by Dave Ulrich
A new senior Chief Human Resources Officer from operations reflected on his first 90 days in the job. He noted that HR folks seemed consumed with improving talent processes. He observed that they had developed many good disciplines at bringing people into the organization and helping them be productive. He said that he felt that they were 65 to 75% up the “S-curve” of managing talent. But, he realized that the challenge in his organization was not about talent alone, but about building a culture. He shared that his organization was changing its business focus and merely getting good people into the organization was not enough; the organization needed to create a more adaptive culture. He believed the tag line, “culture eats strategy for lunch” and he felt that HR should be the steward of culture as well as talent.
In the last 15 to 20 years, leaders have been encouraged by remarkable work captured in the “war for talent.” (The book with that title, authored by Ed Michaels, Helen Handfield-Jones, and Beth Axelrod came out in 2001.) Many have built systems for bringing people into the organization (sourcing, having a value proposition), moving them through the organization (development, performance management, engagement), and removing them from the organization (outsourcing). The war for talent was a great battle, but we now need to turn to victory through organization. Talent is not enough. Individuals are champions, but teams with championships.
In today’s rapidly changing business world, the challenge of building the right organization complements and super-cedes the talent challenge. It is interesting to note that the Chartered Institute of Auditors has prepared recent documentation to help auditors monitor culture. Getting good people into the organization fails with creating a culture where people work hard on the right things. One of the challenges for HR professionals to facilitate building the right organization is that there are related concepts, terms, and prescriptions that require clarity. Are organizations to be thought of as resources, core competencies, health, climate, processes, values, shared mindsets, organization types, or systems?
With these confusing concepts, no wonder leaders have difficulty in creating competitive organizations. The concept clearly matters, but it seems impossible to articulate or define with any precision. Let me propose a three-step process for leaders to bring discipline to creating victory through organization.
First, organization capabilities represent what the organization is known for, what it is good at doing, and how it allocates resources to win in its market. Organizations should be defined less by their structure and more by their ability to establish the capabilities required to win—that is, to serve customers in ways that competitors can not readily copy. Organization capabilities might include ability to respond to or serve customers, drive efficiency, manage change, collaborate both inside and outside, innovate on products and business model, access information, and establish the right culture. Leaders can facilitate capability audits to determine if the organization has prioritized the right capabilities to win.
Second, culture represents the pattern of how people think and act in the organization. While organizations can have many capabilities, culture is likely to the key for future success. The right culture takes what the organization should be known for by key customers and uses this external identity to shape internal thought and action. Leaders can audit the extent to which an organization has the right culture.
Third, management actions can be identified and implemented to create and sustain the desired culture. My colleagues and I have classified these actions into intellectual, behavioral, and process agendas. Intellectual agendas ensure that managers create a shared culture inside and outside the organization; behavioral agendas show the extent to which all employees behave consistently with the desired culture; and process agendas institutionalize the culture through management practices.
The three dimensions in this organization logic parallel psychologists’ understanding of individuals. Individuals have personalities (parallel to organization capabilities) that have been categorized into the “Big 5”: openness, conscientiousness, extraversion, agreeableness, and neuroticism. These five personality traits capture domains that can be observed and measured. Individuals then have habits (organization culture or patterns) that determine how they approach life. Psychologists say that 50% to 80% of what people do come from habits or routines. These habits show up in how people think (cultural intellectual agenda), act (cultural behavioral agenda), and manage emotions or sentiment that signal and sustain behaviors (cultural process agenda). Psychologists who diagnose individuals look at each of the three levels (personality, habit, action); likewise HR professionals who assess organization can look at three levels (capability, culture, and management action).
The three steps are important ones. If leaders who manage talent, leadership, and culture bring similar rigor to organization as they have to talent and leadership, they will add even more value to their organizations. The wars for talent will be changed into victories through organization.
Dave Ulrich () is Rensis Likert Professor of Business at the University of Michigan and a Partner at the RBL Group. His latest book is Leadership Capital Index (Berrett Koehler, September).