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1. Transforming HR: Line Delivery's The Way To Go*

By By Thomas R. Connolly, Walter Mardis and James W. Down

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1. Introduction

Leading companies are linking HR and strategy but many companies following suit are realizing the path is not without its bumps. No matter how hard it tries, HR is having difficulty shedding its image as a paper-pushing department. After a decade of proponents touting the direction HR needs to take, only a handful of companies have succeeded at making HR a strategic business partner. But it can be done.

It was nearly a decade ago that several management visionaries began promoting a new direction for the human resources function. They argued that, as business made the transition from an industrial to an information age, the knowledge, know-how and experience of employees would become the core assets of companies. The real foundation of competitive success would no longer be proprietary processes or even distinctive products, but rather outstanding people. As the nurturer and caretaker of the work force, the HR department would in turn need to undergo fundamental changes, moving beyond its traditional responsibilities of personnel administration and employee advocacy to play a central role in helping companies fulfill their highest-level business goals. If HR did not become more tightly linked with strategic and economic objectives, the reasoning went, its ability to make an adequate contribution to the bottom line would be undermined.

The logic was, and is still, compelling. Unfortunately, the path from idea to reality has not been an easy one. Many management teams have had trouble figuring out what it will actually take to transform HR into a strategic function. As a result, a lot of lip service has been paid to "making HR a strategic business partner," but the only real changes that have occurred in most HR departments are have resulted from downsizing and other cost-control efforts rather than from a realignment of responsibilities. In most companies, HR remains focused on administrative and clerical tasks.

Is the new vision of HR doomed to go unfulfilled? With that question in mind, we recently undertook a benchmarking study of 17 companies that are widely recognized as leaders, both for their success in the marketplace and for their success in HR management. The results of the research are encouraging. Many of these companies are making concrete progress in forging an HR-strategy link, often at the same time that they are dramatically cutting the overall cost of HR management. Moreover, the most successful efforts shared a number of common themes and characteristics that can provide guidance for other companies looking to transform their human resources function.

The new status of HR is definitively reflected by senior HR managers when they describe their function. Margaret Savage, director of strategy services at British Telecom, describes the role of HR at her company in clearly strategic terms: "The only long-term competitive advantage which companies possess is the ingenuity, skills and capabilities of the people they employ. At British Telecom, the HR department is charged with fostering that resource."

Ron Parker, vice president of human resources at PepsiCo’s corporate office, echoes her belief that HR is an essential function as furthering corporate strategy: "PepsiCo is a hard-driving, performance-oriented company. HR is charged with putting programs in place to support this entrepreneurial culture." Parker explains that each year PepsiCo’s HR department examines the strategic plans of all the company’s operating divisions, looking at the HR implications of all the key elements, from category management to delivery efficiency. "On this basis, we are able to incorporate very focused performance measures into executive performance and incentive plans," he says. "We want executives to see the linkage between individual and organisational performance."

Despite the continuing trend toward smaller HR staffs, particularly at corporate headquarters, the HR function in the sample has actually increased its influence in the executive suite. Most of the companies report that senior management is committed to having a strong HR function support all elements of the business, that top HR executives have regular CEO and boardroom access and have been made full members of the companies’ top management committee, and that senior line executives view HR as an equal partner with other staff specialties. These companies are using downsizing and reengineering not just to reduce the number of staff members devoted to traditional administrative tasks, but to allow HR professionals to shift their focus to higher-value activities such as change management, organisational development, communications and information management, and succession planning.

2. An Emerging Organisational Model

The increasingly strategic role of HR does not mean that there is uniformity in the way progressive companies have designed their HR functions. Companies are tailoring their functions and organisations to meet the unique characteristics of their business and to reflect the philosophy of the CEO and other top executives. Firms that want to promote a strong sense of entrepreneurship among their business units often, for example, have a small corporate HR staff that focuses on a very limited number of activities. They grant line management broad authority to tailor HR practices to individual business unit needs. In contrast, companies with strong, homogeneous corporate cultures often have a much larger corporate HR operation with broad oversight over firmwide practices.

Underlying these approaches, however, are three common threads that together form the outline of a new organisational model for HR: corporate headquarters sets the direction for HR strategy firmwide, administrative functions are concentrated in highly efficient central service units, and line managers are responsible for delivering day-to-day HR services to employees at the business-unit level. We have named these three characteristics, respectively, Strategic Recentralisation, Scale-Driven Economics and Line Delivery.

# Strategic Recentralisation.

Most of the companies studied provide greater corporate oversight of a cluster of critical HR activities that mesh with corporate strategy. The goal is to ensure greater strategic control from the center and greater consistency and uniformity of approaches among business units. At many companies this has meant actually pulling back selected strategic responsibilities that had previously been delegated to the units.

The fast-growing software supplier Oracle, for example, has long avoided creating a strong HR presence in its corporate headquarters. Rapid workforce expansion, however, is now forcing the company to formalize many HR functions that in the past were left largely to chance, including executive compensation and development, equal opportunity programs, employee research, recruiting and HR strategic planning. Greater centralized control is seen as essential to protecting the firm’s technologies and financials, yet the company has been careful to position the central HR organisation as a catalyst, the hub of a "cooperative server" environment.

Many of the best companies have become very sophisticated in providing corporate direction for HR without usurping line authority. At General Electric, a pioneer of decentralized management, senior HR managers at headquarters coordinate with their counterparts in line organisations by attending forums for communicating strategy and vision and sharing best practices. To ensure that managers throughout the company fully understand key corporate values, GE also conducts extensive, centralized training and development programs. The company finds that this approach leads to a greater worldwide focus on those organisational competencies that GE perceives as critical to success.

At the highly decentralized global engineering firm Asea, Brown, Boveri (ABB), a very small headquarters staff focuses on critical priorities that cannot be carried out at the business units. Percy Barnevik, ABB’s chairman, has stated that the company is a "federation of national companies with a global coordination center." Consistent with this philosophy, corporate HR focuses on two related priorities: First, it plays an active role in managing the development and compensation of 1,500 top executives who are expected to serve as a worldwide resource for the business units. Second, it works hard to expose promising people to a range of international experiences and promote cross-unit sharing of personnel. These strategic initiatives have been recentralized to provide greater focus in those areas in which the global coordination center can add clear value.

# Scale-Driven Economics.

Cost reduction remains a priority for HR, and most companies appear to have concluded that the benefits of consolidating routine HR administrative tasks are too attractive to pass up. In an interesting development, however, several companies are not consolidating the tasks at headquarters. Instead, they are handing them off to a semi-autonomous service center or to a business unit with special competence in a given function, which then fulfills the function for the whole company. In addition, many of the companies are giving the "customers" of these central services--i.e., the business units--significant influence over the support services provided, the costs and the performance standards.

At IBM, this has led to the creation of a single, centralized services group designed to cost effectively fulfill most HR administrative needs for all U.S. operations. The group designs HR programs for all U.S. units and also provides direct support to managers and employees via a call center. HR information is just an 800-phone number away.

At chipmaker Intel, the transactional aspects of HR--benefits changes, address changes, etc.--are being removed from the various business units and consolidated into an Employee Information Services Unit. While the consolidation will reduce HR expenses, cost reduction was not the primary motivation for the change. The consolidation was undertaken to shift time-consuming administrative tasks away from the firm’s HR specialists at the business-unit level. This will free them to devote more time and attention to organisational and strategic issues. Microsoft is another fast-growing company that is centralizing administrative functions in an effort to streamline customer service.

As part of its goal to move away from being structured as a holding company, where HR decisions were largely left to business units, American Express has recently begun consolidating all training, development and administrative service functions. Its goal: to become an operating company, where there is a strong need for the firmwide alignment and efficient delivery of HR processes. "In a holding company, the "silos" could operate more independently. As we restructured, we moved to a single set of consistent, uniform values and supportive messages for our employees," says Glenn Kaufman, vice president of organisation development.

The functions are not all being co-located or managed as part of a single centralized unit, however. Benefits and compensation administration will be handled by a central site in Salt Lake City with 800-phone number access for employees. Employee relations advice, previously provided to line management within the business units, is being centralized in a single unit in Greensboro, N.C. Several other functions are being assigned to an American Express operating unit. Still other activities are being outsourced. All Amex businesses will have a relationship manager to ensure that their unit’s needs are met by all the HR service suppliers, internal and external.

Amex’s model, according to Kaufman, allows HR to meet management’s directive to "Do what you’re doing for us at the least possible cost, and whatever you do, provide value." Kaufman is obviously pleased with the way the HR organisation has worked as a team, even in the sensitive task of shrinking its overall size. "[The change has] allowed us to reduce the number of HR professionals in business units, and yet helps us deliver the consistent application of Amex’s human resources values." he says.

A final example that Kaufman uses is his own team of organisational effectiveness practitioners. Previously they operated out of the holding company silos, without much interaction or sharing of knowledge. "Now," Kaufman says, "we are one team, sharing best practices and learning from each other."

# Line Delivery.

While administrative, "backoffice" tasks are being consolidated, many leading companies are pushing responsibility for the actual day-to-day delivery of HR services to the field. There are two main aspects of this shift: the deployment of capabilities to divisional and business unit specialists and the assignment of HR delivery responsibilities to line managers instead of HR staff. When provided with effective linkages to the central service units, business unit managers can satisfy employee needs more efficiently than can more distant HR practitioners. In many cases, interactive information systems are being developed to allow employees to directly fulfill many of their own HR-related needs.

Pete Peterson, vice president of human resources at Hewlett-Packard, says his company is revitalizing its long-standing principle that line managers are responsible and accountable for people. "As we increased the number of personnel liaisons, we found they increasingly dealt with day-to-day people issues." he said. "Today we have fewer liaisons, and they are refocusing on unit-wide organisation priorities. People management is clearly the responsibility of line managers."

Samsung Electronic Corp. has centralized selected strategic responsibilities, such as recruiting, compensation standards and "culture management." but as T.H. Lee, manager of international human resources, reports: "HR delivery is seen as a continuing responsibility of line managers." GE also stresses that line managers are accountable for leading and developing their people, and the company has continuously downsized the HR function as it has pushed HR delivery responsibilities to the line.

The shifting of responsibility to line management has meant that, in many companies, the HR function in the units is shrinking as fast as if not faster than at headquarters. Top management has concluded that as long as there is a clear overall HR strategy and an efficient and easily accessible centralized services capability, local line executives can act as real managers of people. As Peterson at Hewlett-Packard notes, "In the past, line management would say they "got whatever they needed from personnel." Today they say "Personnel helps me to do more for myself." In the future, they’ll be saying, "I’ve got what I need. I only use personnel for the problems I can’t solve."

3. Tailoring the Model to the Company

The way leading-edge companies organize themselves to deliver their core human resources processes varies considerably depending on management style and culture. Companies tend to fall into one of three categories, Advisors, Influencers and Directors.

Advisors typically delegate most operational and strategic decisions to operating units, while retaining policy control over a small number of HR functions. They tend to believe that economies of scale in staff functions are less important than giving business units control over HR activities. In these companies, HR’s roles will typically include identifying and developing future leaders, facilitating the exchange of best practice HR information, and developing HR policy in support of corporate goals. Phil Wilson, senior vice president of human resources at Oracle, uses an analogy based on the theory behind Oracle's own products: "We want HR to be the hub in a cooperative-server environment." Corporate HR sets the strategy and supports a network of HR functions among the global business units.

Influencers retain both strategic and operational authority over a number of centralized functions. These companies walk a tightrope between the need for companywide consistency in policy and practice and the desirability of business unit autonomy. A typical Influencer HR department will share responsibility for both strategic and administrative work between central and unit management. Intel is an example of a company operating in this middle range. HR’s corporate-wide role at Intel includes a variety of broad, strategic mandates, including ‘keeping the culture.’ ensuring alignment with the Intel vision, reducing legal vulnerability through fair application of guidelines and developing leaders. Similarly, a select group of HR functions are managed on a common basis across the company, including, for example, benefits planning, human resources information systems, recruiting and employee assistance programs. Other functions, such as exempt compensation and performance appraisals, are delegated to or shared with business units.

Directors tend toward tight strategic and operational control. They usually centralize HR to gain economies of scale, minimize risk and promote consistency. A typical Director HR organisation will have broad responsibility, supporting the company with a full array of strategic and operational people policies and control parameters. At British Telecom, the structure of the HR organisation has three elements: policy, delivery and consultancy. A small policy group, at headquarters, designs the practices and programs common throughout the company. Delivery of the programs is the responsibility of a centralized services unit. A separate consultancy unit has staff assigned to each of the firm’s five business units and provides support for unit needs while also helping maintain firmwide coordination. BT’s Margaret Savage says, "Centralized human resources can work with and for the line. In partnership with the line, we optimize the flexibility, enthusiasm and competitive advantage of our people."

A company’s categorisation as an Advisor, Influencer or Director should strongly influence the organisation and responsibilities of its HR function organisation.

4. The Big Picture

In all three types of companies, HR is shifting from a ‘micro’ to a ‘macro’ view of its managerial mission. The old personnel focus on individual case management has been replaced by a new concentration on organisation-wide issues such as change management, leadership development and culture building. Routine employee issues are now typically the responsibility of line managers or the individual workers themselves, and benefits transactions and other administrative tasks are performed by a centralized service unit or outsourced entirely.

Aetna Life & Casualty provides a case study in HR transformation. Two years ago, the role of HR at Aetna was to undertake many of the tasks that line managers wanted to duck—transactions, rules, regulations and HR policies. Today, some transactional areas have been made the responsibility of line managers (for instance, resume tracking and job posting); employees themselves have the capability to complete many transactions, such as address changes, directly at the job site; and centralized service staffs perform benefits and compensation administration. At the same time, the company is streamlining many HR procedures. For instance, the number of job titles tracked by the compensation department has been cut from 40 individual titles to just three families of jobs.

The HR transformation has enabled Aetna to significantly cut the overall cost of HR management and reduce the size of the HR staff. Interventions by HR professionals are now limited mostly to more complex and difficult situations managers face; they are rarely involved in providing advice on routine how-to issues. "The goal is to transform HR from a transaction-oriented department to one where HR is working in partnership with managers to solve problems by giving more accountability to the managers and providing them with the appropriate tools and processes to perform this responsibility," says Don Benson, head of human resources services at Aetna.

Gary Grom, senior vice president of human resources at Sara Lee, sums up the change occurring in HR with this observation: "You can’t control the universe; limit what you try to manage. You’ll do better and have greater influence on the business. At Sara Lee, we don’t tell them what to do; our job is to lead."

5. Preparing for Change

Obviously, dramatic changes are finally under way in Human Resources. The good news is that the influence of HR will increase as its energies become focused more on strategic contributions and less on administrative and clerical tasks. The bad news is that many HR executives are not confident that current HR professionals with traditional HR skills possess the capabilities to make the transition that these new approaches demand. A surprising number of the HR executives we interviewed express a high degree of concern about the abilities of their staffs to cope with the present and future pace of change.

To beef up the skills in HR, many companies are recruiting line managers into HR roles. Aetna, for example, is increasingly selecting business generalists for top HR positions--that is, men and women with good sales ability and a broad knowledge of current trends in the insurance industry. Merck is now looking to chemists, business strategists and epidemiologists to add their knowledge and background to the HR function. The cross-fertilisation of the HR function with talent from general management and other areas will be critical as the pace of change picks up.

In seeking to link HR with corporate strategy, companies are taking many different paths. But whatever the course chosen, the top-gun HR organisations are concentrating their intellectual and organisational fire power on a limited number of high-stakes targets. Their goal is to enrich the depth of knowledge in HR, to tighten the ties to corporate strategy, and to communicate their enhanced capability and insights to the top management echelon. Their approach, we believe, will spread throughout the corporate community in the coming years.

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LAST THREE WORKSHOPS FOR THE YEAR: ‘A Master Class: Moving HR Into

Line For The New Economy’ – PrciewaterhouseCoopers

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A MASTER CLASS FOR HR PROFESSIONALS: The competitive pressures wrought by the New Economy & New World Of Work call for a change in the role of the Human Resources (HR) function. No longer is being a Strategic Partner sufficient!
 
In today's business environment, HR professionals must become business leader in their own right to identify new business opportunities, define business strategy, and company priorities, and prepare the organisation for discontinuous, and often disruptive change.

REGISTRATION FEE: Inclusive of lunches & teas, parking, and learning materials:

DATES: >> 21-22 July 2004; >> 4-5 August 2004; >> 19-20 August 2004 (Starts @ 07:30 for 08:00); Venue: PricewaterhouseCoopers Sunninghill.

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2. The Importance of Career Guidance & its Impact On South African Business

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1. The Problem

Within the South African public educational system there is presently inadequate provision for vocational guidance or assessment of individual learners. This weakness results in high unnecessary costs for the Country and South African Business, as well as social discontent and hardship.

The majority of young people leave school with only a vague knowledge of employment opportunities and with little insight as to the most appropriate career direction for their abilities, interests and personality.

A large number of school-leavers receive no training at all beyond school and become virtually unemployable. And yet, if pointed in the correct direction, could have become assets to the South African economy.

Those school-leavers who believe that their only chance of future employment, with current unemployment at around 40%, is gaining some qualification, undertake tertiary education, irrespective of their suitability for the subjects chosen.

Little wonder that the drop-out rate for first year tertiary students stands at 35%!

It is at this point that the first of the wasted costs are incurred, especially by companies giving bursaries to these students.

The next area of wasted costs comes after these school and university leavers are employed. Research shows that a large proportion of employees feel "stuck" in their careers. This leads to low morale, disinterest and de-motivation, translating into poor performance and bad service levels. Further company training tends to have only a short term affect. In the end unhappy employees either leave at their own wish or need to be dismissed. In either case, the cost to the business is substantial – recruitment costs, training costs, hidden costs resulting from the poor performance, and the lack of continuity within the business. In the case of dismissal, there could well be added costs arising from our very stringent labour laws. The psychological cost to the employee and his family in either case can also be considerable.

Career guidance at grade 11, as undertaken in many first world countries, would help alleviate much of this hardship and unnecessary expense. It could also play an important role in reducing the high unemployment rate.

However, despite a recent reduction in price, the cost of psychometric assessment is still beyond the means of many schools and learners, especially those in the public educational system.

2. The Solution

A solution is now available through the use of Career Mapper, the world’s leading careers guidance psychometric assessment instrument, and a funding project being driven by Perfect Careers.

Being aware of the cost hurdle, Perfect Careers has drawn up a funding opportunity to enable the less and under privileged grade 11 learners to be assessed through the use of Career Mapper. Funding will be through Business, in the form of individual companies, "adopting" one or more schools within the public sector. All aspects of the programme will be handled by Perfect Careers in close cooperation with the adopted school and the sponsoring company.

3. About Career Mapper

This fully computerised assessment tool, developed by leading psychometrist Professor David Bartram of Hull University, UK, is registered with the SA Health Professions Council.

As it needs no psychologist to administer it or interpret the results, the programme can be run by teachers – all it takes is one double period.

Career Mapper is currently used throughout North America and the UK as well as developing countries such as Indonesia.

4. About Perfect Careers

Founded in 2000, Perfect Careers specialises in providing comprehensive career guidance to grade 11 and 12 learners through the use of Career Mapper. Perfect Careers is a corporate member of the Independent Schools Association of South Africa (ISASA) and has worked extensively with their member schools. It is also a networking partner of The School Guide and Standard Bank Ltd.

5. Project Outline

The organisation of the project is flexible and can be structured to meet the individual requirements of each sponsoring company.

The execution of the project will be handled by Perfect Careers and includes the training of the schools’ career guidance teachers in providing individual feedback to both pupils and parents. During this feedback it will be ensured that each learner understands the report they get as well as hearing:

>> What they are like

>> Their personal profile

>> Their individual traits

>> Their working characteristics

>> A comprehensive guide to the careers they are suited

>> Access to a website that gives detailed information as to where training is available for those careers, what is required to apply as well as the who, where and what about bursaries for those careers.

>> An imported Life Planning Guide workbook

Perfect Careers will supply the back-up to the career assessment programme which each school will have and use on its own computers.

6. Benefits to the Sponsor

The sponsoring company will have access to the assessment reports for the purpose of screening potential bursary recipients. Should the sponsor wish to have its logo/name on all assessment reports to increase brand awareness, this can be done. If the sponsor wishes to have advertising/marketing material distributed at the "adopted" schools, this can be arranged. The sponsor’s name will appear on the Perfect Careers’ website. Perfect Careers is currently in touch with the SETAs to have the programme accepted within the training requirements of the levy.

For more information as to how your company can get involved in this transformation process, contact Perfect Careers:

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3. Handling Your Employees' "Exceptional Events"*

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1. Introduction

Before the 1990 passage of the Americans with Disability Act (ADA) {Editor’s comment: and by logical extension The Employment Equity Act, 1998, life and work used to fit neatly into separate compartments. Personal troubles such as addiction, mental illnesses, or family crises weren't considered appropriate—or safe—topics for workplace discussion. But legal protections and the increasing emphasis in the United States on what's often called work/life balance have encouraged a new openness.

Although in many ways a salutary development, that new openness has also thrust employees and their managers into uncharted territory. They're learning on the fly to negotiate the effect on the workplace of life's "exceptional events," those profound occurrences that blur the boundaries between personal life and work.

Exceptional events are not just a new challenge for managers, they are a test of leadership, with potentially profound consequences for the employee affected as well as for the companies where they work. Handled well, they can strengthen the bonds between employee and employer, improve retention rates and staff morale, and even boost productivity. Handled poorly, exceptional events can disrupt entire workplaces, damage lives and corporate reputations, and subject companies to legal liability. Because exceptional events are as inevitable as they are unusual, managers need to prepare for them.

How to prepare? The current literature offers plenty of advice. According to the law and the human-resources handbooks, managers should be conversant with the details of a whole alphabet soup of labour laws. They should have policies and programs in place for every contingency. They must be compassionate but firm about performance. They must be ready to follow the employee's lead on confidentiality at all costs. All of which sounds good on paper. But what happens when a gravely ill employee asks to be excused from the office several afternoons a week for treatments during the final beta test of a software product? What happens when an employee whose performance is slipping discloses he has bipolar disorder?

Policies and procedures can be of enormous help in the management of such dilemmas. But when managers talk about exceptional events, they don't talk about structural, by-the-book solutions. Instead, they describe the day-to-day decisions that often seem trivial but can have a significant effect on the well-being of employees in crisis, their co-workers, and the companies they work for.

I have conducted scores of interviews with managers who have been challenged by exceptional events. They agonized over the tough choices facing them: how to balance the needs of the employee with those of the business; how to support without intruding; what should be private; and how to talk with other employees whose work will be affected.

The following cases show how some managers answered those questions. Not every case ends well or was handled perfectly, but a few common themes emerge that may help guide other managers. Two notes: First, the stories in this article involve employees who were solid performers, at least before their exceptional events. The element of poor performance radically complicates a manager's choices in handling an exceptional event and deserves a discussion all its own. Secondly, in the interest of privacy, personal and company names and some identifying details have been changed.

2. Rallying around Laura

One Saturday afternoon, Allan, the human resources chief of Catalina Press, a custom niche publisher, received a call from Christine, a line manager at the company. One of Christine's employees, Laura, had been seriously injured in a car accident. Her fiancé, who had been in the car with her, was dead—just weeks before their planned wedding.

After absorbing the shock, they knew they needed to establish a preliminary plan for dealing with the tragedy. Allan encouraged Christine to contact Laura and assure her that the company stood ready to help her in any way possible. Until Laura was ready to return to work she was not to worry about anything but her recovery.

Exceptional events are a test of leadership, with potentially profound consequences.

Allan and Christine then turned their attention to practical matters. Laura was going to be out for an indefinite period. How was her workload going to be parceled out? How was Christine going to break the news to Laura's coworkers? And how would they handle it?

They handled it like troupers, as it turns out. One team member volunteered to complete a project of Laura's that was nearing completion. Another volunteered to fill in for her at a conference the next weekend in Atlanta.

After Laura left the hospital, she sent an e-mail to Allan inquiring about her options. He reiterated that the company was prepared to assist her in any way possible. Then he spelled out the company's disability policy and urged her to take as much time as she needed to make up her mind.

"I think just leaving it like that was hugely important," Allan says. "In a couple of days she called and asked to go out on short-term disability, which for us was ninety days."

Before the ninety-day period was over, Laura called Christine to say she'd like to come back to work part time. Christine and Allan left it to Laura to determine how many days she would work and how soon she would resume a full-time schedule. Christine knew her group was nervous about Laura's return. Some didn't know how to acknowledge her loss. They didn't want to bring up a painful subject, but they also didn't want to hurt her by appearing callous. Allan talked with Christine's group about the options they had in their interactions with Laura.

"When something bad happens, people often want to reach out, but they say nothing," he told them. "The worst thing that could happen would be for Laura to feel that no one was talking to her. What I've learned over the years is that it will make a huge difference to Laura if you just say something. It doesn't matter what you say, it's just the fact that you say something."

Allan's advice was spot on. "Everyone was so sweet," Laura said later. "It was a terrible time, and the company and everyone I work with gave me nothing but support. When I think about that, I'm just so grateful I work for a company like Catalina." She was back at work full time in less than sixty days.

3. From Frank to Frances

Exceptional events are by their nature both private and public. That was certainly the case with Frank, a help-desk employee at a midsize technology company. One day Frank entered the office of Eileen, his HR manager, and closed the door. "Eileen," he said, "I've decided to undergo gender reassignment." He wanted to know whether his health insurance would cover his medical costs, but he was equally concerned about the effect on his job and his relationships with his coworkers.

Frank and Eileen sat down with Frank's manager, Louise, who was surprised but supportive. Frank was a solid performer, someone Louise wanted to retain. But they needed a plan. Who would be told? When? Who would break the news, and how?

They decided that Frank's group of immediate coworkers would be informed well in advance, so that they would understand the physical changes they would see in him and have time to get used to the transformation—and to calling him Frances, his new name. Eileen and Louise would communicate with their respective bosses, and Frank would decide whom else to tell and how and when to tell them.

Next, they identified issues that had the potential to create discord and discomfort. One key question: Which bathroom would Frank use? They talked about whether Frank would be present when his work group was informed, and they agreed that people would speak more freely and comfortably in his absence.

Eileen describes the meeting: "I sat down with my group and said, 'I've got some significant news about Frank. He's fine, but he's going to go through gender reassignment—a sex change. I know this isn't something that we deal with every day, and I want to talk about how to make this work for all of us.' I told them that this would play out over a fairly long period of time, and that right now we were assuming Frank would not have to take any extended absences."

The group members' reactions varied widely. "Most people responded with concern for Frank and decided to accept his news without criticism," says Eileen. "But some people pushed back in their chairs a bit. One person started to get a little bit—I wouldn't say hostile—but a bit demeaning. And another person, a middle-aged white male, said he didn't think the negativity was really reflective of the spirit of acceptance the company strives for. It was interesting, because the gentleman who spoke up in defense of Frank was not someone I would have necessarily expected to do that."

Frank's case is exceptional, but even when the changes are less extreme, people can see perfectly well that, as the expression has it, "there's an elephant in the living room." And that confronts leaders with a crucial test. How can they respect an employee's privacy without denying the presence of the elephant? The answer varies with each case, but one thing is certain: Employees watch the leader for cues, and what they observe strongly colors their views of the leader and the organization.

"In this company," Eileen says, "the culture of toleration and inclusion was already in place. Other organizations couldn't support something like what we did, and we might have had to take a different tack. We might have introduced Frances into another work group or created a new place for her. We might have discussed whether she needed to leave the organization and arranged a severance package."

In Frances' case, she was reintegrated into work group without significant disruption. Such an outcome would not have been possible without candid discussion and a supportive culture.

4. The decline of Lila

Sometimes, even when managers go well beyond the call of duty, they still feel they should have done more, as the story of Dave and Lila illustrates.

Lila, a longtime top performer at a defense manufacturer, took a short-term leave after a member of her family died suddenly. Upon her return, she began to behave erratically. "One day it would be the Lila I always knew, and the next day I hardly recognized her," says Dave, her manager. And then came the suicide attempt."

When Lila returned to work two months later, her behavior was still problematic. "She'd be sitting at her desk," Dave recalls, "just looking at her computer screen but not seeing what was in front of her. You'd talk with her and she wouldn't respond."

When Lila's clients began to complain about a lack of service, Dave had to confront Lila about her work. Such conversations are difficult in any event, but especially so in Lila's case. When she had a good day, he would praise her, but often her subsequent performance would deteriorate rapidly. Then he would have to tell her that her clients were complaining, and she would grow defensive. "I tried to be supportive," says Dave, "and yet also recognize that accountability doesn't go away. Trying to deal with that day to day was very, very difficult."

Lila's troubles began to affect the performance and morale of her work group. "We were just getting done what we needed to get done to survive," says Dave. "Meanwhile, her behavior was getting worse and worse. She would sit at her desk and cry all day. The rest of my team was handling the work but feeling stressed about how to cope with her."

Lila's troubles began to affect the performance and morale of her work group.

Dave was torn. "I wanted to believe she was going to get better. And I felt loyal to her." But after twelve months, Lila's behavior and performance were still spiraling downward. Dave knew he had let the problem go on long enough—probably too long. He had to act decisively. He offered Lila a choice: She could take a long-term disability or go on probation. The memory of that conversation still pains him.

"This person's life is already destroyed," he says, "and now I'm just complicating it even further."

With Lila's permission, Dave had discussed her case with her doctor. "I talked with him at length," he says, "and I knew that I could do so much more for her if she went out on disability leave." Lila ultimately took the leave. She struggled with depression for the next five years, and at the time of this writing was just trying to reenter the workforce.

Today, Dave wonders what he could have done differently. "If I knew then what I know now," he says, "I would have sat down with her right after I started seeing a pattern of erratic behavior. We should have recognized it and talked about it and put together a plan to deal with it instead of letting it go on so long and just hoping it'd get better. I think it would have made the whole thing easier for everyone."

6. Conclusion

Each exceptional event is, by definition, unique. Nonetheless, the managers I interviewed offered strikingly similar lessons learned.

Inform, involve, include. The effect of an exceptional event is never confined to one employee. Coworkers inevitably feel the blow, too. Fortunately, most people want to help. Don't try to manage the crisis alone—or worse, try to deny that a crisis exists. Stop and give yourself time to acknowledge what has happened, and time to build a strategy to deal with it. Give your people the information they need—while respecting privacy constraints—and tap their collective energy, wisdom, and compassion.

Be flexible about boundaries. When describing their experiences, managers acknowledge that it is sometimes necessary to journey into unknown emotional territory with their employees. They say it is critical to keep paying attention and be ready to shift focus quickly. Exceptional events have both emotional and operational repercussions. The work of the group may suffer if managers deal with only the emotional effects. But managers risk alienating their employees if they assess the event only in work-related terms. Make room for both sets of concerns.

Let your values be your guide. Every exceptional event is a test of leadership. To find clarity amid ambiguity, managers need to consult their own values and those of their organizations. When those values are congruent, managers can take some comfort from the knowledge that, even if the outcome of their decisions is less than optimal, they can look into the mirror every morning, knowing they tried to do the right thing.

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4. Across The Board: Official Communication Of The

SA Board For Personnel Practice (SABPP)

By Huma V Rensburg: CEO SABPP who can be contacted at

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# MORE INFORMATION ABOUT THE DRAFT DISCUSSION DOCUMENT "HR PROFESSION ACT"

The draft "Act" can be accessed on the SABPP website (www.sabpp.co.za). We have had a huge amount of interest and calls for talks on the Act. Comments are being received daily and some have been extremely helpful. For those who do not have the background of this process of professionalisation of human resources, I give Shaun Schwanzer the HRCOSA President’s brief overview of how events unfolded and the way forward:

1. Introduction Stage

During the Introduction Stage the internal organisations of the SABPP and HRCOSA busied themselves with finding direction and creating the documents etc… as follows:

a. March 2003. The SABPP and HRCOSA held discussions with the Dept. of Labour's Mrs Adrienne Bird (Deputy Director General: Employment).

b. August 2003. The Minister of Labour opened the IPM's National Convention with an encouraging and motivational speech, which set the scene for further developments in human resources at his invitation.

c. November 2003. HRCOSA (HR). SABPP (profession), IPM (practitioners), SACOB (business), FEDUSA (labour) and ROCCI (business) and some eminent academics in the HR field held the 2003 HR Crossroads Conferences to provide information and canvass the 'mood' for professional registration and national legislation. The Minister of Labour's speech delivered by the Dept. of Labour's Mrs Adrienne Bird (Deputy Director General: Employment), provided more detailed direction.

d. December 2003. HRCOSA and SABPP drew up the "Human Resource Profession Act" (incorrectly titled at the time) as a discussion document proposing the establishment of an eventual human resource professional registration Act.

e. May 2004: Discussion document (titled the "HR profession Act") is tabled at the SABPP Board.

2. Consultation Stage

The Consultation Stage involves the distribution of the document for general comment and is being conducted as widely as possible as follows:

a. June 2004: The discussion document is released to the HRCOSA & SABPP & IPM email data-bases as well as others placed at our disposal.

b. July 2004: Stakeholders meet to discuss clarifying the status of the discussion document.

c. August 2004. Final presentation of the discussion document; and input at the IPM's National Convention.

d. September 2004. Review of the input received at the IPM's National Convention.

3. Approval Stage

The Approval Stage involves the final approval by the SABPP Board of its document for presentation to the nationally accepted legislative processes as follows:

a. November 2004. Preparation of final discussion document and presentation to the SABPP Board for final approval.

b. January 2005. Presentation of final discussion document to NEDLAC, Ministry of Labour and Public Service & Administration (as HRCOSA Government Representative).

Thereafter to the Parliamentary process.

# HR AFRICA CONFERENCE: SHAUN SCHWANZER

It is clearly now becoming opportune that all parties in the process of wanting to professionalise the HR industry get together and make a success of this process. Yes, we will tread on toes and neglect to consult with some, but please don’t stand on ceremony, come forward and express your views and input, all of which is appreciated.

SHAUN WILL BE SPEAKING ABOUT: PROFESSIONALISNG THE HR FRATERNITY: MOTIVATING THE HR DESIGNATION ACT

>> The logistical nightmare: How are we going to cope?

>> Scope and criteria for accreditation of HR professionals: What about all the grey areas?

>> Applying ISO standards to the HR profession: Detailing what these include

>> Detailing the requirements of the proposed HR Charter

# RE-LAUNCH OF THE SABPP EMAIL DISCUSSION FORUM

The email discussion Forum launched by the SABPP in 1997 has through the years elicited some lively debate. A feature of this forum has been the immense goodwill shown by participants. In all some 1500 practitioners subscribed (and some unsubscribed in time) to participate in the sharing of information, exchange of policies, debating current issues and helping those who request help. Over the past month or so the Board has been experiencing problems with the MWeb server carrying our list. We sincerely apologize to our subscribers for the inconvenience this caused. We are practically up and running again and will resume our service shortly.

# LAPSED REGISTRATIONS

Please note that by the end of July 2004 all past professional registrations will be regarded as finally cancelled, as those professional levels of registration and specialist categories will no longer exist. Contact the Board to reinstate. Penalties will come to effect in accordance with the SABPP Charter.

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5. Got a New Strategy? Now Make it Happen

By Michael Beer and Russell A. Eisenstat

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1, Introduction

Despite widespread rhetoric about the need for organizational agility, an astonishing number of businesses stay stuck in neutral when they need to implement a new strategy.

Consider the situation that Lynne Camp faced in July 2000. Camp, the vice president and general manager of Agilent Technologies' Systems Generation and Delivery Unit (SGDU), was charged with creating a single global company from a set of fragmented businesses in Asia, Europe, and the United States. To gain control over product decisions being made by the regional teams she had inherited, Camp and her senior team had originally adopted a functional organization structure. This enabled them to exit many marginal, local businesses and focus on the opportunities that were most promising from a global perspective. It also allowed them to introduce more efficient shared processes.

Despite these strengths of the new structure, problems began to emerge. The functional departments didn't give the new businesses the attention they needed. The staffs of the regional field organizations were in a funk; they thought their customer perspective was being overlooked. Conflict between the functions, the businesses, and the field organizations was growing. The senior team was slow to make decisions, and no one took responsibility for the performance of the developing businesses.

2. A lack of openness lies behind many failures to implement strategy.

Camp surveyed the problems and concluded that the best way to increase accountability and speed up decision making—and thus to support the strategy of focusing on a few promising businesses—was to switch to a matrix structure. Members of the senior team strongly disagreed. A matrix would not work, they thought, and besides, they were too overloaded to undertake another major reorganization. Camp could have imposed her solution unilaterally, but she knew that if she did, she'd undermine the senior team's commitment, which was critical to making this complex global structure work. She needed to find a different way out of the impasse.

As Camp searched for an approach that would jump-start change at SGDU, she began to suspect (correctly) that people throughout the unit were talking about its strategy—and she further suspected that plenty of managers a couple of layers down had insights that she needed to hear. But these conversations took place behind closed doors, for the most part. And private conversations, by their nature, can't mobilize an organization to address the gaps between its business strategy and the structure, capabilities, and market realities it faces.

In our experience, the challenge Lynne Camp faced—SGDU's collective inability to talk openly about its problems—is common. This lack of openness lies behind many failures to implement strategy. We've become convinced that the most powerful way for leaders to realign their organization is to publicly confront the unvarnished truth about the barriers blocking strategy implementation. Typically, this involves looking closely at the roles and decision rights of various parts of the business, as well as changing the behavior of people at all levels. Public, organization-wide conversations about such fundamental issues are difficult and likely to be painful. But pain contributes to a species' survival by triggering learning and adaptation; it can have the same effect on organizations. Businesses and the people inside them don't learn to change unless they have the courage to confront difficult truths.

3. The Strategic Fitness Process

Because most initiatives fail to uncover the truth, they lead to only superficial change. Employee surveys, 360-degree feedback, interviews by external consultants, and even relatively honest one-to-one conversations between a key manager and the CEO (remember the courageous discussion Sherron Watkins had with Kenneth Lay at Enron) typically do not move the organization forward. They do not convince employees that management wants to know the truth and is ready to act. Quite the reverse—all too often, these methods lead to cynicism, and cynicism is the enemy of commitment to change. In one highly regarded company we studied, a task force of respected managers rebelled when asked by senior management to conduct and analyze a worldwide employee survey. They refused to get involved in yet another hopeless exercise. Meanwhile, senior managers fully believed that they had acted on past feedback.

We believe that organization-wide conversations are essential, so about fifteen years ago we launched a research program to develop a process that leaders could use to engage their people in an honest conversation. The "strategic fitness process" was designed in partnership with senior executives to enhance their capacity to implement strategy quickly and effectively. It does so by fitting the organization to the strategy and increasing fitness, the capacity of the organization to learn and change. Since then, this process has been used in more than 150 businesses in the retail, hospitality, high technology, banking, and pharmaceutical industries.

4. Crafting a conversation that matters

After more than a decade of implementing the process and researching its consequences, we have identified several overriding lessons that we believe are relevant in any organization-wide conversation, whether or not leaders use our particular process. To wit:

# Leaders need to advocate, then inquire, and repeat as needed.

A conversation about strategy needs to move back and forth between advocacy and inquiry. Most failures in organizations start when top management advocates a new direction and begins to develop programs for change without finding out what influential people in other parts of the organization think of the new focus. They thereby set themselves up to be blindsided by concerns that emerge much later. A smaller number of well-intentioned top managers make the opposite mistake. They do not advocate at all. Instead, in the name of participation and involvement, they depend entirely on inquiry—assembling a large group of managers and asking them to define a direction. The result is often widespread frustration. Managers and employees look to leaders to articulate a point of view about where the business is going, a point of view to which they can respond. Leaders need to advocate, then inquire, and repeat as needed.

The conversation has to be about the issues that matter most. To energize the organization, the conversation must be focused on the most important issues facing the organization—the company's strengths and the obstacles to performance. It's all too easy for senior managers to become swamped in the operational details of managing a business. What gets crowded out are tough and honest conversations about the fundamental issues that will determine long-term success. Do we have a distinctive business strategy that key managers believe in? Do we have the capabilities to execute that strategy? Is our leadership effective?

The conversation has to be collective and public. Successfully realigning an organization with a new strategic direction almost always requires simultaneously changing the worldview and the behaviors of a whole set of interdependent players—the CEO, the senior leadership team, and managers down the line. This won't happen without a collective, public conversation. By "collective" we mean that several levels of management across important functions and value-chain activities have to be engaged. By "public" we mean that senior managers need to keep everyone three to four levels below them informed about what has been learned, as well as what changes are planned.

# When people hear "honest," they tend to think "spontaneous." But public conversations in organizations are rarely spontaneous.

The conversation has to allow employees to be honest without risking their jobs. In most of the companies we've studied, managers talked about strategic problems with one or two people they trusted but pulled their punches in more public settings. In Agilent's SGDU division, for example, everyone knew about the tensions between the regional entities and the functional departments. Everyone was aware that the senior team wasn't managing effectively, and many managers doubted Camp's ability to lead the organization out of the morass. But none of these issues was discussed publicly, for two reasons. First, managers feared that being honest would hurt their careers or even endanger their jobs. Second, they were afraid that Camp and her senior team would feel so hurt and defensive that the conversation would not lead to change and might even set back the organization.

The conversation has to be structured. When people hear "honest," they tend to think "spontaneous." But public conversations in organizations are rarely spontaneous, as Lou Gerstner found out when he took charge at IBM in 1993, because the stakes are so high. Gerstner describes a strategic meeting at which managers sat at a large conference table with scores of assistants behind them, all listening to a PowerPoint presentation and engaging in little or no discussion. He was so frustrated by the lack of real dialogue that he turned off the overhead projector, with what he calls "the click heard around the world." Gerstner learned, as we have in our work, that the "free-for-all of problem solving" so essential for high performance "does not work so easily in a large, hierarchically based organization." Paradoxically, to achieve honesty and full engagement in these organizations, you need to structure the conversation carefully.

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6. Complimentary HR Tools/Downloads: Identifying Your Targets For Change*

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The targets of your change are the people or groups who will be directly impacted by the change or who are essential to carrying it out. Your goal in identifying them is to make each of your targets optimally ready and able to succeed in this change. They must understand the change, why it is needed, what is expected of them, how it will unfold, and what is in it for them to want to succeed in making the change. If they don’t have this understanding, chances are they will resist the change or even prevent it from being successful. Each will need attention from the change leaders to be engaged, prepared, and supported to succeed.

This tool assists you to determine the targets of your change and to think about what they each will need to fully commit to making the change a success. If a target group is concerned about a certain aspect of the change, they may resist the change if this concern is not resolved. If they have a high need for information or certain skills in order to succeed, this need must be addressed in your change plans. Use this information in your change strategy to plan how to respond to the needs of each of your target groups.

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7. Case Law & Legislation Review:

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# Wyeth SA (Pty) Ltd v Manqele & others

SUBJECT: Procedural Fairness in Dismissal Dismissal or resignation

Issues: Question whether Commission committed a gross irregularity by one Commissioner entertaining oral submissions on the matter prior to another Commissioner hearing the matter – Held that what followed the agreement rather than what preceded it was determinative – review must therefore fail – Second question is what constitutes an "employee" – person who has concluded contract of employment but has not yet commenced working an employee for purposes of the LRA

SUMMARY OF FACTS: The applicant raised two grounds for review. The first was that the Commissioner committed a gross irregularity in handing down a ruling in circumstances where another Commissioner had heard oral submissions from the parties’ respective representatives concerning the merits of the matter. Secondly, it was contended that the Commissioner committed a material error of law, alternatively, that he arrived at an unjustifiable conclusion in ruling that the first respondent was an "employee" of the applicant as defined by section 213 of the LRA.

The facts giving rise to this application were largely common cause. The candidate was offered a position by the company and they concluded a written contract of employment. Prior to the candidate commencing employment, the candidate was advised that the company was no longer prepared to employ him. This decision was directly related to the candidate’s purchase of a vehicle which did not conform to the contract. The candidate thereafter referred a dispute concerning an alleged unfair dismissal to the CCMA.

The company took the point that the candidate was not an employee as defined in section 213 of the LRA. An agreement was reached between the parties in terms of which the point in limine would be addressed by the filing of affidavits by both sides and to furnish the CCMA with "written submissions /arguments". The parties agreed that the Commissioner would thereafter make a ruling, and that they were in agreement that it would not be necessary to schedule a hearing for arguments and that the "ruling will be made on the affidavits and submissions."

Before the Commission’s hearing took place, the employee advised Senior Convening Commissioner that it intended to request the presiding commissioner’s recusal on the basis that he was alleged to have suggested at the conciliation proceedings that the CCMA would not have jurisdiction and that the dispute ought to be dealt with by the civil courts. Without any recourse to the company, the matter was thereafter allocated to another Commissioner. The second commissioner ruled that the candidate became an employee the moment an offer of employment was accepted.

SUMMARY OF JUDGEMENT: It was clear that the parties contemplated that the ruling would be made on the basis of the affidavits and submissions filed in terms of the agreement. There was nothing in the agreement between them to indicate that anything that may have been submitted to the first commissioner was to be of any consequence in the determination of the point in limine. Given the nature of the agreement between the parties, and their clear instruction that the point in limine was to be determined by what followed the agreement rather than what preceded it, there was no prejudice in this instance to the company by having an alternative Commissioner determine the matter in accordance with the terms of their agreement. The first ground for review therefore failed.

The interpretation of the definition of "employee" adopted in Whitehead v Woolworths (Pty) Ltd necessarily consigns a person, who is an employee party to a valid contract of employment to become effective on a later date, to a jurisprudential limbo unless and until that party physically renders services in terms of that contract. Persons in these circumstances may well have resigned from their existing employment and put themselves at considerable financial risk in the expectation of commencing work in terms of an agreement that is binding on both.

The court said that to deny the statutory protection of the security of employment conferred by the LRA in the interim between the conclusion of a valid contract of employment and the physical commencement of work seemed to be contrary to a purposive interpretation of the definition of "employee". A less literal approach to the statutory definition of employee is further justified by the extent of the constitutional protection of employment rights. Section 23(1) of the Constitution provides that "[e]veryone has the right to fair labour practices". The choice of the word "everyone" was deliberate; other constitutional labour rights extend to a "worker". In the court’s view, the term "employee" as defined in section 213 of the LRA and the requirement that a person "work" for another to be an employee extends to a person who is contracted to work.

It followed therefore that the second ground for review also failed. The court found that whether the first respondent was dismissed and the fairness of any dismissal was a matter to be determined by the CCMA, and this court was only to find whether, as a party to a valid and binding contract of employment, the candidate is an "employee" for the purposes of a claim under Chapter VIII of the LRA.

The application was dismissed with costs.

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8. Book Reviews

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# Play to Your Strengths: Managing Your Internal Labor Markets for Lasting Competitive Advantage

By Haig Nalbantian, Richard Guzzo, Dave Kieffer, Jay Doherty, McGraw-Hill; 1st edition 2003

All leaders know people are critical to the success of organizations. Executives just don’t act that way sometimes. Why? Because they lack the facts. Too often they don’t know which workforce practices create the greatest value or which attributes of a workforce are critical to business strategy.

Absent these facts executives look outside for cues on what to do through benchmarking and searching for so-called best practices. The result is a perverse reality in which other companies, often competitors, are in effect telling them how to run their company. Such copycat tactics can’t be right, and the evidence shows they aren’t.

All of this is changing. Now companies can measure the links between their specific workforce practices and business results--learning what’s creating value and what’s not. Consequently, important decisions about where to cut costs, where to re-allocate spending, and where to invest more for greater returns can be based on facts specific to their enterprise.

It’s an extraordinary opportunity. Indeed it’s the last great unexploited source of competitive advantage for companies today.

Play to Your Strengths describes this new science of human capital management. Using it gives companies the advantage of acting based on the measured impact of their firm-specific practices on their business outcomes.

>> Learn how to break the typically squishy thinking around workforce decisions

>> Learn why your "internal labor market" is the key to understanding your workforce dynamics •Learn how to actually predict what effect a new practices will have on business results •Learn how to beat the competition with advantages others can’t copy •Learn how to build true accountability for optimizing the return on your human capital investments

Whether your strategic imperative is being the low cost producer, delivering world-class customer service, producing matchless quality, or generating head-turning returns for shareholders, this book will show you how to make the necessary decisions to meet your goals.

This book is a key read for all managers who want to invest astutely in their people to enable great performance for their company." – Adrian J. Slywotzky, best selling author of The Profit Zone and How to Grow When Markets Don’t

"I encourage every executive who takes seriously the idea that people drive revenue, profit, growth, and customer satisfaction to consider the tactics discussed in this book." – David A. Daberko, Chairman and CEO, National City Corporation

" The authors have outlined a practicable, real-world framework for companies to analyze and implement change. Any organization that sees its people as an asset can benefit from this approach." – Daniel H. Mudd, Vice Chairman & COO Fannie Mae and former President and CEO of GE Capital, Japan

"This is the new thinking in business. And it works. More than once I have applied the principles and tools presented here. The book provides innovative ways of getting the facts about how a company really is managing its people and how that affects it business results. With these insights you can do a lot, from setting long-range strategies to solving specific, pressing business problems." -- Kurt Fischer, Vice President Human Resources and Diversity Officer, Corning Incorporated

# Human Resources in the 21st Century

By Marc Effron (Editor), Robert Gandossy (Editor), Marshall Goldsmith (Editor)John Wiley & Sons; 1st edition, 2003

New and faster technology, redefined values, and shifting customer demands are changing the way businesses operate in the twenty-first century. Human resources and business leaders are faced with the challenge of redefining their strategies on leadership, talent, and diversity, while evaluating their operational effectiveness. This book presents the compelling contributions of thought leaders-such as David Ulrich, Rosabeth Moss Kanter, and Jeffrey Pfeffer-who offer a road map for what these leaders can expect. Renowned HR executives also provide their expert advice and prescriptions for the future. The nature of human resources will continue to evolve as the new century progresses-with this book, HR professionals can change with it.

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9. The Hardball Manifesto: Play to Win*

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EDITOR’S QUESTION: Do you have the business skills/smarts to be a professional HR partner, and leader in your own right at the types of companies described in the article below?

Toyota, Dell, and Wal-Mart all play rough, and play to win. No need to apologize for enjoying making your competitors squirm, says this Harvard Business Review excerpt.

1. Introduction

We believe the time has come to rebalance the hard and the soft. Softball players that have survived until now—think of most airlines, the U.S. auto industry, the recording industry, to name a few examples—are in deep trouble. Hardball players are taking their places at an unprecedented rate. Companies join and fly off the Fortune 100 list faster than ever before. In this quicker, tougher world of business, playing hardball is not an option; it is a requirement for winning.

Ready to relearn the fundamentals of winning and losing? Start with the Hardball Manifesto. It lays out the keys to becoming an effective hardball player.

2. Focus on competitive advantage

Focus relentlessly on competitive advantage. The history of business is littered with the remains of companies whose competitive advantages, once robust, simply withered away. Hardball players, by contrast, strive to widen the performance gap between themselves and competitors. They are not satisfied with today's competitive advantage—they want tomorrow's.

Although a lot of companies talk about competitive advantage, few are able to put a finger on exactly what theirs is, and fewer still can quantify it. Hardball players know—empirically—what theirs is and exploit it ruthlessly.

Companies that relentlessly pursue competitive advantage are wonders to behold. Wal-Mart is first and foremost a logistics company, and it established its competitive advantage in discount retailing in the 1970s with a network of "cross-docking" warehouses. Goods from suppliers were accepted only in full truckload quantities. They were then moved across the dock and loaded onto other trucks that later departed fully loaded with a variety of goods going to stores.

But Wal-Mart didn't stop with this drastic reduction in its transportation costs. It went to "everyday low prices" to stabilize demand and thereby further reduce costs. Supercomputers were installed to track and analyze consumer purchases, competitor prices, and other information. Satellites beamed the data from stores to suppliers and on to warehouses, helping to keep inbound and outbound trucks full and shelves stocked. Suppliers were told exactly when to deliver shipments to warehouses; if they missed the window, their shipments might be returned until the next window opened—or rejected altogether. Wal-Mart also used sales and inventory data to tell companies like Rubbermaid which products it would carry—no matter what the companies thought was the appropriate merchandising of their lines.

Wal-Mart continues to tighten the bolts on this system, so far without any signs of shearing. In Wal-Mart's intense and relentless effort to further increase efficiency, suppliers' costs and consumer prices are, apparently, expected to decline forever.

Strive for "extreme" competitive advantage. To hardball players, there's something far more important than competitive advantage. It is, in effect, extreme competitive advantage, which is the ultimate endgame. Unlike plain old competitive advantage, which can be fleeting, this is something that puts you out of the reach of your competitors. They're likely to cry that such an advantage is unfair—not because it's unjust, but because no matter how hard they try, they cannot match it. Often, the hardball competitor has an economic system that is unassailable. Or a relationship with a customer or a supplier that is not available to its competitors. Or capabilities such as fast product development or superior customer knowledge that others cannot replicate.

3. The nicest part of playing hardball is watching your competitors squirm

Toyota's production system, for example, is so much better than any other automaker's that the company practically flaunts it. The system lets Toyota produce, at both high and low volumes, a great variety of high-quality vehicles at very low cost. Toyota is so confident that its system cannot be replicated that it has welcomed competitors into its factories. "Study us all you want," the company has said. Despite decades of trying, no rival has matched Toyota's system. Toyota continues to push the boundaries of its advantage with a new type of flexible assembly line—dubbed the Global Body Line—that costs 50 percent less to install and can be changed to accommodate a new model for 70 percent less than Toyota's previous production system.

The rewards to Toyota have been spectacular. Its global market share has steadily risen from 5 percent in 1980 to more than 10 percent today, with each point of market share worth about $10 billion in revenue. Toyota, which recently overtook Ford as the world's second-largest automaker (in terms of volume), says its global market share goal is 15 percent by 2010. Does anyone want to bet against it?

4. Avoid attacking directly

Perhaps paradoxically, hardball players avoid direct confrontation. That's because they're smart. History shows that for a military force to be reasonably assured of success in a direct attack, its strength must be several times greater than its opponent's. That's not a prospect hardball players like. Even if they have the strength, they prefer the economies of force inherent in the indirect attack.

Southwest Airlines' unusual but highly successful route strategy is a classic indirect attack. Traditional airlines built huge competitive strengths in their hubs; for example, United has nearly 1,000 flights in and out of Chicago's O'Hare airport every day. Southwest chose not to attack the major airlines on their well-defended turf. Instead, it opened operations in small, out-of-the-way airports. For instance, bypassing Boston, it offered service out of Manchester, New Hampshire, and Providence, Rhode Island. Instead of trying to get slots at O'Hare or New York's LaGuardia airport, it set up operations at Chicago's Midway airport and at Islip on Long Island. Not surprisingly, there were no bloody battles with the major airlines for control of these locations.

Once Southwest was established in the smaller airports, the major carriers faced a dilemma. How could they respond to Southwest's small-airport success without stepping out of their well-protected foxholes at the major airports? Should they compete directly with Southwest in smaller airports where Southwest had built a competitive advantage? Or should they create their own non-hub-based airlines to compete with Southwest? With either response, the major carriers would be playing into Southwest's game. And, in fact, no major carrier has yet resolved this dilemma. Numerous attempts to confront Southwest directly—for example, Continental Lite—have failed. Meanwhile, Southwest continues to push into small cities. Its well-documented success as other airline companies teetered after the September 11, 2001, tragedy only confirms just how savvy Southwest was.

5. Exploit people's will to win

Hardball requires guts as well as smarts. Victory often belongs to those who want it the most. Southwest's founder, Herb Kelleher, despite his aw-shucks persona, is a hardball player, and Southwest is a hardball team. Don't be fooled by its touchy-feely image in the media—or by its stock ticker symbol, LUV. Sure, in a syrupy training video, one animated character tells employees, "Spirit is engaging our minds and our hearts and our souls to do the right thing. Southwest spirit is you." But in an advertisement for the whole world to see—including employees—Southwest once crowed: "We came. We saw. We kicked tail."

6. Hardball requires guts as well as smarts

This is a great mantra for hardball players. To achieve competitive advantage and drive toward extreme competitive advantage, hardball players must be action oriented, constantly impatient with the status quo. Fortunately, one can foster this will to win and turn softball players into hardball players.

One way to do this is by adopting hardball strategies of the kind we describe below. These by themselves can help release people's natural desire to win. But to really turn softball players into hardball players, you need to create and maintain in people a hardball attitude. This becomes more difficult as your advantage over competitors grows and people become complacent. As Kelleher said in a letter to all employees in the early 1990s, "The number one threat is us." He added: "We must not let success breed complacency; cockiness; greediness; laziness; indifference; preoccupation with nonessentials; bureaucracy; hierarchy; quarrelsomeness; or obliviousness to threats posed by the outside world."

To avoid such complacency, you need to foster a sense of urgency. Once, in response to United's launch of a competing service in several California cities that were served by Southwest, Kelleher dispatched a letter to employees with the headline "Commencement of Hostilities." Noting that United had more than 100 planes that could be "hurled against us" on the contested routes, he warned that "our stock price, our wages, our benefits, our job security, our expansion opportunities…are all on the line." In several cities where the competition was fiercest, Southwest employees came to work wearing camouflage outfits and battle helmets.

7. Conclusion

Know the caution zone. Hardball involves playing the edges, probing that narrow strip of territory—so rich in possibilities—between the places where society clearly says you can play the game of business and those where society clearly says you can't. The hardball player ventures closer to the boundary, whether it be established by law or social conventions, than competitors would ever dare.

But to play the edges, you have to know where the edges are. This is perhaps the most complex and daunting aspect of hardball. So hardball players do their homework. They know their industries cold. They have the legal and accounting counsel to help them determine what they can and can't do. But the answers often are far from clear. […]

At the risk of repetition, let us stress once again that hardball is not about breaking, or even bending, the law. It is not about crooked accounting, breaching contracts, stealing trade secrets, or predatory pricing. It's not about being mean.

Well, not too mean. The nicest part of playing hardball is watching your competitors squirm.

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