Dave Ulrich on how to supercharge your human capital investment for the best business outcomes

Why HR investments often miss the real value drivers

Imagine spending hundreds of thousands of dollars on developing an algorithm that predicts the people most likely to leave your organisation. It’s a good HR investment, yes? For we all know that retaining good people is an essential ingredient for business success.

Now what if you had data that showed the ability to retain people did not have much impact on outcomes in reality. Instead, acquiring the right people had more impact on the results that matter for your business.

What about your investment in leadership? All organisations want to build better leadership. I bet it’s one of the first areas in your HR budget you look at each year. Let’s build a leadership development programme. But what if research across 1,200 organisations worldwide finds that investment in leadership training does not have the most positive impact on business outcomes. Instead, it’s building the business case that generates the outcomes. If people know why leadership matters and how leadership drives results in your company, that will cause more positive outcomes than simply designing a training programme.

These are two examples uncovered by Dave Ulrich and his colleagues at strategic HR and organisational leadership Consultancy The RBL Group. But don’t think these necessarily translate to your business. For here’s the rub. To really deliver value to their businesses HR needs to take the next step and move from benchmarking and best practice – both of which still have their place – to ‘guidance’. In other words, beginning with the results your particular organisation is trying to achieve.

From best practice to organisational guidance: The shift HR must make

“I think we in HR get so excited about our latest best practices or innovative ideas that we walk into the business leader and say, I'm going to do this in diversity. I'm going to do this in culture change. I'm going to do this in agility. I'm going to do this in innovation – instead of starting with that result,” says Ulrich.

“We have this unconscious bias of seeking best practice. We've gone to some really great thought leaders in HR and said ‘look, this idea, it will help you focus your work’. The response? ‘But what's the best practice we should have in agility? That's a hot topic today.’

“The first best practice is – is agility the right one to focus on or should you focus on innovation? Should you focus on collaboration? Should you focus on customer service? Which capabilities should you organisation drive right now?

“Instead of benchmarking – how do I compare – or best practice – who do I copy - let's move to guidance. What can I do to meet my goals? Guidance moves from description to prescription. Start with the question what can we do with our HR human capital investments to help us as a business reach our business results?”

How an organisational guidance system transforms HR decision-making

It sounds easy but Ulrich and the team at RBL have discovered some 185 variables that could deliver the best outcome for you organisation. These are based around the five most common outcomes businesses desire – employees, strategy, customers, financial investors and communities – and initiatives and competencies in four pathways – talent, organisation, leadership and HR. Imagine all that in a grid.

In this video interview Ulrich explores why now is the right time for HR professionals to get out of their comfort zone and harness this time of uncertainty rather than trying to manage it. He discusses how HR leaders can move from benchmarking and best practice to an ‘organizational guidance system’ (OGS) and what that looks like in practice. And he invites HR professionals to help shape the OGS and be part of what he calls the greatest HR disruption in more than 50 years through taking a free assessment that will generate their own OGS report.

“I think there's going to be 20-30% of HR professionals who are comfortable wearing their old clothes. They fit well – they benchmark, just tell me the company I'm going to go try to copy. If you're in that bottom 20%, I hope you've had great guidance for your retirement plan because somebody's going to replace you. Companies cannot allow human capital to lag the requirements of the business today,” he says.

“I hope HR people in the last year have found that in this crisis of 2020 and 2021 human capital is center front. 2008 and 2009 was the financial and economic crisis, 2020 and 2021 is the people and organisation crisis. I hope you've reinvented. I hope you've experimented. Try those things that will work, even if we don't do them perfectly. Get on board. The best is yet ahead.”

Transcript

Why benchmarking and best practice fall short

Let me tell you where our field's often been around benchmarking. We love to know how do I compare to someone else? How do I look? How do I compare? In leadership I get my 360, how am I doing versus somebody else? And I love to see the comparison shopping, or we then say, Oh, I need to improve on this because I'm not as good, or I need to get better and build on my strengths.

Who do I learn from, where do I go get a best practice? Look at the books on your shelf. Look at the books on my shelf. I've written the books, they're full of best practices. What is it that Amazon does? What is it that Unilever does in social responsibility? When you stop and take a step back, benchmarking is a comparison game.

And so instead of benchmarking – how do I compare? Best practice – who do I copy? Let's move to guidance. What can I do to meet my goals? 

It sounds so simple to figure out what does guidance mean? So when we go from benchmarking – how am I doing – to best practice – who can I learn from? What's next? And the term we came up with is "guidance". 

What HR guidance really means

I like the term guidance. When I was a young man in college, I went to a guidance counselor who gave me tests, looked to my strengths, my passions, and helped me shape a career. Now that I'm old, I have a retirement guidance counselor. A guidance is the computer. The phone is a guidance about my life and where I can spend. Guidance moves from description to prescription. What should I do? As we explore that, how do I get guidance? 

For example, I've thought about The People Space and I was going back over some of the last issues that have been so good, your four or five or six articles, every issue. Oh, if I go back over the last six or eight months, I've got 50, 60, 70 articles in The People Space that are all terrific. And I go, wow, that's really good stuff! So here's the question. Not just, how am I doing against that stuff – benchmarking. Best practice – wow that's good stuff or Siân wouldn't put it in her news report. Which ones work for me, which ones work for me?

And notice the simple example I gave, I have to start with what I want. So in an organization we say guidance begins with results. An HR professional sits with a business leader. The first question is not here's an HR tool – it could be whatever tool it is, building more agility, changing the culture, building leadership. The first question should be what are the results our organization is trying to accomplish? How do we define success? Because guidance needs a North Star – Steve Covey's word. It needs a direction. And so we believe that guidance starts by saying here's five results that most businesses are trying to do.

The five results that matter most

This is not new. It's the balanced scorecard. Employee results: in today's world, employee wellbeing, their productivity is so critical. Strategic results: reinventing our strategy, especially in the digital world. Customer results: our net promoter score our customer share. Financial results: both financial performance and investors. And community results – so critical today in the transparent world. Guidance starts by saying what are the results we're going after? What is it we are trying to accomplish? And then the second question is where could we invest in human capital to make those results happen? Of all those 50 or 60 great ideas in The People Space, which three or four work best for us?

That's the question. It's actually a pretty simple question. Do we in HR know where we should invest our human capital work in order to deliver the results that matter to our company? 

That sounds easy. It is not easy to answer. Do you, as an HR professional know where you should invest in the next 12 to 18 months in human capital to deliver the results your business cares about? What a simple question. That's the question guidance is trying to answer. 

One of the questions we face with guidance and I'll give a specific, but let me frame it a little bit more, is to say where is the portfolio of things we could invest in?

Where HR should invest for impact

We've got to have a topology. We've got to have a way to organize this almost unlimited world. So as I said earlier, think of five columns.

Those are the outcomes we want – employees, strategy, customers and financial investors, and communities. Now think of the rows. Where could we invest? 

There are four pathways in what we call the human capital area. So human capital includes four things, talent – that's my fingers – what can we do to build better people?

The individual competence, the talent. We've identified 10 initiatives. Second is organization. My fist. We've identified 12 organizational capabilities. Like agility, innovation, efficiency, social responsibility culture. Leadership. We've identified six ways to build leadership. And human capital includes my wrists, the HR function itself.

So take a quick step back. There's five columns, four pathways for human capital – talent, organization, leadership and HR. In those four pathways, this is where it gets complex, there's 37 initiatives we've identified and I know we don't have it. We had 36, we added one in the last three months. Five columns, 37 initiatives.

Think of that grid. That's 185 cells. Where should I invest? Where should I invest? Which of those 37 rows will give me the cells, the columns I care about? 

Here's the value specifically that you ask about. We worked in a company, and the company was working very hard to retain good people, and so they created an algorithm that actually got a patent.

They spent hundreds of thousands of dollars or pounds or euros to figure out how do we know who's likely to leave? For example, one of the predictors of leaving, they update their LinkedIn profile. They start attending other conferences. They start, they have a boss who's not as good. They've had too long in the same position.

This company created a very nice profile of who's likely to leave. Here's the question. In our talent row, remember talent is one of the pathways for outcomes, retaining good people is clearly one of the initiatives. When we look at our data and we now have data from 1,250 companies, that's amazing, the ability to retain people did not have much impact on the outcomes.

Let me say that again. The ability to retain good people across 1,200 sample did not impact those five outcomes of employees, strategy, customer, investor and community. Acquiring people did. So we go back to the senior HR person and say, it could be that in your company, retaining people is the key talent initiative.

But for the overall sample, it's not. Let us help you figure out which of the initiatives work for you. I'll give one other quick example. In leadership, we have six initiatives to build better leadership. A lot of companies want to invest in leadership development. Let's train and develop our leaders. We'll spend money building a leadership training program.

Our data shows that for the overall sample, maybe not for your company, that doesn't have the most impact on those outcomes. What does is building a business case. If people know why leadership matters and how leadership will drive the result of our company, that will cause more positive outcomes than simply designing a training program.

How HR can shift its mindset

If I'm an HR professional, the first thing I've got to do is get my mindset right. And this is not new, Siân, you and I have talked about this for decades and decades ago HR was focused on activity.

How many people got 40 hours of training? I hope you remember that discussion from 10 or 20 years ago, and finally it dawned on us that it's not 40 hours of training that matters. Did the 40 hours of training have an impact? And so we don't want to look at HR in terms of activity. We want to look at it in terms of outcome.

This is an extension of that thinking, only move it up a level. We don't want to look at the initiatives we invest in. We want to make sure that they deliver the right outcomes. So how do you take that simple question? And I love what you said. I love to think in terms of diamonds, just start with a simple question.

Are my investments in human capital, delivering the results that my business needs? What a simple question. And by the way, you laugh and I laugh and you've got these 37 by five matrix, it's just horribly complex. Then at the bottom of the diamond, how do you make it simple? I've been trying to put my, whatever IP I have, in a box.

And that's the guidance system. We've been able to say go online – www.rbl.ai – with CorpU as a great partner. We can now do a survey that takes 10 to 12 minutes on each of those four pathways that will give you some guidance about where you should invest. 

Then when you go into a business leader, the biggest problem at the bottom of the diamond is your mindset. I think we in HR get so excited about our latest best practices or innovative ideas that we walk into the business leader and say, I'm going to do this in diversity. I'm going to do this in culture change. I'm going to do this in agility. I'm going to do this in innovation, instead of starting with that result, start with the question. What can we do with our HR human capital investments to help us as a business, reach our business results?

The future of data-driven HR decisions

Let me tell you where I hope we go. And I hope people will join us in this journey of exploration. Think of five outcomes as a pentagon, I'll hold up five fingers.

You've got employee strategy, customer, investor, financial and community. Think of those five triangles in a pentagon, think of four squares, those four pathways – talent, I could invest in talent, organization, leadership and HR. Here's where we want to go. And we're not there I'm admitting, but this is the vision.

And it's always good to have a vision that leads you forward. A business leader says, I look at those five outcomes. I'd like to move up 30% in customer. 

At the same time look at the four cells: talent, organization, HR, leadership. It looks to me like the organizational piece has to move up the most. Ooh, that's cool. So if I want to move up customer, organization moves up. Now double click on that. We have 12 organizational capabilities. Which of those 12 should I invest in my human capital investments to move that customer dial 30%?

This shows up. Now, let me just stop. I think that's cool. By the way, I shouldn't share what we don't have. We haven't yet done that because we need the data to make it work. We need to create those algorithms, but that's so cool. And it goes the other way. I want to go invest in leadership. Now let's say organization, I want to become more agile because everybody's telling me to be agile.

That's in the organizational capability four cells. If I increase my agility index, my agility score, and it's part of our survey, by 30%, what's going to happen to my pentagon. Which of those triangles, employees, strategy, customer, investor, or citizenship, which one am I going to impact the most? By the way, I'd love to have those two dials.

I see HR people in the future, sitting down with their business leaders saying let's speculate a little bit. What if we want to increase our employee wellbeing that is such an issue coming out of the pandemic we've been writing about. And you've had some great pieces in The People Space about the emotional deficit disorder and the need for empathy and building that, well what if we want to increase that where should we invest? Let's start playing with those two dials.

That's where I see the guidance system heading. So that we in HR become digitally enabled. This is all digital, it's all SAS, so software as a service, it's all database using algorithms to make better decisions. 

The problem with chasing best practice

When we go into a company or when we talk to people, the most common barrier we've run into with HR people is their mindset. And I think a lot of us in HR, it's our what do they call it? Unconscious bias. Some of Amy Edmondson's work. I think we have this unconscious bias of seeking best practice. We've even gone to some really great thought leaders in HR and said, look, this idea, it will help you focus your work. But what's the best practice we should have in agility? That's a hot topic today. The first best practice is, is agility the right one to focus on, or should we focus on innovation? Should we focus on collaboration? Should we focus on customer service?

Which capabilities should our organization drive right now? And so I find in HR, the barrier is getting our headset around we're not in HR to do HR, we're in HR to help our business deliver results. 

I think there's going to be 20 to 30% or some percent of HR professionals who are comfortable wearing their old clothes. They fit well, they wear, we benchmark, just tell me the company. I'm going to go try to copy what Amazon does with customers. What I said before Unilever does brilliantly and I hate to start naming companies because there's so many good ones. What other companies do with technology. 

I hope in HR that we're willing to get out of our comfort zone. One of the lessons that I hope people think about in the last year, and it's been the weirdest year, it's not just a global pandemic health wise, it's an economic crisis for some industries.

As you said, it's a digital re–invention time with AI and machine learning and distributed technology. It's a social citizenship crisis with racism, refugees, Black Lives Matter. It's an emotional crisis. As we face emotional trauma. In the United States, more than others, more than Britain right now, it's a political crisis as we have such horrible political dissent. The collection of these crises has taught us that we're going to live in a world of uncertainty. We don't know the future. In fact, I like to say anybody that comes on the show with you or with someone else and says, I know the new normal, turn around and run because they don't need you.

They bought Google, Zoom and Amazon stock in January of 2020. We don't know the new normal. And so instead of being threatened by uncertainty, instead of trying to manage uncertainty, let's harness it, let's harness it. Let's use the uncertainty as an opportunity to discover new ideas.

I hope HR people in the last year have found that in this crisis of 2020 and 2021 human capital is center front. What we know, what we do, is the most critical thing a company has to work on. 2008 and 2009 was the financial and economic crisis, 2020 and 2021 is the people and organization crisis. I hope you've reinvented.

I hope you've experimented. By the way, if you're in that bottom 20%, you're not willing to I hope you've had great guidance for your retirement plan because you're going to be moved by, somebody's going to replace you. Companies cannot allow human capital to lag the requirements of the business today.

Now in my mind, the best is yet to come. That's an opportunity for discovery and I hope that we in HR/people can discover what human capital initiatives, I'll say it again, in talent, organizations, leadership and HR, will deliver employee results. Help us become caregivers to our people. Deliver strategic results as our business reinvents our strategy and how we position ourselves in a new digital world.

Reinvents customer results, net promoter scores, customer relationships, rediscovers and reinvents financial results. And perhaps most critical today is citizenship results. For me, Siân, this is the future of HR. I hope you can get on board. We've tried to give you the simple plank, gangplank or plank way to get on this new direction.

Is it perfect? Not even close. In fact, as you get involved, you're going to tell me, Oh, Dave said this would be so easy. It's not. Yell at me, curse at me and then join us on this journey of discovery to make the best yet ahead. So Siân, I feel passionate about it. I am so grateful, Siân, for people like you, who are constantly not doing what they've always done.

My rule of thumb has been for the past number of years, and you and I talked about this a decade ago, I want 20 to 25% new material every 12 to 18 months. For me, the past year has moved that up to 40 to 50%. My dear friends in HR get onboard. Reinvent, rediscover. Try those things that will work, even if we don't do them perfectly. Get on board. The best is yet ahead.