building a change-ready organization: critical...

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Building a Change-Ready Organization:

Critical Human Capital Issues 2013

An i4cp Report

Strategy Leadership Talent Culture Market

Critical Human Capital Issues 2013

The five domains of

high-performance organizations

About i4cp i4cp focuses on the people practices that make high-performance organizations unique. Years of

research make it clear that top companies approach their workforces differently. At i4cp, we work

with our network of organizations to:

Reveal what high-performance organizations

are doing differently.

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Provide the resources to show how workforce

improvements have bottom-line impact.

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peers collaborate to drive strategic research and share

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of how human capital practices drive high-performance.

Visit i4cp.com to learn more.

About this report Change is in the air for 2013, and while a challenge for organizations at all performance levels, analysis

of this year's critical issues survey data reveals that high-performance organizations are taking a more

proactive approach to preparing their workforces for what's to come. Help set your organizations' human

capital priorities for the coming year and find out how promoting leadership and organizational agility,

effectively managing talent, and developing superior workforce planning and workforce analytics can

transform change events from problems into opportunities.

About the Market Performance Index (MPI) i4cp’s Market Performance Index, or MPI, is based on self-reported ratings encompassing an

organization’s performance in four key areas: market share, revenue growth, profitability and customer

satisfaction as compared to the levels achieved five years previously. The average of the four ratings

determines MPI score. In this report, the issues with the strongest links to performance were identified

by filtering high MPI scores to isolate those activities that show a clear relationship with higher market

performance.

http://www.i4cp.com/

Contents

The Critical Human Capital Issues of 2013 .................................................................................................. 1

Change is Pervasive, Problematic and Pursued Very Differently .............................................................. 1

Agility and Preparedness are Key to Managing Change Effectively............................................................ 2

Agile Organizations Require Agile Leaders and Workers .......................................................................... 2

Preparedness is Enabled by Effective Management of Talent .................................................................. 4

Managing Talent Begins with Workforce Planning ................................................................................... 5

Wider and Deeper Capabilities are Needed to Manage Talent Well........................................................... 6

Conclusions and Recommendations ........................................................................................................... 8

Authors and Contributors ........................................................................................................................... 9

About the Survey ....................................................................................................................................... 9

About the Critical Issues Index .............................................................................................................. 9

References ............................................................................................................................................... 9

©2013 Institute for Corporate Productivity (i4cp)

Use of all results, analysis and findings requires explicit permission from i4cp.

www.i4cp.com Page 1 | Proprietary

Time-to-full-productivity Critical Human Capital Issues 2013


The Critical Human Capital Issues of 2013

The main theme emerging from i4cp’s Critical Human Capital Issues 2013 research study is the increasing

urgency of dealing with change. Indeed, three of the top 10 critical issues cited by organizations deal directly

with change, including the ability to manage and cope with change, which has steadily increased in importance

from #3 in 2011 to #2 in 2012, and finally #1 in 2013. In fact, while the significance of these three issues

continues to grow, the ability of most HR organizations to effectively deal with them has stalled or deteriorated.

While change is neither new nor newsworthy, the way that high-performing organizations (HPOs) and low-

performing organizations (LPOs) go about dealing with it most certainly is. As you will read throughout this

report, HPOs plan for change and use effective talent management practices to support and shape the future,

as well as metrics and analytics to measure progress and to pinpoint gaps that impede effectiveness and

impact. In contrast, LPOs, which also place

great emphasis on change, focus mainly on

short-term fixes and reactive initiatives.

These result directly from uncertainty of

the business strategy. As a result, low

performers are unable to align the efforts

of the workforce with any longer-term

organizational objectives, and lack the

leadership and resources to see them

through.

Change is Pervasive,

Problematic and Pursued

Very Differently

Six of this year’s top 10 issues (among a

list of 70) have remained the same over

the past four years. This is a reflection of

myriad factors, most predominately the

increasing uncertainty and complexity that

has resulted from economic instability,

legislative and regulatory change, the

shortage of critical skills in key markets,

demographic shifts and increasing

expectations among customers. Moreover,

these issues are a consequence of the

consistently ineffective attempts of many

organizations to anticipate and respond to

change.

However, when viewed through the lens of

HPO versus LPO, the top critical issues

take on starkly different meaning. In fact,

Building a Change-Ready Organization

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only three of this year’s top 10 issues are shared among both groups—two of which center on change and the

other focuses directly on leadership development.

LPOs continue to view change traditionally—as in what’s

happening to them in the present—and focus on the

basics of how to deal with change through better

management of culture and communications. They are

reactive instead of proactive.

HPOs on the other hand, are far more adept at dealing

with change—nearly three times more effective at

managing and coping with change, and over four times

better at managing organizational change. They also

outperform LPOs by a factor of four times in getting the

current culture to embrace change.

What, then, accounts for the variance in abilities of HPOs

and LPOs to meet the change challenge?

Agility and Preparedness are Key to Managing Change Effectively

i4cp defines agility as the ability to move quickly, decisively, and effectively in anticipating, initiating, and

taking advantage of change. When it comes to change, CEOs want to know how to get their organizations to be

proactive—and anticipate change—instead of functioning purely reactively. They grapple with questions such

as: How can I create a more flexible, decisive organization in which change is initiated and embraced rather

than approached with fear and skepticism? And how can I get everyone to impartially evaluate performance on

business metrics and plan accordingly? In short, how can I instill agility into my organization?

The answer to these questions can be boiled down to a single word: preparedness. To be agile, organizations

must be prepared. HPOs prepare for change better by approaching it both strategically and tactically. They take

a longer term view of their business, including the forces that affect it and the capabilities necessary to deal

with it. HPOs work simultaneously from the inside-out (applying knowledge of readiness in terms of current

supply of human capital versus anticipated demand) and from the outside-in (using knowledge of external

factors, including what the market demands). This level of preparedness is also a reflection of the strength of

its leaders.

Agile Organizations Require Agile Leaders and Workers

Agility must be purposefully developed in leaders and employees. i4cp research (in a joint study with

leadership expert William Joiner) revealed nine practices for increasing the agility of an organization’s

leadership (shown in the sidebar on the opposite page).

Increasing the agility of the leadership team often requires creating a new culture within that group. A

purposeful approach involves assessing the pace of change and degree of inter-dependence to determine the

level of agility desired and the team’s current and optimal agility levels. Once this is done, a plan to increase

leadership agility can be formulated—it should emphasize reflective action and utilize methods such as one-on-




one coaching, workshops, and action learning programs. It should both work simultaneously from the inside-

out and from the outside-in, and break agility down into practical, manageable questions, practices and next-

steps with strong focus on follow-through and results.

i4cp’s research shows that teaching change

management is one of the more important competencies

in the development of agile global leaders. However, our

research also reveals that while HPOs are four times

more effective at it than LPOs, the effectiveness among

the majority of organizations with this critical

competency is abysmal and getting worse. Forthcoming

collaborative research on global leadership development

from i4cp and the American Management Association

will reveal additional insights on developing leaders’

ability to better manage organizational change.

Agility can also be instilled into the broader workforce by

promoting talent mobility, which refers to the ability to

move workers within an organization across functions

and roles, across businesses or business units, and/or

across countries in order to address critical business

needs.

When done right, talent mobility allows greater

organizational agility by quickly filling near-term talent

needs as well as developing talent to fill critical job roles

longer term. It also results in greater levels of

engagement and retention among key talent by providing

exposure to the broader business as well as the

organization-wide career opportunities available to them.

One VP of human resources for a global food retailer with

many different businesses recounts how the company is

changing its development model and career planning to

ensure and reward a more holistic understanding of the

business. Specifically, they are laying out a framework

that supports “if you want to be promoted you need

these types of experiences (category manager,

merchandising roles, etc.), and if you want to eventually

run one of our divisions, you're going to also have both

Operations and Merchandising experience across more

than one of our businesses”. This commitment to talent

mobility builds not only the organization’s capacity to

take advantage of change through growing its talent but

also builds individual agility and resilience by

encouraging staff to take on new roles and challenging

developmental experiences.



Preparedness is Enabled by Effective Management of Talent

The level of agility in an organization is greatly affected by how talent is managed. There is a subtle but

important distinction between talent management and management of talent.

In practice, talent management often represents an HR-centric, inside-out view of the policies, procedures and

processes associated with managing the employee life cycle. Management of talent, on the other hand, is a

business-centric, outside-in view of the capabilities needed to maximize talent performance. Talent

management is activities-based; management of talent is results and outcomes oriented. Talent management,

while necessary, will be far from sufficient unless it fully enables the management of talent by the business.

This important distinction is further corroborated by i4cp’s research study The Future of HR: The Transition to

Performance Advisor; in which the HR organizations of HPOs were found to be focused on equipping line

managers to be better managers of talent. To this end, i4cp’s Talent Management in the Trenches research

suggests that a few foundational elements are essential to move the focus from talent management to the

management of talent:

Senior business leadership must view the organization’s talent management strategy as a business

issue, not an HR issue.

The talent management strategy is created as an integral part of the overall business strategy. In

essence, all business operational strategies must incorporate a talent strategy.

Functional process or elements of talent management (e.g. recruiting, performance management)

must be planned and executed as part of an integrated talent management strategy. This grows

increasingly imperative as organizations seek to utilize human capital data for planning purposes, as

well as gain more visibility into the performance and potential of their enterprise workforce.

Unfortunately, a majority of organizations are

ineffective in employing important talent

capabilities. As a result, the workforce is not

performing to its potential and gaps in

leadership and critical roles exist due to failure

to develop adequate bench strength and

ineffective development of leadership

competences throughout the organization.

In contrast, with their focus on the

management of talent, HPOs are vastly more

effective at equipping the business to

anticipate and deal with change. For example:

HPOs demonstrate an advantage of two and a half times in performance management by employing a

purpose-driven approach that fuses strategic and tactical approaches to managing organizational

performance. This ensures that the day-to-day execution of strategies is tied to overall objectives and

goals. (See i4cp's upcoming report, Purpose-Driven Performance Management in High-Performance

Organizations, for more on this high-performance approach).

http://www.i4cp.com/file/surveys/the-future-of-hr-the-transition-to-performance-advisor/download

http://www.i4cp.com/file/surveys/the-future-of-hr-the-transition-to-performance-advisor/download

http://www.i4cp.com/file/surveys/talent-management-in-the-trenches/download




More than three and a half times as many HPOs as

LPOs indicate effectiveness in succession planning,

and driving it further down in the organization, thus

ensuring better ability to quickly fill leadership gaps

when they arise with qualified candidates.

HPOs are nearly three times more effective than LPOs

in leadership development, which—given the increasing

focus on line manager accountability (see Talent

Management in the Trenches)—results in an

organization that is better equipped to not only align

the workforce with where the business is headed, but

to anticipate and respond more proactively to change.

Managing Talent Begins with Workforce Planning

“The right people with the right skills in the right place at the right time”… this is often cited by many managers

as the ideal workforce scenario. If this is the goal, the most effective starting point is via knowledge of what you

need as compared to what you’ve got. To this end, workforce analytics and workforce planning rank #2 and #3,

respectively, in terms of critical issues among HPOs, while these are nowhere to be seen among the top 10

critical issues of LPOs.

In general, HR organizations are not keeping up their ability to

measure, analyze and draw insights from workforce data and

quantify the value and ROI of human capital, both top 10 issues.

More than 60% of HR groups indicated workforce analytics as

important but only 14% indicated they had an effective capability.

The ability to measure human capital value and performance was

not much better—57% indicated it was important but only 16%

were skilled in doing it. This suggests that many HR organizations

are doing little more than guessing at the workforce drivers of

business performance and how to better manage talent.

Unfortunately, an inability to measure and plan stifle HR’s

capacity to respond effectively to change.

With regard to workforce planning, i4cp’s research reveals three

levels that are important to pursue and have strong impact on a

company’s ability to improve market performance:

Operational - the majority (including 62% of HPOs and 48% of LPOs) of organizations focus on

operational workforce planning. In essence, this is what’s needed to run the business from a current

headcount perspective (e.g. headcount forecasting to staff shifts);

Tactical - a more strategic level of workforce planning is referred to as tactical. This focuses on what’s

needed to manage the business (e.g. staffing plans to accommodate seasonal demands or new store

openings). Only 38% of HPOs and 30% of LPOs indicate they pursue this level of workforce planning.

“The HR function provides

a lot of data but not

information. You've got to

be able to provide data, but

also to tell people how to

make educated decisions.

That's information.

Business leaders want

information—they don't

want more data.”

Skip Spriggs CHRO, TIAA/CREF





Strategic – the most elusive level of

workforce planning, yet the most

impactful on market performance, is

strategic workforce planning. This

typically looks 18 months out or longer

(three-to-five years) and focuses on

what is needed in order to lead the

business and ensure the organization is

best prepared to anticipate and adapt

to change. Nearly twice as many HPOs

(32%) than LPOs (17%) are doing the

strategic level of workforce planning.

High-performance organizations are especially rigorous in their approach to workforce planning. These

organizations:

1. Define what the business needs to look like over the next three-to-five years; what products/services

will be added/retired, what markets will it enter/leave, and what skills/competencies will be required.

2. Gain deeper understanding of talent segments and risks. They start by conducting talent reviews in

order to identify high-potential employees, as well as understand the organization’s critical and pivotal

talent segments. Critical roles are ones essential to the organization’s success and require skills or

competencies that are difficult to find or develop. Pivotal roles are those that are not prohibitive by

skills or competencies, but can make incremental impact on key business measures such as

customer satisfaction. The goal of talent segmentation is to identify roles first, then skills, then

individuals.

Wider and Deeper Capabilities are Needed to Manage Talent Well

In addition to workforce planning, five of the top 10 critical issues among HPOs deal directly with managing

talent (performance management, succession planning for both executives and non-executives, leadership

development, and coaching). Only one of these (leadership development) is ranked among the 10 most critical

issues for LPOs.

Once an organization has defined its critical roles, it must plan to fill them. This requires orchestration among

an organization’s learning, performance management and leadership development functions, along with its

talent acquisition function (i.e. integrated talent

management). Nearly nine in 10 HPOs (89%)

indicate succession planning is important to

their organizations in 2013, as compared to

only 56% of LPOs. However, an even more

revealing finding is how HPOs are taking their

succession planning initiatives to layers below

the executive level. In fact, more than one-half

(54%) of HPOs are expanding the reach of this

process, whereas only one-third (34%) of LPOs

indicate the same. Extending this process to




non-executive job roles reinforces the notion that critical roles are not ones that are isolated to the executive

ranks, and also prepares the organization to adapt more quickly and effectively to change.

i4cp’s research on the performance management practices most strongly correlated to market performance

shows that several are also important contributors to the organizational agility. For example, ongoing goal

review and feedback provides opportunities to recognize new realities and shifting priorities and to make

necessary adjustments in goals and methods. Developmental plans for each period ensure focus and progress

on acquiring new skills and experiences. This creates a mindset of continuous learning and ongoing

development, which are both critical enablers of individual agility and resilience. Goal setting for the upcoming

timeframe ensures that individual goals change and adapt to major shifts in the business environment. (See

i4cp’s Nine Keys to Performance Management white paper for more information).

An exemplar of effective performance management in practice is Corning. The leadership team at the company

is highly involved in the PM process and participates in competency identification, calibration sessions, goal

alignment, critical metrics discussions and progress reviews in open forums. Practices such as these, along

with virtual town hall meetings or Q&A lunch sessions, enable employees to see and hear that leaders back

PM’s importance. Furthermore, top executives’ recognition of employee success stories and customer

accolades help to connect personal efforts with key corporate success measures.

http://www.i4cp.com/white-papers/nine-keys-to-performance-management



Conclusions and Recommendations Change is the dominant theme of the HR agenda in 2013. This alone is not significant, but what is worrisome

is how consistently unprepared and ineffective many organizations have been in managing change. Based on

the trend over the past four years, the situation will likely worsen unless new strategies for building capabilities

are implemented that enable organizational agility.

The research findings and insights presented in this paper suggest the following actions to increase

organizational preparedness and ability to respond to change:

1. Shift the focus of HR from talent management to managing talent – Promote a business-centric,

outside-in view of the capabilities needed to maximize talent performance. Make sure they are tied

directly to measures of market success.

2. Develop agility in leaders and workers – Individuals at all levels of the organization can be trained to

think and behave in ways that promote agility. Invest in specific training initiatives such as one-on-one

coaching, workshops and action learning programs. Promote talent mobility to build experience with

change and increase the organizational flexibility of talent deployment.

3. Build strategic workforce planning capabilities – This should include operational workforce planning to

support day-to-day activities, tactical workforce planning to manage the business and strategic

workforce planning to ensure the ability to anticipate and respond to shifts in market demand, as well

as mitigate business risk.

4. Focus on critical roles and performance throughout the entire organization – This will require an

expansion of succession planning focus and capabilities in many organizations. Define key roles

wherever they exist in the organization, not just at the top. Once completed, focus on the critical skills

needed for these roles, and lastly the individuals that currently demonstrate them or have the capacity

to develop them. Performance management should be adjusted to promote agility. Review and

feedback must be frequent to help staff stay in tune with shifting priorities. Sight lines of development

plans should be short to enable frequent adjustments if needed. Strategic and tactical goals need to

be constantly checked to ensure alignment.




Authors and Contributors Tony DiRomualdo ([email protected]), VP of research, and Kevin Martin ([email protected]),

chief research and marketing officer, authored and oversaw development of the findings discussed in this

report. Additional analysis and input was provided by Jay Jamrog ([email protected]), SVP or research.

Lorrie Lykins ([email protected]), managing editor and director of research services, edited this report

and Eric Davis ([email protected]), senior editor, provided graphic design.

About the Survey This report provides analysis of the results for i4cp’s 2013 Critical Human Capital Issues Survey, which was

conducted in December 2012 and had 313 respondents. Previous iterations of this survey—formerly titled the

Major Issues Survey—have been conducted by i4cp over the past three decades and provide rich longitudinal

perspective that informs our research and, in turn, aids our members in setting organizational priorities.

Data for this study have been filtered for organizations with 1,000 or more employees. Breakouts by

organization size, industry and other demographic factors are available in the interactive data workbook for

this study, which is available to all member organizations through the i4cp website.

About the Critical Issues Index The Critical Issues Index (CII) is calculated by multiplying the mean score for the importance of an issue by

another number related to effectiveness. Issues with a high CII score are considered prime areas of focus that

could, if addressed well, result in the greatest boost to organizational performance.

References Institute for Corporate Productivity. (2010). Organizational and Leadership Agility Survey. www.i4cp.com

Institute for Corporate Productivity. (2011). The Critical Human Capital Issues of 2011. www.i4cp.com

Institute for Corporate Productivity. (2012). Talent Management in the Trenches. www.i4cp.com

Institute for Corporate Productivity. (2012). The Best Get Better: Critical Human Capital Issues of 2012.

www.i4cp.com

Institute for Corporate Productivity. (2012). The Future of HR: The Transition to Performance Advisor.

www.i4cp.com

Institute for Corporate Productivity. (coming in 2013). Purpose-Driven Performance Management in

High-Performance Organizations. www.i4cp.com





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