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Building an HR Strategy to succeed in a changing economic climate

Although all HR leaders know how to build an HR Strategy, putting one into practice is not so straightforward. If it was, HR teams around the globe would have top strategies in place, capable of delivering endless value to their businesses. So what, Pierce asks, makes it so difficult? What are the challenges that organisations such as Japanese multinational conglomerate, Hitachi, face?

Changing world of work

“One of the challenges that we face, I think, is the changing world of work,” said Pierce.

Not only do businesses have to understand global trends, but they must also understand local trends and what impact such trends have on their business, he said.

“So we need to have that external focus and understand what’s happening in the world of work and the sort of changing economic environment in which we find ourselves if we’re going to have an effective HR Strategy.”

Company culture is also an important aspect to take into account when designing an HR Strategy as in order for it to be effective it needs to be culturally appropriate, he added.

Of course external factors and culture are in of themselves interrelated, Pierce pointed out.

“This is because what happens externally affects our culture which in turn affects our HR Strategy because although cultures are typically for the long-term, whereas strategies come and go, over time culture is also shaped and changed.”

Operating in a VUCA world

“As well as thinking about those factors being interrelated, as HR we need to understand what levers we need to pull to ensure that we can operate effectively and strategically in what is a VUCA world.”

Pierce explains that VUCA is a US military acronym for: Volatile, Uncertain, Complex and Ambiguous.

“It refers to the speed of change and the mindset needed to deal with the world around us from a military perspective. But isn’t this whole concept of volatility, uncertainty, complexity and ambiguity also true about business environments? And HR too? I think the world we work in is more than ever VUCA.”

Living and operating in a VUCA world means the challenge for HR is to question whether there are any principles that can be applied to what they need to do to have an effective HR Strategy, said Pierce.

“We need to understand the fact that the world is VUCA, and therefore we need to work out how we navigate our way through it. But I think it’s important that we recognise that more than ever that the world is uncertain, it is complex and there is ambiguity. And in that situation, the demands on us, from an HR perspective are greater than they’ve ever been.”

This in turn means that the expectation on HR from their organisations is today greater than it has ever been, and rightly so, if HR is ever truly going to be strategic partners to their organisations’ leadership, added Pierce.

Back to first principles

“So where do you start with all of this?” Pierce asks.

“It’s about the business, and that’s the first principle. That’s where we need to start our thinking if we’re going to ensure that our HR Strategy is going to be value adding and appropriate.”

Therefore the business goals, which are the strategic imperative of any business, also need to be at the heart of any HR Strategy so that HR can ensure that both it and the business are aligned, he said.

But how do you capture that in a nutshell?

“For me, it’s about asking the question: what actions must we make so that our organisations’ people capability can deliver its business goals? Fundamentally that’s what it’s all about.”

Pierce said HR must understand the broader market and economic context in which its business is operating in order to really understand what is happening in that business.

“So HR leaders have to see themselves as business leaders first and HR leaders second in my view. They need to understand the P&L and the balance sheet to talk the language of business. We need to identify and help the business understand where it has strong core competencies; where the business needs to change and what HR needs to do about it to help it achieve the strategic imperatives that it has.”

The impact of a changing world on HR Strategies

Thirty years ago there was no internet. Today everybody has a device on them 24/7 with which they can communicate. Furthermore, around four million people in the UK work from home some or all of the time.

“What does this mean for your HR Strategy? What does this mean for your company culture? Inevitably they have to change. And if they don’t, you don’t attract the best.”

He added: “These are massive changes in a relative short period of time that we need to take into account in HR. They highlight the fact that we need to be looking outside our organisations as well as inside them when we think about our strategic contribution.”

According to Pierce it is therefore vital to understand the business, its environment and to bring the wider HR context into HR’s strategic thinking; not to mention being aware of the people related issues outside the company which are going to impact the business right now or in the future.

“If we don’t bring the latest thinking about people into our organisation, then who is going to do it?”

Megatrends

It would be remiss not to mention the impact of megatrends on the changing world of work; trends that shape work and working lives, Pierce said.

These trends include changes to the employment market such as a shift in job type from less blue collar work to more white collar work, the age demographic of workers has increased, educational attainment of today’s workforce has also gone up, organisational size has decreased, and union membership has declined, said Pierce.

“The challenge for us in HR is to know what these trends actually mean for us? What does it mean for our companies?”

Multigenerational organisations

Adding even more complexity to the mix is the fact that organisations today must cope with a multigenerational employment environment and their very different characteristics, said Pierce.

“At least three generations, sometimes more, are employed at the same time.”

This in of itself brings about challenges of its own.

“For example, take Millennials, there was a report to the President of the USA last year which said they have been shaped by technology, they value community, family and creativity in their work. They are staying with their early career employers longer than they did previously. Millennial women have more labour market equality than previous generations did and they tend to get married later than previous generations.”

How do these changes impact companies?

Pierce said there was no one single answer to this question and larger companies would be slower to adapt to the changes given their size compared to smaller, more agile and nimble businesses. Nevertheless the fact remains that when drawing up an HR Strategy, the aforementioned changes to the world of work need to be taken into account by all companies, he said.

“I think there’s always a time lag as companies try and get their head around that and decide how they will deal with it and actually respond to it. In fact they also try to determine to what extent they can anticipate these changes.”

For example, take today’s teenagers who are digital natives and live on their screens and communicate mostly through handheld devices, said Pierce.

“The questions for us are going to be: To what extent do digital natives adapt to the employment environment? And to what extent does the employment environment adapt to the digital natives as they come onboard?”

Pierce said the fact that a lot of the decision makers were either baby boomers or Generation X made things more complicated.

“So they are the older people who perhaps don’t ‘get’ some of this stuff in quite the same way. This is why there is a time lag. That and because large organisations are typically slow to change compared to smaller organisations that are much more agile and nimble.”

What does all this mean for company culture?

“The culture we have around us tends to be built around our own values and is quite deliberately built. Strategies in my view tend to come and go and change over time. So from our organisations’ point of view, should we be focusing on developing great cultures and just allow the great culture to ensure that we can accommodate our staff, generate what we need for the business and be an attractive place to work? Or is it broader than that?”

Answering his own question, Pierce said it was imperative to nurture a company’s culture and to create cultures which were going to be attractive to new staff and to people from each of the generations while at the same time developing an HR Strategy that will nurture the culture and help it to evolve.

“This is because culture and HR Strategy are closely linked. And we need to think about both in HR not one or the other.”

What these changes mean for Hitachi

Hitachi is a complex, global organisation with circa 330,000 people in about 900 companies globally, said Pierce. In Europe alone the business has around 15,000 people across 100 companies including nuclear power stations, trains, data systems, construction machinery, financial services, consulting and others.

“The particular strategic challenge we have is we’ve been traditionally huge in Japan. We are absolutely everywhere in Japan and a huge powerhouse. But to compete financially with other global businesses we have had to globalise and develop our businesses outside Japan, which is what drives our HR strategy.”

This is why Hitachi is facing a huge global change management challenge to create an organisation and to create an HR Strategy which will allow Hitachi to be globally appropriate, whilst remaining culturally appropriate, and being able to develop its culture and business outside Japan, he added.

But what is Hitachi doing to be able to attract, retain, engage and develop staff at local level, who want to be part of the Hitachi Group, and yet belong to an ever changing group workforce that is not homogenous but more varied than ever?

“The challenge for us is in many ways greater because we have a company that is 100 years old with 100 years of history and a culture of diverse, autonomous businesses. Whilst our culture is our DNA and helps define who we are and who we have been for decades, and also underpins our success, the fact that we have this great diversity in all these businesses raises questions around how well we really understand who we are in Hitachi, and if we do understand it, how do we change it and are we able to go to the market for talent and to really attract, retain and develop the best?”

From an HR perspective it is important to not only be able to face these questions but to answer them also, as well to ensure that as a business Hitachi does indeed globalise and focus its attention on its target of generating 50 per cent of its annual $90 billion revenues outside Japan.

“We have therefore started a journey in HR in developing an HR Strategy to support the change and to support globalisation within this VUCA global context, which we are on track to achieve.”

How?

“The starting point was to develop a database,” said Pierce. “I know this doesn’t sound like a particularly exciting, attractive or engaging place to start, but we recognised that until we understood who we have working for us, where they are and what they do, we couldn’t actually start that journey of change.”

Pierce said this was because although Hitachi has some good practices across some of its companies, they haven’t always been good at sharing them and therefore they were not able to take a holistic view of the business, including its existing talent.

“So we developed a database, an HRIS (HR Information System) which we are continuing to build on to give us that broader perspective about our people. This is helping us to build a picture of where we are and where we are going, which covers that foundation of change.”

In response to the changing world of work Hitachi have also introduced a global performance management system, said Pierce.

“So for the first time we are able to measure performance, to cascade objectives, and to reward people in a consistent way.”

The HR Strategy also includes the introduction of a global recruitment site, he said.

“For the first time if someone is looking for a job in Hitachi they can go to the careers site and at any one time we have about 500 jobs advertised and these are all outside Japan.”

Pierce said since this initiative’s launch Hitachi had amassed a database of circa 150,000 who had registered their CVs with the organisation.

“So for the first time we have a much clearer, global presence in the employment market and a much clearer statement of our employer brand.”

And finally in September 2013 Hitachi launched its first global employee survey, which has been carried out annually every since. The latest survey measured engagement by comparing Hitachi with an external benchmark of big global businesses so as to identify the organisation’s best practices opportunities for improvement.

“We have a participation rate of about 80 per cent. That’s about 150,000 people participating across Hitachi. And they provide fantastically rich data on what we are doing well and what we need to be doing differently, both at global level but right down to the individual businesses and teams as well.”

Based on the findings from these surveys Hitachi is now also introducing a new talent management process, including working through what that means for succession planning and career planning.

“So there are a number of strategic initiatives that we’ve taken to try and find ourselves a culturally appropriate, best practice platform which is also going to work in a global business,” said Pierce.

Lessons learned

Pierce said as well as sharing their stories, it was very important for businesses to also share what they have learned.

“I think we can actually learn a lot from each other by talking about where we are on our own journey, from our own company view.”

From Hitachi’s perspective they have learned a number of practical things through the process of adapting to the changing word of work, he said.

“The first thing we learned concerns engagement and the fact that we have to engage with business leaders and HR leaders of our many diverse businesses because if you really want to create change in an organisation and to develop a consistent strategy across a diverse business you have to get the right people on board and to engage those who will really make the change happen.”

He said they had considered every possible way of getting buy-in from those individuals, and had looked for champions of change at local level; people who understood the benefits that could be achieved from change in the way that Hitachi operates and who were prepared to introduce some of the aforementioned strategic initiatives.

“So we have to build relationships and that takes time because we are not an organisation which can mandate change. And that for us is a limitation of our culture and yet one of our great strengths I suppose because it encourages people to own their own businesses and to do things to create business success. Because the businesses are so diverse it makes sense that they have that freedom, but the problem with that means you can’t always get every business to change at the same speed, in the same way. So we have to consult, discuss, listen, involve, pilot, solve problems, build relationships and find every possible way to get buy-in with key people. It’s a very complex but necessary strategy.”

Pierce said the business had also learned the importance of tenacity and resilience for HR staff. Although those two adjectives would not typically spring to mind when one considers what is important to be successful in HR they are in fact integral to the work involved during change management.

“A tireless focus on change, combined with the emotional intelligence to involve and engage others in the right way can make a real difference. So tenacity and resilience are not enough in themselves but you cannot give up, you have to keep focus and you have to ensure that if you really believe what you say, the focus will make it work,” he added.

During this exercise, the importance of communication was yet again brought to the forefront, said Pierce.

“HR can never communicate too much. Employees always want to know more. Every employee survey I’ve ever run says communication isn’t good enough. We could communicate all day long I think and everybody would still think there’s something we are not telling them. And maybe that’s human nature. But I do think in HR we sometimes assume that because we know it, other people know it too or understand it, and they don’t. So I think there is an onus on us to communicate more.”

And finally, HR need to remember that they need to be able to ‘sell change’ to their businesses.

“There is a line in the Tom Cruise movie, Jerry Maguire, ‘show me the money’. I think this is a great line and is important for our businesses because they talk about money all the time. In HR we need to think in those terms when we sell change to our businesses. We have to demonstrate what’s in it for them, what are the financials of it. And so I think ‘show me the money’ is a great way of putting it and the right question to be asking,” Pierce concluded. 

Stephen Pierce’s four top tips for building a successful HR Strategy in a changing economic climate:

  1. Know your business. Everything has to start with the business.
  2. Know the workplace trends and bring those into your organisation and communicate them.
  3. Know your own culture and understand how it will influence your HR Strategy and what needs to change in both of them.
  4. Be uncomfortable. It’s very easy to make minimal change if your organisations have a bigger challenge or a bigger need, but you’ve got to be uncomfortable and push change in a way that might take us out of our comfort zone in HR. If you’re comfortable then you’re probably not changing enough!