Dr. Dave Ulrich – The Future of HR

hi my name is Dave Ulrich I’m a professor at the Ross School of Business of the University of Michigan and a partner at the rbl group as we look at the field of HR we see an evolution in the thinking HR began in the 1930s and 40s so this is time and it focused on the administrative systems of work managing the processes managing the terms and conditions of work labor contracts HR then began to shift to a set of HR practices and a lot of the focus was on staffing and training and compensation and how do we do these practices succession planning organization designed in an effective way then in the last 15 years they’ve been linked to strategy so we had some very smart people in the organization design field and HR strategy field can I look at strategy and in that mirror begin to create my HR systems we think the next step in HR is to go outside not just to look at strategy as a mirror but as a window and to say let’s look outside the company and begin to see how we can do our job better when we go outside we go to customers we go to investors we go to communities we go to government agencies and HR becomes a lever for those external factors that’s the direction that’s the focus that we CH are headed how do we do HR from the outside in and that outside in focus means that we have to begin to understand the administrative work the practices the link with strategy but we then have to connect it to the external factors that’s our question that’s our challenge how do we do that when we look at that logic we say to make that happen what we have to look at are a set of criteria and we think there are 10 criteria that we look at in building HR I’m going to overview these quickly they’re in a book that HR magazine put out last year on eBook around are we there yet we now have a stress test the first criteria is does HR add value are we focused on HR from the outside in are we focused on HR in a way that will shape and create value for the company that means we don’t look at HR in terms of what we do but in terms of what we create for other people the second criteria begins to look at the context in which we work Lynda Gratton and some other wonderful and dear colleagues have looked at the context of work what’s the setting in which we do our work we like to talk about social technological economic political environmental and demographic trends those trends should be a part of what we think about because if we’re gonna create value from the outside in INH our need to be aware of the context of that work and Linda’s work and our work has begun to define what that context is third we need to look at the stakeholders who we serve those stakeholders can be inside the company clearly the employees the organization linking HR with strategy but they also should be outside the company how are we doing HR in a way that serves our customers our investors in our community and the stakeholder model of HR forces us to go outside for example we’ve done some work looking at HR through the eyes of the customers we begun to say good reward systems are not good because they have internal criteria they’re good because the customer guests through the incentive systems the behaviors that satisfies the customer we don’t want to just be the employer of choice we want to be the employer of choice of employees our customers would choose that outside in view we’re now doing work with investors we are now going to a number of investors we’ve done interviews we’ve done a large survey we’re doing focus groups what do investors want from the HR world and we’re trying to figure out that investor perspective the same could be true of communities question one do I understand HR value creation do I understand the context in which my company operates the the country the the industry social technological economical political do I understand in link HR with stakeholders both inside and outside then number four five and six what will HR focus on when an HR person sits down at a table with the business leader what’s the conversation he or she will have we believe there’s three things one is individual and the individual is about talent will I help my company have the right people will I

have the right talent well I have the right systems to sustain and build talent in the field today talent is a big part of human resources in fact some have said you’re the chief talent officer you’re not human resources and HR is all about talent we believe the talent this is the individual this is the organization is a key factor but we believe it’s limiting if all we do in HR is Bill talent we’ve missed a key piece we also have to build number six the right organization organization is how the talent works together as a team it’s the culture or it’s the capabilities it’s what we’re good at and we found in our work that there’s a couple of key capabilities we have to be able to master we have to manage innovation we have to manage service we have to manage collaboration we have to manage efficiency and we can identify what do we need as an organization’s identity that allows us to succeed the test I love to use as interesting in sports what percent of time is the leading scorer in the World Cup the one who wins the Golden Boot on the team that wins the World Cup what percent of time is the best athlete on the team that wins the tournament and the answer is generally 15 to 20 percent in basketball in American soccer British football in almost every team sport in hockey the talent 15 to 20 percent of the time will succeed 70 to 80 percent of the time it’s the organization and if I’m in HR sitting in a meeting I say do we have the right talent competence commitment contribution and do we have the right organization and the integrator is leadership do we have the right leadership by leadership we mean not just the individual leader but leadership deep inside the company we’ve just had the privilege with HR magazine of doing another ebook with norm Smallwood and I and we’ve said leadership has a set of dimensions that we can see one part of leadership is doing the basics well we call that the leadership code here’s the basic things every leaders got to do it’s generic the other part of leadership is what we call the brand do we have differentiated leaders do the leaders in our company separate themselves from somebody else and now we’re trying to say the next step in leadership is sustainability do we actually sustain the change in both individual leader and collective leadership behavior in the company so let’s go back I’m an HR person as I look out to the future what do I need to be aware of creating value in the outside not inside I’ve had some people say boy that’s not new well it is new we’ve had HR often focus within the walls we say who are the customers of HR and the answer is often the employees part right part wrong how do I create that value I understand the context of business where do I focus where do I live I understand and serve the stakeholders for my company my customers my investors my communities as well as my Cape Organization and invest and employees what do I then focus on when I’m in HR sitting in a strategy meeting what do I deliver what do I contribute to that discussion we’ve had a story told an HR person got invited to strategy they were all excited the first first strategy meeting was what do we do to do business in Asia and he said wow that’s a business issue I don’t have much to contribute second strategy meeting how do we innovate products faster wow that’s a big issue I don’t know what I’m gonna say third issue how do we manage our capital costs in our capital structure well I don’t know what to say fourth meeting not invited in any of those meetings now there’s three things we would advocate you say do we have the talent we’re going to Asia what talent issues are required how are we going to do business in Malaysia in the Philippines in Vietnam what are we gonna have to do around town where do we find him how do we promote them how do we pay him what do we do about organization and culture how do we build the right culture how do we build the right DNA what capabilities do we need to do in China that relationship culture the ability to collaborate between government and industry and fifth or fifth of other one leadership what do we need to have as leadership I now can say that’s what HR sits and contributes now how do we do that the final four questions questions seventh do we have the right HR department what a great question I struggle today how do you organize HR and in the struggles to organize HR there’s two choices that come out do you centralize or do you decentralize one option is you centralize HR and you have a single head of HR with functions reporting to that head staffing training compensation benefits OD org development reporting a head of HR the other is you decentralized and you put an HR department without structure

in every country or in every business unit we find or the third option is you do both you have some kind of shared service organization or matrix where you do a combination here’s what we have found the way you organize HR should be linked to the way the business is organized if your business is centralized HR should be centralized if your business is decentralized HR should be decentralized if it’s a combination it should be a combination a lot of people have missed allocated that we have found that about 20% of businesses are centralized government agencies single agencies small companies single product businesses they’re centralized they shouldn’t have a complicated HR structure other businesses like virgin in India Tata in the united states berkshire hathaway their pure holding companies that’s probably 10% but somewhere between 65 and 70% at 75% of companies have a shared service or a matrix organization those are the companies where the HR department finds multiple roles with a common purpose you there have a center of expertise with great knowledge the specialists you have embedded HR people the generalist and you have the administrative support they work together in an integrated way to deliver value we organize our HR department P we invest in our HR practices we’ve identified four buckets of HR practices one is around people staffing training development career management moving the flow of people one is around performance rewards and compensation one bucket of practices is communications and one is around work which includes facilities organization design managing the workflow those practices need to be aligned with the outside customer and investor they need to be integrated with each other and they need to be innovative third tool is the people in HR do our HR people have the competencies to do our work we are now into sixth rounds of studying competencies for HR people and we know what does it take to be a good HR professional and in the last data set we have a set of data of the skill sets for HR that will continue to emerge and finally is analytics do we measure our success some people put measurement first I like to put measurement last because it quantifies and informs the decisions we make that’s it the future of HR has 10 criteria ask yourself how will you do them number 1 am I focused on creating value more than activity do I focus on my receiver’s do I know who they are number 2 do I understand the context of my work setting do I understand the external social technical economic political criteria number 3 am I connected with stakeholders inside the company the employees and the cut and the organization and outside with customers investors in communities number 4 do I bring insight and knowledge and action to the talent equation can I help my company have great talent number five can I build great leadership can I make sure that our leadership team at the top and throughout the company is superb number six can I create the right organization can I create the right set of capabilities and culture that helped us go forward and finally number seven do I build the right HR department have we put our HR resources together in a way that delivers value number eight have I aligned integrated and innovated my HR practices or design one of the key practices staffing training compensation have I integrated number nine have I invested in my HR people are we taking care of ourselves and number ten do I have analytics and metrics to track what we do I’ve been asking this short clip to give you a view of the future of HR we’ve written a paper on this called are we there yet it basically has a stress test we’ve now written another paper on leadership and are we there in the leadership state that we need to be because when we do those things we an HR contribute value to the company and not only to the employees inside but to the customers investors and communities where we live and work for the last 25 years I’ve had the privilege of being a part of this HR profession we have grown we have expanded 25 years ago we would have talked about change a practice here there we might have talked about change the HR structure we might have talked about get our HR people better or measure now we begin to see the flow of how that fits together so that HR is in fact a true contributor and a partner if you will to the success of a business what a great profession to be in HR

magazine professionals in Europe in London in the United States Latin America Asia Australia around the world in the UAE have been so helpful at teaching us how we build HR to deliver value if you would like more information we have a website www.wefeedtheplanet.com