they methodically analyzed the data, the answer came back loud and clear about what distinguished his company from competitors in the labor market: absolutely nothing. As a result, the head of human resources persuaded senior management at this company to launch an initiative aimed at redefining the company’s culture and human resources practices around the idea of being a “career” employer. He believes this will give the company a competitive edge against other technology firms, which have tended to deemphasize commitments to their employees and play up the notion that individual employees must be responsible for their own careers.

The formulation of the organization’s human resources strategy begins with basic questions concerning how employment will be structured, what corporate culture will be fostered, how careers will unfold in the organization, what sort of employees will be sought, and so forth. Within this general category of tasks we include both organization-wide human resources strategy and the tailoring of that strategy to specific business units, regional units, functions, or divisions.

Especially important in terms of organization-wide strategy are answers to the questions: How consistent should human resources policies and practices be throughout the enterprise? Where are distinctions in policies and practices (across locales or employee subgroups) desirable? How much latitude should particular organizational units be given in formulating their own human resources strategies?

After the broad outlines of strategy have been set, questions about general policies arise, such as: What will be the broad base of compensation and performance management throughout the organization or in particular units? What tasks will be outsourced, and will the outsourcing be done via labor contractors or independent contractors? What training will be done in-house, and what will be outsourced, and to whom? It is hard to draw a line between strategy and policy, and we will not make any attempt to do so: In this category we will include any human resources related activity that sets rules for the management of human resources that apply broadly to groups of employees.

Formulating strategy and general policies, it seems to us, is a managerial task of the utmost importance. It is fraught with ambiguity; there is no checklist of what to do or what to think about. The outcomes are noisy-how do you know if you’ve succeeded? Results often take a long time to be realized. Interdependencies with other parts of business strategy are tight.

At the same time, dependence on local environmental conditions can be important, so the local environment must be well understood by those who formulate human resources strategy and policies. Finally, the tasks here strongly mix guardian and star elements. Poorly aligned or inconsistent human resources policies and practices can be devastating for an organization. At the same time, the ability to see beyond conventional wisdom, to put together a human resources system that works especially well, is as potent a competitive weapon as one can imagine.

- Implementation of Strategy and Policies. In this category we have in mind tasks that involve nontrivial judgment in fitting general policies and procedures to specific cases. Performance evaluation of individuals and teams, crafting job designs, decisions on whom to hire (and where specifically to look, although this could be construed as part of policy formation), decisions on whom to promote, decisions on training for individuals, specific layoff decisions, and the like all fit here.

Ambiguity in these tasks is not particularly high if a well-formed set of human resources policies and practices is in place; however, outcomes are noisy and feedback can be substantially delayed. Interdependencies with other parts of the business can be substantial; decision-makers should have a fairly well-developed “big picture” of the organization or, at least, of the specific function involved. Because of reputation and social comparison effects, these tasks are predominately guardian roles, although especially when it comes to recognition of talent and accurate placement of individuals, some star aspects are involved.

- Record Keeping, Compliance, and Personnel Service Delivery. Here we have in mind those tasks that, unfortunately, have come to dominate many line managers’ perceptions of what the human resources Department does: compliance reports; keeping employee records; filling out forms for benefits and payroll; and so forth, on down to buying the beverages and pizza for the regularly scheduled employee beer blast.

There isn’t a lot of ambiguity here and performance is fairly easily monitored. The job is a mix of some guardian and mainly foot-soldier tasks: Screwing up compliance reports can get the firm in trouble with legal authorities, and a bad benefits office can reduce employee morale pretty quickly, but management that isn’t completely asleep or complacent can usually avoid the big disasters in this realm.

This enumeration of the tasks involved in doing human resources management helps clarify a root problem with how human resources is traditionally organized. In the traditional organization, this bundles together all these tasks, a small fraction of the activities account for a huge proportion of the value added by the function, by creating potential upside and/or helping the organization avoid downside disasters. In contrast, most of the activities conducted, measured by time expended or paper consumed, are the routine foot-soldier tasks, perceived as adding little value by managers and employees. Complying with rules and filling out forms imposed by central human resources regarding job searches, performance appraisal, or compensation and benefits – or being required to have a human resources representative present during a sensitive conference with a subordinate are frequently not viewed as helping matters very much. And employees, once they are hired, often interact with the human resources department only when they have a problem or concern, so they may not have an especially positive view of the function either.

In any event, it is not altogether surprising that a function that is perceived as responsible for explaining benefits programs, processing change-of-address forms, complying with governmental regulations, and enforcing policies that limit managers’ discretion on how they can treat employees-or that is touted as the “conscience” or “kinder, gentler side” of the corporation-is unlikely to be viewed as a hard-charging, tough-minded, strategic business partner.
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Good and objective measures of performance are hard to come by. Giving human resources specialists a role in evaluating general managers may turn recommendations from the same specialists into something closer to “commands,” an outcome we would very much like to avoid. On balance, however, this is a role that can often play and a role that ought to be undertaken by someone; so this is a task we urge you to consider assigning to specialists. And there is ample precedent for such a role. After all, many companies have used a similar approach in other arenas-for instance, having specialists charged with overseeing corporate quality or ethics initiatives are responsible for training, coaching, and helping to evaluate general managers in contributing to those initiatives.

A dotted-line relationship between service providers and (especially) in-the-field human resources specialists is an excellent idea. Should you hire for this newly configured human resources function? What sort of training should you give them? What kinds of career paths should they follow?

One should think of these people as “nearly” general managers who specialize in these issues. They should be trained in business generally. They should be interested in and knowledgeable about business, particularly your business. As part of their on-the-job training, they should get exposure to the other business realities facing your enterprise. The reasons should be obvious: To be successful, human resources needs to be integrated with other general business concerns. A specialist, in an advisory position or otherwise, who doesn’t appreciate the larger general business picture facing the organization is poorly situated to provide sensible guidance. And even if the guidance given is sensible, this person is less likely to be able to get the ear and respect of general managers.

Think of hiring general management types and then giving them the experience and training needed to become human resources experts, or you can think of hiring human resources types with basic business training, who are ready and willing to migrate into general management. There is no reason to suspect that either of these is generally superior to the other. But it is worth pointing out that each of them poses a particular problem to be surmounted.

If you decide to hire someone with professional training, it may be hard to find someone with basic training in other crucial aspects of business. If you peruse the curricula of undergraduate and graduate-level programs that grant specialized degrees in industrial relations, personnel management, human resources, and the like, you will discover that graduates frequently are not required to have taken a course in business strategy, and sometimes not even corporate finance or accounting. Not to put too fine a point on it, we don’t think the simple net present value calculations used in a few places in any book should be off-putting to any student in any field of management. But one of the academics who anonymously reviewed a book manuscript for its publisher – a professor whom we expect teaches in a well-regarded department or school of industrial relations or human resources – suggested that such material would make it impossible to use the book for his or her students. If you hire folks professionally trained in human resources, you should be careful to ascertain what they know of a general business nature and how willing and able they are to plug any holes in their knowledge. You should verify that they are ready, willing, and able to spend time learning other aspects of your specific business. And then you should follow through, with tours of duty in other functions or (at least) with some in-house training in what your firm does and how.
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