HR Optimization

HR OOptimization
From Personnel Administration to Human and
Organizational Capital Development
Rick BBellingham, EEd.D.
with
Russell JJ. CCampanello,
Contributing EEditor
HRD Press, Inc.
Amherst, Massachusetts

Copyright © 2004, HRD Press
All rights reserved. It is a violation of the law to reproduce, store in a retrieval
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Other books by Rick Bellingham:
Ethical Leadership, Second Edition
The Manager’s Pocket Guide to Spiritual Leadership
The Manager’s Pocket Guide to Corporate Culture Change
The Manager’s Pocket Guide to Virtual Teams
The Complete Guide to Wellness
iii

Dedication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .vii
Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .ix
Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .xi
Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .xiii
Section I Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section II Core Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2. Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3. Human Capital Management System (HCMS) . . . . . . . . . . . . . . 29
4. Learning and Development. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5. Staffing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6. Leadership Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
7. Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
8. Process Excellence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Contents

Section III Account Management . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
9. Business Consulting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
10. Employee Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
11. Change Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
12. Performance Management . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
13. Diversity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
14. Measuring Human and Organizational Capital . . . . . . . . . . . 139
Appendices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147
Appendix A: Customer Satisfaction Survey . . . . . . . . . . . . . . . 149
Appendix B: Critical Consulting Skills (Positioning, Contracting,
Productive Dialogue) . . . . . . . . . . . . . . . . . . . . . 157
About the Author . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187
HR OPTIMIZATION
vi

We would like to dedicate this book to our children, Emily, Nina, and Rebecca.
It is for them that we have the passion to create healthy, innovative, and
productive work environments.
Dedication

First and foremost, we want to acknowledge Robert Carkhuff, Ph.D., whose
perspectives, constructs, and technologies made this book possible. Dr. Carkhuff
is the originator of the terms Human and Organizational Capital Development,
which he service marked in the 1980s.
We would also like to acknowledge people who contributed significantly to the
content in this book: April Hendrick, Bill O’Brien, Doug Nufer, Ed Raine,
Evelyn Flaherty, Greg Friedman, James Fuller, Jen Kahler, JoAnn Nikka, Laura
Moorehead, Lisa Wales, Maria Van Parys, Maritzie Rudden, Matt Cohen,
Michael Serino, Michele Giametti, Neal Bruce, Nicol Pitchon, Theresa Daniels.
We could not have written this book without their input and feedback.
Finally, we want to express our gratitude to our clients who have helped shape
our ideas. We have worked with over 200 companies over the past 25 years, and
it is our learning in those organizations that provided the material for this book.
Acknowledgments

This book represents a blueprint for human resource transformation. It not only
contains action steps and tasks, but also provides the vision for the future of
human resources.
It is obvious in this book that Bellingham and Campanello have not only lived
in the organizational trenches for many years, but also have done their research.
It is scholarly, pragmatic, and easily accessible. Bellingham and Campanello pos-
sess an incredible track record for innovation and results.
Implementing the recommendations in this book should result in a great com-
pany in which great people have great jobs. It explains how to align the business
and people strategies to achieve profitable growth. It successfully outlines the
levels that exist between a company’s present state and the end game. Thus, one
is never too far away from an orientation point.
The beauty of this book is that it stimulates thought and provides a process for
discussion. Each chapter is written to engage readers in a thought process that
can be applied to their unique situation. The book encourages readers to assess
their current situation, think about organizational readiness for change, and
then develop action strategies to elevate the function. This book succinctly out-
lines critical success factors and invites readers to add their own success factors
and their reasons to change.
Some of the most compelling ideas of each chapter are contained in the
Lessons Learned section. The authors derive these lessons from over 40 years of
work with more than 200 companies. As such, they constitute a rich source of
guidelines for successful transformation.
Perhaps the most unique contribution this book makes is to organize all 14
human resource functions into their respective components, functions,
processes, conditions, and standards. Based on the work of Dr. Robert
Carkhuff, no other book has taken such a systematic and deductive approach to
Foreword

HR optimization. Again, the experience of the authors comes through in the
conclusions of each chapter. Their multidimensional thinking provides frame-
works and models that are invaluable for guiding transformation efforts.
As a business leader, I am continually implored to take into account the human
and organizational factors that account for sustainable growth. This book
shows how to do just that.
Barry Cohen, Ph.D.
Executive Vice President PTC
HR OPTIMIZATION
xii

We believe that many contemporary HR organizations have unique and sub-
stantive capabilities—it is our responsibility as an HR community to share our
thinking and our models with the wider HR community in the hopes that more
companies will invest significant resources in people and culture.
This book is not meant to be a cure-all for all HR departments within all
companies. Each company and each HR department has unique needs that
require thoughtful tailoring. We hope that this book will be a stimulus to
help you think through your particular challenges and distinguish yourself as
an HR professional independent of organizational support for HR. As such,
this book is incomplete; it will be completed by your participation. In each
chapter there will be opportunities for you to assess the current level of func-
tioning of your organization, to identify reasons for you to change, to reflect
upon the critical success factors in your organization, and to summarize the
lessons you have learned in your efforts to implement initiatives in each
function.
Your organization may only want or demand personnel administration from
HR. This book provides guidelines and strategies for optimizing that role. On
the other hand, many organizations are demanding more from HR. In a service
economy, compliance and reporting are necessary but insufficient requirements
for HR. Many businesses are asking HR to add value, to act as strategic part-
ners, and to develop individual and organizational capabilities. Whatever your
organizational reality is, this book will help you and your colleagues grow as
HR professionals.
We would like you to see this book as an invitation to change because it repre-
sents the tone with which we would like to see the book received. It imposes nei-
ther participation nor use. We see the writing of this book as a dynamic process
that will encourage you to journal your experience in transformation. We
Preface

believe that every one of you will have a different perspective on and experience
with the changes you are making.
The book is divided into three sections: Introduction, Core Solutions, and
Account Management. The Introduction describes the purpose of transforma-
tion: for organizations to evolve from good companies (or bad companies, if
that is the case) to great companies; and for people to be able to describe their
jobs as a great experience. Sections II and III discuss how HR can contribute to
the creation of great jobs in great companies.
The 14 chapters in this book each discuss one HR function—each chapter has
seven parts:
1. Introduction
2. Scale
3. Why Change
4. Critical Success Factors
5. Reality
6. Lessons Learned
7. Conclusions
The Introduction describes the function and discusses why the function is an
essential element in a great job. The Scale enables us to assess where we are and
where we want to be in the function. Why Change addresses the reasons we need
to look at things differently and to elevate our thinking. It should be noted that
examples in this section represent a composite of over 200 companies. Critical
Success Factors summarizes our strategy for change and incorporates theoretical
constructs that support the change. The Reality is a place for all of us to describe
our journey along the way—it’s a place for sharing the human-interest stories that
will bring this book alive and make it real for the reader. It’s also the place to
describe the organizational realities and context in which the implementation will
take place. Lessons Learned encourages us to identify potential pitfalls and to cap-
ture and share our insights about transformation and the evolution of people and
functions. Conclusions organizes the key points from the chapter into compo-
nents, functions, processes, conditions, and standards. We used this organizing
construct so that by the end of the book you will not only have a path for
transforming your function, but also a framework for ongoing analysis and
development.
As you will see, everyone has an opportunity to contribute to this book. You
may have a strong feeling about why change is required. Write it down. You may
have an interesting story to tell that helps the reader understand the barriers and
HR OPTIMIZATION
xiv

obstacles to change. Share it. Your experience may have led to a real epiphany
for the Lessons Learned section. Pass it along.
In fact, we encourage you to write your own story. This book simply provides
examples and perspectives we have acquired along our own journey. To make
this book really work for you, you’ll need to personalize each section to your
own situation. You may have different reasons for change than we describe here.
Your critical success factors may be different from what we have found to be
successful. This book is a road map, not a recipe. Create your own stew.
PREFACE
xv

How would you rate your job? Great? Good? OK? Bad? Depressing?
What measures did you use to arrive at your rating?
In the United States, a common measure of a great job is one that pays a lot of
money. This book asks, “At what price?” Clearly, there are quantitative meas-
ures of success that need to be taken into account, but what about the qualita-
tive side?
One of our clients was a man who had just sold his company for $30 million.
As it turns out, we had helped him structure the company in a way that made
the sale possible. The terms of the sale included a clause for him to continue as
CEO of this company for two years. After the deal closed, we asked him what
success looked like for him at the end of those two years. When he started spout-
ing quantitative measures, we interrupted him and said, “You’ve already won
that game beyond your wildest dreams, what about the personal measures of
success, like being able to spend more time with your grandchildren?” He was
visibly startled, but to his credit, responded, “You’re right. I do need to change
my measures of success.”
Unfortunately, few of us are able to achieve the quantitative level of success this
client attained. This book suggests a re-framing of our measures of success and
encourages both individuals and organizations to take more responsibility for
the qualitative side of the equation.
Most people spend a large portion of their lives working. It is not uncommon
for a person to work 50 hours per week for 40 years or more. This equates to
100,000 hours of work in a typical lifetime. This book explores the impact of
that huge investment of time on the quality of our lives. Sadly, in many cases,
the most significant investment of our time has a negative return.
In our work as HR professionals, it is important for us to remember that we
can have a significant impact on the quality of life for our colleagues in our
Introduction

respective organizational communities. As Dave Ulrich, a leading HR strategist,
would say, our work is more than becoming administrative experts, we need to
be employee champions, change agents, and strategic partners. In doing so,
however, we need to keep in mind the desired outcomes of all our efforts: to
improve the quality of life of our colleagues and to add measures of success that
give people real meaning. As Jim Collins, a noted author and consultant, would
say, our organizational goal is to transform our organizations from Good to
Great. Our goal at the human level is to enable all employees in our company
to respond to the question “How would you rate your job?” with a resounding
“Great!”
It may be helpful to start this journey with an assessment of how you would
rate your job. Simply complete the following survey to determine if your work
experience is for better or for worse.
Job Satisfaction Survey
1. I look forward to going to work on Monday morning.
2. I feel positive and up most of the time I am working.
3. I have energy at the end of each work day to attend to the people I care
about.
4. I have energy at the end of each work day to engage in personal interests.
5. I have the time and energy in my life to read books that interest me.
6. Most interactions at work are positive.
7. I have good friends at work.
8. I feel valued and affirmed at work.
9. I feel recognized and appreciated at work.
10. Work is a real plus in my life.
11. I’m engaged in meaningful work.
12. I feel free to be who I am at work.
13. I feel free to do things the way I like at work.
14. My values fit with the organizational values.
15. I am aligned with the organizational mission.
16. I trust our leadership team.
17. I respect the work of my peers.
18. I have opportunities to learn what I want to learn.
HR OPTIMIZATION
4

19. I feel involved in decisions that affect our organizational community.
20. Creativity and innovation are supported.
21. I feel informed about what’s going on.
22. I know what is expected of me at work.
23. I have the materials and equipment that I need in order to do my work
right.
24. I have the opportunity to do what I do best every day at work.
25. My manager cares about me as a person.
26. I know someone at work who encourages my development.
27. My opinions count.
28. My co-workers are committed to doing quality work.
29. My manager reviews my progress.
30. I am fairly compensated.
Give yourself 2 points for each statement you answered positively. Use the fol-
lowing scale to evaluate your job:
50–60 points: Great Job
40–49 points: Good Job
30–39 points: OK Job
20–29 points: Bad Job
0–19 points: Depressing Job
Now that you have an assessment of where you are on this scale, we can begin
our discussion of how to create the conditions and standards that will enable
you to answer more of the questions positively. Before we begin the process of
assessing where you are on all of the HR functions, it is critical to get a sense of
the context in which we are trying to make changes as individuals and as organ-
izations. This introduction will help you evaluate not only how you are feeling
about your current job, but also how you view your organizational culture. As
we mentioned earlier, our organizational goal is to transform our organizations
from good to great. Jim Collins conducted extensive research on this subject and
wrote a book about the findings, Good to Great.
What follows is an adaptation of the timeless characteristics that Collins discov-
ered in his research:
1. Undaunted curiosity
2. Rigorous not ruthless
INTRODUCTION
5

3. Culture of discipline:
Disciplined people
Disciplined thought
Disciplined action
4. Leadership humility
5. Professional determination
6. Right people in the right jobs
7. Unwavering faith
8. Honesty about the brutal facts of the current reality
9. Carefully selected technology accelerators
10. Core values
11. Understanding of differentiating competencies (what we are best at in the
world)
12. Piercing insight into economic drivers
13. Focused passion
14. Goals based on understanding vs. bravado
15. Executive decisions based on
Dialogue and debate
Autopsies and analysis
You may want to ask yourself how many of those characteristics would describe
the organizational culture in which you work. Which of the 15 characteristics
would you consider to be strengths in your organizational culture; and which
would be weaknesses?
The results give you an indicator of context and organizational readiness. One
of the central challenges of HR professionals is to continually calibrate the work
with organizational reality.
This book contains ideas for transformation in 14 critical Human Resource
areas that will result in employees pronouncing that they have a great job in a
great company. Focus on all of the following 14 areas will result in significant
contributions to human and organizational capital:
1. Compensation
2. Benefits
3. Human Capital Management System (HCMS)
4. Learning and Development
HR OPTIMIZATION
6

5. Staffing
6. Leadership Development
7. Communications
8. Process Excellence
9. Business Consulting
10. Employee Relations
11. Change Management
12. Performance Management
13. Diversity
14. Measuring Human and Organizational Capital Development
Each chapter contains principles for improving the delivery of services. As you
read each chapter, remember the goal: to elevate the human and organizational
capabilities of the company from good to great. At the beginning of any inter-
vention or transformation effort, the first question that needs to be addressed is
“What are the desired outcomes of this investment?” For an HR Optimization
project, we answer that question as follows:
The compensation system rewards desired behaviors and core values.
The benefits package promotes and encourages wellness and wise medical
consumerism.
The HR information system is user-friendly and serves as the foundation
for capturing, maintaining, and reporting on all employee data worldwide.
Learning and development programs have real business and personal
impact.
Staffing processes result in attracting, hiring, and retaining the right talent
in a short amount of time at low cost per hire.
HR business partners add value to all discussions related to strategy, struc-
ture, and business issues.
Great talent stays with the company and employee satisfaction ratings are
high.
HR leads change management initiatives and helps to define desired end
states.
Leaders are promoted from within and are extremely successful in achiev-
ing business results.
All employees have contribution and capability plans written and
reviewed.
INTRODUCTION
7

Employees are inspired by the company vision and direction; everyone is
certified to tell the story.
HR is easy to do business with; processes are smooth and efficient.
The company acts as one team and leverages its collaborative processing
capabilities.
There is significant diversity of talent in all organizations at all levels.
At the beginning of each chapter, there is a scale that outlines the range of pos-
sible outcomes for each of the items listed above. For example, while the ideal
outcome of changing the compensation system is to reward desired behaviors
and values fairly and appropriately, there is no guarantee that the ideal will be
achieved. There may be too much resistance to change or too much attachment
to old ways of rewarding performance. Some people will prefer reward systems
that are based solely on revenue production and that compensate them for
achieving the ends independent of the means. Rewarding people based on a bal-
anced scorecard and company performance may represent a dramatic shift in
philosophy and threaten people. Therefore, it is critical to construct a range of
possible outcomes, assess the gap between the current reality and the future pos-
sibility, and determine the amount of resources required to achieve the goal
given the level of resistance. Each of the scales presented was built on a generic
construct that can be represented as follows:
5: Ideal End State.
4: Very Positive, but Less Than Optimal End State.
3: Acceptable End State.
2: Less Than Acceptable End State.
1: Totally Unacceptable End State.
The key to all change is seeing possibilities against the backdrop of reality. It is
just as important to envision the possibility as it is to assess the reality. Having
a broad range of outcome measures with specific indices for measuring success
guides the transformation efforts and enables change leaders to determine
dynamically what additional resources or shocks will be required to achieve the
desired end-state—the scales simply facilitate that process. In reading the scales,
it is important to understand that the scales are cumulative from level 3 up to
level 5, i.e., a level 5 outcome incorporates the positive aspects of level 3 and
level 4 outcomes.
Each chapter in this book is designed to help HR departments achieve success
in each of the 14 solutions addressed herein. If you are using this book to engage
your team in the work of transforming HR, we suggest you welcome contribu-
HR OPTIMIZATION
8

tions from any source. When people contribute ideas for transforming your HR
organization, acknowledge their input. With your team, you can establish a
model for your own HR transformation. When you complete the journey, your
whole team will own it.
If you are able to “move up the scale” in the 14 functional HR areas, you
will be contributing to human and organizational capital development. The last
chapter of this book, “Measuring Human and Organizational Capital
Development,” explores ways to measure the business impact of your
progress—a new way for assessing the strength of your strategy and for
measuring human and organizational capital.
INTRODUCTION
9

IInnttrroodduuccttiioonn
How people are compensated for their work in regard to base salary, bonuses,
and stock grants has a large bearing on how they feel about their job and their
company. People need to feel they are being compensated fairly and competi-
tively. Most importantly, people need to believe that their compensation is
directly linked to their personal performance, as well as corporate performance,
and is in line with their contribution. Fairness is the operative word.
Compensation strategy needs to be linked to corporate strategy. Decisions on
the richness and mix of compensation depend on “who” the company is and
what it is trying to achieve. For example, a company that positions itself as a
dependable, steady organization may not want or need a compensation strategy
with a high variable component. It is a mistake for companies to promote some-
thing that is not real. HR professionals need to make sure that the compensa-
tion strategy is consistent with the organizational reality. While we all aspire to
doing great things (at least that is our assumption about the reader of this book),
“great” needs to be defined relative to the organizational context in which you
are working.
SSccaallee
There is a range of possible outcomes in any effort to change the compensation
system. Here is a scale to envision possibilities and assess current realities:
Compensation
Chapter
1

5: Reward systems tied to desired behaviors and core values.
4: Reward systems tied to company performance.
3: Rewards tied to individual performance.
2: Rewards in line with market/no internal equity issues.
1: Rewards not tied to performance or to market. System lacks integrity and
is not perceived as equitable.
Where are you on the scale now? ______
Where do you want to be on this scale in one year? ______
WWhhyy CChhaannggee
Company A grew very rapidly as a result of superior engineering technology.
As a high-flying, high-tech company, Company A was able to attract and retain
great talent with relatively low cash compensation and rich option packages.
As competition became more intense and the economic climate deteriorated
(i.e., devaluation of high-tech stocks), stock options became a less important
component of the compensation package. Whereas in the past, Company A
could easily attract and retain people by offering base pay and total cash com-
pensation at the 50th percentile with a great deal of upside potential on stock
options, conditions have changed. The company now needs to take a hard look
at each component of the mix. Company A needs to move toward the 75th per-
centile on total cash compensation and reduce its reliance on and use of stock
options. In order to attract and retain key talent, it needs to design a compen-
sation system that drives a high-performance culture and that is intimately
linked to the performance management system. In short, Company A’s reasons
to change are the need for greater flexibility, fairness, and attractiveness as an
employer.
YYoouurr RReeaassoonnss ffoorr CChhaannggee
CCrriittiiccaall SSuucccceessss FFaaccttoorrss
The two essential ingredients in transforming a corporate culture are leader-
ship role modeling behaviors and the reward system. People take their cues
HR OPTIMIZATION
14

from their leaders. Thus, leadership behaviors must be consistent with the
values and philosophy of the compensation system. If behaviors that support
the desired and required norms and values of the new culture are rewarded,
then people will get the message that compensation is tied to cultural leader-
ship. If the compensation system continues to reward old ways of doing busi-
ness, then cultural proclamations and business imperatives will ring empty
and employees will become increasingly cynical. In order to create an envi-
ronment in which people feel great about their jobs, the compensation
system must be aligned with stated values and operating principles. Leaders
must be clear about performance expectations and how associates will be
rewarded.
At the foundation level, rewards need to be in line with the market and sup-
port the business strategy. Organizations need to make a policy decision to
pay at the 50th percentile, the 75th percentile, or whatever is appropriate.
If a company pays less than the 50th percentile, there will need to be multi-
ple factors in the culture to “compensate” for a lack of compensation or it
will be impossible to attract great talent or star performers. On the other
hand, the strategy may not be to hire stars. The compensation strategy may
be to attract solid performers by paying fair wages in exchange for security
and growth opportunities. In essence, the compensation strategy should
reflect the needs of the business strategy in attracting the most appropriate
talent.
Once a company decides the strategy and the corresponding pay percentile,
benchmarking analyses are required to determine the comparability of each job
in relation to market rates. In order to execute business strategy, it is usually nec-
essary to compete for appropriate talent. Business strategy drives decisions
related to compensation because it specifies requirements for critical talent that
can only be acquired and retained through competitive compensation programs.
The corporate culture also influences compensation decisions because it either
consists of a number of compelling reasons for joining or staying with a com-
pany (for example, a winning company, great branding, quality of life, career
development, or any of the Great Job/Great Company indicators listed in the
Introduction) . . . or it doesn’t. If there are few compelling reasons for joining
or staying with a company other than compensation, then the compensation
package will need to be very rich. A good compensation system does not keep
people focused on their compensation, it keeps them focused on other com-
pelling aspects of the organization because pay is not a distraction. Again, the
operative word is fairness. Employees will always ask, “Am I being paid fairly
and rewarded appropriately for my contributions to what the company says is
important?”
COMPENSATION
15

Decisions surrounding compensation present a terrific opportunity for HR busi-
ness partners to take a leadership role with their clients. Since compensation
usually tops the list of what’s most important to corporate clients, business
partners can add real value to their clients through their consultation on
compensation issues. In any company, the way compensation issues are handled
is critical to the perceived effectiveness of HR.
It is also important to minimize inequities within departments. Over a period of
time, because market rates vary according to supply and demand curves, there
may be several people in a department doing very similar jobs but who are paid
at significantly different rates. For example, one person may have been hired as
a computer programmer in 1997 when the market value for such jobs was
$50,000. Another programmer could have been hired in 2000 when the market
rate for the same job was $75,000. Thus, while appropriate market measures
were used to determine salary, the changing rates create inequity issues within
the department. These issues are compounded when gender and race come into
play. Salary offers, merit increases, and other compensation decisions must take
into account both comparability and equity considerations. These issues typically
consume a large share of compensation specialists’ time.
While it seems to be common sense to tie rewards to individual performance,
this practice is far too uncommon. We have worked in multiple corporations in
which the compensation team and performance management team did not talk
to each other. Unfortunately, very few organizations are satisfied with their per-
formance management system and even fewer believe that performance is linked
fairly and accurately to compensation. In too many cases, employees perceive
that rewards are tied more to who you know than to what you deliver. This per-
ception violates one of the primary characteristics of a “great job”: I am fairly
compensated. While performance management will be discussed in more detail
in Chapter 12, it is important to make the connection here. The other common
factor that causes employees to rate a job as “depressing” is to have an opinion-
ated boss who uses only one source of input to make compensation decisions—
his or her own perception. Not only are managers often not in the best position
to evaluate performance, they may also suffer from biases that could taint their
evaluations. In the worst of cases, the manager may be a golfing buddy of an
employee who is of the same age, race, sex, background, and sexual orientation.
This employee may benefit from a “halo effect,” while another employee from
a different set of circumstances may be unjustly compensated. These situations
feed the negative perception among employees that compensation decisions are
based more on “how you dance vs. what you do.” In single-rater situations,
quiet contributors are also often ignored unless the manager is finely attuned to
each employee’s various levels of contribution. When compensation is linked
HR OPTIMIZATION
16

closely to performance and employees feel that evaluation decisions are done
fairly and accurately, employees are much more likely to proclaim, “I’ve got a
great job!”
Assuming that a company has addressed internal equity and market comparabil-
ity issues and that compensation is linked intimately to performance, the next
level of achievement is to tie compensation to organizational performance. This
linkage is typically accomplished through incentive programs. When bonuses are
given every year independent of the financial performance of the firm, then
employees begin to see this form of compensation as an entitlement. If bonuses
are tied to company performance, employees are more likely to think interde-
pendently and the company has a greater chance of survival in tough economic
times. If employees know that they will be compensated based on how well the
company achieves its revenue and profitability goals, then everyone will actively
seek ways to help each other succeed. A one-team mentality starts to take form
in which all members of the community work collaboratively for the greater
good. This phenomenon is what makes people experience their everyday work
experience as a great job. Feeling part of a community in which all members are
focused on common goals leads to greater satisfaction than simply working inde-
pendently to collect a pay check each week. It is important to point out, however,
that variable compensation can only be leveraged so far. Base salary needs to be
fair enough for employees to “hang in” during tough times. The perception of
fairness is based on both structural fairness and reward fairness. Structural fair-
ness relates to how the job fits into the career path framework; reward fairness
relates to the amount and timing of incremental increases.
At level 5 on our compensation scale, reward systems are tied to desired behav-
iors and values. Stock option grants are the most common way of making a
statement that particular behaviors are valued and that the organization wants
the person to remain in the community. When stock option grants are awarded
to people who achieve financial goals at the expense of all other stated values
in the culture, employees rightly conclude that they are simply a member of a
mercenary community with one value—money—not a growth community in
which several values are rewarded and recognized. Linking rewards to desired
behaviors and values requires three key elements: (1) a clear articulation of what
the desired behaviors and values are; (2) a commitment to tie compensation to
those behaviors; and (3) a reward system that takes into account the contribu-
tion that individuals make to the desired culture. Articulating the desired values
is not an event that the executive committee performs; it is a process in which
employees at all levels of the organization participate. If employees are involved
in the process of stating desired behaviors and values, they will be much more
likely to own them. When values are clear, they can become a vital part of the
COMPENSATION
17

performance management system, so employees get regular feedback on how
well they are contributing to the values or detracting from them. That feedback
should influence compensation adjustments.
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While the theoretical constructs of compensation appear logical, the reality
often presents many challenges. Here are some examples from our experience.
Tenured vs. new employees. With changing economic conditions, it is not
unusual for people to be recruited into the organization in boom times with
inflated salaries. When this happens, loyal employees who have served many
years may find themselves with far smaller salaries than new employees with less
experience. These situations, which are difficult to avoid, are even more difficult
to resolve when the economy slows and profit margins come under pressure. Do
you always pay market value for new jobs? Do you always limit pay raises for
existing employees to a certain amount? What happens when you refuse to pay
inflated market values or if you start making exceptions for certain employees?
If rigid adherence to a philosophy of limiting pay raises to a certain percentage
results in a situation in which employees have to quit and return to get signifi-
cant bumps in compensation, how do you deal with those employees and the
ones who stayed with you and came up short?
Legacy products vs. new technologies. Supply and demand curves sometimes
create bidding wars for people who have skills in hot products. For example,
when SAP first emerged, consulting companies were paying “hot skills” bonuses
to attract people who had SAP implementation skills. The problem occurs when
the supply and demand curve shifts and the hot skills cool off. What happens if
the bonuses for these skills are baked into base salary? Do you take away the
bonus? Should you use variable compensation to deal with “hot skill” pressures
on compensation?
Transfers between organizations. In many organizations, some departments
follow the compensation rules, while other departments don’t. When an individ-
ual transfers from a department that doesn’t follow the rules into a department
that does, what do you do if the person’s compensation is far above his or her
HR OPTIMIZATION
18

colleagues in the new organization because he or she benefited from exceptions?
For example, a Web designer in marketing with essentially the same job as a
Web designer in IT makes much more money because the marketing department
tended to pay higher wages and regularly made exceptions to the rules. In
addition, the person in marketing has an incentive plan and the person in IT
does not. What do you do when the marketing person gets transferred to IT?
What do you do when exceptions become the rule?
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TToopp TTeenn LLeessssoonnss LLeeaarrnneedd
1. It is important to start with a guiding philosophy and stick to it.
2. HR business partners can have a tremendous impact on the business by
optimizing the compensation value proposition.
3. Effective compensation policy requires a balanced approach with thought-
ful consideration for how compensation is configured among base, variable,
and stock incentives.
4. As the business climate changes and business strategy changes, compen-
sation must adjust policies to be aligned with the changes.
5. The leadership team must own and believe in the compensation strategy.
6. It is critical to be able to accommodate exemplars and star performers
without destroying internal equity.
7. Compensation is as much art as science.
8. Compensation decisions need to take into account performance, equity,
and market conditions.
9. Structured flexibility is the best policy. There is always a need for discretion.
10. Compensation must be interdependent with other initiatives such as
performance management, career development, etc.
COMPENSATION
19

CCoonncclluussiioonnss
The components that need to be taken into account in any comprehensive
compensation program are base salary, bonuses, incentives, and stock grants.
The right levels and mix of these components should result in improved
performance and motivation. The three critical processes of compensation are
benchmarking, performance management, and continuous calibration. Clearly,
economic conditions play a major role in compensation decisions, but the stan-
dard of fairness should remain constant.
HR OPTIMIZATION
20

The benefits package is an essential part of the employment agreement. Employees
need to feel that they are financially protected from catastrophic loss or dis-
abling disease. In the United States, this level of coverage is necessary to meet
the social service threshold—the level at which basic health care needs are met.
Many benefits address fundamental needs for safety and security (which accord-
ing to Maslow’s hierarchy must be met first). Other benefits, such as tuition
reimbursement, address higher-order needs. If people do not feel safe and secure,
they cannot move up the transformational ladder to feel belongingness, esteem,
and self-actualization (a great job provides all of these). A comprehensive
benefits package should address the full range of needs of a diverse workforce:
financial, social, emotional, physical, and intellectual.
SSccaallee
There is a range of possible outcomes in any effort to change a benefits package.
The following scale helps to envision possibilities and assess current realities:
5: Benefits package attracts the right talent and promotes and supports total
employee well-being for a diverse population.
4: Benefits package promotes wise consumerism and employee well-being
and engages people as healthy partners.
Benefits
Chapter
2

3: Benefits package is competitive with market in comprehensiveness and is
cost-effective.
2: Benefits package is competitive with market in comprehensiveness, but
more costly than most.
1: Benefits package is not competitive with market and promotes unwise
consumerism; policies promote sickness behaviors.
Where are you now on this scale? _____
Where do you want to be on this scale in one year? _____
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Historically, Company B offered one of the richest benefits packages of any
high-tech company. Company B was one of a few companies that provided 100
percent medical coverage. When health care costs were rising at 5 to 7 percent
per year and profit margins were robust, Company B was able to afford a com-
paratively rich benefits package. Now health care costs are rising at 15 to 20
percent per year and company profit margins are declining. It is prohibitively
expensive to continue to offer the same benefits package. In 2002, Company B
paid approximately $17 million in U.S. health care costs. With no changes in the
benefits package or economic conditions, those costs would exceed $50 million
in 2008. In addition, the benefits package was designed to address the needs of
a male, family-oriented employee base. As the workforce becomes more diverse,
benefits packages need to change to take into account different demographics
and life style orientations. There is also a growing body of research that sup-
ports the idea that partnering with employees on health care management and
focusing on prevention can lead to significant cost savings and to healthier
employees. By targeting high-risk employees, promoting positive health practice,
and educating employees on wise medical consumerism, health risks and their
associated costs can be reduced. In short, the reasons to change are lower costs,
more flexibility, and better health care.
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Benefits can be a compelling part of the great job equation. Some of the funda-
mental benefits employees expect in their benefits package are health, dental,
HR OPTIMIZATION
22

and life insurance. In today’s environment, an enhanced level of benefits usually
includes an employee stock purchase plan (ESPP), a 401(K) plan, dental care,
Employee Assistance Programs (EAPs), and vision care in addition to the stan-
dards mentioned above. Many progressive companies offer elder care, child
care, paternity and maternity leaves, as well as provide comprehensive wellness
programs, encourage work-life balance, and take seriously the idea of creating
a healthy work environment.
Transforming benefits requires an elevated perspective of health. Benefits should
address the physical, emotional, intellectual, and financial issues that are impor-
tant to employees. For example, particularly in this economic climate, the
401(K) plan is a very important component of the benefits package. Employees
want to have flexibility in how they access their retirement accounts.
With medical care costs rising at 15 to 20 percent per year, it is cost prohibitive
for companies to pay 100 percent of all health-related claims. Companies need to
form healthy partnerships with employees in which both parties actively seek ways
to keep the other healthy and whole. Since benefits make up a significant portion
of the overall rewards program, employees need to be educated about the eco-
nomic value and true cost of health care. Most employees do not appreciate the
real value of the benefits provided because there has been little or no communica-
tion to the employees about the benefits and there are typically few educational
programs to increase awareness and to promote behavioral change. Providing
employees with total compensation statements that detail both pay and benefits
helps educate employees about the economic value of their benefits package.
Ongoing communications about benefits programs reinforce the mutual nature of
the healthy partnership and keep employees informed of changes and options.
Essentially, benefits programs need to be dynamic and sustainable for the long
term. HR professionals need to engage employees in productive dialogue about
the economics of benefits and their role in the dual goals of increasing health
and decreasing costs. This dialogue also makes it possible to design benefits that
fit the needs of employees so that they realize the value of what is provided. The
overall theme of benefits programs should be to promote the wellness of
employees and their families.
Employees are more apt to embrace change if they understand the context,
reasons, and benefits of the change. When a company makes the decision to
redesign benefits programs to reduce costs, it must also find creative ways to offer
more choice and greater flexibility so that selected programs can be enhanced to
balance those programs that are being reduced. Changing behavior takes time and
requires a great deal of communication and education in order to be successful.
Communication campaigns should incorporate both Web-based and print media.
The benefits program needs to be branded in order to promote recognition and
BENEFITS
23

consistency. Ongoing communications are needed to announce open enrollment
choices and to educate employees about their options. One extremely useful
communication tool is to send annual benefits statements to employees
that explain the financial value of benefits provided in the total compensation
package.
Medical premium plans may be converted to self-insured plans in order to
reduce fixed administrative costs, eliminate state premium taxes, and allow for
a uniform plan design. In self-insured plans, the company pays for all covered
health care costs (e.g., dental, vision, medical, etc.), but carries insurance to
cover catastrophic events. Self-insured plans allow for more flexibility, better
financial management, and gain sharing. Full flexibility programs can then be
explored to increase employee choice. Full flexibility programs mean that bene-
fits are assigned price tags and employees are given credits to purchase benefits
to meet their individual needs. It should be noted, however, that the transition
to self-insurance and to self-service requires robust systems and consistent com-
munications. All of these elements—self-service, communications, systems, and
education—are intimately connected and interdependent and constitute an inte-
grated health management system.
Shifting to self-insured, full flex programs requires benefits professionals to
keep a constant watch on cost drivers to insure that spikes in certain areas
don’t undermine the economic viability of the programs. These cost drivers
may come from mandated legislative changes, new coverage and procedure
requirements, medical price inflation, or changes in utilization of services,
e.g., increases in the frequency of claims driven by improved diagnostic pro-
cedures, an aging workforce, and so forth. Advancements in technology can
also drive costs because they result in new medical equipment, procedures,
and medications that impact the intensity of care. Also, the trend toward
reduction in Medicare reimbursement generally results in cost shifts to the
private sector.
One critical advantage of self-insured plans is that they enable gain sharing with
employees. Gain sharing means giving back a percentage of cost reductions
achieved through healthy lifestyles and wise medical consumerism to the
employees who practice positive health practices and use health care resources
wisely. Additional cost savings, not distributed to employees, can be used to
fund wellness activities and programs. It is a win-win solution.
In addition to all the fundamental components of a comprehensive benefits
program, there are additional perks to consider such as fitness centers, free
breakfasts and drinks, cafeteria subsidies, and concierge services. The
challenge is to figure out not only what benefits to offer to employees but also
how to make them connected and integrated with the organization.
HR OPTIMIZATION
24

Whether one views health care from a national perspective or an organizational
perspective, the same six factors need to be taken into account:
Quality
Cost
Access
Choice
Simplicity
Responsibility
The reason the health care problem is so difficult to solve is because any
solution requires a trade-off among those six values. It is impossible to provide
universal access and freedom of choice to the highest quality care in a simple
way at low cost. The only way to achieve a win-win solution is for all parties to
take responsibility for wise medical provision and consumerism and for healthy
choices. Forming healthy partnerships appears to be the most promising avenue
for change, but it will take a great deal of work to create an interdependent atti-
tude in which both employer and employee look for ways to help each other
grow.
While the theoretical constructs underlying benefits packages appear logical,
reality often presents many challenges. Here are some examples from our
experience.
Entitlement vs. empowerment. Theoretically, one would think that communi-
cating to employees about the economic value of their benefits package and
educating them about the options and choices they have would lead to a sense
of empowerment. Unfortunately, in many cases, employees view benefits as
something HR does to them and they take the benefits for granted. It’s hard to
educate employees about economic value and the marriage of compensation and
benefits. Particularly in paternalistic cultures, employees don’t understand that
benefits need to change in response to changing economic and competitive
BENEFITS
25

conditions. Therefore, any changes in benefits packages need to take into
consideration the sense of entitlement employees have and how strongly pater-
nalistic the culture is.
Competitive differentiator vs. cost drain. A competitive benefits package not
only has value to the employee but also to the company. Excellent benefits are
a critical component of a compelling employment offer. Smart candidates com-
pare the benefits packages of competing offers as well as the salary component.
In many cases, a benefits package that meets the particular needs of a candidate
can offset a lower salary offer. Benefits can be a powerful differentiator, partic-
ularly when an individual puts a heavy weight on vacation, wellness, or even
coverage for fertility treatments. In times when competition for talent is severe,
having flexibility in the benefits package can make a difference. Flexible cafete-
ria plans, however, require more work to implement.
Emotional vs. intellectual factors. While some changes in benefit plans make
good sense from an intellectual point of view, they can meet with strong emo-
tional resistance. People don’t like to change benefits, particularly on coverage
that is personal. A change in plans may mean a change in relationship with a
health provider with whom an employee has close ties. Therefore, any changes
in plans need to consider emotional as well as economic factors.
1. It’s important to ensure that management understands how benefits are
tied to organizational strategy.
2. Employees deal better with open, honest, direct communications than
with surprises.
3. Before making any changes, ask for input and feedback from multiple
groups.
4. It’s important to stay close to and manage health care providers.
5. Education of employees is crucial, particularly as it relates to the
economic value of benefits.
6. Employees need accurate decision support information to help them
choose among their options.
HR OPTIMIZATION
26

7. Wise medical consumerism can result in significant cost savings.
8. Organizational culture is a major factor in the success or failure of any
program—we must understand what people value.
9. Timing is everything—changes must be introduced at a time when there
are few competing announcements.
10. A dynamic and sustainable benefits plan requires a dynamic and sustain-
able relationship with employees.
Level 5 benefits programs promote wellness, encourage partnerships, and enable
wise medical consumerism. A comprehensive benefits program should take into
account the physical, emotional, and intellectual dimensions of a person’s life
through all life stages. Physical factors might encompass medical coverage and
health insurance. Emotional factors might include an EAP program. Intellectual
factors might involve financial planning or legal assistance. The functions of a
benefits program are to reduce costs, increase flexibility, and improve care. These
functions are discharged by facilitating enrollment, partnering for health, and
communicating effectively. Clearly, the age and diversity of the workforce may
affect the range of benefits programs offered, but the standards of protection and
support should remain constant.
BENEFITS
27

Having access to the information you need to do your work is a fundamental
requirement for a great job. Effective information systems and infrastructure
make it easier for people to acquire meaningful decision support information.
Clearly, that decision support information needs to be accurate so that business
leaders can make intelligent and informed business decisions about investments
in human capital—the combination of commitment and capability that gener-
ates new sources of gain.
Without sufficient information, decision making and individual/organizational
development are made more difficult, if not impossible. Systems need to support
our ability to develop individual and organizational capabilities. As such,
HCMS is different from HRIS (Human Resource Information System) to the
extent that it provides knowledge vs. data. Data are simply discreet facts.
Knowledge is processed information which means it requires human analysis.
Therefore, an HCMS is the output of information technology and human pro-
cessing. The information technology component may include learning manage-
ment systems (for example, THINQ and SABA), staffing systems (for example,
WebHire and Brass Ring), and human resource systems (for example,
PeopleSoft, Oracle, and Lawson).
An efficient HCMS fully integrates all component systems, reduces the hassle
factor in a job, and provides the knowledge platform on which a great com-
pany can be built. Above all, it ensures data accuracy and protects employee
Human Capital Management
System (HCMS)
Chapter
3

confidentiality. Employees need to know that their personal data are strictly
confidential. Managers need to know that the information they are being pro-
vided is trustworthy. And organizations need to know that confidentiality safe-
guards are government mandated. HR earns the right to engage in higher level
work only when it is able to ensure employee confidentiality and data integrity.
It should be noted, however, that management and employees own responsibil-
ity for accurate data.
SSccaallee
There is a range of possible outcomes in any effort to change the systems related
to managing human capital. The following scale helps to envision possibilities
and assess current realities for HCMS in your organization:
5: One global, efficient, best-of-breed, user-friendly, seamless system that is
the foundation for capturing, maintaining, and reporting on all employee
knowledge worldwide.
4: Global, efficient, and integrated enterprise solution for capturing, main-
taining, and reporting employee information and competencies world-
wide.
3: Adequate and efficient means of centrally capturing and maintaining all
employee information and skills worldwide.
2: Adequate but inefficient means of capturing and maintaining employee
information worldwide.
1: Inefficient, inadequate, individual systems for capturing and maintaining
employee data worldwide.
WWhhyy CChhaannggee
Company C’s current system doesn’t have data integrity, and it is passing
inaccurate information to numerous downstream systems. In order to be
credible, it needs to be able to provide reports that are reliable and
repeatable. Currently, the lack of reliability and repeatability is damaging
credibility. In order to be cost-effective, Company C needs to reduce redun-
dancies. Currently, many of the systems and processes are redundant. These
redundancies result in unnecessary costs. In short, Company C does not have
the basics in place.
HR OPTIMIZATION
30

Company C needs to capture worldwide employee data with high integrity.
Business leaders need accurate and timely decision support information to be
effective. Company C has an incompatible and inadequate set of systems and
technology that makes it difficult and time consuming to ensure information
integrity. The current HRIS does not have global capabilities and does not
enable the company to feed related systems in an efficient way. As a result, dif-
ferent countries use different spreadsheets to account for information that could
all be processed with better contextual knowledge with a more robust system.
Essentially, Company C is currently at level 1 on the scale and it needs to be at
least at level 3 to be able to respond reliably to business requests.
Finally, new requirements are imposing new demands on HR systems. With the
advent of the Internet, business leaders expect to have access to information they
need to make informed decisions. Timely, accurate, and meaningful information
is required for intelligent strategic positioning. When HR fails to meet manage-
ment requirements and expectations for accessible and accurate information, or
if these requirements and expectations are ill-defined, HR’s perceived effective-
ness is damaged. In short, Company C’s reasons for change are the need for
integrity, accuracy, timeliness, and efficiency.
HR typically has an abundance of data. Unfortunately, the data does not usu-
ally translate into accurate, timely, and usable information that can facilitate
effective decision making. In addition, the information usually resides in multi-
ple locations and there is no easy way to access the information from a single
view. This fragmented amalgamation of data results in redundancies, unin-
formed decisions, and an enormous waste of time. Ideally, an information man-
agement system should make it easy for decision makers and employees to get
the information they need quickly and easily and in a form that facilitates good
decision making.
Simply stated, an effective HCMS increases efficiencies and leverages informa-
tion. At the foundation level, an HCMS needs to reduce the time it takes
employees to do certain activities, thereby reducing labor costs. Reducing time
and costs associated with routine HR activities can be achieved by enabling
HUMAN CAPITAL MANAGEMENT SYSTEM (HCMS)
31

managers and employees to access a portal or a self-service application instead
of requiring human intervention. These activities can include enrolling in or
changing benefits, registering for training, changing home and mailing address
information, applying for a job, making a salary change, checking pay stubs,
accessing organizational charts, getting approval for a promotion, or creating a
job requisition. All of these activities normally require a great deal of labor costs
and time. An HCMS system can reduce these costs significantly. It should be
noted, however, that transitioning to self-service requires a transformation in
culture. Moving to self-service means that employees need to own the data and
take more initiative in getting the information they need. In addition, openness
has risks and rewards. The risk is that giving people access to information that
can be interpreted in multiple ways could generate more questions and create
unfounded angst. The rewards are that employees feel more empowered and
self-sufficient and can find information they need to support personal and pro-
fessional decisions.
Having acknowledged the cultural requirements and confidentiality risks, the use
of self-service applications can reduce many of the costs associated with printing,
publishing, and binding manuals as well as distributing forms, letters, reports,
statements, etc. An effective HCMS can make it much easier to do business with
HR. Self-service applications can make administrative tasks much simpler and
more accessible. This goal requires that processes are well defined and simplified
and people are trained in how to use the system. By giving employees direct
access to services, HR is relieved of administrative tasks and is freed up to work
on higher level issues and change initiatives. Having one portal for all HR-related
information makes it possible to present pertinent information to all employees
on a consistent basis. A self-service application not only enables employees to
view their paid time-off balance, benefits elections, or paycheck data, it also
serves as an excellent vehicle for communicating company information.
At level 1 on the scale, critical information can get buried in an e-mail file or
somehow get lost in a “wall of noise” that arises from multiple communication
channels bombarding employees from every direction. As a result, there is no
way to capture, maintain, and use employee information worldwide.
Since so many employees work remotely and function as virtual teams, an effec-
tive self-service application should be accessible through a browser. Making the
portal accessible through the Internet allows employees to be connected to criti-
cal information wherever they go. Employees should be able to use any Web
browser to take advantage of a server doing all the processing. Self-service func-
tionality enables employees to be empowered and more productive.
Building an effective HCMS starts with defining the requirements for success.
The next step is to ensure that there are processes in place to achieve those
HR OPTIMIZATION
32

requirements. Then, decisions can be made about how to capture, organize,
distribute, and use the information contained within the system. Capturing
knowledge means collecting implicit and explicit information from new and
existing sources. Organizing knowledge means categorizing information to facil-
itate its use and value. Distributing information means making decisions and
accessibility rules to ensure that information gets to the right people at the right
time in the right format. Using knowledge means leveraging information both
internally and externally to continually achieve better results. An effective
HCMS drives knowledge to people who can use it.
Thus, in essence, an HCMS is a transactional-based knowledge management
system. Knowledge management is the process of getting the right information
from the right source to the right person using the right vehicle at the right time
in the right format so that people can make the best decision or take the wisest
course of action. The decision or action may require different levels of knowl-
edge. Data consist of basic facts. Information is contextualized data or concepts
and ideas made up of related facts. Knowledge is processed information or
causal relationships between interrelated elements of information. Wisdom is
applied and tested knowledge. It results in the ability to forecast and control
situational outcomes within a particular domain.
An effective HCMS needs to provide accurate information capital and manage
our human capital accurately throughout the employee life cycle. A global sys-
tem is required to support worldwide initiatives and processes. In addition, suc-
cess requires leadership and cultural support. It is a mistake to assume that all
leaders want information that an HCMS can provide and that the culture is one
that values openness, responsibility, initiative, and ownership. It is also a mis-
take to underestimate the amount of planning, process development, and IT
support required to implement any new system. Successful implementation of an
HCMS involves a thoughtful consideration of leadership needs, cultural resist-
ance, IT requirements, and data ownership.
While HCMS theory appears logical, reality often presents many challenges.
Here are some examples from our experience.
33

Manual vs. electronic. While there is clearly a rapid evolution to electronic
processing, there is still a lot of paperwork to be completed manually. HR is
frequently asked to fill out employee change forms and performance manage-
ment documents. And no matter how sophisticated the system, there are always
requests for information that require manual effort. For example, headcount
reporting may take into account temps, contractors, or part-time employees.
Without a full understanding of FTEs (full-time equivalents) in the organization,
it is difficult to manage expenses and achieve profitability goals.
HR vs. management responsibility. Even though there is a clear trend for
employees to own responsibility for data input and processing, accountability for
data integrity is typically assigned to HR. When management gets inaccurate data,
HR gets blamed. In many cases, management will often talk about the need for
adequate infrastructure and information systems, but investments do not always
match the rhetoric. It is always a challenge to put responsibility for data audits,
common review, or performance management in the hands of management.
Independent systems vs. integrated systems. In global companies, it is fairly typ-
ical for each company or geographic region to use home-grown spreadsheets to
handle reporting and compensation responsibilities. When it becomes necessary
to roll up data into company statistics, it becomes a nightmare to piece together
all the disparate data and processes. A variety of independent systems causes
a great deal of frustration not only for corporate leaders but also for new
employees who might be accustomed to more integrated, enterprise solutions.
1. Providing integrated sources of information elevates the role of HR.
2. Distribute and use knowledge instead of burying management with
data.
3. Don’t build in silos (for example: learning management, staffing, HRIS,
performance management) without an integration plan.
4. Leverage small improvements—demonstrate that systems work. Million dol-
lar investments are not always required to improve the way work gets done.
5. Engineer processes before buying systems, but recognize the fact that
sometimes new systems provide a catalyst for developing new processes.
HR OPTIMIZATION
34

6. Educate management on the value of effective HCMS.
7. Use process improvement to change the culture.
8. Invest in training people in the tools—it must be a process, not an event.
9. Conduct training in new technology for all HR staff—it’s the foundation
of HR.
10. Ensure that the HR system is integral to and connected with other
systems.
An effective HCMS takes into account the business needs for data, information,
and knowledge. Data needs might relate to headcount or demographic numbers.
Information might address trends in each organization and geography over
time. Knowledge might include an expert resource network and/or skills bank
that enables employees to leverage the experience of subject matter experts to
gain competitive advantage. The functions of an HCMS are to develop informa-
tion capital, human capital, and organizational capital. The processes required
to optimize capital development are defining requirements, capturing relevant
tacit and explicit information, organizing the information into meaningful cate-
gories, distributing the information to the right people in the right way, and
leveraging knowledge to achieve results. Clearly, cultural conditions such as
openness and risk taking influence the effectiveness of an HCMS, but the stan-
dard of trustworthiness remains constant.
35

One of the defining characteristics of a great job is the opportunity for growth.
In many ways, the purpose of life is to grow. Learning and development provide
multidimensional opportunities for growth at work. If individuals are learning
and growing, the company has a much greater chance to grow also. Without
individual growth, there is rarely organizational growth. Given the dynamic
nature of today’s marketplace, there is no chance for sustained company growth
unless individuals are learning and growing. In order for individuals to sustain
growth, the organizational culture must support growth and recognize progress
on learning and development goals. In order for organizations to sustain
growth, learning activities must be aligned to performance improvement and
business results. In a great company, learning and development support both
individual (personal and professional) and organizational growth.
SSccaallee
There is a range of possible outcomes in any effort to change learning and devel-
opment programs. Here is a scale to envision possibilities and assess current
realities regarding learning and development:
5: Employees average 10 days per year of business impact development; mul-
tiple learning options are leveraged and zero latency exists.
Learning and Development
Chapter
4

4: Employees average 7 days per year of business-related development; mul-
tiple learning options exist, and there are minimal time lags between skill
requirements and skill availability.
3: Employees average 5 days per year of excellent development; several learn-
ing options exist, and time lags between skill requirements and skill avail-
ability do not disrupt performance.
2: Employees average 3 days per year of random development; a few learning
options exist, and time lags between skill requirements and skill availabil-
ity cause performance problems.
1: Employees average less than 3 days per year of out-dated development;
very few learning options exist, and skill availability never meets skill
requirements.
WWhhyy CChhaannggee
Building relationships has not been as important to Company D as generating
revenue. Company D now realizes that growing revenues is dependent on
improving relationships internally and externally. While Company D ranks
highest among its customers on the most comprehensive solution in its market
space, it ranks lowest among its competitors on customer satisfaction. The
biggest reason for the low customer satisfaction rating is the fact that customers
don’t trust Company D. Since organizational growth is dependent on people,
Company D needs to teach people how to become trusted advisors with cus-
tomers and with employees. Unfortunately, many managers not only discourage
development as trusted advisors, they enable and permit destructive behaviors.
In addition, Company D has been an “on your own” culture. Employees learned
what they needed to know through their own initiative, peer networks, and
Internet searches—there was no development culture at Company D. In order to
realize its mission, Company D needs to provide employees at all levels with the
knowledge, skills, and experience to be helpful to customers. It also needs to be
seen as the first choice for helping employees win in their careers. In short,
Company D needs to make relationships as important as revenue.
Company D offers a variety of disparate programs, but they are all random and
inductive. Even though the programs are well designed, they do not relate to cor-
porate objectives. There is no consistent process to register employees in classes,
track progress, or estimate a return on investment. The company culture does not
support learning and development—it is viewed more as a cost than an investment.
HR OPTIMIZATION
38

The functional test of learning and development is whether or not the programs
and activities make any impact on the business. Having said that, it is important
to set an organizational standard for development in order to send the message
that employee learning and growth are important. The scale in this chapter is
defined in both quantitative and qualitative terms so that both impact and
expectations are taken into account.
The best way to ensure that learning and development will have a business impact
is to design all interventions around the competencies required for success in par-
ticular jobs. Involving client groups (e.g., Sales, Services, Marketing, R&D) in the
development of job models and related competencies is critical for accuracy and
success. The organization is responsible for defining competencies required for
maximum business impact in each job, and the individual is responsible for assess-
ing himself or herself on those competencies and then acquiring the skills related
to those competencies. Again, this type of disciplined process requires cultural sup-
port in order to sustain the system. The key is to create simple, empowering, think-
ing tools that enable managers to improve business processes.
One critical success factor is a clear learning strategy. A learning strategy is
designed to address all of the learning demands created by the business strategy,
organizational needs, and cultural requirements. A learning strategy is an imple-
mentation road map for the competency, skill, and knowledge requirements and
takes into account system needs and cultural support. Developing and imple-
menting a learning strategy is critical to the business because it ensures that indi-
vidual and organizational capabilities are aligned behind its marketplace
positioning and organizational needs.
A learning strategy is designed to achieve four major goals:
1. To enable colleagues to acquire the skills and knowledge they need to per-
form optimally on their jobs and to fulfill their personal development goals
by providing easy access to the right content delivered in the right way at
the right time.
2. To develop and/or acquire programs, processes, systems, and technologies that
support the business strategy, the cultural requirements, and the competency
model and that meet organizational needs for learning and development.
LEARNING AND DEVELOPMENT
39

3. To create an environment that supports innovative thinking, organizational
learning, personal development, and high performance. Learning needs to
be a part of the greater organizational change management plan.
4. To link knowledge management and people development strategies to
financial success, i.e., to demonstrate positive return on investment.
Finally, with the strategic context and competency requirements in mind, the
learning strategy must take into account three critical learning processes that
will enable the improvement of individual and organizational performance:
1. How to improve access to learning.
2. How to develop and deliver learning opportunities.
3. How to manage learning and realize value.
Another critical success factor is the belief employees have in the culture. People
need to believe that corporate-sponsored learning will be useful to them and that
their efforts will be rewarded. In addition, learning and development cannot be
delivered in isolation from other organizational initiatives. Success depends not
only on an integrated approach, but also on other systems, processes, guidelines,
and procedures.
On an individual level, there are two primary reasons to grow: to improve per-
formance on current job realities and to improve positioning for future job pos-
sibilities. It is important for individuals to understand both the economic and
personal value of development. On an economic level, competency-based incen-
tive plans reward individuals for acquiring and applying certain skills. On a per-
sonal level, the acquisition of new skills usually translates into heightened
confidence and a sense of empowerment.
On the organizational level, there are multiple objectives for a long-term learn-
ing strategy:
1. Align learning investments to performance needs and business requirements.
2. Ensure fair access to learning.
3. Develop the right learning options and opportunities.
4. Deliver learning in the right way at the right time to the right people.
5. Create an environment that supports learning and development.
6. Install the right systems to manage the learning process most cost-
effectively.
7. Maximize return on investment.
8. Achieve zero latency (ensure that people get the skills and knowledge they
need to meet project deliverables just in time).
HR OPTIMIZATION
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9. Reduce turnover.
10. Improve performance.
11. Improve the attractiveness of the organization.
12. Leverage opportunities for collaboration.
These objectives can be summarized by level in the organization and by process,
impact, and outcome variables.
One of the biggest challenges in HR is to sell the value proposition of programs
it offers. The chart above is a helpful tool for thinking about what the value
proposition is for clients at different levels in the organization. A project man-
ager simply wants to ensure that he or she has the right skills available at the
right time to do the job so that performance can be improved. The value propo-
sition for executives focuses on capital development: organizational capital, cus-
tomer capital, cultural capital, and financial capital. This chart helps the HR
professional personalize the value proposition to the audience, i.e., become
more thoughtful about what value is responsive to whom.
In the five-point scale described in the second section of this chapter, there is
mention of how many learning options are being offered and how well they are
being leveraged. The list on the following page provides a stimulus for thinking
about the various learning options that might be considered in a comprehensive
learning and development strategy.
41
Process Impact Outcome
Executive Cultural
Management
Organizational
Development
Reduced
turnover
Achievement of
business goals
Manager Performance
Management
Human
Development
Zero latency
Improved
performance
HR Learning
Management
Competency
Development
Improved cost-
effectiveness
Improved
quality

LLeeaarrnniinngg OOppttiioonnss
1. Classroom learning
Internal courses
External courses
Technical training
2. Interactions
Peers
Customers
3. Benchmarking
4. Cross-functional teams
5. Mentor
6. Self-Study
7. Online learning/Web-based training
8. Knowledge sharing
Central repository
Expert resource network
Networking
Communities of practice
Professional associations
9. OJT (on-the-job training)
10. New hire training
11. Corporate University
12. Web site surfing
13. Modeling
14. Coaching
15. Road shows
16. Reading
17. Laboratory
18. Lunch and learn
19. Application success sharing
20. After action reviews
21. Product demos by experts
22. Webinars
HR OPTIMIZATION
42

23. Seminars
24. Workshops
25. Webcasts
26. Conferences
27. Conference calls
28. Intranet connector
29. Town meetings
30. VP forums
31. Action learning interventions
32. Virtual teaming
33. Multiple rater assessments
34. Customer satisfaction surveys
Access to most of this learning is a function of cultural support for thinking and
learning. Leaders are the primary gateway to learning access, i.e., if leaders sup-
port and encourage participation in many of the activities listed above, col-
leagues will have continuous access to learning. Beyond cultural and leadership
support, however, access involves connecting learners to learning options out-
side day-to-day activities at the workplace. Access to classroom training, online
courses, educational materials, expert and knowledge resources—both inter-
nally and externally—requires assistance beyond what can be expected from
leaders. The chart below is a thinking tool for helping you consider a variety of
ways to improve cultural and leadership support for learning:
This chart will help you think through what needs to happen before, during, and
after any learning opportunity in order to maximize its impact.
43
Before During After
Learning
Provider
Participant
Sponsor
Manager
Leader

There are several critical decisions that need to be made concerning access to
learning opportunities. Here are a few of the key questions that need to be
answered:
1. What is the right blend of learning options, i.e., what percentage of learning
should be done online, what percentage should be in the classroom, etc.?
2. How much freedom do you give your employees to select learning options?
What is the spending authority of each employee?
3. What level of support will be required to institutionalize continuous learn-
ing? For example, what policies need to be created to support learning and
development?
Question #1: What is the right blend of learning options, i.e., what percentage of
learning should be done online, what percentage should be in the classroom, etc.?
We recommend converting as much compliance-level training as possible to
e-learning delivery and developing the technological capacity to make it easy for
employees to access Web-based training at home and at work. We also strongly
recommend that selected training, such as leadership development and team
development, be done in a classroom setting. Most important, however, is to
ensure that all employees have access to a multitude of the informal learning
opportunities listed earlier. The reason for providing multiple learning options
is that learning delivery needs to match the learning style of the participant. And
it is critical to apply adult learning principles to guide decisions regarding learn-
ing options.
Question #2: How much freedom do you give your employees to select learning
options? What is the spending authority of each employee?
We recommend giving colleagues freedom in pursuing learning objectives.
Respect and trust are key values in a learning culture. The decision on this issue
will send a loud message about how we walk that talk. In addition, we believe
that personal development of any type has transfer power to the business. As
people grow, the business benefits from their increased insight, creativity, and
wisdom. In order for this policy to work, however, employees need to know
how their jobs fit into the big picture, what competencies are required for their
jobs, and how any learning is aligned with business objectives.
Question #3: What level of support will be required to institutionalize continu-
ous learning? For example, what policies need to be created to support learning
and development?
While we don’t recommend creating a raft of policies that would dizzy even the
most bureaucratic of organizations, we do recommend developing policies
related to:
HR OPTIMIZATION
44

Tuition reimbursement
Dollar limits for classroom and online learning
Approval process
Line item allocations and charge backs
A critical success factor is to list all the questions that will need to be addressed
in order for learning and development to realize its potential. The three ques-
tions discussed above may trigger additional questions for you. The most impor-
tant outcome of answering these questions is to institutionalize learning in the
culture. This will not happen with a random, event-based approach to learning.
Implementing a learning strategy requires several critical decisions concerning
the development and delivery of learning opportunities. Here are a few of the
key questions that need to be answered.
1. What programs best support your performance needs, competency require-
ments, culture, and business strategy?
2. Should you develop your own programs or buy programs that are already
developed?
3. Should you build an internal staff for learning and development or out-
source most of the programs?
4. How should you deliver your learning opportunities: online, self-paced, or
in a classroom?
5. How can you customize all learning opportunities so that they reflect your
way?
Question #1: What programs best support your performance needs, compe-
tency requirements, culture and business strategy?
All skills need to be mapped against the business strategy, the cultural require-
ments, and competency model to ensure that you are linking all of your course
offerings to business needs. You also need to link the learning options to the
competency requirements. Development and delivery must take into account not
45

only what courses should be offered, but also who teaches them and how they
are best delivered. Start by identifying the company’s business goals. Next, align
performance requirements to those business goals. If there is a gap, investigate.
The gap may exist because of non-skill and knowledge issues (i.e., a process
needs to be modified). On the flip side, you may find that the gap exists because
the majority of the performers do not have the right skills and knowledge. At
this point, seek out the highest performers. Interview these performers (internal
or external) and use their help to identify the skills and knowledge used to per-
form the process. Next, determine if the majority of performers truly do not pos-
sess the required skills and knowledge (you may do this via surveys,
observations, assessment reviews, leadership insight, etc.). If they do not, you
will be much more inclined to buy or create the learning program.
Question #2: Should you develop your own programs or buy programs that are
already developed?
We recommend that, whenever possible, you should buy programs that are
already developed. There are a multitude of courses available to teach most
required skills and it is very expensive and time intensive to develop courses
from scratch. However, there may be certain courses that can only be developed
internally because of the uniqueness of your culture, products, methodologies,
and leadership style. Another dimension of this question is whether to provide
programs electronically or in live classrooms. The answer to this question must
take into account costs and learning styles, but one factor is to ask how results
will be measured. A simple rule of thumb is if it can be tested on the Web, it can
be delivered on the Web. For example, teaching swimming might be hard to
measure on the Web, but spreadsheet mastery could be tested on the Web.
Question #3: Should you build an internal staff for learning and development
or outsource most of the programs?
We recommend an outsourced model. Hiring internal staff is not only expensive,
it tends to be ineffective over time because skill requirements are constantly
changing. However, most companies need a driver and sponsor of learning as
well as a core infrastructure to coordinate the customization of all content by
subject matter experts and to develop and oversee all internally developed pro-
grams listed in the development recommendations. The roles of the internal
learning and development organizations need to be clearly defined and collabo-
rative opportunities agreed upon. We suggest that the learning and development
organizations (Learning Council) should have the following roles:
Develop and implement the learning strategy.
Select and administer the appropriate systems and technologies for imple-
menting the strategy.
HR OPTIMIZATION
46

Help develop cultural support for thinking and learning.
Orchestrate and manage the delivery of internal and external courses.
Question #4: How should you deliver your learning opportunities: online, self-
paced, or in a classroom?
Overall, it usually makes sense to deliver most of the technical courses online,
whereas the leadership, marketing, sales, and professional development courses
are better taught in a classroom situation. You will need to continually evaluate
the blend of high-tech and high-touch delivery. You should also continue to look
at how you can convert some of the course content you now deliver in class-
rooms into online versions, particularly as you grow globally.
Question #5: How can you customize all learning opportunities so that they
reflect your way?
Your company surely has some “secret sauce” it doesn’t want to share with the
outside world. You need to ensure that your sauce gets mixed into the learning
recipe without compromising its integrity. We recommend forming a close rela-
tionship with an outside training provider with whom there is a high degree of
trust and who can help to customize some of the courses. We also recommend
that associates participate in the development and delivery of courses where it
makes sense. Some courses, particularly in leadership development and opera-
tions, should be home grown so that you can continue to differentiate your com-
pany in the marketplace by your leadership style, corporate culture, and
intellectual capital. Most important, all learning opportunities need to be built
around the core competencies.
The underlying dynamic in most of these questions is whether programs are being
offered to justify HR existence and survival or are being offered to enable busi-
ness growth. To the extent that HR gets caught up in its own survival needs, it
will continue to miss opportunities to partner effectively with its business clients.
TThhee WWoorrkk CCoonnttrraacctt HHaass CChhaannggeedd.. DDiidd WWee TTeellll AAnnyyoonnee??
The work contract used to be: Loyalty for Security. Now it is Commitment for
Development in a safe and secure environment.
For most of the 20th century, workers felt that as long as they remained loyal to
the company, they could expect job security and health coverage. Even though
there were always issues about pay inequity, market comparability, benefits
design, and work environment, workers did not typically feel anxious about los-
ing their jobs through restructuring, downsizing, or re-layering. While there
have always been fairness issues, lack of security was not a predominant con-
cern. As a result of that psychological contract, many workers never worried
47

about their market value, i.e., what their current skills were worth in the mar-
ketplace. In essence, these workers engaged in planned obsolescence. When lay-
offs became more common toward the end of the century, these workers found
themselves scrambling for jobs at significantly reduced wages.
The old contract is dead. Very few companies are now willing to guarantee job
security for any length of time, so it is a bit unrealistic to think that employees
should be totally loyal. On the other hand, most companies provide develop-
mental opportunities for employees that make it easier for employees to find
new jobs if economic conditions require significant cost and headcount reduc-
tions. In exchange for the ability to learn new skills, it is reasonable for organi-
zations to expect that employees demonstrate high commitment while they are
employed. The new contract can be graphically depicted by the following grid:
Expecting high commitment in Europe and Asia, however, can be problematic.
The reaction is, “How do you know what my commitment is?” More accept-
able language in Europe and Asia is “personal accountability and support.”
Development has to include consideration for expatriate assignments as well. In
a global economy, one of the most critical skill-sets a person can learn is how to
conduct business in multiple cultures.
1. Educate people about possibilities for growth.
2. Demonstrate the impact of programs through ROI analysis.
HR OPTIMIZATION
48
Responsibility Expectation
Organization Provide developmental
opportunities
High commitment
while employed
Individual Learn the skills
required to increase
market value
Respect, fairness, and
integrity during time
of employment

3. Be more concerned with quality than quantity.
4. Understand what it will take to be successful in the organizational culture.
5. Map learning to performance needs and business results.
6. Create a value proposition and reasons to change.
7. Don’t forget the basics: Skills + Support = Success.
8. Leverage the power of sponsorship.
9. Involve stakeholders.
10. Solve business problems through networking, relationship building, and
collaboration.
A comprehensive learning and development program encompasses the compo-
nents of professional development, sales development, technical training, and
product training. The functions of learning and development are individual
growth, organizational growth, and company growth. Multiple processes are
employed to discharge these functions: self-paced learning, e-learning, and
instructor-led training. Clearly, the extent to which the company embraces the
notion of organizational learning impacts the effectiveness of learning and
development initiatives, but the standard of positive and sustainable perform-
ance remains constant.
49

A great company is built by great people. The search for world-class talent is an
ongoing priority for a great company. One critical requirement for a great job is
to be able to work with great people. Exceptional talent attracts exceptional
talent. All of these principles underscore the importance of staffing.
SSccaallee
There is a range of possible outcomes in any effort to change the staffing process.
The following scale helps envision possibilities and assess current realities:
5: World-class talent attracted, hired, retained, and aligned behind corporate
objectives. Staffing is measured on the performance of people hired.
4: Great talent attracted, hired, and retained. Staffing is measured on reten-
tion of mission critical/highly capable talent.
3: Adequate talent attracted, hired, and retained. Staffing is measured on cost
per hire, time of open requisitions.
2: Fair talent attracted and hired. Staffing is measured on number of positions
filled.
1: Poor talent attracted and hired. Staffing effectiveness and efficiency are not
measured.
Staffing
Chapter
5

WWhhyy CChhaannggee
Historically, Company E relied heavily on outside agencies to conduct a high per-
centage of searches. While the agencies were able to source excellent candidates,
the costs were very high. In fact, average cost per hire in some departments
exceeded $15,000. While a reasonable standard for agency usage is around 10
percent of hires, several groups had agency usage in the 35 to 40 percent range.
In addition, Company E sourced a large number of employees from personal con-
tacts. While employee referrals can be a rich source of candidates for a company,
it can also lead to an extremely homogeneous workforce. For Company E, the
sourcing pool consisted predominantly of white, male, military athletes. This
DNA (organizational gene pool) served Company E well when the sales strategy
was to be the most aggressive player in the market and when the primary clients
were white male engineers. But in the new competitive, relationship-oriented
marketplace, this strategy no longer makes sense. Company E needs to attract a
diverse workforce through a more cost-effective mix of sourcing strategies. It
needs to not only recruit a more heterogeneous workforce, but also to encourage
its diverse workforce to recruit from diverse talent pools. To compound the prob-
lem, managers within the company perceive HR as résumé finders instead of
staffing consultants who could add value to the entire staffing process. In short,
Company E needs staffing to attract and retain the right talent.
One of the most critical factors of a great job is working with great people.
Waging the war for talent requires real commitment from senior leadership and
processes that result in excellent choices. There are five phases within a Staffing
Methodology or Process: Planning, Sourcing, Assessing, Closing, and Engaging.
People, culture, and technology support and enable these five phases. The
people enabler includes interviewers, managers, business partners, etc. The
HR OPTIMIZATION
52

cultural enabler refers to the norms and values in the organization that either
enhance or impede a systematic process. The technology enabler makes it
possible to conduct the staffing process more efficiently and effectively.
11.. PPllaannnniinngg PPhhaassee
The planning process begins with the creation of a workforce plan and ends
with a clearly defined approach to filling jobs. This plan includes the roles that
each person will play within the staffing process.
Workforce planning brings together business executives, finance leaders, HR
leaders, and hiring managers for the purpose of creating a top-down and bot-
tom-up view of the human capital requirements to achieve business objectives.
Hiring managers identify ideal start dates and the staffing organization rolls
up all the requirements (competencies, experience, knowledge, skills, and atti-
tudes) and start dates into a comprehensive plan. The workforce plan is used
to create a hiring plan. This plan takes into account turnover and internal
transfer expectations. With the workforce plan and hiring plan in place,
staffing consultants facilitate a conversation with business executives and
finance leaders that results in a staffing budget. Based on the budget, staffing
leaders define and implement a collateral strategy to attract talent. Also after
budget approval, hiring managers create job requisitions and secure approval.
Staffing consultants verify that the job requisition content is accurate and
complete. Once the requisition is approved, the manager and staffing
consultant meet to commit to a staffing strategy that is documented in a serv-
ice-level agreement. In this document, the staffing consultant and hiring man-
ager create a staffing strategy for each of the remaining steps of the
methodology and reach agreement on start dates, assessment procedures,
interview teams, and the communication strategy. After role expectations are
defined, the staffing consultant moves the approved requisition to open status
in the staffing system. Entering the requisition into the system enables the
staffing organization to track the time and costs associated with each position.
STAFFING
53
Planning Sourcing Assessing Closing Engaging
People, Culture, and Technology

22.. SSoouurrcciinngg PPhhaassee
The goal of the sourcing phase is to attract talented individuals for opportuni-
ties on a global basis. During this phase, candidates become aware of and
excited about career opportunities. During the planning phase, the staffing con-
sultant and hiring manager defined a sourcing strategy. Now the strategy will be
verified and updated to reflect any changes. The staffing consultant verifies the
job description, prioritizes job requirements, ensures that the approved recruit-
ing budget is appropriate for the job, uses internal and external resources avail-
able to source the best candidates, and updates the service-level agreement as
necessary. The hiring manager identifies target companies or candidates for the
job, gains approval for additional sourcing costs as necessary, participates in
sourcing efforts, and solicits candidate referrals from colleagues.
33.. AAsssseessssiinngg PPhhaassee
The assessment phase is designed to measure the fit between the candidate and
the job. The assessment includes measuring a candidate’s capabilities, motiva-
tions, and cultural fit with the organization. The goal is to find candidates who
fit well with the corporate culture and who demonstrate how their skills and
values are aligned with business needs. In this phase, candidates also assess
the organization and decide if the company meets their expectations for a
rewarding career opportunity.
During this phase, the staffing consultant meets with the other members of the
qualifying team to review and update the staffing strategy, determines if the
candidate meets the minimum requirements as defined by the hiring manager,
conducts the initial candidate interview, provides an introduction to the
company, and facilitates a structured feedback discussion with members of the
qualifying interviewing team.
44.. CClloossiinngg PPhhaassee
The goals of the closing phase are to acquire candidates who are the best fit for
the jobs available, to notify candidates who were not selected, and to have
candidates who, regardless of the outcome, feel better about the company after
participating in the staffing process. During this phase, the staffing consultant
verifies the candidate’s current compensation and expectations, identifies
outstanding issues, and defines the compensation package within the compensa-
tion range. Then the staffing consultant and hiring manager work together to
create a compelling offer, including salary, bonus, stock, relocation (if necessary)
benefits, and development/career opportunities. The hiring manager gains
HR OPTIMIZATION
54

additional offer/contract approval if the final compensation package is outside
the range approved in the requisition.
After all these details are covered, the appropriate leader communicates the
verbal offer to the selected candidate and communicates his or her decision to
other members of the hiring team. As a person transitions from “candidate” to
“new hire,” it’s the responsibility of staffing to complete the appropriate
paperwork.
55.. EEnnggaaggiinngg PPhhaassee
The goals of the engaging phase are to help orient new colleagues to their new
company and fully assimilate into the culture, to ensure that they have the tools
and relationships necessary to start their new jobs, and to facilitate a rapid
learning curve. During this phase, the staffing consultant and hiring manager
work together to ensure that new hires have office space with computer equip-
ment, are set up in payroll, and have signed up for benefits. The hiring manager
should also introduce the new hires to other colleagues inside the group and cre-
ate a support network outside the group, possibly including mentors. As a result
of the engagement phase, new colleagues not only understand job expectations
and how their jobs relate to the overall business strategy, but also feel connected
to their teams.
While staffing theory appears logical, reality often presents many challenges.
Here are some examples from our experience.
Good times vs. bad times. Staffing issues change dramatically in different eco-
nomic conditions. During good times, getting the right people presents a major
challenge. The emphasis is on creating the most compelling offer in order to
compete with multiple offers the candidate brings to the table. Sourcing good
candidates is a continuous challenge because the demand for talent far exceeds
supply. During bad times, getting a requisition approved presents the major
STAFFING
55

challenge. The supply and demand curve shifts, so the supply of candidates far
exceeds demand and the caseload and the nature of work in staffing changes.
It’s difficult to maintain excitement and motivation in the staffing organization
during tough times because there are always stops and starts, and the interview-
ing process is typically drawn out. In short, sourcing presents the biggest chal-
lenge during good times, and selection (assessing and closing) presents the
biggest challenge during bad times.
Quality vs. quantity. Staffing is typically assessed on the number of jobs it is
managing, the number of candidates that are presented, the number of people
hired, and the cost per hire. Unfortunately, these quantitative measures do not
reflect the quality of the hire. The most important measure of staffing is reten-
tion and performance, i.e., does the person stay and does he or she demonstrate
the level of contribution and commitment expected. While cost is fairly easy to
compute, the effectiveness part of the equation is usually ignored. Effectiveness
can be measured by the time it takes the person to reach peak performance on
the job, how long the person stays with the company, and whether or not the
person is promoted or advances in the organization. These measures are more
qualitative and take more time to track. The real issue is whether or not staffing
is able to get the right person in the right job at the right time. These are all
qualitative measures that rarely get the attention they deserve.
Recruiters vs. consultants. Changing the way people think about staffing is an
ongoing challenge. Most business leaders have an image of people in staffing as
recruiters—people who source candidates and get them hired. The staffing con-
sultant is a person who adds value to each phase of the staffing process: plan-
ning, sourcing, assessing, closing, and engaging. An effective staffing consultant
is much more than a recruiter. A staffing consultant is engaged in workforce
planning, performance assessments, and ongoing dialogue with clients about
getting the right resources working on the most important tasks. Changing the
image of staffing with clients and positioning staffing appropriately in the
organization as a value-added service is a reality that staffing consultants
confront on a daily basis.
The people in the role of recruiting talent into the organization are perceived by
candidates as the “face” of the company; the representatives who embody the
culture and character of the company. In many cases, this face is the only con-
tact a candidate has with the company. The impression the staffing consultant
leaves with a candidate has significant impact on the company’s brand image in
the marketplace.
The impact the staffing function has on the perception of the marketplace
should not be underestimated. A number of factors make up this impact: the
quality of the staffing consultants’ work, their personal character, their broad
HR OPTIMIZATION
56

and in-depth knowledge of the company they represent, and their personal com-
mitment to the company and its mission. The reality is that this value is rarely
recognized or appreciated.
Manual vs. electronic. Managing changes in realistic time frames is difficult
with manual procedures. There are client demands for weekly reports as well
as daily requests. Trying to respond to all the requests for information and
for people is practically impossible without an electronic system. Staffing sys-
tems, e.g., Brass Ring or WebHire, enable the staffing process and make it
more efficient and effective. Spreadsheet accuracy is critical for managers to
control their expenses and make informed decisions. Providing that
accuracy and ensuring data integrity is much easier with electronic tools and
systems.
1. You can’t fix what you don’t measure.
2. The recruiting system is a critical enabler.
3. Choosing the most important metrics is critical.
4. It takes years to establish/inculcate great processes.
5. Leadership changes dramatically affect the ability to move from one level
to another.
6. You must align staffing strategy with competencies required for today and
tomorrow.
7. The requisition process is necessary to focus on what matters, e.g.,
competencies, cultural fit, level of commitment.
8. Focus on hiring the “right” people vs. world-class talent.
9. Every company says it wants to hire top talent—very few want to invest
the time, money, and resources to do it.
10. Employer of choice may be the wrong strategy; you want the right people
in the right jobs.
STAFFING
57

The components of a comprehensive staffing program are planning, sourcing,
assessing, closing, and engaging. The functions of staffing are to recruit a diverse
and talented workforce that meets business needs and to retain the most critical
and capable people. Several processes are used to discharge these functions:
direct hiring, Internet recruiting, employee referrals, agency assignment, and
assimilation. Clearly, the abundance or scarcity of talent in the labor market
affects staffing programs, but the standard of getting the right person in the
right job at the right time remains constant.
HR OPTIMIZATION
58

There is no possibility of creating great jobs in a great company without effec-
tive leadership. A person’s relationship with her or his boss is a major factor in
how the person views the job. A positive and productive relationship is essen-
tial. But many managers are promoted to leadership positions without having
the skills to build relationships and mobilize commitment to the organizational
goals and objectives. Leaders need to be continually assessed for performance
and potential: performance is a combination of the contribution the leader
makes as well as the leadership role he or she plays; potential is a combination
of capability and commitment. An effective leader contributes to the company’s
strategic direction, to the bottom line, and to the organizational culture. In this
chapter, we will discuss the competencies required for great leadership as well as
the process used to optimize talent.
SSccaallee
There is a range of possible outcomes in any effort to improve leadership devel-
opment. Here is a scale to help envision possibilities and assess current realities:
5: Most promotions from within are extremely successful.
4: Most promotions from within are very successful.
3: Many promotions from within are successful.
Leadership Development
Chapter
6

2: Some promotions from within have limited success.
1: Almost no promotions from within; rare success.*
*It should be noted that many companies promote from within, but those pro-
motions turn out to be unsuccessful because the promotions are based on inap-
propriate criteria and/or nothing is done to help the person acquire the
competencies required for success in the new position. This scale does not reflect
that option, but if that is the case for your company, you should assign yourself
a level 1 rating.
WWhhyy CChhaannggee
Leadership development needs to change because marketplace and organiza-
tional requirements have changed. In the past, Company F needed its managers
to drive for results, control costs, and monitor work. In response to that need,
HR provided a series of supervisory and management-level courses that taught
managers the fundamentals of supervision. These courses focused on tactical
considerations and helped managers comply with internal policies and external
laws. They were designed to enable managers to do their jobs and relate to peo-
ple in reasonable ways. In the marketplace today, there is a need for continuous
generation of new ideas to help customers win with superior products, services,
solutions, and partnerships. In the organization today, there is a need for lead-
ers to inspire people to think creatively about new ways of working, to motivate
people to perform at their highest levels, and to align all work behind corporate
goals and priorities. Whereas in the past most decisions were made by a small
group of executives, there is now an attempt to push decision making lower in
the organization and to hold managers accountable for the results to which they
commit. These new requirements mean that leaders have to think strategically
and relate collaboratively in order to be successful. It is no longer sufficient to
perform well as a supervisor or manager by monitoring tasks and controlling
costs. In today’s world, every employee needs to think and act as a leader by
identifying priorities, building programs and teams, and driving results. If we
are going to provide opportunities for people to grow, we need to provide them
with the skills and support they need to be successful. Company F needed to
change because the predominant leadership style was resulting in poor morale
and turnover of key talent. In order to improve morale, productivity, and prof-
itability, Company F now requires leaders who are competent, empowered, and
collaborative.
HR OPTIMIZATION
60

The functional tests of leadership development involve asking the following
questions:
1. Are we promoting from within?
2. Are our leaders successful in their jobs?
If our leadership development efforts are effective, then we should be growing suf-
ficient talent internally to fill new leadership roles as they open up. It is not suffi-
cient, however, to provide leadership opportunities to internal candidates. The
people who are promoted must succeed in their new jobs. The challenge is to
determine what makes a good leader in different cultural contexts. A leader could
be extremely effective in North America and fail miserably in Japan. Similarly, a
leader could perform well in marketing and not do well in engineering. There are
certain truths about leaders, however, that hold constant in any context: integrity,
the ability to identify strategic opportunities, the ability to build teams, and the
persistence to drive results. One important factor in the success of any leader is to
be clear about the measures of success at the beginning of the job.
In order to be effective, leaders need to be able to know and grow:
Their own commitment and capabilities
Others’ commitment and capabilities
Their organization’s capabilities
Their customers’ capabilities and satisfaction
These are the four components of leadership. Leaders need to focus on knowledge
and growth for themselves, others, their organizations, and their customers.
There are well-defined meta competencies that enable leaders to discharge their
responsibilities in all four components of leadership:
Envision possibilities.
Assess realities.
Think creatively and analytically.
LEADERSHIP DEVELOPMENT
61

Relate inclusively and interdependently.
Plan dynamically.
Act rigorously and relentlessly.
Learn continually.
The grid on the next page provides examples of competencies that are directly
related to success in each cell. Thus, if the primary component of a leader’s job
is to know and grow the customer, and the primary functions are to think
creatively and relate interdependently, then the competency in that cell will
indicate what the leader needs to know in order to be successful. The assign-
ment of competencies to each cell is not meant to be exclusive. For example,
the competency of motivating others could be critical in multiple cells. Since
this book is an invitation to transformation, the cell assignments should be
seen as stimuli for you to think through what competencies are required in
your organization.
As mentioned earlier, the challenge was to identify required competencies
for a leader whose primary job responsibility was to know and grow cus-
tomers and whose primary functions were to think creatively and think inter-
dependently.
Thus, in this example, the competencies required for success for this leader
would be:
Essentially, good leaders need to be able to envision, assess, think, relate,
plan, act, and learn. These are the metacompetencies of leadership. Leaders
need to be able to size up people and situations, analyze organizational
dynamics, and diagnose accurately what it takes to motivate people. They
need to generate new responses to changing conditions and apply innovation
to customers’ needs. They need to be able to engage people in meaningful
dialogue and create an environment of trust. They need to be able to plan,
organize, manage, and measure work in efficient and effective ways. And
finally, they need to be able to hire the right people, get work done, and drive
for results. All of these competencies can be summarized by Identify, Build,
and Drive. The effective leader identifies strengths, weaknesses, opportuni-
ties, and threats; builds individual and organizational capabilities; and drives
for results.
HR OPTIMIZATION
62
Business acumen, Intellectual horsepower, Problem solving, Customer focus,
Integrity and trust, Presentation skills, Written communications

LLeeaaddeerrsshhiippCCoommppeetteenncciieess
63
KnowandGrowCustomer
CapabilitiesandSatisfaction
Strategicagility
Innovationmanagement,
Customerlistening
Businessacumen,
Intellectualhorsepower
Problemsolving
Customerfocus,
Integrityandtrust,
Presentationskills,
Writtencommunications
Processmanagement
Re-engineering,
Actionorientation,
Functionalandtechnicalskills
Dealingwithparadox,
Technicallearning
KnowandGrow
OrganizationalCapabilities
Organizationalagility,
Perspective,Managingvision
Timemanagement
Dealingwithambiguity,
Creativity,
Decisionquality
Bossrelationships,Comfort
aroundhighermanagement,
Managingdiversity,Political
savvy
Organizing
Commandskills,
Managerialcourage,
Driveforresults
Learningonthefly
KnowandGrowOthers’
CapabilitiesandCommitment
Hiringandstaffing,
Motivatingothers
Sizinguppeople,
Understandingothers
Conflictmanagement,
Negotiating
Fairness,Caring,Compassion,
Patience,Humor,
Interpersonalsavvy,Listening,
Informing
Managingandmeasuringwork
Delegating,Developing,
Confronting,Directing,
Buildingteams
Managingdiversity
KnowandGrowYourOwn
Capabilitiesand
Commitment
Self-knowledge,
Careerambition
Work/Life
balance
Timelydecisionmaking
Personaldisclosure,
Ethicsandvalues,
Composure
Planning,Prioritysetting
Perseverance,
Standingalone,
Actionoriented
Personallearning,
Self-development
Envision
Possibilities
AssessRealities
ThinkCreatively
andAnalytically
RelateInclusively
and
Interdependently
PlanDynamically
ActRigorously
andRelentlessly
LearnContinually

While leadership theory appears logical, the reality usually presents many chal-
lenges. Here are some examples from our experience.
Company F’s CEO issued a challenge to his management team: “We need to
optimize our resources throughout the organization. That means we need to
ensure that
We have our best people in our most important jobs.
We have development plans for our high performance/high potential people.
We no longer accept or ignore poor performance.”
His bold and demanding challenge raised several questions:
1. How do we evaluate objectively what our most important jobs are?
2. How do we evaluate objectively who our highest performing/high poten-
tial people are?
3. How do we ensure that we are providing the right developmental opportu-
nities to the right people?
4. How do we deal fairly with poor performers?
HR took on the task of providing substantive responses to all these questions.
Question 1: How do we evaluate objectively what our most important jobs are?
In order to answer this question, we needed to develop criteria for evaluating
each vice president (VP) job. These criteria were designed to evaluate if the job
really merited a VP or senior vice president (SVP) title. Company F had 186 VPs
for an employee population of 4,200, which meant that about 4.4 percent of its
employees had a VP title. A benchmarking study indicated that in comparable
high-tech companies, about 3 percent of all employees were VPs. That meant
that Company F had about 60 more VPs than what one might find in a bench-
mark company. That statistic posed a problem because the intent of this process
was not to demote 60 VPs, but to ensure that the highest performing people
were in the most important jobs. Thus, one of the first challenges of this process
was to keep the discussion laser focused on optimization vs. demotion.
HR OPTIMIZATION
64

We established a set of criteria to facilitate the analysis and dialogue. Here are
the criteria we used to evaluate the jobs and the people.
SSeenniioorr MMaannaaggeemmeenntt JJoobb RRaattiinngg SSccaalleess
Instructions: Refer to the standard criteria below to evaluate each VP titled posi-
tion in your organization. Do not evaluate the person in the role today—this is
a job evaluation only. Total the points associated with each job you evaluate.
Job Title: __________________________________
Name of Person Currently in Job __________________________________
Strategic Nature of Job/Liability Potential _______
5: Extremely Strategic and/or great liability potential in the case of inaccuracy
4: Very Strategic or high liability potential in the case of inaccuracy
3: Strategic or liability potential in the case of inaccuracy
2: Somewhat Strategic or liability potential in the case of inaccuracy
1: Tactical or no real liability potential in the case of inaccuracy
Size and Scope of Job _______
5: >100 employees
4: 51–100 employees
1: <15 employees
Revenue/Cost Responsibility _______
5: Responsible for > $50 million in sales or >$18 million in costs
4: Responsible for $30–50 million in sales or $12–18 million in costs
1: Responsible for < $10 million in sales, <$1 million in costs
Relationship Responsibility (internal and external) _______
5: World-wide responsibility for 2 or more functions, reports to executive VP
4: World-wide responsibility for entire function
3: International responsibility for entire function
2: Responsibility for function within United States, Europe, or Asia
1: Responsibility for a function within a particular country or geography
65

Technical/Professional Requirements ________
5: Very High technical/professional requirements, broad company knowledge
4: High technical/professional requirements
3: Technical/professional requirements
2: Some technical/professional requirements
1: Very few technical/professional requirements
TOTAL: _______SVP = >20; VP = 15–20
SSeenniioorr MMaannaaggeemmeenntt PPeerrssoonnaall RRaattiinnggss
Instructions: Refer to the standard criteria below to assess each of your senior man-
agers (VPs and above). Total the points associated with each person you assess.
Name: _____________________________________________
Performance: (How is this person doing on current job?)
Contribution: _______
5: Far exceeding expectations on current job
4: Exceeding expectations on current job
3: Meeting expectations on current job
2: Falling short of expectations on current job
1: Falling far short of expectations on current job
Leadership: _______
5: Inspires others in people development and core values
4: Promotes people development and impacts core values
3: Actively develops people and supports core values
2: Sometimes engages in people development and supports the values
1: Doesn’t engage in people development and/or distracts from the core values
Potential (Can this person do more?)
Capability: _______
5: Has the knowledge, skills, and experience to do much more
4: Has the knowledge, skills, and experience to do more
3: Has the knowledge, skills, and experience to do more with development
2: Lacks the knowledge, skills, or experience to do more
1: Does not have the knowledge, skills, and experience to do more
HR OPTIMIZATION
66

Commitment: _______
5: Extremely committed to the company, personally accountable for company
growth
4: Very committed to the company, personally accountable for organizational
growth
3: Committed to the company, personally accountable for departmental
growth
2: Lacks commitment to the company, accountable for personal growth
1: Not at all committed to the company, not accountable
Question 2: How do we evaluate objectively who our highest performing/high
potential people are?
The senior management teams of each organization reviewed each job on the
Job Rating Scales and each VP on the Person Rating Scales. If a VP job fell
below a total of 15 points on the five scales, that job was tagged in case the
person in the job were to leave for any reason. The person was not demoted,
but the job was designated as one that would not be replaced as a VP. In a
separate exercise, each VP was rated on the Person Rating Scales. Since there
were two scales for Performance and two scales for Potential, it was possible
to map the totals into an optimization model (see page 68) using the following
guidelines:
Performance:
High: Exceeds expectations/Inspirational leader (8–10)
Med: Meets expectations/Impact player (5–7)
Low: Falls short of expectations/Detracts from core values (<5)
Potential:
High: Has capability and commitment to do more (8–10)
Med: Has capability and commitment to do more with development (5–7)
Low: Lacks capability and commitment to do more (<5)
Readiness:
Green: Ready now
Yellow: Ready within 1 year with development
Red: Ready within 2 years with development
67

Criticality of Job:
3: Mission Critical
2: Very Important
1: Important
Leadership Competencies
In addition to mapping all VPs into the optimization model and indicating
the criticality of the current job and the readiness of the person to move, the
executive staff also agreed on organizational principles to ensure that the
process reinforced core values in the culture.
OOrrggaanniizzaattiioonnaall PPrriinncciipplleess
Evaluation:
All VP jobs will be evaluated whenever there is significant organizational change
or every 2 years.
All VPs should be evaluated on an annual basis.
VP jobs are reviewed independent of the person.
HR OPTIMIZATION
68
P
e
r
f
o
r
m
a
n
c
e
High
Med
Low
Low Medium High
• Map In People
• Assess Readiness
• Assess
Job-Person Gaps
Potential

Authority to hire:
Proposed VP jobs need to be approved by the executive committee and the deci-
sion must be unanimous.
SVPs have authority to hire who they want as long as the position has been
approved as a VP job.
Guidelines for hiring, promoting, and rating:
Whenever VP jobs open up, we should make every effort to fill them with
diverse cultural backgrounds.
When senior management positions open up, we will use our designated talent
pool as a viable source for candidates.
SVPs can assign designations independent of the numerical ratings, e.g., the
“person” ratings should only be seen as decision support information.
If a person reports to an SVP, it does not necessarily follow that she/he should
have a VP title.
Question #3: How do we ensure that we are providing the right developmental
opportunities to the right people?
In many organizations, “one off” decisions are made on who gets to go to devel-
opment programs whether they be executive MBA programs or two-week inten-
sive programs. Even more common are organizations that provide random,
inductive leadership training. This means that the training is not tied to the com-
petencies required for success in the current job or future job. The outline below
illustrates how one company leveraged its optimization process to ensure that the
company provided the right developmental opportunities to the right people.
OOppttiimmiizzaattiioonn PPrroocceessss
Phase I: VP Job Evaluation
1. Meet with the executive team to review the criteria and the process.
2. Once we agree on criteria, we will make no promotions to SVP or VP with-
out going through the criteria in the executive committee.
3. Reach agreement on how to integrate with Performance Management.
4. Build evaluation tools and support documents.
5. Evaluate all VP jobs on the criteria.
69

6. Based on the data, each executive VP in collaboration with the HR
Business Partners will identify key positions within their respective
organization.
7. Executive committee will review all positions and identify the most impor-
tant positions.
Phase II: Succession Planning and Performance Management
1. Executive VPs will assess all VPs in their respective organizations using the
“person” criteria (performance and potential) and assign a red, yellow, or
green readiness rating to each VP.
2. Executive VPs will identify top talent in their organization and develop-
ment plans for each.
3. CEO will present results of analysis and the optimization plan to board of
directors.
Phase III: Optimization
1. Each executive VP will meet with CEO and SVP of HR to
Review organizational structure.
Review current list of key positions in order of priority and criticality to
the business.
Present “talent pool” of high-potential, high-performing leaders within
the organization who are ready to move into high-impact jobs.
Present a succession plan based on key positions and leaders with poten-
tial and readiness for immediate and future growth.
Discuss development plan for those included in succession plan with
emphasis on assignment management.
Identify minorities, women, and employees with unique/critical skill sets.
Invite high-performing, high-potential leaders to apply for educational
grants to continue their development on the competencies required for
success in their next job.
Review steps to operationalize the optimization plan.
2. Each executive VP will implement optimization plan.
Question 4: How do we deal fairly with poor performers?
It is just as important to deal fairly and effectively with people in the lower left
quadrants of the optimization grid as it is to provide developmental
opportunities for people in the upper right quadrant of the grid. The optimiza-
HR OPTIMIZATION
70

tion process not only uses specific criteria on which all managers are evaluated,
it also incorporates multiple-rater assessment as a critical part of the process.
Poor performers must be dealt with directly, fairly, and quickly. Too often, poor
performers are permitted to hide in the organization and continue to collect
their pay checks with no accountability. The key ingredients of fair dealing are
to evaluate everyone on the same criteria, to enlist multiple sources of input on
potential and performance, to provide constructive feedback, and to give a per-
son a reasonable amount of time to improve. If performance on specific objec-
tives does not improve in a reasonable amount of time, then action needs to be
taken. While some executives believe that the lower 10 percent needs to be elimi-
nated each year, we do not subscribe to that notion. Cutting by percentages is a
losing strategy. The more effective strategy is to hold everyone accountable to
performance goals and to deal honestly and directly with those who fall short
of meeting expectations.
1. Development needs to be based in the reality of the leader’s job and orga-
nizational culture.
2. Senior leadership role modeling and support are critical.
3. Raising awareness of the need for development is half the battle.
4. Flexibility and a variety of development options are important.
5. Rewarding for development sends a clear message that personal learning
and growth is valued in the culture.
6. Development needs to be built into every activity—point out development
opportunities.
7. Debriefing doesn’t mean assigning blame—it means learning.
8. Provide thinking tools and methodologies: Identify-Build-Drive; Analysis-
Dialogue-Discipline.
9. Create environments in which people can learn.
10. Leadership is not a program—it is a commitment, a process, and a belief.
71

The components of a comprehensive leadership development program include
opportunities for knowing and growing self, others, the organization, and cus-
tomers. The functions of leadership development are to increase the ability of
leaders to identify opportunities and threats, to build partnerships, and to drive
accountability and results. Several processes can be employed to develop lead-
ers: promotions into more challenging jobs, leadership training, and educational
assistance. Clearly, the extent to which a company supports development and
succession planning impacts the success of leadership development efforts, but
the standard of continuous learning remains constant.
HR OPTIMIZATION
72

In the thousands of organizational studies conducted by consultants over the
past several decades, one major theme appears constantly: the need to improve
communication. It’s hard for anyone to feel as if they have a great job when they
don’t feel informed of what’s happening in the organization nor involved in
making decisions. Quite simply, people need to know what’s going on in their
work environment to be successful. When people are uninformed, they feel
out-of-sync. When they are not involved in decisions that affect them, they do
not feel aligned with the organization’s strategic direction. In companies that
communicate extraordinarily well, people are aligned with corporate and
organizational goals and objectives. The test of communications is alignment.
SSccaallee
There is a range of possible outcomes in any effort to improve workplace com-
munications. The following scale will help you envision possibilities and assess
current realities in your organization:
5: Employees are inspired by the organization’s vision and direction; everyone
feels like they are part of the action. People are aligned with the vision.
4: Employees feel incorporated in the business and are aligned with the
mission.
Communications
Chapter
7

3: Employees feel involved in organizational decisions and direction and are
aligned with organizational goals.
2: Employees feel informed of organizational decisions and direction and are
aligned with departmental objectives.
1: Employees feel ignored and are not aligned.
Where are you on the scale now? _____
WWhhyy CChhaannggee
Information has not flowed smoothly in Company G. Idiosyncratic decisions
are made frequently that affect other people, but those decisions are commu-
nicated tersely, if at all, to those affected by the decision. Company G can be
characterized as having a culture of negotiation. If someone doesn’t like
a decision from one source, he or she simply goes to another source to nego-
tiate a different deal. Even at the executive level, some decisions are made
without informing or involving other senior executives. Company G does not
have a vision statement and there is significant resistance to spending time
developing a mission statement that reflects broad-based input. Historically,
most decisions have been made by a small team of executives without involve-
ment or dialogue with the rest of the senior management team. This command
and control communication style has been changing, but one would not
describe the Company G culture as empowering or engaging. In short,
Company G needs to change in order to create an informed, involved, and
inspired workforce.
At a minimum, people need to be informed of decisions that affect them and of
the strategic direction of the organization. If there is a commitment to create a
supportive community among colleagues and associates, then there needs to be
evidence that the commitment translates into open communication. Town meet-
ings are an effective way to communicate company news and changes and to
HR OPTIMIZATION
74

share openly the progress or lack of progress that is being made on corporate
objectives.
At an acceptable level of communication, employees feel involved in decisions
and are clear about the strategic direction of the firm. This may require focus
groups, breakfast meetings, practice communities, etc. While it is rare for an
organizational community to feel that involvement efforts are adequate and
real, it is still important to make genuine attempts to engage people in meaning-
ful dialogue when appropriate and possible.
At the highest levels of communications, employees feel inspired by the mes-
sages they are receiving. The vision statement should align with employees’
deeper aspirations and reflect a higher purpose. It should be phrased in
such a way that employees would want to share it proudly with their most
significant others. The statement should be one that employees identify with
and can internalize. It should be a simple, powerful, and repeatable phrase
that inspires employees to dedicate themselves to furthering the purpose of
the organization.
Communications cover a wide range of interactions: investor relations,
employee newsletters, town meetings, employee suggestion systems, meetings,
performance reviews, goal setting, ongoing feedback, coaching, memos,
conference calls, Web-casts, etc. Given the abundance of communication
channels, it’s surprising to hear the common complaint, “There are no commu-
nications around here.”
Why is there such a disconnect between the amount of time managers invest
in communications (either through meetings or memos) and the lack of clar-
ity employees typically experience? The average manager spends a large por-
tion of time in meetings. Some studies indicate that managers spend more
than 50 percent of a typical day reading and writing. The average employee
spends almost an hour producing each memo. The average document is
reviewed four times before it reaches its intended audience. Given the prolif-
erate amount of memos circulated in a given day, that’s an enormous invest-
ment in time and energy. Yet, according to a Louis Harris study, less than
one-third of employees think that management provides clear goals and
directions. Even though we know that open communication is one of the
most important retention factors, it is difficult to satisfy employee expecta-
tions for information and involvement. One possible reason for the discon-
nect between the high investment in time and the low result in clarity is that
senior managers rarely do a good job of cascading corporate goals through-
out the organization. If goals at the top are not well articulated and commu-
nicated, it is unlikely that employees will feel like they know what’s going on
and how they fit in.
COMMUNICATIONS
75

There are three critical success factors for effective communication: (1)
develop a communication strategy, (2) create a culture of trust, and (3) hold
individual managers accountable for communicating with their employees.
Individual managers need to be trained to deliver good news and bad news
about performance, to provide ongoing coaching, and to present ideas
cogently and effectively. Creating a culture of trust requires a long-term
commitment to open, honest, and direct communications about successes and
failures, financial results, and strategic changes. Multiple channels of com-
munication, an ongoing commitment to tell the truth, and leadership
authenticity are all essential elements in building trust. A communication
strategy involves more than developing a technology infrastructure. An effec-
tive communication strategy addresses how an organization cascades its
goals, clarifies expectations, manages change, distributes information,
involves people in decisions, incorporates them in the business, and inspires
them by the vision, mission, and strategy.
The most important success factor is to make conscious decisions about what to
communicate to whom and to be clear about the purpose of the communication.
The table that follows is a helpful thinking tool for making conscious
communication decisions:
This tool can help you think through the level of communication required for
your various constituencies. Are there situations in which you can ignore
employees or the board of directors? When do customers need to be involved
in decisions? How do you inspire employees with a particular message?
This tool helps you raise questions that can lead to improving communica-
tions.
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76
Employees Customers Communities Board of
Directors and
Shareholders
Inspire
Incorporate
Involve
Inform
Ignore

While communication theory appears logical, the reality usually presents many
challenges. Here are some examples from our experience:
Consistent messages vs. a wall of noise. Some organizations go communications
crazy. Each department has its own newsletter and disseminates pithy stories to
the whole population. As a result, employees are choked with confusing and
irrelevant information. At the other extreme, there is a communication void.
Employees have no idea how well the company is progressing on its stated goals.
To compound the confusion, messages often conflict with one another—there
are a thousand specks of light instead of a spotlight on critical messages.
Memos vs. meetings. What would happen to corporations if all memos and
meetings were banned? Crafting memos and going to meetings constitute a
major share of an employee’s day. What could be done to improve the quality of
memos and meetings? Conscious decisions need to be made about the appropri-
ate form of communication for a given issue. These issues are compounded when
working in virtual teams. For more information on how to improve communi-
cations in virtual teams, refer to the book Virtual Teams (Bellingham, 2001).
1. Use good e-mail protocols—not too long, not too often.
2. Use voice mail for a personal touch, but keep messages under 2 minutes.
3. Add face time and reduce travel costs through teleconferences.
COMMUNICATIONS
77

4. Promote interaction with Web-casts—don’t make them all “tell.”
5. Hold town meetings once per quarter to discuss progress against objec-
tives.
6. Align all employees behind corporate and organizational goals by cascad-
ing them through the organization. Make sure that corporate goals are
well articulated and communicated.
7. Encourage ongoing and constructive performance feedback.
8. Engage in productive dialogue and problem solving during face-to-face
meetings.
9. Use memos to inform people of changes and decisions.
10. Leverage technologies for knowledge sharing and collaboration.
The components of a comprehensive communication program are employee
communications, customer communications, and shareholder/investor commu-
nications. The functions of communications are to inform, involve, incorporate,
and inspire all stakeholders so that they are aligned with the strategic direction.
Several processes can be used to discharge these functions: town meetings,
e-mails, voice mails, newsletters, and Web-casts. Clearly, the extent to which
senior management believes in openness affects communications, but the stan-
dard of honesty remains constant.
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A fundamental requirement for human resource departments is to be easy to do
business with and efficient with their processes. Managers and employees want
to be able to request information and conduct transactions with an organization
that reflects consistency and operational efficiency. Transactional processing
needs to be simple and fast. In order to meet these employee expectations, each
process needs to be designed to make interactions efficient and effective. Once
existing processes are defined, then HR can look for ways to add reliability and
efficiency. As an organization, it’s difficult to do great work if you are bogged
down by inefficient processes.
SSccaallee
There is a range of possible outcomes in any effort to improve HR processes.
Here is a scale to help you envision possibilities and assess current realities in
your organization:
5: Processes are dependable, repeatable, and efficient. Managers and employ-
ees don’t think about transactions after they are sent to HR.
4: Processes are dependable and repeatable. HR is seen as easy to do busi-
ness with.
3: Employees can get answers to their questions in a timely fashion.
Processes are dependable.
Process Excellence
Chapter
8

2: Information access and transaction reliability are dependent upon who in
HR initiates them.
1: Information and transactions are unreliable and inefficient.
WWhhyy CChhaannggee
In Company H, most HR processes were not documented and there was no
way to understand what, or how, to improve. Many processes were redundant
across various HR functional groups, and HR owned all aspects of the transac-
tions, i.e., HR took responsibility for filling out forms and entering data. Process
inconsistencies existed across all business units, resulting in gross process ineffi-
ciency. As a result, Company H wasted millions of dollars from incomplete and
late transactions, unclear policies, auditing, tracking, and conflict resolution.
Most processes involved manual, paper-intensive steps that often required re-
work. The inconsistencies, lack of clarity, and slowness caused communication
breakdowns among managers, HR, compensation, and benefits. This process
shabbiness created confusion and frustration among business clients and led to
feelings of great dissatisfaction with HR. Company H wanted HR to develop
quality-driven processes that would enable HR, managers, and employees to
focus on adding value to the business. The long-term goal was to develop an
organization that focused on continuous improvement and was flexible enough
to adapt rapidly to changing business needs.
The key to process excellence is to identify all the critical processes that cur-
rently exist in HR and to understand their impact to manager or employee sat-
isfaction with HR. To achieve this usually requires the creation of a process map
that illustrates the interrelationship of all processes and how they flow. All
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PROCESS EXCELLENCE
81
processes should then be ranked in order of importance to the client, e.g., the
organization, a manager, or an employee.
Some of the key processes that clients value and that impact the perceived effec-
tiveness of HR include the following:
New hire process
Employee change record process
Promotion, demotion, job title changes
Status changes
Incentive and commission changes
Transfers
Salary change
Termination process
After the processes are prioritized, each process needs to be documented so
that it can be used as an instruction set by those employees in the organiza-
tion who use the process. Documentation should include recommendations
for improvement, opportunities for automation, and metrics to measure
success. Recommendations should address issues of standardization and
localization.
One approach to process improvement is to
Identify, analyze, improve, and document current priority processes.
Identify technology to streamline processes and reporting.
Implement enabling technologies.
Continuously improve processes to meet changing business needs.
This approach could take several months to several years to implement fully.
Each process should have a flow chart. A termination process might look like
this:

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82
RReeaalliittyy
While process excellence theory appears logical, the reality usually presents
many challenges. Here are some examples from our experience:
Management ownership vs. HR ownership. In some companies, HR has the
responsibility for social service activities such as event management, buying
flowers for special events, distributing holiday gifts, etc. HR professionals often
voice frustration and resentment about doing these services but do them any-
way. Distributing ownership for people and organizational responsibilities is an
ongoing reality in the life of HR professionals. Managers are always inclined to
push paperwork and “people issues” to HR when they should be assuming
responsibility themselves. A challenge for HR is to enable managers to fulfill
their appropriate responsibilities in employee relations and process excellence.
HR readiness vs. organizational readiness. It is often the case that HR has a
critical need to improve processes, but the organization would prefer slow
methodical change. Changing processes requires that people do things differently,
Manager HR meets HR Generalist HR
notifies HR of with coordinates conducts
termination employee action list exit
interview
Manager fills Connect to Cobra Benefits HRMS
out requisition Staffing and
form for Process payroll
replacement

but history has shown that people are attached to their habits. HR could create an
air-tight business case for process improvement that clearly demonstrates gains in
efficiency and effectiveness, but without a thoughtful, well-executed roll-out, the
organization could simply say, “No thanks.” Continuous calibration is a mindset
that needs to dominate HR’s approach to change.
Dial tone vs. enhancement. Many organizations just want dial tone service from
HR. If they pick up the phone, they want someone to answer. If they want a cer-
tain fact, they want to find it simply. If they want to hire a new
person, they should be able to do so without a lot of bureaucracy. When HR
wants to change or modify their processes in order to enhance their effectiveness,
clients sometimes react negatively because they just want the basics. If the client
wants basic compliance and HR delivers a different standard, client satisfaction
may suffer. When HR tries to deliver what it thinks the client needs instead of
providing what clients say they want, the end result is frustration for all parties.
Policy vs. negotiation. In a culture that lacks standards, it is difficult to imple-
ment policies that require people to follow procedures. Many clients resist a dis-
ciplined approach to any process because they have been rewarded for not being
disciplined. If going around the process or not using the process is rewarded,
why would someone want to go through the effort of following guidelines?
1. It’s hard to make change if it requires people to act differently.
2. Initial changes should focus on high-value customer-facing transactions.
3. Keep an open mind and explore processes even if you believe they are
working well.
4. Remember the culture—if it’s fast paced and open, then make your
changes quickly with lots of information.
5. Make managers owners of the information—provide them with regular
reports to audit.
6. HR needs to be ready to deliver quality solutions when the organization
is ready to receive them.
PROCESS EXCELLENCE
83

7. HR needs to fill its own tool box—build its own capabilities.
8. HR needs to respond to client requests with value-added solutions.
9. HR needs to vary the timing of interventions per client group depending
on readiness and capabilities.
10. HR needs to respect the capabilities of the entire HR department to
absorb change and new material.
CCoonncclluussiioonn
The components of process improvement are instructions, data, forms, flow
charts, and employee services. The functions of process improvement are to
improve access, to reduce complexity, and to improve ease of use. Several
processes enable HR to discharge these functions: call centers, drop-in centers,
self-service, and change management. Clearly, the extent to which people
embrace change impacts the potential effects of process improvement, but the
standards of reliability and efficiency remain constant.
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Section III
Account Management

Creating a great company requires effective business consulting on the part of
HR in all customer-facing activities and account management. Jim Collins, an
internationally known business consultant who wrote Built to Last and Good
to Great, suggests that a primary role of a business consultant is to help a com-
pany instill some of the timeless characteristics mentioned in the introduction to
this book (e.g., analysis, discipline, and dialogue—add value). If HR business
partners are going to fulfill that role and add value to the organization, they will
need to address the cultural norms that impact strategy, structure, staffing,
systems, skills, and style. This chapter addresses the core requirements of busi-
ness consulting. Since the degree of difficulty of business consulting exceeds the
other areas and requires more elucidation, we have attached Appendix B as a
primer for critical consulting skills.
SSccaallee
There is a range of possible outcomes in any effort to improve business. Here is
a scale to help you envision possibilities and assess current realities in your
organization:
5: HR adding value (e.g., identifying opportunities and threats) to all strat-
egy, structure, and/or business issues.
4: HR adding value to most strategy, structure, and/or business issues.
Business Consulting
Chapter
9

3: HR adding value to some strategy, structure, and/or business issues.
2: HR at the table for some strategy and structure issues.
1: HR not at the table for strategy and structure issues.
WWhhyy CChhaannggee
Company I has not been tuned into the concept of business partnering with
HR. Historically, Company I viewed HR as administrative experts and, to
some degree, employee champions. The notion that HR could partner with the
business to orchestrate change and to think strategically had not been
accepted or supported. The shift to account management was an attempt to
position HR not only as administrative experts and employee champions, but
also as change agents and strategic partners. Company I has had a limited
view of what HR can contribute to the business. The primary emphasis in
Company I has been to generate financial capital. There has been little value
placed on the importance of information capital, human capital, organiza-
tional capital, customer capital, or community capital. In order to make that
transition, HR needed to be at the table and add value to business issues that
relate to these new aspects of capital development. If HR focuses only on
financial capital, it will always be seen as conserving costs at best and as
adding overhead costs at worst.
Any consulting intervention can be for better or for worse. A critical success
factor in a consulting intervention is the skill level of the consultant engaged in
the process. Eight critical consulting skills help HR increase its ability to make
a positive business impact with their clients.
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88

CCoorree SSkkiillllss::
Goal Setting (the ability to clarify direction and specify objectives)
Data gathering and analysis (the ability to collect relevant information and
to process and present that information in meaningful ways)
Problem solving (the ability to frame problems, conduct root cause analy-
ses, generate options, define criteria, and create action strategies)
Planning and project management (the ability to develop plans and moni-
tor progress against objectives)
Delivery and measurement (the ability to facilitate deployment and to
demonstrate value realized, e.g., return on investment)
FFuunnccttiioonnaall SSkkiillllss::
Positioning (the ability to elevate your relationship with clients and demon-
strate value)
Contracting (the ability to specify who does what by when and for how
much)
Productive dialogue (the ability to engage in meaningful conversations)
KKeeyy PPrriinncciipplleess::
Authenticity
Learning orientation
Trusting yourself and your experience
An in-depth discussion of the three functional skills is included in Appendix B.
OOvveerrvviieeww
Consulting competency is defined as:
Generating innovative ideas and applying consistent practices to ensure
the impact of key initiatives and their cultural adaptation: providing
productive advice for improving the performance of individuals, teams,
and the whole organization.
Desired behaviors are defined for various levels in the HR organization using
this framework. The objective for the consulting skills intervention is to enable
individual contributors, managers, and executives within HR to improve their
ability to do the following:
BUSINESS CONSULTING
89

HR Individual Contributor:
Gather appropriate information through skillful questioning and listening.
Mobilize resources and provide appropriate advice and expertise to meet
customer needs.
Use an understanding of change processes to anticipate and plan for the
effects of change initiatives.
Help customers identify the benefits and challenges related to change
initiatives.
HR Managers and Directors:
Demonstrate change leadership by partnering with the line to initiate and
implement organization changes.
Evaluate change initiatives over time and develop strategies for renewing
or deepening their impact.
HR Executives:
Provide innovative advice to business leaders that lead to new and more
productive initiatives for the organization.
Initiate major change initiatives required to address current and future
business needs (push senior management to understand and address
critical issues).
Build broad buy-in and support from key stakeholders for change initia-
tives across the whole organization.
In Competence at Work: Models for Superior Performance, Lyle Spencer defines
competency, skill, and behavior as follows:
Competency: A measurable pattern of skills, behaviors, knowledge,
beliefs, values, traits, or motives which causes superior
performance and results within a defined job context.
Skill: A consistently demonstrated ability to perform certain
physical or mental tasks or job responsibilities.
Behavior: An observable sequence of physical actions, verbaliza-
tions, or nonverbal cues.
Consulting is helping to conceptualize and achieve desired future states. It
involves an interaction between a consultant and a client to design and imple-
ment a particular intervention. Three key words need to be defined here:
Consultant: A person in a position to have some influence over
an individual, a group, or an organization, but who
HR OPTIMIZATION
90

has no direct power to make changes or implement
programs.
Client: A single individual, work group, department, or organ-
ization. The client is the person or persons whom the
consultant wants to influence without exercising direct
control.
Intervention: The goal or end product in any consulting activity—a
planned action in response to an identified need.
Appendix B focuses on the consulting skills required for an effective interven-
tion with a defined client. However, there are multiple types of skills required of
consultants. The most common are as follows:
Content Expertise: Specific skills in an area of expertise.
Interpersonal Skills: The ability to put ideas into words, to listen, to give
support, to disagree constructively, to influence, and to
maintain a relationship.
Consulting Skills: The ability to start up, execute, and finish the tasks
underlying the consulting relationship.
A consultant can also be expected to play a number of roles in an intervention.
Common roles a consultant plays include the following:
Expert: As an expert, the consultant examines the situation,
decides what needs to be done, and directs the inter-
vention. The client plays an inactive role during the
consulting process, judging and evaluating after the
fact.
Pair of Hands: As a pair of hands, the consultant plays a passive role
during the process. The client knows what needs to be
done, but does not have the time or resources to deal
with the problem. The consultant simply carries out
tasks assigned, i.e., serves as a pair of hands for the
client.
Collaborative Partner: As a partner, the consultant enters the relationship
with the client with the understanding that her or his
specialized knowledge and skills as well as the client’s
knowledge of the organization are both required to
solve the problem. Problem solving thus becomes a
joint undertaking. The client is actively involved
throughout the consulting process.
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91

Having clarified the key terms related to consulting, the types of skills that
are employed in a consulting relationship, and the roles that are played in an
intervention, it is important to keep in mind the key principles that should guide
the consulting process.
KKeeyy PPrriinncciipplleess
Authenticity
Peter Block, the author of Flawless Consulting, defines authenticity as follows:
Authentic behavior with a client means you put into words what you are
experiencing with the client as you work. This is the most powerful thing
you can do to have the leverage you are looking for and to build client
commitment.
There is a tendency for consultants to look for ways of being clever with a client.
We agonize over ways of presenting our ideas—of phrasing the project so that it
will get a great reaction. We sometimes get caught in the trap of straining to fig-
ure out what will convince the client that we are everything they are looking for.
It is a mistake to assume that clients make decisions to begin projects and use
consultants based on purely rational reasons. More often than not, the client’s
primary question is: “Is this consultant someone I can trust?” Is this someone I
can trust not to hurt me, not to con me; someone who can both help solve the
organizational and technical problems I have, and, at the same time, be consid-
erate of my position and person? When we operate in too clever or manipula-
tive a way, or lay it on too thick, clients pick up on it, and trust begins to erode.
Low trust leads to lower leverage and lower client commitment. Authentic
behavior leads to higher trust, higher leverage, and higher client commitment.
Being authentic literally means that the consultant is genuinely himself or
herself. He or she does not present a façade. Authentic behavior also has the
advantage of being incredibly simple. It is literally to put into words what you
are experiencing. As Geoffrey Bellman, author of The Consultant Calling,
states, “I must have the opportunity to be myself while I work. Work that con-
tinually requires me to hide who I am is too burdensome to pursue.”
Gelinas-James, Inc., has a list of behaviors that describe what authenticity isn’t
and capture the essence of this point. They say:
You are not being authentic when:
You say only what you believe the client wants to hear.
You ignore the sticky issues.
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You do not pay attention to your own feelings.
You become too “technique-y” or hide behind jargon.
You call on higher authority instead of presenting desires and wants as
your own (“I know your boss wants us to . . .”).
You let innuendoes, cynical remarks, or “red flags” pass by without
acknowledging them.
You hide what is going on inside you.
Steps for authenticity:
Acknowledge what the client says.
Comment on what you think/feel/see.
Speak for yourself; use the first person (“I believe that . . .” vs. “People
often believe . . .”).
State the feelings you are having (“I’m confused over how this request fits
into your overall business strategy”).
State what you are seeing and hearing without blame or judgment (“You’ve
told me that there won’t be any resistance from your group on this project,
but we talked to at least four people on your team who are causing
problems. Can you help me reconcile this?”).
Be authentic, but don’t overwhelm your client with your openness.
Speak the unspoken (“Clearly, the retention issue is huge, and it doesn’t
sound like either of us is confident of the root cause of the problem”).
If you really want to form a collaborative partnership with your client and have
satisfying consulting engagements, then authenticity is a critical success factor.
Learning Orientation
Consultants who approach their work with a learning orientation maintain a
constant focus and intention to learn from all stakeholders. Consultants with a
learning orientation enter every project with an open mind; they do not assume
that they already have the answer. In fact, they realize there may be they do not
assume many solutions to the issues, and they invest heavily in asking questions
to clarify their understanding of the presenting situation. They aren’t shy about
asking questions that they need answered to better understand the situation, and
they are willing to admit that they will need some time to think about possibili-
ties. They are not inclined to impress the client with instant answers; rather, they
take a more thoughtful approach. In doing so, they build client trust and com-
mitment. After all, how does it make clients feel when the issue with which they
BUSINESS CONSULTING
93

have been wrestling for a while can be “fixed” immediately by the wise consult-
ant! Maintaining a focus on learning rather than “fixing problems” opens the
door for more collaborative and effective solutions. Here are some helpful steps
to remember:
Hold the intention to learn with the client.
Be careful that you don’t make promises in the moment without taking
time to reflect.
Understand that consulting isn’t getting the right answer once; it is an
iterative process to discover what works.
Trusting Yourself and Your Experience
Reaching agreement on the contract confirms that the client believes that you
have the needed expertise and skills to be a partner in solving the client’s
problem. You have the technical, interpersonal, and consulting skills necessary
to perform your role. Rely on those skills and your past experiences and trust
your instincts to make the right decisions in difficult situations.
While the theoretical constructs underlying business consulting appear logical, real-
ity usually presents many challenges. Here are some examples from our experience.
Before vs. after. Functioning as a strategic partner and business consultant
means being invited into conversations with partners before there is a problem.
The reality is that most HR business partners are invited in when there is a prob-
lem of some kind after the strategy has been set. While the goal for business
partners is to relate to clients as trusted advisors and thinking partners, the real-
ity is that they are asked to do tasks after the fact instead of relating intimately
and thinking creatively about business issues and possibilities in the early stages
of germination. In short, business partners usually spend more time in fermen-
tation than generation (fermentation is defined as the heat caused by organic
change).
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People and culture vs. customer and finance. The goal of a strategic partner is
to engage clients in productive dialogue about competitive differentiation. These
conversations often go beyond people and cultural issues typically reserved for
HR professionals. The reality for most business partners, however, is to focus
exclusively on the value-add that they can provide as it relates to people and
organizational process interventions and solutions. It is unusual for HR business
partners to be involved in conversations about a range of capital development
issues that could lead to business growth.
Partners vs. pairs of hands. A true strategic partnership is recognized by the fact
that the client is as anxious to engage the business partner as vice versa. The
client and the HR professional are partners in the true sense of the word. The
key to becoming a partner is to have intimate knowledge of the company strat-
egy and to be able to provide a valuable perspective to the client. The difference
between a “pair of hands” and a partner is the quality of perspective. Clients
are always eager to hear a fresh perspective that could represent a significant
source of gain. They are almost always not interested in hearing a worn-out
perspective that simply results in more work and no gain.
1. If you are able to understand the limits currently placed on you by a
client’s perception of you, then you are better able to break free from that
perception.
2. If you learn as much as possible about the business challenges of your
client, then you will be able to engage more effectively in active inquiry,
proactive advocacy, and collaborative processing.
3. If you are able to describe specifically the range of desired outcomes that
will most likely occur based on a given intervention, then you will be posi-
tioned to assess the current gaps between current state and future state
and to estimate the resources required to close the gap.
4. If you are clear about what you are bringing to the table as a consult-
ant, then you will be able to make better choices about what you offer
BUSINESS CONSULTING
95

the client in terms of products, services, solutions, partnerships, and
possibilities.
5. If you clarify who the client is and what exactly they hope to achieve as a
result of the proposed intervention, then you will avoid wasted energy
and dissatisfaction and increase your chances for high commitment and
ultimate success.
6. If you are thorough in your assessment of the situation, then you will be
able to do a much better job of defining resources, roles, and responsibili-
ties.
7. If you give your client alternative ways for achieving desired outcomes,
then the client will be more engaged in the process and assume more
ownership for the outcome.
8. If you actively inquire about the clients’ frame of reference, you will get a
much clearer understanding of the problem and the gaps between your
image and the client’s image.
9. If you proactively advocate for your point of view relative to the situation,
cause, and direction, you will be able to influence your client to think
differently about problems and possibilities.
10. If you merge images with your client about problem, cause, and direction,
you will increase ownership for the solution and ensure that the interven-
tion is aligned with business requirements.
The components of change within the purview of a strategic business partner
include shared values, strategy, structure, staff, systems, skills, and style. The
functions of consulting in all seven areas are to improve performance and
to serve as the catalysts of capital development. The core processes for dis-
charging those functions include positioning, contracting, and productive dia-
logue. Clearly, the competence of the business partner and the perception of
value from the client affect the outcome of the intervention, but the standard
of added value remains constant.
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PPrroojjeecctt IInniittiiaattiioonn FFoorrmm
Purpose: To clarify requests and desired outcomes.
General Project Information
Project Name:
Project Sponsor:
Project Leader:
Business Organization:
Point of Contact:
Expected Start and End Dates:
Date Requested:
Business Request: Define the business problem or opportunity to be addressed
by the project. Objectives and expectations need to be clearly defined.
Brief Description: What is the project? What are the major components?
What is it going to accomplish? What is excluded from the scope?
Major Deliverables and Outcomes:
Strategic Fit: Does this project meet the market and/or Company L business
strategy? What is the potential business impact? Why should we do this proj-
ect? Why should we do it now? How will success be measured?
Resource Requirements: What skills are required? How many people? How
much time?
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Positive relationships with colleagues, managers, and direct reports are an
essential element of a great job. When interpersonal relationships are going
poorly on a job, nothing will counterbalance the negative effects from interper-
sonal tension and stress. Employee relations is a traditional but valuable role
of HR account managers. Dealing with conflict, difficult employees, negotiated
settlements, and simple disagreements are basic skills required of any account
manager. In addition, the account manager needs to fulfill the role of employee
champion for members of the organizational community. Dealing effectively
with administrative details and acting as employee champions are prerequisites
for performing as a strategic business partner and change agent.
SSccaallee
There is a range of possible outcomes in any effort to improve employee rela-
tions. Here is a scale to envision possibilities and assess current realities:
5: Retention of right talent >95%*
4: Retention of right talent 90–95%
1: Retention of right talent <80%
*Right talent means that you have adequate capabilities in the most critical jobs.
Employee Relations
Chapter
10

Turnover data is only meaningful if it is clear who is leaving the organization. In
the grid above, it is most important to retain talent in the upper right quadrant:
WWhhyy CChhaannggee
Company J had a corrupt culture. People were promoted based more on who
they knew than how they performed. Nepotism was rampant and favors were
distributed inappropriately. The culture valued relationships over perform-
ance. Many managers were arrogant and had huge ego needs. Interactions
with employees tended to be patronizing and condescending. Several senior
executives were having affairs with people within the company. As a result of
these attitudes and behaviors, there was an underlying malaise in which
employee complaints bubbled up. Company J not only had to address the
symptoms that were manifested, but it also had to take a hard look at the
causes.
Employee relations focuses on the importance of understanding and merging
corporate, management, and employee needs to increase efficiency, productivity,
and profitability. Employee relations examines the implication of changes
taking place in the economy and the workplace and how they affect the
management and motivation of people.
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Wrong Capabilities Right Capabilities
Mission Critical Role Retention of right talent is
critical in this box.
Marginal Role

HR professionals act as liaisons through which the organization communicates
policies and employees voice concerns. In this role, HR professionals are often
faced with difficult and sensitive situations. Employee relations encompasses a
broad range of issues including:
Corporate culture
Health and safety
Performance evaluation
Sexual harassment
Diversity
Communications
Conflict resolution
Office policy
Coaching and counseling
Progressive discipline
This chapter will not attempt to address all the issues related to employee rela-
tions. We will deal briefly, however, with the three main problems associated
with poor employee relations and the three primary sources of gain related to
positive employee relations. The topics are the same for both: corporate culture,
performance management, and management behavior.
1. Corporate culture can either enhance employee relations or destroy them.
On the negative side, the norms and values of an organizational culture can
be the most debilitating factor in a person’s life. When the organizational
norms reinforce rigidity, insensitivity, secrecy, favoritism, and exclusivity,
employee relations will be reactionary and primarily focused on negative
issues. On the other hand, when organizational norms reinforce respon-
siveness, clarity, support, analysis, dialogue, discipline, openness, fairness,
growth, and flexibility, employee relations can be more proactive. In a
positive culture, the emphasis on employee relations is on building motiva-
tion and commitment vs. defusing crises. For a more complete review of
corporate culture, please refer to the book Corporate Culture Change
(Bellingham, 2001).
2. Performance management can also enhance employee relations or cause
real problems. Negative issues related to performance management
revolve around clarity, fairness, standards, and compensation adjust-
ments. Expectations need to be clearly and specifically communicated to
employees. Employees need to know what has to be done to keep their
job, and they need to feel that the requirements are achievable.
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Performance standards may include but are not limited to quality, quan-
tity, timeliness, and manner of performance. Performance standards not
only need to be clear, but also need to be fairly evaluated. In order to meet
the fairness standard, managers need to gather information from multiple
sources to ensure that they have input from people who are in the best
position to evaluate the performance. Input gathering can be done infor-
mally by soliciting information from customers or other employees who
work closely with the person being evaluated. Or, input gathering can be
formalized through 360-degree appraisal methods. Issues usually arise
when there are disconnects between the employee’s view of the degree to
which performance standards were met and the manager’s view. When the
manager believes an employee has not met standards, then the employee
typically expects to have a reasonable amount of time to improve per-
formance before termination, demotion, or pay increases/decreases take
effect. When an employee receives an appraisal that is less than his or her
expectation, he or she will likely want to know specifically what perform-
ance standard was not met, what evidence there is for unacceptable per-
formance, and what opportunities there are for improvement. If the
manager has set unclear expectations and has fuzzy evidence, there will
surely be an employee relation issue.
On the positive side, effective performance management can inspire great
work. If a manager clearly states expectations and standards, provides regu-
lar feedback and coaching to help the employee meet the standards, and
reinforces achievement through compensation adjustments, developmental
opportunities, genuine praise, and/or promotions, positive attitudes will
soar. When an employee understands the contribution he or she can make
to the organization and has opportunities to develop capabilities to
improve current performance, then employee relationships can be a posi-
tive asset in the organization. For more information on performance man-
agement, refer to Chapter 12.
3. Management behavior is the third major source of gain or loss related to
employee relations. Management arrogance and ignorance cause the great-
est amount of stress for employees. Managers who think they are above the
rules and/or are unwilling to check their egos at the door, do untold harm
to employee relations. Most employees despise condescending, patronizing,
or dismissive behavior. Arrogance is the corporate plague. If arrogance is
the leading cause of employee dissatisfaction, ignorance may be a close
second. (By ignorance we mean a lack of awareness of commonly accepted
standards of conduct, e.g., sexual harassment, respect for differences, basic
decency.)
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On the positive side, one of the most powerful reasons people stay in a job and
perform well in a job is their relationship with their boss. Employees who feel
good about the relationship they have with their boss are typically motivated to
do great work. Managers who have good relationships with their employees
tend to be responsive, respectful, supportive, and demanding. Employees gener-
ally want to do the best possible work for people who treat them well and pro-
vide them with challenging and meaningful work assignments. For more
information on leadership behaviors that have a positive impact on motivation
and performance, please refer to the books Spiritual Leadership (Bellingham,
2002) and Ethical Leadership (Bellingham, 2003).
While the theory appears logical, the reality usually presents many challenges.
Here are some examples from our experience:
Stated values vs. day-to-day behaviors. The discrepancy between what appears
on corporate walls as core values and the day-to-day behaviors of managers is
at the root of most ER issues. When managers don’t walk the talk, it causes a
great deal of employee angst and consternation. Many companies include
innovation, quality, and teamwork among their stated values. When employees
see quality compromised for speed or teamwork violated by individual aggran-
dizement, they begin to question the commitment the corporation has to its own
values.
Coaching vs. evaluation. Most employees appreciate feedback on how they are
doing. Theoretically, performance reviews are supposed to be positive
experiences for employees. After all, people like to know how they are stacking
up. Performance reviews that focus on support, direction, and/or coaching yield
positive results for both the employee and the manager. The reality, however, is
that many performance review sessions are seen as judgmental, demeaning, con-
descending, unfair, or negative. These reviews cause a good share of employee
relation issues. One of the challenges of HR professionals is to persuade line
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managers to go to performance management training sessions. Most managers
evaluate themselves as very competent in doing performance reviews, but the
fact is that most are not.
Old school vs. new school. The reality is that many managers have been very
successful (in career and financial measures) in achieving their goals (career and
financial) even though they behave inappropriately or illegally. Behaviors that
may have been tolerated in the past are no longer tolerated now. Getting man-
agers to acknowledge their inappropriate behaviors and to change them is a
major challenge. In a diverse workforce with a wide range of lifestyle issues, an
insensitive and/or clueless manager can fall into ER pitfalls haplessly. One criti-
cal task of HR professional is to keep managers abreast of changes in employ-
ment law and to make sure that training programs exist to address compliance
issues.
1. Creating a healthy and safe environment is the first step.
2. Focus on fairness.
3. Identify the values that are jeopardized or violated.
4. Train managers in how to conduct performance reviews.
5. Train managers in interpersonal skills.
6. Mandate compliance training, e.g., sexual harassment.
7. Regularly audit the culture.
8. Take an inventory of employee care programs and ask if they are
sufficient.
9. Understand both sides of any conflict in detail before taking any action.
10. Form a “soul committee” with a specific charter to point out gaps between
stated values and day-to-day behaviors.
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Effective employee relations addresses issues affecting employees, managers, and
the organization. HR professionals need to walk the fine line of balancing all
three of these components. The functions of employee relations are to improve
productivity, morale, and job satisfaction. Several processes play a key role in
discharging those functions: health and safety, performance management, con-
flict resolution, coaching, progressive discipline, and corporate culture. Clearly,
the extent to which organizational leaders are willing to acknowledge the gaps
between stated values and day-to-day behaviors affects the impact of employee
care programs, but the standard of respect remains constant.
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Great companies manage change well. In these economic times, people realize
that change is a way of life. That realization, however, does not eliminate the
resistance people have to change. At a minimum, employees need to understand
what changes are occurring and why they are occurring. Beyond the basics, peo-
ple also want to know the desired outcome for a change and what’s in it for
them. If people understand the rationale for change, how big the gap is between
where they are and where they need to be, and how they will benefit from the
change, it is easier for them to move to acceptance and commitment. People need
time to process change. It’s unfair and unproductive to announce a change and
expect people to make heroic jumps to the new state. Managers need to process
changes with employees and include them in the thinking. Change means think-
ing differently, relating inclusively, and planning dynamically. If people can
improve their thinking, relating, and planning skills, change becomes exciting.
SSccaallee
There is a range of possible outcomes in any effort to improve change manage-
ment processes. Here is a scale to envision possibilities and assess current realities:
5: HR adding value to all change management initiatives.
4: HR adding value to most change management initiatives.
Change Management
Chapter
11

3: HR adding value to some change management initiatives.
2: HR at the table at some change management initiatives.
1: HR in the way of change management.
WWhhyy CChhaannggee
Company K has endured dramatic changes over the past several years: the
acquisition of smaller companies, the introduction of new software solutions
into its suite of products, multiple reorganizations, several reductions in force,
and hundreds of new initiatives and programs. In very few instances were these
changes managed well. Typically, these changes have been imposed with mini-
mal communication, involvement, or training. There have been few attempts to
define the desired end state, assess the current state, and then mobilize efforts to
close the gaps. Historically, changes have been announced in the organization
and people have been expected to adapt and move on. This disruptive change
has worn down the workforce. People need to see that new changes will be
introduced with more analysis, dialogue, and discipline. If HR wants to be seen
as a critical player at the table, change management represents a great opportu-
nity. Business leaders know they need help on this issue. HR is in position to
provide that help.
There are five essential phases for successful change management: Design,
Diagnosis, Development, Delivery, and Determination. Each of these phases will
be discussed below.
Design phase: In the design phase, the most important step is to define the
desired end state. The change sponsor must describe what success will look like
after the change. One of the most useful ways to define the end state is to use a
scale to define the range of possible outcomes that could occur as a result of this
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intervention. The design should result in a model that shows the interrelation-
ships of the components, functions, processes, conditions, and standards related
to the change, as we have done in this book. The key outcome for the design
stage is a high-level strategy for getting from where you are to where you need
to be, as described in the next two phases:
Diagnosis phase: In this phase, the change agent assesses the current state and
estimates the gap between the current state and the desired state. The diagnosis
should include an analysis of the culture, past change efforts, organizational
readiness for change, and some of the sources of resistance related to the change.
One of the most critical success factors in this phase is the extent and depth of
involvement of those impacted by the change. Key stakeholders need to be iden-
tified and assessed on their ability to serve as sponsors, change agents, and tar-
gets. It is also important during this phase to determine the degree of risk and
the cost of the change. Change factors such as culture, history, and resistance
also need to be taken into account. The end result of the diagnostic phase is to
establish a sense of urgency for change. If the analysis does not create a sense of
urgency, then the change sponsor should seriously question whether or not to
introduce the change. In our experience, if there is no urgency, change efforts do
not usually succeed. Urgency is essential to gaining needed cooperation.
Reinforced complacency can act as a powerful force against change, particularly
if people believe the status quo is acceptable.
Development phase: During this phase, people and programs are developed to
be able to bridge the gap between where the organization is and where it needs
to be. Sponsors, change agents, and change targets are all identified and com-
mitment secured. Systems and technology are also built or acquired during
this phase. All of the learning programs, communication plans, and reward
systems need to be created. This phase is the time to create a guiding coalition
and to develop the vision and strategy for the change. In order to counterbal-
ance the forces of complacency, it is necessary to create a more powerful force
for change. No one individual is likely to be successful in creating organiza-
tion-wide change. Putting together a guiding coalition means finding the right
people—people with position, power, expertise, credibility, and leadership
skills. It also means creating trust through carefully planned off-site events
and many joint activities. The size of the coalition depends on the size of the
organization and the scope of the change initiative. The end result of this
phase is a well-defined solution that takes into account the people, cultural,
process, technology, and financial variables required for success.
Delivery phase: During this phase, the focus is on implementation. People
acquire the skills and support they need to make whatever changes are desired,
and processes are reengineered so that the organization can operate more
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efficiently and effectively. One of the most important aspects of the delivery
phase is to communicate continuously to stakeholders and to empower people
to take action in support of the change. The real power of a change initiative is
unleashed only when most of those involved share a common understanding of
goals and objectives. Communications are required to develop that shared
understanding. In the delivery phase, it is critical to generate short-term wins
and to consolidate gains in order to show momentum. All change efforts need
visible, unambiguous wins at regular short-term intervals. The role of short-
term wins is to provide evidence that the sacrifices are worth it, to reward
change agents, and to build momentum. A key success factor in this phase is to
establish and monitor milestones for people, process, technology, and culture.
Determination phase: During this phase, it is important to measure progress and
to reassess what still needs to happen to achieve the desired end state. In the
determination phase, inconsistencies between new practices and the old culture
need to be examined. Change agents must listen for signs of resistance and
address them directly in the context of the change initiative. Change sponsors and
stakeholders need to change their language to reflect the new changes. Based on
reviews of progress, this phase may trigger the need to loop back to a previous
step and bolster the people or programs in ways that will enable them to succeed.
The end result of this phase is to show clearly the value realized for the client.
While the theory appears logical, the reality usually presents many challenges.
Here are some examples from our experience:
Scaling vs. skating. Scaling is the essential first step in any change effort.
Without an agreed upon range of possible outcomes (scaled goals), the account
manager will only be skating on the surface. A discussion on desired outcomes
requires an in-depth discussion of what success really looks like to the client. For
example, one client wanted to implement a technical career path process for all
engineers in his organization. Instead of launching into a massive development
effort to create these paths, the consultant asked instead, “What’s the desired
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outcome of this work?” After an hour of dialogue, the client was able to articu-
late that clarity, parity, and strength were the desired outcomes. Those values
were scaled as follows:
Clarity
5. Technical career paths and roles are competency based, clear, and func-
tional, and all employees have direct access to development tools.
4. Technical career paths and the technical career ladder are well defined.
3. Career advancement for all positions is based on clear, objective, and meas-
urable criteria within the organization (competency based).
2. Career advancement decisions and opportunities for individuals are based
on discussions of technical prowess (abstract).
1. Career advancement is based on tenure and contacts.
Parity
5. Technical people are fully rewarded and recognized at each step in the career
ladder at the same level as management progression within the industry.
4. Technical people are recognized and rewarded appropriately at each step in
the career ladder at the same level as management progression.
3. Technical people are recognized as critical in the organization.
2. Technical people are only recognized and rewarded within their
department (small circle).
1. Technical people are not rewarded or recognized adequately or appropri-
ately.
Strength
5. Best people in most important jobs. All jobs are optimized (two to three
successors identified for each and every position). Complete succession and
talent development plan implemented.
4. Clear successors identified for all mission-critical jobs (for every job above
20 points for both technical and management job levels). This includes
succession planning and assignment management.
3. Successors identified for many mission critical jobs. Optimization process
completed on an annual basis.
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2. Able to attract key talent into the organization.
1. No identified bench strength.
Programs vs. Politics. The ugly truth about most corporations is that many indi-
viduals invest more time in political positioning than in program changes.
Individuals typically resist change either because they have too much to lose
from making the change or because they will have to exert too much effort to
make the change. The reality of corporate life is that many people have carved
out comfortable niches for themselves. They understand where the power is,
they understand how to play the game, and they can get through their days
without a lot of strain. Asking people to let go of a role they have worked hard
to create for themselves is not an easy undertaking. Beyond letting go, other
individuals just don’t want to do what is necessary to benefit from new ways of
doing things. It might mean learning new skills, exposing vulnerabilities and
weaknesses, or taking risks. Many individuals avoid all three of those chal-
lenges. Introducing new programs, therefore, requires more than simply com-
munications and training. It requires equipping managers with the skills they
need to deal with resistance.
Habits and history vs. openness to change. Even if individuals can see the
benefits of change, are willing to let go of the old ways, and take on the chal-
lenges of change, the organizational culture can still limit the success of any
change program. How different departments are accustomed to working
together might affect progress. For example, the sales organization might con-
sider itself immune from many organizational policies. History also plays a role.
If the organization has experienced many change initiatives that have not been
sustained, then the credibility of new change efforts comes into question. In
addition, habits are hard to break. If certain behaviors are ingrained in our
approach to work, these behaviors are difficult to change. First, we need to be
able to observe the habits. Second, we need to be motivated to change. And
third, there needs to be some urgency to change. Without motivation, urgency,
skills, and support, there is very little chance for successful change.
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1. Develop a business case as a first step, i.e., what’s the value proposition?
2. Clarify the business change requirements and the desired end state.
3. Conduct an organizational readiness analysis.
4. Create a deployment plan and risk assessment.
5. Develop and deliver an incentive and recognition plan.
6. Develop and deliver a communication plan.
7. Develop and deliver a training plan.
8. Continually engage the senior stakeholders.
9. Measure progress on people, process, technology, and cultural variables.
10. Document learning and value realization.
Effective change management addresses the current state, the desired end state,
and the gap between the two. HR professionals need to clarify all three compo-
nents with as much detail as possible. The functions of change management are
to improve productivity, reduce deployment risks, and to align all capabilities
behind the strategic direction. Several processes play a key role in discharging
those functions: design, diagnosis, development, delivery, and determination.
Clearly, the extent to which organizations either resist or embrace change affects
the impact of change management, but the standard of meaningful change
remains constant.
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Introduction
One of the most important aspects of a great job is to be able to perform at your
highest potential and to contribute to the success of the organization.
Performance management is a core business process that enables employees to
align their efforts behind the organization’s strategic direction. An effective per-
formance management system also promotes productive dialogue between man-
agers and employees and encourages employees to grow and develop.
Performance management is not about forms and procedures; it is about align-
ment, engagement, and growth. An effective performance management system
clarifies the contribution each employee is expected to make to the business,
supports the development of capabilities the organization requires for success,
and encourages commitment and accountability.
Scale
There is a range of possible outcomes in any effort to change the performance man-
agement system. Here is a scale to envision possibilities and assess current realities:
5: 100% employees with Contribution and Capability plans written and
reviewed; >95% rated participant or above.
4: 90–99% employees with Contribution and Capability plans written and
reviewed; 90–95% rated participant or above.
Performance Management
Chapter
12

1: <70% employees with Contribution and Capability plans written and
reviewed; <80% rated participant or above.
A contribution plan has three to seven SMART goals and objectives.
A capability plan has competency-based personal development goals.
Where do you want to be on the scale in one year? _____
Why Change
Company L didn’t communicate corporate goals or expect managers to conduct
performance reviews. Since the organization operated in thick silos, each group
had its own set of goals, but did not hold anyone accountable for achieving
those goals. There was no operating plan and no feedback mechanisms to let
managers know how well they were doing against the plan. This chaotic
approach to performance achievement worked fine until revenues quit growing
and expenses didn’t. When the expense and revenue lines crossed, the company
realized it needed to apply more discipline to its performance management
process. If Company L was going to survive and grow, it needed to have all its
resources aligned behind its strategic direction.
Your Reasons for Change
Critical Success Factors
Performance management should occur throughout the year as a continuous
process. An effective performance management process helps managers and
employees plan and review performance periodically to ensure optimum contri-
bution, commitment, and capability. Achieving optimal performance requires
ongoing communication, coaching, and feedback.
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Performance management is an ongoing business process. When done well, it
ensures alignment of employee efforts to business goals as well as employee
engagement and performance growth. A performance management system plans
and reinforces immediate and long-term development and encourages commu-
nication and feedback.
Performance management is important to the individual and to the organization
because
It links individual and team goals and efforts to organizational priorities.
It helps employees understand what is expected of them and how their
work contributes to the overall success of the organization.
It enables organizations to manage change more effectively by providing a
system for planning, communicating, and revising priorities.
It results in a performance history that remains with the employee in case
of transfers or organizational changes.
Performance management is process driven and shared by both the employee
and the manager. Both should keep up-to-date copies of the plans. An employee
should take an active role in his or her own success by
Becoming familiar with the performance management process.
Engaging in the process of creating contribution goals and capability devel-
opment plans.
Reviewing personal performance and understanding management perspective.
Developing capabilities.
Seeking out feedback and continuing to learn.
A manager should partner with the employee and serve as a coach throughout
the performance management process. Specifically, the manager’s role in the
process is to
Cascade goals to employees, making sure that the manager’s goals are
aligned with the organization’s goals.
Collaborate with the employee as much as possible in planning for contri-
bution, commitment, and capability development.
Involve the employee and others in reviewing performance and understand
their perspectives.
Empower the employee to drive his or her own development and provide
coaching and support.
Engage the employee in productive dialogue including accurate, meaning-
ful, and fair feedback throughout the year.
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At the beginning of the year, goals should be cascaded throughout the organiza-
tion from senior management to the individual level using a balanced scorecard
method. When the goals have been cascaded, employees build their own contri-
bution plans. Throughout the year, contribution goals should be developed with
new employees, transferred employees, or when roles change. After the contri-
bution plans are set, capability or development plans are built to encourage
ongoing learning and growth.
Employee performance is a combination of contribution, commitment, and
capability. Successful performance is a function of all three components.
Contribution can best be measured through a balanced scorecard. A balanced
scorecard is a plan that represents contribution areas such as customer focus,
financial accountability, internal business process improvement, and capabil-
ity development. Employees should identify into which areas their goals fit.
Each department should be encouraged to have goals that are balanced, but
it should not be a forced process. The scorecard is simply a thinking tool that
promotes a multidimensional approach to performance. The example on the
following page illustrates department goals and how they fit into a balanced
scorecard [customer focus (C), financial (F), internal business process (I), and
growth (G)].
In this example, customer focus pertains to both internal and external cus-
tomers; financial goals include profit, revenue, operating margin, expenses, and
business development; internal business process relates to operations, utiliza-
tion, performance management, revenue recognition, etc.; and growth encom-
passes knowledge management, organizational learning, competency modeling,
and training. If one goal addresses more than one key contribution area, there
should be measurement criteria in each area that define success.
If an employee is on an incentive plan, the contribution plan serves as docu-
mentation for the incentive goals. Some or all of the contribution goals
can be applied to the incentive. It is helpful, however, to identify the weight
each goal carries toward the incentive. For example, goal 1 may carry 40 per-
cent of the weight in determining the incentive bonus. The manager and
the employee who is on the incentive plan should identify those goals that
should contribute toward the incentive. The selection could be based on the
following:
Significantly contributes to organizational and/or corporate goals
Represents a stretch goal for the individual
Highest priority goal
Revenue-generating goal
Customer-focused goal
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Balanced Scorecard
All goals should use the SMART acronym:
Specific: Clear, concise, measurable statements of needed
accomplishment.
Motivational: Meaningful, interesting, and challenging to the employee.
Attainable: Realistic based on available resources and reasonable
growth.
Results-Oriented: Defined in terms of the outcomes that will be achieved.
Time-bound: Clearly defined time frame.
119
Department Level Goal Area
C F I G
Measures, Targets, Timelines
Improve responsiveness to level-1
customer inquiries
X X 90% resolved within 2 days by
March 2003
Fully implement customer track-
ing system according to specs by
Dec 2003
Increase approval rating on
customer satisfaction survey
X Mean of 7.3 on customer satis-
faction survey by March 2003
Increase operating margin X 15% operating margin each
quarter
Reduce travel expenses by using
online meetings
X 30% decrease quarter over
quarter beginning in Q2
Develop tools and procedures by
Nov 30
Define and implement a project
management process
X 95% of project using set process
by March 2003
Employees can articulate individual
goals aligned to business
X 100% of employees by Dec 1
Implement cross-training program
to optimize talent
X 5 cross-training assignments by
June 2003
Create competency models for
department jobs
X 10 jobs with identified compe-
tencies by March 2003

As mentioned earlier, commitment is one of the three critical success criteria
for performance. Managers need to ask employees to commit to their jobs
and the company because the company will not be successful unless each
employee takes full responsibility for success. Building commitment, how-
ever, requires more than simply asking employees to be responsible.
Management must take responsibility for creating the conditions and the
culture that make high commitment a possibility. No one can force someone
to be more committed to a job or a company. Commitment cannot be
planned or scheduled. Commitment is a result of meaningful work and pro-
ductive dialogue with managers. The emphasis in these discussions needs to
be on the behaviors that demonstrate commitment rather than the subjective
nature of the term. Employees and managers need to engage in honest con-
versations about supporting organizational direction and identifying barriers
to achieving goals.
Some important discussion questions include:
What prevents the employee from taking full accountability for the work?
What prevents the employee from supporting the organizational direction?
What motivates the employee?
What is important to the employee about the work?
What is de-motivating the employee about the job?
What is in the employee’s and manager’s control to change?
How do the employee’s values fit with organizational values?
Three are several actions a manager can take to increase commitment. Actions
will vary depending on the unique factors impacting an employee’s commitment.
Some possible actions include:
Engage the employee in a discussion about strategic direction.
Encourage collaboration with another department or team member.
Work with the employee to identify projects of interest.
Connect the employee with customer issues and concerns.
Exchange information.
Make sure that goals are aligned with the department and organizational
direction.
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Capability or individual development plans address the competence that is
needed to meet employees’ current job goals and/or to prepare them for their
next job, or future business needs. Developing capabilities is much easier if com-
petency models are in place for each job. If job models are built throughout the
organization with roles, descriptions, and competency requirements well
defined, then coaching sessions are much simpler because the manager and the
employee can have an objective discussion of what’s required for success in a
particular job and how well the employee stacks up on the competencies.
Competencies describe the following:
Knowledge, skills, and abilities needed to perform a job successfully
Behaviors and attitudes that differentiate superior performers from aver-
age ones
If an employee knows the competency gaps that are either precluding opti-
mum performance in the current job or promotional consideration for another
job, then he or she can create a development plan to close those gaps.
Execution on the development plan, of course, depends on the developmental
resources available and management support for learning and growth. In an
ideal scenario, a manager would encourage developmental opportunities,
identify the business outcomes that were achieved as a result of new learning,
and recognize growth either through a merit increase or a promotion. If that
scenario were repeated multiple times in a given organization, a learning cul-
ture would emerge.
When discussing an individual development plan, the manager and employee
should address the following questions:
What is the current level of competency of the employee?
What is the required level of competency to improve performance?
Which gaps are most critical to address?
What skills and knowledge does the employee require now, and in the
future, to achieve desired results?
Who in the organization would be a good mentor or source of learning?
How will it become clear that the employee has strengthened his or her
capability?
On the following page, there is an example of an individual development plan.
121

Individual Development Plan
At the end of the year, the manager evaluates the employee’s performance and
schedules time for a productive dialogue with the employee. The purpose of the
meeting is to review the contributions made during the year, the commitment
demonstrated by the employee, and the progress on the individual development
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Capability/Development Goal Development Activity
Present the corporate overview and
handle typical objections successfully
Observe 3 corporate overviews
Practice 2 presentations with team
feedback
Complete the Web-based training
(WBT) on objection handling
Be able to accurately assess critical
customer needs and partner with them
to address the issue
Shadow a customer service specialist
on 2 customer visits
Complete the “Relationship Manage-
ment” program
Learn and teach the team about the
best practices and approaches of three
major competitors
Join and participate in 1 professional
association
Work with marketing and other
resources to get competitor information
Conduct competitive analysis and
present findings to team
Master advanced level Excel by March 3 Complete Excel training
Become advanced in project
management process and procedures
to complete complex projects to
specifications
Become proficient in collaboration
technologies
Involve cross-functional groups early in
projects that impact their business

(capability) plan that had been jointly developed. In this review session, it is
particularly important to understand the employee’s perspective and to provide
performance feedback about the employee’s contribution, commitment, and
capability.
An effective performance review takes into account the employee self-review,
others’ feedback, and a mid-year progress discussion. It is critical to conduct the
review in a fair and objective manner. Some tips for evaluating performance
include the following:
Evaluate specific, observable, and job-related behavior only.
Recognize positive performance.
Identify areas needing improvement.
Avoid personal bias.
Evaluate the entire year evenly.
Avoid being too strict or lenient or rating all employees as average.
Provide examples and use them in discussion.
Don’t surprise the employee with critical feedback that he or she is hearing
for the first time at the annual performance review.
Contribution, capability, and commitment are each critical to successful per-
formance. Each is unique and should be considered separately and each may
impact the others. Specifically, for an employee to contribute successfully, she or
he needs capability and commitment. Additionally, external factors may also be
impacting the employee’s success. In order to provide accurate and fair ratings
in each of the three areas, it is important to consider what is supporting or hin-
dering that employee’s success and plan accordingly. One way of rating perform-
ance in each of the areas is the following scale:
Leader
Role Model
Contributor
Needs Development
Unacceptable
While the definitions and descriptions differ for each area, the same scale can be
applied to all three. We believe that using the language of leader, role model,
etc., is a more constructive way of rating than using a numerical scale.
Qualitative ratings tend to be more motivational than quantitative evaluations.
What follows are definitions and descriptions for each level on the scale for con-
tribution, commitment, and capability.
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Definitions:
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Contribution Commitment Capability
Leader Demonstrates per-
formance beyond
expectations and
improves the way
the work gets done.
Clearly demonstrates
accountability for
work and enhances
organizational
direction. Inspires
commitment in
others.
Teaches and leads
others as an expert
in job-related
competence.
Role Model Demonstrates per-
formance beyond
expectations (e.g.,
quality, timelines,
and results).
Clearly demon-
strates accountabil-
ity for work and
enhances organiza-
tional direction.
Demonstrates
mastery of compe-
tencies beyond the
stated scope of the
job.
Contributor Performs at the
expected level for
the job. Contributes
to the success of the
company.
Demonstrates
accountability for
his or her work and
supports business
goals and culture.
Is committed.
Demonstrates the
appropriate level of
competence for the
stated scope of the
job. Is capable.
Needs Development Performs somewhat
below expected
level for the job.
Improvement is
required.
Accountability for
his or her work
and/or organiza-
tional direction is
not clearly demon-
strated. Commit-
ment is unclear.
Needs to improve
competence to be
successful in current
position.
Unacceptable Does not meet per-
formance expecta-
tions for job. A
performance
improvement plan
is required.
Demonstrates a
lack of accountabil-
ity for his or her
job and/or organi-
zational direction.
Is uncommitted and
undermines culture.
Does not demon-
strate minimal level
of competence for
the stated scope of
the job. Unskilled.

Contribution refers to the results of the employee’s work. Considerations should
be given to the employee’s job performance on significant goals, objectives, and
projects that he or she worked on throughout the period. To achieve a certain
rating, the employee must consistently perform at that rating level with regard
to her or his formal contribution goals, the results of initiatives that were not
tied to previously set goals, as well as other job responsibilities. Quality, timeli-
ness, and results should all be considered. It should be noted that, regardless of
job position, any employee can be a leader.
Commitment is evidenced in the actions that demonstrate accountability,
pride, and ownership in the work, the team, and the organization.
Commitment is also evidenced in the actions the employee takes to advance
or support the group or organizational direction. These actions should
include helping out other team members within or outside the group, taking
personal responsibility for outcomes, helping to keep others positive and
focused, etc. Three dimensions must be considered: commitment to his or her
own work, commitment to the organization, and commitment to supporting
the stated values of the culture. When rating an employee on commitment, it
is important to identify examples of how commitment is demonstrated. A
manager should focus on the demonstrated actions that provide evidence of
potential commitment. Ultimately, only the employee knows her or his level
of true commitment. The manager is simply rating the demonstrated actions
that impact her or his work, the work of the team, and the organizational
culture.
Capability is evidenced by the extent to which an employee applies and
transfers their skills and knowledge. A person who teaches and coaches oth-
ers in one or more areas is demonstrating the highest level of capability.
Capability is also evidenced by the extent to which a person is the “go-to”
resource in the department or organization because of his or her experience
and skills.
All three areas of performance (contribution, commitment, and capability) are
unique and important, but one overall summary rating is needed. The purpose
of the overall performance rating is to link the performance evaluation to the
recommended merit increase or promotion where applicable. The overall rating
is the manager’s summary evaluation of the employee’s total performance.
Managers need to use discretion to determine the weight the organization gives
to each of the three employee success criteria.
Conducting a performance review requires advance planning and preparation.
Open communication is critical. Managers should encourage a dialogue by
asking questions and checking for understanding and opinions throughout the
discussion. Some tips for managing the discussion follow:
125

Do:
Put the employee at ease.
Show a supportive attitude.
Reinforce the positive.
Be honest and candid.
Encourage conversation.
Actively listen.
Ask about the employee’s opinion.
Discuss specific examples.
Ensure the employee understands areas needing improvement.
Build on strengths.
Stay in control.
Summarize actions to be taken.
Do not:
Discount employee perceptions.
Focus solely on areas needing improvement.
Dominate the discussion.
Assume silence means agreement.
Let the conversation get off course.
Describe the employee’s behavior as better or worse than it is.
Be vague or unclear.
In order for performance management to be effective, people need to feel
that their work has a strong connection to corporate goals and understand
the standards of performance on which they are being evaluated. In addition,
the performance management system needs to be seen as fair and credible.
Performance standards need to be seen as achievable and methods of
measurement need to be seen as sound, e.g., a balanced scorecard approach.
Managers play a critical role in the performance management process.
Constructive managers help employees find solutions to problems at work,
attain needed information and resources to do their jobs, and translate
strategy into action. Constructive managers also pay attention to the factors
that have the biggest impact on employee performance: understanding how
to complete projects and assignments, enjoying work, having influence on the
selection of projects, working on challenging projects that are important to
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their personal development goals. Finally, constructive managers emphasize
performance and personality strengths. On the other hand, managers who
make frequent changes to projects and assignments undermine the fairness
and credibility of the system.
Your Critical Success Factors
The Reality
While the theoretical constructs underlying performance management appear
logical, the reality usually presents many challenges. Here are some examples
from our experience:
HR process vs. business process. Performance management is a business
process. It is a process for ensuring that all employees are aligned behind corpo-
rate objectives. Many managers see performance management, however, as an
HR program—a low-impact process that requires them to fill out forms and do
paperwork.
Program vs. behavior. It’s not about the program—it’s about the behavior.
Performance management, if done properly, is an excellent vehicle for engaging
employees in dialogue and clarifying direction. The reality, however, is that
many managers see it as a burdensome program that is pushed on them. HR
professionals need to focus on the values and the tools, not on the program.
Timing. While there is never a good time to conduct performance reviews, some
times are better than others. If performance reviews are done at the same time
as multiple other programs, they do not get the attention they deserve. Also, we
have found it helpful to separate performance reviews from merit increases, so
managers have time to reflect on the review and ensure that any compensation
adjustments are tied directly to performance.
Your Reality
127

Top Ten Lessons Learned
1. Start with corporate goals and objectives.
2. Position performance management as a business process.
3. Support managers with training and guidance.
4. Be flexible.
5. Focus on the value proposition, e.g., alignment, engagement, and growth.
6. Trust managers to do what is necessary.
7. Use differential evaluations and differential rewards.
8. Link performance management to compensation and rewards.
9. Don’t make assumptions about a manager’s knowledge, attitude, and
skills.
10. Balance needs to fit the culture and shape the culture.
Conclusions
In summary, performance management is an ongoing business process, not an
event. The purpose of performance management is to facilitate alignment,
engagement, and growth. Three important success factors in a comprehensive
performance management process are contribution, commitment, and capabil-
ity. The key processes that make performance management work effectively are
goal setting, productive dialogue, and periodic reviews. Clearly, the extent to
which managers are helpful and supportive, rewards are connected to perform-
ance, and people trust the system will affect the impact of a performance man-
agement program. The standard of alignment, however, will remain constant.
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In a great company, people value differences, make decisions with diversity in
mind, and act inclusively. These are the three critical ingredients of diversity. We
know that diversity leads to innovation and improvements in the bottom line,
yet we are reluctant to make a full commitment. We know that diversity deep-
ens our acceptance and appreciation of differences, yet we hesitate to take bold
action. We know that diversity improves teamwork and productivity, yet we
continue to gravitate to homogeneity. We know that diversity gives us a chance
to confront our own intolerance, yet we avoid the opportunity to connect har-
moniously with persons who have walked a path unlike our own. What keeps
us from acting more congruently with stated values? An experience with diver-
sity might help us uncover the answer.
SSccaallee
There is a range of possible outcomes in any effort to leverage diversity. Here is
a scale to envision possibilities and assess current realities:
5: Diversity principles and practices are widespread throughout the corpora-
tion worldwide and are demonstrably linked to revenue growth and
for attracting, retaining, and empowering employees. Company is bench-
marked for its practices.
Diversity
Chapter
13

4: Gender, racial, and international diversity practices and policies exist
throughout the company. Employees and customers comment on how
diverse the company is.
3: The company takes strong steps to become more diverse through aggres-
sive recruitment, staffing, and development of diversity candidates.
2: Lack of diversity is recognized as problematic; plans are being created to
move the corporation to a different situation.
1: The corporation is mostly a homogeneous population of like-minded and
like-thinking executives, managers, and employees. Cultural-, racial-,
and gender-based statements are commonplace and have led to lawsuits
and financial settlements. The status quo is unconsciously or consciously
maintained.
WWhhyy CChhaannggee
On the one hand, Company N is rich in diversity. Twenty-five percent of its
employee population is Asian and it has a large number of people on green cards
from other countries. Company N also values diversity of thought.
On the other hand, Company N has less than 1 percent African American, 1
percent Hispanic, and 18 percent women employees. Its sales organization is
particularly homogeneous. Instead of leveraging its strength in diversity, it is fal-
tering from its homogeneous weakness. Sourcing efforts do not tap into diverse
talent pools, and there is no advocacy and/or mentoring program for minority
employees. As a result, innovation, teamwork, productivity, and profitability
suffer. In addition, attrition of diverse employees is rising and there have been
recent charges of sexual harassment. Company N needs to make diversity more
of a strength in its culture.
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Benchmarking indicates the trend toward a broad definition, one that goes
beyond the visible differences such as race, ethnicity, age, and gender. Here are
several definitions used by different organizations:
Company N: “. . . differences that make each of us unique plus the simi-
larities that bring us together.”
Hallmark Cards: “. . . about people, respect, and inclusion.”
Covance: “. . . is based on respect for one another and recognition that
each person brings his or her unique attributes to the corporation.”
Fannie Mae: “. . . the varied perspectives and approaches to work that
members of different identity groups bring that can positively impact the
organization.”
Oracle: “. . . about expanding the range of opportunities for all our
people—employees, owners, suppliers—to freely invest human capital,
ideas, energies, expertise, and time.”
McDonald’s: “The governing word is inclusive. We describe it in the
context of race, gender, physical abilities, sexual orientation, economic
status, culture, lifestyle, geography, and thought. We don’t leave the
subject of equal opportunity and affirmative action but instead expand
on both by stepping into the marketplace. Now we have an opportunity
to link the commitment to equal opportunity to the success of the
business.”
IBM: “We believe that diversity—and fostering an inclusive workforce—is
not only the right thing to do, it is also critical to maintaining a competi-
tive advantage in today’s global marketplace. Inclusion is a business
approach that embraces these diverse characteristics in a way that engages
all employees at all levels, fostering both individual success as well as the
success of the company.”
Bell South: “A third of all Americans belong to a minority group. A diverse
workforce is not a luxury but a necessity.”
Servicing and marketing to diverse partners challenges a homogeneous
company. Companies and partners make buying and alliance decisions as much
on “who the company is” as well as “what the company offers.” In an increas-
ingly diverse workforce, many companies will not look favorably on a company
that doesn’t seem concerned about diversity issues. As Bell South indicates, a
diverse workforce is a necessity.
DIVERSITY
131

Litigation and minority turnover occur less frequently in diverse companies.
Companies that are not in compliance with EEO and Affirmative Action legis-
lation are more vulnerable to legal action than companies that have made seri-
ous attempts to diversify.
There is more innovation in diverse companies. Heterogeneous teams have been
proven to generate a greater quantity and quality of ideas than homogeneous
teams.
Becoming an employer of choice attracts the best and brightest candidates.
These candidates tend to represent diverse backgrounds and ethnicity. A level 3
company knows what diversity looks like and knows how to find diverse can-
didates. At level 4, the company does not necessarily look for someone who can
conform to the culture, but seeks out people who understand differences in cul-
ture and can find the right entry points.
We are living in a global economy. Companies need to do business in a multi-
cultural world. Good diversity practices allow individuals in the United States
to interact more successfully with employees in foreign locations. Changing
demographics of employee, partner, and customer bases necessitates the under-
standing and utilization of all differences.
Increased productivity comes as a result of leveraging the unique skills and capa-
bilities of the global workforce. When there is a demonstrated desire to fully use
all the talents of a diverse workforce, then people work harder and smarter.
Diversity is about domestic diversity and about global diversity. Domestic diver-
sity starts with recognizable differences in sex, age, race, and physical ability and
moves on to the more subtle differences.
Global diversity has multiple meanings:
Ensuring that we have local representation in countries where businesses
reside.
Understanding that for Europe and Asia, diversity is first and foremost
understood in terms of gender issues, and second, in terms of cultural
differences.
Ensuring that every employee works from a global mindset and skill set
with a sensitivity to differences.
Ensuring the HQ culture understands and adapts a global mindset.
Businesses in the United States dominate the global economy. This power demands
a level of cultural sensitivity in which most businesspersons fall short. One of the
reasons that Americans have problems doing business in the international arena is
because we typically are not well informed about cultural differences around the
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world. We also assume that businesses in other countries operate in similar ways
to U.S. companies. An effective diversity program results in the capabilities to sail
the Seven “Cs” with skill and grace. Differences in understanding across the globe
on each of these business essentials will make the point:
Commitment: Commitment in one country may mean something entirely differ-
ent in another country, depending on cultural norms and values. Commitment
in Germany may mean applying your intellectual gifts while you are at work,
whereas commitment in the United States is usually translated as the number of
hours you work in a day and how many vacation days you have left over at the
end of the year.
Consistency: Consistency in Japan may mean continuing to do things in the
same way for 10 years. In the United States, it may mean meeting a performance
goal for two quarters.
Contribution: Contribution in the United States is roughly translated as perform-
ance plus leadership in the pursuit of corporate goals and initiatives. Contribution
in Brazil may mean donating time and/or money to a community organization.
Computers: A computer in the United States means a machine that will
accommodate all the recent technologies and provide instant access to the
Internet. Computers in Kenya may mean a machine that enables you to type and
store letters.
Competitiveness: Competitiveness in the United States is associated with fierce
individualism and defeating the enemy. Competitiveness in Sweden may mean
working together with colleagues to achieve differentiation in the
marketplace.
Confidentiality: Confidentiality in the United States means that your private med-
ical records can only be shared among professionals. Confidentiality in Israel may
mean that no conversations are shared with anyone without permission.
Confrontation: Confrontation in the United States may mean directly challeng-
ing someone in a public forum. In Hong Kong, confrontation may mean politely
pointing out incongruence between words and actions in a private setting.
Companies in the United States have had too many shipwrecks on these Seven
C’s over the past 20 years. We need to develop better radar screens that pick up
clues to potential disaster. We also need to make more effort to understand
cultural differences.
Avoiding these shipwrecks means not pushing U.S. corporate programs around
the world; it means thinking globally, and acting locally; and it means acknowl-
edging functional, geographic, and business differences.
DIVERSITY
133

The three most critical success factors in a diversity program are aggressive
sourcing, strong advocacy, and disciplined promotion procedures. Minority can-
didates are available to fill key roles if a company takes the time to search for
talent pools that are rich in targeted groups. Assuming a company seeks out and
hires a diverse workforce, it is critical to ensure that new hires have someone in
the organization who will advocate for them and provide opportunities for vis-
ibility to senior executives. When promotions are being considered, companies
that value diversity will make every effort to give minority candidates a fair shot
at the opportunity. Just as companies need to seek diverse sourcing pools, they
also need to build and use diverse promotional pools of internal candidates.
Good people do not always look the same or talk the same.
While the theoretical constructs underlying diversity appear logical, the reality
usually presents many challenges. Here are some examples from our experience:
Affirmative action vs. quotas. The idea of quotas is emotionally charged. Some
people believe that quotas are arbitrarily imposed and constitute reverse
discrimination. Others believe that quotas represent a stake in the ground to
establish a more diverse workforce and to acknowledge the disadvantages
created by centuries of institutional racism. The principles behind affirmative
action constitute a common ground for groups with opposing views.
In March l961, less than 2 months after assuming office, President John F. Kennedy
issued Executive Order 10925, which established the President’s Committee on
Equal Employment Opportunity. Its mission was to end discrimination in employ-
ment by the government and its contractors. The order required every federal con-
tract to include the pledge that “The Contractor will not discriminate against any
employee or applicant for employment because of race, creed, color, or national ori-
gin. The Contractor will take affirmative action, to ensure that applicants are
employed, and that employees are treated during employment, without regard to
their race, creed, color, or national origin.”
It is here for the first time in the context of civil rights that the government called
for “affirmative action.” The term meant taking appropriate steps to eradicate
HR OPTIMIZATION
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the then widespread practices of racial, religious, and ethnic discrimination. The
goal, as the President stated, was “equal opportunity in employment.”
In other words, affirmative action was instituted to ensure that applicants for
positions would be judged without any consideration of their race, religion, or
national origin; these criteria were declared irrelevant and taking them into
account was forbidden.
The Civil Rights Act of 1964 restated and broadened the application of this
principle. Title VI declared that “No person in the United States shall, on the
ground of race, color or national origin, be excluded from participation in, be
denied the benefits of, or be subjected to discrimination under any program or
activity receiving federal financial assistance.”
But within one year, President Lyndon B. Johnson argued that fairness required
more than a commitment to impartial treatment. In his 1965 commencement
address at Howard University, he said:
You do not take a person who for years has been hobbled by chains
and liberate him, bring him up to the starting line of a race and then
say, “you’re free to compete with all the others,” and still justly believe
that you have been completely fair. Thus it is not enough just to open
the gates of opportunity. All our citizens must have the ability to walk
through those gates. . . . We seek not . . . just equality as a right and a
theory but equality as a fact and equality as a result.
And so several months later, President Johnson issued Executive Order 11246,
which stated that “It is the policy of the Government of the United States to pro-
vide equal opportunity in federal employment for all qualified persons, to pro-
hibit discrimination in employment because of race, creed, color or national
origin, and to promote the full realization of equal employment opportunity
through a positive, continuing program in each department and agency.” Two
years later, the order was amended to prohibit discrimination on the basis of sex.
While the aim of President Johnson’s order was stated in language similar to that
of President Kennedy’s, President Johnson’s abolished the Committee on Equal
Employment Opportunity, transferred its responsibilities to the Secretary of Labor,
and authorized the Secretary to “adopt such rules and regulations and issue such
orders as he deems necessary and appropriate to achieve the purposes thereof.”
Acting on the basis of this mandate, the Department of Labor in December
1971, during the administration of President Richard M. Nixon, issued
Revised Order No. 4, requiring all contractors to develop “an acceptable
affirmative action program,” including “an analysis of areas within which the
contractor is deficient in the utilization of minority groups and women, and
further, goals and timetables to which the contractor’s good faith efforts must
DIVERSITY
135

be directed to correct the deficiencies.” Contractors were instructed to take
the term minority groups to refer to “Negroes, American Indians, Orientals,
and Spanish Surnamed Americans.” The concept of “underutilization” meant
“having fewer minorities or women in a particular job classification than
would reasonably be expected by their availability.” “Goals” were not to be
“rigid and inflexible quotas” but “targets reasonably attainable by means of
applying every good faith effort to make all aspects of the entire affirmative
action program work.”
Such preferential treatment required that attention be paid to the same criteria
of race, sex, and ethnicity that had previously been deemed irrelevant. Could
such use of these criteria be morally justified? That is the key question in a
debate that has continued for more than two decades.
Quantity vs. quality. The authors believe that affirmative action efforts should
abide by the principle established in 1971, i.e., that corporations should set tar-
gets reasonably attainable by means of applying every good faith effort to make
all aspects of the entire affirmative action program work. Setting these targets
should not be seen as setting quotas for the number of positions in a particular
function, but as a meaningful attempt to share power with diverse groups of
people. The sharing of power not only passes the real test of affirmative action,
but also leads to better business results.
Superficial vs. substantive. While many companies provide lip service to affir-
mative action principles, not enough commit to a substantive response.
Superficial approaches lead to an entitlement mentality among employees at
best and endless complaints at worst. The real substance of affirmative action
revolves around opportunity. Not just opportunities for jobs, but opportunities
to influence and to provide additional opportunities for the communities of
respective minority groups.
1. Create a diversity steering committee with broad representation.
2. Don’t focus diversity efforts on any one particular group.
HR OPTIMIZATION
136

3. Hire the best and brightest from every community.
4. Base promotions on performance, merit, and support of the diversity
strategy.
5. Build a business case by sharing the research on the connection between
diversity and profitability and performance.
6. Focus on creating a culture of respect and inclusiveness.
7. Configure your training from awareness to skills, and dovetail it with
leadership and management development.
8. Develop plans and policies for inclusiveness: seek first to understand.
9. Establish a mentoring program.
10. Offer diversity and sexual harassment training.
There are two components to a comprehensive diversity program: systems and
culture. Systems include recruitment, talent management, and mentoring.
Culture includes the norms and values that surround hiring and promotion. The
functions of diversity are team optimization, innovation, and productivity. The
processes for discharging those functions are sourcing, advocacy, and promo-
tions. The conditions required to realize the full potential of a diversity program
are entrepreneurial spirit, respect, inclusiveness, and straight talk. Clearly, the
extent to which leaders think inclusively and value differences will impact the
success of a diversity program, but the standard of success remains constant.
DIVERSITY
137

This book is based on the premise that HR can transform itself from personnel
administration to human and organizational capital development. That premise
begs the question, How do you measure individual and organizational capabil-
ities (human and organizational capital)? In this chapter, we will not only
explore different measurement possibilities but also demonstrate how human
and organizational capital are aligned to business needs.
SSccaallee
There is a range of possible outcomes in any attempt to improve business. Here
is a scale to help you envision possibilities and assess current realities in your
organization.
5: Human and organizational capital metrics used to improve business per-
formance.
4: Decision support information used to actively manage human and organi-
zational capabilities.
3: Standards set that enable the evaluation of human and organizational
capabilities relative to peers.
2: Human resource information used to make business decisions.
Measuring Human
and Organizational Capital
Chapter
14

1: Personnel data not used effectively for management or performance
improvement.
WWhhyy CChhaannggee
In Company O, metrics revolved exclusively around financial indicators. There
was a lot of talk about people being the most valuable asset, but there were very
few actions and initiatives that supported those statements. In Company O, the
statement “People are our most important asset” was an empty slogan that
caused more cynicism than commitment. Similarly, there was a lot of talk in
Company O about the importance of aligning the culture, but few resources
were allocated toward a systematic approach to make it happen. In short, the
whole idea of human and organizational capabilities was a vague and amor-
phous concept that had no substance or credibility associated with it. The com-
pany was essentially operating on one cylinder and with one indicator on its
dashboard—financial results. Unfortunately, the indicator was trending toward
empty and the one-cylinder engine was sputtering. Company O needed a multi-
valve engine and a complete dashboard to measure performance.
The purposes of measuring human and organizational capabilities are to iden-
tify strengths, weaknesses, and performance gaps and to be able to develop and
allocate resources appropriately across competing priorities. In order to deter-
mine whether current performance is acceptable, metrics must be compared on
time, cost, quality, and quantity indicators against comparable benchmarks.
Metrics can also be used to determine whether human and organizational
resources are most effectively deployed.
Human capital development is the process of improving an employee’s ability to
assess, think, relate, plan, and act more efficiently and effectively. Human capi-
tal measurement is the ability to link improvements in human capital to
increases in business performance.
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Building organizational capabilities means aligning people, processes, systems,
and culture behind the business goals. In order to align people behind organiza-
tional goals, it is necessary to identify the individual competencies required for
success and then either hire for those competencies or develop them in the work-
force. In order to align processes behind organizational goals, it is necessary to
identify the processes required for operational excellence and then either reengi-
neer current processes or design and implement new processes to improve effi-
ciency and effectiveness. In order to align systems behind organizational goals,
it is necessary to understand what systems are required to enable people and
processes and then either buy or build those systems. First, we understand the
relationship between people, processes, and systems and the achievements of
our goals. Then measurements are needed to assess the impact.
Capabilities come in many forms. They not only represent the knowledge, com-
petencies, skills, and experience of the workforce, they also encompass our abil-
ity to deliver quality products, make timely decisions, manage costs, share
knowledge, respond to marketplace opportunities, optimize performance, and
plan for the future. In short, organizational capabilities are the critical factors
required to achieve our mission.
Overall, organizational capabilities can be measured through individual and
organizational excellence. Specifically, individual capabilities can be measured
by providing employees with multiple-rater assessments of the competencies
required for success in their jobs and through the performance management sys-
tem. Organizational capabilities can be measured through an assessment form
and through results indicators such as customer satisfaction, market share, rev-
enue growth, and profitability. For example, VPs could be surveyed to identify
the organizational capabilities required for successful execution of corporate
goals and to assess the current strength of those capabilities. Based on that
input, the organization can focus on closing whatever performance gaps exist in
those capabilities. This gap analysis helps the organization set priorities for
improving organizational and individual effectiveness.
The overview on the following page lists various ways of measuring human
(people) and organizational (process, technology, and cultural) capabilities. The
indicators in each cell are simply examples of measures that could be used to
assess how well the “capital development engine” is running.
MEASURING HUMAN AND ORGANIZATIONAL CAPITAL
141

HHuummaannaannddOOrrggaanniizzaattiioonnaallCCaappiittaallMMeettrriiccss
HR OPTIMIZATION
142
Culture
1#ofvolunteerdaysper
employee
2#ofcross-functional
teams
3Sharedvalues
4Customerloyalty
5Clearauthority*
6Predictability*
7Communityrelations*
8Knowledgecaptureand
transfer*
Technology
1Avg.spanofcontrol
2#ofnewbreakthrough
products
3#ofnewcustomers
4Revenueperemployee
5Goalalignment*
Process
1Forecastaccuracy
2Sales/Customer
3Salesfromproducts
releasedinlast2
years
4Improvementsincom-
petencies
5Numberofcustomer
references
6Numberofcustomer
bugfixes
7PLMmarketshare
8Decisionaccuracy*
People
1Turnoverrate
2Percentof
employeeswith
balancedscore-
cards
3Attractionoftop
talent*
4Retentionoftop
talent
5Diversity
6Employee
Commitment*
Quantity
Quality

*MeasuredbyOrganizationalCapabilityAssessment
143
9Adaptability*
10Cost/Customerloss
11Costs/Newcustomer
12Profitability
6Speedtomarket
7Productivity*
8Customerprofitability
9Speedtomarketwith
newproducts*
10Salescycle
11Averagedurationof
customerrelationship
12Trainingcostsper
employee
13Cost/Rev*
14Costofsales
7Timetoclose
openreqs
8Timetodevelop
newcapabilities
9Zerolatency
10Cost/Hire
11Cost/Training
day
Time
Cost

While the theoretical constructs underlying human and organizational capital
measurement appear logical, the reality usually presents many challenges. Here
are some examples from our experience:
Quantity vs. quality. Most organizations think about measurement in strictly
quantitative terms such as reductions in time or cost or increases in speed or rev-
enues. While these are critical elements of measurement, it is also important to
take into account qualitative dimensions such as the ability to think creatively
and relate interdependently. Human and organizational capital measurement
requires consideration for both quantitative and qualitative dimensions.
According to Watson Wyatt, superior human capital practices are not only cor-
related with financial returns, but also increased shareholder value. In their
research, Watson Wyatt found key links between human capital and shareholder
value creation. The key links were in rewards and accountability: a collegial and
flexible workplace, recruiting and retention excellence, communication
integrity, focused HR service technologies, and prudent use of resources.
Clearly, each of these links has a quantitative and qualitative dimension. We
need to make sure that we have an appropriate balance between these two types
of measures. For example, turnover is typically measured by the percent of
people who leave a department during a given quarter. That number, by itself,
is often misleading. If the turnover consists of world-class talent with mission-
critical responsibilities, then it is a real problem even if the number is low. If, on
the other hand, mediocre talent with nonessential responsibilities is leaving, it
may not be such a bad thing.
Limited vs. expansive. The image of human and organizational capital is still
limited by the “personnel” legacy from which it is evolving. The people factor has
been historically measured by headcount, turnover, and costs. This view typically
assumes that all people are interchangeable and replaceable. It doesn’t take into
account the reality of today’s labor market or potential value of those employ-
ees taking leadership roles. If everyone is viewed as having leadership potential
in a given moment, independent of position or title, then the potential value-add
is dramatically expanded. A limited view of human capital is to measure and
track what people physically do on their jobs and the tangible results of their
work. A more expansive view is to measure how well people assess, think, and
relate to others and what they contribute to intangible assets. Similarly, if orga-
nizational capital is measured by the independent contributions of each depart-
ment, it may miss the contributions generated by interdependent functioning.
Having an expansive view of the possibilities helps assess what the appropriate
measures should be.
HR OPTIMIZATION
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1. Create a broad, multidimensional framework to measure human and
organizational capital.
2. Manage and regularly clarify expectations from the top.
3. Make sure you have adequate resources and infrastructure for measurement.
4. Recognize contributions to human and organizational capital as well as
financial capital.
5. Facilitate open discussions and the sharing of ideas.
6. Foster trust with key functions across the organization regardless of their
support.
7. Support cross-functional teaming and actively involve all levels of the
organization.
8. Always assess the “build versus by trade-off” against the measurement of
progress. Don’t let the “not invented here” syndrome get in the way of
making progress.
9. Develop a set of common terms and definitions.
10. Start with pilot projects in supportive functions.
The components of a comprehensive human and organizational capital meas-
urement initiative include knowledge capital, people capital, and cultural capi-
tal. The functions of capital measurement are to improve return on investment
and to increase market capitalization. Several processes can be employed to
measure human and organizational capital: define requirements, capture knowl-
edge and capabilities, organize information, disseminate information, and lever-
age capabilities. Clearly, the extent to which a company understands the value
of capital development affects the measurement efforts, but the standard of
impact remains constant.
145

Dear Colleague,
Now that our new HR management team is in place, we are getting a feel for
the culture and how HR can best serve your needs. We are very excited about
what we have learned so far about the people, the products, the processes, and
the technology that makes our company grow.
In an attempt to provide you with the best possible services, I would like to ask
you to give us feedback on what you perceive as the most important and most
effective services from HR. Over the course of the last year, we have sharpened
our focus on customer satisfaction and defined specifically our priorities. Your
input will enable us to ensure that we are providing the services that are critical
to you and your business success.
On the following pages is a survey that lists all of the current HR services. For
each service, there are three columns. In the first column, please indicate how
important that service is. In the second column, please indicate how effectively
you think HR is performing the service. In the third column, please indicate if
you think the service has been getting better or getting worse over the past 6
months. Please use the following 4-point scales for your ratings:
Customer Satisfaction Survey
Appendix
A

Here is an example of how each service might be rated:
Business Consulting: Working with senior managers to think through strategic
and tactical priorities for business issues, including strategy, structure, and
staffing.
Thank you very much for providing us the feedback we need to focus and
improve our services. We will share the results of the survey with you as soon as
they are summarized.
Thank you.
HR OPTIMIZATION
150
Rating Importance Effectiveness Direction
4 Critical to business success Highly effective Much better
3 Very important Effective Better
2 Important Ineffective About the same
1 Not important Very ineffective Worse
Importance Effectiveness Direction
Business Consulting 4 3 4

HHuummaann RReessoouurrcceess CCuussttoommeerr SSaattiissffaaccttiioonn SSuurrvveeyy
For these questions, please rate your responses according to the following scale:
Benefits: Designing and delivering noncash compensation, including days off
(e.g., vacation, sick days, etc.), health and dental insurance, accident liability
protection (e.g., life insurance, disability income continuation), employee assis-
tance plan (e.g., alcohol counseling, financial counseling, elder care and child
care referral), tuition reimbursement, and 401(K).
Comments:
Business Consulting: Working with senior managers to think through strategic
and tactical priorities for business issues, including strategy, structure, and
staffing.
Comments:
CUSTOMER SATISFACTION SURVEY
151
Rating Importance Effectiveness Direction
4 Critical to business success Highly effective Much better
3 Very important Effective Better
2 Important Ineffective About the same
1 Not important Very ineffective Worse
Benefits
Business Consulting

Change Management: Influencing company decisions, activities, and manage-
ment practices through the application of HR skills and business knowledge.
Diagnosing, developing, delivering, and determining the results of organiza-
tional interventions designed to facilitate strategic implementation.
Comments:
Compensation: Ensuring that employees are paid fairly and in line with mar-
ket comparables. Also, reducing pay inequities within each organization and
developing a rewards philosophy that attracts, motivates, and retains great
talent.
Comments:
Compliance Reporting: Ensuring the adherence of business practices with appli-
cable federal, state, and local laws as well as with internal policies and
procedures. Also, educating managers and employees about these laws.
Comments:
HR OPTIMIZATION
152
Change Management
Compensation
Compliance Reporting

Diversity: Achieving diversity of talent at all levels in all organizations. Meeting
EEO and AA guidelines.
Comments:
Employee Information: Collecting and maintaining information on employees
throughout the world, including personal information, job-related history, bene-
fits eligibility and enrollment, educational achievements, hiring paperwork
including offer letters and signed agreements, and compliance-required records
such as I-9s. These data need to be maintained with accuracy, timeliness, and
appropriate accessibility/confidentiality.
Comments:
Employee Relations: Establishing and maintaining positive and direct commu-
nications among employees, working with managers to build and support
an environment conducive to open exchange of information. Third-party con-
flict resolution/mediation; coaching, counseling and feedback; team building;
individual/group awareness and assessments.
Comments:
153
Diversity
Employee Relations
Employee Information/
HRMS

Globalization: Taking cultural and regional differences into account for all
decision making and implementation.
Comments:
Leadership Development: Creating, providing, and evaluating learning opportu-
nities, either internally or externally delivered, that maximize people manage-
ment and leadership effectiveness (e.g., performance management, coaching,
delegating, developing direct reports, leading teams, inspiring commitment).
Comments:
Learning and Development: Identifying, providing, and evaluating learning
opportunities (e.g., career development, technical training, skills training), either
internally or externally delivered, that maximize employee capability and align
with business objectives.
Comments:
HR OPTIMIZATION
154
Globalization
Leadership Development
Learning and Development

Performance Management: Aligning individual and organizational capabilities
behind the mission. Also, engaging employees in productive dialogue about
commitment, contribution, and capability development.
Comments:
Employee Services: Making it easy to do business with HR. Facilitating
employee transactions and employee changes as efficiently and effectively as
possible.
Comments:
Recruiting and Internal Mobility: Attracting, sourcing, selecting, and hiring
quality candidates to fulfill needs in a timely manner, either through direct
advertising, recruitment firms, employee referrals, or other means. Maintaining
databases of applicants and reporting on staffing metrics (e.g., filled/unfilled
positions, source of hire, cost per hire). Facilitating internal career movement for
employees.
Comments:
155
Performance Management
Employee Services
Recruiting and Internal
Mobility

The Skill of Positioning
Introduction to Positioning
The role of HR has been evolving over the past several decades.
We need to discriminate where and how we invest our time. If we believe that
the highest value we can provide to the organization revolves around generating
best solutions through collaborative processing, we need to find ways to reposi-
tion ourselves in the organization and to align our energy behind that goal.
Indeed, HR consulting has changed dramatically in scope and depth over the
past 50 years. These changes can be best understood if we look at major events
in each decade and how those events shaped our thinking.
In the 1950s, our function was called personnel. We helped to hire people,
orient them, pay them, provide them with benefits, and let them go when the
time came. Organizational leadership was of the command and control vari-
ety that emerged naturally out of the military experiences of World War II.
As long as we kept our leaders out of trouble, we were seen as doing our jobs.
In the 1960s, a new battle cry was heard: “Question Authority.” This mentality
was born in the Vietnam War era and dominated the thinking of young people
for at least a decade. It was also in the 1960s that our work became more
commonly referred to as Human Resources. Leaders began to realize that
employees needed more than to be told what to do while at work; they needed
to be heard and have a sense of involvement in their jobs. HR was called on to
Critical Consulting Skills
Appendix
B

make sure the company was in compliance with its own policies and procedures
and that it was not violating local, state, or national laws.
In the 1970s, organizational leaders began to give more than lip service to the
idea that people are our most important asset. Given that recognition, many
training companies were created to help develop employees to their fullest
potential. HR either developed and delivered its own product or purchased
off-the-shelf training programs from a burgeoning supply of vendors. “Train-
them-up” became the new demand from corporate leadership, and HR
responded in the best ways it could to satisfy its customers. Primarily, however,
HR was still positioned as a “pair of hands” to perform tasks for management.
In the 1980s, the Quality Movement came into being. “Meet commitments in
accordance with requirements” and “Do it right the first time” became the
songs of the day. Leaders started demanding more responsiveness to their needs
and asked for customized services to help them meet their business challenges
and improve product quality. HR was expected to develop people and to reduce
the costs of poor quality. It had elevated its positioning from performing tasks
to meeting business objectives and from “pairs of hands” to relationship
builders.
In the 1990s, as the global economy imposed new demands for continuous
innovation, HR started playing a more visible and vital role in the organiza-
tion. Some leaders perceived HR as business partners and asked their assistance
in enhancing organizational and individual effectiveness. In the early years of
the decade, the term “human capital” came into common parlance as the
Information Age imposed demands on people to process information more
quickly and to leverage knowledge more effectively. Leaders started looking to
HR for solutions to their human, organizational, and business issues. They
expected internal consultants to help them navigate in a world in which idea
generation was more important than patent protection. Human resource devel-
opment (HRD) had now positioned itself as providing value-added systems and
solutions to meet business requirements. It was seen as the primary developer
of human capital.
As we have entered the new millennium, business leaders are now looking for
a new relationship with HR. They are hoping consultants will help them
enhance their human and organizational capital and help them refine and
develop the leadership skills to grow the business in the new economy. They are
hoping to develop interdependent relationships in which new possibilities for
growth are generated. This shift in expectations represents an enormous posi-
tioning opportunity for HR.
HR OPTIMIZATION
158

These trends can be summarized in the chart below:
* Human Capital Development (HCD)/Organizational Capital Development (OCD)
Based on interviews and focus groups at Company P, there is also a dramatic
shift in roles underway. Company P’s HR desires to be positioned and perceived
as a partner for value-added business solutions. It wants to be at the table by
helping business leaders think through issues in multidimensional ways; empow-
ering them to develop their talent and their teams through new skills and state-
of-the-art technologies; and coaching them to set and reset priorities based on
changing marketplace conditions. Accomplishing this change in positioning will
make HR central to the business. Individual positioning, however, has to be con-
ducted in the organizational context. Readiness and receptivity will change in
each organization. Some organizations may embrace elevated positioning,
whereas others may reject it.
Positioning Overview
Positioning means creating the perception of serving as a value-added partner
for business solutions. Positioning is an important functional skill because it gets
consultants “at the table” where they are able to help leaders think through
business issues. There are four key steps in positioning:
Scaling
Assessing
Learning
Elevating
The desired outcome for positioning is to make a SALE to your client that
results in an intervention that leads to a positive business outcome. The four
steps—scaling, assessing, learning, and elevating—will help make that SALE.
CRITICAL CONSULTING SKILLS
159
’70s Personnel Tasks Pair of Hands (P)
’80s HR Objectives P + Emotional/Relationship Issues (E)
’90s HRD Systems P + E + Information Technology and
Organizational Development
’00s HCD/OCD* Solutions P + E + I (I = Interdependence,
Innovation, Integrity)

Step 1: Scaling
The Idea
Scaling is the ability to describe a range of possible outcomes from a given inter-
vention. It recognizes the reality that any intervention can be for better or for
worse and sets the stage for the consultant to talk intelligently about resources
required to achieve a desired end-state. The generic scale for describing the
range of possible outcomes is as follows:
5: Ideal
4: Fully acceptable
3: Minimally acceptable
2: Less than acceptable
1: Destructive
Example
Referring back to the introduction to positioning and how HR has evolved over
time, the following scales could be used to describe a range of outcomes from
our positioning efforts:
Perception of HR
5: Capital Development Engine
4: Human and Organizational Capital Development
3: Human Capital Development
2: Human Resources
1: Personnel
Key Values of HR
5: Leadership
4: Enhancement of people and organizations
3: Conservation of resources
2: Compliance with internal policy and external regulations
1: Keeping out of trouble
Primary Positioning of HR
5: Collaborative processing capabilities
4: Partnerships
3: Solutions
HR OPTIMIZATION
160

2: Services
1: Products
Relationship Goals
5: Interdependent partner
4: Collaborative partner
3: Preferred provider
2: Internal provider
1: Vendor
Your Turn
Select one of the scales above and/or create a scale that best represents the range
of outcomes that could be achieved through the repositioning efforts of HR in
Company P.
5:
4:
3:
2:
1:
Step 2: Assessing
The Idea
Assessing is the ability to determine the gap between current state and desired
future state. It enables the consultant to engage the client in a meaningful and
authentic discussion about where the client is and where he or she wants and
needs to be.
Example
Using the scale for HR positioning described above, the executive staff deter-
mined that HR had primarily provided products and services in the past and
needed to reposition itself as a partner for value-added solutions.
5: CPC
4: Partnerships (where we need to be)
161

3: Solutions
2: Services (where we are now)
1: Products
Please note that moving up the scale to partnerships does not mean that HR
would no longer provide products, services, and solutions. To the contrary, HR’s
ability to form meaningful partnerships with business leaders is dependent on its
ability to deliver high-quality products, services, and solutions. It is simply ele-
vated positioning that helps to get HR “at the table.”
Your Turn
Using the scale you created in the previous exercise, assess where you are and
where you need to be.
5:
4:
3:
2:
1:
Step 3: Learning
The Idea
Learning is the ability to discover as much as you can about your clients’ busi-
ness so that you can engage in meaningful dialogue about their needs and chal-
lenges. Continuous learning will improve your ability to engage in active
inquiry, strategic visioning, and collaborative processing.
Example
Continuous learning is one of the six guiding principles of consulting, along
with excellent communication, expectation management, proactive resource
management, commitment to quality, and positive business impact. This appen-
dix suggests the following applications of the continuous learning principle:
Understand the client’s developmental objectives and assist the client in
attaining those objectives.
Leverage existing templates.
Align staff developmental needs with business needs during project staffing.
Provide stretch opportunities in order to gain experience outside individual
comfort zones.
HR OPTIMIZATION
162

Your Turn
Think about a client with whom you are currently working or with whom you
may work in the future. What could you do to learn more about that client’s
business opportunities and issues?
Step 4: Elevating
The Idea
Elevating is the ability to demonstrate that you can add value to more business
challenges at higher levels than others currently believe. This step is critical
because it helps you break free from whatever limits your client may believe
you possess. An organization consists of a variety of components, functions,
and processes and operates with certain conditions and standards. You may
be perceived as being able to function effectively in a limited number of com-
ponents, with a particular level of management, under certain restrictive con-
ditions. Elevating whatever perception limits you is a critical step in
positioning.
Example
The chart on the following page represents one way to describe an organization.
This chart indicates where one HR consultant is perceived as functioning most
effectively. This hypothetical consultant is having difficulty breaking free from
the perception that she is not able to add value to executive-level thinking, par-
ticularly outside of R&D. She is looking for ways to elevate her positioning both
upward and outward.
Your Turn
Using the chart on the following page, or one you create yourself, please indi-
cate where you believe you are currently “boxed-in” and fill in the cells where
you believe you could add value.
163

Positioning Exercise
Now you will have an opportunity to put all the positioning steps together to
make a SALE.
Background
A Company P vice president states in a meeting that he wants to dramatically
improve the cycle time on a key process because it will save money and time plus
reposition the company against competitors. He indicates that previous efforts
have failed, but he does not know why, nor does he care. He believes that peo-
ple lack commitment to divisional goals and thinks it’s high time that people
stop protecting their turf and start acting more like a team that is accountable
for success.
Your Situation
You were not present at the meeting, but heard about it from a credible source.
You were not asked for help, but believe that you understand enough about his
plans that you can add value.
HR OPTIMIZATION
164
Marketing Sales G&A R&D Services
Policy
(Management
Committee)
Executive
Grades (2–3)
Management
Grades (4–5)
X
Supervisor
Grades (6–7)
Individual
Contributor

Exercise
How could you use the positioning skill to improve your relationship with this
client? Pair off with another HR business partner and role play what a position-
ing conversation might look like. The person role playing the client should be
open to your initiative.
Summary
The four most important principles to remember about positioning yourself
effectively with a client are
1. If you are able to understand the limits currently placed on you by a client’s
perception of you, then you are better able to break free from that perception.
2. If you learn as much as possible about the business challenges of your
client, then you will be able to engage more effectively in active inquiry,
proactive advocacy, and collaborative processing.
3. If you are able to describe specifically the range of desired outcomes that
will most likely occur based on a given intervention, then you will be posi-
tioned to assess the current gaps between current state and future state and
to estimate the resources required to close the gap.
4. If you are clear about what you are bringing to the table as a consult-
ant, then you will be able to make better choices about what you offer
the client in terms of products, services, solutions, partnerships, and
possibilities.
Contracting Skill
Introduction to Contracting
Contracting is making explicit agreements on
Expectations the consultant and the client have of each other.
The results they want to create.
The method they will use to deliver the results.
How they are going to work together.
Contracting is one of the most critical consulting skills. The degree to which you
are successful in contracting is the degree to which you will be successful in sat-
isfying your clients’ as well as your own needs. There is a simple formula that
supports the concept of contracting:
165

Client Satisfaction =
Results
Expectations
The results of your work are only as good as the expectations that your client
has. Effective contracting is the best way to ensure that results meet expectations
and, thus, that both the consultant and the client are satisfied as a result of hav-
ing worked together. Simply stated, contracting is the process by which you
make promises that you can really keep, promises that will give you and your
client satisfaction.
Contracting is an iterative process. It comes into play in all five phases of the
consulting process: Design, Diagnosis, Development, Delivery, and Determina-
tion. The contracting process is never complete because conditions change and
because the client and consultant continue to gain new insights into the inter-
vention model. The contracting process normally mirrors the complexity of the
client request. If the client request is for a long-term project, you can expect the
contracting process to involve multiple conversations with the client and other
stakeholders. If the client request is for a single event or a technical request such
as compensation or benefits information, the contracting process will likely be
much shorter. (If you are having difficulty finding an issue or intervention that
requires a contract, you can always default to change management because there
are always new initiatives being introduced that require this service. Every new
initiative requires some level of change management if it is going to realize the
value intended.)
Contracting Overview
Contracting is the ability to define explicitly the components, functions, and
processes of a consulting intervention. The contracting skill is important
because it results in clear statements of opportunities, challenges, objectives,
scope, approach, methodology, time frames, roles, resource requirements, deliv-
erables, metrics, and confidentiality concerns.
The basic contracting steps are
Clarifying the request and the desired outcomes.
Assessing the situation (gathering data).
Exploring alternatives.
Reaching agreement.
Although these steps generally occur in this order (CARE), you may have to
revisit a step based on new information that you uncover in the contracting
process.
HR OPTIMIZATION
166

Just as excellent positioning will increase your chances for a SALE, contracting
requires great CARE if you want to achieve outstanding results.
Step 1: Clarifying the Request and the Desired Outcomes
The Idea
This step begins with understanding who the client is. Although this step seems
obvious, it is frequently missed in the consulting process. The person making the
request may not be the client. In a staff support function such as HR, confusion
may occur when a request is received from a generalist on behalf of the actual
client. In these instances, it becomes critical for the internal staff group to reach
a shared understanding of who the client is and how they will work together
to deliver the desired results. In the Company l, with its Core Solutions and
Business Partner functions, confusion may occur regarding who has primary
responsibility for what as it relates to the 5Ds contained within the consulting
process: Design, Diagnosis, Development, Delivery, Determination. When the
project involves a long-term commitment or has a high degree of complexity, the
persons who are responsible for the work will almost always need to have direct
client contact. It is absolutely essential to define roles and responsibilities
between Core Solutions and Business Partners in all phases of the intervention.
The point is simple: Unless you can contract directly with the client, you have
only marginal hope of achieving the results you or your client wants.
Moving forward before clarifying the request and the desired outcomes ensures
that you will
Waste energy in conversation and design.
Not deliver client satisfaction due to varied expectations.
Lack the commitment required for success.
End up exhausted and personally dissatisfied.
The second part of this step is to determine the client outcomes. When consult-
ants take the presenting request, immediately promise to act on it, and start
designing an intervention based on the request, clients never have a chance to
think through the results they want to accomplish as a result of the request. The
omission of this step is very likely to lead to disappointment and frustration. Use
of the scaling step, presented as part of the positioning skill, will help the client
and consultant clarify what the problems, goals, and desired outcomes really are.
This step can be tiring for both the client and the consultant, but the clearer
you are about the outcome, the more effective you can be in all phases of
the consulting process. Vague discussions will leave the door open for unmet
167

expectations on both sides of the table. When outcomes are written clearly, they
can then be used as guides before, during, and after sessions to check progress.
The term outcome is used intentionally here (as opposed to objectives):
Outcomes suggests focusing on determining what participants will be able to do
as a result of the work you are designing. Using outcome language generally
helps clients clarify the actions they want and need.
Example
The Project Initiation Form (at the end of Chapter 9) is a good example of what
should be included in clarifying a request. It suggests an appropriate level of
detail for defining who the client is, what is being requested, and what the
desired outcomes are.
Your Turn
Use the Project Initiation Form to clarify a request you have recently had from
a client.
Step 2: Assessing the Situation
The Idea
Once you have a clear idea of the actual request and have identified the
client’s desired outcomes, the next step is to do a brief assessment of the situa-
tion. There are several areas you will need to explore in your contracting con-
versation:
1. The background of the request in detail and its connection to the business
priorities
2. The project outcomes and why this request is important to the client
3. The scope of the project, i.e., what are the boundaries (what’s in and
what’s out)
4. The approach, time frames, and any urgency issues
5. Roles and responsibilities (who needs to be involved and at what level)
6. Resource requirements
7. Potential resistance and current barriers that are or could inhibit progress
8. Deliverables
9. Metrics
10. Confidentiality concerns
HR OPTIMIZATION
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Here are some additional thoughts on selected areas:
Background: It is important for the consultant to have a solid understanding of
the business situation that has precipitated the request and, equally important,
to understand how the request fits with the priorities of the business. By gain-
ing this information, the consultant will be better prepared to make recommen-
dations that are consistent with the business priorities and provide participants
with a meaningful context for this work.
Objectives and Motivation: By understanding what is important to the client
about this request, the consultant can be more effective at designing the work
plan and at soliciting client input in the areas where they have the most passion.
In some cases, you may discover that the client is motivated not so much out of
his or her desire for the work, but because his or her boss wants it completed.
This is an early warning signal for obstacles you may encounter in fulfilling the
request and lets you think about ways to engage the client on a different level.
Scope and Boundaries: Perhaps one of the most frustrating consulting experi-
ences is the problem of “Scope Creep.” Whenever you find that your target
group has suddenly expanded or that your end product is arbitrarily trans-
formed into an interim milestone, you have entered the land of Scope Creep. It
is imperative that you identify from the beginning who the intended group is
and what the scope of your work is regarding beginning and end points. By
making the boundaries of the project explicit, you eliminate the potential for
confusion when you are midstream in the work. It is useful to state not only
what you think the boundaries are, but also what is out-of-bounds based on
your understanding of the project. By having this conversation, you and the
client can reach agreement on what scope for the project will best enable the
achievement of desired outcomes. Then, if later on in the project either you or
the client feels that the scope needs to change, you can re-contract for timing
and design options.
Time Frame and Urgency Issues: You must get a sense of the client’s timing in
your initial conversation. There is usually more flexibility in the timing than
is initially communicated, and you need to distinguish between what is impor-
tant and what is urgent. Some clients have a great sense of urgency about rel-
atively unimportant projects. Other clients may have insufficient urgency for
very important projects. In any event, you need to know the time parameters
under which you are working because they will impact the approach you
recommend.
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Resistance and Barriers: It is important to know early what issues you may be
facing when designing a work plan for a client, particularly if the project spans
a longer period of time. This information helps you to know who you may need
to spend time with prior to outlining the work plan and tips you off about what
will be important to consider when designing the work. When the project you
are asked to support represents significant organizational change, you can
expect there will be some resistance. Knowing the source of the resistance and
the reasons behind it can be powerful in helping you to be effective.
Sometimes you will even face resistance with the client in the contracting
process. It is important to understand that resistance is an emotional response
and has little to do with you personally. Resistance takes a number of forms.
Here are a few of them:
The client has no time to see you or discuss the project with you.
The client overwhelms you with data.
This is the real world—the client implies that your theory may not apply in
her situation.
The client responds to your overtures with silence.
The client acts confused most of the time.
The client is overly critical.
The client exhibits a drive for instant answers.
When you find yourself with a client who is resistant, the following advice may
be helpful:
Don’t take it personally.
Slow down and try to identify what form the resistance is taking.
Listen intently to what is being said and play it back to the client to see if
you are understanding her or his point.
Engage your curiosity and shift to questions for understanding.
Name the resistance you are sensing and wait for the client to respond.
Provide options for moving forward that address the concerns expressed.
Roles and Responsibilities (Who needs to be involved and at what level?): In
addition to having a clearly defined project scope, it is also important to know
who needs to be involved in the project work and in what capacity. Some clients
and other stakeholders want to be extremely involved in the details of project
planning, while others want to be kept informed of progress. The more people
who are involved in the project planning, the more time required to formalize a
plan. On the other hand, the more involvement you have on the front end of a
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project, the more commitment you will have to draw on to help ensure a suc-
cess. Through this conversation, you and your client can begin to identify what
level of involvement makes the most sense given your outcomes and time
frames.
Up to this point, everything we have covered should take place in the initial
client meeting. With an understanding of all the topic areas discussed, it is help-
ful to go away and think about what you have read and heard and get back to
the client in a couple of days to talk about options for moving forward. We rec-
ommend that you set a date for the follow-up meeting before you leave the first
meeting. This allows you to spend some time processing what you have heard
so that you can generate some alternative approaches. It also lets the client
know that you have considered the request with thoughtfulness and care.
Once you have made explicit the desired outcomes, assumptions, and possible
approaches, you and the client can determine if you have enough data and infor-
mation to move forward.
Sometimes—particularly with projects that are complex and span a longer time
frame—there is a need for more investigation about the presenting problem or
opportunity the client wants to address. Perhaps the client has asked for help
because she or he does not have a good handle on what the real issues are and
needs an objective third party to help sort them out.
Gathering additional data before the second client meeting is also helpful when
you are beginning a project that represents a significant change. It is often bene-
ficial to conduct interviews or focus groups with participants before the work
begins to build some rapport with the client group, surface issues and concerns,
and answer outstanding questions they may have.
This step can be a powerful and productive method for jump-starting your
project. Clients and consultants, however, must jointly answer the following
questions before gathering data:
1. Why are you collecting the data and how will you use it?
2. What method will you use:
Individual interviews
Focus groups
Surveys or questionnaires
Observation
Document review and analysis
3. Who will conduct the data analysis? How will they analyze the data?
4. How will you communicate the findings and to whom?
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Once you have collected, analyzed, and given feedback on the findings, you are
now prepared to move to the next step.
Example
Clearly, assessing the situation requires a great deal of steps and a great deal of
thought. Before exploring alternatives, it is important to summarize what you
have discovered by this point, then determine whether or not the discovery
phase should consist of one interview with the client or a thorough data gather-
ing and analysis effort.
Your Turn
Take the time to role play an interview with a prospective client and then sum-
marize your findings using the 10 sections identified in the template.
Step 3: Exploring Alternatives
The Idea
Now that you and the client have a shared understanding of the outcomes,
request, and business situation, you may move on to exploring alternatives. The
consultant should be prepared to make at least two suggestions of ways of reach-
ing the outcomes and should make their recommendations based on their experi-
ence and expertise. The consultant will need to discuss the upsides and downsides
to each approach as well as the requirements of each approach. The articulation
of both client and consultant needs for each approach is extremely important.
Some negotiation typically occurs during this step. The consultant must be clear
about what is and is not realistic for the time frames and must be able to think
with the client about what is most important, providing alternatives and cau-
tions along the way. The consultant must know his or her own limitations, the
limitations of any design, and the additional requirements in terms of time,
money, and additional resources that will be required to deliver against the out-
comes. When this step is completed, the client and the consultant should both
own the outcome.
The following needs should be explicit:
Resources required (people, time, and budget)
How the client and the consultant will participate
How other stakeholders will be involved
Ground rules for working together
Preparation time
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According to Peter Block, there are two things we constantly need to work on:
1. Stating clearly—sometimes at the risk of overstatement—what we need
and want from the client to make this project work
2. Being cautious—sometimes at the risk of understatement—about the
results we alone will deliver on this project
One of the most difficult tasks in this step is to get the client to commit to
the necessary time investment to deliver the outcomes. The consultant must
be clear about how much time is needed and why it is important. The con-
sultant needs to have the capability and knowledge to make the time require-
ments explicit. If the consultant knows that the time requirement for a
project is a minimum of six days given the deliverables, then he or she must
make it clear to the client and state why. If, after this discussion, the client
insists that only two days are possible, then negotiate for what you can prom-
ise relative to the objectives for those two days. DO NOT commit to squeeze
a six-day process into two days by shortening the time frame. Be aware that
every change you make relative to time dedicated impacts the outcomes you
are attempting to deliver.
Always let the client know what you expect in terms of their participation in all
phases of the project, and find out from them what successful participation on
your part will look like to them.
The consultant must be able to identify the skills that the group will need to
build in order to deliver the outcomes. For example, if the group cannot engage
in a conversation without blame and hostility, interpersonal skills training may
be required.
If, after clarifying your needs to the client, there is no agreement, consider back-
ing away from the project or see if there is another plan that would be better
suited to deliver the outcomes.
Example
Please refer back to the contract you developed earlier and explore alternative
approaches, roles, and resources. These are the three areas of the contract that
typically require the most negotiation.
Your Turn
Refer back to the summary you created based on your client interview. Explore
alternative approaches, roles, and resources.
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Step 4: Reaching Agreement
The Idea
You are now ready to make agreements with your client. Some conditions may
have shifted since your initial conversations, so you will need to revisit and agree
on the outcomes and approach.
Next you will need to agree on how you will work together. Identify and gain
agreement on ways to operate given the challenges of the project. Specifically,
you want to reach agreement on the following:
Overall approach and activities
Milestone dates and time frames
Dealing with resistance
Creating the time and space to conduct the work
Key decision points and the decision-making process
How conflicts and concerns will be addressed
How to assess the impact and evaluate the results (metrics)
The next steps (e.g., who will do what by when)
Example
Please refer to the contract you developed.
Your Turn
Please take the time to reach an agreement with a prospective client.
Contracting Exercise
Background
Your client is a manager for a department of 100 people. She has been in the
position for three months and is new to the Company P. After assessing her cur-
rent organization and the business plan that she has to implement, she recog-
nizes the need for a Chief Developer position. This title is consistent with
organizational titles within the department, but she feels this person needs to
have a much higher skill base than any she has observed inside the organization.
She is particularly interested in this person’s ability to build collaborative rela-
tionships with potential external partners. She needs a person with superior
interpersonal skills and an ability to think creatively about new business oppor-
tunities. She believes that her current employees are very tied to doing business
the same way they have been doing it for years and are missing opportunities.
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She feels that by putting someone with a different approach on her team, the
entire group could develop further.
In her previous company, she had a lot of success working with three recruiting
agencies. They did a good job helping her articulate the role requirements and
sourcing against them. She plans to call them to help her work on this position.
Meanwhile, there are internal processes and postings that need to be completed.
Situation
Your manager has submitted a form to you for the Chief Developer position at
a salary of $60,000. You have contacted her and set up a face-to-face meeting.
You believe that $60,000 for a Chief Developer is grossly under-market. There
are other people in the department with the same title who are making
$60,000 per year with much less experience and skill than what you believe
this manager may be looking for. You have a lot of concern about finding
someone to fill the role for that kind of salary, and you are interested in part-
nering with her to improve collaboration in her department—a much bigger
role than helping her handle the administrative details associated with this
recruitment effort.
Exercise
Your objective for this initial meeting is to complete as much as possible of the
first two steps of the contracting process relevant for the initial meeting. Your
goal is to have sufficient information to be able to go away from this meeting
and create a proposed plan of action that would address the client’s human and
organizational needs. Remember to clarify the next steps with the client before
closing the meeting.
Summary
The basic ingredients of an effective contract are captured in the chart below:
175
Who What Where When Why How
Individual Development
Team Development
Organization Development

When you develop a contract with your client, you need to be clear whether the
primary function of the intervention is individual development, team develop-
ment, organizational development, or a combination of the three. Once the
functions are established, you simply need to reach agreement on the 5W/H
components to accomplish the function. You may want to use this chart as a
check step for the contracts you develop.
Key principles to remember about contracting include the following:
1. If you clarify who the client is and what exactly they hope to achieve as a
result of the proposed intervention, then you will avoid wasted energy and
dissatisfaction and increase your chances for high commitment and ulti-
mate success.
2. If you are thorough in your assessment of the situation, then you will be able
to do a much better job of defining resources, roles, and responsibilities.
3. If you give your client alternative ways for achieving desired outcomes,
then the client will be more engaged in the process and assume more own-
ership for the outcome.
Effective contracting may be the most critical skill in the consulting process.
When effectively applied, it ensures a satisfied client and positive business impact.
There is an abundance of tools available to support you in the contracting
process, a few of which have been included here. The key to successful contract-
ing, however, rests in the principles of being authentic, having a learning orienta-
tion, and trusting yourself. If you complete the contracting steps using those
principles, you are well on your way to a positive consulting experience.
Productive Dialogue Skill
Introduction to Productive Dialogue
A consultant must have the capability to engage clients in productive dialogue
through inquiry, advocacy, mental modeling, and generative thinking:
Inquiry means asking questions and listening to seek understanding and to
get the client’s frame of reference.
Advocacy means giving your viewpoint and perspective in a way that is
well received by the client.
Mental modeling means constructing multidimensional frameworks that
can be used to match images of the problems and solutions.
Generative thinking means creating new and more productive ways of get-
ting work done.
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Only through these skills can the consultant get to the essence of the request and
understand the beliefs and mental models motivating the client. The consultant
must be able to recognize when the client’s request is really masking another
desire, a more fundamental desire. Productive dialogue enables the consultant to
get to the real issues and opportunities.
Frequently, clients do not know what or how to ask for help, so they ask for
what they think they need vs. what it is they really want. If the consultant
accepts the request as stated, he or she may design an intervention that complies
with what the client requested, but one in which the client’s fundamental desires
are not being met.
Investing time to understand the “real” request is paramount in delivering the
desired results. These conversations take more time and test the beliefs of both
the consultant and client regarding what good service looks like. Slowing down
a conversation to surface assumptions and gain a full understanding of the prob-
lems, issues, and opportunities, however, can be a challenge. Therefore, it is criti-
cal for the consultant to be able to explain his or her reasoning for pursuing
the dialogue at a deeper level and to assess the client’s patience level during
the interaction. Client tolerance for probing can be a critical success factor in
any intervention. The challenge is not to let our own beliefs get in the way of
having a productive dialogue.
Productive Dialogue Overview
There are multiple forms of conversation. Estimate the relative frequency in
your organization of each of the six examples listed in the chart on the follow-
ing page.
Productive dialogue is the ability to discover the real problems that need to be
solved or opportunities that need to be maximized. The use of productive dia-
logue reduces the chances that an intervention becomes a problem rather than a
solution because it raises expectations and doesn’t address underlying issues.
There are four key steps for productive dialogue:
Getting the client’s frame of reference
Giving your own point of view and perspective
Merging images
Generating better ideas
The purpose of these steps is to gain a deeper and clearer understanding of
the client’s situation, the causes of the situation, and possible solutions for
achieving the greatest business impact.
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Step 1: Getting the Client’s Frame of Reference through Active Inquiry
The Idea
Productive dialogue cannot occur without the willingness and ability of all par-
ticipants to understand the other person’s point of view through active inquiry.
Inquiry is primarily a function of listening and asking questions.
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Type of Conversation Description Purpose
Monologue One way Share or impose a
point of view
Debate/Discussion Two or more
people in
monologues
Win the debate
or control the
outcome
Vested Discourse People are
assigned positions
to hold without
compromise
Find important
questions
embedded
in an issue
Productive Conversation Balanced advocacy
and inquiry; good
use of listening
Convergence
and/or surface
meaning,
assumptions, and
mental models
Strategic Dialogue Judgment is
suspended on a
selected topic or
question. No
conclusions or time
limits.
Divergence and/or
raise collective
intelligence
Productive Dialogue Judgment is
suspended. No set
topics, set ground
rules, time limits,
facilitation, or
conclusions.
Divergence, unity
of spirit, deeper
and broader
inquiry

Listening
The key to effective listening is to hear not only what is said but also how it is
said. When you are listening to what is said, it is important to discipline your-
self to hear the whole message. Often a sender will initiate a message by setting
the stage, for example, “The morale here has sunk to new lows.” Then the
sender will usually give you the story line, for example, “Work loads have
become excessive—it seems like the pile on my desk just keeps getting higher
and higher and I see no end in sight.” The sender is likely to end the message
with some key words that help you understand something of importance to him
or her for example, “I’m really frustrated by the amount of time I spend prepar-
ing for and participating in meetings.” One of the pitfalls of listening is cutting
the person off mentally before the key words are communicated. This can hap-
pen, for instance, if the sender’s statement triggers something in you that you
want to communicate (for example, you may be experiencing signs of fatigue
and stress yourself).
To listen how a message is sent, you need to tune in to the volume, pace, and
tone of what the person is saying. Sometimes the way a message is sent is
more important than what is said. For example, is the person speaking
loudly, rapidly, and with a hostile tone, or at a more moderate volume
and pace in a pleasant tone? In listening to the content of a message and how
it is sent, try to avoid some of the pitfalls of listening so that you can gather
more complete and accurate information. Try following these tips for effec-
tive listening:
Resist distractions.
Suspend judgment.
Recall the content.
Reflect on the meaning (why the content is important).
Reflect on the volume, tone, and pace.
Paraphrase the content in your own words.
Asking Questions
Everyone knows how to ask a question: “Where is my report?” “What’s for din-
ner?” Productive dialogue, however, requires knowing more about the use of
questions to advance your inquiry.
Questions come in two basic varieties: open and direct. Open questions encour-
age others to talk and to share their understanding of the given topic. These
questions cannot usually be answered in a few words; they often require lengthy
179

replies. Direct questions, on the other hand, can be answered in a word or a
short phrase. They help you focus the communication and obtain specific infor-
mation. A third type of question, the leading question, will be mentioned briefly
in this section. The leading question often causes communication problems by
manipulating people into an agreement.
Examples
Listening
Jane says, “Things around here never change. Every time I ask for help, I get
passed on to the next person. It seems like no one will listen to me. How can I
get my job done when I don’t get support from the others?”
Setting the stage: “Things around here never change.”
Story line: “I always get passed on; no one will listen.”
Key words: “I can’t always get my job done; I don’t get support.”
Paraphrase: Feels discouraged because she can’t achieve her perform-
ance goals.
Jane’s opening sentence introduces the topic and sets the stage for what’s to
come. She then conveys her feeling of discontent by stating that she keeps get-
ting passed on to the next person and no one listens. Her use of the words, “get
my job done” and “support” are the listener’s cues to the importance that Jane
places on achieving her goals. Jane’s overall message is one of discouragement
and frustration because she can’t perform at the level she would like and no one
seems willing to help.
Asking Questions
Open: “What do you think about John’s work?”
Direct: “Where do you work?”
Leading: “You do like working here, don’t you?”
Your Turn
As a consultant, you will be asked to analyze a variety of situations and to propose
possible solutions. The following exercise will help you use the listening and ask-
ing question skills to advance your inquiry and get the client’s frame of reference.
Two members of the group will role play an interaction using a situation familiar
to most members of the group. The interaction must involve one member of the
pair communicating his or her thoughts about a situation in a particular organi-
zation. The other member will actively inquire by listening and asking questions.
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Step 2: Giving Your Perspective through Advocacy
The Idea
Giving your perspective means presenting your views in an honest, straightfor-
ward, and clear manner. Clients will usually respond well if you show genuine
interest in their frame of reference through listening, asking questions, and
demonstrating understanding. It is much more difficult, however, to get them to
listen to and appreciate your point of view.
There are several key points to remember when you give your perspective and/or
advocate a particular point of view.
When giving your perspective, use the principle of reciprocity: people tend
to listen to those who have listened to them.
Think before you speak. Before advocating for your position, decide
whether it should be given. Organize your point of view before you state
it, and then make it clear and brief if you decide to deliver it.
Avoid using words and tones that are antagonizing and that will block your
message from getting through. In the same vein, avoid exaggeration and
abstract concepts.
The goal is not just to give your perspective, but to have it heard; therefore,
it is important to assess the reaction to it and to demonstrate understand-
ing of both verbal and nonverbal reactions.
Be clear about your expectations. Never assume that they are known.
When you are reviewing someone’s performance, focus on specific behav-
iors and facts.
You should give your perspective when
1. It is important for the client to know where you stand.
2. Your responsibilities require it.
3. You have something you really need to say.
Example
In the following demonstration, notice how the consultant gives his perspective
to a manager who is having a hard time dealing with a low performing
employee.
Goal: To get the manager to take a stronger stand with an employee.
Perspective: “I know you believe you have done everything you can to get
Charles to raise his standards and performance, but it seems to me that you have
not been as clear as you could with him and you have not let him know precisely
181

what the consequences of continued poor performance might be. For example,
in your last performance review, you gave Charles the highest rating and you did
not indicate any behaviors you expected him to change. In the next conversa-
tion you have with him, I hope that you will tell him two or three behaviors he
needs to change if he wants to be successful in your department.”
Evaluation: Language is specific, understandable, and free of “roadblocks.”
Your Turn:
Please write down your viewpoint regarding this manual.
Evaluate your viewpoint. Be
Specific.
Understandable.
Roadblock free.
Now write down your perspective on a client. In your viewpoint, try to include
the following:
How you feel and why you feel that way
An example that helps the other person know exactly what you mean
A statement that communicates how you wish the person would change his
or her behavior and/or how you wish the situation would improve
Step 3: Merging Images
The Idea
Merging images means being sure that you and the client have agreed on
problem definition, root causes, and possible solutions. It is not enough to get
the client’s perspective, give your own perspective, and then move on.
Consultants need to assess the gaps between their perspective and the client’s
perspective, particularly as it relates to an understanding of problems, oppor-
tunities, causes, and solutions. Then, through productive dialogue, the con-
sultant and the client need to attempt to come to a common understanding.
The following chart may provide a helpful framework for engaging in
productive dialogue.
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This chart depicts how a productive dialogue might unfold. The consultant gets the
client’s view of the situation and gives her own. Together they discuss the situation
and try to reach a common understanding. Then, the consultant gets the client’s
view of the causes for the situation and gives her own. Together they discuss the
causes and try to reach a common understanding of the root causes. Finally, the
consultant gets the client’s view of what solution would best address the root causes
and advocates for her idea of the preferred direction or solution. This process
results in productive inquiry, productive advocacy, and productive alignment.
183
Get Give Merge
Situation (Problem
or Opportunity)
Cause
Direction
Inquiry Advocacy Alignment
Manager View Consultant View Merged View
Situation People aren’t forth-
coming with new
ideas.
There is very little
push back on doing
things in ways that
no longer make
sense.
We need to create
an environment that
encourages generat-
ing innovative
solutions and
challenging conven-
tional ways of
thinking.
Cause People don’t have
the skills and
confidence they need
to make their
viewpoints known.
There is a fear that
pushing back may
result in
retribution.
Lack of trust and
confidence are
keeping people from
speaking up.
Direction We need to train
people in presenta-
tion skills.
We need to train
managers in how to
be more welcoming,
attentive, and
supportive.
Let’s figure out how
to equip individuals
and leaders with
the knowledge,
skills, and attitudes
they need to create
a safe environment
for speaking up.

Example
The table below summarizes a productive dialogue between a manager and a
consultant regarding the results of the Employee Opinion Survey in the man-
ager’s department. In this case, the manager is concerned because the results
indicated that people in her department didn’t feel safe to speak up.
Your Turn
Reflect on a recent dialogue you had with a client. Use this table to summarize what
you covered well and where there may have been opportunities for improvement.
Step 4: Generating Better Ideas
The Idea
Generating better ideas means continuously learning and being open to new
possibilities for improving performance. Clearly, in the example above, as the
manager and consultant continue their dialogue, they will generate new ideas
for creating a safe environment. We need to avoid the trap of getting so locked
into an agreed upon solution that we close ourselves off to better ideas. In real-
ity, the whole idea of productive dialogue is to be able to continuously generate
better ideas and then implement them in practical ways.
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184
Get Give Merge
Situation
Cause
Direction

Example
In the speaking up example summarized above, the manager and the consultant
realized that they had not had sufficient dialogue on the cultural part of this
problem. They decided they needed to get a better sense of the norms and
values that were influencing employees’ willingness to speak up. As a result of
this dialogue, they decided to construct a simple culture audit to assess learning
norms and values in this particular department.
Your Turn
Please review the table you completed in the last section and engage a colleague
in dialogue about ways you might improve on the solution on which you had
agreed. Write down the ideas that you generate as a result of that dialogue.
Exercise for Productive Dialogue
Background
Company Q has conducted a global Employee Opinion Survey. Results of the
survey indicate there might be some issues around “speaking up.” The manage-
ment committee wants to ensure that the Company Q has a safe environment
for generating innovative ideas and for challenging conventional wisdom. A rig-
orous analysis of the data indicates there are individual, leadership, and cultural
factors contributing to the problem. Individuals and leaders need to improve
their knowledge, skills, and attitudes; and the culture needs to strengthen values
and norms related to trust.
Situation
Your client has just received the results from the Employee Opinion Survey for
his department. His department scored toward the bottom on “Speaking Up.”
He is concerned about these results and wants to take appropriate action.
Exercise
Engage your client in a productive dialogue about what to do about the sur-
vey results. Remember to use the productive dialogue grid on page 183 as a
guideline for the discussion. Be sure to engage in active inquiry and proactive
185

advocacy. When you merge images with your client, make sure you take into
account any alignment issues that may be related to your possible solutions.
Productive Dialogue Summary
There are three key principles to remember when using the skill of productive
dialogue:
1. If you actively inquire about the client’s frame of reference, you will get a
much clearer understanding of the problem and the gaps between your
image and the client’s image.
2. If you proactively advocate for your point of view relative to the situation,
cause, and direction, you will be able to influence your client to think dif-
ferently about problems and possibilities.
3. If you merge images with your client about problem, cause, and direction,
you will increase ownership for the solution and ensure that the interven-
tion is aligned with business requirements.
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Richard Bellingham, Ed.D., is the CEO and founder of iobility, a New Jersey
based consulting firm specializing in aligning human and organizational capa-
bilities behind the corporate mission, vision, and values. He has more than 25
years of experience working in the areas of business transformation, organiza-
tional learning, leadership development, team development and ethical leader-
ship. Dr. Bellingham has established a solid track record in leading management
teams to align corporate culture with business strategy, accelerating technology
deployment, and coaching executives how to lead change.
Dr. Bellingham has held senior executive positions within major corporations
including Northern Telecom, Parametric Technology Corporation and Genzyme
Corporation.
Over the past 20 years, Dr. Bellingham has worked with other 200 organizations
worldwide. A representative sample of the clients and the respective initiatives
include:
AT&T: Managing changes associated with divestiture
IBM: Acquisition of Lotus Development
Merck: Consulting skills training
Westinghouse: Culture change focused on innovation, quality, and teamwork
Lotus Development: Business Leadership Forum
Sears: Integrated health management system
About the Author

M&M Mars: Employee Involvement
Parametric Technology Corporation: Precision deployment
Groove: Success acceleration
Harvard University: Establishment of Inquiry Group for Intelligent
Organizations
A widely published author, Dr. Bellingham has written over 50 books, articles,
manuals, and training guides including:
Leadership Myths and Realities
The Manager’s Pocket Guide to Corporate Culture Change
The Manager’s Pocket Guide to Virtual Teaming
The Manager’s Pocket Guide to Spiritual Leadership
Ethical Leadership, Second Edition
The Complete Guide to Wellness
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188

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