The importance of being the CHRO

Execution is fundamental to the success of any business. This is increasingly the case in today's ever more complex, service-driven global economy.

by Booz Allen Hamilton
Last Updated: 23 Jul 2013

And because execution is dependent on the decisions made and actions taken by people at every level of an organisation, the pressure to manage those individuals effectively is greater than ever. So who bears the brunt of all this pressure? The chief human resources officer (CHRO).

This at least is the claim of research from Booz Allen Hamilton. In a new study of how the human capital of an organisation contributes to its success or failure, Booz Allen's Jeff Akin, David Dye, David Kletter and Walter McFarland claim that when an organisation is fully aligned behind its strategy, it executes skilfully and achieves desired results. But by the same token, they argue, the counterproductive behaviour of individuals can take root and impede a company's strategy and ultimate success.

To illustrate the point, the authors use the example of a fictional CHRO, Paul Richter, who works for a company called Dahl Drums - a composite company based on the clients that Booz Allen has advised. Dahl Drums is what Booz Allen characterises as a "passive-aggressive" organisation - one in which everyone agrees to change but never actually does.

According to Dye et al, building consensus to take action in such a company is not a problem; however, converting that consensus into action is near to impossible. "Entrenched, underground resistance from field operations routinely defeats corporate initiatives, as line employees assume 'this too shall pass'," the report says. "Middle managers make a career out of biding their time until the next promotion."

Employees make decisions and trade-offs every day that are "bounded by their access to information and their anticipation of censure and reward". The challenge, then, is to "design an organisation that aligns individual actions with the actions of others and the interests of the firm as a whole".

Booz Allen claims that the formula for achieving this is a function of four individual building blocks (which HR officers are uniquely well positioned to shape) - decision rights, information, motivators and structure - and how they are aligned within the organisation. It refers to the combination and integration of the four elements as "organisational DNA".

The report says that passive aggressive organisations are so hard to fix because their dysfunctions are so "widespread and insidious". The "structure is often misaligned with the strategy, and motivators are too weak to stop the spread of frustration and, ultimately, cynicism", the report says.

So what can Paul Richter, Dahl Drums' under-pressure and exposed CHRO, do under such circumstances? His first step should be to overhaul the company's approach to recruiting and selecting its talent across the four building blocks.

Richter could improve the ‘decision rights' element of recruitment and selection by changing the selection process from an ad-hoc hiring by individual units to a more formal, cross-functional recruiting programme in which decisions are made by a committee. He could then tighten processes for sharing and acting on information regarding candidates and top performers, the report says.

To improve motivation, Richter could ensure that mediocre performers are weeded out of the management ranks, while those remaining are encouraged to recruit skilled friends and associates through a referral programme that compensates them with $10,000 if their candidate is hired, suggests the report. Structure could be improved by putting mechanisms in place to enable employees to move across previously "siloed" business units.

Similar improvements could be made across the same four building blocks in the area of performance management, the report says.

It concludes that changing organisational behaviour is not just pulling individual levers, but developing an integrated, holistic approach to performance enhancement that aligns all four building blocks. HR officers are essential to achieving this alignment and as such are fundamental to a company's success, it says.

It appears that real-life Paul Richters have a daunting challenge ahead of them.

The Performance Gene: Unleashing the human element of organisational DNA
Jeff Akin, David Dye, David Kletter and Walter McFarland
Booz Allen Hamilton

Review: Nick Loney

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