WORKINGS OF A HUMAN CAPITAL STRATEGY
Introduction and background
QBIT supports the Data-centric organisation maturity model1 (DCM™). This model suggests an explicit link between successful business strategy and the stability and flexibility of the operating model(s)2 deployed by the business. This link and its importance may seem obvious to some and while we experience good results in its application, it does require further research which is currently in progress. The business operating model itself is complex but is based on very structured logic3. The income generating units/divisions of businesses as well as the support functions, work within a larger macro operating model. There are similarities to this and the organisational “value chain”.
The internal coherence and integration of the elements are key to developing organisational maturity and therefore greater business success. This includes the contribution of so-called ‘support’ functions like Finance, Human Capital or Communications. Some components of this chain are normally far better developed than others. Possible reasons for this may simply be that they drive the business income itself or report on vital components of it. Reporting on financial results is probably one of the more established support functions in business today4. All forms of reporting of business results at the strategic and macro operating level directly affect the quality of business decision-making.
When referring to the reporting of business results, information on long-term marketing plans, talent management and other functions are just as important, yet not all of these operations do it successfully. The DCM™ forces both an internal chain of events and the integrity of each element so when quality policy and supporting processes are enabled through organised systems and technology platforms; accurate reporting of business results becomes possible. Although this view is simplified for the purpose of this document, the DCM™ clearly links the stability and quality in policy and processes to the integrity and usability of the information produced from the enabling IT systems.
Within the above context, the micro-level operating model for Human Capital is under attack for not playing the strategic role it should, thus not contributing to the quality of strategic and operational decision-making which impacts daily operations and strategy itself. The need to play such a strategic role regarding the most expensive, and what is fast becoming the scarcest, resource of business will not be debated in this document. However, the ability of Human Capital to succeed at this is all too often questioned by business and professionals in the field, and this then becomes the core focus of the remainder. This document focuses on a structured approach to Human Capital models, strategies and decision-making. The fundamental premise here is that such a structured approach to Human Capital delivers the flexibility in strategy which business requires of Human Capital.
1 A separate document is available on this model. Please ask your Qbit representative.
2 How the business does things; methods, policies and processes.
3 Based on principles of Organisational Architecture.
4 General accepted accounting practices (GAAP) or the recently developed International Financial Reporting Standards (IFRS).
The Operating Model of Human Capital
Standard Integrated People Practices (SIPP™) was developed as the operating model to aid business in designing and integrating appropriate Human Capital policies and processes that would, when correctly implemented and enabled, deliver information that will contribute appropriately to business decision-making on all levels5.
The classic argument against standards of this nature is that they do not facilitate the creation of innovative solutions to new and old business problems. This point of view merely illustrates a lack in understanding of these basic standards. In fact, the opposite is probably true. Newer, more appropriate versions of SIPP™, accommodating the challenges of three generations in the work place and other modern dynamics of employment are developing constantly. The fundamentals of understanding “work” and associating, developing and rewarding people appropriately in the context of our understanding of “work” cannot be challenged6.
Linking Human Capital to strategy
Taking a functioning, mature operating model for Human Capital for granted, affords one the opportunity to consider the kind of conversations regarding people that should happen around the business strategy table. At the risk of over simplifying discussions regarding Human Capital required in modern business, which is not the intention, it is important to note that thought leaders seem to categorise these conversations around 5 “themes”, which QBIT refers to as ‘the 5 Strategic Levers.’ These themes woven together become the basis of how organisations engage, manage and relate to staff at all levels and report on them.
- Work and structure
As a basic point of departure, we should understand, discuss and report on the work that happens in business and, more specifically, how we structure or organise work in the form of a hierarchy.
This pays homage to the statement “form follows function”. Any change in strategy might affect the kind of work that is required in the business or how we structure it. Examples of these are: a new product range, a merger, closing a production plant, focus on R&D, process efficiency etc. This can affect:
- Levels in the hierarchy
- The type of roles required
- Number of people in the roles (position)
- Actual structure (legs in the structure) or
- The whole philosophy of the structure – market facing, geographical, client facing etc.
Certain design elements of the structure and number of jobs may directly impact the implementation of the business strategy and costs related to it. This reality check can often impact a change in the strategy itself.
What gets measured gets done. As strategy shifts, the emphasis or focus of work might change. Whilst the focus can obviously not contradict the foundation of work, as staff make daily decisions or choices in the work place, these choices will be influenced by the focus currently required by the strategy which is driven through the performance management process. This can also be in the form of a target.
As the business tracks the results of staff and team performance in the context of strategically relevant outputs, focuses and targets, certain tactical responses (decisions) might manifest to keep the outputs and deliveries on track in order to deliver on the strategy.
Specific decisions on high and low performing units, high and low performing people in those units, the balance between lead and lag factors reflected in output and the dynamics of the Norton and Kaplan balanced score card process all become tools that enable business relevant discussions under this lever.
- Reward and recognition
You get what you “pay” for. There is little as powerful in changing human behaviour or driving a different or new strategy and output, as rewarding people differently for it. This includes
base pay, incentive pay and recognition campaigns.
We know reward is not a motivator in itself, but wrong or inappropriate reward is certainly regarded as a de-motivator. Debate on relevant pay principles and strategies and how they relate back to the business focus and strategy is essential. Who is getting what slice of the cake? Is it appropriately structured to drive the required delivery?
- Competency and skills
Any shifts in business strategy, and specifically changes like new business models, different market strategies, new product sets or closing current product sets, new legislation etc., imply
shifts in skills sets. If these shifts are not anticipated with strategic discussion and analysis, there is a permanent lagging of skills with regard to strategic delivery. Shifting competence within a business happens in any of the following ways and can happen as fast or slowly as the business allows (quickly or up to 5 years):
- Staff development
- Culture, climate and engagement
This reflects on behavioural competencies that will apply to the business as a whole. For example, the values, leadership philosophy or any specifics related to business strategy or vision that are intended to drive a desired climate e.g. high innovation.
This is by far the most complex category of discussion around people and the timeous delivery of strategy. This represents what people think, believe and want from the business as a total system of processes, colleagues, managers, work/life balance etc. It is impacted by the other four categories and how they change and align.
Applying the strategic levers in Human Capital
Driving business through a specific strategy requires that the executives have influence through the decisions they make.
Consider the following scenario: Business XYZ needs to protect their market position and continue to drive growth despite the fact that a new competitor from a larger country, technically superior, has just entered the market. Finding a willing buyer for the business or buying a competitor are the two viable options on the table. Current profitability is low, which will impact the bank’s willingness to fund either of the two options. A decision regarding the need to increase profitability whilst not sacrificing client retention or net client growth, forces the executive to look at cost drivers, process efficiencies or spend on research and development as an example. Cutting edge research and development may hamper long-term growth or might impact the belief that the business has a bright future in the eyes of the market financial analyst. An alternative may be to modernise the production plant that might impact negatively on cash flow but the anticipated impact on profitability through cost savings might make this option more appropriate.
Executives make decisions that impact business to achieve a certain outcome. The decisions are normally found in very specific categories: cash flow, profitability, stock holding cost etc. These are described as strategic levers in the hands of the executives.
In the previous section we discussed categories or clusters of information that typically exist in the Human Capital arena. These clusters of information in fact become the strategic levers to the executive team regarding their Human Capital in the organisation.
Considering the above scenario within business XYZ, what can strategically be done from a Human Capital perspective?
|Work and Structure
|Integration of structures to drive efficiency and minimise duplication. Should the number of sales and retention agents increase? What about staff turnover? A modernised plant will lead to significant shifts in the work/job content or even the structure itself.
|Shift the focus on:
Retention/sales and related targets during contracting and setting of weightings in performance management.
Contract on long term research and development results being implemented.
Contract the continued focus on cost and process efficiency.
|Reward and Recognition
|Ensure appropriate long-term schemes are in place to focus success on implementing results of research and development work. Build a financial scheme to retain sales staff – but increased pay is a risk so increase the percentage incentive to total package. Focus on the scarce skills required in the new plant, are they paid appropriately?
|Competency and Skill
|Focus on sales and client service skills as well as on the skills required for the modernised plant.
Are we buying or developing the skills? What is the availability of technical skills in the market? Consider bursaries for students in this field.
Culture, Climate and Engagement
Focus on client service, innovation and technical precision. Create an understanding of the business strategy through specific communication interventions. Design and implement employee engagement and change programmes.
The above matrix is a potential “one size fits all” view of the Human Capital strategy. The longer the focus of the strategy is, the easier it will be to identify appropriate related people strategies to deliver and support the business direction.
This document focuses on a structured approach to Human Capital models, strategies and decision-making. The fundamental premise here is that such a structured approach to Human Capital delivers the flexibility in strategy which business requires of Human Capital.
Flexible Human Capital Strategies
Providing actions are aligned with the strategic levers and are also focused on the agreed business strategy, using the matrix from the previous section to define related actions for each Division in partnership with the executive team, will both deliver on business needs and provide a clear, flexible context for HR to work in. The ultimate success of such a process lies in the implementation of DCM™ and SIPP™.
|HUMAN CAPITAL: Strategic Lever Grid
|Strategy for Division 1
|Strategy for Division 2
|Strategy for Division 3
|Strategy for Division 4
|Work and Structure
|Reward and Recognition
|Competency and Skill
|Culture, Climate and Engagement
Human Capital’s ability to make a meaningful, trustworthy and relevant contribution to a business strategy and impact a business’ ability to deliver in the most efficient manner over an extended period of time, is linked to its ability to get the basics right. Dealing with complex business systems made up of processes, people, technology and their often-conflicting interests is not an easy task. Line managers working with and being responsible for the most unreliable and flexible, yet most valuable and difficult to replace of the three (namely people) deserve all the support Human Capital can provide.
MANAGING COMPLEX ORGANISATIONAL SYSTEMS
Data Centric Model (DCM™)
Understanding, explaining and managing the Human Capital function in business is complex. In order for us to aid Human Capital in its growth towards a mature service delivery unit in business, we must study and analyse its functioning and processes in the broader context of organisations and how they function. Organisations consist of people, processes and technology and, while this sounds simple enough, the fact remains that processes, and technology are largely predictable in their responses but people are not. It is therefore the management of the interrelationship between these three components which merits investigation and it is the methodology of this investigation which forms the basis of this document.
‘Systems thinking,’ as a way to explain complex environments and more specifically, the singularity of how systems impact one another, has become topical over the last few years. Explaining a system, aids in analysing, managing and predicting the behaviour of the system being studied. This affords us the opportunity to plan and control an environment so that we can manipulate, or at least attempt to manipulate, these environments better. For the purpose of this document these environments will be called systems and the main area of interest will be business systems.
For thousands of years man has studied systems in some form or another. Hunting for food successfully requires one to understand some of the complex systems in nature. Finding your way through Manhattan at 5 o clock in the afternoon requires us to understand a totally different kind of system. Getting home and boiling water for a fresh cup of coffee is yet another system we have to understand and be able to cope with in modern society. The study of systems as entities in themselves has really only been formalised over the last 30 years. Many tools have been developed for us to explain, understand and manage the systems around us.
For the purpose of this document we will however have to take a shortcut. Businesses are systems in themselves, as is the Human Capital offering within business. Understanding these however, requires the basic understanding of the following terms and principles. These terms also provide some insight as to how we could effectively manipulate systems, hopefully to the greater good for all.
- Fencing/framing a system
Systems can be overly complex, so we often have to break them down into a structure of sub and sub-sub systems etc. This allows for the isolation of the system intended for study or examination but at the same time enables the monitoring of its impact on other systems. An example of this is the study of solar energy; how we manage it, describing it as a sub system of earth and as a sub-sub system of the relationship between the sun and earth is very helpful. If this fencing or framing of a system does not happen one soon drowns in detail, and what truly needs to be studied becomes blurred.
- Simple and complex systems
Wherever we look, we find systems of one sort or another around us. A key-holder is an example of a system that is simple or simple enough to study on its own and thus requires no further breakdown. An example of a complex system would be the universe, or a transport system. The more complex the system, the greater the need to frame it for further study. When deciding on the frame of a system in order to isolate it from other systems (which form part of, or impact on it), it is essential to remember the problem, topic or issue being studied.
- Natural and Man-made/mechanistic systems
The differentiation between pure/natural and man-made/mechanistic systems has become increasingly complex in recent years, largely because we have been studying natural systems and duplicating them in mechanistic form whilst not referencing the impact they have on one another. To illustrate; air-conditioning systems are mechanistic whilst the body’s temperature control sub system is natural. Thus, if an air-conditioned building or car is studied, it is much more complex than before. Numerous examples exist of how these duplication and replication processes have impacted natural systems.
- Open and closed systems
Understanding the difference between open and closed systems provides some input into the relative complexity of the system but more importantly, how easily standard responses of the system can be impacted by other systems. Open and closed system definition does not apply during abnormal operation. We can explain and manage all the things that can impact it during normal operation; switch on, switch off etc. in the case of a torch light is a classic example of a closed system. If, however it is driven over by a car (abnormal operation), although it stops functioning it is still a closed system. The fact that it was impacted by the incident does not suddenly make it an open system. Open systems are, by nature, always totally susceptible to a multitude of impacts from other environments. Most of these impacts cannot be planned or timed and the outcome of the impact can often not be determined. A music concert is an open system. The Solar system is also an open system although many people believe that it is closed, not understanding the impact certain gas emissions will have on it. Similarly, a family or a circle of friends or businesses are all examples of open systems.
- Deterministic/Systematic and Non-deterministic/Random systems
In the context of this document, the most important factor in differentiating one system from another is how predetermined its response or behaviour is. If the response of a system is 100% predictable the system will be called deterministic. If the response is totally unpredictable or even random by nature, the system is a non-deterministic system. All systems are found on a continuum between deterministic and non-deterministic. The presence of man in a system, and the complexity and the level of openness and unpredictability in the interaction directly impacts the level of random behaviour a system may demonstrate. This holds true for man-made and natural systems. Man’s quest is to force man-made systems as close as possible to the total deterministic in order to manage, plan, predict and essentially manipulate these systems better. Human beings, being the most random system of all.
- One Dimensional Business Systems
Using the terms just introduced, Business Systems are complex, manmade, open systems of a random nature. Business systems and the study of their workings are as old as the first trading of goods for other goods in an open, free market where demand and supply ruled. Since then, these systems have become far more complex, largely as a result of our quest for more profit and higher levels of control and predictability. For the purpose of this document we will explore the components of business systems in simple terms at first; using known terms and concepts, but simply studying their interrelationships.
The opportunity to plan ahead and have a goal to work towards is now such an integral part of modern business that an inspirational and challenging business vision, combined with a strategy or long-term plan to succeed, is regarded as a ticket to the game. One current debate is whether the relevance of business visions and strategy has become archaic because of the pace of business change in these modern times. Counter arguments for this however, remind us that a business system with imbedded processes, systems and people, simply cannot be reinvented every six months with our current ways of thinking. Products come and go; production methods change but the aim of keeping core vision and strategy of businesses relevant for a longer period of time7 should remain. Changing this too frequently is costly, disruptive and it distracts the business from its purpose and influences the overall trust of investors and market analysts. A relevant and appropriate vision and strategy is thus regarded as a given for this document.
How we build a business system or deliver on the direction from a given vision and strategy is both simple and complex. Defining a business model and value chain to satisfy the client is a design issue. Some components of this design are based on the size of the business, but the business system will essentially consist in some form of some of the following; Finance, Human Capital, Communications, Technology, Marketing and Sales. Other components are closer to the core of the business model itself; purchasing, manufacturing, research and development, call centres, distribution etc. These will be called business sub systems.
No matter which of the above sub systems we refer to, a specific chain of events exists in order for this sub system to deliver value to the business. One can refer to this chain of events as a natural law of business. Fragmentation anywhere along this chain of events substantially decreases this sub system’s ability to deliver value.
It is prudent to explore the concept of value before continuing. Value in this context means the ability to inform, guide and influence decision making operationally and tactically to inform and guide the formulation of business strategy; be that as a support or core function of the business.
This chain of events (delivering the value for a sub system in business) is highly deterministic in nature. For the moment we will ignore the impact of people on this chain of events itself, this will be explored later.
Important at this point though, is that this chain of events exists to counter the effect people, as totally random systems, have on business.
This chain of events forms the baseline of the DCM™ (Data centric Model). This chain represents a systemic breakdown of sub-sub systems to the last meaningful element in business; the transactions themselves, the basic work elements of an operating business, and then slowly builds it back up from data produced by the delivery of transactions to show the link through different layers of complexity with Vision and Business Strategy.
7 A typical life cycle of a business vision and strategy is still 5 years
The basic premise of this model illustrates that a lack of thinking, formulation and agreement of an operating model influences the practices and the policies that govern them in business and ultimately the quality of information etc. used in decision making.8
It is at the Operating Model level9 where we decide how to best integrate a business and its core functions. At this level no silos may ever exist. Once an Operating Model is agreed the exploration of the detail happens through understanding the principles of the model and is reflected in the detailed policies and practices that support it. This also forms the baseline of the governance framework in business.
How these policies or practices then translate into transactional form in the most efficient and effective manner possible is process design and management. Putting the design into practice through technology or a manual system represents the lowest meaningful level of sub-sub system.
As transactions are processed on a daily basis these transactions produce data. Reviewing the quality, volume and frequency of the data tells us more about the stability of the process itself. Data integrity and process control reports should exist at this level. Many techniques exist at this level; Six Sigma, 20 keys etc. which are known world-wide for building efficient processes. Changing a process to make it more efficient or effective is normally a debate concerning quality or cost. Changes to processes hardly ever influences policies/practice or operating model. If they do, the impact must be studied carefully. Business has generally become better at the process and transactional levels but the relationship between policy/practice and operating models is most often sorely lacking.
Taking data and placing it in a meaningful context (information) allows for operational decision making in the general business. This information also offers useful insights into applicability, use and general relevance of business policies and practice. In essence providing guidance as to how these policies might adapt to reflect changing needs or the evolving business practice itself. How these changes may affect business process, or the operating model needs consideration.
Studying and monitoring shifts in information over time provides insight into changing transactions and thus changing behaviour.10 Trends emerge, and knowledge is gained about the sub system and its effect on the business system itself.11 This effect can be used at tactical decision-making level. “Learning Organisations,” a buzz word of a couple of years ago, is also monitored from this level. Finally, the knowledge provides valuable insight into the operating model and its overall relevance and value to the business. In the next section, the integration of other knowledge emerging from other subsystems, (thus moving out of the silo) is incorporated and the concept of business information and management information is born.
Constant learning from knowledge about the responses of the organisation (transactions processed) and the integration of knowledge stemming from other silo operating models provides a base of wisdom or deep insight into how the organisation responds to strategy and vision. This understanding may not only influence the way we deploy strategy and related strategic decisions but may influence strategy and business vision itself. This is a long-term process and will only truly exist in mature organisations no matter how fast the market and other macro conditions change.
8 A detailed definition and example using Human Capital as a sub system is available in annexure A.
9 For further definition see the SIPP™ document.
10 A transaction is the reflection of a need for someone to action something.
11 Knowledge management is born at this level in the Organisation.
This level of organisational maturity is scarce. The moment organisations start to translate data into information the process of maturing business starts. This state is a highly flexible one and at no point is it an indication of a giant too slow to move or worse still, a dying business.
The most relevant fact to note at this point is that data produced by a sub system, and its relevance and integrity are linked to stability in the processes, clarity in policies/practices and their integration through the operating model. Not adhering to this law of business systems (DCM™) will result in huge frustrations, manifesting in symptoms such as lack of relevance, lack in strategic contribution, chaos in process environments and the failure of technology systems.
- Organisational Systems
Larger business systems may have multiple vertical pipelines running down into the business, some of which will be service based structures and some core business based structures. Having operating models, policies and processes processing data, information etc. is as relevant for a production unit as it is for sales, Human Capital or finance. Each potentially having its own vertical to represent it.
How many of these verticals exist and which of them can be integrated is an organisation design issue. Some of this decision making will however also be dictated by the size of the business and the business sub system itself i.e. finance will probably never share its operating model with any of the other support functions because of the legal compliance issues, reporting requirements or conflict of interest.
Understanding the impact of these verticals for a complex business system as shown here is important as it has become a major cost driver in recent years through business needs like organisational score cards, Management Information Systems and Scenario planning tools or “What-If” management decision making tools.
It is clear that the same organisational vision and strategy applies across the verticals. Agreeing and managing horizontal integration servicing this strategy is however no mean task. Fragmentation at the Operating Model level (total value chain) will lead to fragmentation right through the chain of events to information, knowledge and wisdom thus influencing decision making directly.
These integration discussions often become political and many organisations attempt driving integration at a process level. The major issue with this approach is that this level is riddled with detail. If integration is not agreed at the conception of the Operating Model, it is highly unlikely that integration will be achieved lower down.
Pushing integration down this events chain is also counterproductive as the decision makers working at this level are mostly specialists and should focus on the specialised processes. In essence, silos must exist, they are healthy but not at the Operating Model level.
Executives often desire silo free behaviour in their businesses and many costly tools are bought in an attempt to achieve it. Data warehouses and the like all exist because the appropriate level in business does not own and design integration into the level where it should exist.
- Human Capital Systems
The main interest of this document however is the integration of organisational systems not only through technology and processes but also people. We describe business systems in the ways reflected in this document and many others to make it possible for people to manipulate these business systems for own interest, mostly profit driven and financial in nature.
How people own these systems and sub systems is however just as important. Ownership is taking accountability for a task to happen. This may include the design, management and operation of a certain sub system.
The importance of people in organisations is no longer debated but is by no means well understood. This is understandable when one considers that people are the highest form of random, open, complex system known to man.
Because of the need to manipulate these business systems, we have no choice but to explore how best to integrate people into their design, management and manipulation. This is one of the main reasons why a support function such as Human Capital exists. In a separate document SIPP™ (Standard Integrated People Practices) is explored as a standard for an Operating Model in the Human Capital environment.
What is of more interest at this point is a generic view of people and their integration with business systems. Research in this field has expanded rapidly over the last 60 years following the collapse of the industrial era, post World War II. This coincided with concepts such as IP and highly sophisticated business designs.
Work at this level focuses largely on Organisation Design, Job Design and Grading Systems. Most of these fields are already too granular and accept the level at which the role operates and judges other related issues like pay. The work originated by Elloit Jacques in the late sixties still continuues today, providing fascinating and far reaching research of effective people systems. In his and other like-minded studies of successful and unsuccessful ways of organising people (people systems) in structures, they stumbled upon a so called ‘natural level of accountability’ that is rooted in time span and complexity, later called levels of work (LoW) or the Requisite Organisation.
This document will not be exploring this work in itself but will briefly reflect on its impact on the Data Centric Model. Jacques stumbled onto a natural order in people systems that illustrated a preference and ability to work at a certain level. Business and other systems that accommodated this Natural Level of Work were found to be much more efficient and effective than others.
When plotting the first 5 levels of LoW there seems to be a natural fit with the Data Centric Model as presented in this document. Levels 6 and 7 falls outside of the DCM™ as they focus on broader strategy; for example, multi nationals and global organisations that can typically plan up to 30 years ahead. However, LoW levels 5 to 1 in these global businesses do fit as tightly with the DCM™.
Building Requisite Organisations (accountability hierarchies) builds a structure to deliver the core transactions at level 1 in a business. Thus, all managers and executives serve level 1 staff. Over time, inefficiency at the levels 2-5, or 7 for that matter, will directly impact the work at level 1.
The descriptions in the diagram above are highly simplified and summarised versions of the work required at each level. The premise being to build a structure incorporating Levels of Work in the Business System so that appropriate ownership and accountability can ensure the
efficient operation of the business system.
The DCM™ can also be made applicable for governance, compliance and audit frameworks in business. The DCM™ is currently introduced to more and more clients and further academic research around it is being planned. This document is a work in progress.
STANDARD INTEGRATED PEOPLE PRACTICES (SIPP™)
Organisations exist mostly to maximise profit for investors or fulfil a specific service for the greater good to society in its broadest sense. Even with calls for the triple bottom line and a focus for responsible business practices, the core element tying people to business is the work they do. There is no real purpose in over romanticising the relationship between people and work. It is simple: organisations need things done and people are, for the most part, still the best resources to deliver.
Although the relationship between people and work might sound simplistic, it is not, and the nature of this relationship forms the core of this discussion document. Understanding an organisation’s vision, business model and strategy is one way in which to define the work a business needs doing to deliver on its strategy. Translating strategic requirements for work into jobs and structure in a hierarchy appropriately will be analysed later.
The frequent assessment of the relevance of work in business is as critical to organisational success as the business strategy itself. The more relevant the understanding of required work, the better we are at linking people to it. The relationship between people and work consists of the following:
- An accurate description of the work required;
- Outputs delivered through the work; and
- An indication of the competency or skill required to deliver on outputs.
Clarity on these elements makes it possible to match appropriate people to work and then formulate the most applicable pay, incentive and recognition structures to reward people for their effort. The closer the match between people and the work they do, the more passionate people become about what they do. Combining this with a healthy organisational culture and strong relationships between staff and management creates a much greater likelihood of an organisation with motivated, focused employees who find their work meaningful. Exponential growth in the profits of these kinds of organisations has been reported worldwide.
Work to the power of people (Wp™) has become a concise way to articulate the relationship between people, work and profitable, efficient business. It has also become the context in which to explain Standard Integrated People Practices (SIPP™). Proper articulation of people’s roles in business and how Human Capital capability supports this, has the potential to assist Human Capital as an industry and as a profession with the aim of being true business partners. Articulating SIPP™, and its embedded compliance issues, will drive compliance and ensure business support for the basic disciplines that should exist if the true value of people (ROI, cost, investment) and a Human Capital capability is to be fully realised. The concepts proposed here are universally true and transcends industry, business type, maturity and cultural differences that might exist between organisations.
- The SIPP™
SIPP™ consists of a set of statements. Each of these statements has some element of flexibility embedded within it. The standard should be interpreted literally. Industry techniques, tools and methodologies exist to achieve each of the standards. The standards are presented in clusters and must be applied in a strict chronological order unless otherwise stated. Changing the order makes the standard useless and impacts directly on the value of the Human Capital delivery and the perception thereof.
Cluster I: Standards for the Foundation of HR
This cluster is described as foundational because it sets out the basic and most significant of the HR processes, and the value-add HR processes that businesses have come to expect. The items contain statements describing standards. This specific cluster is also listed in chronological order.
- Definitions of work are based on relevant and current information about the business, its vision, business model, product set, desired output and strategy.
- Definitions of work are described through a single standard deployed in the organisation.
- A standard method of levelling is used in the definition of work. This same method of levelling is used to build the relevant organisational hierarchy even if this hierarchy is only used for levels of accountability, but the structure itself may remain informal. This levelling mechanism is not the grading model used to benchmark pay.
- A resource planning and forecasting (establishment tables) process exists that utilises the work definitions and business hierarchy. This is linked to the budgeting and business forecasting process. This may exist only for medium and large businesses.
- Generic job definitions may be used. Jobs could also be uniquely described up to final positional level. This level of detail (granularity) of work definitions is a business choice. Level of granularity has an impact on the cost of the Human Capital function and the level of association of staff with the definitions itself.
- A standard for job titles exist in the business. This standard is linked to the work itself.
- Output associated with work is relevant to the level of the work and the content of the work itself.
- Output is aligned to key strategies.
- Output is reviewed and aligned on a yearly basis within the context of business strategy and related tactics.
- Output may be weighed in the alignment process by using techniques like the Norton and Kaplan Balanced scorecard.
- Competency and/or skill required to do the work is defined within the context of the work definitions and output to be delivered. A competency or skills framework should exist that is based on the definition required and the broad capability requirement of the business.
- A standard grading model is used throughout the organisation. This grading model is not used as the model for levelling the business.
- Pay, incentive and recognition schemes are defined for relevant positions. The total reward practice is considered.
- Pay, incentives and benefits are benchmarked annually using the job purpose that stems from the job writing/description standards listed above. The result of the benchmarking process is reflected in the reward strategy for the business.
Cluster II: Standards for the HR Process
This cluster represents the end-to-end processes in HR. It requires and relies on the stability of the foundational cluster. The items in this cluster are not necessarily listed in chronological order.
- Employment contracts exist for all permanent staff or staff deemed as permanent.
- Staff are contracted for performance, which is reviewed on an annual basis for outputs achieved using job definitions and output requirements.
- The results of the review process are used as input to the total rewards strategy and decisions relating to overall human capital management regarding value added practices.
- An input review process is conducted once a year with the line manager. A personal development plan (PDP) is the result of this process. This process may be integrated with the output review process.
- The PDP is a long-term development plan that should contain a mix of approaches to development based of the maturity of the person in the role, or the requirement of the job itself.
- The skills and/or competencies are evaluated by a qualified assessor once every three years. The results are used to update the competency or skills profile of the individual.
- A legally compliant standard recruitment process is used across the business.
- New recruits are assessed for competency and/or skill and matched against those required in the job.
- An induction programme exists in the organisation. Package and benefits consulting may form part of the induction programme.
- A staff member is consulted during the review of their job content, performance output, reward and development plans.
- Job content and related grading is reviewed once every three years. A review panel consisting of HR and management recommends changes to the senior or executive management.
- Standard processes exist to deal with consistently poor and good performers.
- Legally compliant exit processes exist in the organisation. Exit interviews may be integrated into this process.
- The Employment Equity and Skills Development Act are integrated into the HR processes. All required legal reports are issued on an annual basis.
- A remuneration committee, recognised by the organisation’s board and with a third-party representative, advises the board on pay/reward related decisions.
- All HR processes are documented and reviewed on an annual basis. These processes are used in the periodic audit of HR.
- A HR handbook exists. This handbook complies with policy and process.
- Sound operations management processes are used in the HR operations area.
Cluster III: Standards for advanced HR processes
This cluster of standards should never be embarked upon until the foundational and process clusters are stable. Some exceptions are discussed in the standard itself.
- A list of critical jobs and a list of critical skills sets and or competencies should exist for the business.
- A talent grid which contains people who will potentially fill the list of critical roles should be set up according to a set process. The two sides of the grid are normally driven by competency of the individual and the other by level of performance, preferably long-term performance. A talent forum will track the individual’s respective progress or decline through the talent matrix. A talent matrix could also be set up per job family or per level in the business. A talent grid per department is not encouraged.
- A career path should exist for all critical jobs in the business. This is a preferred set of job experiences that will allow the growth of the incumbent as they progress along the career path towards filling the critical job. The career path should reflect the jobs forming part of the standard job design work which stem from the foundational practices. A career path can include horizontal moves through the hierarchy. Level jumps should be avoided. People for whom career paths exist are normally rated high on the talent grid.
- A development path addressing the skill or competency set required by a career path must be developed and service providers or other processes to facilitate this must be identified.
- People high on the talent grid, but with no further career path because of some specific restriction, should be used as coaches or mentors in the business.
- A process monitoring the staff maturity pipeline should be established for all critical departments in business, but preferably for the total business. This pipeline informs decisions regarding new appointments, staff placement (internal), changes in reward and decisions regarding development.
- An attraction and retention strategy should be developed using information from the business and the application of current HR processes like focused reward or development should be structured so as to improve retention.
- A formalised process for staff engagement on employment related and other business relevant matters should be set up. Although staff engagement forms a critical part of the foundational HR practices, the process is probably only formalised at this point.
- A formal process for tracking and managing discrepancies between desired and actual culture should exist from as early a stage as possible in the business. Addressing these gaps should be facilitated through management and staff engagement processes.
- A staffing risk plan should exist for critical jobs/functions or departments in the organisation.
- An employee assistance programme should be developed as early as possible.
- An HR scorecard tracking business relevant delivery should be set up. This HR scorecard is reflected in the performance management contracts for staff, line managers and the HR functions itself.
The overall management of Human Capital, SIPP™, Technology and related reporting will be touched on in the document in Complex Business Systems.