The Perfect (Performance) Storm: Two Items You Must Have On Your 2004 Agenda

This is a fascinating time to be in human capital management, which includes human resources as well as such functions as organizational development, leadership development, training and development, etc., whether they fall under the Human Resources (HR) department or within Operations or other business units. Why do I think so? A variety of factors are now putting human capital items at the top of senior management’s agenda. Business pressures, and a need for rapid execution like never before, are forcing recognition that having the right approach to human performance is central to success. Human capital management is no longer the exclusive province of the HR Department, if it ever was.

Personally, I think it’s even more exciting and challenging to be involved in the technology supporting this area. Because of the need to systematically deal with human capital and human performance, organizations want and need to find ways to leverage technology in this area. We are only in the infancy of developing solutions for what is coming to be known as “ePerformance.” About 18 months ago, seeing the challenges that my clients were facing, I began a research project to find out what was “really happening out there.” I went into this project assuming that there had to be some better answers. During this process, I examined what vendors were offering and where they said they were going, and I interviewed over 175 senior human capital managers in more than 75 large ($1B+) organizations throughout the U.S. The interviews focused on the kinds of issues they were facing, how they were addressing these issues, and the outlook for ePerformance solutions.

I believe this research is particularly relevant to members of The eLearning Guild. The Guild is composed not only of people who are using technology for training, but it also includes people who are looking at the myriad uses of technology to improve human performance. If it were up to me, we would immediately rename the group the “ePerformance Guild.” In this article I present some of my central findings and, in particular, those relating to two topics: (a) the landscape and challenges facing us as human capital managers, and (b) the top two items that should be on our agenda for 2004 as members of the Guild. I’m confident that the content in this article will help you shape discussions about top-level human capital challenges in your own organizations. I believe that these top items, and the context from my research, are critical to effectively defining strategy for 2004.

The Setting: Business and Human Capital in 2004 — The Performance Storm

One of the striking results of the research has been the consistency of the challenges facing companies and, in turn, facing human capital managers. As I was concluding my research, I saw a Conference Board CEO survey conducted in Fall 2003 that identified the top business challenges. These included (a) lack of pricing power (pricing power is the effect that a change in price has on demand — lack of pricing power means that raising prices lessens demand), (b) changes in type of competition, (c) industry consolidation, and (d) regulatory issues.

Given this business environment, the Conference Board survey then asked CEOs about their top management issues. Interestingly, four of the top eight issues were human capital issues. It led the Conference Board to conclude:

“It’s the People, Stupid!” — Conference Board CEO Survey, Fall 2003

In fact, these days when CEOs say “People are our most important asset,” they may actually mean it.

In my interviews, human capital managers cited very similar top issues, and they were remarkably uniform in describing how these top level challenges caused an environment of constant and ever more rapid change. These managers had certainly heard the new (re-) emphasis on people from senior executives in their organizations. They often cited discussions with senior management about “people,” “innovation,” “learning,” and “organizational effectiveness” as the “only sustainable competitive advantage” for the business. They also often said that senior management was squarely focused on “ability to execute” and “execution is the key.” It would be surprising if these don’t sound very familiar to you.

The Conference Board survey and my interviews underscore the importance of human capital strategies in organizations. As Guild members, we are in the middle of these strategies. After years of fighting and clawing for our position at the table, we finally are getting there. Now that these issues are being discussed at the very top of the organization, it’s a great time for us. But wait — like all good things, there’s another side to this story.

Through these many conversations, I also heard a growing sense of frustration around people issues. People costs may be as much as 40-75% of budget in typical organizations. At the same time, employee satisfaction and engagement levels in many organizations are well below where senior management would expect. It appears that employees aren’t really committed to helping management succeed in this very challenging business environment. Instead, organizations seem to be made up of “compliers,” not “owners.” Senior management often feels it’s fighting a war using an army of pacifists.

To make matters worse, senior management doesn’t really have the tools to understand these issues. They lack appropriate metrics and real visibility into people issues, and they feel they actually have little influence. So from their perspective, people are simultaneously the biggest cost and also the biggest barrier to effective execution. A little overstated, but likely not far from the truth for many organizations.

Now, to add to the mix, are you aware of the little thing called a “skilled-worker shortage?” If you subscribe to Business 2.0, take a look at the September 2003 article titled “The Coming Job Boom.” It’s an eye opener about the demographic shifts coming up. We all know about the aging of the baby boomers and the gap in the workforce that will be created. It’s understandable that people have a hard time worrying now about future skilled-worker shortages when there is so much unemployment, and while many are worrying that their jobs are moving off-shore. But the statistics are a “wow” experience.

One quote from the article tells the story. Referring to the tight labor market that existed at the end of the “dot-com” era, Labor economist Anthony Carnevale, former chairman of President Clinton’s National Commission for Employment Policy predicts:

“By comparison, what employers experienced in 1999 and 2000 was a minor irritation. The shortage won’t just be about having to cut an extra shift. It will be about not being able to fill the first and second shifts too.”

Sidebar 1 Startling Skilled- Worker Shortage Predictions, provides more data. Note that both the Business 2.0 article and the data in the Sidebar refer to the U.S. However, low birth rates in some countries, especially Japan, are expected to cause similar shortages there. Even with a growing off-shore work force, the shortfall will amount to an estimated 10 to 14 million workers.

Now I do recognize that these are economists speaking, but in this case the research assumes a sizeable shift to off-shore work and normal GDP growth. The predictions are ultimately based on demographics which are highly reliable (all the people are already born). If you are aware of the struggle that healthcare organizations have to find nurses today, that’s a predictor of what may happen in many different fields in the future.

In the research, I also heard another disturbing trend. Recent downsizing and the aging of the workforce has left midlevel management particularly weak. This means that (a) execution today is hard given lack of management capability, and (b) there is big concern among senior executives that they don’t have their leaders of tomorrow within the organization.

Combining the focus of top management on performance with the complexity of these people issues and the upcoming skill gaps makes me firmly believe we are currently in the calm before the storm — the “Performance Storm.” All of a sudden, things are converging on performance. Listen for the terms “business performance management,” “performance improvement,” and “performance management” flying around your offices. In the past two years, many companies have ignored these issues because the focus was on cost-cutting, and talent seemed to be plentiful. But now that businesses are coming out of the “hunker down” mode of the recession, we are seeing really big human capital challenges that are going to come crashing down on us in the next few years.

The good news is that many of the human capital managers I talked to seem to have their radar on, and they seem to see the storm coming. Of course, seeing the storm and being able to ride it out are two different things. As a homework assignment, go watch “The Perfect Storm” again. I’ll give you a hint: in the end they all die fighting the storm.

Challenges 2004

So with that as the backdrop, let’s shift our focus down a level: what specific challenges were facing the human capital managers that I interviewed? The top challenges were somewhat varied (see Sidebar 2, Human Capital Challenges) but there were definitely three themes that were repeatedly mentioned:

• Focus on strategic human capital services not transactional services,
• Talent development, and
• Technology direction.

Let’s look at each of these. First, recognize the difference between transactional HR-type services, e.g., payroll administration, benefits administration, etc., and human capital services. While organizations certainly need a way to provide transactional services, the issues are distinct from those involved in providing business-critical services around human capital and human performance. Senior HR management can focus on cost and service level improvements for transactional HR separately from the strategic issues around human capital and performance.

Second, a very common senior management objective in organizations today is to “develop the best talent.” It’s scary how many times I’ve heard this incredibly vague objective coming from the very top of the organization. During my research, the discussion around this issue often turned quickly to more specific challenges in the following area

• Recruit, Select, Hire, Onboard
• Develop, Grow
• Retain

I’ll look at the “develop the best talent” issue more in the next section.

Finally, we heard quite a spectrum of predictions about the current and future states of technology. (See Sidebar 3, Technology Solutions.) But almost to a company, these expectations were accompanied by comments about the anticipated technology challenges and frustrations. The most commonly cited challenges were:

• Most people had some idea of the kinds of solutions they had in mind, but were not sure if their approach was correct.
• Most technological solutions addressed only part of the needs, and they didn’t quite fit the most pressing issues.
• Those interviewed had implemented various solutions, but these implementations were silos (disconnected or isolated solutions that did not communicate effectively with each other), e.g., performance management systems, learning management systems, documentation, support, etc.
• Different areas in the organization were doing different things.
• Many of those I spoke to had no clear picture of what their technology direction should be.
• And, of course, there were significant budget constraints.

The overall result is a feeling of discomfort around technology. Obviously, this is the world we live in, so I’ll get back to this issue below.

These are the top challenges cited for 2004. So how does this translate into agenda items for 2004? There are two issues that we, as ePerformance practitioners, should have on our agendas that aim squarely at talent development and technology direction. The following sections look at these issues.

Agenda item #1: Get a handle on the “talent goal”

When senior executives say that one of their important issues is how to “develop the best talent,” understand that they may have no real idea what this means, although it sure sounds good. This is a great opportunity for Guild members! Start a discussion around this vague goal and get some initial solutions underway. Solutions go far beyond technology, but technology plays a big role in this area.

The first part of getting this moving is easy. Once you move conversations about the “Talent Goal” beyond the superficial and begin to ask what it really means, the challenge becomes much clearer. “What does this goal mean?” “How do we know what our talent level is today?” “How do we know if our talent level is increasing?” “How do we know where we need to raise our talent level?” These are all very hard questions and there are no easy answers.

Senior management probably has some vague ideas about where the gaps are, and they may have some intuitive feeling for talent level, but even senior HR managers don’t have a good picture today of the necessary measurements or metrics. Almost certainly they won’t have answers to the questions about talent level. Let’s consider three important aspects of moving this forward in your organization.

Align measurement expectations

The first key step is to get alignment with senior management about what their expectations really are and how you can approach measurement. I’ve seen several efforts to define these things fail when the focus wasn’t on issues that the business really cares about. A classic case was the decision by senior HR management to use a survey tool that asked a variety of standard engagement, satisfaction and people practices questions, but business management disparagingly called these “HR-type” questions, even though this survey instrument had been proven to correlate closely with business results.

This disconnect is quite common. Consider the difference between typical “HR-type” questions, such as “Have you received a formal performance review within the last six months?” versus questions that look directly at behaviors that lead to customer satisfaction, such as “Have you contacted the customer within the last seven days?” The “HR-type” question has the advantage of being generic — it applies across company and job function. The downside is that theoretically you could have a high performing company or team with low scores on that question and high scores on questions that matter to the business.

I do not mean to dismiss the value of instruments that focus on people practices — these instruments often point to problems, and they are often predictors of performance. But as a community we need to recognize that such instruments may or may not be accepted by the business.

Again, the first key is alignment of expectations around what needs to be measured. The good news is that there are a wide variety of metrics and instruments that can be applied to practices that are not necessarily specific to company or job function, but which are closely aligned with valued business outcomes. Examining these instruments in the light of the performance particulars (outcomes and behaviors) that you want to measure may cause survey tools to emerge that can provide some initial opportunities for alignment.

As technologists we have a real opportunity to get these instruments rolled out in our organizations. We also have the opportunity to use the resulting metrics at both an organizational level to define and drive higher level strategy, and at a tactical level as input into improvement of individual human performance.

Avoid the competency bog

Many organizations are talking about competencies as a central theme — but, although it is certainly relevant to the “talent goal,” I always get a little cautious when someone talks about “competencies” because the term means different things to different people. The good news here is that there has been lots of research and a variety of effective models created around more narrowly defined terms such as outcomes, behaviors, skills, knowledge, process, inputs, desire, and resources. Competencies based on these issues hold great promise for organizations, because ultimately they define things like talent level. Also, outcomes and behaviors are factors that the business will get excited about.

At the same time, many organizations are struggling and bogged down with competency models. Because they see competency as central to all aspects of human capital (hiring, development, etc.), they want the perfect model. The problem is that for any reasonably sized organization these models are incredibly large and complicated.

To avoid this, many human capital managers simply focus on initial models — they assume that they will improve these models over time. Care is required when taking this approach because basing performance reviews on a model that you know is only partially complete is problematic. Assuming you take care to define the stages of your model and act accordingly, an early stage (partial) model can get you moving. Business managers will get behind those elements of the model that point at outcomes and associated behaviors that they know drive their business. Focusing on this lowhanging and agreed-upon fruit is a great start and avoids the competency bog.

Combine metric sources

Finally, as technologists, we have a somewhat unique opportunity to help address the need for measurement. Organizations use different metrics for specific job functions. For example, many measures track the performance of customer service representatives (CSRs) and salespeople. Including these measured numbers, along with other kinds of measurements, can provide a picture of talent. Combining the results of an auditing tool for customer service representatives with totals for call volume and firsttime call handling, survey results by their coach or manager, and a self-assessment can give a detailed picture of a CSR’s performance. This picture can easily support development planning and further, these metrics also tend to establish patterns for the supervisor as he or she looks at roll-up numbers.

Because technology is a great tool for collecting and distributing metrics, we should be jumping into this fray and defining how we can help address the objective of “develop the best talent.”

Agenda item #2: ePerformance Strategy

As I mentioned in the Challenges section, questions about technology were abundant during my interviews. Surprisingly, very few companies that I talked with had taken a systematic approach to ePerformance. There are various factors at work here, but the two most commonly cited reasons for this were: (1) different parts of the organization (business units, Organization Development vs. Training and Development, etc.) are working on different aspects of the ePerformance picture, and (2) there is little understanding of the opportunities for technology solutions.

In speaking with people at widely varying stages of technology adoption, I still found some common elements shared by those who were finding success with technology. These are people who felt they had made appropriate progress in their use of technology, who said they had realized success in the eyes of the business with their use of technology, and who felt they had a good handle on technology. Some common characteristics I found were:

• They’re over the fact that there is no single, holistic solution. As much as some vendors would like you to believe that they have a solution that addresses the spectrum of issues, there really is no single solution that you can go out and buy. Instead, the common theme is buying best-of-breed, and then integrating these solutions — integration is the key.
• They have an ePerformance strategy. There was a definite correlation between people who felt they were being successful and those who had defined an overall strategy for their use of technology. Many firms that did not know how their isolated, tactical, or short-term “point” solutions fit into the larger picture were struggling. Firms that knew the longer-term direction could make technology choices that made sense both short-term and longer-term.
• They make progress incrementally based on a specific time horizon. To make progress on defining a strategy, a three- to five-year time horizon seems to be the sweet spot. If the time horizon is closer than that, you will have solutions that become silos. A more distant time horizon becomes nearly impossible to choose.
• They use a variety of different ePerformance approaches. Successful projects often used a very wide variety of solutions, or as one person called it “very blended solutions.” Typically, these solutions involve a combination of inventions such as reference systems, on-going support systems, assessments, performance support tools, reminders, controlled communications, etc.

The bottom line here is that, while there is no easy solution, and while every company is likely to have different needs, no one should ignore the need to create an ePerformance strategy. An ePerformance strategy gives the bigger picture and makes each decision along the way that much easier. I often heard managers express frustration that they seemed to be asking the same questions over and over again around technology. Is this the right tool? Should we be doing something with this now, or hold back? All of these questions looked at individually are very hard (if not impossible) to answer. Taken in the context of an ePerformance strategy, the answers often become quite clear.

So how do you define an ePerformance strategy? (1) Start with very important conversations around defining the objectives and success factors for the organization. (2) Define the primary approaches that will be used to address each kind of performance improvement program around these objectives and success factors. (3) For each of these approaches define how technology can be used to support these strategies. (4) Prioritize the strategies, and the technology support for those strategies, to define a particular approach over a given timeline.

The outcome is an ePerformance strategy that includes a high-level plan.

In my experience, this process yields alignment between your direction and the objectives of management, and it yields a workable plan to act upon. Many questions suddenly become much easier to answer. By way of an example, one of our clients was undergoing a major transition in their business and needed to look at how they were going to support the people side of it. Although they had a pretty good picture of some elements of their strategy, they didn’t know how technology would apply. After using the process described above, the following plan elements emerged:

• Individual level assessments including performance data, multi-level reviews, and self-assessments integrated into a LMS (Learning Management System).
• A LMS that could be used for development planning, providing resources based on the individual level assessments, and follow-up and tracking of activity.
• A semi-automated performance review process (originally they were looking at much more robust tools).
• A variety of e-Learning mechanisms, including virtual classrooms and selfpaced online learning.
• A wide variety of tools and online job aids including many that focused on communication.
• And, of course, integrating these systems into their existing technology and migrating some existing data to the new systems.

In order to create an effective plan, an organization needs to be aware of what can be done. This is another place where Guild members can make valuable contributions. One of the common reports I heard from senior HR managers showed a lack of knowledge and awareness of what can actually be done. “What are other people doing?” “Is this the right technology to consider?” Of course, it is a big challenge right now to keep up with all of the opportunities for ePerformance. There is a lot going on inside corporations that is not being discussed. Many of my conversations started with, “We aren’t really doing much with technology,” only to find some real nuggets inside that organization.

So how do you find out more? Well, of course, you join and participate in an organization like The eLearning Guild to help get connected with others in the field. And you read lots of articles. (Please see the additional resources at the end of this article.)

Conclusion

Whenever a big storm approaches, there are a variety of actions people take. Some people head for cover and some people grab their surfboard (at least here in California they do). This is a storm where we need to do some surfing. We can’t sit back and allow the discussion of how technology will be used to improve human performance to go forward without our participation. It would be easy to sit back and be viewed as the online training group — and, unfortunately, that is what “e-Learning” has become for many people.

I truly believe that we as a community need to:

(a) Understand the landscape facing us as human capital managers within our organization, (b) Begin to define how we can help measure and define human capital in our organizations, and (c) Create a picture of how technology will be used in our organizations to improve human performance (an ePerformance Strategy).

It should be a fun year!

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