Human Resources Myopic: How Firms Are Losing the Human Capital Battle

In 2014 the Spanish football league champion has been Atletico de Madrid. How is a club with just the 30% of the budget of Real Madrid and Barcelona able to over perform those huge teams? The answer could be playing like a team rather than rock and roll stars, having a well-motivated team rather than just motivating a few people, and creating a challenging environment taking risk offering opportunities to potential outstanding players. And something similar happen to companies, so there are huge organizations that are losing the human capital battle because they have Human Resources Myopic. So let’s review some of the commonest Human Resources Myopic:

1. Misunderstand experience

Confuse future success with experience in large multinational companies and/or key positions

Many people assume that large multinational hire “always” the best people. Indeed, there are many people working for multinational firms that they are not outstanding. Many times experience is used as a leading indicator of success. In my personal point of view using experience as an indicator of success is leading many times to hire the wrong staff. I would suggest analyzing one by one the eight secrets of success that Richard St. John teach us:

• 1. Passion (do it for love, not for money): Does the candidate loves/enjoy with his job? Why?
  2. Work (it is all hard work, nothing comes easily): Does the candidate work hard? Any example?
  3. Focus (focusing yourself): What is the focus/objectives of the candidate?
  4. Persist (persist to failure): Can the candidate show any example of persistence?
  5. Ideas (generate and bring up ideas): Can the candidate show the last idea that brought to his organization?
  6. Good (put your nose down in something and get dam good at it): What are the strongest points of the candidate?
  7. Push (push yourself physically and mentally): What does the candidate do to push himself to the next level?
  8. Serve (serve others something of value): Can the candidate show any examples serving the organization or customers?
     

     Believe that mastery is equal to experience

     Mastery is the desire to get better and better (Dan Pink). Unfortunately, you can find people with experience but they are not able to get better and better, or at least at the speed required. For instance, there are a passive staff that they expect to get better and better without a proactive approach to self-improvement (people without continuous learning habits like reading).

     Over weight experience

     Experience in an industry and/or position can be something good because accelerated the implementation time and risk of executing initiatives. However, many times experience is the enemy of creativity and over performing, because experience used to push people to replicate the same strategies that competitors. It is amazing the number of firms that they are not able to growth properly for many years, but if they are not the industry leader and just copy the industry leaders is complex to win leaders using their own strategies.

     High average length of employment is good

     Amazon does not think that they have to retain all their workers. In fact, Amazon is paying employees to quit, because they do not want old employees rather than dedicated ones.

2. Hiring/Promoting

Human Resource leads hiring processes rather than supporting

The hiring process is a key process that must be led for the person that needs the position. Nerveless, we can find managers that they think that HR is going to facilitate they work although they do not understand the risks leaving the HR department to filter candidates rather than generate candidates. Could you image a good football trainer that delegates the task of deciding who players are hiring? Good managers take advantage from HR Department to generate more candidates for the open position and receiving support to understand the personal skills and coherence of the candidate. But they do not delegate the task to filter people. Why? Because it is difficult that HR understands better than managers the complexity of the position needs. For instance just in supply chain the Supply Chain Council has identified more than 160 job descriptions that need a very deep area knowledge in order to manage properly. That means that a firm can have closely to 1.000 potential job descriptions that HR is unlikely to manage properly. So the only way for HR to lead the hiring process in today complex job description environment is looking for professional profiles that exactly fits the current professional requirements which used to mean over weight professional skills more than personal ones and that decision should be taken for the manager leading the process.

Unbalanced outside hiring versus inside promotion

In this case organizations used to perform poorly because having the tendency to overvalue external people used to demotivated good staff and they will likely leave the firm. On the other hand, over promoting internal people means rejecting to bring “new blood” to our company. I mean giving up new knowledge, new experience, new ideas, and so on.

Hiring/Promoting much more extroverted than introverted staff

There are still many people that get very easy impressed for extroverted. For instance, there are studies that show talkative people are rated as smarter, better-looking, more interesting, and so on. Thus, we could assume that extroverted are better prepared to create and lead teams. However, introverted are quiet, work more slowly and deliberately, cerebral people, reflective and good listeners. I mean they are thinkers/introverted that could bring very good ideas. Having a quite unbalanced number of introverted could generate “lack” of good thinkers and new ideas.

3. Leadership style with Human Resources Myopic

The main issue of poor performance is not having bad “soldiers” rather than bad “generals”

Companies underperforming most of the time have “bad Generals,” I mean bad top management. Good top management teams create high perform teams and build strong middle management staff, while weak top management teams used to be promoted until their level of incompetence and they do not know what they need and how to create high performance teams. “Bad Generals” create poor performance teams in which people are unmotivated for being managed by mediocre people. We have to stress that there are HR departments that they do not pay enough attention on top management and they used to focus on middle management. Having 360 degree feedback for top management would be a good approach. In order to identify mediocre top management, it is important to know the profile of mediocre top management:

o   They do not lead the team because they are not confident enough in their competencies.

o   This people do not take risk challenging people because they are not prepared to coach the team.

o   They cannot lead by example because they are not better than their team members.

Aggressive versus soft leadership

Nowadays “aggressive” leadership like the 70 – 20 – 10 Rule of Jack Welch is considered too strong leadership approach and poor HR oriented. Thus, many firms move to the opposite side, I mean they used a soft leadership and acquiescent HR approach. Likely the best approach is a balance between the aggressive and the soft management. We have to mention that companies underperforming are more likely coming from a soft management period rather than an aggressive one.

Confuse communication skills with leadership skills

Good communication is a desirable skill for leadership. Nonetheless, communication without strategic thinking and executing skills, it is not working at all. We could use any leadership model in order to be sure that we do not over or under weight any leadership skill.

“Business politics” staff vs transformational leaders

It is amazing the amount of promotions of “business politics” because they are politically correct (they take decision that people like, although it hurts the firm) and they did not use to assume high risks (they do not have impressive results, but they do not make noise). On the other hand, we have transformational leaders that used to be “fighters” who take tough decisions and do what they must do rather than what could be expected. Unfortunately, transformational leaders did not use as popular as “business politics.”

A new transformational strategy and the same team

There are organizations that try to implement a new transformational strategy, but they “believe” that the staff is able to implement whatever strategy. Unfortunately, transformational strategies used to need the new blood/staff with new capabilities to implement the new strategy at least in a few key positions. Crafting the firm strategy is not easy, but properly executing the strategy is even more complex. And one of the complexities is that not everybody fix in a new transformational strategy.

4. Motivating staff

The unchallenging environment

They are people that limit the challenging concept. They believe that challenging is doing the same tasks but bringing higher results. This is a challenge, but the “real” challenge is allowing staff to perform tasks that they have never done before (manage people, having complete responsibility for the profit and loss account of a Business Unit, etc.) This “real” challenge means motivating staff at the same time that push managers to perform the tasks of coaching,  supporting the staff, making people growth, motivating and so on. It is amazing the amount of companies that are not prepared to offer “real” challenges to their employees, and those unchallenged have to leave the firm. Many people know the concept of empowerment, but how often the concept is in practice in our workplaces?

Omit autonomy motivator

Companies like google show us the importance to lead staff by objectives and offer them autonomy to direct their lives. I mean flexible timetables that allow workers to combine professional and personal lives, and time to think and bring up new ideas.

Bad implemented talent or leadership program

There are much talent or leadership programs that rather than discover the real talent of the organization are based on assuming that top management know where the potential talent of the firm is. So there is not a formal process to motivate staff and discover the real talent rather than a discretional process to decide who potential talent has. There are firms that do not use these initiatives to motivate staff to show their best and offering the opportunity to win a position in the talent/leadership program. Many organizations decide by finger who potential talent has what used to unmotivated many people that will leave the firm.

5. Rewards

Focus on HR complexity reduction rather than on implementing flexible salary

I have heard in many firms that they do not implement a flexible salary because it creates a lot of complexity in the HR area. Flexible salary is a very powerful tool to retain and motivate people at the same time that organizations are able to influence much better on productivity and total payroll. It is amazing that there are companies that they would say that they have successfully implemented flexible salary for top management, but again they are quite myopic to realize that we are motivating generals and unmotivated the troop. The business battle is impossible to be won without the unconditional commitment of the troop.

Invest on people is training the staff rather than offering new opportunities

Training is a necessary investment, but the “real” investment o people is promoting people.

6. Structure

Multinational firm rather than a true global company

Multinational firms used to have a powerful headquarter that centralized most of the important decisions. They used to have presence in other countries in order to increase sales and profits. But they did not use to take advantage of human capital from other countries beyond selling and producing. True global companies used to have several regional headquarters, a more decentralized structure, and they used to look for taking advantage of people diversity to create a more powerful organization. A good exercise is analyzing the percentage of each nationality in the different company organizational layers. Multinational firms used to be attractive in the long-term for people with the same nationality of the headquarter.

Vertical centralized structures rather than horizontal decentralized ones

They are managers that prefer vertical structures with two or three direct reports because it is less work and “responsibility.” Although having five or six direct reports should be perfectly managed. The good point of horizontal structures is that there are more positions of middle management which must be the skeleton of the firm. Middle management is going to be more motivated for reporting directly to a higher level in horizontal structures. At the same time we are building a more flexible and agile firm with less dependency from specific people.

7. Innovation in HR

Innovation is using new HR tools rather than bet on people

We can have many wonderful Excel and Word templates in our HR area, but the real innovation should probably have staff from other industries, having a true global organization, having introverted, having different leadership styles in the same company, etc.

The balance scorecard presents us that the pillar of business is the learning and growth perspective which is very much focus on HR. Therefore, having HR myopic is not just generating an important issue in that perspective rather than affecting the whole business model and likely having an underperforming organization.