In This edition

1. The CEO's Path To The Top: How Times Have Changed
2. HR Needs To Finally Take Responsibility For People Management Results & Stop The Excuses
3. Incentives, Motivation, & Workplace Performance: Research & Best Practices
4. Transparency: The Clear Path to Leadership Credibility
5. Human Capital Reporting: An Internal Perspective
6. Across The Board: Official Communication From The SA Board For Personnel Practice (SABPP)
7. Book Reviews
8. Finding Practical Solutions To Skills Development Problems
9. Case-Law & Legislation Review:
10. Unsubscribe & Moving Soon

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1. The CEO's Path To The Top: How Times Have Changed

http://knowledge.wharton.upenn.edu/

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1. Introduction

When Edward D. Breen was named chairman and CEO of scandal-plagued Tyco International in July 2002, one national magazine reasoned that he had taken on a job that would make "lesser CEOs quake in their wingtips." But Breen's footsteps to the top were not just steady; they also tracked a new pathway to the executive suite, one no longer dictated by the older, company-trained, academic-elite candidates. Breen was 46, a graduate of a non-Ivy League school and, to everyone's relief, had moved up the corporate ranks of another company entirely, never holding a job at Tyco until he was named CEO.

As one of the top human resource executives at EDS, Tracey M. Friend found that her entrepreneurial background was a plus when she interviewed for the job of portfolio manager for recruitment services. A graduate of the University of Florida, the 35-year-old Friend had already built and sold her own Internet recruitment and training company and worked for two competing technology companies before joining EDS last August. "Skills and capabilities open the doors, not degrees," she said.

And when Ed W. Flowers, 48, was named senior vice president for human resources at Russell Corp. -- the Atlanta-based apparel company -- in July 2003, he had no reservations about joining the executive ranks of a company where he had never worked. "People advance in their careers today based on performance," said Flowers, a graduate of the University of North Carolina at Charlotte who had previously been global head of HR for the Merisant, a Chicago-based maker of table sweetener products. Advancement is "not based on an entitlement mentality."

2. Good-bye, Organization Man.

In a new study that compares Fortune 100 executives in 1980 with their counterparts in 2001, Peter Cappelli, director of Wharton's Center for Human Resources, and Monika Hamori, a professor at Instituto de Empresa in Madrid, have documented what business people like Breen, Friend and Flowers, along with many others in the corporate and recruiting worlds, have no doubt already witnessed: The road to the executive suite and the characteristics of the executives who get there have changed significantly over the last two decades.

To summarize: Today's executives are younger, more likely to be female, and less likely to have Ivy League educations. They make their way to the executive suite faster than ever before (about four years faster than their counterparts in 1980), and they hold fewer jobs along the way. They spend about five years less in their current organization before being promoted, and are more likely to be hired from the outside.

What's more, the Organization Man, the lifelong corporate employee who worked his way faithfully and slowly up the executive ladder, appears to be headed out the door -- increasingly nudged, apparently, by women. According to Cappelli and Hamori's The Path to the Top: Changes in the Attributes of Corporate Executives 1980 to 2001, not a single woman held a top management job in the Fortune 100 in 1980. In 2001, 11% of the Fortune 100 top executives were women. Compared to men, the women executives are younger (47 vs. 52); move into executive positions faster (21 years vs. 25 years), and are less likely to be lifetime employees (32% vs. 47%).

"From the 1950s through the 1970s, American executives looked a lot alike," write Cappelli and Hamori. "They tended to be model organization men who stuck faithfully with the companies that first hired them, and they climbed methodically up the corporate ladder until, at last, they retired. The dominant notion during this time was that a business career ran its course inside a corporation."

According to Cappelli, Fortune magazine editor William H. Whyte put the phrase "Organization Man" on the map when he wrote a book by that title in 1956, posing what was then viewed as a novel question: "Why would executives ever leave their firms?" Further studies answered that question: In the Organization Man era, executives only left the fold if a company didn't deliver on its promise of upward mobility. But, write Cappelli and Hamori, "there were hints throughout the 1970s that things were changing ... Our research puts executive careers under the microscope once again."

In a recent interview, Cappelli acknowledges that he is still unsure what to call this new corporate executive model. But he is definitely convinced of two things. First, the new model "is here to stay, through the conceivable future." Cappelli points out that by focusing on the more conservative, larger Fortune 100, the study utilized companies "most likely to be able to retain the traditional model of organizational careers." So if these august, institutional business models have experienced change over the last 20 years -- as they have, according to this research -- then "it's likely that the changes we measured would be [even] greater in smaller corporations," Cappelli writes. And even though 45% of executives in 2001 are still classified as "lifers" -- those who spend their entire careers in one company -- the percentage is down from 54% in 1980. Also, the number of "lifers" in young companies (those existing for 30 years and less) is only 17%.

Second, the new model clearly underscores that "different skills are being rewarded, and that a new type of executive will benefit from this trend," says Cappelli. "The businessman in the gray flannel suit -- the person who was nameless and had no independent profile but fit into the organization -- that person clearly suffers in this model. People who can promote themselves clearly win. It's tempting to say that people with more merit get ahead now, although I'm not exactly sure that this is true because it's hard to judge real merit. But the people who appear to have merit clearly have the advantage in this model."

In The Path to the Top, Cappelli and Hamori also report:

>> Changes in size, age and management structure of the Fortune 100 companies, as well as the list's industry concentration, contributed to executive career evolution. Only 26% of companies in the 1980 Fortune 100 list were also in the 2001 list. "The changes in the Fortune 100's makeup dramatically highlight the continuing shift in the United States toward a service economy," Cappelli and Hamori write. 'The decline of the manufacturing sectors on the list (from 17% to 1% of the total) and the rise of financial services (from zero to nearly 17%) are especially striking."

>> Corporate hierarchies are flattening. "We measured a considerable change in the distribution of executives by job responsibility between 1980 and 2001. Not all companies have exactly the same hierarchy of titles, but most have three tiers -- CEO and chair level, EVP level and VP level ... We found that the percentages in the top and middle tiers declined (27.8% to 22.8%, and 65.1% to 59.3% respectively), while the percentage in the lower tier expanded substantially (from 7.1% to 17.8%), again supporting the perception that corporate hierarchies have become flatter."

>> Different types of firms offer different prospects for advancement. "It's clear, for instance, that there are huge advantages to working in a growing firm. Executives are much more likely to be promoted in firms with healthy growth rates than in stagnating companies ... Other things being equal, younger firms offer faster advancement, perhaps because of their tendency to have flatter hierarchies." Also, "the youngest firms -- presumably the fastest growing -- do the most recruiting of outside talent."

>> The "speed to the top" depends on the industry. This report and previous work suggest "companies in fast-growing industries offer better prospects for advancement. For example, the two industries offering executives the fastest paths to the top in 2001 were wholesale trade and financial services -- two industries that had no companies big enough to be in the Fortune 100 in 1980." But Cappelli found one finding particularly surprising: In both 1980 and 2001, executives reached the top more quickly in industries that were undergoing structural change. In 2001, for instance, the steel industry offered one of the fastest paths to the top (just over 23 years). "It makes sense because turmoil creates opportunity," Cappelli said of an industry wracked by consolidations and restructurings. "One of the reasons you get to the top faster is that people are being jettisoned quickly."

>> Changes have also taken place along the "inside track" to the executive suite. Through the 1970s, "marketing was the preferred track into the executive suite, but the results here suggest that finance now offers by far the best path (it offered the best path in 1980, too, but consulting and human resources were close behind). The finance track will remain the dominant path to the top job as long as the investor community wields a powerful influence on corporations."

>> Increasingly, graduates of non-Ivy League institutions have worked their way up the corporate ranks. "The top executives of powerful companies once shared the common bond of elite education," Cappelli and Hamori write. "Between 1980 and 2001, the percentage of Fortune 100 top executives with Ivy League undergraduate degrees fell by four points (to nearly 30%) while the proportion from public schools increased by 16 points (to 50%) ...The results for second degrees suggest an even greater change. There is something of an increase in the proportion of second degrees, principally MBAs and law degrees, among these executives by 2001, and the decline in the percentage that came from Ivy League institutions was much greater than for undergraduate degrees. It's unclear whether this means corporations were becoming less elitist and more open to students from all levels of society. A possible explanation is that the Ivy League produced a smaller fraction of graduates over time, especially in the exploding area of professional degrees."

>> According to Cappelli, executive search firms play a role in this changing path to the top, but he's not sure to what degree. "Head hunters are a big part of the story. They both benefited from and caused" many of the changes during the last 20 years. "Whether they were driving it is an interesting question. I would say that they responded (to the trend), and once they got in there, they facilitated the move very quickly. Ironically, one of the complaints that you hear from executive recruiters today is that it's difficult to find people to move around because no one has any experience any more. How do you assess talent without a proven track record? It's hard to get objective measures when you are trying to decide, 'Is it the steak or the sizzle?'"

When presented with these findings, executives from several search firms had different reactions. "I certainly tell people that staying with one company is a negative," says Franklin D. Marsteller, an executive search consultant with Spencer Stuart in Philadelphia. "I think that the movement between companies is a plus. A progressive resume does make people look very valuable."

But Marsteller believes that recruiters played no role in the changing market. "We really only respond to our clients' trends. We don't generate trends," he says. "I think the bigger issue over the last 20 years has been clearly not pedigree, but performance. The 1980s were the transition years away from the Ivy League and the country club set to performance and results, and the faster the better. Ed Breen, the new Tyco CEO, is an example. He was a rising star at Motorola before we recruited him."

Kenneth L. Kring, a senior partner with Heidrick & Struggles who founded the executive search firm's Philadelphia office in 1997, isn't sure whether search firms played a role in the changing path to the top. "But what I do know is that people move quicker, and the requirements of leading organizations have gotten harder," says Kring. "The skill sets required are less developmentally traceable. The learning curves are steep and people fail in jobs like they have never failed in before because organizations are measuring things differently and have less patience."

Cappelli agrees that not only has the path to the CEO's office changed, but the role of the CEO has changed along with it. "Management jobs today are really very much about projects," he says. "They are hiring CEOs and executives to do certain things -- not to fill a job but to do X or Y. They are hiring them as a substitute for doing strategy. And the person that they are looking for becomes the strategy."

In conclusion, Cappelli and Hamori write: "Overall, there may be something of an 'Is the glass half full or half empty?' issue in interpreting these results. Despite all the discussions about corporate job-hopping and an open labor market for executives, one might say that almost half of these top executives in 2001 were still in the company where they held their first job, and the average executive had been there 15 years. There is clearly some stability in the careers of top executives in 2001. On the other hand, these are the largest companies in the world with the biggest internal labor markets and the strongest policies oriented around promotion from within. If more than half their top executives now come from the outside, roughly half their careers have been spent elsewhere, and both the percentage of lifetime careers and average tenure are falling significantly, then something is clearly different about how executive careers operate now. The 'Organization Man' model has clearly eroded."

* Reprinted under license agreement with The Wharton School University Of Pennsylvania

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1. Who Is Responsible For Producing Great People Results?

In my over 35 years in HR I have been consistently disappointed with the answers I get when I ask HR professionals "who in the corporation is responsible for providing great people results?" Normally when I ask the question to HR professionals, I get a blank look and unfortunately, I almost never get the response "HR is, of course". In direct contrast, when I ask line managers, they invariably say it’s HR. The results of the question from CEO's are mixed. Most say HR, but it's not uncommon to also get a puzzled look in return. Can it be that no one is responsible for producing great people results?

To me the answer to the question should be clear and a resounding… why the vice president of HR is! But unfortunately, the fact that "who is accountable" isn't clear makes me wonder why the issue of accountability for people results has remained unclear over these many years. Incidentally, I ask the same question about finance, marketing or PR, there is no hesitation about who is accountable for their results.

This article will explore the issue and hopefully, make a solid case for HR stepping up to the bar and accepting responsibility for producing great people results (i.e. outstanding workforce productivity). This article is designed to make you think. And yes, it may anger some with long histories in HR but there is often confusion and anger before real change can take place. So bear with me and even if you get angry, maybe it at least will start you on the path of rethinking HR.*

2. Being Strategic Means Taking Ownership And Being Accountable

Almost by definition, strategic people assume responsibility for getting things done and for producing results. For example, CFO's assume responsibility for financial systems, CIO’s for information and computing systems and the head of retail operations for producing retail sales results.

Individuals in HR claim that they are "strategic partners" but for some curious reason, they almost universally fail to accept the actual responsibility for producing strategic "people results". The reasons that HR professionals generally give for not accepting responsibility for people results can generally be grouped into two categories. They are:

>> We have no control over what managers do, so it's not fair to hold us accountable.

We're just administrators not decision makers or a profit center. Key people decisions are made by top management.

Let’s start with the "no control" issue to see if it's valid.

Argument #1 - We don’t have total control, so holding us accountable is unfair

No Strategic Player Ever Has Total Control

It is certainly true that HR does not have total control over all aspects of people management. HR serves as only one part of a joint effort, along with senior executives, line managers and even employees. The question then arises, is it fair to make HR accountable for people management results?

Many people equate being strategic with having a formal authority or control, but there is really no automatic connection between the two. Strategic individuals don't always have as much power and control as they would like and almost no one has total control over their functional areas. . For example the CFO takes responsibility for all financial actions but they, in fact, have little direct power over how money is spent on a day-to-day basis. Managers routinely go "over budget" and others managers frequently violate financial guidelines but in reality, the CFO has no real power to punish individuals or departments that violate financial guidelines. Yes, you might think that CFO's have total control over budgets but in fact, all budgets are reviewed and approved by the executive team and the CEO. CFO really just implements budgets. In most cases the finance department doesn't even formally own or even possess the funds that they must take responsibility over.

The lesson to be learned here is that, despite the fact that the finance department lacks total control over financial matters, it still accepts the responsibility and accountability for financial results. Unfair perhaps, but they don't whine about it. Instead, they realize that everything in business is a team effort. Instead of expecting total control they realize that most of their "power" comes from educating and influencing others not from any formal authority to fire or even punish individuals that violate financial standards. In short, what CFO's do is take responsibility upfront for the things that they have determined to be important and strategic to the success of the organization, even though financial managers do not have total control or power over the entire situation.

Let's look at another example. Store managers in a retail chain like Starbucks have little or no control over the product mix, the prices, the brand, the location or even the wages they can pay. It’s clear that they depend heavily on the decisions of others. In spite of their limited control, they still accept accountability for store sales and profit. If they don't succeed, regardless of corporate regulations and constraints, they are replaced. But rather than whining about their lack of control, store managers learn to accept that they must produce results no matter what. In short, they are accountable without total control. The same can be said for advertising, where a great campaign can fail to produce results because of inappropriate pricing or a weak supply chain. In the same light, individuals that manage the supply chain don't have total control over suppliers, the weather or transportation tie-ups. But all except responsibility and accountability for producing results.

Now let's shift to the HR situation. It's a fact that expenditures on wages, benefits and HR department costs often average 60% of total variable expenditures for a firm. No one can argue that it's a huge expenditure of money but who is responsible for ensuring that this expenditure produces great results.

3. Are Line Managers Responsible?

You could argue that line manager should be responsible for people results, but if you did, it would be difficult to find more than a few line managers that would agree with you. Certainly most line managers almost automatically blame HR for handcuffing their ability to produce results with their people. If HR believes that line managers should be responsible, it is certainly within their power to design metric and compensation systems that hold them accountable for producing great people results. However, in less than 40% of firms are managers actually held accountable (where they are measured and rewarded for great people management results.) And since HR controls the compensation and reward system, it seems clear that even HR doesn't believe (at least in the remaining 60% of the firms) that managers should be accountable for people results.

4. Is Senior Management Responsible?

The next logical group to shift the accountability to would be the CEO and the senior management team. It's generally true in organizations that the senior management team does make decisions on the overall compensation, employee headcount and HR budgets but those decisions are made in conjunction with the VP of HR. However, it is also true that the Board of Directors sets the CEO’s measurement and reward criteria and great people management or people productivity appears in the assessment criteria only in rare cases. When you talk to CEO's, they expect all senior-level executives to take responsibility for the functions they oversee. CEO's expect finance to produce financial results, production managers to increase production results and for supply chain managers to get the product on the shelves. So the question arises, why should the VP of HR (who we all would agree now has a seat at the executive table), be exempt from being responsible for their functional area, i.e. producing great people results?

5. HR Must Be Accountable

The key lesson to be learned from this analysis is that the CEO expects people that lead a function to be responsible for the results of that function. This is clearly true for line functions but it is also true in such overhead areas as finance, supply chain and yes HR. Executives in HR further add to the confusion by demanding a seat at the table and by proclaiming themselves business partners while simultaneously failing to step up and to clearly and publicly accept responsibility for producing great people results.

It has been a long tradition for non-strategic individuals in HR to take a narrow perspective and accept only the responsibility for the "operation" of people management systems. This narrow perspective guarantees you will not be considered strategic because the very definition of strategic means moving beyond taking responsibility for "your own operation" and instead taking responsibility for the "results" even though these results may occur outside your functional organization. If you accept this broader view that HR is responsible for the "output" or results of the people management systems (not just the operation of the systems), then you are already taking a strategic view of HR. If you have the courage and foresight to assume the "captain of the ship" role you must move beyond accepting responsibility for the operation of HR departmental processes and you must add to that the broader responsibility for the actions and the performance of the employees, which were hired, trained, developed, rewarded and appraised by those processes.

Everyone else at the executive table has long ago gotten past the issues of lack of control.

It's time for HR to realize that no critical business function, whether it be line management or overhead has more than partial control over processes, decisions and resources . Like all other critical business functions, HR must get results through other people and other functions. In short, HR must assume the "captain of the ship" responsibility for producing great people results in spite of, or with the help of line managers and senior executives. Obviously HR doesn't have literally the power to force managers to act correctly or to force the CEO and the executive team to make the "right" decisions on compensation, headcount and HR budgets but the CIO, CFO and head of supply-chain don't have that power either.

6. You Can't Reap The Rewards Unless You Accept The Responsibility

In order to take credit for something you have to take responsibility for it first. The corollary to that is that if you want to take credit for some strategic result, you must first assume some degree of "ownership" over that strategic area. In this case, HR needs to assume responsibility and ownership for employee productivity, so that when productivity improves, HR can in turn take credit for that accomplishment. Unfortunately, all too often HR professionals want to take credit when productivity is high but they don't want to take the blame and the responsibility when it drops.

Other senior functional heads long ago learned to accept and even demand accountability because they realized that accepting responsibility is a requirement for being strategic. They further realized that even though accountability can mean blame and criticism, on the positive side, accepting responsibility can also mean praise, recognition and rewards for producing great results. In fact, anyone in HR with compensation experience should be the first to recognize the fact that with increased responsibility and accountability (i.e. Hay points), come increased base pay, bonuses and promotional opportunities. Perhaps one of the reasons that the VP of HR has become a "terminal job" (where if you move beyond it) is because all of the jobs above it require clear public accountability for producing results.

7. Education, Influence And Persuasion, Not Control Are The Keys To Success

The conclusion that great HR leaders must reach is that they will never have complete power or control over people issues. They must realize that they can only succeed with the help of others so they must learn from other "accountable" senior executives what approaches and tools that they use to get the results they need "through others". Some of the tools that HR must learn to utilize in the absence of total control include:

>> Educate managers -- Educating others that the importance of great people management in producing business results. This includes quantifying the dollar impact of great versus poor people management.

>> Rely on metrics -- Providing metrics that demonstrate that they cannot meet their individual departmental goals unless they are effective at managing people (i.e. Great people management is a critical success factor in business success). HR must demonstrate that the most successful managers follow HR's recommendations and that the least successful ones suffer when they take another course.

>> Become an expert - demonstrate to line managers and senior executives that you are truly an expert in business problem solving. In addition demonstrate you are an expert in preventing and solving people problems and in getting increased productivity. Learn to use persuasive arguments and how to build strong relationships in order to influence managers to adhere to HR guidelines and recommendations.

>> Provide comparison data -- Provide the senior executive team with benchmark data demonstrating how the leaders in their industry fully fund HR programs and initiatives. Also demonstrate the economic costs of "underfunding" HR.

>> Become a consultant -- Stop being an "HR cop" and instead become an internal consultant with the same credibility of a McKinsey management consultant. Instead of constantly yelling at managers and telling them "you might be sued", instead provide advice, data and information that support your case. Just like an external consultants must do, learn how to influence, cajole and persuade managers that you are an expert and that following your advice is the only way to get great business results.

>> Change the reward structure -- Nothing will get line manager's attention faster than changing their compensation and bonus formula to include employee engagement and employee productivity measures. By making them share some accountability, while simultaneously rewarding them for results you will increase their interest and involvement in people management issues. Changing their reward structure makes them more of a partner" than an adversary. In the same light, the entire HR staff must have their pay at risk based on continually improving people management results.

>> Act like a P&L manager -- Demonstrate that you have "skin in the game" by demanding that the bonuses of senior HR executives be directly tied to the firm's people results. By putting your pay and the HR budget at risk (based on performance), you demonstrate that you are like other managers and are willing to "put your money where your mouth is".

Make a public declaration -- And last but not least, standing up and declaring you are responsible and accountable for producing great people results is essential to building your credibility. This has the effect of demonstrating that you are not a sideline "overhead" player but instead, it demonstrates you are willing to except responsibility for success and blame for failure. This assertion makes HR equivalent to P&L managers and other highly respected strategic individuals who also accept accountability without total control.

Strategic individuals "find a way" to influence others. No single approach will work for every manager and situation, so HR must have a variety of approaches and influence tools. Remember, the ultimate goal is to influence people that "don't have to cooperate" to instead work together as a team in order to produce the desired strategic result.

8. Taking responsibility and being strategic go hand in hand.

Argument #2 - We are just administrators not decision makers or a profit center

The second argument that HR professionals frequently make in order to avoid accountability for producing people results is that the HR function is an administrative or overhead function and as a result, it does not make decisions. In the first place, declaring yourself as an administrative or overhead function, almost guarantees you can't be considered strategic. By definition, overhead functions are important but they are tangential to business success, so it is a strategic mistake to ever declare that you are primarily an administrative function. Such a declaration not only lowers your status but it might inevitably lead to the outsourcing of your function because it is becoming common practice to outsource all administrative or non-core functions.

Other "Overhead" Functions Have Successfully Made The Shift To Profit Center Status

Other formally "overhead" functions have recently shaken that degrading label and have emerged as primary contributors to corporate profit. For example, supply chain used to be known as purchasing, warehousing and delivery, all secondary overhead functions. However, unlike in HR, the leaders in these areas realized that even though they were all too often classified as overhead, that they were in fact a critical contributor to business success and profits! You need to look no further than Wal-Mart and Dell which openly declare that an effective supply chain is "the" critical business function in organizations. Incidentally, the total budget expenditure on supply-chain is relatively minuscule compared to the amount spent on people, so our potential business impact is much higher. Other "formally" overhead functions that have successfully made the transition to key business contributor include six sigma, customer relationship management, product branding, lean manufacturing and even PR.

9. Demonstrate Your Impact In Dollars

The key lesson to be learned here is that there are many formally overhead functions that have shaken the "administrative label" and have found a way to become recognized by everyone as profit centers. But it takes more than talk to make the transition. Other critical success factors include the extensive use of objective metrics, technology and the ability to convert the results into dollars. To HR that means that it must demonstrate to senior management the dollar differential in output, revenue and profits between divisions that utilize excellent people management tools and strategies compared to those business units that take another approach. By demonstrating how great hiring, the retention of key individuals, increased motivation, continuous development and the internal movement of individuals can impact the bottom line; HR can also become recognized as the latest and the most important profit center.

10. Measure And Improve Workforce Productivity

Productivity is a measure that can be used in all functions. It is relatively easy to calculate and it is also easy to compare productivity between diverse business units. The key productivity metric that top management should learn to expect from HR is a continual increase in workforce productivity.

Workforce productivity is merely the ratio of dollars spent on "people" (all employee salaries and benefits as well as all HR department expenditures) versus the output produced by these employees. Some use a simpler revenue per employee measure, but in any case, it's easy to demonstrate any improvement or decrease in workforce productivity. Workforce productivity has an added value in that it can be used to compare organizations in the same industry. In fact, it's not unusual for top performing organizations in an industry to produce two to five times more "people productivity" than average firms in the same industry (Dell for example produces nearly $1 million in revenue per employee). We all know intuitively that great people management makes a difference in business results, but if you want to be a strategic player, you must go beyond "thinking and believing" and instead, you must demonstrate in dollars the impact of great people management practices on an organization's bottom line.

Strategic HR professionals accept this responsibility even though it is clear that they don't have total control or direct ownership over all people decisions. When you adopt this view, you accept the fact that you must advise, cajole, educate and somehow influence managers and employees throughout the organization so that they can "execute" and produce the highest workforce productivity. HR’s situation is really no different than the supply chain environment where managers must educate, influence and cajole suppliers and vendors, over which they have little direct power or authority.

Tactical people take responsibility for operating systems. Strategic individuals take responsibility for producing results!

11. Becoming The "Chief People" Advisor" To The CEO

Before leaving the topic of accepting responsibility for all people management, it's important to determine if there should be any limits on that "responsibility and ownership". I add this important note because many individuals in HR assume that their people results responsibility goes only in a downward direction (toward line managers and employees). This means that while some vice presidents’ of human resources have learn to accept their responsibility for the people and systems "below them" few even consider the responsibility "above them".

The key issue here is should the Vice President Human Resources seek out and assume the responsibility for managing their peer vice presidents and the senior executives of the corporation? Obviously these high-ranking individuals are also employees so should a VP of HR be so bold as to accept responsibility for improving their productivity. It is certainly true that the CFO doesn't limit their advice to "underlings", so should the VP of HR accept the responsibility for advising the CEO on the management of their executive team, is a question most VP's of HR are afraid to address. Yes it is true that technically the CEO is responsible for managing the executive team but it's equally true in many cases that CEO's are not great people managers. Most CEO’s don’t get promoted to that level based on their strong people skills (or more VP's of HR would become CEO's within their own organization). There are numerous accounts of CEO that lack people management skills and as a result, the CEO's executive team does not operate as an effective unit. I am not proposing here that the VP of HR actually run the executive team but what I am suggesting is that great VP's of HR must "manage up" and serve as the chief people advisor to the CEO on the management of his or her executive team. Yes, the VP of HR is but one senior executive on the team but they are also likely to be the person with the most skill in managing people and team performance. I only know of a handful of VP's of HR that accept this ultimate responsibility for managing up but those handful of individuals that have accepted that role are, without a doubt, the most strategic and impactful of the VP's of HR that I've ever encountered.

12. Conclusion

I hope that if you have learned only one thing from this article, it is that it is an oxymoron to have a "seat at the executive table" and at the same time to expect to be exempt from the rules of accountability that all others at the table must share. Yes, it's true that HR must produce its results by working through a wide variety of individuals and organizations, over which it can exercise very little control. I am the first to acknowledge that producing great people results requires working with great numbers of "difficult" people including managers, employees, union reps, lawyers and senior executives. But the fact that the job is complicated doesn't make it any less important.

Intuitively, each of us in HR already knows the importance of great HR but that view is unfortunately, not always shared by senior management. HR has a long and messy history of suffering through crushing staff and budget cuts which can be attributed, at least in part, to our lack of willingness to stand up and be accountable. With the growth of outsourcing, there is no better time to assume the role of the manager and owner of the most important assets in the corporation. It’s also the most expensive asset but at the same time, it is the one with the highest potential return on investment.

Now is the time to stop arguing over the difficulty of assuming accountability for people results. The time has come when we must cast off the administrative and overhead labels that we have carried so long and the tired "lack of control" excuses that go with it. We are now faced with the opportunity to become the most powerful profit center in the organization. Unfortunately, it may be a short-term opportunity because the other option looming on the horizon is being outsourced because we were deemed a non-core function with no direct impact on the bottom line.

* Reprinted by permission of the authors

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3. Incentives, Motivation, & Workplace Performance: Research & Best Practices

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1. Overview

Despite the fact that organizations spend over $100 billion annually on incentive programs, many business people question their effectiveness. Now, a ground-breaking study proves that incentive programs can boost performance by anywhere from 25 to 44 percent, but only if conducted in ways that address all issues related to performance and human motivation. The study found that most organizations lack the knowledge or will to create properly constructed programs that yield desired results.

The Incentive Federation determined in 2000 that North American organizations spent approximately $27 billion a year on merchandise and travel incentives. Cash incentives included, the total exceeds $115 billion. But surprisingly, few organizations apply formal return on investment processes or measures to their incentive program design.

Numerous researchers have studied the impact of incentives and related programs for at least 100 years without establishing a clear consensus among business circles as to whether or not incentive programs deliver measurable and meaningful performance results. "Incentives, Motivation and Workplace Performance: Research & Best Practices," conducted by researchers for the International Society of Performance Improvement, and funded with a grant by the SITE Foundation, was designed to analyze the complete body of scientific research on incentive programs, determine what if any research-supported conclusions exist as to their effectiveness and the circumstances under which they can succeed, and to benchmark these findings with actual business conditions through surveys and interviews with business executives whose organizations use incentives.

The study was designed to help answer four questions: Do incentives increase work performance (and under what circumstances)? Which incentive programs are most effective? What types of organizations need incentives? And what model best expresses how to select and implement successful programs?

The report also yielded an eight-step model describing the process by which incentive programs can best be designed to influence performance.

2. Meta-Analysis Reveals Positive Impact

The researchers began by conducting a thorough "meta-analysis" of existing, scientific research on incentive programs to identify any trends regarding their effectiveness, and the elements that lead to success or failure. The search process included every known source of research on the topic, excluding those studies that failed to live up to or disclose verifiable research practices, or those conducted by commercial organizations with some potential axe to grind. The final meta-analysis was based on 45 existing studies that met researchers’ exacting standards.

To compare research results with current practices, researchers conducted surveys via the Internet and telephone of 145 U.S. organizations that use incentive systems.

3. Key Findings

The meta-analysis of research and subsequent surveys yielded surprising evidence about the effectiveness of incentive programs and the elements behind success. Here are some of the key findings:

>> Incentive programs improve performance. If selected, implemented, and monitored correctly, incentive programs—with awards in the form of money or tangible awards—increase performance by an average of 22 percent. Team incentives can increase performance by as much as 44 percent.

>> Incentive programs engage participants. The research found that incentive programs can increase interest in work. When programs are first offered for completing a task, a 15 percent increase in performance occurs. Asked to persist toward a goal, people increase their performance by 27 percent when motivated by incentive programs. When incentive programs are used to encourage "thinking smarter," performance increases by 26 percent.

>> Incentive programs attract quality employees. Organizations that offer properly structured incentive programs can attract and retain higher quality workers than other organizations.

>> Longer-term programs outperform short-term programs. The study found that incentive programs that run for a year or more produced an average 44 percent performance increase, while programs running six months or less showed a 30 percent increase. Programs of a week or less yielded a 20 percent boost.

>> Executives and employees value incentive programs. All things considered, both employees and managers say they highly value incentive programs. Nonetheless, 98 percent of survey participants complained about their implementation. A program’s success and return on investment, obviously, depends on how well it’s operated.

>> Quota-based incentive measures work best. Programs that reward performance based on meeting or exceeding goals generate the most positive results. Piece-rate programs, for doing more of something, also provide positive results, according to the research. Least effective (yet commonly used) are tournament-based programs; i.e., closed-ended programs that reward a pre-selected number of winners, as opposed to open-ended, quota-based, or piece-rate programs that give everybody a chance at success.

More research is needed on the use of non-cash tangible rewards, as opposed to cash. The researchers cited a lack of sufficient research to isolate the relative motivational value of cash versus non-cash awards, or to determine whether or not companies can get the same or more motivation for less money by using non-cash awards. Nor does sufficient research exist to measure the impact of cash incentive awards on compensation or pricing strategies. Companies may actually be able to get more motivational impact for less money if employees can choose their own rewards. Finally, the researchers suggested that many programs using non-cash awards do not follow the guidelines for successful program implementation, outlined on page four.

4. The Conditions for Success

The study isolated five conditions under which incentive programs work best:

# Current performance is inadequate.

# The cause of the inadequate performance is related to deficiencies in motivation.

# The desired performance type and level can be quantified.

# The goal is challenging but achievable.

# The focus on promoting a particular behavior does not conflict with or override everyday organizational goals.

5. Implementation Steps

The study included a model for developing effective incentive programs and diagnosing existing ones, known as the Performance Improvement By Incentives (PIBI) model. The model is based on a complete review of research and survey findings.

The Strategies For Success

To help companies develop effective incentive programs, the researchers identified an eight-event PIBI (Performance Improvement By Incentives) Model. It specifies the human issues relevant to performance, provides guidance on the step-by-step procedures of implementation, and allows decision-makers to troubleshoot and correct the system if it fails to yield desired results.

A. Assessment.

Management determines that performance levels are inadequate because of a shortfall in motivation. Part of this assessment process is a "gap analysis," to assess differences between a company’s goals and employee performance. If the gap analysis shows that employees are capable but lack the effort necessary to improve performance, then an incentive program can be a useful way to change that behavior.

B. Program selection.

In considering the alternatives, it is best to adopt a quota-based incentive program, or at least a piece-rate (or reward for performance) model that gives each person the opportunity to earn awards by surpassing attainable performance benchmarks.

C. Work Value.

Incentives increase performance by boosting the value people assign to work goals, causing them to make stronger commitments to those goals and achieve them. The program has to provide the meaning, rewards, communication, and support that foster a sense of value.

D. Establish training and communication.

Once an incentive is perceived as having adequate utility value, people should focus on their abilities to perform the relevant tasks. This process includes training support and regular communication to make sure people do the right things that contribute to success.

E. Support.

People have to believe that the organization will support their performance goal and provide incentive rewards fairly. This requires careful attention to the ways rewards are given, how the rewards are distinguished from compensation or (for resellers) pricing issues, and the fairness with which awards get disbursed.

F. Emotional appeal.

The biggest performance gains come when people become emotionally engaged. With careful consideration, incentive awards should have a positive impact on emotion and organizational spirit.

G. Measurement.

Three motivational outcomes should be measured: active choice—choosing to do the targeted work in the intended manner, commitment—persisting over time, and mental effort—thinking clearly.

H. Analysis and Feedback.

The incentive program must be analyzed against the performance objectives and costs, with information recycled in order to adjust future programs.

With more than 2 million jobs slashed over the past two years, employee retention and recruitment may seem unlikely priorities for many American businesses. But if government projections are accurate, a labor shortfall beginning in 2005 could threaten the survival of companies that fail to prepare for it now.

"Enlightened, forward-thinking companies understand that now is the time to act, not later when they have no choice," says Mike Hadlow, president and CEO of US Motivation, a performance management company in Atlanta. "When the labor situation reverses, companies which have failed to employ comprehensive human capital management practices, including incentive and recognition programs, will risk losing their best and brightest."

"Human-capital management" has fast become a buzz phrase among a growing number of executives. By focusing on people through effective leadership, communication, recognition, and incentive programs, companies hope to accomplish two goals. First, boost the productivity and morale of workforces demoralized by layoffs and budget cuts. Second, create a workplace that assures the retention and recruitment of top-notch personnel when the economy rebounds.

"Talent management during crisis times is critical," says Sharon Taylor, senior vice president, Corporate Human Resources, for Newark, New Jersey-based Prudential Financial. "You need to wrap your arms around the people who will carry you through the tough times and bring you into the future. You also need to create an environment that is attractive to people who may be coming in to join your company in the future."

Companies can’t afford to become complacent about their people in tough times, warns Jim Dittman, president of Dittman Incentive Marketing Corp., a New Brunswick, New Jersey-based performance improvement company. "The notion that people are just ‘happy to have the job’ overlooks the fact that competitors are looking for every edge they can get, which may well start by seducing the best people in your organization. Motivation programs conducted during times that try men’s souls can create bonds that last for years to come. They communicate the message that ‘we think you’re important, we think your contribution is critically important, and we’ll get through this thing together.’ And when they do that, the company and its employees come out on the other side stronger than when they went in."

Motivating Your People

There is no shortage of research to back up claims that something needs to be done to re-energize workers. "Recent studies indicate that 30 percent to 40 percent of the working population is unhappy in their jobs to the extent they have ‘checked out mentally and emotionally,’" says Joyce Gioia, business futurist and president of the Herman Group, a management consulting firm in Greensboro, North Carolina.

In a study conducted for the Society of Incentive and Travel Executives (SITE) Foundation, 85 percent of employee respondents agreed that their level of motivation definitely has an impact on either the quality or quantity of their work. Yet 59 percent believe their company does not do enough to motivate them.

"Companies experiencing workforce reductions need to be particularly vigilant to ensure every employee is working at an optimal level for maximum productivity," says Rodger Stotz, chair of the SITE Foundation research committee and vice president, global practice leader for Maritz Inc., a performance improvement company in Fenton, Missouri. "Results indicate that employees are very attuned to what their companies are doing, and not doing, to get them to work harder and smarter, and money is not the only variable. Creating a motivating environment for occupational excellence may seem obvious, but this data indicates that companies are under-utilizing this effective management tool," adds Stotz.

An increasing number of companies are stepping up and taking notice of the power of incentive and recognition programs, according to Karen Renk, executive director for both the Incentive Marketing Association (IMA) and the National Association for Employee Recognition (NAER) in Naperville, Illinois. "A recent survey conducted by WorldatWork and NAER found that employee recognition programs increased in 2002 over 2001. According to the 2002 Employee Recognition Survey, 84 percent of the respondents had an employee recognition program in place. This shows that despite a weak economy, organizations understand the importance of keeping their employees happy, productive, and aggressively contributing to the bottom line."

Lorin Young, who is responsible for strategy, planning, and financial management for Nationwide Insurance’s Office of Administration in Columbus, Ohio, insists that a human-capital plan is as vital to a company as a financial plan. "If you’re striving to be a great company, you first have to be a great company to work for. It’s impossible to ask an employee to give a great customer experience if their work experience isn’t like what you want the customers to have."

Nationwide takes great pride in its people management programs, particularly in these turbulent times. "We’re aggressive in looking at what we can do to reduce operating expenses without having to jump to eliminate people to get our expenses down."

For companies that do effectively incorporate human-capital management strategies into their workplace, the bottom-line rewards can be plentiful. An Andersen Consulting survey reveals that programs to retain and reward leading sales, marketing, and customer-service people can give a $40 million lift to the bottom line of a $1 billion business. Companies with a strong link between enterprise strategy and rewards programs are also credited with generating a shareholder return almost 40 percent higher than competitors without such a strategy, according to a study from the Aberdeen Group.

These powerful statistics come as no surprise to Cathy Atkinson, who had the opportunity to witness the power of recognition programs firsthand. Atkinson worked in conjunction with The Bill Sims Company in Columbia, South Carolina, to implement a program at West Valley Nuclear Services in Buffalo, New York. The program, which sought to assure that the facility was meeting new guidelines for energy savings and procurement, targeted 800 employees, from engineers to cafeteria workers. Employees earned awards that ranged from free coffee to gas grills and cruises for their efforts. The result was an incredible $2.2 million in savings and cost avoidances in 18 months.

But the best part, according to Atkinson, was the program’s return on investment. "We paid pennies on the dollar. If you’re looking for a way to save money, get your employees to help you do that. They know the waste in your company better than anyone."

While not every recognition program includes tangible rewards, many experts insist that such awards enhance the program. "Recognition is key, and when coupled with tangible awards you multiply its impact at least five times," says Bill Sims, Jr., president of The Bill Sims Company. Citing Mary Kay Cosmetics’ legendary recognition program as a case in point, Sims adds, "There’s something about human nature that likes that pat of the back from Mary Kay, but also thinks that pink Cadillac is nice, too."

Programs including verbal reassurance with tangible rewards also have a powerful impact on reducing employee turnover, which is estimated to cost as much as 30 percent of an individual’s salary and benefits package. In fact, 60 percent of employees say they would be unlikely to look for another job if assured of a "bright future" by their current employer, according to a study from American Express Incentive Services LLC in Fenton, Missouri.

Holding onto employees really pays off. Even a 5 percent increase in employee retention can result in a 25 percent-to-85 percent increase in profitability, according to the Harvard Business Review article, "Putting the Service- Profit Chain to Work."

Overcoming Reluctance

Despite overwhelming proof that recognition and incentive programs are an effective part of any human capital strategy, why have some companies been reluctant to employ these tools?

"I think some companies see recognition programs as a burden. But they are not a burden if well designed and well-administered," says Prudential Financial’s Taylor. "They also provide the leadership of the company with valuable information and a means to communicate and connect."

Some companies mistakenly perceive these programs as costly when in fact they provide a tremendous return on investment when designed properly. Incentive programs aimed at individuals increase performance an average of 22 percent; team incentives can increase performance as much as 44 percent, according to the study "Incentives, Motivation and Workplace Performance: Research and Best Practices," conducted for the International Society of Performance Improvement with a grant from the SITE Foundation.

A program need not be glitzy or expensive to achieve dynamic results either, says Vic Anapolle, former operations manager for W.R. Grace & Company’s Atlanta Darex Container Operation. Working with The Bill Sims Company, Anapolle spent a mere $7,500 to target 80 employees in a variety of areas including sales, safety, customer service, attendance, productivity, and standards compliance. Employee awards included everything from coupons for Starbucks to apparel and merchandise. The program resulted in $175,000- $185,000 in savings each year. The operation was also accident-free for a year and a half and received recognition from OSHA as a model compliance site.

Says Anapolle, "Happy employees can really be productive employees. We achieved these results under the threat of cutbacks and slowdowns at the operation." He adds, "Motivated employees will carry you through the poor economic times and will accept what you need to do in tough times, instead of being divisive."

Technology has been instrumental in making recognition and incentive programs affordable and user friendly. "Materials and administration costs, which were once 15 percent to 20 percent of a programs’ cost, are now as low as 3 percent to 7 percent of a program’s cost," according to Mike Arkes, president and CEO of Hinda Incentives, a Chicago-based performance improvement company.

A case in point is an online program that Maynard, Massachusetts-based Sales Driver developed for V-Span, a Philadelphia-based conferencing network services provider. The program allowed managers to create, control, and update their incentive programs online, saving valuable time and money. Russ McFadden, senior vice president of account management for V-Span, was impressed with the program’s ease of use. "You’re not having to lose valuable face time with customers to manage a contest."

Support for the study of human capital management continues to grow. In fact, The Forum for People Performance Management and Measurement was recently launched at Northwestern University in Evanston, Illinois. The Forum will develop, manage, and distribute an extensive research agenda and provide a better understanding of the financial benefits and methodologies for having optimal customer satisfaction and employee loyalty. "At most companies incentive and recognition programs are implemented in idiosyncratic fashion with no regard to what the company wants to achieve. They’re add-on tactics," says Frank Mulhern, chairman of the Department of Integrated Communications at Northwestern. "But companies that do it well understand that these programs feed into the company’s overall strategic planning." Companies interested in evaluating their own people-performance strategies can take advantage of the Forum’s research services at no charge.

Motivating in Turbulent Times

Even for companies that do comprehend the importance of human-capital management, recognizing and motivating in today’s tumultuous environment call for special considerations. "In many cases it requires companies to get to the things that made them great in the first place," says Richard Gaeta, president of Premier Incentives in Marblehead, Massachusetts. "When times are great, companies tend to lose focus on staff training, customer service standards, and many of those strategies that kept them in the forefront. Keys to motivating today include targeted staff training, rewarding staff for outstanding customer service, encouraging ‘entrepreneurial’ spirit, and implementing comprehensive performance improvement programs that motivate existing staff."

Focusing on behaviors is also critical, according to Louise Anderson, CEO of Anderson Performance Improvement Company. "In years past, it has been the practice of management to base awards strictly on results. In today’s environment, companies find themselves having to reduce staff and ask employees to perform harder than ever before. The real key is to identify top-producing staff who may already be operating at a 120 percent and identify the behaviors that make them successful. By copying these behavior patterns, they will teach by example and other employees will follow and produce increased results."

Companies that fail to get the message that human-capital management is the key to survival will find themselves going the way of the dinosaur, according to the Herman Group’s Gioia. "Companies that do not recognize or provide incentives to their high performers will find their top talent migrating elsewhere as soon as other options are available. Many companies have cut back or eliminated their recognition or incentive programs because they felt they didn’t ‘have to spend the money.’ They mistakenly approached these investments as expenses. Unfortunately, most will not become aware of this grave error until it is way too late."

* Reprinted by permission of the author

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4. Transparency: The Clear Path to Leadership Credibility

By Karen Walker & Barbara Pagano who can be contacted at

www.linkageinc.com

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Through our more than 30 combined years in leadership development and coaching, we have learned that what distinguishes the outstanding leaders - the ones who inspire followers to dig deep and commit to the cause, the ones whose people are able to say, "I'd go to hell and back for my boss" - always comes back to nine specific behaviors.

These behaviors are the framework for transparent leadership that builds credibility. When leaders practice transparency-a sort of "what you see is what you get" code of conduct-in ways that show respect and concern both for the individual and for the common good, amazing things occur. Organizations benefit from a more efficient process of decision making and tactical execution, as players are more informed, operations speed up, and problems are identified more readily along the way. Leaders build trust and experience more finely tuned collaboration with their peers and followers. And both the organization as a whole and the individual leader are perceived as having a higher level of credibility.

A crucial element of transparency is figuring out just how open to be-just how much to hang on the line for all to see-for while there can be too little transparency, there also can be too much. When transparency is employed without a keen understanding of the potential effects of revealed information, it can be unfair and irresponsible both to the organization and to its individual members. Leaders have to have a firm finger on the pulse of their organization and its culture, knowing people's capacity to absorb information and anticipating how it might be interpreted and used. It is in part an artful use of intuition. Yet the nine behaviors offer practical guidelines that can help leaders wrestle with decisions around transparency.

Transparent leadership that builds credibility requires one to master:

1. Being Overwhelmingly Honest

Leaders think they're overwhelmingly honest, but many followers say otherwise. In leadership assessments, over 50% of almost 13,000 peers and direct reports felt their leaders could improve in being honest and ethical. When transparent leaders decide not to share certain information with their followers-perhaps because they do not yet have all the pieces or because, for whatever reason, they are unable to tell-the unbreakable principle of honesty requires them to say so: "I can't tell you that right now, but here's what I can say." Overwhelming honesty should be delivered with respect and concern for others. Followers should not be left to wonder about hidden agendas. When leaders drive this core value down through their team, not only is trust built, but another fantastic result also can occur-followers become tolerant of not having all the facts.

2. Gathering Intelligence

In surveys, 95% of leaders were unable to give themselves the highest rating at demonstrating an understanding of their own strengths and weaknesses. Asking others for their opinions about something conveys respect and shows that they are valued. It also promotes transparency as a reciprocal agreement. When leaders ask for feedback about their own performance and discover how others perceive them, they are better able to align their intentions with reality and develop a plan for improvement. In order to learn and grown, leaders must have self-awareness, which, ironically, requires input from others.

3. Being Composed

Effective and admirable leadership requires composure. Challenges, stressors, and obstacles are inherent in any organization and in any leader's path; how leaders conduct themselves during the good times and the bad can be indicative of their character, competence, and ultimately, credibility. While the call for transparency that builds credibility urges leaders to reveal their true opinions and emotions regarding relevant business issues, it does not allow for leaders to irresponsibly let it all hang out. Followers expect their leaders to be composed. And they are always watching. Also, a certain level of predictability builds trust.

4. Letting Your Guard Down

Leaders who keep in mind the spirit of authenticity while working hard to create meaningful connections with their followers, demonstrating sincerity of being, and revealing personal information that adds value to the context of work, will be practicing an important part of leadership transparency that builds credibility. Doing so, however, requires a certain level of maturity and self-awareness and a heightened sense of how people might perceive, dissect, and disseminate the information that is revealed. And because authenticity or personal transparency ultimately describes the quality of a relationship, leaders must create opportunities in which to engage with their followers, allowing the followers to know them.

5. Keeping Promises

When leaders match their words and actions and do what they say they will do, they place a high value on their commitments. Promise keeping in leadership is not always clear-cut. Sometimes leaders are forced to reconsider promises and disappoint followers. Those are the times when transparency is particularly important, because followers who understand the reasoning behind broken promises may be more accepting of the consequences.

6. Properly Handling Mistakes

How leaders handle mistakes actually may be more important than getting things right the first time. Even with its inherent risks-such as appearing weak, incompetent, or otherwise less than perfect-confessing mistakes signals courage, accountability, and humility. Indeed, mistakes are an opportunity to visibly demonstrate a commitment to honesty.

7. Delivering Bad News Well

Delivering bad news can be tricky business, yet doing it well is essential. When sensitive, controversial, or potentially hurtful information is not delivered well, people can feel betrayed, angry, and indignant. Trust is destroyed and relationships suffer. For most leaders, delivering bad news is hard, and some even opt for silence. Those on the receiving end usually appreciate bad news that is delivered promptly and with honesty, directness, care, and concern.

8. Avoiding Destructive Comments

In developmental assessments, 88% of leaders admitted they could improve in avoiding destructive comments, and 83% of their bosses agreed. Language that divides or is otherwise destructive can undermine the whole reasoning behind leadership transparency-to improve relationships, increase trust, and build a credible reputation. Leaders must model and reward language that does not employ inappropriate blame or criticism, us-versus-them attitudes, or talking down.

9. Showing Others That You Care

In order for leaders to be successful at influencing and motivating people, their followers must have a solid answer to the question: Do you care about me? Leaders must visibly show their followers that, yes, they do care, and this is done by developing the followers, recognizing them, and seeking to know and understand them. While showing value for employees has lasting, bottom-line benefits in morale, quality, and productivity, a leader should not be motivated to demonstrate care and value for the organization's benefit alone. Such a narrow view undermines the formula and ultimately devalues the individual players in an organization. True leadership is built on a kind of social contract that says, "Follow me, and I promise that I will help you succeed." When this contract is not honored, the motivation behind a leader's strategy of transparency is put into question, and followers are led to wonder about hidden agendas.

10. The Payoffs

What people expect from leaders is usually rooted in the basic interpersonal operation of the leader-follower relationship, where personal connections are made through trust, reliability, care, and appreciation. Once this platform is built well and maintained, leaders can deliver the rest of what they have to offer-their talents-and business flourishes. However, when leaders do not succeed in building this platform, the connection with followers is weak, and there is little chance to move to a higher level of effectiveness and success.

As organizations seek to be more credible and implement strategies to become more transparent, there likely will be some discomfort, especially for those responsible for being more transparent. Companies and leaders will be forced to address their undesirable areas and deficiencies if the fog is removed. Yet in the clearing of these awkward stages of building a more transparent operation are benefits for both the organization and its leaders-increased trust, effective collaboration, and overall better organizational health. And when people are allowed to see those undesirables and deficiencies, some likely will try to help to turn them around.

In turning leadership around, in helping organizations become more transparent and always credible, leaders not only must develop an intuitive sense of transparency's optimal level, but they also must fulfill the nine expected behaviors of credibility. If leaders hone this basic platform with their peers and followers and build a reputation marked by rock-solid credibility, they sometimes will be excused from the rigorous procedures of transparency, no longer having to account for every action and reasoning. Trust will have returned. And those leaders will experience the power that comes from sharing knowledge-instead of holding onto it-and the success that comes when they are always preceded by a credible reputation.

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5. Human Capital Reporting: An Internal Perspective

By Jim Matthewman and Floriane Matignon of Mercer Human Resource Consulting

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The Chartered Institute of Personnel and Development in England has issued a new guide to human capital reporting.  The guide contains many interesting perspectives and valuable discussion.  It is available for free download at:

Forward

The issue of human capital reporting has risen up the management agenda in recent years. The debate on intangible value has concluded that people and their collective skills, knowledge and experience are a significant source of wealth and competitiveness in a majority of organisations. Yet the people side of the business is still often ignored in major decisions and doesn't feature prominently as a factor for potential investors when determining the likely future performance of a business. We believe this is not because it doesn't matter or that directors and shareholders are blind to these realities, but because businesses find the people contribution hard to identify and measure.

We are not alone. We are witnessing a shift in the business community towards developing their understanding of the value of people. We believe this must happen – and quickly. In the fast-paced knowledge economy, businesses that have the greatest understanding of their people and are able to tap into their collective assets, motivating them to apply their abilities in the interests of the business, will be those that get ahead in the competitive stakes and deliver high levels of service and performance.

The Chartered Institute of Personnel and Development (CIPD) has been committed for some years to raising awareness and developing knowledge on human capital. We've already published research and a practical Guide on the external reporting of human capital information. With this Guide, we aim to help personnel and development practitioners develop systems to capture, analyse and communicate information relating to their human capital in order to articulate its worth and contribution to the business. Our research demonstrates that improved business measures that demonstrate the value added by both people and people management practices will improve management decisions. In turn, managers equipped with better information, enabling them to understand what motivates their people to perform or exhibit positive behaviour, will be able to manage better and deploy their people assets more effectively. We are also convinced that good-quality internal reporting on human capital is the cornerstone of good-quality external reporting.

The ability to communicate the value and contribution of people to key stakeholders in the business has already been recognised as critical to understanding the true worth of organisations. Recommendations from the Department of Trade and Industry's Accounting for People report and proposals for operating and financial reviews stress the importance of meaningful external reporting on people. It's apparent that many organisations are already moving towards a measurement-oriented human capital approach to managing their people. In doing so, they are strengthening the link between HR and business strategy because by recognising people as the owners of assets they become an integral part of strategies designed to maximise the return on assets. But it's also true that many organisations are still struggling to find ways of effectively evaluating the contribution of their people.

This Guide recognises that HR practitioners may find themselves at any point along the road to human capital management. And our research shows that there's no single measurement formula or set of measures of human capital effectiveness that can be used. Reporting has to be tailored to the goals, needs and character of each organisation. But, in all cases, without robust data informing decisions-makers of the real impact people make to the business, organisations can't improve and move on to effectively manage and motivate their human capital for business success. This Guide is not therefore designed to be the universal 'magic' solution to human capital management and measurement. It's designed to offer practical support to HR managers actively seeking to develop a better understanding and hence more effective mobilisation of their human capital, and to set them on a route to better internal measurement and reporting and thereby improved management of their most important assets.

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6. Across The Board: Official Communication From The SA Board For Personnel Practice (SABPP)

By Huma van Rensburg who can be contacted on sabpp@mweb.co.za

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# Progress on the Human Resource Professions Act

SABPP is convinced that 2005 will be the year that the human resources profession gets the recognition it deserves through an Act of Parliament. After much consultation and discussions we are now ready to submit the final revision of the Act to the powers that be. It was heartening to hear this week that important individual role players as well as bodies such as BUSA and others are now supporting the Act. The Board and HRCOSA both have actively engaged with stakeholders on the issues involved.

As the profession entrusted mainly with the implementation of the many labour related Acts, it is time for HR to claim respect and recognition and to be allowed to play the role it must. For this to happen, a code of conduct entrenched by an Act and ensuring accountability will greatly enhance HR. We also believe that registration of all credible HR people will go far towards professionalisation of HR in general, and also including the public sector.

Watch this space for further news!

# ETQA News: Discretionary Grant from Poslec SETA

We are delighted to report a breakthrough in obtaining support and funding from at least one SETA. The Board received a substantial grant to upgrade its IT, website, database and other information systems in order to serve human resources better. We would like to thank the Board of Poslec SETA for giving us an opportunity to state our case and to grant the money without further ado. Also a word of thanks to Hennie Richards for his support and management of the process.

The SABPP would like to challenge all other SETAs to consider the role of HR in the various sectors. We do believe banking, mining, insurance, retail and many others have a sizeable interest in the training and education of professional HR people Instead of denying the role of HR and the validity of our ETQA, we request other SETAs to also consider discretionary grants to fund an essential service.

# Learnerships

The SABPP will be quality assuring 758 learnerships being set up by PSETA for the public sector. These learnerships will be based on the NQF National Certificate in Human Resources Support, through an accredited provider and the work experience will be gained in the various public sector Departments.

As we are not a SETA able to set up and fund HR learnerships, all SETAs are requested to set up HR learnerships, based on the NQF HR qualifications developed by the Standards Generating Body Human Resource Management and Practice (SGB HRMP). The SABPP ETQA will gladly quality assure such learnerships. We have already started negotiations with other SETAs and agreed to MoU’s in this regard.

# Accreditation of training providers

We are happy to report that there is suddenly a huge interest from training providers to accredit with the SABPP ETQA and we are serving our clients as efficiently and quickly as possible.

At a meeting between Services SETA, SABPP and SAQA the following was put on the table:

>> Services SETA will no longer apply for extension of accreditation for the Certificate in Labour Relations. The SABPP ETQA, however, regards Labour Relations as part of its domain of human resources.

>> This level 5 certificate will most probably fall under the ambit of the HEQC;

>> The SABPP is willing to negotiate an agreement with the CHE to quality assure all HR related qualifications in higher education and we have gone some way towards this goal;

>> The Board does not agree that all "vocational" parts of HR should fall under the appropriate SETAs. An ETQA for HR was defended vigorously and successfully by the Board for exactly the reason that one profession should not be divided into small parts being administered by different bodies with differing standards, views and interest in the specific parts of HR in their sector.

>> The Draft Human Resource Code of Good Practice of the Department of Labour (DoL) very clearly sees the field of Human Resources as an integrated domain consisting of numerous sub-domains that cover the full spectrum of workforce management practice areas. They have carefully avoided any hint of reductionism that divides HR into vocational, technical, professional practices. No institution of higher learning (anywhere in the world) teaches HR as a disconnected set of miscellaneous functional or vocational roles. The DoL outlines the key human resource areas in its draft code of good conduct as:

1. Commencing employment:

• Attraction
• Recruitment and Selection

• Induction
• Probation
• Medical and psychological assessments

2. During employment:

• Conditions of employment (IR)
• Remuneration
• Job analysis and job descriptions
• Performance management
• Skills development
• Promotion and transfer
• Confidentiality and disclosure of information
• The working environment and facilities
• Retention
• Discipline, grievance and dispute resolution (IR)

3. Ending employment:

- Exit interviews

We are in agreement with DoL that Recruitment and Selection and IR is an inherent part of workforce management, and hence the professional domain of Human Resources.

The SABPP has been quality assuring HR for 22 years. The Board is, however, more than willing to work closely and amicably with all SETAs who have a mutual interest in HR such as ETDP, Services, Poslec and others. It is possible that these bodies would want some representation in Board Committees dealing with their specialist areas, something that the Board would welcome.

# Registrations

The Board is delighted at the rate of registrations flowing into our offices. Many larger companies are registering all HR staff. We are proud that KPMG, DeLoittes and PricewaterhouseCoopers have all signed on to the new vision of registered and professional human resources in South Africa by registering their human resources contingents. We give fair warning that once everyone wakes up and starts registering, the Board will be inundated and the queue may be very long indeed.

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7. Book Reviews

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# True Change: How Outsiders on the Inside Get Things Done in Organizations

By Janice A. Klein, JOSSEY-BASS, 2004

Drawing on her own long-term research and extensive work experience, Janice Klein reveals how the power of people (insiders who are able to see problems from outsider's perspective), approach ("pulling change"), and system (support infrastructure) combine to turn new ideas and concepts into institutionalized practices. In particular, certain people inside organizations "outsiders on the inside" are key to driving innovation, adaptation, and real change. Using examples from leading companies in MIT's Leaders for Manufacturing (LFM) and System Design and Management (SDM) Partnership such as Boeing, Intel, Motorola, Alcoa, Ford, Kodak, and others she shows how employees at all levels can learn how to become "an outsider on the inside," and be in the right place at the right time to discover opportunities to "pull" into their organization. Throughout, we grow to understand the perspectives of numerous "outsiders on the inside," by hearing their voices and observing their actions. The strategy Klein provides is relevant for any company that hopes to build a change capability, rather than attempt only to manage change.

# Labour arbitration

A whole range of different disputes and, in particular, the most common form of labour dispute - the unfair dismissal dispute - are required, in terms of the LRA, to be resolved by arbitration. Most arbitrations take place under the auspices of the CCMA, while in some industries bargaining councils have taken over the function, and private arbitration remains an option to those who choose and can afford it. Arbitration is no longer the exclusive preserve of the legally trained - individuals, company and union representatives and consultants find themselves engaged in presentation of cases. Even though the CCMA processes are relatively simple, there are still basic rules and procedures that any litigant hoping to succeed needs to know. There is also some knowledge of basic legal principles and industrial relations norms required to enable a party to properly present or defend a case. The authors of this book provide those who venture into the waters of labour arbitration (whether at the CCMA, a bargaining council or a private arbitration) with the tools to do so successfully.

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8. Finding Practical Solutions To Skills Development Problems

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1. The evolution of skills development structures and initiatives

The time has come to ensure that the National Skills Development Strategy (NSDS) evolves from being an initiative with a predominantly social emphasis to one that is financially and operationally sustainable. This will never happen unless companies incorporate the Government’s strategic vision on transformation and capacitation in their daily activities. Key stakeholders – such as experienced providers, skills development facilitators and assessors – who owe their existence to successful implementation of the NSDS, need to be consulted in the search for solutions to practical problems that have been experienced over the past five years. Their knowledge, experience, insight and competence make their input to elected or appointed structures invaluable.

One of the primary goals of skills facilitation is to help ensure that the second five-year phase of the NSDS is implemented effectively. This entails joining forces with like-minded bodies to help resolve issues that have plagued delivery of initiatives such as learnerships and skills programmes during the past five years.

Many of these bodies have made submissions to the National Skills Authority for incorporation in NSDS 2005 – 2009, which will serve as the policy framework for skills development. However, these parties now need to come together to ensure policy can be implemented to the satisfaction of business, labour and the Government.

In supporting the National Qualifications Framework and National Skills Development Strategy, the ASDFSA is also committed to the improvement of structures such as the Sector Education and Training Authorities (Setas). All 25 authorities have done excellent work and those who seek solutions to problems caused by the continued lack of buy-in from business, clumsy learnership implementation models and frustrating delays in the payment of levy grants should take cognisance of this.

2. Flaws in the skills development system

A. General

The mechanisms of the National Skills Development Strategy – the skills development levies, Setas, learnerships and other standards-based skills programmes, summative assessment and certification etc – have given rise to some skewed thinking. It is often pointed out that, in a socio-economic environment such as South Africa’s, business should be spending between five and seven percent of payroll on training and development. Unfortunately, business has to an extent become fixated on Seta-sponsored learning initiatives, and is limiting vocational training expenditure to the one percent stipulated by the Skills Development Levies Act. Business must be reminded that it needs to invest at least a further four to six percent of its wage bill in training and development if there is to be socio-economic stability and growth.

B. Continued lack of buy-in to skills development initiatives

Implementing a learnership is an intricate process involving many parties including the Seta, host and lead employers, learners and training providers. If, as they are, the Setas encourage small and medium-sized enterprises (SMEs) to participate in learnerships but are slow to pay grants, they not only put the skills development process at risk, they also threaten the survival of the business and those who depend on it. This simply encourages the belief among small a company that structured skills development is the preserve of big business and that, for them, the levy is nothing more than a tax. This is one of the reasons why SMEs have been hesitant to get involved. If they are participating because they have been persuaded of the benefits by an institution such as Sacob or Nafcoc and this engagement has caused a crisis, there is a huge danger that the organisation will lose credibility with its members. There is a much greater danger: the majority of SMEs will point to the experience of those that closed their doors as a result of their participation in skills development programmes as justification for their continued reluctance to do so.

Some large stakeholders have demonstrated a willingness to embrace and manage the principle of business capacitation by engaging in learnerships. Others took on learners because they saw huge potential benefit for the corporate bottom line in the considerable direct and indirect financial inducements. However, to counteract the possibility of large companies exhausting the available funding, the Setas go to great lengths to ensure SMEs are also awarded learnership contracts.

Unfortunately, many of these have engaged in learnerships with the same perception of a healthy financial return (often with scant regard for the people involved) and have contributed both wittingly and unwittingly to the problem. In some cases, employers who ignore the formal vocational learning component have contracted learners. In other instances, unscrupulous employers fail to pay learners the requisite stipends and/or do not have the appropriate contracts in place.

C. Seta funding and staffing.

Legislation limits Seta operational funding to 10 percent of levied income. The more it seeks to satisfy the demands of its members, the greater the risk a Seta runs of spreading itself so thinly on the ground that it becomes ineffectual. Many administration and implementation problems exist because Seta employees might not grasp complex issues and relationships that affect the conduct of skills development in a sector, particularly one not previously overseen by an industry training board.

The problem is worsened in sectors that feature large numbers of SMEs because many small companies (which are often owner-managed by people with little formal knowledge or experience in running businesses) seek advice in areas outside the immediate scope of the Seta. Though they might believe that implementing learnerships could be a sound growth strategy, these companies receive little effective support because Seta employees are not only generally untrained in management, they are unaware of the workings of micro-enterprises operating in competitive environments. Also, the more value-add services a Seta offers to its member companies, the fewer resources it can allocate to its core areas of activity: sector and workplace skills planning (including research), processing grants, administration and finances, communication, accreditation of training providers, learnerships, quality assurance and compliance.

The Setas must either limit themselves to these core areas and leave the development of effective and sustainable implementation models to competent stakeholders, or alternative funding should be explored. The latter would require a policy intervention from Government.

Simplifying processes will not only reduce frustration on the part of stakeholders, it will also encourage buy-in from SMEs and labour.

D. Accrediting training providers.

Companies of all sizes and degrees of complexity have recognised that learnerships and skills programmes are a wonderful means by which to pursue growth and transformation, provided they manage them as an element of their business strategy. However, if the grants are not paid promptly, the viability of learnerships is immediately diminished – especially if they are used as a funded mechanism for growth.

Closely linked to this is the critical issue of the accreditation of training-providers, which needs to be addressed on a broad scale: the manner in which the Department of Education approaches accreditation still does not take into consideration business’s training and development needs. While the Setas’ vision of quality vocational training is a good one, the bureaucratic nightmare that is often the result of engagement could cause companies to write off their levies and focus on a relatively hassle-free skills development process outside of the NSDS system. Therein lies the risk of a proliferation of non-accredited providers offering courses that offer people no marketable skills and worthless qualifications.

Any Seta, as an education and training quality assurance body for an industrial sector, has the right to establish to its own satisfaction the integrity of the parties as well as their compliance with learnership contracts. However, if Setas use the lack of understanding of quality assurance issues to either manage its financial affairs or abrogate its contractual commitments, providers will believe they are being bullied and never buy in to the system. If providers are not committed, learners will never be properly certified and the Setas will become irrelevant.

Providers, on the other hand, need to understand that they exist solely at the discretion of business and that their usefulness is determined only by the additional efficiency they can bring to the workplace. The converse is also true: business is reliant on training providers to remain abreast of the needs of the industries they serve and to offer quality training that is relevant and adaptable. This training must be linked to the strategic goals of company and country, yet offer short-term operational benefit.

3. The road ahead

The focus of the past five years has been on numbers and meeting targets set first by the NSDS and then revised by Nedlac at the 2003 Growth and Development Summit. Given the time constraints of meeting these targets, certain risks had to be taken and many Setas launched learnerships without such elements as assessment and moderation mechanisms being in place.

In certain instances this could have been conducted as a parallel process to the initiation of the learnership and, by the time summative assessment of learners was required, the appropriate procedures would have been developed with people trained to implement them competently.

The fact that this has not always been done is one reason why relatively few people have emerged from learnerships offered by some Setas and also why they might be experiencing budgeting problems.

While the Association is confident assessment and certification problems will be ironed out in the months ahead, the Department of Labour should establish a policy regarding people who are ready to exit learnerships before receiving their certificates of competence. This policy should encompass the responsibility of employers to pay a wage that is more fitting to someone who is in effect qualified.

Having learners "disappear" before receiving their qualifications would completely undermine the vocational training process as it relates to continuing development. Organised business as well as captains of industry must urgently investigate the financial restructuring of learnerships (in respect of loan and bursary schemes) to resolve any immediate or pending funding crises that might prompt the Department of Labour to impose a management solution that might undo the efforts of the past five years. With due respect to the Department, it is not in the business of doing business and the ASDFSA would hate to see the hard work that has already been done go to waste.