Wednesday, July 1, 2009

Innovation in HR: Implementing Blue Ocean Strategy

A Blue Ocean represents a brand new, uncontested market place where - a Company offers a very compelling value proposition. On the contrary, Red Ocean represents an existing market that is well defined as well as heavily populated by the competition. W. Chan Kim and Renee Mauborgne, authors of the best-selling book, "Blue Ocean Strategy" suggest crafting and implementing a Blue Ocean strategy that will make competition irrelevant. Borrowing the same metaphor, I will proceed to discuss some "next practices" that corporations are adopting or beginning to adopt to make their people practices somewhat "out of the box".

While the benefits of these blue ocean practices are yet to be seen, these represent a fresh breath in an otherwise routine and run-of-the-mill professional practices in the field of HR.

If HR knocked down barriers to innovation so that employees could do the best for the company at every turn, HR would be heroes. Outsource the transactional stuff, if you can, and get your hands dirty in the creation of value through innovation. There are a lot of rewards in that, both personally and for the organization. It means that HR needs to be seen as innovative, too. It may take a lot of innovation to find the barriers to innovation in your organization and then knock them down. Only people can innovate. So it is your job to foster, development and encourage those people to bring innovation to fruition in your organization.

The blue ocean practices observed and presented below represent a very refreshingly different perspective. While I do not recommend a blind implementation, I do recommend a healthy dose of attempt and practice after tailoring to individual company culture and ethos.

Employee Life Cycle & Blue oceans People Practices:

I will present an illustrative list of blue ocean practices covering the employee life cycle from hiring to on-boarding, designations to training, performance management to rewarding and employee relations to exit management.

Offers designed as Contracts:

One of India's leading financial services product software companies that got acquired recently by a global software product market leader had this practice for many many years. This practice involved hiring software professionals across levels on contract for 2 years at a time, renewable when the contract expires if both the employee and the organization are willing. Since employment security today is only as good as the competence and employability of the employees themselves, there is no inherent concern with job security in this model. Barring miniscule exceptions, most companies anyway experience a heavy churn of employees after 2 or 3 years. Against this backdrop, the contract model at least provides the following benefits:
(a) better and planned churn management; and
(b) a lot less
sleepless nights on attrition (good news for HR?).

Prevent Infant Mortality:

Yet another challenge plaguing many companies is the early departure of 10 to 15% of employees within 6 to 12 months of joining. Just when they are about to become productive, they decide to leave citing adjustmental and compatibility (with technology, domain, team, manager) reasons. Often referred to as "infant mortality" in HR circles, this can be overcome by instituting periodic pulse checks on areas where "things can go wrong." A California based leading provider of outsourced product development has this done on the 30th and 90th day for all new joiners and takes the feedback very seriously and acts on them resulting in considerable reduction in the early departures.

Employee-owned Development Budget:

A European Consumer Electronics major with its software center in Bangalore introduced this several years ago to combat the complaint that no one takes training seriously. This takes a different mindset with no operational hassles at all. Here the training budget is worked out per capita and the employees are given this as their personal development budget. Since employees own this budget, they can use it for determining their development (training, seminar, membership in professional bodies, etc). There are some basic conditions to be adhered to like getting the immediate manager's sign-off on the relevance of the development initiative chosen by the employee. This led to a remarkable improvement in the morale of employees and focused development owned and executed by the employees themselves. So, beat the training blues by passing the responsibility and budget to employees!!

10% rule in Performance Management:

Most companies do follow a "bell curve" to segment people based on their performance. This is meant to help create a high performance culture as bell curve helps communicate clearly that 5 to 10% of the underperforming people should "shape up or ship out." I propose a new practice called the "10% rule" that I picked up from a company I was associated with before.

Here the rule recommends drawing bell curve for all the people managers in the company based on their commitment and performance in their responsibilities towards their people such as goal-setting, coaching and development. Those people managers who fall short of and come under the bottom 10% should be removed from people management responsibilities and made individual contributors. A radical thought and practice, but if we realize how much damage poor people managers can cause, the benefit of the 10% rule will be very evident.

Competence-based Base Salary:

Not a totally new practice, but has not quite caught up much in India so far. In its true spirit, this calls for granting pay increase to employees based on demonstrated competency enhancement year after year. Delivering against performance goals or targets set for the year would only qualify for the variable pay, being on target (100%), less or more depending on met targets, fell short or exceeded them. Base salary is increased only under conditions that employees measure up against a validated and widely implemented competency framework and demonstrate a higher level of competences required for their current or next job. Implementation of this is fraught with difficulties and so care is needed to systematically move from a performance-based salary review to competency-based salary review.

Yellow Pages as a key tool for Knowledge Management:

Managing knowledge - both retention and sharing - has become a huge challenge for organizations especially in the context of increasing attrition. When key people leave, they carry all the knowledge in their heads with them. Organizations are beginning to invest in creating systems and frameworks for generating and generalizing knowledge. In knowledge intensive industries, there will always be more knowledge that will remain implicit in the heads of people than companies can ever tap it into explicit knowledge through documentation. Rank Xerox found out that maximum knowledge was imbibed not from their 'blue books' but due to sharing between their service engineers at the coffee machines in the corridors! Hence, there is an even more pressing need to "connect people" by preparing an elaborate list of "who knows what" and make it available on the internet with appropriate
coordinates for reaching out. For ease of remembrance, let us call this a Directory of Internal Yellow Pages.

Stay Interviews for celebrating the positives:

Exit interviews need no introduction as most companies do this as a routine. While data from exit interviews could be very useful to understand triggers for employee resignations, this is not a very proactive intervention. On the other hand, Stay Interviews involve business HR partners talking to employees working for over 18 to 24 months in the company and collecting reliable information on what makes them feel good about the company. The aim is to get at least 3 or 4 top of the mind 'positives' people perceive and value. With sufficient data, organization can go about 'celebrating those positives' and strengthening them. This will more likely help retain people proactively than exit interviews.

Value Innovation in HR:

The HR leaders who would like to create blue oceans in people practices need to examine the value these innovative practices will create for the business. The partition line between blue ocean and
run-of-the-mill practices lie in value created in terms of intangibles such as more satisfied employees, more competent managers and more productive HR teams besides a great culture of executing on plans. HR has a huge opportunity ahead and if they miss it, they have no one else to blame!

The number one thing that HR can do for the strategy of the company is to create an environment in which the workforce can innovate and stimulate innovation. If Human Resources departments would design themselves around the mission that everything they do must enhance the workforce, its intellectual environment, and its tools to foster innovation, HR would be at every strategic discussion in the company.

The role of human resource managers in firms that implement the Blue Ocean Strategy is to increase the link between a business’ strategists with the rest of the company in support of the strategy. Research for the Blue Ocean Strategy took 20 years, and those studies have shown that companies’ boards do not regard HR managers as strategists.

HR managers are seen as important, but they are not strategists. Therefore, it is up to human resource departments to forge a substantial link with those who develop corporate strategy. HR has to create bonds so HR managers can be in the role of developing corporate strategies.
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