HR today is not about HR: it’s about the business, Dave Ulrich tells Oxford Saïd
‘HR today is much more subtle and complicated than it was 10 years ago. As a profession there is much we need to learn and unlearn.’
Dave Ulrich, Rensis Likert Professor of Business at the Ross School, University of Michigan, and a partner at The RBL Group, was speaking to an audience of HR professionals and business leaders at Saïd Business School on 6 June 2017. In a presentation that was both warm and challenging, he happily responded to audience questions and explored various intellectual and practitioner byways as he described his view of the future of HR.
Making HR relevant in a VUCA world
People in HR are too often accused of being inward-looking and only interested in HR, he suggested. When asked about their ‘business challenge’, they will talk about things in HR terms such as talent management or leadership development. Even analytics, the ‘new shiny object’, which feels rational and evidence-based, has less than anticipated business impact.
But ‘the real business challenge is winning business in the market place with customers and investors,’ he said. And responding to that challenge is about creating ideas with impact. This involves developing new thinking on competitive organisations that will create value, and then making a difference through building those competitive organisations.
All of this takes place in a business environment typified by constant disruption – whether technological, social, or environmental – and new stakeholders, both internal and external, who are growing in importance. Social trends, in which a focus on the individual leads as much to isolation and loneliness as it does to personal freedom, combine with the challenges of a VUCA (volatility, uncertainty, complexity, and ambiguity) world.
What drives competitiveness?
What does it take to be competitive in this environment, he asked. How does a traditional and historic retailer such as M&S, for example, compete with an online, drone-experimenting, massive marketplace such as Amazon? ‘It’s this sort of disruption that prompts new thinking.’
Ultimately, he thought, ‘if you are not creating value for someone else then you won’t be competitive.’ And whatever you are doing has to be unique or, at any rate, not easily copied.
While competitive advantage can be found in technology, financing, and strategy, ‘the real difference is in the organisation,’ he said.
The importance of the organisation
In the (football) World Cup, the winner of the tournament’s Golden Boot – the individual leading scorer – is a member of the winning team only 20 per cent of the time.
While at the Academy Awards, the winners of the Oscar for best actor and actress are also in the ‘best picture’ with a similar frequency.
In fact, it seems that the relative impact of individuals compared to the organisation is 8:2 in favour of the organisation. In other words, as Ulrich put it, ‘People matter but it’s not individuals who create wins’ or individuals can be champions but teams with championships.
Yes, you have to have good people – which is where talent management and development matter. But they have to play well together to win – which increases the importance of the organisation and culture. And creating the right organisation and culture is down to leadership.
HR as the architect for talent, leadership, and culture
Ulrich described recent research in which the top 10 to 15% of CEOs (by salary) were measured along 15 leadership competence dimensions. Other members the C-suite were also measured along the same dimensions. Which did the audience suppose had the profile closest to that of the CEO?
Interestingly, despite the fact that the question was so clearly loaded, members of the audience guessed CFO, COO, CMO … until Ulrich relented and revealed that it was in fact the CHRO, ‘which is not who you’d bet.’
But even the best HROs do not usually become CEO, which is surprising given that the CEO is often seen as ‘Chief people person’. However, as Ulrich said, ‘You can be good in HR and create value in HR – it is not true that the only way you’re seen as good … is if you leave and become CEO’.
The point, he said, is that the HR function is the architect of talent, leadership and culture; the line managers, led by the CEO as chief people person, are the owners. If you commission an extension to your house, for example, it is the architect who provides the design, wisdom, and frameworks, although you as the owner signs it off.
Building culture and identity from the outside in
The usual approach to culture and identity is to look at it from the inside out, he said. It starts with questions such as: What do we believe in? How do we do things around here? And people are then measured and rewarded according to these qualities and the brand is designed to reflect them.
But if you’re going to win competitively, you need to look at the organisation from the outside in.
For example, Amazon has come under fire recently for a culture that has been variously described as ‘brutal’, ‘harsh’, and ‘harmful’. Ulrich was clear that abuse is never acceptable. But, to be honest, why do we like Amazon? A quick show of hands showed that more or less everyone in the audience was an Amazon customer, with a fairly large percentage admitting to being Prime customers. What people liked was its pricing, its quick delivery, and the fact that you can buy pretty much anything.
So what does Amazon have to build internally in order for it to deliver what customers pay for? Speed and efficiency are clearly important. ‘The culture inside an organisation should reflect the promises we make to customers – it’s not about value statements,’ confirmed Ulrich, its about the value of those values for the key customers. It is not about a culture, but the right culture.
How is it done?
Building culture starts at the top, and it starts by defining what the organisation wants to be known for by its customers, or other key stakeholders.
Ulrich recommends asking all members of the management team to define three things that they believe the organisation should be known for. With a management team of 10, you’ll get 30 different answers, and with a high functioning organisation around 24 of them will be the same and will match what customers want.
Then the culture has to be made real for the employees. This starts from the top down, with the management team driving the intellectual agenda. But it is also a bottom-up process: employees can tell you how to do it and create the behaviours that match the culture. Meanwhile, it also needs to be woven into systems and processes.
At the centre of the model, pulling all of these activities together, is leadership, which Ulrich described as ‘the biggest test of culture’; a company’s external brand shapes its culture and leadership.
The HR team
Ulrich concluded by looking at the competences that HR professionals needed to look beyond their traditional remit and start to develop HR from the ‘outside–in’.
Administration, practices, and strategy were still important, he said, but this new role for HR required them to be in addition a mix of architect and anthropologist, creating value for the organisation through coordinating talent, leadership, and culture.
Getting invited in business conversations, he said, requires being a ‘credible activist’, someone who could build relationships and represent stakeholders, both internal and external (investors and customers) and get people moving in the right direction. But once in those conversations, HR professionals deliver value to customers and investors by being strategic positioners who not only know the business, but can anticipate future business requirements. But to deliver business results, HR professionals should be able to navigate the paradoxes at the heart of organisational life (such as long-term vs. short-term focus, centralised vs. decentralised operations, internal vs. external focus). ‘The HR people who can navigate these tensions have the biggest impact on the business,’ he said.