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Brian Sadowski, CTO of ACS on Transforming IT Leadership.
Much has been said and written about Transformational Leadership recently and the value this approach can bring to business. To many, this is still an abstract concept that seems beneficial but remains difficult to put into practice. When broken down to its basic tenants, transformational leadership is about caring for the individual team member no less than caring about the mission of the company, the satisfaction of the client or the value returned to the shareholder. It is through the genuine concern and care for the team member that extraordinary results can be achieved. Information Technology team members are no exception to this approach, however buried in the data center, telecom closet or cube maze they may be.
Throughout the evolution of technology over the past several decades, one thing has remained constant. Change. Protocols, languages, toolsets, you name it. Very little if anything in technology is exactly how it was 20-30 years ago. It takes great effort to keep pace and to seek out opportunities to leverage innovation for business benefit. From a personal perspective, technologists must continually pursue ways to stay current with their specific discipline. For many, this is a source of great anxiety and can breed a sense of insecurity in the individual IT team member. A worrisome and insecure staff cannot be expected to deliver extraordinary results. In these instances, it is the role of the transformational leader to help his/her team change their view of their contribution to the organization. To be sure, technology endeavors require a minimum level of required skill in order to execute. However, business stakeholders crave a technical staff that truly understand the business and the nature of the challenges and opportunities the business faces. In the end, a technically elegant solution has little value if it does not clearly address business objectives. By connecting the technical staff with the business and its objectives, one can expect a technology solution that does not reflect a “technology for technology’s sake” approach. Rather, business stakeholders will find a better partnership mentality present within IT and may be surprised to have IT present new ideas, models, product offerings, etc… From the IT team member’s perspective, the value that they have attached to themselves drifts away from a specific tool or technology expertise and more towards the knowledge they have of how their technical discipline contributes to the goals of the business and perhaps delivers a competitive advantage for the organization.
It is also the role of the transformation leader to place equal value in understanding elements of the IT team member’s personal life that may contribute to their performance at work. For many, this is where the principles of transformational leadership become difficult to subscribe to as this type of leadership requires a degree of personal touch and sincerity that may feel out of place at work. When it comes to IT team members, it may seem even more foreign as technologists have generally been characterized as introverted technical “geeks” who fear communicating with the business world, let alone exposing what may be happening in their personal life. A truly transformational leader finds a way to breakthrough this veneer and connects with the individual, identifying the things that make that person tick. The key to it all is sincerity. Going through the motions will only drive a wedge between the leader and the team member. Demonstrating genuine care for the team member, how they feel about their place in the organization, their contributions, career path, personal life, etc… can also offset the negative effect an economic downturn has on an organization, manifested as frozen salaries, reduced benefits, diminishing bonuses, etc… When a team member knows that his/her leadership truly cares about the impact these type of steps have on their lives, and when the team member is more in tune with how they contribute to the results of the organization, both good and bad, there is a greater degree of acceptance and understanding as opposed to the typical negative backlash that occurs. Again, this is something that cannot be faked.
Are you behaving as a transformational leader today? It’s really an easy question to answer. Put yourself in your team members’ shoes. Do you speak with them about topics outside of their immediate work deliverables? Do you truly have an open door policy even if it requires that the door be open on a weekend or in the middle of your vacation? Are you helping your team understand their contribution to the business objectives or are you focusing them simply on technical deliverables on a project plan? Granted, a traditional, transactional style of leadership can be very effective. But if you desire to lead and be part of a truly extraordinary team delivering truly extraordinary results, consider altering your approach. You may find it benefits not only your team, but it also delivers real fulfillment and satisfaction for yourself.
A report entitled ‘A talent shortage for European Banks’ (Putzer et al, 2008) concluded that a shortage of strong internal candidates for critical positions will force European banks to overhaul their talent management efforts in order to stay competitive and ensure strong growth. Thirteen banks were represented in their study and they found a common theme, ‘That the CEOs and top executives of banks must personally endorse and live talent management, so that an understanding of its importance percolates throughout the organisation.’ (Putzer et al, 2008). They are encouraged to do this by having more rigorous talent management processes and by using objective indicators to measure effectiveness.
This is not an issue peculiar to the banking sector in Europe but an important theme for all industry sectors in Asia-Pacific and the conclusion and advice is consistent with recent research findings that note the importance of CEO and senior business line managers driving their organisation’s philosophy towards management of firm human resources, and which emphasises the importance of data to measure success (Aldrich, 2009).
Talent portfolio segmentation
A recently completed piece of doctoral research (Aldrich, 2009) predicts the widespread development of additional functional roles within the human resource functions of institutions in the capital markets and investment banking sector and also other industry sectors. This may include, the increase of people-related risk specialists and an increase in human resource professionals that are employed to produce business-impact related metrics that allow for a more granular analysis of the human resource environment. To engage both senior business line managers and senior human resource professionals in this discussion, the management of human resources has been conceptualised as a form of portfolio management (Aldrich, 2007).
A number of studies support the approach of conceiving the talent pool of organisations as an investment portfolio. For instance, Wright et al (1994) define the human resources of organisations as a ‘pool of human capital under the firm’s control in a direct employment relationship’ and Agrawal et al (2003) state that
‘In most businesses, not all employees are created equal. A sub-set … always plays a disproportionate role in creating value. Our experience suggests that workforces fall into six segments: top executives, knowledge workers, middle management, skilled workers, less-skilled workers and bureaucrats … any of these can emerge as the most pivotal.’
Developing the theme of segmentation, Boudreau and Ramstad (2005) wrote that
‘The human resource function should begin its transformation by applying tools of segmentation … Just as marketing systematically segments customers to target investments strategically, human resources function needs to segment talent to deploy human capital strategically.’
Further to this, management consultants McKinsey (Guthridge et al, 2008) also state that talent management should not be limited to ‘top talent’ but instead should follow a more inclusive approach by thinking of employees as ‘a collection of talent segments.’
Therefore, just as certain business activity involves the management of asset portfolios, such as: foreign exchange; equity; loans; bonds; and, commodities, ’Talent Portfolio Management’ involves taking an investment-based, strategic approach to the management of human resources. For instance organisations in the capital markets and investment banking sector can segment their talent portfolio into different human asset groups, for example, front-office stars, their teams and those in key support roles. The ultimate goal is to ensure that organisations can consistently deploy the right people, in the right place, at the right time, for the right cost and for them to be fully engaged.
Talent Portfolio Management
A Talent Portfolio Management approach, Table 1.0, requires the following:
- a clear focus on talent as a strategic investment by the CEO as chief talent officer/chief investment officer who segments the talent portfolio and the most senior business line managers;
- business line managers who portfolio-manage segments of the talent portfolio;
- commercially aware, credible, business partners in the human resource function who analyse the talent portfolio from a financial perspective; and
- human resource specialists who provide risk management support.
The CEO could be described as the chief investment officer: senior line business managers as the portfolio managers of talent for each segment of the talent pool; human resource business partners as portfolio analysts and advisors; and, other human resource specialists acting as portfolio risk managers.
Changing functional roles and competencies in human resource management
A Talent Portfolio Management approach to managing human resources requires advanced skills, for example in organisational analysis and statistical modelling, which may not currently be part of the core competencies of professionals in the human resource function and therefore this approach, though straightforward to conceive, may require a radical change in thinking by business line managers and the human resource professionals that support them. The implications include:
- a strategic approach to management of the talent portfolio, led by the CEO. This involves an understanding of the fundamental links between leadership and management competency as it relates to the human resource environment; talent portfolio management; and, better firm performance;
- an integrated and strategic working relationship between the human resource function and business managers;
- stronger numerical, analytical and commercial skills in the human resource function;
- greater measurement around talent, building up to sophisticated human capital metrics; and
- the identification and active management of people related risk.
The above implies the creation of functional human resource roles that focus on human capital metrics, human resource portfolio modelling and people risk management.
Making talent a strategic priority
Talent must be a strategic priority in practice however, continued progress is needed to address the findings of Gutheridge et al (2008) that
‘Companies like to promote the idea that employees are their biggest source of competitive advantage. Yet the astonishing reality is that most of them are as unprepared for the challenge of finding, motivating and retaining capable workers as they were a decade ago.’
Firms that take a disciplined approach to the management of their talent will achieve the ultimate goal of ensuring that in they can consistently deploy the right people, in the right place, at the right time, for the right cost and for them to be fully engaged. A Talent Portfolio Management approach gives organisations clear guidance that will enable them to implement talent management strategies that will have real business impact.
The world has focused its attention on Asia-Pacific, expecting this region to provide both revenue growth and diversification but the supply of talent continues to lag demand. Talent Portfolio Management requires organisations to leave less to chance as it forces a systematic and ongoing dynamic review of the talent policies, practices and processes that support their management of talent.
Dr Paul Aldrich is a Partner based in CTPartners Hong Kong office who covers the capital markets and investment banking sector for Asia-Pacific. CTPartners is a global executive search firm which differentiates itself by it’s Performance, Quality and Results.
The Board of Directors Institute on Human Resources convened its first annual Institute on Monday, March 1, 2010 at the New York City headquarters of TIAA-CREF. With panelists and participants from corporations in North America, Asia, and Europe, private equity firms, and nonprofits, the daylong discussion focused on themes that included “empowerment, accountability, and the goal of achieving the maximum return from human capital in an era of expanding risk and regulation,” in the words of Brian Sullivan, Chairman of CTPartners. One of the panels focused on an important issue that has become the focus of many debates in recent years – “The Elephant in the room – Why doesn’t Human Resources have a seat at the table in the boardroom?”
“The first panel established that talent is indeed the true differentiator,” commented Laurence “Lon” O’Neil, President and CEO of the Society for Human Resource Management. “Our panel will take a hard look at the roles and responsibilities of the board, given the current economic and regulatory realities. As the pace of change increases,” he added, “we need to consider what’s been missing from boards. Where does HR fit, and how can this profession’s skills and insights empower boards and management teams to be more successful over time?”
Mr. O’Neil moderated a panel that included Michael Feiner, a Professor of Management and Sanford C. Bernstein, Ethics Fellow at Columbia Business School, and the former Chief People Officer for Pepsi-Cola’s worldwide beverage operations; Gerald M. Lieberman, former President and COO of AllianceBernstein L.P.; Patricia M. Nazemetz, Corporate VP and Chief Human Resources and Ethics Officer of Xerox Corp., and a Director of WMS Industries Inc.; and Dermot J. O’Brien, EVP, Human Resources and Corporate Services, of TIAA-CREF.
Mr. Feiner launched the discussion with a bold assertion: “There are a lot of elephants in this ‘room.’ Many senior corporate leaders honestly believe that the main thing HR does is organize the picnics, the blood drive, and the employee handbook. Meanwhile, there simply aren’t enough world-class HR leaders to satisfy the need out there for them. And there are company line managers who may know that they should have an HR partner, but they don’t have a clue about how to find the right person, build the right partnership, and get the best value from what HR could potentially offer. These are very big stumbling blocks.”
Mr. O’Brien asserted that a board’s primary responsibility should center on governance and oversight. “But that should be conceived of in terms of a full ‘portfolio,’ and certainly the human portfolio is part of that.” He stressed that there’s more at stake than simply developing the right compensation strategy. “Let’s talk about corporate culture,” he said. “Boards need to make certain that their companies nurture the kinds of cultures in which people could feel comfortable raising their hands if they see a problem. Human resources has a big role to play in promoting a culture of transparency and accountability.
During these challenging times, boards must balance many essential responsibilities. “Selection of the CEO may be the most important because without the proper CEO, the company will flounder,” said Ms. Nazemetz. “Yet it’s also a core objective for any director to try to ensure that talent is deployed within the organization at its highest level of return. HR should find many ways to help here. For example, when I’m a director, I don’t just want to see a human resources presentation. I want HR to help me get beyond the data to understand what’s truly going on in the company and in the workforce. I want to have different ‘touch points’ and sources of insight.”
Too many boards are preoccupied with “risks and the headline issues,” concluded Mr. Lieberman. “Yet there are so many complex issues that demand their attention, including things that are very hard to assess, like competence, culture, and values. Data can and should be an important part of the board’s assessment process. But there’s more that’s necessary. I firmly believe that when there’s trust, dialogue, and healthy interaction between directors and human resources leaders, corporations will be much stronger.”
Over $30 billion in retail bankruptcies and 250,000 store closings. Iconic, category leaders like Blockbuster, Zales and Borders are contemplating bankruptcy or fire sales. Top private equity firms lead retail portfolio companies into bankruptcy. These headlines over the past two years illustrate the seismic shift shaking the world of retail. The bad economy, inept management and Wal-Mart are insufficient explanations for their misery. The real reason is both scary and exciting; but has more to do with the world their customers live in, and the inability of these retailers to adapt to it.
For most of the 20th Century, retailers flourished by focusing on product, price and brand. Today, that’s no longer enough. Purveyors of everything from apparel to groceries to consumer electronics and general merchandise are battling four macro trends: Price pressure from larger-scale retailers; market share competition from innovative, low-cost rivals; product commoditization; and brand glut from an excess of specialty and private label operators.
Retailers — even those hawking goods in the earliest bazaars — have always profited by exploiting their superior knowledge of merchandise, prices and availability. The Internet, however, is rapidly shrinking this information gap; in fact, in many cases shoppers are more sophisticated than their retail counterparts in using online tools. To make money today, retailers must offer personalized solutions by bundling unique products and services, for which well-informed shoppers are willing to pay a premium.
To succeed, retailers have to come to grips with the new reality that they operate in a multi-channel, customer-centric (mc3) world. Over 80% of retail transactions today involve customer interactions across multiple channels for research, purchase or service.
Americans have dramatically changed the way they shop, consume media, communicate and access information but most merchandisers have barely altered the way they acquire, communicate, inform, sell to and serve customers. U.S. consumers now devote almost 30 minutes, on average, each day to browsing the Internet—more time than they spend with the ads in any other shopping medium. Yet retailers earmark less than 5% of their advertising and customer acquisition budgets for online purposes; and continue to fork over billions for newspaper advertising. Retailers can increase sales while reducing marketing expense 30-50% by shifting to new Internet based platforms — where customers are.
We are at the cusp of a millennial shift in the way things are bought and sold – from a product focus to one based on deep customer relationships, from transactional to emotional. Sellers now have access to two things they did not before. For one thing, when buying or browsing online, customers reveal exponentially more information about themselves. For another, new media (Internet, kiosks, cell phones) allow sellers to personalize each interaction with each buyer. The key to a seller’s success in the next millennium, one may surmise, will be his ability to capture as much customer information as he can and then use it for the benefit of the customer. Sellers who build deep, powerful, and trusted relationships with buyers will be the winners and may end up selling the same buyers a diverse set of products and services. Sellers will likely be classified not by the category of products and services they sell but rather by whom they sell it to. The question retailers need to answer is: How well do I know my customer?
Retailers with outmoded business models like Borders and Blockbuster will shortly be extinct if they don’t change. By putting the names and addresses of millions of their customers interested in books, movies and games to better use, they can still build new, innovative billion-dollar businesses with superior operating economics.
This new world of retailing can either be an ominous threat or an exhilarating opportunity. The good news is that most leading retailers still have the financial resources to adapt if they choose to. If not — well, we all know what happened to the dinosaurs.
Love Goel is the Chairman and CEO of GVG Capital Group, a private equity firm focused exclusively on building market leaders in the multi-channel retail and consumer sector.
Lessons from Online Travel during the Downturn by Tracey Weber, President, Travelocity North America
Online travel companies started 2009 with great uncertainty. Would consumers continue to spend on travel? It’s a discretionary category, but it’s also one that can be very important for people: It can enable consumers to stay close to family and friends, enable them to experience new cultures, even enable them to help the world. Well, 2009 proved that consumers do indeed view travel as an important category–and one they still wanted to spend their hard-earned dollars on. But that came as travel suppliers greatly reduced their pricing to stimulate demand. This is particularly true for hotels, which discounted their rates by unprecedented amounts – for certain destinations, seasons, and days of week, you could find rates more than 50% cheaper than the prior year.
At Travelocity, we had to become a better retailer and not just an online shopping engine. Although the deals on travel were better than ever, most consumers were overwhelmed when it came to finding the best ones. When should I buy? What should I buy? It was critical for us to develop new tools that would help retail travel better and help consumers find the best deals. We created “Deals Wizard,” an easy-to-use visual tool to help consumers sort through deals to multiple destinations across a broad range of time. We also launched “Deals on a Map,” which enabled users to compare prices across destinations by looking at a map. We also expanded our “Good Day to Buy” email, which alerts customers when air fares and hotel rates have dropped by 20% or more, to include more destinations and more types of products. And lastly, we had to get creative with our retail messaging both in traditional advertising channels as well as in new channels like social media and mobile. During the summer time, we had an integrated campaign called “Summer of Possibilities” during which people could vote on where Travelocity Roaming Gnome would travel and then engage with him in that location.
A down economy presents many challenges for companies, regardless of industry. In particular, leaders need to help their organizations balance innovation and operational excellence. In the case of travel, we had to innovate to become better retailers – getting deals out so consumers kept traveling and purchasing with us. However, it was also critical that we manage our operations as perfectly as ever – there was less room for error on key processes that affect customer satisfaction (for example, call center wait times) and less room for error on costs. The “glass half full” view of the downturn is that it stretches your organization and your leadership team and in the process can show strengths you were not aware of and uncover areas of weakness that need to be shored up. We’re looking forward to continued recovery in the economy for 2010–but move forward having learned some useful lessons in 2009.
CEOs making New Year resolutions are not a new phenomenon. After all, they are people and most people look at a new year as one that is more promising than the one past and resolve to correct the wrongs of the prior year by making changes to their behavior. Boy, do they have their work cut out for them this time! 2009 was not just another fiscal period. It was a seminal year for most CEOs. It ruthlessly separated the wheat from the chaff and bared the souls and guts of the weak. Ones without fortitude find themselves redrafting resumes than making resolutions.
However, the ones that did make it and pulled their organizations through this leadership defining period should take a moment to savor the experience. No degree from an Ivy league school or the experience of leading teams through prior downturns were guarantees for determining solutions this time around. It was different in many aspects – the downward spiral was damaging in both its speed and its depth; tenured institutions were not spared its wrath and a seismic political shift altered the regulatory landscape for many industries. Still, many CEOs weathered the storm with aplomb and efficiency. As I spoke with dozens of them over the last month, they believe that 2010 holds the promise of a strong recovery. This should be uplifting for the millions of employees that follow these leaders.
In a year that proved without a shadow of a doubt that there is no elevator to the top, these leaders deserve our congratulations and our praise. We will showcase many of them this year on this blog. Here is wishing every one of our thousands of readers a prosperous and successful New Year!
As 2009 comes to a close, Bud Baker, the former Chairman of Wachovia speaks about how CEOs should prepare for succession….
Imagine, if you can, a corporate chief who takes the top four company managers and invites them to do each others jobs. Is the risk of this too breathtaking? Is the payoff meaningful? Would any Board question the chief’s sanity?
It is difficult to think of a major corporation today lacking a strong Governance Committee and management succession plan. Less sure is that Chief Executives themselves take seriously the opportunity to influence and lead the succession process. At the heart of the matter, is the constant need for an unvarnished assessment of available talent and timely exposure of leadership candidates to critical experience.
In truth, brave CEO’s must offer the best candidates to the Board and give aspirant’s fresh leadership experience. This may be inconvenient. It may mean taking a time-tested technology chief and putting him or her into sales. It could mean redefining jobs to make them more relevant in a radically changing world. In this turbulent world, we don’t need a marketing officer, we need someone who discerns and interprets customer desires. We don’t need an economist, we need a visionary to evaluate business lines and take the company out of things we shouldn’t be doing. Perhaps we should take our best sales person and send him or her to critical, but often neglected, Shareholder Relations.
Should we move people to allow them to absorb provocative new experiences – even if the timing is inconvenient? Does anyone on our team have a fresh and practical view of strategic thinking? Are we willing to take risk to bolster high performance aspirations?
At the end of the day, it is easy to criticize leaders for failing to recognize the need for change. At the end of the day, too few of us have been brave enough to do so.
The sessions continue to be informative and vibrant. As some of the brightest minds from around the planet ponder the future of India and her role in the new world order, it is impossible not to be impressed by the optimism radiating out from this conference. This is in stark contrast to what I’ve been hearing in the western world for the past eighteen months. Some of the comments I’ve heard either in conversation or from their speeches:
C.K. Prahalad from University of Michigan’s Ross School of Business and ranked by Fortune magazine as one of “the world’s best minds” had this forecast for India in fifteen years – “India will have 500 million skilled workers and become one of the major knowledge bases for the entire world. She will be home to 30% of the Fortune 500 and 10 Nobel prizes will have been awarded to Indians.” Impressive and if proven true, astounding.
Predictably, a lot of conversation has ensued about the aggressive GDP growth projections. Ashok Jha, Chairman of MCX-SX said that disinvestment in the profitable public sector enterprises will help reduce the fiscal deficit substantially from the current 6.8%.
Tejpreet Singh Chopra, CEO of GE, India expressed concern for the 300 million people that are expected to join the workforce over the next few years. The service sector growth has flattened a bit and there is only so many jobs that the agricultural sector can add. Therefore quick investments are required in manufacturing, infrastructure and power to provide meaningful employment to this massive new workforce.
Kapil Sibal, the Union Minister for Human Resource development in India added another perspective. He said, “sixty three percent of those who pass high school go to college in the US. That number is fifty percent in Europe. In India it is an abysmal 12.5%. We have to increase this quickly to sustain the 9% GDP growth we all talk about.”
Raghuram Rajan, Professor of Finance at the University of Chicago’s Graduate school of business had a different kind of prescription. He used the example of the iPod to illustrate it. “The iPod costs around $200. Of this amount, $50 goes to China for manufacturing. The remaining $150 rewards innovation, design, advertising, financing, etc. India should focus on these services that envelope the core cost since the ROI is greater and more sustainable.”
The leaders were not shy about speaking about obstacles. Kamal Nath, the minister of roads & highways said, “We are not only the world’s largest democracy. We are also the rowdiest.” Although the government has a publicly stated goal of laying 20 km of new road per day, he said that they have only achieved 10% of that but the streamlining of processes and the cutting of red tape has significantly increased that pace and he was confident that they will achieve the stated rate by the middle of next year. “I no longer measure my life in hours and minutes. I measure it in kilometers”, he joked.
The 2009 WEF was inaugurated this morning in New Delhi by the Prime Minister of India, Dr. Manmohan Singh. Dr. Singh, the primary architect of the new Indian economy was very upbeat about the prospects of the Indian economy in 2010 and beyond. He felt that India responded to the economic crisis better than most other countries. If there is a normal monsoon next year (the Indian economy has a direct correlation to these seasonal rains), he expects GDP to grow by 7% next year. His medium term objective continues to be 8% to 9% growth per annum. Since the domestic savings rate is an astonishing 35% of GDP, he believes that this is a feasible target. “India looks to the future with confidence and hope. We are better placed than any other time in the recent past to push reform forward. I hope to see India as one of the leading economies of the world”.
In “The India Competitiveness Review 2009″ released especially for the WEF, N Ramesh Rajan and Jairaj Purandare of PWC India report that “Indian CEOs’ optimism extends to the country’s broader economy as well, with nearly two-thirds expecting recovery, defined as stable and steady growth, by the middle of 2010. Indeed, more than one-third of CEOs believe their industry and the country’s economy have already recovered or will have by the end of this year.
“Indian chief executives expect their greatest international competition in global markets during the recovery to come from China (34%) and the EU (15%)…. And the US, headquarters for 140 of the Fortune Global 500, was only named by 6% of Indian CEOs as their greatest international competitor”.
Over the next couple of days I plan to spend my time with these CEOs to ratify these statements.
