Human Resources versus Human Capital
A word and a world of differences
by Jas Chong, August 2014
« We are sailors on an ocean of change and the organization we are part of are the ships we sail. We cannot sail against the prevailing winds, but we can learn to work with the winds and the waves and harness their energy to arrive at the destination we aspire to reach. » Michael H. Hugos
Change is the only constant
« As water has no constant form, there are in war no constant conditions.» Sun Tzu.
Business priorities are constantly changing to meet market forces and developments. Advancements in internet and mobile technologies has changed consumer behaviours dramatically and thus forcing business to adapt or be obsolete. Not only do business have to keep up with competitors, as entry to market with the help of technology becomes easier, they also have to face up to non-traditional competitors. It is under these challenges that the case study is based on.
Digital transforming lives and business
The case study is based on a global travel company that focus their activities in package tours for families to sunny places from Europe. With non-traditional competitors entering into market like google flights and new competitors like on-line bookings, the travel industry is due for an overhaul. The extensive overheads of travel agencies in shops and selling packages is decreasing in benefit will on-line selling becomes dominant.
The change programme Digital Transformation spearheaded by group CIO is an ambitious effort to overhaul the legacy technological platforms to create a more uniform and modern front to catch up with consumer habits that had changed over the years.
The impact is not only technological but largely in the people and the competences of the company. This case study looks at how people is the heart of the change effort and where good human resources practices advances the programme and bad practices hinders and eventually stall any change desired.
Leverage to Grow
Focus on strengths
The company had decided to embark on a large change programme to digitise their customer journey. This large scale programme is largely IT led that would focus on enhancing digitally the way they communicate and conduct commerce with their customers. With fragmented systems and multiple non-connected platforms, the path to change was long and arduous. It could be years before benefits are realised with customers and by then, the market would have moved on and render change obsolete. The result could be an endless game of catching up.
Focusing on strengths within the company, they realised that there were huge opportunities and pockets of knowledge. The plan was to create a domino system where each country would focus on their strengths and create expertise to benefit the rest of the countries simultaneously. To do this, an ecosystem of centres of excellences were created with focus on technical expertise in: web, mobile, customer relationship management (CRM), big data, middleware, e-CRM and social.
In addition to simultaneous change and delivery, time to market is key to retain existing marketshare and acquire new clients. As most of the markets already practiced agile, it was decided that agile development would be the dominant delivery methodology. Development would be deployed in a consistent rhythm across different markets with continuous improvement. The result would be step change over a period of 5 years.
The biggest change is people and not technology
The success to change would be the willingness of teams to work in synch and together. Firstly, all local CIO had to agree to the roadmap and to cede their control on local budget to global governance and use. Secondly, the choices of technology would have impact on existing competences and skills. Employees would have to embrace the change and look beyond personal impact to overall company survival and growth. Thirdly, change in technology would ultimately impact employees in sales, marketing and shopfronts.
The choice of where to set up centres of excellence (CoE) was not about existing technical competence but about people competences and skills. They decided to set up a web CoE that would service all web developments from Stockholm, Sweden. The team in Stockholm had been delivering across the Nordics market (4 countries) and knew how to manage the competing priorities in each countries. In addition, the proportion of e-commerce sales to agency sales in Sweden was the highest in the company and the team understood the mechanism of digital practices include SEO, SEM and web analytics. In spite of a new technology platform, there was confidence that setting up the web CoE in Stockholm would accelerate change.
For accelerated growth, they had also decided to engage third party providers and independent contractors with key competences and skills to complement internal expertise where the initial heavy lifting of development work would be done. And to ensure continuity, the goal was to pair internal teams with vendors to learn and gather expertise to eventually manage all development internally.
A tale of two HR
The first stages of change was setting up the web CoE. Web was considered as prime customer contact points and where benefits from initial deployment could fund further changes. The challenges included, multiple sites and applications, various stages of maturity and different platforms. In implementation, this was where HR was at the heart of success. The next section on change reverted was a less successful example of HR.
Starting without HR
In the Web CoE, an external technology vendor was engaged to implement a new web platform and solution. The vendor was also tasked to form the CoE and to work with internal staff who were placed into the project. There was a 20 – 80 ratio of internal to external staff and the difference in culture and language created misunderstandings. (the CoE was based in Stockholm, Sweden and vendors were from UK and India). The lack of team work and understanding started to endanger the delivery of technology.
While the technology teams continued with the set up, management and board had yet to approve nor released budget. In addition, without involvement of HR, there was no dialogue with unions and caused further complications in the creation of teams. The immediate impact to internal team members transferred to the project was a lack of job security leaving their old job for a new position that were yet to be approved. Stalling in budget approval also affected momentum and motivation of the team.
HR late but presence counts
As the web CoE teams and local IT teams grew increasingly restless, HR was called in to assist with the process. As HR teams in Stockholm, Sweden had not been previously informed of the programme, this could have easily turned into a political brick wall. But HR quickly grasped the situation and the impact of the programme and stood behind the programme team to help transition and set up the web CoE. This was to huge relief to the change programme team.
HR and change team focused on the immediate teams. Firstly, HR facilitated coaching of staff to help them settle into the CoE. Secondly, we started drafting the resource planning and set up in preparation to communicate with workers union. Thirdly, we began working on long term build of competences. People considerations become forefront in the set up the CoE and order was slowly put in placed.
Focusing on competencies and not skills
The choice of technology in Web CoE was different from existing platform. The first thorny question was what to do with the existing teams and communicating while not causing panic and that would impact productivity. If we were to focus on technical skillets and programming language, most of the development team would have to be replaced and we would have lost a great deal of company knowledge and people assets.
To retain knowledge and people assets we decided to use this as an opportunity to promote and realign roles. We outlined key business roles such as product owners, project managers, integration for internal staff. These roles have lower dependency on direct programming language skills and provided promotion or horizontal movements possibilities for technical staff who can move into management and/or business positions. As these roles needed strong company knowledge and influence, internal staff will work better than vendors in scoping development requirements.
Finally, we started designing up-skilling programme for developers who will need to learn a new programming language. And we ensure that there is pair programming with vendor teams so practical technical knowledge can be transferred. Not only were pair programming a method for developers, this method of pairing experts with rising experts was also in integration roles and product roles to facilitate transfer in knowledge and reduce reliance on vendors.
Iterative organisation development
As agile delivery focused on small releases and multiple release cycles, it made sense to ramp up the team in sync with delivery. We started drafting organisation chart by iterations. This meant that we started with a nucleus team and a resourcing plan to add staff with adjustments every 3 months. There was no established structure of what a team will look like 5 years, rather, it was a team fit to the agile release cycles. This provides the necessary scaling needed in resourcing and also leaves room for additions over time. It also requires HR to remain in constant conversations with the team to keep up with resource requirements as it moves closer to each release.
The organisation chart also included roles held by vendors and when they would be replaced by internal hires or new hires. This was key in creating a sustainable structure and also called for constant communication with vendors for clarity. It was important that the set of roles and organisation chart is not limited to internal staff but viewed as total talent requirements. It also provided a pipeline of roles for HR to assess internal competences and transition or external recruitment plans.
Internal staff or potential staff who will be transitioning into web CoE were consulted on both the organisation and the core job descriptions. Staff were involved in reviewing the organisation and participated in creating the job description to ensure fair process. (See next section on job description).
Finally, the plan and up-skilling programme was presented to the union for approval. HR led the discussion focusing promotional opportunities to existing staff; training and development for developers; and creation of jobs. HR also explained the iterative organisation to give time for local teams to join the new team or look for other opportunities internally or externally while they continued to work on existing platform over the next few years. HR was successful in convincing the union and the discussions were smoother than expected when it was demonstrated that staff were consulted in the process and had in principle agreed to the change.
Lean and agile HR practices
There were multiple newly created roles and skills where existing job descriptions did not cover. The next stage of work included the creation for job descriptions for internal transfers as well as new hires. But the focus was coaching teams into their roles and used this as learnings for the formalisation of job descriptions. The job descriptions will service 2 purposes: recruitment of new hires and point of reference for internal transfers to their new roles.
We focused the recruitment and internal transfer efforts on 3 key areas: Principle accountabilities, experience and competences. Principle accountabilities outlined the key areas of success for the roles. In experience, we focused on similar environments and cultures rather an exact match in previous job experience. And in competences, we integrated a new set of technical competences. As such, we also provided possibilities to qualify existing staff who would be eliminated if we had focused on programming or exact technical skills.
We challenged some standard parameters. Firstly, while education is required, it is not key. Secondly, we integrated a new set of competencies that typically takes time and approval. Rather than trying to implement IT competences across the whole IT department, we also decided to use the web CoE as a pilot. And with each new role, we would include competences for new hires or transitioned personnel. We also agree not to create « superman » profiles but . emphasised on creating a balanced team where members complement each other in experience and competences. Finally, we used a set of interview questions focusing on situations and reactions in difficult situations.
The other HR story
In the background, group HR was also working with group CIO on restructuring the IT organisation. Group IT functions are fragmented in the organisation with staff spread across various geographies and some taking partial group and partial local roles. There was an overall lack of clarity in reporting lines and accountabilities. In addition, lines were further blurred with the digital transformation programme and added the anxiety of staff and their place in the light of changes ahead. To create focus and coordinated efforts with local IT teams, group restructuring was long overdue.
While web CoE set up was iterative and adapted over a period of time, group IT reorganisation was in contrast a big bang effort. Organisation charts were redrawn and HR and CIO communicated the change to heads of local IT as well as key group personnel. 1 to 1 conversations with « key personnel » were held along side to communicate the change while the rest of the group was largely ignorant or hear it from top management through grapevine or their managers. There was no plan for transition and the organisation was presented as it should be. Thus people started to scramble to find a place for them in the structure.
The biggest difference was that in Web CoE, there transition while work continues. As the organisation was not defined, there was room for additional roles and the message was clear in transition over time. In group IT functions, HR had presented the future state and there was no mention of transition and evolution possible in the structure. This immediately created anxiety and political pandering to find a place.
As part of the reorganisation efforts, HR also thought it useful to introduce several new elements at the same time. An external consulting company was hired and asked to produce a « best in class » proposal on the structure, drawing examples from existing companies. However, the examples were UK based companies and agile methods in IT delivery were not considered. The « best in class » proposal also focused on future state but did not provide iterative stages that could lead up to a future state. Finally, none of the IT managers were consulted in the creation process and it was communicated in presentation. Compared to 4 months of change conferences on technology decisions and iterative outputs, a big bang change was less well received.
When the new group IT organisation was introduced, there were newly created roles where role profiles were not ready or non-existent. There was also not enough work in gathering feedback and conversations for fair process. Instead of clarifying roles, it created a vacuum left for interpretation and further political manoeuvre.While the web CoE roles are open for application internally and externally, the group IT roles were rather assigned through closed door discussions.It further created mistrust in the process.
Secondly, the existing matrix reporting system were to replaced with local CIO reporting directly to group CIO. On paper, it seemed like a straight forward practice that exist in many companies. In practice, it slowed decision making process and act in contradiction to an agile development process. This also removed local IT teams from local management and thus a necessary layer of local governance and local decision making process. While group wide technology decisions provided the framework, local business were crucial in prioritising local needs. In this structure, group IT costs will be larger as it now has to cover all teams across geographies and subjected to group cost approval process for a larger sum. The overall impact is a longer approval process on all decisions and disempower local teams.
Thirdly, the new organisation would also include a « pooled resourcing » structure that would replace dedicated teams approach. (A typical model in IT consulting firms) It seemed like a good way to manage resources, but in practice not practical. In a CoE scenario, the aim was to enhance expertise and accelerate delivery through multiple release cycles. With iterative team growth, there would be no spare resources to « slot » to another team when needed. Even in non-technical functions like product owners and business analysts, understanding of product will grow with each release, switching team members would only mean a steeper learning curve each time. And for technical roles, a web developer is very different from a mobile developer to render « pooling » impossible.
Much of the discussions in the reorganisation were greeted with silent disapprovals and indifference. An attitude of « wait and see » grew and further created discontent and distrust in the programme. Worst, in the absence of clarity, political pandering arises and took centre stage. The vision of digital transformation had lost its sight.
Human Resources vs Capital
Context is key
The intentions of reorganisation were well placed and change was necessary. However, orchestrating change with mismatched solutions is like asking a jazz band to play classical music. In this case, HR had bought the most beautiful classical score without taking time to understand what the audience is looking for and the strengths of the players.
Group HR were not close enough to the programme nor IT capabilities to provide guidance. While the CIO was making the decisions on structural set up, HR was neither providing right challenges nor useful directions. For political serenity, both decided to take on board the plan of a consulting firm and left liabilities and accountability at the hands of external parties.
The main focus of reorganisation was cost cutting and removing duplication. This is a depreciation driven view than appreciation driven. Rather than looking at where there is wastage and cut, they should be looking at strengths and how to strengthen the team with right reporting structure and leaders. To them pooling resources will mean less wastage and lower cost. In effect, the programme will not have excess resources to rotate. Even if there were incompatible skills, the short term solution will be using their understanding of the context for knowledge transfer and development.
Communication was command and control in waterfall style and communication is mirrored in the same style. Especially with local CIOs, change of their reporting structure is not just about a boss who approves vacation days. They had been hired and built relationship with their managers who are local CEOs, changing the structure requires conversations and relationship building. As discussed earlier, this structure will not accelerate their transformation but rather hamper it.
Involvement of group HR could have been earlier to give time for considerations and understanding. And to compensate for time lost, HR has stressed themselves into finding perfect solutions rather than dialoging to create step change. It also felt like HR just wants to be done with this problem then to see this as an opportunity to build a stronger organisation.
The multiplier effect is key
In thinking of people in an organisation, 1 plus 1 is never 2. When HR considered people as resources, we began to hear terms like « seat warmers », «benching people », « 1.5 resource ». This when we think of a position as an empty seat that needed to be filled. Yet, « filling » an additional seat rarely has little or no impact to the rest. This systemic impact is the multiplier effect. In some cases, it can be positive and in others, negative.
Consider teams rather than individuals. In the web CoE and mobility CoE comparison, the web CoE evolved towards a stronger team together with external vendors and independent contractors. The starting pace is slower but over time, the increased in understanding and output is exponentially higher. In mobility CoE, various vendors with different expertise were placed together. However, lack of understanding and teamwork resulted in turnover in the project and increased further cost in implementation. In addition, there was no transfer of knowledge and increase in internal expertise.
Consider potential than present strengths. In the digital world, evolution is fast and situations will arise where there is no precedent. Equally, the last financial crisis also taught us a lesson in reduced predictability and importance of adaptability. If the web CoE had considered internal staff according to their current job and expertise, there would be no retention of employees and resulted in a great loss of knowledge. Sometimes, it is well to remember that capabilities could be hidden because the situation has not called for it. People will also inspire each other to reach out to the best.
Consider team results than individual results. With an ambitious programme to change digital expertise, knowledge transfer is important. Pair programming and mentoring to facilitate development calls for working in teams. If people were rewarded and assigned individually, they will have no incentive to focus on group outcome and limit the strength of a team.
Conversations with HR in Stockholm, Sweden on web CoE had often been around the potential of a person, how they can impact the team and delivery and where we can develop them. Conversations with group HR had often been hair pulling about regulations, following the right process and cutting down the numbers. There is truth in the saying, we put our money where our mouth is.
« Values are what govern the behaviour of people, but principles are what ultimately determine the consequences. » Stephen Covey
There are many articles written about organisation culture. The way I think about culture is closer to anthropology where people evolved and learnt through experiences and then to classify and represent experiences to repeat them and to act creatively and imaginative in accordance to these. And the power of learning lies in repetition. Thus, if a company wants to value respect, then the practicing principles will have to be congruent to constant listening, considering points of view and repeated conversations repeatedly.
When I consider this case study in hindsight, I marvel at how good HR practices can propel things forward while bad ones can create so much negativity. And mostly, the importance of this profession and the potential to do good and the inadequacy today.
Today’s HR reputation is not in a very good place in many places. The continual decompensation of the profession will mean reduced representation of people and culture in the boardroom. While finance, IT, legal and business all put forth their concerns, people, the most important asset has no advocate and at best inadequate patchwork representation by other functions.
To continue this spiral, we will also lose future generations of talents in this profession as they are attracted to more « flashy » functions like marketing, « better paid » functions like finance and « futuristic » functions like IT. HR profession will be the choice of last results for young people reviewing career choices and aspirations. The situation can only be more dire.
HR has to step up and step out. HR has to step up their game, innovate, integrate new practices and implicate themselves in the business they represent. HR has to step out of their office and talk to people, raise awareness, build trust and understand the drivers of the marketplace. Begin by taking a small step, even baby steps.
“My life amounts to no more than one drop in a limitless ocean. Yet what is any ocean, but a multitude of drops? » David Mitchell, Cloud Atlas, 2004.
I am a change management consultant, Singaporean Chinese national based in Paris, France. I intervene by crossing the lines between technology and human resources to build understanding and construct solutions focusing on the people-side of change to ensure change is adopted and sustained. In this case study, I intervene and mange change requirements and worked with HR to implement all changes related to organisation and set up. In particular to the set up of web CoE, I also act as a HR partner intervening on behalf of HR.
The case study is based on actual events. Any views or opinions presented in this article are solely those of the author and do not necessarily represent those of the company represented in the case study.
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