Episode Transcript
[00:00:05] Good morning, everyone. Today I'm going to skip the HR technology stuff for a week, and I want to talk to you about systemic HR and the dynamic organization. So, as many of you know, for the last roughly two years, we've been conducting a pretty significant research study on the future of the HR profession. And that includes the skills and capabilities of each individual HR person and the structure and operations of the HR function, which are two different topics, but very, very interrelated. And at the same time we were doing that, we were also doing a study of organizational mobility, internal mobility, and agility, which we called a dynamic organization. And it turned out the two are very, very linked. And for those of you that are corporate members, you can get access to all of this research to read and listen to. And for those of you that aren't members, we're going to be offering more of this available to nonmembers in a much lower cost format. But I would suggest you join our academy, because that's going to be the vehicle we're going to use to distribute it. So, taking a step back, the profession we're all a part of has been around a long, long time, and it started as the personnel department.
[00:01:22] If you ever watched the office and looked at Toby, there was always this HR role to kind of run the payroll and take care of the basics of hiring and staffing and maybe a little bit of performance management and how to let people go and so forth. And that was certainly long before I was in HR, and that function existed probably in the 18 hundreds, probably before then. And then along came I o psychology, and then later, much more hierarchical organizations, and the need for succession management, performance management, cascading goals, leadership development, corporate universities. That was really popular when I started in the early 2000s, back in the days of GE and jack welch. Of course, we had the digitization of all of our companies. And then we had interest in big data people, analytics, retention, the war for talent, the need to hire technical people. A much more focus on technical capabilities. In the company a focus on diversity and inclusion, of course, which used to be called affirmative action, but then was accelerated with the George Floyd incident and has become a whole theme of HR management development, leadership development, new models of leadership. And now, of course, we're dealing with hybrid work, pandemic response, mental health, well being, flattening of organizations, skills systems, four day work week unions, et cetera. And so what's basically happened, if you draw a line from the past to the present, is this profession, which started as very much a tactical back office administration function, has become very, very strategic. You all know that we used to talk about getting a seat at the table as a big deal. Well, there's no question that HR is at the table, because all of the issues companies face, especially now that the labor market is so competitive and it's going to get worse, are people issues. And as I've said many times, every company is in the people business, whether you like it or not. Your people are your company. And if you don't manage your people well, your company won't perform well. You'll have a union, you'll have high turnover, you'll have low performance, or you'll just fall behind. So HR is in the middle of all this, and we've been asked, as all of you know, to step it up, become more strategic, solve more strategic problems. Don't just focus on these internal systems, but get out there and help us run our companies, transform them, implement change, develop new leaders, improve the employee experience, and by the way, help us become more productive because we can't hire so many people anyway. So we've got to get more out of the people we have. And that is a fundamental change that has happened. Now, when we look back at the job titles that were in HR, by the way, a lot of this research was done in partnership with LinkedIn. Certainly the demographic stuff seven years ago versus today, there are almost 35% to 40% more job titles in HR and roughly 25% to 30% more skills in HR. So this profession that started as something relatively simple is really complicated. I mean, the reason I like it is because everything from economics to culture to psychology to technology to AI, to management to business, to accounting, is all in HR. So people that used to think HR was a fallback position for their career when they couldn't find anything else to do, it's not like that anymore. It's a very noble, important, complex profession. And one of the things that I've talked about many, many times is we need to be what I call full stack HR professionals. Those of you that are recruiters or L and D specialists, or payroll people, or compensation people, or diversity leaders, you've got to get to know these other domains because your relevance is dependent upon your ability to solve problems that cross domains. So that's why we built our academy. That's the reason we spent so much time with you guys talking about this stuff.
[00:05:28] And I hear this over and over and over again from our clients, that we need to empower and energize our HR teams to just become more cross trained and ambitious with their personal skills so that they can participate in these bigger projects and these bigger initiatives. Now, the function of HR is a different topic. When I entered this world in the early 2000s as an analyst and somebody mentioned the word coe to me, I was kind of quiet and I wasn't even sure what it meant. And then one of the people that people saw said, oh, a coe is the center of excellence. And I kind of laughed and I said, oh really? That's where all the excellent people work. So all the non excellent people are not in the center of excellence and the excellent people are in there. I didn't make any sense to course, you know, I now understand it, but what I realized was going on is that what we were basically doing is developing specialties and functional specialties in the organization. And so what we did with the help of a lot of consulting firms, I won't mention any names, is we designed all of our HR functions around the model of the 1980s it department. Now, I don't mean that as a negative thing. I'm just telling you the way it went. I was in IBM in the 1980s, and I worked in 1980s it departments. And what they were was big organizations of it people working with their own computers, their own machine rooms, their own backups, their own disk drives, et cetera. And they had specialty groups. They had a security group, they had a backup group, they had an operating system group, they had a database group, they had an applications group. And each of these groups were structurally siloed to do different it functions on behalf of their employees, just like HR. And then there was a sort of a service center that sat on top of them. That is exactly the way we set up HR. And if you look at any of those models of coe models, they basically came from it.
[00:07:33] Because what we were trying to do is reduce the cost. Because the way HR departments grow is they tend to become very splintered. When the company is small, you've got an HR leader or manager, and he or she does the hiring and maybe the payroll and deals with some of the basic performance stuff. A little bit of leadership and culture. And then the company grows, and we have a second HR person. A third HR person. Then there's a recruiter, and then there's somebody hailing and learning, and then there's somebody responsible for comp, and then there's a diversity person. And these people kind of come on, and then we buy another company. Then we open a new office. Then we go into a new country. Oh, we need an HR person over there, we need an HR person over here. And pretty soon we got a lot of HR people sprinkled all over the company. And the ratio of HR people to employees goes up and up and up, and we start to say, whoa, how did we get all this overhead? And we come along, and by the way, we've got 15 systems and five payroll providers, and nobody can find any data. So let's do a transformation. So we hire a consulting firm, they bring in workday or SAP, and they set up COEs for us. And by the way, the COEs are what I call federated in the sense that the head of learning and development doesn't run a centralized group, they run a distributed group, as does the head of recruiting, as does head of Dei and all the other functions. And that process, which has been going on for a long time, is a cleaning up process and it is designed to improve service delivery, reduce the cost of HR, get better data, centralized systems, and eventually improve the employee experience. And I was involved in a lot of these projects at Deloitte and most of them revolved around the tech where somebody said, I'm tired of this old PeopleSoft thing, let's upgrade to workday. And by the way, while we do that, let's fix the way we're organized in HR. And this is still going on. I just had a big meeting with an insurance company this week that is going through this right now.
[00:09:38] But you're basically getting to level two in our four level model of systemic HR. You've essentially reduced the cost of delivery and you've centralized many of the functions, but you've created specialty silos.
[00:09:52] That is not where we're trying to go. That is a means to an end, but is not definitely not the end. What comes next in systemic HR, and by the way, I'm walking you through the four levels of maturity is building integrated solutions. So of course, the next thing that happens is somebody says we need a new onboarding program. We need an employee experience, focus on well being, we need a management development for first line managers. We need a new program to deal with labor relations and whatever the problem may be, or our sales performance is low, or our R and D group can't hire anybody, whatever. So one of these problems comes up and they're all cross disciplinary.
[00:10:35] None of those are simply a hiring problem, simply a pay problem, simply a management problem, they're all of that. And so we start to say, oh, let's implement Agile or whatever design thinking, whatever buzword you want to call it, and let's get a group of people together and design a solution. So you pull people out of the COEs, you pull multiple of them from different COEs and you work on this thing and you develop it. So you develop an onboarding program and you realize that the onboarding program for the It people in California is not the same as the onboarding program for the truck drivers in Minnesota or for the refinery workers in Russia. So oops, the onboarding program is a little more complicated than we thought. We need to build a global onboarding program, so we need a new platform for that and we need to customize it and we need to have governance around it, so we know who's responsible for what version of it and it gets a little more complicated. And now we're in the product management business of managing what we would call a product or a process or an offering. It's got a lot of names or a solution and so now this little agile team that once got together to design this is stuck with it. We can't just go back to the coe's and say, we're done now. We need to take care of it. We need to talk about it with the service centers and make sure they know what it does. We need to operationalize it. We need to look at the tools behind it and so forth. And this is what we call level three of systemic HR, where we're building solutions. And these solutions are everything from a hybrid work program, a new hire alumni attraction program. I mean, you know what I'm talking about, a talent mobility program, a program to improve management effectiveness under low performance, on and on and on. And it's hard to put these in a coe because the coe's don't own the total solution. So you create these groups, or sometimes they're called pods. In some companies, they take a whole group of HR people and they assign to one population. So there'll be a group of HR people responsible for the nurses in a hospital, because the nursing population in a hospital network is different from the It and administration and medical professional groups. Or we have a group of HR people clustered together to work on performance of sales, the sales organization. And that's really a big step forward because now we're getting out of the world of service delivery and into the world of problem solving. And we're developing these solutions, and we're trying to figure out how to implement them in our technologies, and we're trying to operationalize them and we're trying to own them. And that's why we call these productization. Because as I've learned in my career, nothing ever ends.
[00:13:25] As soon as you build something, it gets tweaked and changed, and we got to iterate on it and evolve it. So now the HR department has got a bunch of coe service centers, business partners, and then a bunch of offerings. By the way, in the middle of this transition from level one to level two to level three, the business partner role changed. At level one, the business partner is a generalist, somebody who kind of hangs around and does administrative work for people. At level two, we call them business partners. And theoretically, we ask them to be strategic. In most cases, they're not. They don't know how to be strategic. They don't know what strategic means. They're not trained in organization design. They're not trained in comp. There's things they have different areas of weakness. So we get a lot of demand for full stack HR training amongst business partners. And by the way, I think an evolved company, the business partner role is a very strategic role. And everybody in HR should be a business partner at some point. So they get a chance to stand off and sit in the meetings with the senior leaders of a business area and deal with the issues. Holistically because what the business partner is doing at level two and level three is they're interfacing with the COEs and the solution groups to make sure that the business units that they support are getting exactly what they need aligned to their needs. And it's hard for them to do it without a business partner because this 1980s It department doesn't really have a solution group or a consulting group, which then leads us to level four.
[00:14:59] At level four, and we've debated the term for this, and you'll see this in some of the material we're going to launch. You move from a product and solution focus to a problem focus, where we really design HR around problem solving, consulting. And the analogy that we've been using is the US post Office. The US post Office is a solutions organization.
[00:15:26] They have learned through decades of work and billions of dollars how to deliver the mail better and better and better. Their product or their offering is the mail. And they're really good at getting it to you every day, including Saturdays, not Sundays on time. They've got trucks, they've got delivery, they've got packaging, they've got technology, et cetera. They don't deal with email. They don't even know what email is. They don't realize that the business they're in is actually eventually going to go away. They're just selling this product that they have. A consulting or solution oriented company is Netflix. Netflix is in the business of delivering entertainment, not delivering CDs. And as you know, they did start with CDs because that was the technology at the time. And then they moved into online videos, and now they're a production and media company and they are basically chasing a problem. And that's the difference. And we call that falling in love with the problem. If you're an ambitious HR person and you're in a business meeting and you look around the room and you see what's going on and you sense there's a problem, you should be thinking to yourself, how can I help to solve this problem? What are the tools and information and experience or expertise that I have that can help this group perform at a higher level? Maybe it's recruiting, maybe it's assessment, maybe it's development, maybe it's something else. Maybe it's org design that is level four. And what we find in the level four companies, and we roughly assess that about six to 7% of companies are at level four is. They tend to be flatter HR organizations, more dynamic. They have much more cross training. Their HR professionals rotate around a lot into and out of the business. They really professionalize the HR function. And there have been companies that have done this for years. I have met with many very sophisticated HR companies over the years. UnitedHealth Group. American Express? Verizon. Others? Where I met people, that where they really respected this profession and they really took it seriously. And they took business executives and moved them into HR as a rotational assignment to professionalize the HR function, but also to do the same thing in reverse to make sure that the people in the business units understood what this HR function was trying to do. But this is an evolution. This is not an operating model where you flip a switch and you move from point A to point B. This is a stepwise change in operating model, in skills and agility and relationships in the HR function. And there's a lot of things that get in the way. I would say for the most part, what gets in the way is vision and ambition and fear. Just like in every other part of the company. A lot of HR people are afraid of change. They're maybe not sure that they can handle a new role. They haven't been told that this is in their best interest and they haven't been given an incentive or storytelling to encourage them to do it. They haven't been giving professional development. I'll tell you a funny story that Bill brings up all the time. When Bill was at Deloitte, he told me that the spending on Deloitte consulting training for the overall consulting professionals was around $2,000 a year or something like that, per professional, which is a high number generally from a benchmarking standpoint, but not for professional services. The amount of money spent on the HR function per head was more like $150 a year. I mean, that's disgraceful. And I'm not blaming Deloitte, but we can't operate that way when we're in such important jobs. And if you think you think a manager can do your job, which by the way, a lot of them think they can, a lot of managers think, yeah, I can do this. I know how to hire people. I know how to manage people, I know how to set up performance, I know how to pay people. I've done it my whole career. Well, just try letting them do it. They don't have time. They're not specialists at this. Yeah, I can play with my PC, but I don't want to reset the password in Outlook. I'd rather have the It people do. It's a waste of my time and they're much better at than I am. We are specialists in the human capital domain and we need to demonstrate that and we need to take it seriously. And I think what holds a lot of you back is to some degree, imagination. I remember this story when I was at Deloitte. I talked to the head of It for it was actually a semiconductor company. And we were talking about organization design. We were doing design research and I was explaining to him what we had learned about agile teams and cross training and internal mobility and accountability matrices and how to create accountability in a matrix organization and the Agile model spotify, all that stuff. And he goes, Well, I understand all that and I agree with it. He said, the problem I have is I have these functional groups in it. I've got the VP of this and the VP of that, and each one of them feel like they own their organization. And when I get a request for a new problem, a new application, a new system, security breach, whatever it may be, I got to go to these guys and I got to beg them to give me somebody to work on this. This is the CIO. And he said, I'm sick of it. I'm not doing it anymore. He said, I basically took away all their job titles. I said, you guys, we're going to all be peers. We're not going to have any more VPs, and we're going to focus on problems, and we're going to work on problem groups, and we're going to become more agile. We're going to redeploy ourselves on different problems at different points in time. And those of you that are VPs aren't VPs anymore. And he said what happened, of course, was a lot of the VPs quit. And he said, you know, it was the best thing that happened because they weren't doing anything anyway. They weren't getting involved in the details of what we needed to do. And now we are. Now I don't know where he is with this. Now I could call him back, be interesting to talk to him, but that's a dynamic organization, and that's what we have to do in HR. And it's not going to happen overnight, because all of the HR people in the world have been told to be specialists. I mean, that's why there's 600 job titles and 92 skills in our capability model. But just like engineers become full stack engineers, and I know lots of software engineers that know a lot of things about different parts of systems. I'm in my sixty s. I learned the database stuff early in my career. I learned about PCs when I was a young guy, and I've piled on that all sorts of new skills and new skills and new skills over time, as I've learned. And I don't forget the old things. You still have them. And that's what happens in HR. If you're a recruiter. You don't have to be a recruiter your whole life. You can become a business partner. You can work in Dei, you can work in L. D. You can do other things, and you'll still be a good recruiter. You'll pile those things on and you'll become a full stack professional. And all of a sudden you're going to become a consulting resource. This is what great consultants do. They learn through experience. And that's the way we have to run HR. Yes, we need the service centers. Yes, we need the COEs. We call them virtual COEs. They're still COEs, but that's what's going on. And we call this systemic HR. We haven't trademarked the term. We probably should, but the reason we call it systemic was when I was first talking about it with everybody here. I said we got to think about HR as an integrated system. Like the human body. When the human body has an infection, it isn't addressed by one organ. The entire body responds, the blood supply responds, white blood cells are created. Different activities happen in the hormone system. I'm not a biologist, I can't tell you. But we have to look at ourselves as our HR departments, as integrated systems that respond. And when we need somebody to work on something, we find specialists, we bring them together. They work together as a team. They solve the problem. They institutionalize the solution or not, depending on what's needed, and they go back and do what they were doing before, later. That's not that hard to do. It sounds weird, it sounds difficult, but believe it or not, it's actually very empowering and developmental for the function. And when you do that, and when you move in this direction, you're going to be amazed at how much more exciting it is to be in HR, how much more value you add and how much more efficient you'll be as an HR department. And nobody will ask you how much money you're spending. Nobody will care anymore. They'll give you all the budget you need because you're out there working on really significant, important problems in the organization. So that is the quick and dirty story on systemic HR and the dynamic organization. The systemic HR research is developed and written. Kathy Enderis and I presented it at LinkedIn three weeks ago. We will be going through it with clients. If you're a corporate client, we'll take you through the whole story. We have diagnostic tools. We're going to build a course in the academy about this. We have a very, very comprehensive research report, which is a really interesting read, which is currently for members. If you're a corporate member, you're going to get all of this. If you're not a corporate member, I really encourage you to join. We're not charging a lot of money for membership because there's a lot of value here. And you can also join our academy because we do put most of this material in the academy in a developmental way. We don't put all the detailed research in there, but we create courses around this material, and we would love to just talk to you about it. We're still doing interviews. We're going to be working on this for the next couple of years. This is not a once and done thing. This is an evolution of the profession. And what we're in the business of doing is helping you with this. We're studying it. We're talking to companies. We'll be significantly discussing this at our conference next May, which I hope you guys can come to, and lots of other ways that we'll try to get this information out to you. Anyway, that's kind of what it's all about. Stay tuned for more information and we got some big, big things to talk about in the AI world and this copilot stuff very, very soon. Stay tuned for that. Talk to you later.
