Focus@Henley, May 2014 by Henley Business School

Focus

ISSUE 4. MAY 2014

Bringing you the insights you need to drive your agenda

CBI boss John Cridland looks to the future at Henley Keynote Lecture READ

READ

HR data and metrics: overhauling your approach P4

READ

HR Doctor: Are you too busy dealing with your own internal customers…? P8

READ

Henley MBA Entrepreneur gets creative with Sirius Programme P6

READ

How emerging economy firms lose money P10

READ

Are you ready to address ‘customer effort’ – and is it worth the effort? P7

READ

The top 10 risks companies fear most... P11

Welcome

Focus@Henley edition 4 – bringing you the latest news and views from the home of executive education Focus@Henley is designed to bring you the best of our cutting-edge research and innovation in strategy, leadership, management, HR and coaching, and Issue 4 doesn’t disappoint!

e start this issue with a report on last month’s Keynote Lecture by John Cridland CBE, DirectorGeneral of the CBI, during which he gave the Confederation’s views on topics as diverse as the future of the economy, London’s airport expansion, immigration and the referendum on Scottish independence.

The International Business and Strategy team reports their findings on why firms from emerging economies are losing money, and we even have space to squeeze in Part 4 of Nick Holley’s compelling HR Doctor series, which highlights the recent outbreak of compartmentalisation, and explains how it can be cured!

We also feature a fascinating paper by Nick Kemsley recommending that you overhaul your approach to HR metrics and data, and then take a look at how ‘customer effort’ is fast becoming one of the key benchmarks for performance success.

We feature one of the Henley’s MBA students who has used the expertise she gained from her studies in taking both a measured and energetic approach to her new entrepreneurial business.

As ever, all feedback on what you like – and especially what you don’t – so do get in touch and play your part in continuing to make Focus@Henley essential reading. Thanks for reading Focus@Henley. We look forward to hearing from you. Claire Hewitt, Head of Learning Design +44 (0) 1491 418767 exec@henley.ac.uk www.henley.ac.uk

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Engaging Business Event

CBI boss John Cridland looks to the future at Henley Keynote Lecture D

irector-General John Cridland CBE, head of the CBI, confidently reported that UK business is now ‘firing on all cylinders’ and is in good shape to grow over the coming years.

Business leads the way According to John, recent improvements in business performance – including the fifth consecutive quarter of positive growth in the economy – are giving consumers more choice and boosting confidence. And at the heart of a thriving Britain is a prosperous business community, led by the private sector.

At the Keynote Lecture in Henley Business School’s Engaging Business series, hosted by Norton Rose Fulbright at their offices overlooking the River Thames at Tower Bridge, John spoke on the subject of ‘Business Delivering Prosperity for Britain’. While problems clearly still exist, there are good signs that the recovery will be

a more controlled and sustainable upturn, with a move from mainly operational spending to much more capital-focused investment.

Taking a positive view The CBI is currently predicting growth figures for both this year and next that are likely to see Britain outperforming the EU. In addition to defining the CBI’s views on the country’s involvement in the EU, the London airport expansion, the relationship between immigration and education, and the Scottish independence referendum, John set out five key priorities for future growth and prosperity: 1 Securing a global position for the UK 2 Boosting the capacity of business to

grow 3 Spreading the benefits of the growth

we create to all 4 Investing more in our infrastructure 5 Restoring public confidence.

For the full article, click here

To find out more about future events, visit www.henley.ac.uk/events or contact Charlotte Zittel at the Corporate Events Office on +44 (0)1491 418 777 or at henleyevents@henley.ac.uk

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HR data and metrics

HR data and metrics: overhauling your approach Nick Kemsley

Nick Kemsley, Co-Director of Henley Centre for HR Excellence, Henley Business School

n this highly-summarised version of a longer article, I attempt to provide a practical blueprint to guide HR functions in overhauling their data approaches. Although I am sure that the metrics alignment blueprint below does not cover every nuance, I hope it is helpful in showing how HR data and metrics are an integral part of the transition from strategy to execution and renewal.

The four key steps describe a logical flow. In my work about strategic workforce planning I talk about how critical this step is in understanding the most important things to measure, and in creating engagement and credibility at a senior level. Next we must assemble the right suite of metrics, and create relevant insights, rather than just information. We must

Metrics alignment blueprint What are the short- and longer-term business objectives?

What are the key organisational implications?

How do these compare to what we have?

Strategic workforce planning What are the priority needs, capabilities or risks?

Which gaps are most challenging to address?

What capability gaps are there?

How do these translate to data and metrics needs?

What data do we have already?

What can we do with them?

Metrics development & synthesis What insights can be drawn from the data?

How can they be filled?

What gaps remain?

What’s the best way of presenting them?

What data is most relevant to needs?

What presentation format is most insightful?

Data presentation & reporting How do we talk about them?

How does this change the way we report data?

Are the key insights easy to see?

What are we going to do about them?

Is action warranted?

What needs to happen?

avoid using data just because we have it, and we must be conscious of having the right balance of process and outcomes metrics. We must also ensure that the insights we identify are presented in the most effective and engaging way. Key to this is the transition of the HR data pack from a partially relevant ream of information, to a topically-focused summary of key insights relating to critical business issues. Lastly, it is of critical importance to monitor risks, and establish whether any actions to address these are making a difference. Action without data, and data without action, are both highly wasteful. Let’s explore a couple of examples in the area of talent management. It is common for organisations to measure things like total attrition, internal to external recruitment ratios, time to hire, roles with ‘ready now’ successors and so forth; but these are terribly generic without the context of strategic workforce planning helping us. For example, look at attrition in the most critical populations. Equally, measuring the number of roles with ‘ready now’ successors is a process measure, not an outcome measure. In reality, it doesn’t tell us whether succession planning is working, because it doesn’t tell us what is actually happening.

Corrective action & monitoring How do we track progress?

Is it making a difference?

Is it happening?

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• T he second page comprised a set of carefully chosen metrics to provide the best possible insights relating to the organisational enablement of these business objectives or management of the risks.

Contrast this with some more insightful talent metrics like the four below: • Percentage of occasions a critical role is filled by the named successor. This is a really insightful metric and we need to measure what actually happens. • W hat happened to those people we said were great three years ago? How many HR functions actually measure this? One organisation I worked with identified that 75% of promotions were applied to individuals rated ‘remain in role’. • Offer-to-acceptance ratios for those in critical skills groups This helps gauge the attractiveness of the organisation to target groups.

• T he remainder of the document is a summarised version of ‘background data’ on issues such as diversity, recruitment or full-time equivalents. Anything of note has been pulled forward into earlier sections, and the default position is not to review this data in the actual board meeting unless it is relevant to the agenda. Board members may read it at their leisure before or after the meeting. We can perhaps imagine that more insightful data, presented in a more focused and exception-driven way, may well be more successful in engaging a senior audience in people data and metrics.

In summary HR data and metrics remain a critical and largely under-exploited opportunity for HR to crystallise its value in business. context and insight are the key currencies, and HR should synthesise its data to ask the right question, rather than relay answers which are looking for a question. This, combined with more concise and business-focused presentation formats and reporting, will allow HR to revolutionise its alignment to business objectives, articulate its value and improve its credibility; and is perhaps the most obvious way for HR to demonstrate return on investment. About Nick Kemsley Nick Kemsley is co-director of the Centre for HR Excellence, Henley Business School.

For the full article, click here

• Percentage of new hires in critical skills groups leaving within one year Helps identify what may be cultural or career influences on retention of individuals with critical skills.

What about data presentation and reporting? Often, the HR data report forms a 45-minute slot on the board agenda each month, but attention seems to drop among board members during this session or it is frequently postponed in favour of more pressing business. Imagine if the data pack was reworked in the following way: • T he front page showed a table of key business objectives versus critical organisational risks, with each marked red, amber or green to summarise progress. There is a ‘points of note’ section.

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There needs to be a ‘so what?’ However, reporting the metrics is only part of the story. HR has to be seen to be proposing strategies to validate and address issues identified through such measurement approaches, and reporting back on progress. This is where HR can reap the reward of having developed a set of outcome and process measures, since this can help it to identify where people processes need to be improved or redesigned in the context of business objectives, or where more fundamental strategies should be proposed. Trend measures then allow HR to show to what degree gaps are being closed.

Last year

3,122

Participants attended Henley programmes, from private, public and third sector organisations

CASE STUDY: MBA Entrepreneur

Henley MBA Entrepreneur gets creative with Sirius Programme

Lesley Zhang

Adapted from an article on www.businessbecause.com

esley Zhang left a finance career in Asia behind for an MBA in the UK. After getting into the Sirius Programme, she has plans for creative entre -preneurship in music and fashion. Most entrepreneurs will have heard of the Sirius Programme. But not many MBAs will have heard of Rentez-Vous, the fashion rental start-up that is swapping its way across Paris and London. The company’s official launch three months ago marked a major turning point for Lesley Zhang, a Henley Business School MBA who co-founded the business after getting onto the Sirius accelerator last summer. Lesley moved to London from China for an MBA in the UK after becoming inspired by the city’s thriving creative culture. Rentez-Vous, which allows women to swap clothing by ‘renting’ items to fashonistas nearby, would be a fitting conclusion to her tale. She had always been interested in British culture – especially the music scene – and Henley, one of the highest MBA-ranking universities in the UK, is one of the few schools to offer an MBA specialising in the music and creative industries, developed with an international team of industry executives. ‘It was the main reason why I chose Henley,’ Lesley says. ‘It was a great opportunity to build a network in the creative sector and I was lucky enough to be mentored by the head of the programme, Helen Gammons.’

She knew she wanted to become an entrepreneur, specialising in entrepreneurship for her final business project, but her path was not clearcut. ‘We had a module called Personal Development,’ she says, “where we set out our goals and made a plan of action to achieve them. At the beginning I said I wanted to make a change, but I didn’t have the confidence to do it’.

Henley has given her the tools to break the mould. ‘It’s about the mind-set and also the reputation Henley has,’ she says. ‘It’s often all about the name of the school and the network of alumni.’ ‘Henley has guided me through the journey and provided useful advice, and I’m very grateful for that. We still get regular alumni meetings and I’m still seeking lots of advice.’

Rentez-Vous has been in business for less than three months but Lesley has every confidence it will thrive. She joined the company after attending the UKTI Graduate Entrepreneur festival in Manchester and meeting her now business partner. This month RentezVous moved their base to Tech City in London, which is supported by the Sirius Programme, with Lesley as CFO.

It seems an MBA network never stops helping you. And it is not unthinkable to see Lesley making herself a success in the music business. She has taken a great many risks; reward is surely due.

Whilst she has no plans to leave RentezVous, she does plans to launch her own music business further down the line, and one thing is clear: an MBA from

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Latest Research – Customer Effort

Are you ready to address ‘customer effort’ – and is it worth the effort? Professor Moira Clark, Director, Henley Centre for Customer Management, Henley Business School

nderstanding the propensity of your audience to engage with your organisation – and remain engaged with it – has occupied marketing teams and business leaders for decades, but there’s a new kid on the block, and it’s causing a bit of a stir. Customer satisfaction (CSat) surveys have been used as a benchmark since time immemorial, and more latterly, net promoter scores (NPS) have been ‘de rigeur’. But now, ‘customer effort’ is being added to the armoury of early adopting business leaders. ‘Customer effort’ (CE) measures the non-monetary experience of the product or service, such as the physical effort, time expended, understanding the acquisition and installation process, and the stress experienced. Simply put, CE evaluates how easy it is to do business with your organisation. The lower the score, the easier it is, and this appears to translate directly into a reliable predictor of intent – and action. And while it hasn’t yet replaced CSat or NPS, a number of enlightened organisations are adding it to their metrics, on the basis that it offers less prescriptive – but more actionable – insights into likely levels of customer engagement and loyalty. CE is proving particularly adept at identifying specific points at which the prospect or customer encounters a game-changing problem, causing them to reconsider their choice, whether it be their experience of the website, or the menu of options that greets them on their first telephone call, or the instructions that

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guide them through the joyous challenge of piecing together their flat-pack wardrobe. But once identified, positive action can be taken to rectify the issue.

In other words, rather than trying to delight customers in every area of their experience, it may be far more productive to focus attention on those that are important to them. And customers who find it less easy to deal with a particular organisation are much more inclined to look elsewhere.

The criteria will vary from sector to sector, and there does appear to be a significant difference in the expectations of B2B versus B2C contacts. And the same process can also be applied to employees. Co-author of the research report, Professor Moira Clark of the Henley To quote BT, who have pioneered Centre for Customer Management, a customer ‘net easy score’ in their views CE as an essential tool for any organisation: ‘The rate of customer ambitious organisation: ‘CE should be loss for the “easy” scores was found to an integral element in any board’s be significantly less than for the others customer management strategy, and and showed a 40% reduction in their there are very strong signs that when propensity to churn’. And other companies properly implemented, it can deliver have seen similar findings, prompting a significant competitive advantage’. them to radically alter their strategic focus: ‘It makes more sense to invest And particularly in the context of her in the lower end of recommendation teaching role on Henley’s Advanced scores, minimising the “no” and “unlikely” Management Programme, Professor responses, rather than moving customers Clark is acutely aware of the need to from “probably” to “definitely”’. provide any competitive advantage to the next generation of business champions. ‘Customers in all sectors want to be heard, and want a quick response. They crave information and explanation, and individualised attention. CE is becoming an important technique for organisational leaders to measure and influence how they achieve this, so it’s important that we remain at the forefront of these innovations.’ For the full Henley Centre for Customer Management report on the research carried out with BT and other organisations click here

The HR Doctor

Are you too busy dealing with your own internal customers to make a real impact on your business? If so, you may be suffering from a bout of compartmentalisation. But don’t worry, there is a cure…

Nick Holley

Nick Holley, Director of Henley’s HR Centre of Excellence

n this latest instalment adapted from Nick Holley’s tongue-in-cheek look at some of the most common ailments affecting the HR sector, the focus is on compartmentalisation, and how to overcome it.

What are the symptoms? • M embers of the HR team compete with each other • W hen things go wrong, HR people blame each other

• A lack of systemic HR thinking • A lack of co-ordination across HR functions • H R doesn’t think about the wider business

And what impact does that have? • HR itself becomes splintered and pressurised by the business • Joined up thinking is required: no part of HR can be an island.

For example… In Henley’s recent research into the ‘three box’ model of HR we interviewed a number of line managers. They don’t see centres of excellence, shared services and business partners. They don’t want to hear excuses when one blames the other. To them it is ‘one HR’ and they just want their issues fixed. While speaking to a senior HR business partner recently about his relationship with the L&D Centre of Excellence, I asked him if he spoke to his equivalent who ran the Centre. He replied: ‘Of course I do. She sits across the aisle from me and whenever she comes over I speak to her’. Not the answer I was hoping to hear.

So is there a cure? Some of the cures are the ‘hard’ things: • Strong leadership focusing the whole team on thinking as ‘one HR’. • Proper governance with clear accountabilities, handoffs, reporting and budgets coordinated across HR. • The right measures linked to variable compensation and consequences that focus on rewarding ‘one HR’based behaviours.

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Business Snippets

Creating strategic impact – four ideas to improve next year’s results But from our research it is the ‘softer’ things that make the real difference: • The leader needs to recruit for and reward the right behaviours; it’s about the HR team and even more, it’s about the business (as David Brent once said: ‘There’s no “I” in team, though there is “me” if you look carefully.’).

• There needs to be continuous engagement, real listening to each other and to the business. The problem is too many people waiting to speak, rather than really listening. Edited from a paper by Nick Holley. To read the full article, click here

Here are four ideas: Broaden the range of employees invited to offer insights and ideas into the strategic plan At a minimum, expand participation by at least one level in the organisation. Exploit how a smart structure can create flexibility While it sounds contradictory, selecting the right strategic planning structure can help employees more successfully contribute to creating strategic impact.

Simplify your strategic language If nothing else, use simple, understandable, and actionable language to describe your strategies and plans. Don’t use corporate jargon and confusing words, so whatever you’re trying to accomplish becomes clear to everyone in the organisation.

Author Nick Holley is joint programme director for Henley’s Advanced HR Business Partner Programme. Nick regularly contributes to articles in the HR press.

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If your prior strategic planning efforts haven’t delivered the insights, implementation success, organisational development, or market results you’d expected, what are your options for improving next year’s results?

Don’t ask the same old strategic planning questions When knowledgeable people are invited to address strategic opportunities from questions that provide ‘strategic detours’, an organisation will uncover exciting new paths to growth. Additionally, through expanding participation within the organisation, answering these questions becomes part of the daily strategic conversation.

• The leader needs to develop and coach the right behaviours.

While at Henley, Nick has worked with: BT, Cadbury Schweppes, Canon, Centrica, GSK, M&S, Microsoft, Ministry of Justice, Nestlé, the NHS, Oracle, Oxfam, Panasonic, RBS, Royal Mail, Shell, Siemens, Travelport, Unilever and Vodafone to help them advance their thinking around HR.

It’s that time of year when many organisations are undergoing intense strategic planning reviews.

Follow on Twitter @HenleyExecEd @jpaskin

Adapted from a 2013 article published by Mike Brown in Brainzooming

Latest Research

How emerging economy firms lose money

Professor Alan M Rugman

Dr Quyen T K Nguyen

Dr Quyen T K Nguyen, Lecturer in International Business and Strategy, Henley Business School, University of Reading Professor Alan M Rugman, Head of International Business and Strategy, Henley Business School, University of Reading

ccording to research by Dr Nguyen and Professor Rugman at the Henley Businesss School, globalisation may not improve performance for emerging economy firms. In the past three decades, firms from emerging economies have expanded internationally in an aggressive manner. Cemex (Mexico); Vale (Brazil); Huawei, Lenovo and TCL (China); Tata Motors, Tata Steel, Tata Consulting Services, Infosys, Hindalco and Sulzon (India); and Lukoil (Russia) are among these firms. A number of them have engaged in cross-border acquisitions by buying out Western firms. Yet, the financing strategies of such foreign acquisitions have been largely ignored.

We have studied the financing strategies of foreign acquisitions and their impact on the subsequent financial performance of emerging economy firms. To do so, we examined the capital structure of the firm, i.e. the specific mixture of long-term debt and equity the firm uses to finance its operations.

Overall, cross-border acquisitions are very difficult, and can result in financial losses, not just for emerging economy firms, but also for Western firms. For the full article, click here

We have three important findings that are relevant to managers: 1. We find that debt is the major financing source that emerging economy firms use to pay for foreign acquisitions. 2.

Debt financing increases the risk profiles of emerging economy firms and weakens their capacity for servicing interest and principal repayment obligations. This is due to poor financial performance in the post-acquisition period. As a consequence, some of these mega acquisitions end in divestments and asset disposals, in which the proceeds are used to reduce debt and redress the balance sheet. This heavy reliance on debt financing reflects serious agency problems in emerging economy firms.

Many of these emerging economy firms have failed to develop the new dynamic capabilities needed to augment their current capabilities and to exploit the new firm-specific assets obtained through acquisitions.

Henleyâ&#x20AC;&#x2122;s EMBA was ranked

in the UK for percentage of women faculty in 2012

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Listmania

The top 10 risks companies fear most... I

n today’s global marketplace, risks to businesses are no longer isolated by industry or location. Managing and mitigating risk is a necessity for survival, but not all risks are insurable. Here’s a countdown of the unpredictable ones that organisations fear most, according to a survey by risk management firm Aon plc:

4: Damage to reputation

10: Political risk

3: Increasing competition

Reputational events can destroy a company’s image and often arrive with little or no warning, so organisations must respond in real time. McDonald’s quick switch to offering healthier menus paid off when the documentary ‘Super Size Me’ equated them with obesity, but not all responses are so swift or effective.

People thought that a small country like Greece couldn’t disrupt markets, but it did exactly that. Then it was Ireland, Portugal, Spain, Italy and Cyprus. Whether it’s protesting against austerity or Middle Eastern politics ratcheting up the price of oil, political risk is a real worry.

9: Cash flow and liquidity risk

One minute the market looks like it’s going well, then suddenly a big bank says it’s running out of liquidity. Risks like these are increasing, and seem to happen overnight.

8: Commodity price risk

This is mostly insurable, but companies that are dependent on natural resources have to be extra cautious in a volatile commodities market. A food company dependent on fixed corn prices suffers when it rises over that price. Feeding chickens and pigs gets expensive and margins get squeezed.

7: Business interruption Major natural disasters create havoc and impact whole communities, but smaller scale interruptions can still devastate small businesses. In India and Brazil, power outages regularly

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Companies see increased competition from local and foreign firms as problematic, making it imperative for them to focus on innovation, brand awareness and product differentiation to survive. cause prolonged blackouts. In Boston, the devastating bomb also created chaos for local businesses. Aon says that 80% of companies that fail to recover from a disaster within a month will go out of business.

6: Failure to innovate

Borders Books opened its first store in 1971, but after 40 years of dominance, hundreds of stores closed and over 10,000 employees lost their jobs. Amazon and Kindle clearly destroyed Borders’ ability to meet customer needs.

5: Failure to attract top talent

2: Regulatory risk

While most companies accept the need for rules to govern business, the sheer volume and complexity of regulatory constraints can be daunting, and can change at a moment’s notice.

1: Weak economies

It’s not just the developed world that’s growing slowly, if at all. China’s GDP has been lagging behind estimates, as has that of Russia and Brazil. Japan was so worried about growth that it weakened the Yen to compete in export markets. Adapted from a 2013 article at www.forbes.com

Attracting talented workers requires reward and engagement. This means having engaged leaders who drive productivity and generate stronger business results. Engaged staff are less likely to leave for other opportunities.