Measuring the human dimension in business

SkillingIndia on September 28, 2012 Comments
Talent management is all about enabling ordinary people doing extraordinary things.

Charles B Tilley, CEO of CIMA
speaks on the global research done on “Talent pipeline draining growth” and “Valuing the human dimension”.

Here are the excerpts of the interview:

Talent management and business strategy

Charles Tilley: This is one of the key topics in our research undertaken this year. Senior business rockstars from world over including from India from companies like HSBC, Unilever, Tata, Shell, etc. were a part of the discussion. They had four principal topics on their minds. The first of those was that we are good at measuring all the financials. But, 70% of people say that they had too much focus on financials and not enough focus on the human dimension. The number one issue was how well can you measure the well run human side of things, which includes customer relationships, supply chain, joint ventures, etc which are driven by people, and most importantly of all is the value of one’s workforce. The other issues were too much focus on the short term rather than thinking about the long-term success of the organization, the challenge of having a grasp on transparency of agenda as we all have been rather keen to keep things private and secret, but, in today’s world we can’t do that. One has to accept that everything may well be on the front pages of the newspapers. The world has changed dramatically; we need to embrace transparency to help understand our customers better and for that we need people skills. Lastly, businesses are typically run as a bunch of silos and one actually needs to think of business in a connected way and that’s very challenging task. Of the above key issues, the skills to grasp the transparency and the skills for working in a team rather than silos are at the forefront. People skills including leadership and management skills, besides technical skills constitutes half of everything that we do. With that in mind, it makes sense that one of the key things that we look for is how we value and measure our people? If we don’t know the value of our people, then how do we know how much to invest in their motivation, training, general support, etc.? A lot needs to be done. In fact, the research was pretty shocking because we didn’t understand the value of our people. Around 40% of the people are holding their business back. A similar number said that they were getting impacted in their ability to innovate. This is because the quality of the people and quality of how they are managed and lead, either creates or stops innovation. The outcome of not innovating and managing people properly leads to missing targets, stopping new initiatives, impacting competitiveness. These are realizations, but, they are the starting point of your life.

One of the interesting things is that the CEOs and CFOs had a similar view of what needs to be done in terms of managing people, but directors of HR had a different view. One of the first things that need to be done and is relatively simple to achieve is for these three critical individuals to spend considerable time to actually agree to what the priorities are.

Senior leadership has to feel responsible for their people, especially the CEO. The CFO is responsible for giving the right data and analysis and the HR Director is responsible for giving advice on how we should proceed and implement things. But, it’s the CEOs job to lead, implement and demonstrate the values, and embed good practices in the business. The fact is a lack of accountability and the standing of who is responsible exists.

Issues in investment in training

Research indicates that 77% of CEOs will be cutting down spends on enhancing workforce skills, training and qualifications for the next 18 months. Will this affect the performance targets and employee retention?

Charles Tilley: The companies that exist and want to be around, are probably there for more than 50 years, want to be around for more than 50 years, have to invest in their people. The emphasis on the short term is very dangerous, indeed.

Investment is a challenge. Firstly, who is responsible? Secondly are you really focusing on the long term success of your organization? If you are not, then, you are going to be impacted in the near future. Thirdly, is there a clear focus on succession planning as well? One of the things that organizations struggle with is the cost of retaining or losing talent. CIMA is developing two tools – one on the cost of losing talent and the other on the cost of retaining talent. The cost of losing a person is higher than hiring a new person as it involves all the effort you invested in the person, and the knowledge just goes out of the door. If the person is involved in important relations in the business, customers, suppliers, and so forth again the cost is potentially massive. The tools we are proposing/developing will enable people to understand the process and then change how they address their processes. If these tools create the realization it will benefit organizations.

In fact, one of the tools I have seen recently said that if you improved motivation by percentage then you will improve your sales by percentage. It’s quite a scientific way of looking at things. If my sales go up by 10%, I can afford to spend a small amount on the motivation of my staff.

Succession planning

51% of organizations do not have a formal succession planning process for C-level roles. What’s your view on having a formal process?

Charles Tilley: A formal succession plan is indeed required in organizations. Whether people retire or leave you need to start planning for a talent pipeline for handover. This can impact your business for a short period of time, but a formal process is required. This should not just be for C-suites, though.

To achieve success in succession planning one of the most important things that one needs to have is thorough understanding of the whole business. Picking up any financial crisis, may be not in India, but certainly in other parts of the world like the US & the UK, it is quite clear that the board of directors didn’t necessarily understand their business fully. Understanding your business is very important or you don’t know where your risks are, and you don’t know where key people are. For instance, if you have an IT system which is run by one person and nobody else knows how to make that system work, he leaves or dies, you are in terrible trouble. Success planning is around where the key dependencies of business are and planning for that enables your business to run smooth. The size of the business also matters. For a larger business it’s typically much easier to have succession planning than a smaller business as there are lesser people to do the job. Thus, succession planning is firstly a thorough understanding of business. Secondly, it is about knowing where are the weak points in business are in terms of reliance on individuals, what are the critical parts of business, and thirdly to have truly robust plans for long term, immediate, or for temporary succession, which work.

Another issue is whether to bring external talent or develop internally. Bringing in external talent has one benefit and two disadvantages. The advantage of an external talent is that the person has the ability to challenge, brings in a different way of thinking, is not associated with the past, and can move on. The downsides are one they don’t know the specifics of the organization so they don’t have the realization, secondly in my opinion the recruitment process is terrible. I think interviews are only 15% effective. However, psychometric tests and proper references help. I would like to use a sports analogy here. In football, players move clubs all the time. As you know in UK as these players move clubs huge amounts of money is paid. They can be fantastically successful in Club A and unsuccessful in Club B despite the million pounds paid. Nobody knows why? It’s just that they don’t fit in. I think exactly the same could apply in businesses. Of course, the possibilities of success can’t be ruled out. But, if you want long term success to continue it is better to have internal promotions if you could do so. Also, everybody feels motivated that their career chart is moving up. Understanding all of these things, and measuring them is a key part of organizations. How many companies have on their scorecards the number of movements they want internally? In CIMA we have a target of moving 70% of our staff within our organization in a year. To execute everything we need to have good data on what is being done and what are the outputs. How much you are spending on it and what you gain, and then you need to analyze what needs to be changed to make it better. Management accountants and HR pros have to work together to deliver the CEOs vision to have a successful company.

Management accounting can add value to financial accounting. As the captain of the ship navigates through storms, etc. to reach safely at the destination, the same applies with the management accounting as they map the financial journey or business journey. They possess management accounting skills, ability to analyze, have the knowledge of cost indicators, managerial skills including communication skills and data processing skills. If the activity is undertaken properly and supported by it provides what the board and management has to do. In reality management has to do a few things: check where it’s going, take decisions, show how long term decisions about where the business heads, what are the risks today and in the long term, ensure that there are right people in the right place, and the right tone from the top. Management accountants help the board to make the right decisions by providing the right information and analysis and a huge part of that is focusing upon and measuring the key people issues in the organization.

Overcoming core challenges in talent management

Charles Tilley: The first thing is the C-suite needs to have a single, clear view. Secondly, the C-suite needs to be committed to talent management. Thirdly, the C-suite needs to be focused on understanding the value of management and in relation to that how much you can afford to invest in those people. They need to lead from the front, ensure that the right people are in the right place, offer the right skills training, the right succession planning, and the right environment. Everyone would be so much productive working in a good environment.

Management’s role is to create a unified team. And that’s very challenging. Many businesses operate in silos, and there is quite a lot of crisis management happening. There’s a lot of management insecurity. If you are working on a long term strategy you are doing incremental growth. It means that you have to trust and empower people much more, which is again challenging.

Talent management prospects in India

Charles Tilley: There are some world class organizations here, who have a clear focus on the long term. Companies like Tata have been around for a very long time and is very successful. There are many well run companies, good universities in India, thus, I think the prospects are good, subject to everybody raising the bar and wanting to reach top levels. The government is also focused as new skills initiatives have been announced. If only politicians and businesses listen to the messages in talent pipeline draining and they really work through, lead by the CEOs with support from their HR Directors and CFOs to address these challenges. I am working with the academia as well. There is as much success and opportunity here than anywhere else in the world.

Skills for C-suite execs

Charles Tilley: They have to be leaders and managers. They have to understand the external environment: what’s going on outside, what your competitors are doing, what’s happening to the economy, what are the politicians doing. They have to be good listeners, which is more important than anything else and then have the ability to take clear decisions. Also, making good decisions is important for CXOs, but nobody ever takes 100% perfect decisions. However, the speed at which leaders take decisions depends on their quality and speed of analysis. Lastly, leaders need to ensure their people are with them in their decisions.

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