The Next Generation Enterprise: Creating the Agile Organization

Naisbitt begins his book, Mindset!, by saying that the future is always with us . . . social media acts as our collaborator, offering stories, facts, and opinions.  But it’s not just the information that’s important.  It’s the sifting process . . . the way in which we select and verify that allows us to bring the information we collect together to create a credible picture of the future that becomes key.   So how are organizations ’sifting’ through the profound changes in technology, demographics, and the economy to identify their inflections points for change?  I think we are starting to see deep changes in the fundamental structure and operating principles of the corporation . . . for me a clearer picture of what it means to be NGE is beginning to emerge:

The very nature of work will change . . . and I say this with the full understanding that many of us have some amount of our organization involved in process based work.  While that type of work is different that knowledge work, we’re even seeing challenges to traditional process models with examples like manufacturing networks.  Processes, like software, can lend themselves to peer production too.  So, NGE work tends to be:

• Project driven . . . based on roles not jobs.  Many of us are already transitioning away from jobs to roles to project based work for some portion of our organization.  This is an important paradigm shift for leaders — ownership for talent is shared and needs to be flexibly deployed against the areas of highest value for the organizaton.  This is particularly true given talent may come from inside or outside of the organization. 
• Community based . . . the active use of collaboration tools to share information, create relationships, develop insight or create product is the work itself.  I often have senior leaders ask me about the value of social networking as though its ‘time wasted’ rather than an opportunity to enable and accelerate the real work of the organization.  Serena Software has “Social Networking Fridays.”  I mention it not because it is exceptional but because it’s simple.  Employees are encouraged to spend time each week on various social networking sites updating profiles, collaborating with colleagues and clients or recruiting for Serena. 
• On demand . . .the style of work is ‘bursty’ meaning it’s discontinuous and done when required by the work not necessarily during ‘work hours.’  Productivity can be seen and measured through results as opposed to ‘face time.’   Much easier said than done.  In my mind, Best Buy’s ROWE performance management system, judging output rather than hours, is an example of responding to the bursty nature of NGE work.  To sum it up, my colleage, Tammy Erickson, wrote a wonderful blog on “Do we need weekends?” The upshot . . .work is bursty, and we need to recognize it from an organizational point of view. 
• ‘Glocal’. . . requires that we simutaneously take a global and local approach and mindset to work.  Whether your business is global is not the issue . . . talent is. 

How we do the work will also change . . .  organizations will be networked with a more fluid structure and transparent processes that are:

• More horizontal and self organizing in nature.
• Peer oriented with minimal control being provided from the center of the organization.
• Supported by processes that are modular and can be assessmbled and re-assembled in a flexible repeatable way.

The organization chart in an NGE world is not necessarily vertical.  It may in fact, be circular.  Mozilla, the non-profit producer of Foxfire web browzer, has an incredibly effective peer development model.  With a tread bare budget and a small cadre of internal developers, it has effectively marshalled an external development community of 400 regular volunteer contributors, and thousands more who patch and test to create viable product. 

The NGE organization will embrace . . .

• Agile experimentation for innovation . . . it will use shorter development cycles with fast feedback enabling the organization to rapidly accelerate when an experiment is successful. 
• Industrial analytics or embedded process based analytics that are used to assess business performance on an on-going basis. 

My favorite example of an organization demonstrating NGE behavior is British Telecom.  This organization has embraced a wide range of on-line tools . . .  using wikis and internal social networking applications that act like Facebook and Twitter, for example, to create a peering culture of collaboration.  Doing so, has allowed them to see how groups organically develop . . . so that they can deploy them against important projects, accelerating the rate of effective collaboration.  Using social networking tools, they can also identify key talent hidden deep in the organization . . . people who don’t show up on the organization chart or in key talent reviews but are the ’supercommunicators’ or key enablers in the organization.  Talent the organization can’t afford to loose. 

The tools we leverage will also change . . . we are already seeing wonderful examples of web based tools that reside on responsive platforms . . . that are available on demand . . . instantly reconfigurable. . . agile and adaptive to circumstances.  Products, services, or interactions are co-created with customers and vendors, blurring roles.  A wonderful example of a platform business is, of course, Amazon.  Starting as an on-line book seller it has morphed into a portal for purchasing options.   Simple examples abound.  My son David, pointed me to Faceforce, a mashup that integrates Facebook with sales force data enabling you to leverage your social network in a new way.  Check out the demo.  At the core of all of this, is of course the interesting but thorny issue of who owns your social network.

As you identify your inflection points for this change . . . here are some parting questions that may help you sift through the information to create a picture of your organization’s future:

• Where is your business model experiencing the most pressure . . . and in what ways will the NGE model facilitate your transformation?
• What is the right level of openness, flexibility, and agility for your organization?  And how can HR facilitate it?
• How can you harness the power of the “community” and for what purpose . . . are there natural pockets of “peering” . . . what collaboration tools make sense for your organization?
• How will this change your talent proposition?  How are you preparing leaders for this new world?  How will your core capabilities need to change?

What NGE examples have you seen?  What are you doing in your own organization?

The List: Provocative Ideas for Talent Management

In point of fact, we are no strangers to tough talent issues having survived many of the business challenges of the last several decades.  But balencing the demands of the business with a ready flexible pool of talent given the demographic changes, will require an increasingly sophisticated set of solutions that many companies have not yet considered much less developed.  Over my travels this past year, I’ve developed my “list” of talent trends. My hope is that there is a nice balence of ‘near in’ with a fair bit of ’stretch’ to challenge thinking.   So here are a few of the ideas on my list:

• Mindset . . .ways of creating or shaping new ways to see the world.   From a talent perspective, I see organizations changing the way they think about ‘who’ is their talent, where is their talent, and how they engage or deploy the talent for maximum flexibility.  Infosys, a hot Indian engineering firm, is reverse hiring talent by setting up shop in the US with a new Global Talent Management Program.  What’s different?  Certainly not the job level or the pay . . . the point of difference is the way they are establishing a global mindset with their new hires.  And programs like Your Encore have certainly changed our mindset about the who, how, and where of our talent pipeline.  The point here is not that traditional organizations are going away, but that they will need to reinvent themselves to participate fully in a networked world.  This is about creating a permable menbrane around the organization, increasing flexibity and agility.   In the end, my favorite examples come the Manpower ads on You Tube . . .they will most certainly challenge your mindset about talent.  Have you seen them?
• Cultural Consciousness . . . the concept of organizational culture is not new, but being conscious about developing, shaping, and communicating culture is taking on a new significance from a talent point of view.  Business Week recently reported on a survey of 43,000 US college students asking them to name their ideal employer.  Ernst and Young jumped up to #4 on a ranking of 220 ccompanies.  Their rise was specifically aided by social networking.  In fact, they are branding themselves with ’social networking.’  They purposefully do not use Facebook to post jobs or look at profiles, they use it as a way to inform — their values, what they have to offer, and to answer questions.  Vlogs, designed by interns, are designed to illustrate what it’s like to ‘work here.’  Not everyone wants to work at E & Y, but for those who do, creating cultural transparency through social networking can increase the probability of finding, selecting and keeping talent . . .the talent right for them.  
• Creating Relevance . . . tapping into what is pertinenet or applicable from a talent perspective.  As the global talent issue has exacerbated, even governments are starting to address the issue.  So let me confirm what we’ve always know . . . despite globalization, location still matters.  Local communities and even countries have strategically developed distinctive advantages from a talent perspective.  Stockholm is focused on succeeding in the knowledge economy by attracting talent with highly valued skills using a vibrant urban environment.  Singapore is focused persuading multi-nationals to establish a base or regional headquarters with generous tax breaks and affordable land.  Anticipating industry needs, they are proactively establishing policies so that they can rapidly respond . . . including equal employment guidelines.  Frankly some of the best work in creating relevance comes in the form of benefits and workplace policies.  In an effort to attract their target talent demographic, people 45 and older, Border’s offers a  ’passport’ program which allows employees to work in multiple geographic locations.  Think warm winters in the south and cooler summers in the north  . . .what’s not to like?
• Open Source . . . Mass collaboration has become a disruptive force that has created new possibilities in every sector.  New social networking tools have changed the very nature of what work is in a 2.0 world.  For me the interesting question here is what does open source mean for leadership.  Gary Hamel in his book, The Future of Management, challenges us to innovate our management models . . . creating new ways to  mobilize talent, allocate resources, and build strategies.  Mozilla, a non-profit software development firm has created a new type of management mantra.  Open source management means: 
  • It’s all about getting community buy-in
  • Volunteers are willing to do more than you think . . . just ask
  • Managers are more powerful when they follow
  • Innovative things happen when you nurture renegades
  • Blend . . . open source is powerful when paired with conventinal approaches
  • Think globally. . . your talent certainly does
  • Listen . . . very carefully. . .and always
• Social Learning . . . increasingly learning happens through others.  It’s multi-threaded, searchable, physical or virtual, collaborative and personalized to each learner’s role in a specific context.  Social networks are certainly not new, but technology has accelerated their importance and impact on a variety of talent processes — development being one.  But how do you do that on a global basis.  Triple Creek offers a networking application that is being used by a number of companies.  Instead of matching individuals based on personal preferences, they are connecting people based on job skills, leadership qualities or the experienes they want to gain.  In my mind, this puts the responsibility for developing and maintaining the relationship where it belongs . . in the hands of the mentor and mentee.  Many of us are familiar with Second Life, which has developed an interesting business model selling virtual property.  Some companies are using Second Life as collaboration hubs for employees and alumni, places to create ‘cross-border’ networks in a 2.0 world, and virtual learning classrooms.  Going one step further, Sun Microsystems, Inc. has developed its own software and simulated building that even allows employees to walk through the hallway for a ‘water cooler chat’ in a 2.0 workspace. 
• Sustainability . . . I want to end the list with a conversation about sustainability . . . the ability to provide the best outcomes for humans and the organization now and in the future.  Issues of sustainability are everywhere — even in talent processes.  HIP Investor helps organizations realize that human impact and profitatility are simultaneously important with a very procative scorecard approach.  My favorite example of sustainability is one that my son David brought to my attention — Patagonia.   As trendy as they may seem, they have been at this sustainability issue for a long time . . .it permeates their very approach to the business, their management mantra, and even the way they attract, develop, and engage their talent.  As their CEO and Founder says, “Most people want to do good things, but don’t.  At Patagonia, it’s an essential part of your life.”

Now that you’ve heard what on my mind, let me invite you to share your thoughts.  What resonated with you?  What other trends have you been watching?  What examples would you like to share?

Talent Readiness Beyond the Demographics: How are you preparing for the future?

We all approach this ‘workforce crisis’ issue from different perspectives.  For some of us, the issue is quite real and our organizations are worried about a range of issues, including impending retirements, brain drain, a revolving door in key markets, a lack of talent in certain disciplines, generational issues, and looking for actionable insights.  Meanwhile others of us are legitimately left wondering what the ‘fuss’ is about. . .yes, we’ve seen the data but our current talent piplines seem to be happy, healthy and full.  Still others of us are quite simply too busy ‘right sizing’ our organizations and trying to survive in the current economic climate.  Regardless of your starting place on the issue, I think we ought to be asking ourselves some tough questions on behaf of the organizations we serve . . .

• Do you know what your organization needs to enable its future success?  Do you know what specific organizational capabilities and individual skills will be required to support the organization’s growth strategies . . . short and long term?  Do you systematically spend an adequate amount of time looking outside the organization for predicitive insights about what the future holds for your organization?  Do you drive today’s talent decisions in a way that enables your future viability? 
• What strategies do you have in place to address key talent gaps?  Do you have a workforce plan . . .have you determined which talent needs are critical to the growth of the business?  As you are making key talent decisions today, are you protecting your future?  Are you global in your mindset, even if your business is local . . . because your talent most certainly thinks globally about where and how they do work. 
• Do you have an organizational culture that fits the future needs of the organization and the evolving workforce?  What shifts in the organizational culture do you need to start driving now?  Do you have the type of culture that attracts the talent you need to enable your future?  As Edgar Schein so elegantly puts it, “Leaders create culture.  Culture in turn creates the next generation of leaders.”  To influence the success of our future, I think we need to pay attention to leader behavior now.  Given that refining culture talkes time, are you actively and consistently coaching leaders in a way that enables your future not disables it?
• How strong is the talent pipline?  Has your leadership team identified the key constituencies which have a material impact on both the current and the future performance of the company?  In what ways will the rapidly evolving workforce demographics have the most impact on the talent for these positions?  I think one of the most intriguing questions is how the demographic changes will impact the path to senior management.  The development road to the top is arduous, and once there, the challenges are significant and demanding.  Add generational aspirations and lifestyle needs to the equation, and therein lies the organizational dilemma.  Will your talent pipeline be robust enough to yield the right number of talented leaders when the time comes?
• How engaged is your workforce?  As your organization competes for talent and a share of mind, employee engagement becomes an important part of the total employment equation.  Over the past several years, companies have tapped into employee engagement initiatives as a way to increase customer satisfaction and bottom line results.  Others have tapped into engaged employees as compelling ways to fuel their growth engine with innovative ideas.  What are your key touch points that influence your workforce’s impression of the company and thus, their engagement?  What undiscovered potential does the employee engagement equation have for your business?  What “unintended messages” has your organization been delivering. . .disengaging your talent at a time when you most need them? 
• In what ways have you created a culture of learning within your organization?  How will your company retain the institutional memory of those leaving the organization?  Are your employees adequately prepared to deliver against your future needs?  I am convinced that learning will be a source of competitive advantage.  And to do that internal training organizations need to morph into sophisticated learning consortiums with deep experience in a range of learning methodologies and technologies.  They will not only develop the human capital of the company but serve as the innovation engine for the business.  Companies at the forefront are actively using social networking with a range of technologies that appeal to different generational cohorts.  What are you doing to compete?  

The fundamental shifts in the workforce demographics will impact every aspect of our organizations.  The talent decisions we make today will most certainly impact our ability to compete in the future.  Are you forward looking enough to help your organization navigate these challenging issues, regardless of your starting place?

So, how are you preparing?  

Demographic Trends - The U.K. Workforce…..Brewing Risks

The UK is a country of 60.6 million citizens that has fallen into the trap along with most other developed countries.  Its population growth has fallen below replacement levels.  The U.K.’s current fertility rate of 1.8 births is below the the replacement rate of 2.1.  At this point, the U.K., like its counter parts in Central and Eastern Europe need to brace for an on-coming set of workforce issues.

 

 

U.K. Demographics.

 

The 2006 U.K. labor force is about 30.3 million workers, roughly the same size as the combined labor forces of California and Texas.  Four workforce risks are visible in the attached age distribution chart.

 

Age & Retirement Risks

With a workforce where one in four is 50 years of age and older, employers are susceptible to both age and retirement risks (Circle 1).  Age risk is the potential productivity loss associated with an older worker and is a function of the worker and the job.  Retirement risk is the potential loss of an employee to retirement.  With 26% of the population in the 50+ category, employers need to move quickly to counter the effects of productivity changes and retirements.

 

Generational Friction

Generational friction is a term used to describe situations resulting from the differences in behaviors and styles among different generations.  With such a disparity in workforce numbers between the aging boomers and the younger Gen Y workers (Circle 2), I anticipate in some situations significant friction because of the dramatic differences in these generations.  The “new guard” is not always interested in following the ways of the “old guard.”

 

Vacancy Risks

Vacancy risks are a function of labor supply and demand and capture the potential of an open position going unstaffed (Circle 3).  It is expected that a portion of the entry and mid-level positions will go unstaffed in the coming years because of the low percentage of workers in the 16 to 34 age groups.  These vacancy risks will result from not only from labor supply challenges but also from labor demand issues as companies increase turnover by poaching their competition.

 

 

If the U.K., like the U.S., was surprised by the effects of oil shortages, then it needs to begin preparing for the next economic asset shortage its eroding workforce.  Beginning with a workforce plan that focuses on alternative career paths, automation, collaboration would be a step towards mitigating the ensuing risks.

HR’s Leadership Role in Organizational Spin-Offs

Introduction

Organizational spin-offs offer companies the chance to “reinvent” the business while keeping a core of the familiar. Start a new company (NewCo), yet keep the advantages of existing customers, products, operations, and people. Re-focus an existing company (Parent) around a tighter core of business and a new cost/operating model.

It is an exciting time of opportunity and possibility.

Yet the opportunity in a spin-off is balanced by the challenges. These include splitting up the two organizations, refocusing the Parent, and launching NewCo, all the while keeping both organizations operating profitably and serving customers. Furthermore, all of these things must be done in a short time frame to respond to the expectations of shareholders, analysts, customers, and employees. Execution of the spin-off significantly affects cost savings, employee motivation, and speed of mobilization to business performance.

For Human Resources, a spin-off is almost unparalleled in the opportunity it provides for significant impact on the business. HR must contribute and lead in the following areas:

•      Business Strategy: Define the organizational vision and culture for the Parent and NewCo organizations, focusing on “people” as a business differentiator.

•      HR Strategy: Align HR programs, services, and costs with business strategy. Choose what to keep and change from the prior organization to increase competitiveness.

•      HR Operations: Split the HR organization and operations into two distinct businesses while delivering HR services to employees without interruption.

•      Organizational Transition: Migrate leaders and employees to the right roles in each organization. Maintain morale and build buy-in to the new direction.

Experience and research show that managing people issues is a key driver of spin-off success. An examination of the challenges and lessons learned from previous spin-offs will help senior managers and HR leaders capitalize on this unique opportunity.

To that end, we first provide some background on spin-offs to aid in understanding and planning. Next, we discuss the “Top Ten” issues in a spin-off. Finally, we describe a recommended approach and principles for ensuring business success in the spin.

 

 

 

The Planning Challenge:

No Two Spin-offs Are the Same

Although the term “spin-off” always means a separation of one part of the organization from its Parent, spin-offs vary greatly from company to company. They differ in scope, time frame, strategic intent, organization, and many other factors. Success of the spin-off requires an understanding of these factors so that a process can be designed that will produce the desired business results.

Business Rationale

One of the most important factors to consider in preparing for a split is the business rationale. Reasons for spinning off an organization can be grouped into three categories:

Financial              Increase market capitalization, improve market analysis, raise capital, improve debt to equity ratios, reduce liabilities, etc.

Performance     Shed under-performing business units, resolve past issues, increase entrepreneurship and accountability, increase speed and agility, etc.

Strategic              Compete in new markets, acquire new technology or R&D, take a new marketing or distribution approach, focus on narrower strategy, etc.

Most spin-offs are a hybrid of these reasons, but understanding the specific drivers of a particular spin-off is essential to constructing an effective plan.

Size and Scope

“Size and scope” refers to the number and size of the business units to be spun off (e.g., revenue, people, customers, products), as well as the characteristics of those business units. Characteristics include the number of countries in which the businesses operate, the degree to which they share infrastructure with the Parent (e.g., information systems, support services), and/or the extent of overlap of customers and products between the Parent and NewCo.

Size and scope have tremendous impact on the speed, resources, and processes needed to complete the spin-off successfully. Most companies underestimate how significant these differences can be. For example, meeting legal requirements in multiple countries (e.g., financial reporting, labor law) may require double the amount of work in a strictly U.S. transaction. Similarly, a decentralized unit with its own infrastructure may be able to spin off under a much more ambitious timetable.

 

 

 

 

Spin Structure

Another key factor is the type of divestiture chosen for the NewCo to split from the Parent. Strictly speaking, a spin-off occurs when the Parent’s stockholders are given new stock representing ownership in what is established as NewCo. A new board of directors and officers are chosen, and NewCo becomes a stand-alone company. Stockholders then own shares in two companies (Parent and NewCo), but no cash is transferred.

By contrast, a straight divestiture is the sale of some of the Parent’s operating assets, usually an entire business unit, for cash and/or stock of the acquiring firm.

Third, liquidation occurs when the assets of a business unit are sold off piecemeal, rather than as an operating entity.

The focus of this discussion is on spin-offs, but there are many similarities in tasks and requirements with all of these different transactions (including a merger or acquisition—the reverse of a spin-off).

Note: Spin-offs can be further segmented into pure spin-offs and equity carve-outs. In an equity carve-out, the Parent sells an interest of less than 20% in NewCo to the public in an initial public offering (IPO). (An equity carve-out is typically done to raise capital and may be a prelude to a full-fledged spin-off of the remaining interests.)

Organizational Culture

A final difference across organizations that significantly shapes the spin-off process is organizational culture. Culture is especially important to consider because although its influence is harder to see it has a tremendous effect on results.

For example, while some companies struggle with tough people decisions, such as filling key leadership positions and transitioning employees into new roles, other companies struggle with the level of execution needed to conduct a successful spin-off within timeframes, thereby missing key details or deadlines. Finally, some companies are slow to recognize how centralized their decision-making has been in the past and have difficulty operating as an entrepreneurial NewCo.

A successful spin-off requires that the Parent consider all of these factors in forming a plan tailored to its organization and business goals.

Transition and Transformation: Managing Competing Tensions

There are two apt metaphors for the challenges facing HR in dealing simultaneously with both transformation and transition: “changing the tires on the car without slowing down” and “redesigning the airplane without crashing.” Achieving these competing objectives is the most difficult–but also the most satisfying—part of a spin-off.

 

“Transformation” refers to the challenge of refocusing the Parent and/or launching NewCo to function as a more competitive, market-focused organization. HR clearly plays a role in shaping the new organizational vision and culture as one that motivates employees and engages their skills. HR must also transform the HR function itself, which typically must tailor itself to better reflect the business needs and cost model of an updated organization.

“Transition” refers to the challenge of maintaining all necessary HR processes and services during a time of great uncertainty and change. During this period, employees still need to get paid and receive benefits and services. Employees and line managers need more communication as more benefit questions arise, and more help is needed with workforce planning and staffing decisions. This requires creating at least an interim HR function for two organizations from what had been a single HR department.

Operationally, the competing tensions of transformation and transition show up in decisions about time and resource allocation, both for the HR leader’s role and for the HR function as a whole. While all of the work needs to get done, there are big differences for HR in terms of prioritizing each task versus defining how it adds value.

For example:

•      The HR leader can work with senior management to define the future vision of the Parent or NewCo. This may include the desired culture, values, talent, customer service, and performance. But it can go beyond that to include matters traditionally outside HR, such as cost reduction or restructuring of the sales and distribution strategy.

•      The HR leader can focus on ensuring high levels of performance during the transition. This may include playing a key role in shaping employee communications, creating short-term incentives and rewards, or supervising program management for the overall transition effort.

•      The HR leader can focus on the HR function itself, ensuring that HR services meet all transition needs and leading the transformation toward the future HR.

These same tradeoffs apply to the HR function as a whole. What resources should be directed toward the exciting opportunities to design the future HR function? Should the “best and brightest” work on transformation, while the “steady and reliable” work on transition? To what extent should HR focus its energies internally on its own operations versus helping line managers and employees deal with change in the business? A clear set of priorities is essential to effectively manage these tradeoffs and promote business success.

 

 

 

 

What Needs To Be Done:

The Top 10 HR Requirements in Spin-offs

 

A spin-off is much more than just a checklist of tasks, but it is helpful to understand the major categories of work that HR must lead or help facilitate. Below is a “Top Ten” list of HR requirements. Appendix A includes a more detailed listing of each.

This Top Ten list is not arranged in priority order because priorities vary significantly from company to company. Yet each requirement is important in its own right and can produce significant problems if poorly managed.

We also encourage HR staff to work closely with senior management and other support functions (finance, legal, IT, corporate communications, etc.) in a coordinated effort to manage the “Top Ten” requirements. Action will be faster, more effective, and executed with greater buy-in with this type of coordination. Some organizations establish a cross-functional Program Management Office (PMO) to provide this coordination for the Top Ten requirements, as well as overall for the spin-off.

 The Top Ten requirements are:

1. Communication

Advise internal and external stakeholders of the direction, objectives, and progress of the spin-off. Communicate information on compensation and benefits, job implications, and HR programs and policies to managers and employees so they can stay focused on their core competencies. Use communication strategy and media to address concerns and increase commitment, appropriate to business goals. Enable the needed attitude and behavior shift from transition to genuine transformation and reinvention.

2. Maintaining Productivity

Establish goals, plans, measures, and incentives to keep the business operating effectively and to ensure customers are served during the spin-off. Use celebrations, rewards, visible scorecards, and executive/manager communications to keep employees’ “eye on the ball.”

 

3. Organization Structure

Determine which business units to spin off and how they will be organized and structured. Design geographic and organizational roles and reporting relationships. Split each of the Parent support units into two separate teams, one tailored to the Parent and one to NewCo.

 

4. Leadership and Governance

Establish a governance structure for NewCo and update the governance structure of the Parent, including roles for senior executives and the board. Assess internal and external candidates. Staff executive roles and the board of directors. Launch the new leadership structure to align with the new roles and direction.

5. Retention of Talent

Retain key employees during and after the spin-off. Position both companies as an “employer of choice” to help with the recruitment and retention of top talent. Adjust workforce/leadership staffing levels and skill sets to meet new business needs.

6. Executive Compensation

Benchmark, design, and financially size compensation, equity, and benefit packages for executives, staff, and the board of directors. Communicate the new packages to promote commitment and performance. Model costs and provide input for S-1 filing.

7. Stock/Equity Planning

Address the change in equity ownership resulting from the spin-off. Maintain the intrinsic value of existing option grants. Define new approaches for qualified plans, stock purchase plans, and restricted stock plans. (Equity arrangements are especially complex globally.) Assess the legal, regulatory, and financial impacts. Draft the necessary legal filings and new plan designs.

8. Employee Benefits and Liabilities

Split and/or assign all existing liabilities and tax treatments for pension, deferred compensation, long-term disability, retiree medical, and accrued vacation benefits. Develop a new benefits structure for NewCo. Model costs and liabilities and draft language for filings and plan designs.

9. Compliance Domestic/International

Identify and resolve any HR legal compliance issues. Domestically, these pertain to qualified plans, ERISA, EEOC, COBRA, HIPAA, excess parachute, confidentiality, and employment contracts. Internationally, they pertain to works councils, data protection, severance triggers, and unions.

10. HR Strategy/Service Delivery

Align HR strategy with the Parent’s and/or NewCo’s business direction. Determine the plan/approach to delivering HR services, both short- and long-term, including cost, infrastructure, and technology. Deliver priority services tied directly to the spin-off (talent, change management, etc.). 

 

 

 

These Top Ten requirements together represent a significant amount of work, and it has to be accomplished in a short period of time. HR should lead much of this work, while partnering with senior management and/or other support teams on the rest. See Appendix A for further detail on each of the Top Ten requirements. 

Recommended Approach and Principles

Our experience with organizations during spin-offs shows that an overall approach is essential to organize the wide range and complexity of activity required. A framework for orchestrating a spin-off is shown below.

A spin-off can be thought of as having three distinct phases: Pre-Spin/Deal

Closure, Transition Management/

Transformation Plan, and

Implementation/Optimization.

HR’s role in Phase 1 is primarily due diligence. HR’s major activities begin toward the end of

Phase 1 and extend through  Phases 2 and 3.

In Phase 1, HR’s due diligence activities focus mainly on the financial and certain operational

implications of the proposed spin-off. Knowledge of  employee benefits and liabilities is particularly important  at this stage, to understand the financial  burden that will be assumed by the Parent and NewCo following the spin-off.

Other key issues  include projecting the strength of each company’s  leadership team and estimating the HR infrastructure cost of each company.

Phase 2 is extremely intense because  of the tight schedule and the huge amount of work to be completed. HR must simultaneously perform transition management for today and transformation planning for tomorrow. Transition management affects all aspects of the Top Ten, from communication through talent retention and from stock/equity planning to compliance. Transformation planning in Phase 2 focuses on HR service delivery, talent, and compensation and benefits.

 

Phase 3 requires careful implementation management and measurement of increased value to the business. This phase is less about vision and design; it’s all about execution. Achieving some “quick wins” is essential while building longer-term capabilities.

 

 

Program management and communication/change management span all three phases. Program management is responsible for the overall spin-off plan (either for HR alone or as part of an organization-wide PMO) and for ensuring that deadlines and milestones are met. Communication and change management ensure that all stakeholders understand what is occurring and are motivated to participate in and support the effort.

 

In addition to the spin-off framework, our experience suggests that five principles are particularly important to successful spin-offs. These principles are based on our first-hand experience helping clients to lead people and organizational action during a spin-off. They are crucial to managing such a complex undertaking in a brief time frame.

 

Capitalizing on a Unique Opportunity

Human Resources as a profession has worked for years to position itself to have significant impact on the business. Spin-offs represent a rare opportunity to achieve this reality through:

•      The ability to participate in new company, culture, and HR strategy/design

•      The unusual opportunity to engage senior management, business units, and other support organizations

•      The opportunity to achieve tangible business outcomes in sum, a spin-off can provide Human Resources with a significant showcase for its capabilities, enabling it to build credibility in the organization.

But executing well on this opportunity requires leveraging the lessons from other companies that are documented in this paper. It also requires HR leaders to play a centrally positioned role of influence in a spin-off. By doing so, HR can demonstrate a higher level of performance and thereby help the business deliver significant increases in shareholder value.

 

 

Outsourced Contact Centers - The Service Imperative

At 12 PM a caller contacts a major U.S. airline to make a reservation and is connected to India. At the same time, a cell phone customer has a question about their new wireless plan and is connected to the Philippines.

Having your customer service call answered by someone in another country is one of the fastest growing and controversial practices in the business world.

Contact centers are the human backbone of “outsourcing,” the business practice of an outside specialist organization and/or employees taking over a service to allow the company to focus on its core business. Outsourcing has been on the rise for the past decade and that growth is projected to continue. Between 2000 and 2005, the number of outsourcing providers will double, according to a Gartner Group estimate. The Meta Group estimates that by 2010, of the 22 core Human Resources processes, large and complex middle market companies will outsource more than 50% of these processes to differentiated vendors. A key finding in all studies is the need for functionality supported by sophistication in Contact Center operations.

 

Offshoring….Increasing the Odds

In recent years, a new core competency has emerged among outsourcing vendors: “offshoring,” or the practice of handling business processes like outsourced services in countries such as Ireland, Chile, India or the Philippines. Offshoring allows U.S. organizations to leverage the costs associated with a less expensive labor pool without sacrificing quality. As an example, the October 18^th 2003 Business Week indicated that GE Capital, with 1,800 employees in India, saves about $340M a year by outsourcing 700 tasks to Indian specialists.

A recent survey by the Management Consultancies Association revealed that MCA members anticipate that offshore outsourcing will grow by 25% over the next 5 years. A 2002 survey by Gartner Dataquest Inc. showed that of responding companies who planned to increase their budgets for offshoring in 2003, nearly 70% expected their offshoring budgets to be 1 ½ times their 2002 levels. The most frequently mentioned offshoring destination, India is aggressively training people to meet the “knowledge demand” by doubling their number of college graduates by 2010. During the same period there will be a projected 50% increase in the number of engineering schools of higher learning. 60 Minutes, on Jan. 11^th did a segment on the impact of Contact Centers on the Indian economy.

Offshoring is not for every company. Some do not have the financial wherewithal to set up an operation thousands of miles away, while others are

not willing to be “early adopters” of an offshoring strategy. A recent report by Forrester Research showed that 60% of the Fortune 1,000 companies in the United States have not embraced offshored outsourcing.

 

Forrester, an independent technology research company, said that migration to offshoring usually involves a 2-to-5-year process. Other companies face restrictions on where they can locate their employees because of government contracts or union agreements. Some companies see offshoring as impractical if their business depends upon call center employees having local knowledge or understanding of accents and culture.

The Economist magazine recently reported that offshored business is predominantly English speaking, specifically U.S. and British companies that outsource some of their internal operations, such as back-office processes and routine telephone call center inquiries. The outsourcing providers are located in Ireland, Canada and South Africa, but primarily India, which The Economist says appears to be the most attractive offshoring destination for some time.

 

Contact Center Operations….the Challenge to Overcome for Human Resources

Whether a customer’s or employee’s calls are answered by someone located in Indiana or India, Mellon’s Human Resources and Investor Solutions predicts that the definition of vendor excellence will be the linkage between the web-enabled employee self service capabilities and customer focused contact centers.

These complimentary capabilities will be the cornerstone of the employee “customer experience” for services provided by the Human Resources function.

We maintain that while outsourcing selected Human Resources processes is an economic necessity, for vendors the challenge to provide outstanding employee “customer service” will only grow. As the Management Consultancies Association survey noted, 60% of its members believe that reliability of service is the most critical factor to an outsourcing operation’s success.

In a weak economy, the need for good customer service only increases. Consumers are more careful with their disposable income, tensions are high on both sides as people struggle to keep their jobs and companies are in fierce competition to retain their customer base. It is counter-intuitive – and incorrect - to assume that the contact centers of outsourcing providers can ignore this aspect of customer satisfaction. The Internet provides a fast, easy method of comparison-shopping as well as another layer of customer service complexity. For contact centers, simply hiring to fill seats and answer phones will no longer meet the needs of this economy’s customers. Their standards are escalating!

What does this mean to contact center operations? It means redefining the type of employees hired, reinforcing an attitude of customer service, developing new strategies for attracting and retaining these employees and changing the corporate perception of the value of the call center and its staff.

Self Directed Leadership Development

 

The topic of leadership is like love; it defies definition in any organized manner. The same is the emerging view regarding leadership development as even those organizations, which profess to do it well, acknowledge that there are issues that impact success.

 

A state of the art Leadership Development Process is a stated goal of most CEO’s.  Like many aspirations the “process” becomes dysfunctional despite the best of intentions of senior managers and the Human Resources function.   The principal contributing factors to this are as follows:

·        A lack of visible CEO and top manager commitment

·        The process devolves into initiatives in search of a context

·        A lack of clarity regarding the strategy, linkages among programs, and benefits to managers

·        Cost drivers frequently put process elements “on hold”

·        The program does not achieve the desired performance nor retention objectives

 

Based upon the above my colleagues and I have begun experimenting with a concept we refer to as Self-Directed Leadership Development.  Although like most consultants, we support the development of competency based development, performance management, and training programs, we have found that sustainable success in many respects relies upon personal initiative.  In fact there is an emerging consensus among our subject matter experts that Leadership Development programs designed around this “personal initiative” assumption have merit in addition to, or in conjunction with, the more organized approaches.

 

Managers whom want to take more control over their career development do crave guidance as to the areas on which they should focus, and what are the avenues of support that they can expect to receive from their organizations.

 

As to the former, we have worked with many top managers, both domestically and internationally helping them resolve the question, what will it take to succeed in their organization in the future?

 

In the context, we have developed a protocol we refer to as the Management Assessment Process (MAP).  Over the years, our experience using Management Assessment Process has allowed us to predict general management competencies that define organizational success.  Our data is based upon over 2,000 interviews of CEO’s and only their direct reports conducted since 1992.  Our data base of companies are derived from North and South America, Western Europe, Asia, and several Eastern European countries.  The range of company size is from start up- through large multi-national.  As well our data includes interviews with senior executives from foreign governmental agencies.

 

We have organized our findings into four categories Threshold Attributes, Role Driven Skills, External Leadership Attributes, and Influence Management that are presented in the balance of this document. In the creation of a Self Directed Leadership Development Strategy all four must be considered.   To appreciate the linkages the following graph is presented.

 

 

 

Threshold Attributes

We have defined Threshold Attributes as the “common denominator” skills required by all managers as the baseline for determining success.  Our consolidated experience indicates that these attributes must be possessed by all managers in abundance.  A deficiency in any of the core attributes, in our experience, either has to be corrected or we are not confident in predicting success for the incumbent.

 

Role Driven Skills

Globally successful businesses are made up of a coalition of managers who when acting in concert define their business and the competitive posture of it’s’ place within an industry as a leader or “wanna be”.  To be successful, the incumbent must function as a specialist and think like a general manager.  This balance creates opportunity for the successful and ambiguity for the less successful.

 

External Leadership Attributes

We have defined Leadership Attributes as those skills that when “rolled up” among all managers, defines the organization’s position in the external marketplace.  These skills define a manager’s ability to promote the organization’s interests through motivation, strategic thinking and knowledge transfer.  The syntheses of these skills frame leadership and the strategic thrust of an organization.

 

Influence Management

Companies are organic in their internal maturation and evolution of value systems.  The crafting of an organization’s culture, climate and social system, is a consolidation of managerial willingness to identify and push the organization’s “levers” and lack of risk aversion in promoting positive change.  Organizations grow from the inside out.  Managers’ influence skills define the framework that catalyzes the organizations common sense of purpose.

 

In an effort to provoke thinking, additional detail for each of these four major areas of developmental opportunity are as follows:

 

Threshold Attributes

Baseline attributes for successful general managers reflect the ability to think strategically while acting globally.  We have identified four common skills among successful managers.  We refer to these core skills as Threshold Attributes in that, without proficiency, in each, manager’s effectiveness is disenfranchised.

 

Global Orientation

As companies become more multi-national, it is essential that managers have the ability to think in a “big picture” context and realistically assess the implications of their decisions on a multi-national scale.  Parochially focused managers are not traditionally successful, based on our experience.

 

 

 

Problem Solving

This is the ability to solve business related problems creatively.  As well, and we believe more importantly, is the aptitude to anticipate where difficulties are like to arise and be able to address them innovatively before they take on lives of their own. Our data suggests that this is found to be a “gap” as often there is a restrained bias for action, and/or a lack of organizational support for the implementation of “untested” solutions.

 

Communication

Effective manager require the ability to move effortlessly among three vehicles of communication, the ability to persuade one-on-one, in writing and through speeches/presentations.  Expatriate and Internationally oriented managers need at least cultural sensitivity and optimally host country language skills as well.

 

Finance and Economics

Successful managers, in our experie3nce, have become somewhat expert in the area of Finance, Political Economies, and International Economics.  All managers can read a P&L.  However, we have found that most successful globally oriented managers have a “feel” for the broader international financial world.

 

Role Driven Skills

In the process of achieving General Manager Status, we have found that successful incumbents have architected a reputation as an “expert” in a specific discipline.  Our experience in numerous industries suggests that there is no one a discipline that is a “stairway to heaven”.  Alternatively, in the recent past, we have found that the more successful managers have been associated as a champion of a critical business process such as Supply Chain or Marketing.

 

In our work outside of the United States two trends bear mentioning.  First is that CFO’s who had traditionally been considered logical successor candidates are not being perceived as forcefully.  They have been supplanted by Sales and Marketing oriented managers.  Secondly, the successful International managers have become somewhat expert on the strategic use of total rewards despite the regulatory restrictions and inflationary conditions in the host country.

 

External Leadership Attributes

Leadership Attributes are the corner stone of differentiation among managers.  These skills define the managerial potential and the incumbent’s reputation within an organization.  We have identified a number of proficiencies we categorize as External Leadership attributes which we believe to be predictors of success for Leaders.

 

Strategic Focus

Successful managers understand the impact of their role on the business.  Most importantly, successful managers appreciated the inter-relationship and inter-dependencies of their roles among others.  Successful managers promote successful companies.  Our experience points out those truly successful managers have the organizational and personal maturity to avoid internal rivalries with a focus of realizing there is a need for all to be winners, or all ultimately are losers.

 

 

 

Leadership Challenge Alignment

Our experience repeatedly points out those successful managers have more that one management style they use with individual reports.  Worldwide, when mangers move up the career path, we have found that they become more delegators.  Obviously, there is a need to do this based on demands of time.  Our experience, however, indicates that successful managers, even in top positions, style ranges from directive to delegation, and they choose the appropriate style based on the task and the skill maturity of those direct reports. They are directive in suggesting to their direct reports that they pattern this behavior.

 

Industry Knowledge

Regardless of the amount of time a manger has spent in that organization’s industry, they can be perceived to have a strong content knowledge of the industry, its dynamics and position in world markets. This is an area we have found for extensive self-study if a manager is coming from a different sector.  The more successful managers have developed strongly held views on the future trends in their industry.

 

Integrity

We found that the more successful managers are role models for avoiding expediency.  Basically, we have found that these managers refuse to compromise and cut corners in the belief that their personal reputation is at issue.  These ladies and gentlemen, epitomize management by values.

 

The scandals at Enron, AIG, WorldCom, among others have raised the importance and visibility of this attribute.  Independent of Sarbanes Oxley, these managers “walk the talk” of Ethics.

 

Public Relations

Successful managers cannot practice mushroom management in respect to the general public, or more importantly, their employees and stockholders.  Our experience has found that the more successful mangers have developed a flair for external PR as manifested by the writing of articles or Op-Ed pieces, speeches, and interviews. As well they are pro-active in terms of efficient communication within their organizations.

 

Influence Management

Influence management are those skills that characterize the person’s positive ability to make a difference within the organization’s culture.  These skills build internal trust in a manager as he or she progresses up the career ladder.  This benefits the organization when the manger, through these proficiencies, is more accepted and credible when achieving a senior leadership position.

 

Conflict Management

Among the three options, avoidance, dealing with conflict badly or dealing with it well, our indicators are that successful managers make a good faith effort to resolve conflict in a principled and fair manner.  These managers engender a reputation for balancing assertiveness with compassion.   Above all contentious issues are not allowed to fester.

 

 

 

 

Network & Coalition Building

Successful managers are recognized for the quality of their relationships on multiple levels.  Foremost are their internal and external networks.  They can solicit and transmit information freely and with recognition that what they are being told is truthful and with the quid-pro-quo that they as well, are not misrepresenting their position.

 

Effective team management and participation is also a predictor of success.  My colleagues and I speculate that in the near term, this activity will only increase in importance as the business horizon becomes more competitive.

 

Staff Development

Everyone benefits when mentoring is positive.  We have found that managers who have engendered reputations as sought after mentors have predictably been more successful.  Our proven hypothesis is that these managers have a better appreciation of the energies that can be harnessed through people.  Most importantly, managers who are good mentors are usually good teachers.  As they evolve to higher levels in the organization, building stronger relationships, they are more likely to have their visions followed than managers who are perceived to be peevish, and “not having the time”.

 

Self-Directed Leadership

In the last decade the Management Assessment Process has been for us a core-consulting tool.  Through this work, we have identified predictors for future success. Our consolidated findings support our hypothesis that many of these skills cannot be taught.  Alternatively they require personal initiative in acquisition.

 

Our hypothesis is not intended to diminish the value of organization driven Leadership Development programs.  We take the view, however, that organization initiatives on their own, even when defined and managed, can only be relied upon to a degree.  The managers themselves need to be participants in controlling their own destiny. 

 

The Talent in any company is its only appreciating asset.  With this in mind we suggest that putting developmental onus on the manager as well as the organization, is a sensible request.

 

High Performance Executive Teams

 

 These days you cannot read a business periodical or participate in a meeting where the need for teamwork and frustration associated with sub optimization isn’t being discussed.  The sad truth is that in this era of restructuring where resources are rationed or absent, the need for teamwork has never been greater  The added complexity is the benefits we are deriving from Collaborative Tools and the attitudinal preferences of the Generation Y workers to whom Teamwork is to be expected not a planned for or unanticipated outcome..

 

A plethora of literature exists on why teams are necessary to promote organizational interests with concomitant wringing of hands as to why the forming and effective use of coalitions is so difficult.  Let’s face it folks, eagles don’t flock.  Teamwork at senior levels is counter intuitive in that it has not been an outcome of conditioning or career recognition.  The achievement to executive levels is traditionally recognition of individual performance and personal decisiveness.

 

The effectiveness of teamwork is further complicated by performance management and reward strategies which emphasize the concept in spirit only.  There is no tangible emphasis on recognition associated with participation in or leadership of teams.  Few organizations “walk the talk” when it comes to promoting the need for teams.  All point to the necessity for cooperation within and across departments but few organizations back up the statements with rewards or sanctions.

 

Just saying teamwork is a desired organizational attribute is a little like kissing your sister.  Mechanically, it is the same but there is a certain ambiance missing…I hope!

 

 Senior Level Executive Teams Lessons Learned

 

My colleagues and I have been experimenting with various executive level team-building approaches as an extension or our organization and process redesign work.  A core of our point of view is that there is a necessity to embed into enterprise operations the use of highly proficient collaborative tools.

 

At the senior level what we have found is the critical need for executives to acknowledge that developing the environment for high performing teams goes beyond just framing the need and appointing the people.

 

Our work has led us to hypothesize that although there may be many appropriate interventions to build and sustain teamwork at levels, e.g. Outward Bound, the initial difficulty is persuading the executives that there is a true community of interests.  This deficiency allows executives to pay courteous lip service to the need for cooperating in a meaningful problem-solving way versus spectator level participation.  At the executive level, we infrequently find insincerity but often encounter over-politeness.  The continued denial that the development of a workable coalition with a unique identity and tailored set of operating principles creates a barrier to success.

 

 

Well-Intentioned Confusion   A European Company subsequent to a restructuring set up a Top Management team (TMT) with Pan European and American Membership.  The TMT meetings were described as exercises where “we all retreated back to our nationalist borders and ignored the fact our very survival depended on each other.”  “We all spoke English but listened in God knows what tongue.”   The popular excuse within the TMT was that cross-cultural differences were the barrier to success.   A consultant was retained to give a one-hour speech on Effective Teaming Principles.  Six hours, a spontaneous workshop and intense debate later, the managers emerged from the session having diagnosed the real problems as a lack of role specificity and articulation form the CEO as to what discretion the team enjoyed vis-à-vis decision making.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Breakpoints

 

Frequently, two major breakdown points are:  (1) a lack of clarity as to the purpose of the team and (2) awareness of the comfort zone of the top manager as to degree of participation.  The fundamental concern is whether or not the group is an advisory or decision-making entity. And (3) the lack of supporting technology compelling face to face meetings vs. ongoing communication.

 

Purpose of the Team

 

Sometimes the basics are so simple they are overlooked.  There is a need for each team to ask:  “What is the question to which our formation is the answer?”  Mission and charter statements do not go far enough.  Specific role delineations, identification of suitable topics to be brought to the team’s agenda, and most importantly articulation by the top manager as to how he or she wishes to see decisions evolve need to be specified.

 

Individual Roles

 

Teamwork is disenfranchised at the executive level by what we call the “I am my function” phenomenon.  This phenomenon occurs when people only represent the point of view associated with their designated role.

 

For example, finance people only participate in financial (or fiscal) economic discussions.  This is self-limiting as the intellectual capital in the room is untapped.  The goal is to create an environment that affords an opportunity for members to demonstrate the broadest skills for the team’s benefit.

 

 

Executive Team Building Approach

 

The desired state of executives to strengthen their potential to become a high performing team presupposes that members recognize the limitations of the status quo.

 

Our approach in “turning the mirror on the team” has a number of steps.

 

Organization Climate Diagnostic

 

We have found that it is necessary to “assess” the organization climate to determine the convergence or divergence of views on factors such as the following:

           

-        Role Architecture - the clarity surrounding roles, accountabilities, reporting relationships and performance expectations

-        Performance Mentality - the degree of organizational pressure to perform….meritocracy

-        Discretion - the freedom, or lack thereof, of management discretion in making and

-        executing decisions

-        Total Rewards - the perspective regarding the competitiveness and generosity of the organizations Compensation and Benefits programs.

-        Infrastructure - the level of support from entities such as finance, HR, IT, Marketing etc.

-        Commitment - the level of perceived commitment to the organization for “the next 5 years”

 

Teaming Workshop

 

Our two-day workshops have a threefold purpose:

 

·        Generate awareness as to the dimensions of the barriers facing this team

·        Agreement achieved as to role, meeting focus, decision-making discretion, top management involvement

·        Development of a Statement of Operating Principles, referred to as the Covenant

 

Teaming Workshop Process