The Strategic Role of Human Resources in the New Economy

A while back, I published a short article on the strategic role of Human Resources in the new economy.  The article: Le rôle stratégique des DRH dans les 10 ans à venir is in French, but since I get so many requests to talk about this issue, I’ve translated it here for you.  The main point I’m making is that in today’s disruptive economic climate, HR can and must become a critical differentiator.

The strategic role of Human Resources in the coming years

To generate creative added value is one of the surest ways for companies to win in the global competition today. Innovation is the new imperative. And in some industries business model reinvention is mandatory. A new approach to human capital is necessary to succeed in the new economy.

Because of the complexity of the new economy human capital becomes increasingly important for a company to succeed.

Let’s explain why.

–    The global economy is becoming more and more global, competition is steeper, speed to market is accelerating and barriers to entry into an industry are much lower
–    More consumers are now becoming better informed and more discriminating  “prosumers” with stronger values and higher expectations for return on their dollar
–    The impact of technology tears down business models and transforms industries (media, music, financial services, etc.) and leads to powerful knowledge networks which creates active communities (Facebook, LinkedIn, etc.) and boosts innovation  (open models)

For these three reasons, creative added value is the safest path to beat competition.

Innovation is now part of every CEO’s mandate and in many industries it’s all about business model reinvention.

A new approach to efficiency needs to emerge… fast!

As we well know innovations comes from executives’ ability to generate new ideas. But idea generating does not follow a linear path! Studies show that on the average an executive generates 80% of his daily value in 20% of his or her time at work.  So it’s really not that effective to impose tight working schedules on your team members.

Yet conventional management and most companies are still operating under the belief that productivity and time spent at your desk follow a linear correlation and not a variable correlation… Here is food for thought for all heads of HR if their companies believe innovation is a key driver of growth.

I recommend Ricardo Semler‘s book The 7 day week-end – changing the way work works. He’s been so successful in his own company in Brazil that he wrote this book to share his no non-sense approach to efficiency and teaches it at Harvard Business School.

Inertia: the greatest stumbling block on the way to innovation

Designing smart innovative business solutions can be challenging but the real deal with innovation is implementation! Why? Because to implement new stuff you need to be able to change… and human nature does not like change… Actually it has a pretty reliable ability to resist change and this ability is called inertia. Any change entails some fear at some level, whether individual or collective, because it threatens our wellbeing and eventually our survival, even if it is ever so subtle.

Our propensity to inertia is linked our capacity for survival, i.e. our instinct. Inertia in an organization is all the more so powerful that it is exponentially cumulative with the number of people involved with a decision. It’s easy to see how difficult it is to change mentalities and behaviors in large organizations with thousands of employees…

There are highly effective solutions to deal with inertia but once again they’re not about logic. It is rare to get another person to be convinced and motivated to change behavior simply based on a lgical argument. People change because their environment is conducive of change.

People will let themselves be influenced all the more so easily that they feel emotionally motivated and their feelings are taken into account. I always wonder when I hear long impersonal rhetorical speeches at corporate gatherings where too many statistics and metrics are exhibited in tidy power point presentations. What’s the strategy behind them? Aren’t big collective changes often enough triggered by speeches with powerful emotions and great staging?

Recent research at MIT shows that 20% only of our grey matter is dedicated to conscious thinking and 80% to non-conscious thoughts. The best way to mobilize people is through symbols, rituals that impacts our senses and emotions and reaches our unconscious.  Steve Jobs understands it well and long before him popes in Rome. Many companies seem to understand this much better when it comes to consumers than when it is about communicating to their employees. And few only are actually convincing in this arena.
Some food for thought for heads of HR to put on the top of their 2010 new resolutions list to accelerate change and foster innovation.

Profit alone is no longer enough. Actually it’s on its way to become the biggest stumbling block to innovation.

Last point, even more important than the above mentioned. To drive innovation and reinvention the most important factor today is to factor in sustainable development into the mission of the company and its strategy.

The sustainability challenge is a mega trend – if not the biggest one in our economy – and it is nowhere close to disappearing. It will affect many generations to come. Its ripple effects are felt on many levels and far beyond and deeper than our conscious mind since they directly affect our wellbeing and potentially threaten our survival as a species.

Therefore they directly and powerfully impact our capacity for imagination, and change. The fastest and most compelling way to facilitate innovation and change in an organization is to move beyond the usual objective of higher profit (which in itself is quite legitimate and necessary of course) to focus on sustainable value creation, which of course entails financial profitability but is not limited to it.

Sustainable value adds on top of profit the notion of the prosperity of all employees, associates, and partners of the company and respect of all ecosystems whether societal, cultural or environmental.

Here is, in my opinion, a third hot topic for any head of HR who values innovation and its impact to drive growth in the organization or reinvent a failing business model.

It is possible!

This holistic approach to corporate mission and strategic management may seem daunting and remote from the day to day concerns of business unit managers in the trenches, busy fighting for their market shares. But the ROI is exponential and reaches far beyond traditional strategic management favored by logic. Based on personal experience both as business leader and advisor to prominent CEOs this approach engages people beyond imagination. Companies like Google, Danone, Toyota or today Renault with its electric car have proved this quite eloquently.

It is time to bring back human capital where it belongs… to the core of corporate strategy, mission and culture. Only intuition can blend the efficacy of logic with the power of instinct.

Intuitive Intelligence
is the optimum ability to innovate and help directors of HR in their  strategic mandate.

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