building a change-ready organization: critical...
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Building a Change-Ready Organization:
Critical Human Capital Issues 2013
An i4cp Report
Strategy Leadership Talent Culture Market
Critical Human Capital Issues 2013
The five domains of
high-performance organizations
About i4cp i4cp focuses on the people practices that make high-performance organizations unique. Years of
research make it clear that top companies approach their workforces differently. At i4cp, we work
with our network of organizations to:
Reveal what high-performance organizations
are doing differently.
Identify best and next practices for all levels
of management.
Provide the resources to show how workforce
improvements have bottom-line impact.
Through our exclusive, vendor-free network – in which
peers collaborate to drive strategic research and share
tools and insights – i4cp provides a unique, practical view
of how human capital practices drive high-performance.
Visit i4cp.com to learn more.
About this report Change is in the air for 2013, and while a challenge for organizations at all performance levels, analysis
of this year's critical issues survey data reveals that high-performance organizations are taking a more
proactive approach to preparing their workforces for what's to come. Help set your organizations' human
capital priorities for the coming year and find out how promoting leadership and organizational agility,
effectively managing talent, and developing superior workforce planning and workforce analytics can
transform change events from problems into opportunities.
About the Market Performance Index (MPI) i4cp’s Market Performance Index, or MPI, is based on self-reported ratings encompassing an
organization’s performance in four key areas: market share, revenue growth, profitability and customer
satisfaction as compared to the levels achieved five years previously. The average of the four ratings
determines MPI score. In this report, the issues with the strongest links to performance were identified
by filtering high MPI scores to isolate those activities that show a clear relationship with higher market
performance.
Contents
The Critical Human Capital Issues of 2013 .................................................................................................. 1
Change is Pervasive, Problematic and Pursued Very Differently .............................................................. 1
Agility and Preparedness are Key to Managing Change Effectively............................................................ 2
Agile Organizations Require Agile Leaders and Workers .......................................................................... 2
Preparedness is Enabled by Effective Management of Talent .................................................................. 4
Managing Talent Begins with Workforce Planning ................................................................................... 5
Wider and Deeper Capabilities are Needed to Manage Talent Well........................................................... 6
Conclusions and Recommendations ........................................................................................................... 8
Authors and Contributors ........................................................................................................................... 9
About the Survey ....................................................................................................................................... 9
About the Critical Issues Index .............................................................................................................. 9
References ............................................................................................................................................... 9
©2013 Institute for Corporate Productivity (i4cp)
Use of all results, analysis and findings requires explicit permission from i4cp.
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The Critical Human Capital Issues of 2013
The main theme emerging from i4cp’s Critical Human Capital Issues 2013 research study is the increasing
urgency of dealing with change. Indeed, three of the top 10 critical issues cited by organizations deal directly
with change, including the ability to manage and cope with change, which has steadily increased in importance
from #3 in 2011 to #2 in 2012, and finally #1 in 2013. In fact, while the significance of these three issues
continues to grow, the ability of most HR organizations to effectively deal with them has stalled or deteriorated.
While change is neither new nor newsworthy, the way that high-performing organizations (HPOs) and low-
performing organizations (LPOs) go about dealing with it most certainly is. As you will read throughout this
report, HPOs plan for change and use effective talent management practices to support and shape the future,
as well as metrics and analytics to measure progress and to pinpoint gaps that impede effectiveness and
impact. In contrast, LPOs, which also place
great emphasis on change, focus mainly on
short-term fixes and reactive initiatives.
These result directly from uncertainty of
the business strategy. As a result, low
performers are unable to align the efforts
of the workforce with any longer-term
organizational objectives, and lack the
leadership and resources to see them
through.
Change is Pervasive,
Problematic and Pursued
Very Differently
Six of this year’s top 10 issues (among a
list of 70) have remained the same over
the past four years. This is a reflection of
myriad factors, most predominately the
increasing uncertainty and complexity that
has resulted from economic instability,
legislative and regulatory change, the
shortage of critical skills in key markets,
demographic shifts and increasing
expectations among customers. Moreover,
these issues are a consequence of the
consistently ineffective attempts of many
organizations to anticipate and respond to
change.
However, when viewed through the lens of
HPO versus LPO, the top critical issues
take on starkly different meaning. In fact,
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only three of this year’s top 10 issues are shared among both groups—two of which center on change and the
other focuses directly on leadership development.
LPOs continue to view change traditionally—as in what’s
happening to them in the present—and focus on the
basics of how to deal with change through better
management of culture and communications. They are
reactive instead of proactive.
HPOs on the other hand, are far more adept at dealing
with change—nearly three times more effective at
managing and coping with change, and over four times
better at managing organizational change. They also
outperform LPOs by a factor of four times in getting the
current culture to embrace change.
What, then, accounts for the variance in abilities of HPOs
and LPOs to meet the change challenge?
Agility and Preparedness are Key to Managing Change Effectively
i4cp defines agility as the ability to move quickly, decisively, and effectively in anticipating, initiating, and
taking advantage of change. When it comes to change, CEOs want to know how to get their organizations to be
proactive—and anticipate change—instead of functioning purely reactively. They grapple with questions such
as: How can I create a more flexible, decisive organization in which change is initiated and embraced rather
than approached with fear and skepticism? And how can I get everyone to impartially evaluate performance on
business metrics and plan accordingly? In short, how can I instill agility into my organization?
The answer to these questions can be boiled down to a single word: preparedness. To be agile, organizations
must be prepared. HPOs prepare for change better by approaching it both strategically and tactically. They take
a longer term view of their business, including the forces that affect it and the capabilities necessary to deal
with it. HPOs work simultaneously from the inside-out (applying knowledge of readiness in terms of current
supply of human capital versus anticipated demand) and from the outside-in (using knowledge of external
factors, including what the market demands). This level of preparedness is also a reflection of the strength of
its leaders.
Agile Organizations Require Agile Leaders and Workers
Agility must be purposefully developed in leaders and employees. i4cp research (in a joint study with
leadership expert William Joiner) revealed nine practices for increasing the agility of an organization’s
leadership (shown in the sidebar on the opposite page).
Increasing the agility of the leadership team often requires creating a new culture within that group. A
purposeful approach involves assessing the pace of change and degree of inter-dependence to determine the
level of agility desired and the team’s current and optimal agility levels. Once this is done, a plan to increase
leadership agility can be formulated—it should emphasize reflective action and utilize methods such as one-on-
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one coaching, workshops, and action learning programs. It should both work simultaneously from the inside-
out and from the outside-in, and break agility down into practical, manageable questions, practices and next-
steps with strong focus on follow-through and results.
i4cp’s research shows that teaching change
management is one of the more important competencies
in the development of agile global leaders. However, our
research also reveals that while HPOs are four times
more effective at it than LPOs, the effectiveness among
the majority of organizations with this critical
competency is abysmal and getting worse. Forthcoming
collaborative research on global leadership development
from i4cp and the American Management Association
will reveal additional insights on developing leaders’
ability to better manage organizational change.
Agility can also be instilled into the broader workforce by
promoting talent mobility, which refers to the ability to
move workers within an organization across functions
and roles, across businesses or business units, and/or
across countries in order to address critical business
needs.
When done right, talent mobility allows greater
organizational agility by quickly filling near-term talent
needs as well as developing talent to fill critical job roles
longer term. It also results in greater levels of
engagement and retention among key talent by providing
exposure to the broader business as well as the
organization-wide career opportunities available to them.
One VP of human resources for a global food retailer with
many different businesses recounts how the company is
changing its development model and career planning to
ensure and reward a more holistic understanding of the
business. Specifically, they are laying out a framework
that supports “if you want to be promoted you need
these types of experiences (category manager,
merchandising roles, etc.), and if you want to eventually
run one of our divisions, you're going to also have both
Operations and Merchandising experience across more
than one of our businesses”. This commitment to talent
mobility builds not only the organization’s capacity to
take advantage of change through growing its talent but
also builds individual agility and resilience by
encouraging staff to take on new roles and challenging
developmental experiences.
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Preparedness is Enabled by Effective Management of Talent
The level of agility in an organization is greatly affected by how talent is managed. There is a subtle but
important distinction between talent management and management of talent.
In practice, talent management often represents an HR-centric, inside-out view of the policies, procedures and
processes associated with managing the employee life cycle. Management of talent, on the other hand, is a
business-centric, outside-in view of the capabilities needed to maximize talent performance. Talent
management is activities-based; management of talent is results and outcomes oriented. Talent management,
while necessary, will be far from sufficient unless it fully enables the management of talent by the business.
This important distinction is further corroborated by i4cp’s research study The Future of HR: The Transition to
Performance Advisor; in which the HR organizations of HPOs were found to be focused on equipping line
managers to be better managers of talent. To this end, i4cp’s Talent Management in the Trenches research
suggests that a few foundational elements are essential to move the focus from talent management to the
management of talent:
Senior business leadership must view the organization’s talent management strategy as a business
issue, not an HR issue.
The talent management strategy is created as an integral part of the overall business strategy. In
essence, all business operational strategies must incorporate a talent strategy.
Functional process or elements of talent management (e.g. recruiting, performance management)
must be planned and executed as part of an integrated talent management strategy. This grows
increasingly imperative as organizations seek to utilize human capital data for planning purposes, as
well as gain more visibility into the performance and potential of their enterprise workforce.
Unfortunately, a majority of organizations are
ineffective in employing important talent
capabilities. As a result, the workforce is not
performing to its potential and gaps in
leadership and critical roles exist due to failure
to develop adequate bench strength and
ineffective development of leadership
competences throughout the organization.
In contrast, with their focus on the
management of talent, HPOs are vastly more
effective at equipping the business to
anticipate and deal with change. For example:
HPOs demonstrate an advantage of two and a half times in performance management by employing a
purpose-driven approach that fuses strategic and tactical approaches to managing organizational
performance. This ensures that the day-to-day execution of strategies is tied to overall objectives and
goals. (See i4cp's upcoming report, Purpose-Driven Performance Management in High-Performance
Organizations, for more on this high-performance approach).
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More than three and a half times as many HPOs as
LPOs indicate effectiveness in succession planning,
and driving it further down in the organization, thus
ensuring better ability to quickly fill leadership gaps
when they arise with qualified candidates.
HPOs are nearly three times more effective than LPOs
in leadership development, which—given the increasing
focus on line manager accountability (see Talent
Management in the Trenches)—results in an
organization that is better equipped to not only align
the workforce with where the business is headed, but
to anticipate and respond more proactively to change.
Managing Talent Begins with Workforce Planning
“The right people with the right skills in the right place at the right time”… this is often cited by many managers
as the ideal workforce scenario. If this is the goal, the most effective starting point is via knowledge of what you
need as compared to what you’ve got. To this end, workforce analytics and workforce planning rank #2 and #3,
respectively, in terms of critical issues among HPOs, while these are nowhere to be seen among the top 10
critical issues of LPOs.
In general, HR organizations are not keeping up their ability to
measure, analyze and draw insights from workforce data and
quantify the value and ROI of human capital, both top 10 issues.
More than 60% of HR groups indicated workforce analytics as
important but only 14% indicated they had an effective capability.
The ability to measure human capital value and performance was
not much better—57% indicated it was important but only 16%
were skilled in doing it. This suggests that many HR organizations
are doing little more than guessing at the workforce drivers of
business performance and how to better manage talent.
Unfortunately, an inability to measure and plan stifle HR’s
capacity to respond effectively to change.
With regard to workforce planning, i4cp’s research reveals three
levels that are important to pursue and have strong impact on a
company’s ability to improve market performance:
Operational - the majority (including 62% of HPOs and 48% of LPOs) of organizations focus on
operational workforce planning. In essence, this is what’s needed to run the business from a current
headcount perspective (e.g. headcount forecasting to staff shifts);
Tactical - a more strategic level of workforce planning is referred to as tactical. This focuses on what’s
needed to manage the business (e.g. staffing plans to accommodate seasonal demands or new store
openings). Only 38% of HPOs and 30% of LPOs indicate they pursue this level of workforce planning.
“The HR function provides
a lot of data but not
information. You've got to
be able to provide data, but
also to tell people how to
make educated decisions.
That's information.
Business leaders want
information—they don't
want more data.”
Skip Spriggs CHRO, TIAA/CREF
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Strategic – the most elusive level of
workforce planning, yet the most
impactful on market performance, is
strategic workforce planning. This
typically looks 18 months out or longer
(three-to-five years) and focuses on
what is needed in order to lead the
business and ensure the organization is
best prepared to anticipate and adapt
to change. Nearly twice as many HPOs
(32%) than LPOs (17%) are doing the
strategic level of workforce planning.
High-performance organizations are especially rigorous in their approach to workforce planning. These
organizations:
1. Define what the business needs to look like over the next three-to-five years; what products/services
will be added/retired, what markets will it enter/leave, and what skills/competencies will be required.
2. Gain deeper understanding of talent segments and risks. They start by conducting talent reviews in
order to identify high-potential employees, as well as understand the organization’s critical and pivotal
talent segments. Critical roles are ones essential to the organization’s success and require skills or
competencies that are difficult to find or develop. Pivotal roles are those that are not prohibitive by
skills or competencies, but can make incremental impact on key business measures such as
customer satisfaction. The goal of talent segmentation is to identify roles first, then skills, then
individuals.
Wider and Deeper Capabilities are Needed to Manage Talent Well
In addition to workforce planning, five of the top 10 critical issues among HPOs deal directly with managing
talent (performance management, succession planning for both executives and non-executives, leadership
development, and coaching). Only one of these (leadership development) is ranked among the 10 most critical
issues for LPOs.
Once an organization has defined its critical roles, it must plan to fill them. This requires orchestration among
an organization’s learning, performance management and leadership development functions, along with its
talent acquisition function (i.e. integrated talent
management). Nearly nine in 10 HPOs (89%)
indicate succession planning is important to
their organizations in 2013, as compared to
only 56% of LPOs. However, an even more
revealing finding is how HPOs are taking their
succession planning initiatives to layers below
the executive level. In fact, more than one-half
(54%) of HPOs are expanding the reach of this
process, whereas only one-third (34%) of LPOs
indicate the same. Extending this process to
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non-executive job roles reinforces the notion that critical roles are not ones that are isolated to the executive
ranks, and also prepares the organization to adapt more quickly and effectively to change.
i4cp’s research on the performance management practices most strongly correlated to market performance
shows that several are also important contributors to the organizational agility. For example, ongoing goal
review and feedback provides opportunities to recognize new realities and shifting priorities and to make
necessary adjustments in goals and methods. Developmental plans for each period ensure focus and progress
on acquiring new skills and experiences. This creates a mindset of continuous learning and ongoing
development, which are both critical enablers of individual agility and resilience. Goal setting for the upcoming
timeframe ensures that individual goals change and adapt to major shifts in the business environment. (See
i4cp’s Nine Keys to Performance Management white paper for more information).
An exemplar of effective performance management in practice is Corning. The leadership team at the company
is highly involved in the PM process and participates in competency identification, calibration sessions, goal
alignment, critical metrics discussions and progress reviews in open forums. Practices such as these, along
with virtual town hall meetings or Q&A lunch sessions, enable employees to see and hear that leaders back
PM’s importance. Furthermore, top executives’ recognition of employee success stories and customer
accolades help to connect personal efforts with key corporate success measures.
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Conclusions and Recommendations Change is the dominant theme of the HR agenda in 2013. This alone is not significant, but what is worrisome
is how consistently unprepared and ineffective many organizations have been in managing change. Based on
the trend over the past four years, the situation will likely worsen unless new strategies for building capabilities
are implemented that enable organizational agility.
The research findings and insights presented in this paper suggest the following actions to increase
organizational preparedness and ability to respond to change:
1. Shift the focus of HR from talent management to managing talent – Promote a business-centric,
outside-in view of the capabilities needed to maximize talent performance. Make sure they are tied
directly to measures of market success.
2. Develop agility in leaders and workers – Individuals at all levels of the organization can be trained to
think and behave in ways that promote agility. Invest in specific training initiatives such as one-on-one
coaching, workshops and action learning programs. Promote talent mobility to build experience with
change and increase the organizational flexibility of talent deployment.
3. Build strategic workforce planning capabilities – This should include operational workforce planning to
support day-to-day activities, tactical workforce planning to manage the business and strategic
workforce planning to ensure the ability to anticipate and respond to shifts in market demand, as well
as mitigate business risk.
4. Focus on critical roles and performance throughout the entire organization – This will require an
expansion of succession planning focus and capabilities in many organizations. Define key roles
wherever they exist in the organization, not just at the top. Once completed, focus on the critical skills
needed for these roles, and lastly the individuals that currently demonstrate them or have the capacity
to develop them. Performance management should be adjusted to promote agility. Review and
feedback must be frequent to help staff stay in tune with shifting priorities. Sight lines of development
plans should be short to enable frequent adjustments if needed. Strategic and tactical goals need to
be constantly checked to ensure alignment.
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Authors and Contributors Tony DiRomualdo ([email protected]), VP of research, and Kevin Martin ([email protected]),
chief research and marketing officer, authored and oversaw development of the findings discussed in this
report. Additional analysis and input was provided by Jay Jamrog ([email protected]), SVP or research.
Lorrie Lykins ([email protected]), managing editor and director of research services, edited this report
and Eric Davis ([email protected]), senior editor, provided graphic design.
About the Survey This report provides analysis of the results for i4cp’s 2013 Critical Human Capital Issues Survey, which was
conducted in December 2012 and had 313 respondents. Previous iterations of this survey—formerly titled the
Major Issues Survey—have been conducted by i4cp over the past three decades and provide rich longitudinal
perspective that informs our research and, in turn, aids our members in setting organizational priorities.
Data for this study have been filtered for organizations with 1,000 or more employees. Breakouts by
organization size, industry and other demographic factors are available in the interactive data workbook for
this study, which is available to all member organizations through the i4cp website.
About the Critical Issues Index The Critical Issues Index (CII) is calculated by multiplying the mean score for the importance of an issue by
another number related to effectiveness. Issues with a high CII score are considered prime areas of focus that
could, if addressed well, result in the greatest boost to organizational performance.
References Institute for Corporate Productivity. (2010). Organizational and Leadership Agility Survey. www.i4cp.com
Institute for Corporate Productivity. (2011). The Critical Human Capital Issues of 2011. www.i4cp.com
Institute for Corporate Productivity. (2012). Talent Management in the Trenches. www.i4cp.com
Institute for Corporate Productivity. (2012). The Best Get Better: Critical Human Capital Issues of 2012.
www.i4cp.com
Institute for Corporate Productivity. (2012). The Future of HR: The Transition to Performance Advisor.
www.i4cp.com
Institute for Corporate Productivity. (coming in 2013). Purpose-Driven Performance Management in
High-Performance Organizations. www.i4cp.com