Article (May-2017)

Articles

2017 Disruptions Cut to the Chase

Dr. Ganesh Shermon

Designation : -   Managing Partner for

Organization : -  KPMG LLP

01-May-2017

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Organizational Upheavals! Organizational Crisis! Organizational Dilemma! Translates to Talent Crisis, Talent Trauma, Talent Uncertainty and War for Talent!


Why do staff in very large numbers follow their Partners/Leaders like a herd of sheep? Do these staff members not have, what we may call as organizational alignment, loyalty or a mind of their own? Do these staff not identify themselves with the vision and values of their existing organization? Are these staff so shallow that money motivates them to do whatever? What makes them do what they do when they follow their leader, perhaps knowingly or blindly?


A recent example is Deloitte India acquiring a very large number of professionals (in several 100s) from KPMG India. Not the first time in talent management history. Pepsi has hired in bulk from Unilever, KPMG from PwC, EY from KPMG, KPMG from Protivity, KPMG from Deloitte, PwC from KPMG and so on. No one is a saint here! Of course, EY did set a great example in the mid 2000 when they Acqui hired Arthur Andersen professionals into EY through a structured acquisition program.


Why? Why do firms resort to mass hiring of professional talent at a price significantly higher than market? Questions continue to haunt a discerning mind, and to list a few. Have firmsnot found a more effective way to attract and retain talent? Have firms chosen a growth path and a business strategy to weaken competition by weaning away significant leadership role holders? Do firms treat this as Acqui Hiring when they are not? Have firms not learnt from their past mistakes, where the presence of multiple firms that they had acquired in the last many years have barely worked well with one another-Issues dealing with cultural integration, performance, transfer of clients, geographic alignment, practice mergers, role distribution, promises not kept, exiting the old for the new, conflicting business practices, key partner exits, staff conflicts etc.?


Laggards of the past are now aspiring leaders! Why not? If other firms were to let-go their leadership status! Deloitte is a world leader, competing closely with PwC! And EY is closing its ranks with PwC and KPMG with a new CEO and a leadership team will give all that it has to fight their war for talent!


Clearly, not many in the global consulting market would doubt Deloitte's capability to do things the right way. It is possible that Deloitte's India HR may have got it wrong, sometimes, but not at a global level where its programs consistently win best employer awards. So is this a new shape of things in a talent world, that corporate should learn to cope and manage. Is Deloitte setting a new next practice to fast forward growth and provide aspiring minds an opportunity to be a part of a nano paced organization? Or did KPMG not do its part in retaining talent through effective HR programs and practices? Was its leadership weak and ineffective in managing its people effectively? Did KPMG not have appropriate and sufficient people engagement programs? Did KPMG not have a suite of Reward - Recognition programs that caters to the needs of their staff? Or is KPMG a victim of market forces, employee dynamics, leadership miss and just an unhappy coincidence of events?


Or are these simply signs of changing global times? In the Digital - Millennial world, rules are being rewritten on what makes staff members retain themselves in organizations. Remember, it is a free world, Deloitte has done nothing wrong. Their actions are neither unethical nor inappropriate. The attraction of mass talent program, perhaps, was not a HR initiated move, so they may not want to take credit for this. This,possibly, given its scale, costs and size of the dealwas a line management led program by the CEO, global leaders, with the vision and plan to scale this firm exponentially. They have simply done what best of organizations, in a war for talent scenario, may do, may be?


Have organizations that are expected to set professional standards, ethics and practices stooping down to (perhaps) destroying other organizations by enticing talent through substantive monetary incentives, while articulating it to such mobile staff, as changing role power, positional freedom, leadership careers, learning opportunities, bonus and incentives and other cultural aspects in business?


The answer to all of the above is simple. Don't judge. Go with the flow. Establish new rules. Find uniqueness in your own strategies and business models. Let people managers lead the way. Ask HR to stay out of retention role. Some HR leaders are busy tweeting their "Insights". Let them do that and stay away from employee engagement issues. It is the new world stupid!


Rewarding the Retained -Cutting the Chase
Throughout history, employers have been challenged with attracting, retaining and engaging staff. From the simplest barter systems of centuries past to the current complex incentive formulas of today, the organizational premise has been the same: You, "provide productivity and results to our enterprise" and we, as employers, "will provide you with something of value." In their simplest forms, compensation and benefits have involved cash or commodities, and that still is true to a large degree today. Digital or not. An employee provides a service and an employer provides cash compensation and/or a benefit of value to the employee. But that is so easy to beat!


Mass Exodus Syndrome - There are of course some syndromes that we now need to live with:
Syndrome1: Acquiring enterprise pay more.
Syndrome 2: New Forms of rewards.
Syndrome 3: Millennials seek aggrandizement.
Syndrome 4: Social is wasted.
Syndrome 5: I hate the boss.


But are these here to stay or are they changing? Over the years, organizations have, either explicitly or implicitly, sometimes by default, recognized the fact that the key to achievement of the organizational purpose is the human resource. If this resource is treated as an input resource in the overall organizational processes, there is a resource cost attached to it. Organizations have also realized that people are motivated when a recognition and cultural system adheres to where there are concrete approach's to changing dynamics in talent management:


1. Talent is about personality.
2. Culture is all fitment.
3. Small is big is beautiful.
4. Focus is key.
5. Networks are real.
6. Result are continuous.
7. Rewards are personalized.
8. Recognition is social.
9. Talent management is self service.
10. Freedom is to give me control.
11. Make bosses sweat for staff engagement.
12. Hating boss is real but ignoring a contrived boss is way too real!

Mass economic reward trends - The economics of demand, supply and the theories of price elasticity would definitely apply to the human resource. What complicates the management of the human resource is that to this economic theory, one has to superimpose the complex theories of managing human behavior. Designing and managing an effective reward system is therefore a management exercise that involves economic, financial expertise and mastery of knowledge of human behavior. These issues are those that are driven by the need for "Economic versus Psychological Bonding."


Workforces in organizations are shrinking and each employee is now expected to add distinct value to the business. Added to this is the increased emphasis in technology, quality and service, which results in the business world changing from a mechanized workforce to the knowledge workforce. The knowledge workforce is expected to take decisions, respond instantaneously to opportunities and take risks. This behavior has to be rewarded differently. Performance is no longer a lifelong contract of commitment, but one that has to be continually reinforced. Changing organization structures also necessitate changing competency compensation practices.


Some of the implications of the futuristic structure on competency compensation are as follows:

  • Collective networks of competencies: For a network or a team-based structure to succeed, it would demand sharing of rewards and, therefore, the creation of team-based reward programs.
    Lean and sharp business organizations and strategic outsourcing: Based on a pure economic evaluation, an organization has to prioritize the building of 'owned' human assets and skill-sets and the leveraging of competencies available with specialist individuals or consulting firms. In the contemporary cost environment, the organizational priorities would be for 'owning' customer focused and service skills and hiring most of the value-adding specialist skills.
  • Nurturing conducive learning: With the increasing importance of augmenting intellectual capital within the organization, individual learning has to be encouraged and incentivized.
    Employee partnerships- stock options, phantom stock options: Organizations increasingly need to have employees with an entrepreneurial spirit. From the organization's point of view, the entrepreneurial spirit would ensure greater contribution from the employee through diverse ideas, complete ownership for the role and the organization, higher element of calculated risk taking and higher commitment. From the behavioral perspective, entrepreneurship has several intrinsic rewards like fulfilling of esteem needs and moving towards self-actualization. From the economic perspective, the extrinsic reward for entrepreneurship has been profit.
  • Facilitating life career succession planning: A good human resource philosophy should seek to get the employee to contribute during his/her work life without worries of being left high and dry at the end of the career. Beyond the age of retirement, the only element of human resource strategy that would impact the individual, is the kind of retirement pension benefits that a competency compensation plan may provide. These schemes, complemented with asset-building programs, ensure life planning for the employee. For example, a pension plan, which offers a superannuated employee his last drawn salary as a pension for the next 25 years.

The mass economic model has indeed been innovating in the area of monetary reward system:

  • Social engagement pay.
  • Customer relationship programs.
  • Individual performance related pay for collective contribution.
  • Competency (Group) related pay.
  • Bonuses and variable pay for differentiation.
  • Team remuneration rewards.
  • Pay at risk for risk.
  • Profit sharing schemes - partnership models.
  • Role awards.
  • Quarter peak peer equivalence bonuses.

Organizations must reward employees because they are in turn looking for certain kinds of behavior: they need competent individuals who agree to work with a high level of performance, loyalty, and ground level commitment. Individual employees, in exchange for their commitment, expect certain extrinsic rewards in the form of performance pay promotions, salary, fringe benefits, perquisites, bonuses, or stock options. But more importantly Individuals seek the intrinsic rewards such as feelings of competence, achievement, responsibility, significance, influence, personal growth, fulfillment and meaningful contribution. Experience has demonstrated that high levels of pay do not mean higher levels of retention. Take examples like stock option, bonus, and sign on lump sum based reward systems in organizations like Infosys, Sun Micro Systems or JP Morgan Chase. They have all realized the value of retention as a function of non-monetary rewards. In today's world compensation system cope with paying for risk of continuing to be employable.


Rewarding those employees whose performance is assessed and benchmarked to a competency standard. Such an approach communicates to the individual (or group) that there to the work of the organization is highly valued. The overall message is simple - improved performance results in improved remuneration. Essentially, workers should feel that their remuneration in relation to their effort, performance and contribution is fair when compared with the remuneration and work performance of their colleagues. An improved behavior that drives performance receives better remuneration.

  • Retain a Culture sought by staff - not that which the leader wants.
  • Only cultures in which staff engage matters - not the CEOs popularity seeking showmanship.
  • Get HR out of the way. Have line managers own people engagement processes.
  • Talent Management is not an HR role - If it is then they should also be held accountable for retention.
  • Every Individual should share their need for reward through growth. If not given them what they want.
  • Don't assume what HR thinks as effective reward is what staff believe that they want.
  • Organizational need for sustained growth is meaningless if staff do not see that need.
  • Accelerated learning through sharing / synergies possible only with social engagement.

Some enterprises work on the premise that growth, learning and a culture where people work effectively when they move jobs, obtain early responsibility and make training and job rotation as a basic means to their growth are indeed effective in their retention of high performers.


Motivating all employees to perform well. Whilst the principle of rewarding high performers may well reinforce their behavior, it is important to motivate those employees who are not performing so well. Good reward systems must not therefore concentrate only on employees who are only performing well, but must also consider the motivation of other employees - all employees must be encouraged to improve their performance.

  • Moves across businesses to ensure cross-pollination of talent & for accelerated learning.
  • Transfers for "hiring from within" to match best opportunities with the best talent.

There are good examples of hiring from within. An organization that would think many times before bringing in lateral management personnel directly from their market. They respect their internal culture and the way they do things far too much to compromise on hiring to meet with headcount needs.


Talent technologies hold the key
Reward systems are based on the results/output from work rather than the effort put in by individuals, as for example; in a reward system based on the amount of time staff spend at work and where staff are encouraged to concentrate on the standard of the end product rather than the input or effort.
1. Consistent performance trumps star performance.
2. Use talent technology to track performance.
3. Let staff assign their own career paths.
4. Leadership pipeline in isolation is a myth - succession is real. Get staff to target positions and go after them.
5. Internalize package solutions - No single technology can cater to all organizational needs. Get best of breed for component talent needs - for example 360 Sharing Platforms.
6. Make aware AI & Robotics as real possibilities, just as much driverless cars and self-managed homes!

Promoting forward planning and objective setting.
The central feature of many systems is the assessment of performance based on the achievement of previously established plans and objectives. This management technique therefore encourages individuals and groups to plan their work activity and achieve predetermined objectives.

  • Consistent not top performers identification.
  • Personalized career progression chart.
  • Skill based development inputs.
  • Customer oriented assignments.
  • Find 360 mentoring processes. People can learn from all. Don't let people hold exalted positions.
  • Coaching, an opportunity for some retired, jobless or wasted, is a waste of money if the recipient does not want it or for the Coach the act is a ritual and not a capability.

Scott Gerber, Founder of Young Entrepreneur council has compiled a few anecdotal notes from successful startup CEO's. Take a peek. HR is a potential employee's first impression - Human Resources departments should strive to not just be super-efficient and organized with new hires, but should really think of themselves as the first ones to welcome a new employee and make a positive impression. Taking care of a new employee/intern's unique needs is an important responsibility that should be done carefully -Annie Wang, Her Campus Media.


Innovation a critical competency - "One reason companies have begun to move to a different kind of people management follows from a shift that's under way in how value gets created. In the industrial economy, companies could often win by operating more efficiently than rivals.


Today, that's no longer enough. Faced with lower-cost competition from developing countries, established companies also need to innovate, to offer products that are better than what's available from competitors. But innovation calls for organizational capabilities different than efficiency. Efficiency requires getting people and machines to mesh more smoothly; the emphasis is on parts fitting in and reducing variation around averages. Innovation, by contrast, involves finding new and better ideas and using new processes. Managing innovation is less about averages and more about understanding outliers. The emphasis is on increasing interesting variation, then identifying value in some of the variants. That isn't easy. People and organizations form habits, which can make it hard to create sufficiently original products and services. Habits also make it hard to see value in new variants; the easiest kind of value to see is the kind you're accustomed to seeing. That's why innovative companies can benefit from people from "the edges" who have different perspectives: individuals with different cognitive or behavioral inclinations who do and see things differently. If industrial competition was about managing averages, innovation-based competition is about harvesting the benefits of valuable outliers.


Traditionally, human resources management has been geared to enabling companies to execute their strategies and plans. But in an innovation economy, things need to be more fluid. Business strategy needs to pick up on changes in the business environment - and so must human resources. Indeed, organizations including Zappos, the online retailer, are experimenting with less structure and attempting to organize around temporary projects as opposed to traditional functional hierarchies. As company strategies shift, many job roles can't be contained in boxes on static organizational charts". Organizations must reward employees because they are, in turn, looking for certain kinds of behavior, what is today called as competencies: they need proficient individuals/teams who agree to work with a high standard of performance, loyalty (challenged by scholars but still holding true) and ground level commitment.


Individual employees, in exchange for their commitment, expect certain extrinsic rewards in the form of performance pay promotions, salary, fringe benefits, perquisites, bonuses, or stock options. But, more importantly, individuals seek intrinsic rewards such as feelings of competence, achievement, responsibility, significance, influence, personal growth, fulfilment and meaningful contribution. Experience shows that high levels of pay do not always mean higher levels of retention and in, "The Dandelion Principle: Redesigning Work for the Innovation Economy - 2014, Robert D. Austin and Thorkil Sonne they continue, "Despite financial hooks like stock options, bonuses, sign-on bonuses, and lump-sum reward systems, organizations such as Apple, Google, Airbnb, Sun Microsystems or JP Morgan Chase also see retention as a function of non-monetary rewards. In today's world, compensation systems cope with the need to pay for the risk of continuing to be employable. This means: a) rewarding those employees whose performance is assessed and benchmarked to a competency standard; b) motivating all employees to perform well; c) supporting a performance/result-oriented approach to work; d) encouraging the use of work systems appropriate to the organization, and e) promoting forward planning and objective setting.


Effectively, we need to retain and reward such employees who wish to be retained. It is an impossible task for an organization to find individual reasons to make people stay and pursue a career in a long-term context. In today's context, careers in themselves do not necessarily mean long-term association.


What organizations need are examples like EY, Unilever, Citigroup, Google, McKinsey or Accenture, where people are empowered to get out into the market or workplace and make things happen. In doing so, they should gain a combination of intrinsic and extrinsic rewards. Ask Vivek Dwivedi, Director from EY and ex KPMG, EY rocks for him! Simple, he feels empowered by his Partners, his CEO/COO who are highly accomplished - secure leaders who have found a path for themselves and for their team members. One cannot do without the other. And that is truly the way for the enlightened retained!