The question if HR deserves a “seat at the table” or how HR function adds value to the enterprise continues to be a hot topic today just like in the early days of HR. A wealth of evidence from behavioral science research suggests that companies with strong leadership, high-performance culture, engaged workforce, and diverse leadership outperform their peers.
Despite the evidence and practice, despite what Master’s and MBA courses teach us, chances are that if you are an HR professional you’ve been seriously contemplating this question at one stage in your career. Not surprising because the HR function deals with business in as many intangible as tangible ways, and the value we build is often longer-term value than directly measurable KPI.
Let’s explore this with a little help from our friend Djole who is a newbie who just subscribed to the gym. He finishes his first weight training, comes back home exhausted, stands in front of the mirror, and expects to see some results. He is the same old Djole, no changes visible. The same situation repeats over the next few days, he concludes that going to gym is a waste of time, decides to cancel a subscription, and invests in something that gives him the confidence he needs – a pair of new shoes.
The result is immediate, and he feels fantastic about it. Joke aside, obviously nobody questions that consistency in visiting the gym will lead to visible physical change and measurable health benefits over time. Similar is with the investment in Leadership development or Culture initiatives. We have all been in a situation where we have sent that one high-potential individual to a week-long offsite leadership development retreat.
When the person returned to the office, neither business leaders nor his/her team observed any measurable behavior change. People costs are among the most significant in today’s knowledge-based industries and the danger of focusing on the short-term is that, unfortunately, in times of financial pressures, we tend to quickly look into cutting on our people investments first.
Not to be understood wrong, HR needs to be data-driven more than ever. At the same time, we need to be advocates with the key ability to communicate the short-term and long-term value of the impact we deliver through the lens of the business and other stakeholders’ success.
Our success and difference in the role we play in our business teams will be determined by how effectively we use our whole self and all our resources to drive change and impact the business. One of the first tools HR professionals have available to bring “to the table” is ourselves – WHO WE ARE, our integrity, our vision, actions, behaviors, dialog, questions, and choices. Our functional expertise and tactical HR processes are secondary.
HR is uniquely positioned as an agent of change and one of the most strategic and future-focused roles in the company. We have a ticket to play in today’s business world, it is up to us to show up when it matters, have a loud voice, and influence others effectively to drive change. “Self as an Instrument” is a concept that originates from OD, and it has many definitions. In my interpretation, it starts with Who We Are, our awareness, our leadership, and personal credibility that will translate all the expertise we have in our toolbox into the influence that will drive real-world business success. We have all we ever need, we have Ourselves.
Understanding the major trends and context in which we operate our business is key to shaping and delivering HR strategies that will drive business value. There are many external trends that we need to understand and that will have an impact on how we shape our HR Strategy. Recent pandemics placed pressure on business continuity and ways of working. The HR department played a lead role in helping businesses and leaders adjust to new realities. We are observing many more trends, to name a few:
- Ever stronger need for a Diversity, Equity, and Inclusion agenda;
- Activism on social media and in the workplace is rising;
- The Future of Work models;
- How to win the War for Talent in the age of Great Resignation;
- The accelerated pace of change is driven by technology adoption and digitalization etc.
I’d like to provide a few examples of how Novartis, a global healthcare company I work for, has responded to these megatrends and how some of the practices and initiatives do connect to value creation for our stakeholders.
In 2018, Novartis made a public pledge with the Equal Pay International Coalition (EPIC*) to achieve gender balance in management at Novartis and further improve our pay equity/transparency processes by 2023. Commitments through this initiative are to:
- Monitor and achieve Pay Equity among men and women with global consistency;
- Remove bias from the system – We will not make salary offers based on historic data or previous candidate salaries but only based on their capabilities;
- Create Pay Transparency – We openly share with our associates how their salary compares to external and internal peer benchmarks;
- Achieve gender balance in management by 2023.
As a result, introducing pay transparency has had a strong impact on engagement and strengthened Novartis’s Inspired, Curious and Unbossed culture. Since introducing this and several other initiatives, our overall engagement score in the company rose by 5 points over a 2 year span. **Our managers and associates have a transparent and quality conversation about pay, capabilities, talent development, and impact at work.
Along with gender pay equity, this is something our associates request and deserve, and responding to these needs of our internal and future external workforce has positive effects on our ability to attract the best and the most inspired talents in the field.
These commitments are not only the right thing to do but they are directly linked to how we, as an HR function, help create value in the long term and respond to changing realities and needs of our stakeholder environment. A diverse and market-reflective workforce will help make better decisions and help the company better understand and respond to ever-changing customer needs.
Lastly, investor groups are also waking up to DEI efforts and demanding a change and progress in the space as HR value also comes in terms of “goodwill” in the company valuation, in addition to being a leading indicator of future success.
According to McKinsey research, companies that can dynamically reallocate their best talent to where they need them most are outperforming their competition in terms of shareholder returns by a stunning 2.2x. By reading this insight for the first time, I was wondering what is the secret and why every HR professional and every company shouldn’t just double-click their efforts on talent management with this attractive promise of doubling shareholder returns.
Over the years, we developed sophisticated systems to plan, identify, assess, develop and deploy talent in organizations. Talent management rose as one of the most strategic HR capabilities and talent supply is often one of the areas CEOs are most worried about.
Traditionally, Talent management efforts are focused on the most senior roles in organizational hierarchy and the whole machine is focused to produce successors and talents ready to succeed our executive leadership. Unlike traditional approaches to talent management, the roles and teams that contribute the most to achieving the long-term business strategy cannot be immediately identified by looking at an organizational chart.
They usually are not the most senior leaders in the organization. I happen to play and love basketball and our traditional talent management approach reminds me of that team whose Team Manager invests all efforts into developing new Head Coaches because it is the most senior role, instead of focusing on growing top prospects and signing that Star player that will bring disproportionate value and propel the team to the finals.
Let’s explore another hypothetical situation, this time of an Airline company. When asked what is the most important role in the airline company, the majority of respondents tend to say it is a pilot. Pilots have one of the most exciting and responsible jobs, and an airline company can’t function without pilots. However, having a best-in-the-world pilot versus an average pilot will have little to no impact on the $ value created at the company.
On another hand, cabin crew roles could have a disproportionately large impact if your company competes on an unmatched level of customer experience and service. Even more so, your Revenue Management specialist or team that excels in dynamic pricing models can make a huge difference in the value created and maximize the price point for the right customer, at the right time. Having read this, in which capabilities would you invest disproportionally?
Following many learnings and engagement with many thought leaders, at Novartis, we have developed a new approach we call Precision Talent management, focused on linking Talent to Future Business Value. The approach has 6 steps and starts with the Future in mind and a deep understanding needed to unpack the enterprise Value Creation agenda. You will notice that the conversation doesn’t start with typical talent/capability questions and doesn’t rush into any tactical interventions.
Define your North Star (Future Value Creation Agenda) This is HR led conversation “What is the North Star for your organization in 3-5 years? What are sources of future value and how do we capture this value? Will the future value come from new markets, new products, new lines of business? What are Imperatives and What are Jobs to be Done to Capture this Value?”
Identify Value Roles. These roles have a disproportionate impact on capturing future value. Do these roles exist today or do we need to create NEW role/s that will eventually do what it takes to capture future value? Define 3-5 Jobs To Be Done for these roles.
Understand Role / Talent Risks. What evidence is required to assess the Role-Talent match? By using very specific Role-Talent risk cards we explore Role Risk categories (Authority, Capacity, Capability, etc.) and Talent Risk categories (Expertise, Capabilities, Behaviors, Retention).
Define holistic HR Interventions to ensure Value is Mobilized. Best Fit talent allocation is only one of the levers we can pull to support future value creation. Based on the identified risks, we define holistic interventions across the Organizational capability model spectrum and this might go in many directions such as Retention awards, Role split into two smaller and more manageable roles, Talent reallocation, and Creation of new roles.
This approach is replicable to any organization and its beauty is in 3 aspects: It is future-focused, clearly linked to value agenda, and utilizes a full HR intervention spectrum beyond talent management lever with a clear measurable feedback loop. It is more than an approach; it is a Mindset that focuses not on what HR does but what business delivers (now and in the future) and how an HR function leads these efforts.
Perhaps the word I’d like to leave the readers with is alignment. By exploring these 3 perspectives on HR value creation it is important to remind ourselves that what we choose to do as HR professionals has to be of value in our given context and help our business win in the marketplace, but also preserve and deliver value for our other stakeholders including customers, shareholders, and communities.
* EPIC is the Equal Pay International Coalition. Led by the International Labor Organization, UN Women, and the OECD. The Coalition’s goal is to achieve equal pay for women and men everywhere
** According to Novartis internal Our Voice survey data, engagement score increased from 71ppts to 76 ppts between ’19 and ’21
Author: Milan Prnjic
Publication: HR World Magazine No. 8 (2022)