Harvard Business Review Notes by Frank Olsson

Harvard Business Review Notes by Frank Olsson

21 July 2015

Harvard Business Review Notes by Frank Olsson

This issue is about HR – “It’s time to blow up HR and build something new. Here’s how!” Some interesting observations even if I feel quite hesitant to the idea of strong central HR as I believe that HR should be the main focus of all senior managers. Developing and maximising the energy and competency within your team must be a direct responsibility of all managers and any suggesting that you can be a manager without such focus and skills is mistaken. The debate will no doubt continue. Please find below a few notes from this issue.

Strategy – How to live with risks – this article shows that audit normally focuses on the wrong areas. Significant market losses are caused by risks strategic (86%), operating (9%), legal and compliance (3%) and financial reporting (2%). The portion of time spent by audit is strategic (6%), operating (42%), legal and compliance (11%) and financial reporting (39%). /My own view is that culture is a key risk component and that doesn’t seem to draw any attention at all from audit. This could easily be surveyed by say 100 random interviews across the organisation. Audit is arguably often hampered by the inherent conflict of interest in serving and retaining a client and policing/ monitoring the client in the interest of external interests and the public/

The article underlines the need to strike the right balance between risk and reward; focussing on decisions, not process and making employees the first line of defence. The English word ‘risk’ shares roots with the Italian word rischiare, meaning to dare. Keeping this in mind may help companies counter old-school tendencies to simply run in the other direction when encountering risk.

Entrepreneurship – preparation trumps passion! Passion often becomes a negative if it is given too much emphasis, either in the entrepreneurs’ minds or their communication with potential founders. Instead, founders should balance their expressions of enthusiasm with clear indications of preparedness – signs that they know how to find and hire the right people and take care of other details that will be critical to success. Both entrepreneurs and their audiences should be aware that without preparedness, passion is worth little.

The Employer Led Health Care Revolution by Patricia McDonald, Robert Mecklenburg and Lindsay Martin. Like most US companies in 2009 Intel faced soaring health care costs – estimated at $ 1 billion in 2012. The cause of the problem – the steadily increasing cost of care. The company decided to tackle the problem as it would a manufacturing challenge: by using lean improvement methods to rigorously manage the quality and cost of its healthcare suppliers. The results were significant: treatment costs of certain medical conditions fell by 24% to 49%, patients could access care and return to work faster, patient satisfaction improved, and more than 100,00 hours’ worth of waste in health care suppliers’ business processes was eliminated.

Why we love to hate HR, and what HR can do about it by Peter Cappelli. Critics say that HR managers focus too much on ‘adminstrativa’ and lack vision and strategic insight. HR managers should set the talent agenda now. They can score big wins for their companies by rethinking programs that have been around since 1950s, making a business case for initiatives that matter – including layoffs, recruiting, flexible working arrangements and performance management - and cutting loose pet programs that lack impact.

People before Strategy, A New Role for the CHRO by Ram Charan, Dominic Barton, and Dennis Carey. There should be a core inner management group of CEO, CFO and CHRO. (Research by E&Y suggest that where such co-operation exists it comes through in higher EBITDA) The CHRO must become a true strategic partner of the CEO and work closely with the CFO. Although capital allocation is important, the reassignment of people along with capital allocation is what really boosts companies. Dow Chemical found that aggressively hiring millennials was the fastest way to create more ‘short-cycle-innovation’ alongside the company’s traditional long-cycle R&D processes. The share of employees under 30 went from 9% in 2004 to 15% in 2014. To benefit from this new talent, the company also revamped its career paths to move the 20- and 30- somethings into bigger jobs relatively quickly, and it invited them to global leadership meetings relatively early. The CEO, CFO and CHRO should get together once a week to discuss early warning signals they are picking up internally or externally about the condition of the social engine. Medium term challenges to consider; what people issues would prevent us from meeting our goals? Is there a problem with an individual? With collaboration? Is a senior team member unable to see how competition is moving? Is somebody likely to leave us? Conflicts are inherent in silo organizations and need to be addressed. Aspiring CHROs should have line jobs along the way, where they have to manage people and budgets.

Bright Shiny Objects and the Future of HR by John Boudreau and Steven Rice. Most HR innovations need to be purpose built. Move away from best practice approach and create something which is best for the company’s unique climate, brand, and business objectives. This allows and requires the application to have impact in connection with other components, leading to a greater payoff. The ability to lead and collaborate across boundaries doesn’t come naturally in today’s siloed and internally competitive organizations / which begs the question – how can we reduce these negatives – silos and destructive internal competition; rather than constantly trying to mitigate – why not seek to eliminate? My comment/. About 5% of staff operate as connectors and they need to be encouraged and looked after. You know you’ve struck it right with your HR program when it starts to look less and less like your competitors’ and contribute more and more to your competitive distinction – when every year makes you more and more different by design.

Engineering reverse innovations by Amos Winter and Vijay Govindarajan. This article emphasizes what others’ have said before. Rather than taking first world products and trying to strip them of cost (and functionality) to suit third world it is better to start afresh in the third world environment and purpose build something that works – and subsequently step it up – if suitable - to satisfy more demanding/ discerning requirements elsewhere. It’s best to adopt the approach that you are designing with, rather than for, stakeholders.

Break Your Industry’s Bottleneck by Barret Ersek, Eileen Weisenbach Keller and John Mullins. If you want to create a successful business, you have to do more than win your share of customers or control costs – you have to break the rules and overturn the received wisdom about how things work. There are five key ways to break bottlenecks: Update your customer experience; Eliminate superfluous expense categories; Neutralize customers’ financial risk; Re-engage employees; and Mitigate environmental or ethical side effects.

Notes by frank@olsson.co.nz 9 July, 2015

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