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2001 was a history-making year with regards to the climate surrounding corporate reporting of financial data. Starting in December of 2001 firm after firm was forced to make disclosures about errors in their financial statements following the aftermath of Enron and MCI WorldCom. Three years later the disclosures continue with statements from Freddie Mac and Goodyear coming in just this week. What is surprising to me is that few in HR seem to take notice of the scrutiny financial reporting is under and what that means for them. Nearly every HR department in the world is guilty of financial misreporting, and should be operating on high alert.

Apart from reporting the results of cost cutting efforts, HR is often atrocious at reporting financial performance. For example, when HR budgets or corporate headcount is reduced, HR typically reports a substantial cost savings, but does that savings actually exist? Unfortunately, it turns out that HR managers all too often under or misreport the financial impacts of HR cost cutting actions. This type of misreporting occurs when HR fails to accurately report the "hidden costs" associated with specific cost cutting actions or the "unintended consequences" that correlate with them. This is a serious problem I call "undercounting costs."

Let me state upfront that this article is not about accounting . It is an article about becoming more strategic by taking a closer look at the unintended consequences that occur when HR takes an extremely narrow view of the impact of their actions. The direct result of this "undercounting" is that HR repeatedly sustains a larger percentage of budget cuts and work load volatility than it would if the "real costs" of certain people management practices were known by top management. The goal of this article is to demonstrate to senior HR managers how to better educate senior management about the real costs associated with under funding HR programs. I promise you that if you read through it, you won't become an accountant but you will see the value of spending some time and resources on identifying the "hidden costs" of HR cost cutting efforts.

2. Stop counting only half of the real costs

When times are tight, everyone is encouraged to reduce their budget, and budget cutting is not necessarily a bad thing. Unfortunately, it can cause serious damage to an organization if the cuts reduce spending too far in one area and not enough in others. In the cases where HR budgets have been severely reduced, it is rare to find a department that has tracked and reported the increased cost and losses that are sustained as a result of reducing or eliminating important HR services. In the few cases where those left behind have tracked such details, the story is clear.

Anyone who understands how business works realizes that the firms accounting department tracks only one type of "costs," those actual or amortized costs that appear in the accounting ledger for the HR department. Accounting ledger costs represent the expenditure of funds for goods and services out of your budget. For example, if you trained 10 doctors at $1,000 apiece, the accounting ledger will show a $10,000 "cost" entry for training. These are real dollars and accounting has done its job by "counting" them and recording them in the ledger.

Following that logic, it’s only natural for HR to assume that if it eliminated the training of those 10 doctors, it can accurately "boast" that it had "saved" the company $10,000. And that is where the problem comes in. On the surface, that might appear to be true, but this narrow thinking omits several other important factors. Those factors are the "unintended consequences" or damages that occur when employees (in this case doctors) are provided with insufficient HR services (in this case training). In this example of accounting has recorded a budgetary "cost savings," but has not recorded the correlating damages caused by having under-trained doctors operating in a hospital.

The "omitted costs" are the dollar consequences or the collateral damage that can occur when you fail to provide the necessary level of services (in this example, training for doctors). It is likely that the "under-training" that occurred in this example will directly affect the quality of a doctor’s work. In fact, the action might have increased the number of deaths, accidents, lawsuits, employee turnover and probability of accreditation problems. These "unreported" costs quite often exceed the initial cost savings estimate of reducing the training. In one major healthcare chain, the cost of an under funded performance management system for doctors ended up being over $1 billion.

What has happened is that only half of the costs associated with reducing training have been reported. It’s HR’s job to ensure that the other half of the costs are recognized and recorded. I call the omission of the damages caused by under funding people management programs, HR "undercounting".

Other Examples

Let's look at another example of "undercounting" as a result of cuts in employee safety programs. "Overcutting" safety programs can result in an increase in workplace accidents, workers compensation insurance costs, and a host of costs associated with decreased workplace productivity. Even though it is likely that accounting would track both the reduction in expenditures on employee safety and the increased costs of accidents and insurance, there is little chance that accounting will ever correlate the two. This lack of correlation doesn't make the increase in accidents and insurance rates any less real, it simply doesn’t connect the two and identify the increase as preventable with a corresponding business case to make the financial argument for maintaining safety training.

Similar unintended consequences occur with machines as well as people. For example, if you eliminate or delay changing the oil in a finely tuned automobile, you will save significantly on short-term costs, however, it won’t be long before permanent damage to the engine will result in repair costs that make the original cost-cutting decision appear to be a silly one.

Real cost savings = The dollar amount of reduced HR expenditure + the added costs/ losses that occur in other departments as a consequence of having fewer HR services

3. Why collateral damage costs go unreported

Even though the added costs of errors and deaths will be real costs to the hospital, they will never be reported in the same HR accounting ledger alongside the "cost savings" of cutting the training program. The reason that no one in accounting correlates these two costs because there is a delay between the cost cutting action and the unintended impact. Another reason why the costs of doing the "wrong thing" (over cutting HR programs) may never be "counted" is the fact that the collateral damage often doesn’t occur within HR, it occurs in other operational departments.

4. Areas where HR frequently underreports real costs

HR fails to track and report costs in four key areas. They include:

A) Underreporting collateral damage and the real costs of "overcutting" HR programs

Strategic HR leaders must understand upfront that under reporting the collateral damage related to HR budget cutting has the net result of negatively impacting firm performance because senior managers never see the real costs associated with under funding HR and make decisions that hurt the bottom line. From a strategic business perspective, it's time for HR to realize that it must more accurately identify, track and report the actual dollar costs of "overcutting" HR programs.

There are many areas where collateral damage can occur. For example, spending less than "what is necessary" on people programs may lead to:

# increased error rates

# increased accidents, which may lead to a rise in insurance rates

# missed deadlines

# increased employee turnover

# increased union activity

# lower output or productivity

# delays in product development and service delivery

Each of these "unintended consequences" can occur as a result of spending "too little" on HR programs and has a measurable economic impact. In addition to the collateral damage areas mentioned above, there is one additional area that by far has the largest economic impact, that area is customer satisfaction. There are several studies that demonstrate the direct connection between employee satisfaction and customer satisfaction. Unfortunately, unless HR clearly demonstrate to senior management that overcutting HR lowers employee satisfaction, they will never make the connection between customer satisfaction and long-term sales decreases.

The "undercounted costs" can be defined as the resulting costs or collateral damages that occur in other business departments as a direct result of HR "spending less than necessary" on people management programs.

B) Underreporting "shifted" costs

A strategic professional looks after the interest of the entire corporation not just their own business unit. On occasion however, HR loses sight of that fact when it undertakes some of its "self-service" initiatives. Clearly HR portals and intranet information services provide helpful information to managers and employees and they provide a positive return on the money invested. However that return may be overstated in some cases because self-service programs may in some instances, just be "shifting" costs from HR to line managers and employees. Let’s look at an example of web-based benefit information.

HR may reduce its own headcount by requiring managers and employees to make their own personal information changes and to find the answers to their benefit questions online, however this action may actually increase the labor costs associated with benefits administration. Rather than having relatively low paid HR employees doing such work, benefits self-service may actually increasing overall costs by taking highly paid managers and employees away from the valuable "line jobs." If HR omits these shifted costs when it calculates its cost of a benefits transaction, it is not accurately reporting the actual costs associated with the initial action. In fact, the action may not have reduced costs at all, but instead shifted them elsewhere.

Just because accounting doesn't track them... doesn't make the losses associated with "doing nothing" or "the wrong thing" unreal losses!

C) Underreporting the costs resulting from failing to invest

When an organization fails to spend money on a people problem, one possibility is that the problem may go away on its own. However, it is much more likely that the problem will fester, get worse and even eventually become unsolvable because managers failed to take action early on. In this case, "doing nothing" will cost you "something". There are three cost areas related to failing to invest. They include:

The costs of doing nothing - there are distinct costs related to "doing nothing" or failing to act when you identify a problem. The consequences of doing nothing are similar to the costs of overcutting HR programs. The difference here is that there is no initial program to cut. There is however, an "opportunity" to develop a new program when HR identifies a "new" people management problem. The "cost of doing nothing" arises when HR allows the problem to "fester" and get worse over time either because of indecision or because HR was unwilling to invest money in a new program solution. The damage caused by in action could have been minimized or prevented it, if HR had just "done something" (invested in a new HR program or solution)

The cost of spending too little on maintenance -- spending insufficient funds to maintain existing programs may cause problems that cost you a great deal of money. In this case, the HR program is not actually eliminated but HR refuses to spend additional funds to maintain and update the HR program. Just as failing to do maintenance on a car's brakes can cause expensive accidents, failing to "invest" in the maintenance of people management programs can also have significant dollar consequences to the business. For example, failing to upgrade an applicant tracking system for recruiting could slow down our recruiting because recruiters had to use an antiquated system. By increasing our time to fill we might suffer the unintended consequences of losing the very best candidates by failing to act quickly.

Lost business revenues and profits as a result of failing to invest -- opportunity costs are the lost revenue and profit that never materialized because HR failed to take advantage of reasonable "profit generating opportunities" that may have resulted in increased revenues. For example, if you are presented with the opportunity to hire away a top competitor's best salesperson, most line managers would jump at the opportunity because it would both increases your ability to sell, while simultaneously hurting your competitor by decreasing their sales revenues. However, if you failed to hire the competitor’s salesperson because of a "hiring freeze", HR has an obligation to report the collateral damage caused by such a policy. Failing to spend money when reasonable opportunities arises to increase revenues have real costs to a business that, unfortunately, do not appear on any accounting spreadsheet

D) Underreporting the costs of having to replace "cut" HR programs

Frequently HR reduces its costs during a downturn by eliminating programs completely. Eliminating HR programs can have dramatic consequences but occasionally eliminating an HR program does not cause any immediate problem. However, because business runs in cycles, HR can find that if the downturn is short-lived, that it will have to rebuild or replace those "recently cut programs" as soon as growth returns. In these cases, it is not unusual for HR to find that rebuilding the "cut" program from scratch are incredibly expensive. In fact, so expensive that the startup costs clearly exceed any "cost savings" accrued during the time that the program was not in existence. In addition, it's worth noting that the slow start up and any weak initial performance of the "rebuild program" may add dramatically to the "uncounted" business costs.

5. Calculating the "real" value added of cost-cutting activities

The "real value" added to the corporation by any cost cutting programs that HR might sanction can be calculated in a formula with six elements. The formula looks like this:

The formula

The real cost-cutting value = the actual dollar value of any budget reductions

minus the dollars lost in each of these 4 areas of "collateral damage"

New problems caused by "overcutting" of existing programs

The additional costs in management and employee time as a result of "shifting" HR activities to employees and managers

The additional costs that result from HR failing to invest including "doing nothing", failing to invest in program maintenance and additional revenue that was lost because the firm did not invest in "new opportunities"

The additional costs associated with rebuilding dismantled programs

"Over cost cutting" is best characterized by the phrase "penny wise but pound foolish"

6. HR’S new role

The first lesson to be learned here is that although "cutting costs" seems relatively easy on the surface, there could be significantly higher costs associated with the "collateral damage" that can follow excessive or inappropriate cost-cutting.

The second lesson is that because professionals in accounting are not experts at "connecting the dots" (i.e. connecting the added collateral damage costs with the reduced HR spending), HR must accept its responsibility in involving and educating them in the area of "undercounting". HR must first help quantify the collateral damage and then demonstrate to accounting and senior management that these collateral damages are directly caused by the initial cut in training. If HR fails to accept this new role, the myth of classifying cutting training (and other primary HR programs) as a "cost savings" will continue. And as long as that myth continues, senior managers will be falsely encouraged to reduce training and HR costs to below the levels where the collateral damage exceeds the initial cost savings. It’s a very serious problem, and by not acting, in effect HR is encouraging senior management to continue cutting HR programs.

7. Conclusion

It's impossible to accurately measure the strategic impact of HR if you only look at the direct costs savings of cutting programs. Although most people in HR are not accounting experts, that does not prevent them from seeking outside help in ensuring that all of the costs associated with "overcutting" and "doing nothing" are calculated into every HR strategic action.

*Reprinted by permission of the author

1. Introduction

The world is currently engaged in a massive transformation of consciousness and, as South Africa approaches its tenth year of democracy, South Africans are taking stock of the country’s achievements. While there is much to celebrate, there is much cause for concern. While poverty and unemployment are still endemic, many of those who have benefited from the dismantling of apartheid are corrupt and unethical.

But there is a movement that believes things are changing – that humanity is shifting from a belief system driven by self-interest to a belief system driven by the common good. Although the factors driving this shift are related to physical, economic and environmental survival at the national level, the implications have global political and spiritual dimensions.

2. Spirit at work

We can expect to see a much greater focus on corporate accountability and a change in the relationship between employer and employee. To survive in the 21st century organisations will need to develop an employee, customer and shareholder value proposition that focuses on employee fulfillment, ethics, and social responsibility. The movement in the US, known as Spirit at Work, focuses on helping people in corporations to address issues of identity, purpose and competence with such questions as "Who am I?" "Who do I serve?" and "How do I work?".

In a paper entitled Fostering the Soul at Work, researchers Margot Corbin and Christine Livingston, argue the need to move away from the paradigm of leaders versus followers, and promote the concept of relationship as the uniting force in fostering a sense of individual meaning.

Workers, employees, "talent", call them what you will, people in the workplace are looking for that "something", that makes work a better place to be, that gives people a sense of fulfilment. Few organisations in SA have even begun to grapple with their workforce’s need for their working lives to have purpose. And even fewer have even imagined how a workforce with a purpose can impact on competitiveness.

Bonang Mohale CEO of Drake & Scull Facilities Management SA, who is speaking at an upcoming Soul of Business in SA Conference, believes success cannot be measured only in the size of your bank account and the titles on your office door: "Success is about many things. It’s about a progressive realisation of a worthy ideal; it’s about achieving embarrassingly good results at work, but ensuring that you are still married to the same person that you fell in love with when you were young. It’s also about spending time, energy and effort in the community. There’s a moral obligation. And then, lastly, it is about ensuring that you have some sort of spirituality; a recognition that things happen for a reason and that all of us are interconnected."

While SA workers appear to be relatively stress-free and appear to have no problem balancing work and life, according to a survey recently conducted by Kelly, they place a high premium on finding meaning in their work. Research suggests that bigger cars and bigger bonuses are not at the top of employees’ "most wanted" list. Rather, they seek recognition of their personal value and autonomy "to be", and qualities of integrity and vision.

3. An opportunity to learn from thought leaders

"It has become clear that the private sector has outstripped the influence of governments as the primary shaper of the economic agendas throughout the world. There is no more decisive a force for determining whether or not we achieve a meaningful future for this society and for humanity, than an ethical and vital private sector," says Edelstein.

"The Soul of Business in South Africa Conference will be an opportunity for influential members of the business community to learn from the experiences of those organizations playing pioneering roles as social change agents," she explains. Speakers include Mpho Makwana, CEO Marketing Federation of SA; Eve Anneke, founding member of The Sustainability Institute; Colleen Bowker and Mille Bojer, founders of Pioneers of Change, an international learning network of young changemakers; and Dudu Nyamane, HR Director, IBM SA.

Topics to be discussed at the conference include new trends in leadership, bringing soul to the workplace and what this means, the dilemma of work-life balance, case studies of successful transformation initiatives, and examples of organisations who are managing to bridge the gap between soul and work.

And a concluding word from US futurist John Renesch: "The companies and institutions that will thrive – attracting the more conscious people who are committed to evolving spiritually – will become ‘conscious organisations’ since they become committed to learning, growing and being more aware, more responsible, and more aligned with their stated values."

2. HR’s role in the new economy

By Jeff Sacht & Christo Nel who can be contacted at jeffs@worldonline.co.za

Executive Summary

GIMT incorporating The HILL School for Business conducted two exploratory studies in 2003 to determine the degree to which South African business is making the shift from a business as usual (Old Economy) paradigm to a New Economy style of managing organisational and people performance.

According to the Beehive Model of organisational renewal, developed by GIMT, Incorporating The HILL School for Business, seven critical workplace practices must be implemented and entrenched for companies to have a competitive edge.

Two groups of respondents were surveyed. A group of 249 current and past MBA students drawn from various business schools were surveyed to obtain a Line management perspective, and a sample of 135 Human Resource (HR) professionals represented an HR staff perspective. Respondents were asked to rate the degree to which their companies implemented seven workplace practices: strategy; structures; business disciplines and processes; talent creation; seeking commitment from all stakeholders; pay and incentives; and change leadership.

The bottom line message that emerges from both studies is that South African business is still far from capable of entrenching the critical strategic leadership and workplace practices required to create a high performance and change hardy business culture capable of rapidly transforming itself to compete in the global arena. The 2 key drivers of business transformation as predicted by the Beehive Model are Strategy and Change Leadership. Both respondent groups agree that these two critical dimensions are weak spots in the way South African organisations function.

Line and HR concur that South African businesses seem to be wavering between what are regarded as New Economy practices, such as flat structures and cultivating empowered, participative employees who have access to information, and Old Economy practices, such as mechanistic and bureaucratic workplace practices.

1. Introduction

One of the major challenges experienced by companies in both developed and emerging economies is to make companies more flexible and adaptable to changing customer demands and new competitive challenges. The first response to these demands is often for organisations to decentralise decision-making. The idea is to give decision-making authority to those who are closest to both customers and the marketplace. The potential problem arising from decentralised decision making is that at least some of the myriad decisions that are made "in the moment" at the lower levels of the company actually conflict with the business’ core value proposition to its customers.

Each individual decision, while appearing optimal within the narrow context in which it is made, may not be optimal from the perspective of the company as a whole. The risk, therefore, is that the company will lose a consistency of focus and that the business’ value proposition to its customers will become muddled and indistinct. So, the question is how to ensure a consistent focus on (and internal alignment with) the organisations value proposition to its customers-while also providing employees with the flexibility they need to react quickly and effectively in the moment.

As line managers become more distracted by changes in the moment, guardianship of company's value proposition to its customers arguably falls to HR. Internal alignment of all the companies structures, systems, processes, and practices with the company's value proposition to customers provides a basis for differentiation in intensely competitive markets; ensuring alignment requires explicit hardwiring of the customer value proposition into company's business and workforce management systems. HR’s role is to facilitate a set of guiding principles reflecting company's value proposition to customers can help to ensure consistency across the entire organisation while providing individual employees with sufficient autonomy to respond to challenges in the moment

A starting point for building focus and coherence is for organisations to adopt a tried and tested model of organisational functioning. GIMT, Incorporating The HILL School for Business has developed the "Beehive Model" and the related "Beehive Survey" based on the work of Christo Nel and his colleagues at the Stellenbosch Business School in South Africa. This model identifies seven sets of critical workplace practices that need to be integrated to entrench high performance and drive sustainable competitiveness within an organisation.

The Beehive Model and Survey has been found to be a robust and practical model, useful across a number of organisational settings, including a major banking group, a poultry producer, and a multinational brewing company, to name but a few.

The next step would be to measure the organisations internal capacity to deliver the organisations value proposition to customers against established organisational functioning benchmarks. The gap between where the company is now and these benchmarks provides the development ‘agenda’ HR needs to facilitate change in the name of building a set of core internal values, systems, structures and business practices required to deliver the organisation’s promise or value proposition to the market place.

This remainder of this paper will describe the Beehive Model, summarise the research that has been conducted to date using the Beehive Model, and present the findings of 2 recent Beehive Surveys, one with line managers, and one with HR to highlight areas of agreement and differences about a strategic agenda for change to build globally competitive South African organisations.

2. The Beehive Survey of Organisational Functioning

Unlike most surveys, which gather employee opinions and ratings of "climate" issues (management and supervisory practices, communication practices, work-life balance, company values, work relationships, etc.), a Beehive Survey targets specific areas that have been shown by sound management theory and research to have a direct relationship with high organisational performance.

Climate surveys have a place in providing useful data to management, but often that data is not actionable. In other words, either because management is unable or unwilling to take action in response to employee opinion about a given issue, or because the data itself fails to provide clues as to the appropriate action to take, nothing gets changed. The result is that employees’ expectations for change fail to be met, and they become less motivated to pour their hearts and minds into their work.

In a paper delivered at the 2003 Global Conference on Business and Economics, Denton and Bouwer state "the Beehive Model’s structure …and the associated (survey) questionnaire indicators are soundly supported by recent academic theory as well as the limited available empirical research on related topics. It is therefore possible to conclude with a reasonably high level of confidence, as viewed against the backdrop of trends in theoretical literature and empirical research on related topics, that compliance with an holistic application of best practice is likely to result in the entrenchment of change and high performance within an organisation’s culture" (Denton, M, & Bouwer, E, 2003, p 2).

The information obtained from a Beehive Survey provides managers and change agents with a profile of an organisation’s performance that can be compared to current best practices. The Beehive assessment gives an organisation, department or business unit the opportunity the re-think it’s workplace practices that research has shown to be strongly related to superior performance in The New Economy. The survey produces a snapshot of the following seven areas shown in figure 1 below.

• Strategy: The ways in which strategy is formulated and utilised as a primary driver of performance within the organisation

• Structures: The extent to which structures are designed to reinforce and drive performance by optimising the organisation’s supply chain and the fulfilment of accountability at all levels

• Talent Creation: Workplace practices and disciplines that ensure the optimum development and utilisation of people and their ability to contribute to performance

• Business Disciplines: The adoption and widespread use of a set of integrated business disciplines that reinforce and cause high performance

• Stakeholder Commitment: Developing the alignment of all stakeholders so that they operate as active contributors to the competitiveness of the organisation

• Pay and Incentives: The alignment of pay and incentive systems that attract, retain, and enhance the commitment of people across all levels

• Change Leadership: The use of proven leadership and processes for implementing change and turning strategy into operational action that delivers competitive performance.

A Beehive Survey is designed to achieve whole systems improvement. For one organisation, that may simply require a re-alignment or redesign of one or more of its human resource management systems. For another company, there may be a more extensive change programme required that could involve changes to structure, changes in the design of key jobs, changes in management decision practices, or even a re-engineering initiative to improve the efficiency and output of its core processes.

3. Current research about New Economy practices in South Africa

GIMT, incorporating The HILL School for Business initiated two exploratory research projects to determine the degree to which South African business is making the shift from a business as usual (Old Economy) paradigm to a New Economy style of managing organisational and people performance.

The survey results will provide Line managers and HR professionals with important base-line information about where change is urgently required if South Africa is to remain globally competitive, and not be sidelined as a business backwater not worth investing capital in. Over time, industry specific profiles for the 25 industry sectors or SETAS (as defined in The Employment Equity and Skills Development Acts, 1998) will provide context specific road maps for change.

The concurrent surveys were administered in June-July 2003. One study examined the responses of past and present MBA students based on the assumptions that MBA students have a greater exposure to senior management thinking and action, and may have access to information not readily available to people at more operational levels. These respondents represent a line management view of organisational behaviour functioning. The second survey targeted a mixed group of HR professional across the spectrum of HR roles found in business. This sample represents a staff specialist perspective. Arguably the HR role is there to focus directly on the behavioural and people management side of business.

Participants were contacted, and asked to complete either an online questionnaire, or a paper based Beehive Questionnaire. Two hundred and forty nine (249) line surveys and one hundred and two (102) HR surveys were completed and retrieved for analysis.

Respondents were asked to assess their organisation on seven sets of workplace practices corresponding to the seven dimensions of the Beehive Model. Each set contains eight pairs of indicators. The pairs of items describe behaviours or ways in which their organisation may be operating.

The participants were asked to consider the two opposing pairs and decide the extent (on a 4-point scale) to which either the one or the other statement is true for the department or business unit within which they work. Below is an example of the bi-polar questionnaire.

 The answers on the left of the mid point (-4 to -1) are called "Old Economy", and those on the right of the mid point (+1 to +4) are called "New Economy". The "Old Economy" answers are counted for each question, and percentaged out of the total number of possible answers including 0 for each question. The "New Economy" answers are counted for each question and percentaged out of the total number of possible answers including 0 for each question.

A graph is constructed using the percentages of Old Economy / New Economy answers. Because answers that are 0, or on the mid point are not reported, but are included in the totals on which the percentages are calculated, the percentages of Old and New Economy answers will not add up to 100%.

7. Survey highlights

The 2 key drivers of business transformation as predicted by the Beehive Model are Strategy and Change Leadership. Both respondent groups agree that these two critical dimensions are weak spots in the way South African organisations function (see tables 1 and 3).

Line and HR concur that South African businesses seem to be wavering between what are regarded as New Economy practices, such as flat structures and cultivating empowered, participative employees who have access to information, and Old Economy practices, such as mechanistic and bureaucratic workplace practices.

It is worth noting that when the MBA/Line results are compared to the HR/Staff results there is a remarkable similarity in the general direction and pattern of scores for both samples by overall score (table 3) and by company size (table 4). This indicates a great deal of alignment between staff and line points of view. From a change management perspective this makes HR’s role as a champion of change somewhat easier. There is less debate about the ‘agenda’ for change. However, this apparent congruence of viewpoints masks the real differences in perception between Line and HR when it comes to entrenching a competitive and change hardy business culture.

 Table 4

By inspection (using a rule of thumb difference of between 6-10% difference in perception/scores between the respondent groups) the major difference appear to relate to company size, and by logical extension the stage of development of the organisations in the two studies.

• For small companies the largest differences between Line and HR are: Strategy, and Change Leadership;
• For medium sized companies the largest differences between Line &HR are: Strategy, Structure, Business Disciplines, Stakeholder Commitment, and Change Leadership;
• For large companies the major differences between Line and HR are: Structures, Talent Creation, Business Disciplines, Stakeholder Commitment, and Pay & Incentives

These seemingly random differences can possibly be explained by the fact that as organisations grow, and become more specialised they require a more differentiated approach to workforce, and organisation management. This alone can account for the relative differences between the respondent groups. Arguably, as business becomes more hectic, and Line management become more preoccupied with dealing with competitive pressures it is up to HR to take up the challenge to facilitate the process of developing organisational coherence and identity to ward off the negative effects on performance of organisational uncertainty.

These differences are more easily recognised by HR who work across boundaries between functions and levels far more than the ‘typical’ line manager is required to. HR may simply be in a better (position compared to Line) to discriminate in finer detail where workforce management and organisational practices are deficient and need to be changed.

8. Develop an agenda for change

If we take a closer look at the ‘New Economy’ scores at an item level (the questions) where there is at least an 8-10% difference in low/pessimistic ratings between the two samples major issues to include in an agenda for changing the way South African organisations are managed are easily identified. These issues are highlighted in bold for each dimension in tables 5-11.

Overall the pattern of scores for all the items highlighted in bold type reveals that HR is even less optimistic than Line about the strength of these New Economy practices in South African companies.

# Strategy: The Strategy dimension of a Beehive Survey examines the way in which strategy is formulated and utilised as a primary driver of performance within an organisation. The survey examined strategy from two perspectives i.e. the process by which strategy is formulated and the way it is used as a primary driver of performance.

Both respondents groups rated this dimension around the 50% mark, which is 30% lower than their South African counterparts. In previous research conducted by the Stellenbosch Business School it was found that globally competitive South African companies scored around 80% for this dimension.

Two key issues that emerge from the recent researchfindings about how strategy formulation is handled by management are:

• Senior management communication (Agenda item 1)
• Formal execution processes (Agenda item 2)

 # Structures: Companies need to make the most of their supply chains, and make individuals accountable. This is achieved by having flat and easy communication, clarity of roles and empowerment of people. Senior management has to be involved in strategic activities and must make the company strategy operational.

The overall score for both samples indicates that South African structuring practices are in the middle (50%). Business life is not geared to senior management ‘walking the talk’ and facilitating, or helping their management teams to translate strategy into day-to-day tactics.

Two of the fundamental principles of organisational structuring that have a major influence on work motivation and commitment levels are identified as Items for change:

• Clarity of roles by level of work (Agenda item 3)
• Role clarity and empowerment of people (Agenda item 4)

# Talent creation: Companies need workplace practices that develop employees to their full potential and ensure they contribute the maximum to the company. One of the more positive findings of the survey is the fact that compared to the other dimensions in the survey, talent creation is being actively pursued. Scores in the mid fifties for both samples are still close to 30% lower than those of globally competitive organisations. To become globally competitive South African organisations need to spend far more than the obligatory 1% of payroll they currently do as part of their Skills Development Levy. And it is naïve to believe that a government imposed levy will spur companies on to high levels of learning and talent creation.

In the light of the findings from the strategy and structure dimensions these modestly ‘optimistic’ scores may mask the fact that talent creation may well not be as relevant or as connected to what are already seen as poorly defined, understood and communicated strategic priorities used by management and Human Resources to inform or guide the talent creation process. This coupled with inadequately defined and aligned performance standards and targets may well provide an explanation of why South Africa as a country scores so low on the various competitiveness indexes published annually (as measured by the Global Competitive Survey).

The key issue in need of attention is unfortunately one of the most difficult to change i.e. a mind shift or attitude change about the role individuals play in:

• Proactive self mastery and development (Agenda item 5)

The overall picture that emerges from the ratings for both Strategy and Business Disciplines indicates that the management of performance as a formal business control and motivational process and system is not working for South African companies. This is a clear indication that what individuals and teams do on a daily basis to connect performance to the larger goals, values and cultural practices of the organisation and the needs of its customers is sub-optimised. Again, this may account for the overall low competitive nature of South African companies.

The item that stands out for adding to a strategic agenda for change is:

• Management (not) skilled in performance (management) practices (Agenda item 6)

 Table 8

For Business Disciplines