After the storm

After the tumultuous rollercoaster ride that was 2009, the New Year has seen business confidence soaring. Sought after talent that was previously happy to stay put is on the move and available again. This puts HR, and capturing the best human capital, at the forefront of business strategy in 2010. So what are the four questions leadership teams should be asking to prepare their business for success?

Where will we find new value from business models over the next five years?

Prior to the global financial crisis, the focus was on new value through innovation. During the crisis it was about extracting more value (generally through cost-cutting) from existing business models. And in 2010 and beyond, I think it will be about both.

Businesses and organisations should be constantly on the lookout for ways to create new value. Consider Inditex, the Spanish fashion giant behind the Zara brand. Here is a company that completely reinvented fashion through supply chain efficiencies. Practicing what it calls a ‘fast fashion’ system, Inditex can design and distribute a fashion forward garment in 15 days.

Equally significant is the number of styles and variations Inditex retails every year. Three teams of designers for women’s, men’s and children’s lines generate more than 10,000 designs, with five to seven sizes, and five to six colours per garment. This means Inditex’s supply chain management must smoothly handle around 300,000 new stock-keeping units each year.

The final flip is that the company produces each garment in very limited quantities. Most clothing companies try to milk the most popular styles and sell them in high volume, which inevitably creates lags in inventory supply and turnover, and at the end of most selling seasons triggers unprofitable discounting to move inventory that no longer excites customers.

Now that’s finding new value from an existing business model! The real question is, who was the brains behind it? In other words, what sort of talent is capable of designing a supply chain with such precision and speed?

What kind of talent will we need to exploit these new opportunities?

GE CEO Jeffrey Immelt worries that the company isn’t attracting enough young hunter-gatherers, because gas turbines are not as cool as iPods and search engines.

“If we can attract the best 22-year-olds,” he has said, “then we can double, even triple in size. If not then we are already too big.” GE’s ability to find and exploit new value depends on its ability to attract the right kind of talent.

Now don’t get me wrong, that talent doesn’t need to be “young”, but there is no question that human capital is the source of more growth, greater innovation, more efficient processes and better business.
To be frank, despite all the talk in the HR profession about talent, every week I meet leadership teams frustrated by their company’s inability to attract the people they need. This is why I believe a new generation of HR leaders with new ideas and new approaches to the role HR plays in the business is essential in the coming years.

We say we want to be partners to the “business”, yet operational managers still feel constrained by our processes and policies. We say we care about talent, and yet we are relying on recruitment companies with higher churn than a fast-food restaurant to establish the relationships and networks with the talent we so desperately seek. It is time for HR to stand up and not only help their business identify the kind of talent it needs, but to build the culture and brand which will attract and engage that talent.

What culture and reputation will attract and engage this kind of talent?

Cutting edge research into human behaviour has shed new light on how we make decisions. Not that it is news to people in HR, but we make our decisions based on internal narratives we have about why certain products or employers will build our sense of self, only we use tangible things like benefits and salary to justify our emotional decisions. Our emotions are driven by stories. Your ability to attract and engage talent depends directly on the clarity of your story.

This is where employer branding comes in. Again, HR is at the centre of the strategic agenda of the business. At the risk of inciting another fad, let me just say this: our approach to employment branding in general has been to treat it as a recruitment advertising activity. This is selling short the art, and science, of branding itself. More importantly it is missing the most fundamental part of building a powerful brand. Starting with an understanding of the business model and how it is changing, we can make decisions about the talent and thinking we need, and then, and only then, can we go about constructing our aspirational employment brand, anchored in reality.

People are not really your greatest asset. The right kind of people, who are highly engaged, are.
Mind-blowing future success will require a new kind of thinker, or at the very least a new kind of thinking from the people we have. If you are to attract and engage this kind of innovative talent you will need to build a powerful employer brand, and then have your leaders deliver on the promise it implies.
And there is the catch. Delivering on the promise will almost always require a new approach to leadership.

What do we need to believe as leaders to create this culture?

There is no more important lever to pull for change then the assumptions of the leadership team. If you change assumptions you change practices and you change behaviour. When you have answered the first three questions you generally find that your business’ existing approach to talent, and even to customers, will need to change significantly if you are going to remain competitive.

For so long we have built our businesses on controlling intellectual property and know-how and on controlling access and distribution. Not only that, but this notion of control has permeated the very way we work. This made sense in an industrial world, but we live in a world now where much economic value comes from ideas. And those ideas so very often come from collaboration between people. Most command and control approaches to workplace culture I have seen don’t inspire a whole lot of collaboration.

In order to get control in the future we are going to have to give some of it up. This scares the life out of most executives. Look at the way so many businesses are responding to “Web 2.0” and social networking technologies.

The point is not to have a debate about control but rather to make it clear that HR in 2010 and beyond will need to be the ones coaching their seasoned executives through a process of transformation as the floor which has for so long been the foundation of their success gets pulled from under them.

As more global competitors reinvent fast, good and cheap means in their industry, they will need HR’s help to let go of what has made them successful to date and grab onto a new way of working, a new business model, and a new approach to leading their people.

It is to HR that we will need to turn. Are you ready for the job?

+ Peter Sheahan is a globally recognised Generation Y and business strategy expert who has worked with organisations such as Google, News Corporation, Coca-Cola and BMW. He has also led review panels on recruitment and youth engagement for organisations including Ernst & Young and the Australian Defence Force. He is the author of five books, including business bestsellers Generation Y and Flip. www.petersheahan.com