development How does your organisation stack up?

The pillars of successful organisational development How does your organisation stack up? This viewpoint explores how senior HR leaders can build and align the three pillars necessary for successful organisational development: strategy, enablement, and engagement >> Now, more than ever, exists a vital opportunity for senior HR leaders to make a real difference to bottom-line performance. Too many organisations are currently falling short of their strategic goals because of a fragmented approach to organisational development. And HR is uniquely placed to respond to the challenge, helping ensure that the three pillars of successful organisational development are aligned to current and future needs. These are as follows: 1. Strategy: forming a strategy which will positively differentiate an organisation s performance from its competitors. 2. Enablement: the structures, processes and culture needed to implement and execute this strategy effectively. 3. Engagement: delivery through engaging people. Drawing on insights from our experience and research into what makes the high performing World s Most Admired Companies1 (WMAC) so successful, this paper explores how senior HR leaders can take a proactive role in building and aligning the three pillars of organisational development. 1Hay Group and FORTUNE magazine have collaborated annually since 1997 to identify, select, and rank the World s Most Admired Companies and uncover the business practices that make these companies both highly regarded and successful. For more information, please visit www.haygroup.com/fortune

2 The pillars of successful organisational development What do we mean by organisational development? There are many different definitions of organisational development, and to some extent this is individual to every organisation. Hay Group sees organisational development as an organisation-wide effort to align the business strategy, structure and people to respond and adapt to the changing external environment. Pillar one: strategy Creating a corporate strategy that will positively differentiate an organisation from its competitors, and then building the organisational capacity that brings competitive advantage. Most companies devote a lot of attention to strategic planning. But the WMAC are adept at putting those strategies into practice. Our research suggests that clarity is key. Within the WMAC, strategic objectives are clearer at all levels and performance measures are more closely aligned with them. WMAC hold their executives more accountable for communicating and executing business strategy. Indeed, nearly 80 per cent say managers understand their roles in implementing strategy compared to 58 per cent in the peer group. Therefore, when developing OD and indeed HR strategy, it is essential to start with a deep understanding of the business strategy, market forces and competitor activity, before applying strategic workforce planning, talent management, assessment and leadership development. Provided below are the warning signs of potential underperformance. Consider how your organisation stacks up between these and the practices of WMAC. Warning signs of the underperforming organisation Characteristics of the high performing WMAC HR strategy has not fundamentally changed in the last five years. HR strategy is aligned to business strategy and culture. HR plan is much less detailed than the business plan. HR teams have little or limited understanding of the business cycle. HR teams pursue HR excellence, as opposed to business excellence as a goal. HR teams do not spend significant time in the business, building relationships and understanding business issues. HR plan has a depth and rigour of analysis that matches the business plan. HR and organisational development plans are consistently reviewed to respond to changes in the external environment. HR teams goals are to support business success. HR teams spend significant time building relationships, and talk business language with operational executives. They have a shared view about where and how value is created in the organisation.

3 Pillar two: enablement Creating the conditions to ensure the organisation can implement and execute its strategy effectively, through structures, processes and culture. Many organisations have a significant gap between rhetoric and reality, and without a cohesive view are in danger of investing in the wrong things. Indeed, Hay Group s annual WMAC study with FORTUNE magazine over the last 15 years, finds that these high performing companies regularly outscore their industry peers on creating the right environment to implement their strategies. WMAC set their organisation up to enable people to be successful by closely aligning their systems and development with their strategy. In particular, two key areas differentiate the WMAC to their peers: 1. Culture aligned to strategy These organisations have strong, positive cultures that make strategy happen, by mobilising and marshalling resources behind key goals and objectives, with strong accountability. An aligned culture is one in which people do things instinctively to help the business, without relying on complicated service level agreements or process manuals. And the WMAC are much less tolerant of off strategy behaviour, with only 22 per cent reporting any degree of tolerance compared to 52 per cent of their peers. 2. Structures and processes that drive performance The WMAC structures and processes sustain performance over time, and are also agile to respond to changing pressures. Dealing with challenges such as innovation, going global, and reacting quickly is just part of business as usual. For example: 83 percent of WMAC innovate in areas of current strength 84 per cent can respond flexibly to local market needs 89 per cent ensure employee skills keep pace with job demands. As a result, the WMAC build structures and ways of working that endure despite economic and market flux. Warning signs of the underperforming organisation Characteristics of the high performing WMAC Last strategic review date is unaligned with the date of the last organisational or leadership model reviews. Discussions about culture change fail to translate into tangible action. Employees are judged on their reputation, not the value that they create. Rewards do not correlate with current organisational needs, with relatively little pay differentiation. Employees constantly find obstacles in the way of success, e.g. process and procedure take precedence over customerorientation and empowering front-line employees. Organisation structure is entirely aligned to strategy. Strong practical focus on creating a culture that enables the organisation to deliver the strategy. Leaders take a common view on what the best opportunities are, and heir best people. Rewards are aligned to organisational goals and performance. Employees feel enabled to respond effectively to customer needs and deliver a high quality customer experience that surpasses customer satisfaction benchmarks. Nearly 80% of WMAC say managers understand their roles in implementing strategy compared to 58% in the peer group.

4 The pillars of successful organisational development Pillar three: engagement Engaging employees around their role in delivering competitive advantage for the organisation. The WMAC see employees as their most important source of competitive advantage; others see employees as their most important source of cost. Today s business environment is marked by intense competition, growing complexity through regulation, and financial constraint. To succeed in this challenging environment, it s critical that organisations take active measures today to engage their people to ensure delivery of the strategy and long term success. Indeed, Hay Group research shows that while organisations in the top quartile of employee engagement demonstrate revenue growth 2.5 times more than those in the bottom quartile, companies in the top quartile of both engagement and enablement achieve revenue growth 4.5 times greater. Warning signs of the underperforming organisation Characteristics of the high performing WMAC Employee costs are seen as just that: costs. No common view of the role of managers and what value they add. Leaders see themselves as boss of their unit rather than part of the wider team. Salaries are likely to be their single biggest cost and it is known exactly what value is obtained from this. Contribution of managers is measured. Organisational leadership knows which managers add most value, and which need developmental support to improve the climates they create for their teams. All employees give the same answer when asked: What are the top three priorities for this organisation? People spend more time on internal reporting rather than delivery for customers. Organisational focus is on the short term, with an emphasis on activity instead of outcomes. Organisation is clear on the behaviour they expect from leaders and articulates this regularly. The link between employee engagement and business performance is regularly measured. than Organisations in the top quartile o both engagement and enablement achieve revenue growth 4.5 times greater organisations in the bottom quartile.

5 How does your organisation stack up? Many organisations have one or two of these pillars securely in place, but only the most successful have all three deeply engrained and closely aligned. The most successful organisations have also realised that these three attributes are not the domain of one function or another; but rather a part of a cohesive, organisation-wide effort that is the shared responsibility of all. Consider these questions below to help identify where to focus your development efforts and create a solid foundation for organisational success. Pillar one: strategy Have you connected your HR strategy to your business strategy through measures such as strategic workforce planning? Are your corporate functions, such as HR, playing strategic roles in shaping and supporting the business; and acting as real partners and enablers to those in operational delivery roles? Pillar two: enablement Is your operating model and structure 100 per cent aligned to your strategy, or does it need reviewing? If your culture changed, would it make life easier or more difficult? What changes, if any, do you need to make to your culture? What are the organisational blockers to higher employee performance? How can you remove them to enable your employees to be more effective? Do you need to review your HR approaches such as reward and talent management to encourage the right behaviours, and attract and retain the right people to deliver the strategy? Pillar three: engagement How many of your leaders are demotivating their teams because of inadequate leadership skills and behaviour? For how much longer can you carry this cost? What percentage of people s time is spent on internally-focused processes, such as management reporting or resolving conflict, instead of delivery of business objectives? What can you do to improve employee engagement to release your people s discretionary effort? For example, reviewing your recognition policies, performance management system, and available training and development opportunities. Or do you simply need to focus on communicating these more effectively?

Given the increasing executive focus on human capital, HR has an unprecedented opportunity to position itself as a true strategic partner to the business. Yet very little tangible, pragmatic advice exists as to how specifically HR can make a real difference to business performance. Here Hay Group unveils the six key requirements for building a strategic HR function that is fit for Find out what separates the FORTUNE World s Most Admired Companies from the rest. Click here to join our webinar, 18 April 2012 >> Summary of the 2011 Best Companies for Leadership study In an uncertain and uneven global business environment, everyone agrees that companies must innovate to survive. The Best Companies for Leadership follow four business practices that support meaningful innovation and drive market leadership. 6 The pillars of successful organisational development Get in touch If your business has room for improvement under any of the three pillars, Hay Group can help. As a global management consultancy with almost 70 years' experience, we help organisations align their workforce and organisation behind their strategy and achieve their business objectives. We develop talent, organise people to be more effective and motivate them to perform at their best. Our focus is on making change happen and helping people and organisations realise their potential. John Douglas Director of private sector consulting t +44 (0)20 7856 7165 e john.douglas@haygroup.com w www.haygroup.co.uk Stephen Welch Director t +44 (0)20 7856 7558 e stephen.welch@haygroup.com w www.haygroup.co.uk Related Hay Group insights Building a strategic HR function fit for today and fit for the future Building strategic HR Use our diagnostic to assess your HR services against the six key requirements for building strategic HR. Analyse how fit for purpose your HR services are now, and where you need to be in order to generate the best possible return on investment. Lighting the path to success World s Most Admired Companies study Hay Group has partnered with FORTUNE magazine annually since 1997 to conduct the World s Most Admired Companies survey and uncover the business practices that make these companies both highly regarded and successful. Best Companies for Leadership study Something new under the sun For a seventh year, Hay Group has identified which organisations have the best leadership practices and what we can learn from them. Our most recent survey focuses on four business practices that support meaningful innovation and drive market leadership. The Enemy of Engagement Put an end to workplace frustration - and get the most from your employees. This book uncovers the hidden impediments to performance - excessive procedures, lack of resources, overly narrow roles: and outlines best-practice solutions for eliminating them. Tomorrow s workforce: delivering strategy through people Tomorrow s workforce Delivering strategy through people Outlining Hay Group s strategic workforce planning approach and framework, this paper highlights how organisations can bring their strategy to life through the right workforce planning: maximising productivity, effectiveness and profitability. Strategic workforce planning helps organisations understand the talent required to deliver their strategy without it, the costs are significant. www.haygroup.co.uk/downloads