Developing HR Strategy by Juta Cibre

Developing HR Strategy May 2010 Issue 32

• Changing nature of the professions • Baring it all on pay and reward — how would you look? • Job description and person specification alignment • Target setting: a scientific process or pure art?

Editorial Policy/Editorial Advisory Board

Editorial Policy

Editorial Advisory Board

The aim of this journal is to publish cutting-edge articles on human resources to inform best practice, policy and theory in the field.

Chris Brewster

Its brief is interpreted widely and covers issues relating to people resourcing, learning and development, employment relations, rewards and benefits and human resources strategy, as well as some global and comparative issues.

Director, Reward Services, Institute for Employment Studies

Editorial policy is to commission research-led pieces, case studies and debates on policy from experts in the field. The Editor also welcomes unsolicited articles from human resources and employment researchers, practitioners and consultants. Please send a 200-word synopsis and we will send you a copy of our Notes for Contributors. Our aim is to encourage discussion between you and the authors or between you and your fellow subscribers. We are always looking for ways to improve our service to you and to ensure that we cater for all your information requirements. It is your views that will have the most influence on the future development of our products. So if you could spare a few moments, let us know what you think and whether you have any suggestions for articles or features that you would like to see in future issues.

Professor of International Human Resources, Henley Management College

Duncan Brown

Jean-Marie Hiltrop Visiting Professor at the Copenhagen Business School, specialising in International Human Resource Management and Change

Andrew Mayo President of the HR Society; Director of Mayo Learning International; Professor of Human Capital Management, Middlesex University

Sonia McKay Professor of European Socio-Legal Studies, Working Lives Research Institute, London Metropolitan University

Brian Willey Visiting Fellow, Kingston University and Chartered Fellow of the CIPD Chief Editor

Linda Holbeche Director, The Holbeche Partnership Editor

Gillian Fraser

Please e-mail your comments and suggestions to me at: gillian.fraser@croner.co.uk Gillian Fraser, Editor

Published by Wolters Kluwer (UK) Limited, 145 London Road, Kingston upon Thames, Surrey KT2 6SR. Tel: 020 8247 1175, Fax: 020 8547 2637 Website: www.croner.co.uk. E-mail: info@croner.co.uk. Copyright © 2010 Wolters Kluwer (UK) Limited All rights reserved. UP/DHRS-MI10032 ISSN 1745-9966 Content Director: Michèle Wheaton. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise without the prior permission in writing of the publishers. Although great care has been taken in the compilation and preparation of Croner’s Human Resources and Employment Review to ensure accuracy, the publishers cannot in any circumstances accept responsibility for errors or omissions or advice given in this publication. Subscribers should be aware that only Acts of Parliament and Statutory Instruments have the force of law and that only the courts can authoritatively interpret the law. Crown copyright material reproduced with the permission of the Controller of Her Majesty’s Stationery Office. Design: Wolters Kluwer (UK) Limited Printed by: Hobbs the Printers, Southampton S040 3WX

May 2010 Developing HR Strategy

Editorial

Editorial It has been interesting, if sad, to note how much the economic crisis and its causes have called into question the nature of professionalism, together with the role and reputation of professionals and professional bodies. As Professor Colin Coulson-Thomas points out, companies that fail invariably employ professionals. The banks that were bailed out during the banking crisis were advised by professionals and audited by professionals. Have these people shown the foresight and competence one might reasonably expect from highly-paid experts? Colin argues that we need a new definition of professionalism that is “fit” for the 21st century and that if professional bodies do not take a lead in creating this, it is likely that other networks will. What does this mean for the HR profession in particular? For example, take the role played by reward systems in triggering the economic crisis. Why did some HR professionals stand by while huge sums were paid out in bonuses and commissions for bringing into organisations what would prove to be time bombs? Is HR a mere pawn in the corporate game or could HR exercise much stronger influence on business conduct and leadership practice? Of course HR strategists must be the shapers and leaders of better practice. But if HR is to win the licence to challenge and lead, the HR basics must be right. Reward communications is the topic explored by Duncan Brown in his latest article. As Duncan points out, reward is the biggest single barrier to raising levels of employee engagement. In practice, the main reward issue that affects employee engagement is not so much the way employees are actually rewarded but that rewards are shrouded in mystery due to poor communication. That is partly because, over the last few decades, UK employers have actively discouraged employees from sharing individual salary information. Duncan argues that this policy should be re-examined and points out that employers cannot over-communicate on rewards. He also provides some timely and practical advice on how to do this effectively.

relevant in today’s fast changing context. The authors outline the components of effective descriptions and specifications. Performance management systems and creating training and development processes are other “basics” which HR must get right if they are to enable improved individual, team and organisational effectiveness. Target-setting is the focus of the article by Cranfield’s Professor Mike Bourne and Dr Monica Franco-Santos. They report on their two-year study of performance target-setting practices where they found that poor target-setting is surprisingly common in UK organisations despite the fact that it results in wasted effort, motivation and resource. The authors provide some practical and straightforward suggestions as to how target-setting can be improved. So, getting the basics right is the bedrock of professionalism. Well-designed and implemented, these processes are the building blocks of organisational flexibility and effectiveness and should act as a springboard to high performance. If you have views about any of the topics featured, or examples of good practice or key learning points from your organisation, we would be pleased to hear from you. Contact Gillian Fraser at gillian.fraser@croner.co.uk or me at linda.holbeche@talk21.com Linda Holbeche Chief Editor

Unless HR professionals get the basics right, their advice on other matters is unlikely to be credible. Russell Connor and Rosemarie McGuire argue that job descriptions and their related person specifications are the neglected transactional tools in the era of “human resources”. In many cases these have come to seem old-fashioned and deterministic and yet, as the authors suggest, they are the unlikely heroes in HR’s quest to add value, since their old-fashioned virtues — of clarity about roles and accountabilities — are even more

Developing HR Strategy May 2010

Contents

Developing HR Strategy Contents

Changing nature of the professions Colin Coulson-Thomas

Baring it all on pay and reward â&#x20AC;&#x201D; how would you look? Duncan Brown

Job description and person specification alignment: the unlikely hero in the search for high performance Russell Connor and Rosemarie McGuire

Target setting: a scientific process or pure art? Professor Mike Bourne and Dr Monica Franco-Santos

May 2010 Developing HR Strategy

Changing nature of the professions

Changing nature of the professions Colin Coulson-Thomas Professionals and the professions used to command respect. Once regarded as an essential foundation and backbone of society, at times they now seem defensive and unloved. Government attention and resources are devoted to various other groups that are considered “minorities”, “under represented”, “excluded” or “marginalised”. The contribution of the “middle class professionals” who are taxed to pay for this is often overlooked or taken for granted. The professions are challenged rather than cherished. Advocates of “social engineering” view them as “elitist” and “privileged”. Many professionals used to take pride in putting the interests of others first. These selfless paragons thought about how they could benefit their clients, the profession and the community, rather than how to maximise their personal remuneration or gain competitive advantage. Are their peers today more self-motivated? For example, on finding an exciting opportunity would they work to benefit an employer, or seek personal advantage by packaging a “buyout” opportunity to secure an equity stake?

Professions under the spotlight Recent events have not helped the reputations of some professions. Companies that fail invariably employ professionals. The banks that were bailed out were advised by professionals and audited by professionals. Have these people shown the foresight and competence one might reasonably expect from highly-paid experts? For example, why did some of them stand by while huge sums were paid out in bonuses and commissions for bringing what would prove to be time bombs into organisations? How many professional bodies have questioned members who were involved in developing, authorising, packaging, distributing and valuing the “toxic” products that caused so much harm to the international financial system? Are they just lying low? In the “me” society of “personal brands” what has happened to traditional professional values? Has greed and self-interest taken over? Are some professionals “taking the money” and looking the other way? How many are just drawing from the well of professional knowledge rather than also contributing to it? In a changing, questioning and uncertain environment, professional bodies and their members face both threats and opportunities. Perhaps the greatest challenge is how to remain relevant, current and vital. Whether or not professional bodies survive and prosper will depend

Developing HR Strategy May 2010

upon how effectively they engage with and support their members. The outcome is particularly important for HR directors and their teams who may be required to take up any slack and fill gaps to secure the competences their organisations require. This article considers challenges to the fundamental building blocks of a profession and the core functions of a professional body, and how a framework for managing knowledge and related tools can be used to successfully address them and enhance member or knowledge worker support services. The approach described has implications for those who manage significant numbers of professionals, or who have management responsibilities within communities of knowledge and/or departments or organisations composed predominantly of knowledge workers.

Professional bodies at a watershed As if external questioning were not enough, economic slowdown and recession have compounded the problems of some professional bodies. With fewer people registering for courses, booking advertisements in journals, or renewing subscriptions, thoughts have turned to cutting costs and alternative models of operation. Some professional bodies also find others encroaching upon their space — from websites serving the networking and support needs of particular communities, to educational institutions offering work-related courses. Can their roles be sustained? While mergers and alliances might create economies of scale, the memberships of many bodies are fragmenting into various areas of practice, each with distinct support requirements. Focusing on certain core roles might release resources, but can some activities be dropped when the functions of professional bodies are often inter-related and retaining members and protecting the public requires a portfolio of services? It is tempting to go “back to basics” and rethink the role and purpose of the professions. However, many aspects of our lives, and related laws, regulations and practices assume their continuing existence. Rather than starting from scratch and reinventing a new form of professional organisation, is there a more effective way of undertaking traditional activities? Are there affordable and achievable options that can address a number of challenges, improve performance and raise standards?

A knowledge-based approach The foundation and source of authority and power of many professions is their knowledge base. One approach

Changing nature of the professions

involves the use of a single framework for bringing together knowledge in a variety of formats into an accessible and more easily updatable repository, and using this to enable knowledge-based tools to support the training, assessment, qualification, continuing professional development, communications, updating, practice support, compliance and standards activities of professional bodies and communities. Such tools are used in over 100 countries. The approach, which is also applicable to a community of professionals or knowledge workers within a single organisation, has already been described in Developing HR Strategy (Coulson-Thomas, 2007a)1. In one international company, over 11,000 people use such a knowledge-based tool. Such tools can make it easier for professionals to handle complex tasks, and enable average practitioners to emulate the approaches of top performers. High returns on investment have been obtained. Benefits include greater understanding, improved performance, reduced costs, quicker responses, less stress, higher standards, and enforced and evidenced compliance.

Maintaining professional standards Many core activities of professional bodies relate to key concerns of corporate HR teams. For example, protecting the public by ensuring compliance with the highest standards of practice is a priority requirement for chartered bodies. Yet even if all members meet minimum standards, the author’s continuing research programme “winning companies; winning people” has found that among the communities of professionals observed there are usually a small number of high achievers or superstars and a long tale of adequate performers (Coulson-Thomas, 2007b)2. Variable standards of practice often arise, especially when new developments occur, because individual practitioners do not always attend updating meetings or systematically peruse professional journals. Even when they do notice and read a relevant briefing, they may have difficulty in remembering it, or relating it to particular situations when confronted with client problems in daily practice. Support tools can provide practitioners with the information and knowledge they require on a day-to-day basis and help them adopt the approaches of high performers when undertaking difficult tasks. They can offer guidance, checklists and templates, processes and procedures, and related documentation that can be tailored to individual clients. They can build confidence and equip professionals to assess and address unfamiliar situations. They can be used to share best practice and built-in checks can ensure compliance with relevant standards.

Building competent practitioners Similar tools can support the training, development

PROFESSIONS

and preparation of aspiring professionals, as one of their strengths is helping people to understand complex requirements. Self-assessment tests can enable users to judge their readiness for examination and practice. Tools can be designed to build competence by ensuring that users learn with each application, while online updating keeps them current with regulatory and other developments. Continuing professional development (CPD) can be vital in fields that are inherently complicated and frequently changing. Direct access to a profession’s continually updated repository of knowledge and best practice ensures exposure to current thinking, while at the same time generating evidence of CPD. Support can be delivered via laptops, palm tops and the latest generation of mobile phones as and when required, even when people are on the move. In comparison, information given on courses is often quickly forgotten. Integrating learning and practice helps understanding, raises standards and benefits clients. Specialists who respond to technical questions and handle queries can be expensive. The number of people required and their level of expertise can be significantly reduced when a professional support tool framework is in place. It is possible to monitor the use of support, for example, the extent to

May 2010 Developing HR Strategy

Changing nature of the professions

Distinct professional communities are increasingly specialising in particular areas of practice. A regularly updated tool can enable them to assess the requirements of individual clients, identify and select preferred courses of action and generate any bespoke documentation that may be required. Built in checks can ensure documents contain appropriate clauses, and that users cannot generate reports, forms and proposals that do not comply with regulatory and other requirements. Developments, such as new technical requirements, regulatory changes or legal decisions, can be quickly disseminated. Users can be directed to the relevant sections of long documents, such as particular provisions in new and complicated legislation as and when it is relevant to a particular task they are undertaking. Improving professional productivity Locating relevant information and analysing a client’s situation and problem can take valuable time. A consortium of eight professional practices, each of which was concerned with a particular category of risk, collaborated to produce a tool that enables users to undertake an initial risk assessment. It supports clients to the point at which they require individual and specialist help, in which case there is a link to the appropriate expert in the relevant firm who receives the assembled information.

which a particular update is viewed and CPD requirements are fulfilled, in order to identify areas in which members require assistance and avoid developing services whose use does not justify their cost.

Engaging and communicating with professionals Support tools are particularly suited to communication with professionals and can be more accessible, current and cost-effective than traditional alternatives, such as journals, newsletters, reports and events. The dissemination of technical updates, feedback, and the sharing of insights and ideas can be automatic and instant. Different language versions can help to facilitate networking and experience sharing across barriers of nationality and within practice, geographic or other communities. Many professionals suffer from an overload of information. They are offered general briefings when they need specific help that is directly related to individual assignments and the problems of particular clients. Receiving what they need in a format that is easy to use and understand is greatly appreciated by busy professionals. A one-off briefing is no substitute for ongoing day-to-day support.

Developing HR Strategy May 2010

Users of professional support tools report great improvements in performance. One company operating in a regulated sector found that tasks, such as analysing a requirement, developing a compliant solution and preparing a proposal that used to take days or even weeks could be undertaken in around 40 minutes, and with only a third of the specialist support previously required. Access to tools linked to a profession’s knowledge base could attract people into professional membership and help member retention. Because of the high returns on investment being achieved by pioneering users of tools, some professional bodies could provide them on a commercial basis. A core tool could be offered as part of a member’s subscription, with supplements being paid for additional support, such as tools related to particular activities or specialisations. Revitalising professional support The approach described could replace, improve or complement a number of services provided by professional bodies, or by those with significant communities of professionals to support. Implementation is manageable, affordable and achievable within an acceptable timescale. Experience suggests that, once set up, a profession’s knowledge management framework and support tools can be easily updated and managed by a relatively small team.

Changing nature of the professions

Commercial and other organisations could collaborate with professional bodies to deliver specialist support services to particular communities, or those practicing in certain areas. Customised and/or branded versions of tools could be offered, licenses granted and subscriptions sold to nonmembers and those not regarded as competitors. Because of their memberships, many professional bodies have more opportunities to spread costs than individual employers. They may also have a competitive advantage when it comes to updating a support tool or suite of tools. They generally have access to those whose role it is to monitor developments and remain current. Keeping tools up to date can be a challenge for an individual company or firm. Increasingly, HR teams are likely to see professional bodies as collaborators, as well as developers of talent.

Points to ponder Key questions for HR directors and teams: • How could the knowledge required by your professionals and knowledge workers be best brought together into a single and easily accessible and updated repository that could support a family of tools for improving productivity and maintaining standards? • How could such tools be used to capture and share best practice, build more competent practitioners, and ensure they remain current and observe relevant regulations and codes of practice? • How could such tools be used to ensure that professionals and knowledge workers access and receive continuing professional development wherever and whenever it is relevant and required, while at the same time recording the steps they are taking to remain current and competent? • How could support tools be used to engage professionals and knowledge workers, improve two-way communication with them, and provide better technical advice as and when it is needed throughout their careers? • Could such tools help your organisation or its clients to address some of the problems encountered when managing communities of practice, and groups of professionals and knowledge workers? • Is there scope for collaborating with one or more professional bodies in the development of tools to support one or more communities of professionals or knowledge workers? Could such tools be offered on a branded and/or commercial basis to external or third parties, and thus, as well as aiding talent building, recruitment and retention, also be a source of revenue generation?

Conclusion The professions are at a crossroads. They face a variety of pressures at a time when their resources are stretched. However, an affordable way ahead has emerged. Communities of professionals or knowledge workers can greatly benefit from the approach described above. Knowledge-based support tools can provide an enhanced service to the members of professional bodies and corporate networks, and a new rationale for professional bodies and collaboration with them.

Further information Examples of how support tools can be used to help average professionals to adopt the superior approaches of high performers can be found in Winning Companies; Winning People by Colin Coulson-Thomas, which is published by Policy Publications and available from www. policypublications.com.

References 1

Coulson-Thomas, C (2007a) Winning companies; winning people — the differing approaches of winners and losers, Developing HR Strategy, January, Issue 12, pp 5–9.

Coulson-Thomas, C (2007b), Winning Companies; Winning People, making it easy for average performers to adopt winning behaviours, Peterborough, Policy Publications.

Prof Colin Coulson-Thomas, an experienced director and consultant and a member of the business school team at the University of Greenwich, is a fellow of seven chartered bodies and has served as Chairman and President of professional and representative bodies. His PhD was a comparative study of professional bodies and he was the Founder Director of the Centre for the Study of the Professions. Colin is the author of over 40 books and reports, including The New Professionals, and has helped over 100 organisations and firms to improve director, board and corporate performance and spoken at over 200 national and international events in some 40 countries. He can be contacted via www.coulsonthomas.com and recent publications based upon his work can be obtained from www.policypublications.com.

May 2010 Developing HR Strategy

Baring it all on pay and reward — how would you look?

Baring it all on pay and reward — how would you look? Duncan Brown Research by the Institute of Employment Studies (IES) has confirmed that reward communications and perceptions of fairness are critical determinants of employee engagement and of validating the wider social role and purpose of business. The Institute’s Director of Reward Services Duncan Brown explains and provides some practical ideas for improved communications on pay and reward. Late last year, the BBC decided to publish online the pay and expenses details of its top 100 or so managers. After all the previous furore over MP’s expenses, some HR and PR directors might look aghast at such a move, seemingly an open invitation for press and public criticism. Yet, were the BBC being foolhardy or forward-thinking?

Externally: minimum communications Three fundamental principles have driven reward policy and practice in UK employers over the last 20 years: market-driven, performance-related and individualised rewards, all of which have relied on as high a degree of individual confidentiality as possible. The underlying, generally unspoken approach to pay communication has been: don’t do it. In more than half of UK employers, employees are strongly encouraged not to discuss details of pay and reward with colleagues, which in some cases, primarily in banking, is contractually enforced. And beyond the required executive remuneration reporting and in recruitment advertising, outside of the public sector, reward details are almost never made available externally. In 2009, these principles and a policy of no pay communications were brought into serious question. The banking crisis and general criticism of the unfairness of prevailing pay and bonus practices, widespread pay freezes, zero bonus payments and pension scheme closures and reforms have all shaken the edifice of reward secrecy. In a recent survey by PwC, only half of the 700 workers polled accepted that cuts had to be made because of the tough times. According to partner Jon Terry: “Pay and promotion freezes, changes to pension schemes, cuts in recruitment and slashed training budgets, combined with poor communications, have eroded the bonds of trust between employers and their employees.” (Financial Times, 9.10.09).

Developing HR Strategy May 2010

Externally, the Equality Bill currently progressing through Parliament will outlaw pay secrecy contractual clauses and gives ministers the power in future to enforce compulsory gender pay reporting, as a means of addressing the stubborn gap of almost one-fifth between average female and male earnings. The half of private sector organisations that still refuse to carry out equal pay audits voluntarily really are burying their heads in the sand. Governance reforms in financial services following the Walker Review and in line with the FSA’s new pay code will also increase the amounts of reward information that the banks will have to publish.

Internally: minimum understanding But the communications issue is not just an external one. Reward and HR directors in one recent survey rated poor reward communications as a greater risk even than over-leveraged incentive plans of the type that operate in investment banking and contributed to the generation of the financial crisis. The research review completed for our forthcoming book on reward effectiveness is pretty depressing for people like me, who make a living by designing new reward schemes for clients. It shows that no type of pay, bonus or benefits plan is universally successful or unsuccessful. Rather, if people understand, trust and believe that a new scheme is going to work, then it is very likely that it will work: a selffulfilling prophecy. What matter are process and practice, not plan and policy. So how are employer practices reflecting the critical role of process and communications at the moment? The CIPD’s 2009 survey of reward management in more than 500 UK organisations paints a depressing, if accurate, picture. The drive for HR to get into the boardroom is apparent, with over 80% discussing reward policies with directors. But fewer than half bothered to consult line managers about reward changes, and more involved outside consultants than talked in advance to employees. The CIPD survey highlights a particular pattern in employee reward communications. They get masses when they join an employer, at the very time when they are getting loads of information about everything else, such as learning where the toilets are and how not to lock themselves out of the building.

Baring it all on pay and reward — how would you look?

But then information rapidly declines to a trickle — the monthly pay slip essentially. Oh, and quite a lot again when you leave.

feel your own pay is fair if you know very little about those processes and how and what other people in your organisation are rewarded?

So it’s like “crash” language courses: very intensive for a short period, yet a few weeks later, you can hardly remember what language it was. The result? According to the CIPD, pay and reward is a bigger cause of dissatisfaction at work at the moment than job security, and only 10% of employees feel fully informed.

The arguments have expanded into wider social criticism. As the Labour MP George Mudie asked a bank chief executive during the Treasury Select Committee Inquiry into the banking crisis last year, “for all that we need incentives, why does the cleaner get 9% and the chief executive 150%? If there was some morality in it, we would not operate in this way”.

The one glimmer of hope in the CIPD data? Twenty three per cent of employers were providing or considering total rewards statements for employees. IES recently investigated the state of reward communications further, carrying out a survey among IES research members and discussing the subject at a network meeting, including employers such as Shell, the BBC, Cabinet Office, Civil Aviation Authority and Eversheds LLP. Communicating the total value of the reward package to employees was rated as the most significant current challenge, and the numbers using these sorts of statement seems likely to continue to increase. But our research also confirms that the HR community is now belatedly waking up to the fact that a zero communication reward policy is no longer viable in our increasingly technology- and knowledge-driven, information-rich society. “Total reward is all about communications”; “it’s all in the communications”, “you simply can’t over-communicate”. These quotes drawn from HR and reward directors in this reward research highlight this realisation: that you can not motivate and engage employees if they do not understand or agree with how you reward them. Fairness Two issues seem to be at work here. First is the issue of fairness, which in thinking on staff motivation and reward has been subservient to the concepts of the market and performance for too long. Towers Perrin found that employees are typically far more concerned with pay fairness and pay relative to others than with absolute levels of pay and, in North America, the Compensation Roundtable found that perceptions of pay fairness were 25 times a more powerful determinant of employee commitment than satisfaction with pay levels compared to other employers. Yet with pay differentials and pay secrecy growing over recent decades, it is hardly surprising that only around a third of employees in the UK feel that their pay is fair, and a CIPD survey identified pay as the biggest barrier to increasing levels of employee engagement. How can you believe in and trust a pay setting process and

Value The second issue is that of value. Increasing numbers of employers are adopting total reward and flexible benefits approaches in an effort to secure greater employee engagement from a workforce with diverse needs, but without increasing their rewards costs. The cost pressures of the last 12 months if anything appear to have intensified the trend — why provide an expensive fixed pension benefit to a younger employee who does not value it and would rather choose to invest the cost of that in an alternative benefit? Yet as the recent Employee Benefits survey showed, the greatest barriers to flexible benefits approaches are no longer primarily tax issues or administration, they are to do with employee understanding. Do employees understand enough about their packages to make the right choices? In too many organisations the answer is negative, holding out the potential for employee misunderstanding and de-motivation, and employers paying to administer flexible schemes which few employees can take advantage of.

Reward communications: opening up At last, the proverbial penny seems to be dropping on reward communications. Internally, our research has found that the volume of web- and intranet-based communications on pay and total reward statements are all increasing, although just placing reward policy manuals on the intranet as some employers have done does not necessarily improve staff understanding or appreciation of their rewards. One employer we know has recently reverted to printed total reward statements which they send to employees’ homes, after finding that few actually looked at the online versions. Nor does using the web to by-pass line managers with reward information seem like a smart move. Almost twothirds of the organisations we surveyed rated their line managers’ skills in reward communications as poor and needing to be improved. Thankfully we are finding more and more examples

May 2010 Developing HR Strategy

Baring it all on pay and reward â&#x20AC;&#x201D; how would you look?

of excellent employee communications in our work. KPMG selected and trained more than 300 Performance Management Leaders in their business to lead on reward management and communications and the results have been impressive. Staff perceptions of reward and recognition increased by 23% over the following two

Developing HR Strategy May 2010

years, engagement levels increased significantly and the firm has won The Sunday Times Best Big Company to Work For award for two of the last three years. And externally, forward-thinking employers such as McDonalds are openly and positively communicating their total reward packages to address common

Baring it all on pay and reward — how would you look?

misconceptions about working in the services sector, and successfully supporting their recruitment drive and growing employment brand and reputation. Eighty per cent of their staff feel they are recognised and respected for their work, and 84% are committed to their organisation. Not bad for a McJob indeed.

Points to ponder

These organisations are not alone. According to the Hay Group’s research, Fortune magazine’s Most Admired Companies do a better job than the rest of us at communicating their reward programmes.

• What help do your line managers need to be able to communicate well about reward?

The key suggestions made at our research network meeting to improve your reward communications were as follows.

• What information do employees need to help them understand enough about their packages to make the right choices when it comes to flexible benefits?

 Listen and engage with managers and staff, do not assume; many large employers seem to be regularly surveying and polling employee opinions and it is important to cover their views on rewards as part of this process.  Leverage your leaders and train your line managers; leaders have to be seen to be practicing what they preach on reward and they have a major influence on employee behaviour, while line managers are the key conduit for reward policies and have to understand and be confident with reward issues.  Closely analyse your audiences and segment your media and messages to suit; look at reward issues from their perspective, rather than your own more specialist one.  Be open and honest and always use face-to-face methods as a key component in the communications of any reward change exercise.  “Don’t use the manual to sell the car”; in other words make sure people understand the rationale for what you are doing, as well as the detailed mechanics; there needs to be an emotional engagement with reward issues, not just an intellectual one. “You can’t over-communicate”. That was how one of our network meeting participants summed up the current progress but there is a requirement to go much further on reward communications. Most of us have employee surveys already, and with more regular and targeted reward communications for employees, and a lot more line manager involvement and training, we can all progress towards building perceptions of the sorts of rewarding and engaging workplaces that we aspire to create. And if we extend this openness externally, we can more clearly illustrate the benefits of working for our organisation, to potential recruits and to society more widely. “Communications is the real work of leadership” according to Harvard professor Nitin Nohria. It is also the real work of reward and HR professionals.

The research referred to will be published later this year in a new book, Evidence-based Reward Management by Michael Armstrong, Duncan Brown and Peter Reilly.

• Do you know what key segments of your workforce value in terms of rewards?

Duncan Brown is Director of Reward Services at the Institute for Employment Studies, a leading independent think tank and research body on employment and HR issues. He has more than 20 years’ experience in reward consulting with firms including PricewaterhouseCoopers and Towers Perrin. He also spent five years as Assistant Director General at the Chartered Institute of Personnel and Development. His clients have included major private sector companies such as BP and Pfizer, government departments such as the Cabinet Office, local authorities and not-for-profit organisations such as the RNLI, ACCA and the United Nations. Duncan is a leading commentator on HR issues, who has published numerous reports, articles and books. He recently completed a new book on reward effectiveness. Duncan has appeared on BBC TV breakfast and evening news, as well as Radio 4’s Today programme . He advises and sits on a number of remuneration committees including at English Heritage, the ACCA and Christian Aid. He has participated on government taskforces concerned with pensions and human capital reporting. Human Resources magazine voted him at number five in its listing of the most influential practitioners in UK HR in 2008. Duncan has an MA from Cambridge University, an MBA from the London Business School and is a Chartered Fellow of the CIPD.

May 2010 Developing HR Strategy

Job description and person specification alignment: The unlikely hero in the search for high performance

Job description and person specification alignment: the unlikely hero in the search for high performance Russell Connor and Rosemarie McGuire Ask any CEO what his or her ideal HR department would be able to deliver and the responses are most certain to include:  p rovide a high performance workforce  e quip the line managers with tools to manage their people that are easy to use and really work d evelop and implement policies that serve the organisation well. Yet, decades after CEOs have asked for this, few HR departments have really delivered. Many HR professionals claim to have the answers for providing a high performance workforce, but relatively few organisations have processes in place that really nurture or enhance performance. Research consistently shows that employees are more likely to be more demotivated than motivated by their performance appraisal systems. The services provided today by modern HR departments bear little resemblance to 40 years ago when the emphasis was mainly on welfare provision. Since then the model of the personnel manager providing a general service to a unit or geographical area has been swept aside by the creation of shared services, centres of expertise, resource centres, employee self-service and business partners. Yet despite the many changes to the form and the function, human resources leaders have often failed to show the link to performance. Driven by the need for cost reduction, HR functions have often outsourced “transactional” services to concentrate on more strategic issues. One service which is often considered to be transactional is recruitment. This vital but time-consuming process involves the “chore” of writing clear job descriptions and person specifications. Job descriptions and person specifications are the building blocks of organisations. It is argued here that, in striving for efficiency and cost reduction, HR functions have neglected the basis on which high performance is established, namely; by creating the dynamic link between jobs and people.

The job description When jobs have clearly defined accountabilities; when

Developing HR Strategy May 2010

people are capable of undertaking these; when they want to do so and are given the appropriate space to do so, human endeavour can produce the most remarkable achievements. In any organisation the specification of jobs is essential to both the organisation and the individuals working in it. The job description is the formal written document that defines the job-holder’s responsibility to operate within his or her job boundaries and defines what specifically the job-holder can be held accountable for. Accountabilities are the critical component. Allocating these clearly without gaps and overlaps is the foundation of high performance. When the accountabilities in jobs are clear, job descriptions then become the basis for:  recruitment  t arget setting

p erformance planning and management  f it-for-purpose organisational design and structures. In some organisations, job descriptions (especially those that list a set of tasks) have fallen into a state of neglect as they were seen as constraining change. However, well-written job descriptions are the building blocks of efficient and effective organisations. They define the “space” for innovation and unless the jobs fit together well, the organisation is unlikely to achieve its purpose. Writing a description that fully captures the requirements of jobs can be difficult. As such, it is easy to default to a list of tasks and activities rather than to set the boundaries, purpose and value-add of the job. Without a common framework and clear definitions regarding the terms used, it is easy for the job description to become a bland statement, over-engineered and ill-matched for the performance required. Well-written job descriptions provide clarity to the jobholder regarding the following.  Purpose. The reason that people are employed is to produce output, with the underlying goal being to create economic value. The purpose is a high level statement of why the job exists and its link to what really matters to the organisation; be that cost reduction, improvement in quality/service or the development of new approaches.

Job description and person specification alignment: The unlikely hero in the search for high performance

 Responsibility. Unless employees know clearly what they are responsible for producing from their work the organisation cannot achieve its goals. The key responsibility areas (KRAs) are the broad areas of the organisation for which the job-holder has responsibility.  Accountability. This is a more specific term than responsibility and relates to outputs. Put simply, accountability is what you can be held to account for. It is what you own. Put brutally, it is what you can be fired for not doing. A factory manager is responsible for the production of product from within the factory but is likely to be accountable for the cost, quality and timeliness of delivery. In high performance organisations, accountabilities are not shared but others can help in the achievement of these.  Resources. This describes the resources that the job-holder is responsible for or uses to achieve his or her aims. Resources can include assets, people and information as well as equipment and tools. P roblems encountered. This describes the type of problems and the critical incidents that are faced. As jobs increase in size and scope, the problems that have to be dealt with move from being predictable and concrete to new and abstract. S cope for innovation and change. This describes the requirement for initiating, creating change and innovating. While some freedom to initiate change may exist within all jobs, not all job-holders have the discretion to make significant changes, to innovate or to ensure that creative ideas are implemented. As jobs increase in size and scope, there is greater opportunity to identify breakthrough innovations and developments.  I nternal interaction. This describes the requirement for interacting internally with others across the total organisation and the degree to which it is necessary to influence others in order to deliver on accountabilities. In many jobs individuals tend to interact with others to deliver outputs that are localised. As jobs increase in size and scope there is a greater requirement to collaborate, influence and build relationships within an extensive network to deliver outputs that are international or even global.  E xternal interaction. This describes the requirement for interacting externally with others. This includes consumers, customers, suppliers and significant external organisations, and other stakeholder groups. In many jobs there are clearly defined external contacts and clear remits such as suppliers and customers. At the higher levels, jobs have to influence national, regional or international organisations or authorities whose policies may have a significant impact on business results.

 D elegated decision rights. Job-holders need to know the “elbow-room” that they have to work within. They need to know the decisions that they can make and those that need to be referred to others.

Job descriptions and performance management systems A job description sets out the boundaries of the job and is an essential element in the annual performance management system. Performance management needs to start with the boundaries and accountabilities being clear. From this it is possible to complete the job specification by setting targets and specifying the resource allocation. Objectivity and transparency is paramount in any performance management system. Systems that are transparent and meaningful include the following: P erformance measures. Measurements that provide indicators that you are on track and building and driving value for the organisation. Performance measures provide clarity and objectivity and promote teamwork. T argets. Targets set clear goals and give employees direction. Targets are powerful communication tools, informing the whole organisation of the expectations of levels of performance to achieve success. Targets can also be used as an employee motivation tool in a job. However, it is important to define what type of target is being set. These range from big audacious goals, through stretch targets to highly achievable incremental improvement targets.  Constraints and resources. While the job description sets out the broad resources available to the jobholder, the actual budget or headcount or database information can change over time. A performance cycle should start by defining the inputs and resources that need to be utilised to provide a return.

Job descriptions and person specifications The job description provides clarity as to the outputs of the job. When these are clear, it is possible to specify the inputs needed and the personal requirements including the necessary skills and knowledge. A person specification is the matching side of the job specification. When these tools work in harmony they provide the basis for:  o rganisational development and design solutions  a ssessment, selection, and hiring processes/systems  s uccession plans/programmes  p erformance evaluation  t raining and development systems.

May 2010 Developing HR Strategy

Job description and person specification alignment: The unlikely hero in the search for high performance

However, when job descriptions are bland or written for the sole purpose of job evaluation, the person specifications can be neglected or default to broad or unspecific personal traits or requirements. Rather than job descriptions and person specification dovetailing together, there is often a systematic disconnect in the ways that jobs and people are described. This is especially the case if the person specifically focuses on the personal qualities and personality factors that are considered to be important. When this happens they are likely to contain many statements such as “enthusiastic self-starter” or

Developing HR Strategy May 2010

“team-player”. These generic metaphors can cause misalignment between the job and the person with negative and expensive results for the organisation.

Making the connection To make the dynamic link between jobs and people it is necessary to take into account the complexity of the decision-making environment. Once this is established, it not only clarifies the types of decisions that need to be made and the outputs of these, it also identifies the thinking skills and mental flexibility needed to operate successfully within a given context.

Job description and person specification alignment: The unlikely hero in the search for high performance

Once thinking and mental flexibility are clearly defined they become vital ingredients in determining a person’s potential for work. Levels of work is a management system that clearly articulates the complexity of the decision-making environment. Within this, all jobs and people can be allocated to one of a number of levels. This measurement ensures that accountabilities are clearly defined and that people are placed into jobs where they can make their maximum contribution to the organisation. Levels of work is used in many large organisations including BHP Billiton, G4S, Prudential Assurance, Huntsman, Anglo-American, Unilever and Tesco. Unlike most other systems provided by well known consultancies, Levels of work makes a direct connection between the type of work undertaken and the capability of the person to undertake this. The essence of the framework is that work and people are described in consistent ways using shared concepts and a common language.

Conclusion With the effects of the global recession still being felt, CEOs are beginning to question the value of their HR functions. At the same time, it is also possible to detect that HR professionals are feeling the squeeze from adopting cost leadership models. Despite significant cost constraints, HR professionals as a whole can create change in their environments paradoxically by focusing on aspects that were once considered “transactional”. We all know the expression, “look after the pennies and the pounds will look after themselves”. In HR there should be a variation on this theme, namely; “look after the job and person specifications and then you can look after the organisation”. Job and person specifications can be used by HR departments to enable and sustain high performance. By adopting a system that aligns these vital ingredients and provides the means to measure the match, HR can provide the organisation with the services that all CEOs should be seeking.

Russell is the Managing Director of Dynamic Link. Dynamic Link uses a Levels of work framework to help build organisations that last. Russell has over 30 years’ experience of working and consulting for both national and multi-national organisations. He has been influenced by Levels of work ideas first expounded by Elliott Jaques. It was at the London School of Economics that Russell was first introduced to the pioneering thoughts of Jaques and, many years later, was reintroduced to his work through an association with the Brunel Institute of Organisation and Social Science. Russell has developed Global Profiling System. This is a Levels of work classification and measurement system and is designed to transform the way that people and jobs are matched. He has a Bachelor of Science degree in Psychology from University College, London and post-graduate qualifications in Personnel Management gained from the London School of Economics. Russell is a Chartered Fellow of the Chartered Institute of Personnel and Development and has a Diploma in Counselling and Psychotherapy from Regent’s College, London. Rosemarie is the Partner, Head of Practice at Dynamic Link working with organisations to provide holistic solutions and systems. Rosemarie McGuire is an International Human Resources executive with over 25 years’ experience. A graduate of the University of Toronto with a major in Employment Relations, Rosemarie is now residing in London and is completing her PhD in Personnel and Development at the London Metropolitan Business School.

Points to ponder • To what extent do you agree that job descriptions are a building block of high performance? • What else do you think needs to be in place for this to be achieved in your organisation?

May 2010 Developing HR Strategy

Target setting: A scientific process or pure art?

Target setting: a scientific process or pure art? Professor Mike Bourne and Dr Monica FrancoSantos Setting targets is an important managerial process. Missing a target can have serious consequences for employees’ motivation and for their pay. However, how often do we take the time to set the right targets? Do we really understand the full impact of using performance targets? Let us start with an example. There was a building materials company that managed to set its main sales target in isolation without consultation with its manufacturing colleagues. It was an ambitious target, but the sales force was highly motivated and was soon performing to deliver the target for the year. After a few months the problems started. The combined output of all the UK manufacturing plants was insufficient to deliver the volumes sold. Deliveries started to slip, customer relationships became strained and, for the second half of the year, the sales force spent the majority of their time placating their customers. A simple but very costly mistake! So what key problems appear when we use targets? How should we set targets? What does academic literature tell us about target setting? What can we learn from theory and practice? In this article we will outline the results of a two-year research project sponsored by the Chartered Institute of Management Accountants (CIMA) into targetsetting practice. We conclude with a summary of the main issues that arise when performance targets are used, some recommendations for avoiding these issues, and a 10-step process to help you conduct target setting more effectively.

What do we already know about target setting? Unfortunately there are two schools of thought in academic literature: those who think target setting is a good managerial tool that can boost individual, team and organisational performance and those who think targets are divisive and counter-productive. For those schooled in the classical management literature, setting targets as “high but achievable” is the prescription from the last 50 years of motivation research. Having a clear, quantified target is more motivational than simply “doing your best”, and has been shown to lead to better performance. However, those who follow the quality literature immediately disagree: targets create fear, undermine team working and destroy performance improvement.

Developing HR Strategy May 2010

The problem is that what applies well to the individual does not work well in an organisational setting. The “high but achievable” mantra works if the whole of the individual’s performance is delivered personally with minimal interaction with the rest of the organisation. But if the individual forms part of a process, the system may well fail to deliver. Herein lies the dilemma. Fifty years of motivation research suggests that targets are useful, whilst a similar period of well-documented practice from the quality movement suggests that targets do not work in this way. The quality movement looks at organisational performance as a process, and if the process is not improved, improvements in performance cannot be sustainable. So how do we resolve this dilemma? During our twoyear project, we investigated, in detail, the target-setting practices in four different sales environments. Our analysis of their successes and failures led us to believe that a more thorough and systematic process was required that combined aspects of motivation theory with elements from quality management. In sum, the target-setting practices followed by each of these organisations had the following things in common: T he forecast was mainly based on past performance. This type of forecast generated what is known as the “ratchet effect”. Sales people who expected to be with the company for the next target period had a perverse reason not to exceed targets even if they could easily do so. For instance, a clever sales person would reach 105% of his or her target to make bonus, never 120% as this higher figure will generate a harder target for the next financial year. The ratchet effect caused sales people to restrict their performance to well below their potential.  Targets were allocated inappropriately across the sales force. This aspect of the target-setting process generated what is known as the “threshold effect”. According to this effect, a uniform performance target is applied to all sales units or regions without recognising their contextual differences. This type of target gave no incentive to excellence and, indeed, encouraged top performers to reduce the quality or quantity of their performance to just what the target required. T argets were perceived to be either too high or too low. When targets were set too high, sales people became discouraged and demotivated. Furthermore, this type of target generated dysfunctional behaviours in the sales force such as outcomes distortion or “window dressing”. When targets were set too low, the maximum

Target setting: A scientific process or pure art?

potential of sales people was not realised and additional bonuses were paid out without a real increase in true performance.  Some targets were based on the wrong performance measures. Performance measures were not reviewed periodically. Some performance measures were obsolete and no longer linked with the business strategy. However, they were still being used in the sales incentive system for target-setting purposes. Sales people typically referred to this issue with the phrase “hitting the target and missing the point”.  Targets were entirely based on financial indicators. This was the case even though most of the organisations studied emphasised the importance of customer relationships in their sales strategy.  The data analysis process on which targets were based was poor and lacked rigour. Data was analysed without considering critical statistical rules and techniques. Besides, data was studied superficially, even though organisations had the IT system capabilities to conduct in-depth analysis.  Targets were not periodically reviewed. Once the targets were set, they were not reviewed until the end of the target period (eg every quarter) unless some major event had happened. This generated distrust over the targets as they did not reflect specific contextual changes that occurred throughout the target period.  Targets were “given” to the sales people. There was little communication and negotiation over the performance targets, which generated a lack of ownership over the targets. It also produced a lack of understanding of how the targets were set and how they needed to be attained.  The interrelationship between targets was not considered during the target-setting process. As a result, some targets were inconsistent with each other. They could not all be attained.  Agreed action plans were the exception and not the norm. Action plans were left to the discretion of the individual sales person. Some sales people and teams had very rigorous action plans but others had none. Successful plans were not openly shared among the sales force as there was a culture of “healthy” internal competition, which limited collaboration and organisational learning. Overall, the majority of the people interviewed or surveyed during our research believed that the target-setting process of their companies did not generate the “right” performance targets, nor did it seem to generate the “right” environment for those targets to be achieved. Sales people were very dissatisfied with their targets (see Figure 1) and they believed that the impact of targets on behaviour was not positive (see Figure 2).

Figure 1: Perceived satisfaction of performance targets

Figure 2: Perceived impact of performance targets on behaviour

Based on the insights extracted from each of the companies’ target-setting processes and on the knowledge obtained from the previous literature reviewed, we designed a specific process, which aims to improve the way in which performance targets are set. This 10-step process (see Figure 3) is presented next in the form of a wheel. The 10-step target-setting process

Figure 3: The target-setting wheel

1. Review stakeholder expectations: The first step is a review of the organisation’s stakeholder expectations. You need to ask, “who are our stakeholders?” and “what do they expect from us?”. This will determine the critical

May 2010 Developing HR Strategy

Target setting: A scientific process or pure art?

Developing HR Strategy May 2010

Target setting: A scientific process or pure art?

areas your organisation needs to address in order to be perceived as successful. 2. Strategic objectives clarification/selection: Once the stakeholders’ expectations are identified, the next step is to express these expectations as strategic objectives. Strategic objectives are clear statements of what the organisation needs to achieve. They must be few in number and they should address the different stakeholders’ “requirements” (such as: what do our customers, and investors, or employees require?).

3. Success map: A success map is a very simple visual tool. It links the objectives together, so that higher level objectives are represented as being delivered through the attainment of lower level objectives. Expressing the goals in this way will provide you with a powerful communication tool explaining what is to be achieved and why. By developing a success map you will be able to explain the goals to the whole organisation, as well as being able to show where each part of the organisation contributes to achieving these goals. 4. Objectives prioritisation: Not everything can be achieved at once, so you will need to prioritise. Most companies we investigated tried to achieve too much. It is much better to prioritise and deliver fewer objectives than fail to deliver on too wide a range of goals. The focus will help employees too, as they will be very clear about what is important in the coming period. 5. Operationalisation: This means designing the appropriate performance measures. How you define the measure will drive behaviour. You therefore have to define the measures so that they i) reflect the goals the organisation needs to achieve and ii) encourage the right behaviour from those responsible for delivering the goals. 6. Data collection: This step is often overlooked. You will need to collect timely and accurate information as a basis for setting your targets. Information is never perfect, but it does have to be consistent and reliable enough to be fit for purpose. 7. Data analysis: This is fundamental to the process. First, you will have to forecast drawing on your knowledge of the past (through data collection and analysis) and your knowledge of the future to project what is going to happen. Second, you will have to analyse the capability of your processes. Are the processes capable of delivering the forecast? Most companies forecast, but fewer reassess their capabilities; a common reason for targets not being delivered. 8. Set targets: Based on the previous seven steps, it is at this point you set the target. Judgment is required and you will need to assess the risk of getting the target wrong. This is also where most of the organisations we studied stopped, but this is not the end of the process. 9. Action plan design: An action plan is required covering all the projects and changes to the organisation that are needed to ensure the target is reached. This may include training and development, new processes, new IT systems, new products or ways of working with your customers. Your targets are based on the activities you have made in this plan so it is important to schedule their delivery. You are also assuming that the plan is delivered, so failing to implement the plan has a direct impact on achieving the targets.

May 2010 Developing HR Strategy

Target setting: A scientific process or pure art?

10. Action plan discussion and agreement: Finally, you must communicate the whole plan to all your staff. Most managers we met thought they did this. However, most staff we spoke with thought they did not. The communication has to be two-way and through appropriate media. It has to be done regularly with a continuing dialogue. Regular staff meetings where the objectives are restated, goals outlined and progress discussed is a good format. Sending out the annual targets by e-mail is not!

Conclusion and recommendations Target setting is part-art and part-science. It is a difficult process and the risks of getting something wrong are high. Organisations now have the capabilities to improve their target-setting process. However, few management teams seem to recognise the complexity inherent in any well-designed system and the care needed in setting and applying individual and team performance targets. To produce an effective system you must make certain that targets are:  clearly defined so everyone understands them  neither too high nor too low  allocated appropriately across individuals and teams  consistent with each other, the company’s economic and competitive environment, and business strategy  based on rigorous data analysis that considers more than just past performance  periodically reviewed  owned and accepted by the individuals that have to attain them  supported by a specific action plan. If you do not, then performance targets will not serve as an effective management process. Finally, you may be thinking that this is too much work to simply set a target. We would argue that the consequences of setting poor targets can adversely affect the performance of individuals and the business for several years. If you cannot spare the time and effort in the first place, then maybe the best resort is not to set targets at all!

Points to ponder • To what extent do your employees feel they “own” their performance targets? How could greater ownership be achieved? • What data would you need to know how well the performance target-setting process is working? How could you obtain this information?

Developing HR Strategy May 2010

Professor Mike Bourne is the Director of the Centre for Business Performance. Mike spent 15 years in industry, before he gained his PhD from the University of Cambridge. Since then, he has been working with companies supporting senior management teams through the process of designing, implementing and using their balanced scorecards and related performance management techniques. He has worked with, and consulted for, a number of organisations including Accenture, Amadeus, BAe Systems, European Central Bank, Lloyds TSB, McCormick Europe, NHBC, Oki Europe, PWC, Schering, Tube Lines, Unilever and Wolseley. His current research interests are in the area of business performance around performance measurement and management techniques, planning and budgeting and, in particular, understanding the impact of HR practices on the performance businesses. Dr. Monica Franco-Santos is a senior research fellow at the Centre for Business Performance. Monica’s research broadly concerns the design, implementation, and management of performance measurement systems. In particular, Monica is interested in the relationship between performance measurement systems and reward systems in both private and public sector organisations. Monica gained her PhD from Cranfield School of Management in 2008, researching the impact of top executive incentive systems on firm performance. She has participated in a number of funded research projects looking at the impact that different managerial practices and tools have on business results. Prior to joining the faculty of Cranfield University, Monica was a consultant working for Watson Wyatt Worldwide. Her expertise was in the design and implementation of compensation systems and other HR initiatives (eg employee satisfaction surveys, definition of HR strategic options, etc). She has also worked in the HR departments of the electric utility Endesa and IBERIA.

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