Leadership, Intangibles & Talent Q3 2010

Four Groups Quarterly
Update

Leadership, Intangibles and Talent

Q3 2010

Four Groups Quarterly Update - Q3 2010

Fixing HR
Welcome to the Q3 Quarterly Update for 2010. After the Summer lull, we have
seen some thought provoking articles surrounding intangibles, HR, innovation
and leadership. In this issue we’ll also explore the following themes:

- Compensation and Motivation
- The HR Conundrum
- Relationships
- Culture
- Talent

Articles are included from the likes of AT&T, the Financial Times, Hay Group,
Hewlett Packard, Science Magazine, Wharton Business School and Zappos.com.

Compensation and Motivation
Furthermore, we are seeing the role
In the past few issues, the role of of compensation being held up as
the HR function has not been given a barrier to many of the things that
much attention. We’ll try to rectify organisations actually want to achieve.
matters this issue and revisit this For example, in a blog post Jeffrey
much discussed issue in light of some Phillips1, looks at how traditional
current thinking on organisational compensation structures, particularly
development. in large organisations can be seen as a
barrier to innovation:
As we will see, in many ways, the
future of HR can be seen to be “The reason that compensation is such
bound up with many of the new an insidious barrier to innovation is
ideas surrounding organisational that we all share it and it’s not polite
development. Whether HR practitioners to talk about. No one wants to focus
are in a position to influence matters on compensation since it can be such
however, is another question entirely. a headache to revise and restructure,
but there’s little doubt it is a serious
Before we get on to the HR discussion, impediment to innovation. Unlike
we are seeing a growing number of some of the other barriers that can be
articles confirming what the likes of overcome - few resources, few dollars,
Dan Pink and Dan Ariely have been few insights - compensation affects
talking about in previous issues, everyone and it is a personal barrier
namely the impact of traditional as well as a corporate barrier. It’s hard
compensation policies on performance to rally people round the innovation
and motivation. 1 http://www.fourgroups.com/link/?180

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flag when they are looking over “It is the non-financial rewards — as
their shoulder wondering about how opposed to the financial rewards —
the innovation work will affect their that are viewed as having more impact
compensation.” on employee engagement,” said Tom
McMullen, North American Practice
“I think that when we strip away all of Leader for Hay Group. “Quality of work,
the other innovation constraints and career development, organization
blockades, we’re going to find a very climate and work-life balance all
small but very powerful disincentive have a greater perceived impact on
to innovate, buried in how we employee engagement than financial
compensate our teams.” rewards such as base salaries, benefits
and monetary incentives.”
There is another interesting take
on the role of group interaction on This is particularly interesting
innovation in an article from Wharton2. quote coming from an executive
In this example it is interesting that at the Hay Group, a consultancy
the authors pick up on the often offering compensation and benefits
negative impact of managers on the services. In particular Dan Ariely
innovation process: has been particularly critical of such
organisations4:
“People like having a process because
they understand that it’s fair. In a “The biggest curse in compensation are
typical brainstorming meeting, it’s not compensation consulting firms that do
fair and everybody knows it. The boss nothing but benchmark compensation
is always right.” against companies, which may or may
not be useful comparisons. They know
I think that this complements the nothing about the science” says Prof
idea that compensation can have a Ariely. “They’re just perpetuating the
negative impact on innovation and misery.”
also change. Current compensation
models clearly have the effect of Compensation consultancies have long
creating a hierarchy of ideas and built been favourites of HR directors looking
in bias towards certain people’s ideas. to bring some impartial analysis
to the table. However, Ariely has a
Coming back to the role compensation point when he argues that there is
has on engagement, another piece3 no evidence for the effectiveness of
on HR Vendor News touches a comparing compensation and benefits
perspective that seems to be picking policies at different organisations.
up more traction: When comparing benefits, a one-
size fits all approach to people issues
definitely does not work.

2 http://www.fourgroups.com/link/?181

3


If HR wants greater influence, focus on In seeking to show value, the
the unique, maximise your expertise result is that HR practitioners have
and solve important and complex been taking a macro view of the
problems. Above all get away from a organisation, striving to provide a
one size fits all approach. similar service to the organisation
as the finance department in terms
The HR Conundrum of crunching numbers and applying
a uniform approach to their areas of
What is the future for HR? In the next responsibility, hiring, firing, talent etc.
few paragraphs I will set out a few
thoughts that have coalesced around a Without doubt, analytics are here
number of recent articles and surveys. to stay and are likely to play
Many commentators continue to argue an increasingly important role
for a strategic role at the top table. in organisational planning and
However, there is very little sign of development. For example, Cathy
this happening. The main problem in Missildine-Martin has a blog post6
my view is that current thinking states about a recent HR Magazine article
that gaining such influence is done by Dave Zielinksi7 that looks at the
through providing evidence of a ROI composition of Google’s HR team:
for the HR Department.
“ 1/3 of the HR team have HR
For too long HR has laboured under backgrounds and bring expertise in
the belief that if it can somehow employee relations along with other
conjour up tangible performance specialist expertise like benefits and
figures, it’s future as a strategic compensation.
influence on the organisation will be
guaranteed. 1/3 of the HR team has little or
no HR background and come from
A recent HR Magazine article by strategic consulting firms or internally
Chris Roebuck highlights the ongoing from Google’s sales and engineering
search for hard numbers to back up departments. These individuals
the continuing existence of the HR are embedded in the business as
function5: consultants.

“How many HR functions have 1/3 of the HR team are the quant
presented a clear case to their FD on jocks. They are statisticians, PhD’s in
the financial value they are likely to finance and organizational psychology.
be adding? How many have identified Their job is organizational analytics
specific initiatives that have delivered especially the predictive kind.”
specific value to improve service to
end users or customers?” There are a couple of interesting

4


things, firstly that 1/3 of the HR team A question we keep coming back to is,
has little or no HR background. This is there an argument to be had that
emphasises the fundamental need the way to get a strategic role is to
for a commercial understanding of give up the macro, organisational wide
the business. Secondly, the analytics view and instead concentrate on micro
are supplied by specialists in esoteric issues? Alternatively, by giving up the
and complex areas such as cognitive quest to show ROI, can HR instead
heuristics. I was particularly interested make itself indispensible?
in the emphasis on predictive
analytics. This flies in the face of the Relationships
traditional dashboard type information
gathered and processed by the HR Let’s start at the top. How can HR best
department. Unfortunately most HR help the CEO? I think that HR’s standing
departments don’t have the budget, in the eyes of most of the current
infrastructure or data required to generation of CEOs is so low that any
appoint such specialists. thoughts of a key strategic role is more
wishful thinking than imminent reality.
A further example of the role
analytics are here to stay and that Instead, by focusing on three areas:
advances in technology and creative relationships, culture and talent, but
thinking are bringing new insight in new, more innovative ways, HR
into organisational performance are can potentially make a significant day
highlighted in a blog post by Gautam to day impact on the CEO and other
Ghosh 8: senior executives.

“Many companies favor job Presuming the average CEO has
candidates with stellar academic between 8 and 12 direct reports,
records from prestigious schools—but dealing with these relationships must
AT&T and Google have established take up a considerable amount of time
through quantitative analysis that a and effort. These relationships, their
demonstrated ability to take initiative dynamics and productivity are likely to
is a far better predictor of high play a key role on the CEOs perception
performance on the job.” of their own and the organisation’s
performance. Even as an organisation’s
However, no matter how smart leader, it is impossible to separate your
you are, the use of such analytics is own day to day experiences and take
unlikely to move HR up the corporate a global view of the organisation. For
totem pole. Furthermore, the majority example, overall performance may
of HR professionals lack the necessary be good but one or two of the CEO’s
skills to drive this forward. Analytics relationships with direct reports may
are here to stay, but only as an be suffering.
offshoot of the HR function.
By providing the CEO with the
information and understanding to

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optimise their relationships and to performance and collaboration are
collaboration with those closest achieved.
to them tools such as our own
4G methodology apply directly to
this area, it is possible to make a It is important to emphasise that this
significant contribution to senior level approach should not be confined to
communication. senior executives. Arguably, helping
all managers improve their own
To support this, there is an interesting relationships is the most effective use
article from McKinsey Quarterly9 of the HR function. In a blog post10,
that emphasises the need for all Meredith Wright cites an interesting
managers to work at their relationship quote from Robert Hogan:
management and awareness of those
around them: “People don’t quit their job, they quit
their boss.”
“Bosses matter. They matter because
more than 95 percent of all people Culture
in the workforce have bosses, are
bosses, or both. They matter because Coming back to the HR Magazine
they set the tone for their followers article by Chris Roebuck cited above11,
and organizations. And they matter he uses the military as an example of
because many studies show that for an organisation that has been able to
more than 75 percent of employees, function without HR.
dealing with their immediate boss is
the most stressful part of the job.” “Many quote the Armed Forces who
are able to do such amazing tasks
“The best bosses work doggedly and succeed without almost any HR
to stay in tune with this relentless function at all save a minimal pay and
attention and use it to their advantage. record keeping function. How can this
They are self-absorbed, but not for possibly work? Should there not be
selfish reasons. On the contrary, HR business partners running round in
they know that the success of their uniform at the front line? One reason
people and organizations depends it works is because there is total
on maintaining an accurate view of clarity of role around who does what
how others construe their moods and with people and the line managers,
moves - and responding with rapid, I.e. officers and NCOs, take full
effective adjustments.” responsibility for their people unlike
some non Forces line managers.”
Theoretically, HR is well placed to
influence this and by systematically I believe a second area for HR to
addressing the way each manager make itself indispensable is around
engages and conducts their facilitating the understanding and
relationships with subordinates, gains development of organisational culture.
9 http://www.fourgroups.com/link/?188 10 http://www.fourgroups.com/link/?189


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In other words providing that clarity providing the opportunity for people
around the role and values of the to use their capabilities efficiently and
organisation. effectively. I don’t mean you are not to
give orders. I mean that what you are
In another post, Gautam Ghosh12 trying to get is something else.”
cites Zappos.com CEO Tony Hsieh
and his book, Delivering Happiness13. “Our first obligation, which is self-
By placing culture at the heart of an evident from my previous remarks,
organisation’s values, alignment and is to let people know they are
consistency are easily achieved. Surely doing something worthwhile. We
this is a job for HR? must provide a means of letting our
employees know they have done a
“Tony’s belief is that the culture of good job. You as supervisors must
the organization is the biggest brand convey this to your groups. Don’t just
it has, and that value drives the way give orders. Provide the opportunity
Zappos treats its people and lets for your people to do something
them take decisions. The culture important.”
is tied to the core competence of
the organization which is Customer This very much ties in with Vineet
Service.” Nayar’s book we featured in the last
issue14.
What Hsieh is arguing is not new. The
technology website Gizmodo recently I think we are only just starting to
republished a 1960 speech by Hewlett appreciate the scope that culture
Packard founder Bill Hewlett. impacts an organisation. A good article
in Strategy + Business15 discusses a
“I think many people assume, wrongly, study on the role that culture plays on
that a company exists simply to make product development:
money. While this is an important
result of a company’s existence, “They found that companies
we have to go deeper and find the introducing a steady stream of
real reasons for our being. As we incrementally improved products
investigate this, we inevitably come typically have a different strategic
to the conclusion that a group of focus than companies such as Apple
people get together and exist as an that are known for developing novel
institution that we call a company so products.”
they are able to accomplish something
collectively which they could not This is interesting because it implies
accomplish separately.” that culture is at the heart of
everything an organisation does, right
“We must realize that supervision is through to the type of products and
not a job of giving orders; it is a job of

7


services offered. In another interesting So where does HR fit in to the culture
piece in Strategy + Business16, Stephen equation. I think that coming back to
Shapiro has a go at equating culture the military analogy is important. And
to personality, an interesting approach I think that this is where it gets really
and something that could have interesting. As we know in the military,
potential when it comes to defining the culture is so clear and deeply
and comparing culture. ingrained that managers or officers
in this case, are able to effectively
“The personality of a company impacts communicate and ensure that this
the people they hire and the methods culture becomes deeply ingrained in
they use to motivate and retain the minds of new recruits.
employees. People who don’t fit the
mold, never join or eventually leave. The important thing to remember is
The result? More of the same.” that culture is not uniform across the
military per se. Instead we find that
I think this is a very example of one of culture changes across regiments,
the reasons why change is so difficult. batallions, ships, squadron etc. This
This theme is carried on with a couple is an extremely powerful and useful
of good pieces17 and 18 about the phenomenon that helps instill values
difficulty of change. Interestingly, both and identity. However, it also governs
articles focus on the human factor in how communication with outside or
terms of project failure: external bodies is conducted.

“Fear makes change intensely I think this applies to organisations
personal. Don’t forget, change scares as well and this is where HR should
most people: they fear for their jobs, get involved. Again, we need to drop
they worry about their families, they the organisation-wide macro view
wonder what will happen to their and concentrate on local culture and
careers. When fear kicks in, that identity. Within organisations you find
big corporate change can become distinct cultural identities in individual
intensely personal. When people are business units and departments. The
afraid, they literally can’t hear as well.” trouble is that people fail to appreciate
these cultural differences and the
“Only full disclosure and truthfulness impact they have on communication
allows for quick course corrections. and collaboration.
empower the team and encourage
them to take calculated risks without The role of HR should be to help
fear of penalization.” individual managers understand and
appreciate not only the cultural values
within their own business unit but also
how this will impact on interaction and
communication with other business
16 http://www.fourgroups.com/link/?195 units.

8


I think by definition this is an element compensation the way it was done 20
of HR that should have a limited shelf years ago.”
life. In a provocative blog post, John
Sumser sums up this up19. Clearly, if A further critique of “we focus on
HR can execute this in a meaningful getting the smartest people” approach
manner, it becomes self-perpetuating is featured in a Wired article21 which
as it is in the armed forces. discusses the role of individual
intelligence on group performance:
“A jaundiced eye notices that HR is
a catch all for the cats and dogs that “Their analysis, published Sept. 30 in
no other function wants. Providing Science, found several characteristics
the glue that holds employees to the linked to group performance — and
organization is the best description none involved individual intelligence.
that can be mustered. As the What mattered instead was the social
need for that glue evaporates, one sensitivity of individual members, the
wonders about the relevance of the proportion of women (who tend to be
department.” more sensitive) in each group, and a
balanced participation of conversation.”
Talent
On a similar theme, another piece
A third way for HR to make itself of research appearing in Strategy +
indispensable is through a more Business22 suggested that:
sophisticated and considered approach
to talent management. Again, we are “hiring too many high-status
not talking about talent management employees dampened effectiveness,
in the traditional sense. Instead by the authors found. Moreover,
focusing on social networks and companies with high-level expertise
connectivity, HR can play a key role at tended to fare worse with superstars
the very heart of the business. in tow than did more run-of-the-mill
outfits.”
The problem with the current approach
is discussed in the Zielinski piece we The alternative is that HR can play a
have already highlighted20 and features key role in fostering experimentation,
comments from Laszlo Bock, vice creating networks, identifying the key
president of global people operations influencers, mapping change etc.
at Google:
This means adopting a new and in
“HR is still essentially doing talent many ways experimental approach to
reviews the same way they were talent. A couple of interesting articles
done 40 years ago, and doing have tapped into this idea and present
some new ideas that may hold the key


9


to improved performance. By moving identification of such people who are
the focus away from identifying and strategically best placed in the network
developing talented individuals, the is not always the most straightforward
focal point should be on groups and challenge.
networks. “The subtle, dark-matter mystery of
social networks is that influence is
For example, there is an interesting oblique and not easily determined by
blog post from Stowe Boyd23, where the sorts of tools we have today.”
he discusses some recent research
from Maksim Kitsak at Boston Conclusion
University:
Dropping the pretence that HR can
“The importance of hubs may have deliver an audited contribution to the
been overstated” say Kitsak and pals. business like other departments is a
huge step. However, by focusing on the
In contrast to common belief, the micro rather than macro, it becomes
most influential spreaders in a social easy to identify areas where HR can
network do not correspond to the make a significant contribution. Above
best connected people or to the most all, what is implied in all of the above
central people” At first glance this is that each organisation requires it’s
seems somewhat counter-intuitive but own unique solutions and approach.
on reflection it makes perfect sense. Unfortunately, this is where the role of
Kitsak and co point out that there experimentation and failure comes in
are various scenarios in which well to play. Traditionally, something that HR
connected hubs have little influence has struggled with.
over the spread of information. “For
example, if a hub exists at the end If I was from Mars, it would strike
of a branch at the periphery of a me as obvious that the department
network, it will have a minimal impact that can contribute to overcoming
in the spreading process through the these people-based obstacles is HR.
core of the network.” However, I’m not from Mars and have
been reading the FT recently, and in
“By contrast, “a less connected person this case I’ll leave the final word to
who is strategically placed in the core Dan Ariely24:
of the network will have a significant
effect that leads to dissemination “There is no worse place to try to do
through a large fraction of the experiments than human resources,”
population.”” he said. “The first thing on their mind
when they hear the word ‘experiment’
This is an interesting idea and is lawsuits.”
has clear implications for change
management, communication and
collaboration. At the same time, the

10


Written by

Michael Folkman, Director
michael.folkman@fourgroups.com

About Four Groups

Four Groups have developed a new
approach called 4G to understand be-
haviour, relationships and culture. 4G
provides its users with insight into per-
sonal characteristics, how relationships
develop within teams and groups and
how culture can be best defined and
managed.

4G provides organisations with infor-
mation on how best to deploy and
optimise the performance of their
people. It also enables preventative
measures to be taken which minimise
the less productive aspects of interac-
tion and group dynamics such as fric-
tion and misunderstanding between
colleagues.

4G represents a systematic approach
to managing the intangible aspects of
organisational behaviour. The method-
ology is easily replicable and can be
implemented quickly and efficiently.

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Leadership, Intangibles & Talent Q3 2010

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