Barriers to Change


There are four fundamental barriers to change. First, although companies may say somewhere in the first couple of pages of the employee handbook that people are their greatest asset, few really live by those words. The heart of the problem, which virtually never is acknowledged, is the pervasive sense that employees are merely an operating cost, not a source of value creation that can be changed and leveraged. Thus, expenditures on human capital almost always are considered as costs to be minimized rather than investments to be optimized. And while from an accounting standpoint the workforce is deemed a fixed expense, in down cycles it is treated as anything but fixed.

A second, more complex phenomenon is that no one really “owns” the human capital issue. Organizations are not structured to create accountability for human capital. Think about it. In your company, someone is directly responsible for R&D, production, sales, customer service, finance, facilities, computers, trucks, and so on. Who is in charge of human capital? The human resources HR department? Not really—not in the same way someone is in charge of accounts receivable or buildings. HR has important administrative duties. It helps with recruiting. It usually takes the lead in training and development. It has major responsibilities in advising senior management on rewards and other policies. The best HR managers act as consultants to business units, but they aren’t responsible in an ultimate sense for the people throughout the enterprise. If anything, at least on their bad days, they tend to blame line managers for mishandling people and people issues.

So what about the line side? Obviously these managers look after people on a day-to-day basis, but their responsibility for people is more limited than most might think. They typically don’t make many people policies or prescribe people practices; they seldom are allowed to “experiment” with people tactics; they are in no position to see or influence strategic decisions about human capital. Most line managers would say, therefore, that they don’t own the people issues. On their bad days they tend to blame HR for their people difficulties.

Of course, no one will ever be fully in charge of people, but that begs the question. Who is going to think strategically about human capital? Who is going to assure that the company’s human capital strategy is aligned properly with its business model? Who is going to measure the impact of people on the firm’s performance? Managing the purse strings is not sufficient. Swings of several percentage points in returns on labor costs are in play. For most large companies, even a 1 percent greater return on the labor bill would represent tens of millions of dollars falling straight to the bottom line.

The subject needs top-of-the-house attention and leadership, which we’ll take up in detail in Chapter 12. In many companies that will require CEOs to wade into this untidy mess with some of the tough questions we have just mentioned. Those who do will launch a new era of creative and effective human capital management.

The third problem is that most practices and policies are made one at a time and are not connected to the others. Therefore, companies sometimes make decisions about leadership selection exclusive of the business model, decisions about benefits independent of pay decisions, decisions about pay in isolation from performance drivers, decisions about spans of control decisions decoupled from staffing models, and so on. Finally, all those individual decisions are exclusive of the larger organizational context. As we’ve said, organizations are systems, but most are managed like a set of discrete and unrelated events.

The fourth and most challenging factor that confounds the management of people is the long-standing lack of good internal measures. To fill the void companies resort to all kinds of inputs. Decisions are based on instincts, anecdotes, and management myths—legends that have, in the absence of better science, taken on the mantle of “truth.”

In the absence of sophisticated measures, the most commonly used assessment is benchmarking. It is a “natural” process. It’s baked into all people to want to know how they, not to mention their houses, dogs, and cars, compare with others. One can’t get away from it, and it certainly has utility in business. But it also has limitations. Most benchmarking leads to the identification and use of best practices, which can make for terribly wrong decisions. Why, for example, would we expect the benchmarks or best practices at a GE appliance factory to be uniquely meaningful to SAP?

These barriers can be hurdled by measuring what up to now has been largely immeasurable: finding those things in your organization that uniquely contribute to your firm’s performance (or erode it) and managing them aggressively. The requirement for doing that effectively is establishing causal evidence with which to make powerful business decisions. All that amounts to a new science for managing people, and that is what this book is all about.




Play to Your Strengths(c) Managing Your Internal Labor Markets for Lasting Compe[.  .. ]ntage
Play to Your Strengths(c) Managing Your Internal Labor Markets for Lasting Compe[. .. ]ntage
ISBN: N/A
EAN: N/A
Year: 2003
Pages: 134

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