Have traditional Human Resources Practices Become Out of date?

In preparation for our IMPACT Annual Research Conference in April, I have been actively studying our research over the last year. What we have discovered (and I will be discussing this in detail in my keynote), is that today’s business environment requires a complete rethink of many of the traditional practices of HR.

Let me briefly explain.

The Invention of Professional Management

Over the last 100 years, businesses have been run by professional management.  The management revolution, which started in the 1850’s, defined a manager as a person who “leads the organization,” sets direction, and supervises the work of employees. The railroads and early oil companies were run this way, and then the pioneering thinker of the early 1900s, Fredrick Taylor, defined the organization as a “system which comes before the people.”

Employees, in this traditional model, are the “resources” to be managed. They do the work which has been designed for them by management, and the various recruiting, talent management, training, and evaluation programs we use are designed and developed by HR.

Think about the term “Human Resources.”  Simply by its definition it implies that people are “resources” like machines and capital … resources that just happen to be “human.”  (This is why I hate using the words “Human Capital Management,” which have the same connotation.)

In this older model of management theory, the “system came before the people.”  Fredrick Taylor, the pioneer of production process improvement, the man behind many of our performance processes, focused on making businesses so system-oriented that he claimed “the goal of management is to make individuals as predictable as physical assets.”

Over the last fifty years many management innovations have turned this model on its head. The most widely discussed is the Toyota Production System, which pioneered the idea that “people come before systems” and that any individual on the production line had the ability (actually the responsibility) to point our problems and stop the line when errors occurred. Toyota proved that this process created orders of magnitude improvements in quality, productivity, and employee well-being.

So this era of “management as supervisor” has been shifting, and more and more we understand that we now need a world where “manager as coach” and “manager as worker” become the rule.

Enter Today’s Business Environment

Now fast-forward to today. Today’s high-performing organizations (Facebook, IBM, Apple, Amazon.com) now move so fast that their product cycles move in months, not years. Their workforce is highly interconnected and shares information instantaneously. They are hired and rewarded for their deep expertise, not their ability to follow instructions. And they work on fast-changing projects and programs which evolve and change continuously.

Even more profoundly, today the managers are no longer really in charge. Customers are.

Think about how the internet has changed customers’ ability to purchase. Today nearly every product, service, and offering can be compared and shopped on the internet. Want to see what other people think of it? Just look online. You can compare prices, service levels, customer experience, and even the employee brand of a company in seconds (just look at Glassdoor.com if you don’t believe me).

What this means is that high-performing businesses have learned how to turn themselves inside out. They are 100% customer focused, and the customers themselves provide the input on what to build, how to sell it, how to market it, and how to support it.

When you look under the covers at the companies that thrive in today’s business environment, you find that they are organized and managed very differently. They have essentially obsoleted the “professional management” model and have turned into highly agile, customer-centric teams.

They are characterized by:

• Small, high-performance, self-organizing teams (e.g. the UPS drivers which appear at your door set their own schedules, with a single-minded focus to maintain relationships, safety, and schedule. Being a UPS driver is one of the most “entrepreneurial” jobs an hourly worker can have.)
• Constant feedback and revision of goals (e.g. Facebook, the fastest-growing software company in the world today, lets its customers change its product direction on a constant basis. The company continuously tries new ideas through its culture (The Hacker Way), and delivers these to customers quickly. If it doesn’t quite work, they fix it fast.)
• Managers as hands-on workers (e.g. at ARAMARK, one of the highest performing food service companies in the US, account managers serve food. At Qualcomm, top product leaders have PhDs and patents from their work in engineering. Alan Mulally, who turned around Ford, is an engineer at heart.  As I described in my last blog post, the new model for leadership is one who sits with the team and rolls up his or her sleeves.)
• All employees have direct access to customers (e.g. at IBM, the voice of the customer is included in every major product and strategy decision. Customers come to leadership development programs and teach, customers assist with business strategy, and all levels of consultants are expected to have customer interactions many times every week.)
• A strong shared mission and culture (e.g. at Whole Foods, now a $10.5 billion company with one of the highest market valuations of any in the grocery business, every store is made up of a small self-managed team, and these teams have total control over budget and operations – driven by a strong culture of service, quality, and sustainability). In fact in our model we state that “culture is now a strategic weapon,” not only a way to improve employee retention and engagement.

These changes in the way high-performing teams operate are not new. The US Navy and many successful global businesses uncovered these tips years ago. But today, driven by the rapid change and transparency in the customer environment, they are becoming absolutely imperative.

Where does HR fit in all this?

Over the last few years our members have been asking us for a lot of help dealing with these changes. Should we centralize or decentralize our Learning or HR function? What form of forced ranking and evaluation model should we use in our performance appraisal process? How do we encourage employees to share expertise with each other in our learning programs? How do we identify high-potential emerging leaders and give them the global awareness to operate in a global business? How do we re-engineer our recruiting and compensation programs so that they are globally consistent yet locally relevant?

These questions are critically important, and often hard to answer. And our research on High-Impact Learning Organizations, High-Impact HR, and High-Impact Talent Management addresses all these questions in great detail.

What we see over and over is that high-performing organizations have now started to do things very differently. They are applying what we call the “Agile Model of HR.”

Rather than overly focus on top-down goal alignment and 100% consistency in annual goals and performance appraisals, they put in place processes which encourage employees to revisit goals regularly.  (Our new Performance Management research shows that companies which revisit goals quarterly or more generate more than 20% greater profits than those who develop employee goals once per year.) They focus their performance management process on feedback and development, not on evaluation. (For the first time since we started doing this research, 70% of all organizations now tell us they want their performance appraisal process to be primarily “developmental” in nature.) Companies like Facebook and Salesforce.com are implementing social rewards and recognition programs, social learning programs, social recruiting programs – all with the goal of creating transparency and speed.

One of the biggest changes we see taking place in HR is the need for all HR processes to be continuous, not episodic. Rather than have an annual performance review, we should have a continuous feedback process. Rather than a formal, once a year training program, put in place a continuous learning environment. And rather than recruiting for jobs “when they become open,” we must put in place a “continuous talent acquisition” and “continuous employment branding” solution.  And today I talked with a company that is implementing a “continuous employee engagement pulse” which monitors employee engagement on an ongoing basis.

The traditional “Human Resources” programs which were designed in the early 1900s are rapidly falling away. Are they becoming out of date? In many cases the answer is yes.

If your HR and Learning programs are focused on building customer centric teams, empowering managers and people to make decisions, encouraging a culture of learning, teaching managers to coach and develop others – then you have moved to the Agile Model for HR. If your HR programs are still focused heavily on enforcing the rules, formalizing structure and centers of power, and putting leaders on a pedestal, then your HR and employee programs are probably holding your company back.

Building business agility is the theme of our IMPACT 2012 Research Conference on April 10-13. Come join 450 of the top HR and L&D professionals in the world and learn more.