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Building Outstanding Organizations: The required HR Foundation

It has been about seven decades since the path breaking studies at the Western Electric Plant in Hawthorne found that there is much more to human enterprise than ‘one best way’ of accomplishing a task, and that Supervisors & other factors affected the performance of employees significantly. While Organizations have progressed much since then in understanding and tapping human potential at work, HR professionals are still out looking for the Holy Grail for creating & sustaining outstanding performance in business organizations.

Based on my limited experience, I feel there are certain factors that the HR function can ensure in the organizational framework that will help create the space that enables outstanding human endeavor to happen. This article aims to capture that understanding in a thought provoking way.

This HR foundation can be grouped into seven elements having increasing order of dependence. (Increasing order of dependence means that we can’t have the first element unless the second element is present, and we can’t expect the second element to exist unless the third element already exists, and so on.)

The seven elements are:

The seven elements

 

The elements in green: Fair-play, Transparency & Meritocracy – every Organization professes to have these as part of organizational policy, however it is only on the website and corporate presentations, not in its actions. Scratch the surface, and the dissonance between its policy and its reality becomes clear.

Interestingly, the above three elements are in the realm of ‘values’ (values are underlying principles that shape actions). What it means in practical terms is that:

 

  • Employees will not make up their mind about the nature of the organization on the basis of the first few ‘Moments of Truth’ – i.e.: transactions they initially experience firsthand. They will typically wait till they experience a number of these ‘Moments of Truth’ firsthand, and then make up their minds. Hence this is a window of opportunity for the organization in establishing its credentials in their new employees’ perception. If you line up a hundred people under the sun at your gate however, and make them wait for their selection process, no matter what your website says about respecting employees, their first ‘Moment of Truth’ will prove it to be a lie.
  • To ensure a positive perception about the above three elements, all Managers & Leaders need to continuously & consistently bring to bear in all their transactions: “Am I being fair?”, “Am I being transparent enough?” and “Am I being meritocratic?”. Only then will employees’ overlook the genuine mistakes in upholding these values in a few transactions – that are bound to happen in a less than perfect world.

Therefore, it requires highly evolved individuals in organizational leadership positions to ensure through positive actions that these elements do not remain mere words in the organization’s policy statement.

The next three elements in yellow – Speed, Flexibility & Tolerance – are present in varying degrees in all organizations. These elements are however individual & context driven, and not embedded through process design principles in the organizational processes.

Policies are created with a view to limiting cost liabilities. There is no reason however, other than short staffing of support functions (thereby limiting their ability to respond to each person & situation with the time and attention it warrants), to not try and create a win-win solution in case of a deadlock, all within the same cost implication.

Most organizations design their internal support function staffing & processes on three criteria:

  • Requirements for Statutory & Audit compliance.
  • Maximizing Leadership convenience in administering policy – taking precedence over internal customer (employee) convenience.
  • Minimizing Cost: Blindly following Industry staffing ratios for support functions in terms of number of support staff per hundred revenue generating employees.

These create a thousand inconveniences for the employee in getting issues resolved & the simplest of tasks accomplished, as these are neither customer centric processes, nor have been staffed adequately to meet the employee expectations. And then organizations wonder why the employees are so unhappy when they should be grateful! Organizations acting with a more holistic understanding however – stand to gain far more than the cost involved in additional staffing.

Last but foremost, the red element – ‘Integrity’ – no organization can strive enough & be watchful enough in ensuring that as an organization it always chooses to do the right things that benefit and not harm its extended ‘stakeholders’, behaves ethically no matter what, and does not play with legal loopholes or tread the fine line while technically being compliant. This is the element on which the entire framework rests. Employees orient their stance to their Organization based on how they see the organization behaving with reference to this element.

Fair-play:

All of us have an innate need to be treated as ‘special’ at best; and ‘fairly’ at least. An organization that understands this and builds processes & systems incorporating this element into its actions, would ensure that there is mutual respect between the Organization and the employee.

An example of this need at work is the fact that many people leave organizations for better pay and prospects. They are tacitly saying:

I am getting paid less than another person in the organization who I feel is not as capable or as deserving. (Hence the internal parity mechanism in the organization’s compensation philosophy has to be extremely strong. One can see the trend towards a higher component of ‘Performance based Compensation’ in more evolved organizations). Unfortunately in most organizations, the organizational philosophy is not geared to address this and instead creates a systematic ‘organizational silencing’ of any issues raised by an individual about parity with another. Hence it creates a situation where the individual quietly puts out her CV in the market and moves to another organization where she feels there is better parity including the trade off of having to start all over again.

“I am more capable than my organization perceives me to be and hence I will try and get it addressed either through my Boss within, and at the same time, look-out for options, just in case”. So when this employee gets headhunted for a better role and compensation –her first thought is –“…that’s interesting! I can make more money & get that next level role there”

A clear evidence of this at work is the fact that a lot of people continue existing in every organization while they could do better for themselves if they looked out. They choose to not do that is proof of the fact that they feel treated fairly by the organization and exercise their choice to stay put.

External job market dynamics do play a part in this, however most organizations are dependent on the immediate Reporting Managers’ ability to ensure an employee’s perception of being treated fairly. The Reporting Managers’ in turn are limited by their own capability & maturity in managing this aspect. Not all organizations are able to design & implement foolproof & robust mechanisms to ensure this, as well as train Reporting Managers in doing this well. GE’s “Session C” is one example of such a robust organizational mechanism.

An interesting approach on fair-play with respect to compensation that has apparently worked with a degree of success is practiced by ‘Semco’, the Brazilian Company made famous by its ‘Maverick’ owner – Ricardo Semler. Semco allows its employees to set their own salaries… The basis for determining the right salaries as explained by Ricardo Semler are the following five factors:

The first three are typically known only to the Organization:

  • What can the job pay? (Intrinsic Job Worth; this depends on the business model / margins in the business).
  • What do the other comparable employers pay? (Market Parity; this available through Industry Compensation Survey Reports).
  • What do my peers in the organization get paid? (Internal Parity; am I getting paid less than someone else in my organization who has similar qualifications, experience and role).

The other two components are known only to the employee:

  • How much money do I need?
  • How much are my batch-mates, neighbors, friends, etc. earning?

Semler says that there is no way that organizations can know and balance the last two factors & hence it is futile for the organization to try and set salaries – it would never be “right”.

Hence Semco makes available the Purchase Orders / Balance Sheet / Book of Accounts along with Salary Surveys to its employees; and it puts everyone’s salary on the notice board! The employees are then asked to set their own salaries.

Ricardo is bringing into play the element of fair-play here by leveraging the next dependent element, Transparency.

Transparency:

It is impossible to create a perception of Fair-play in employees without there being a lot of Transparency in the Organizational decision-making & internal processes. Based on business performance of practicing
organizations, it can be advocated that excluding perhaps the most sensitive competitive details, most organizational knowledge should be put in the organization’s public domain. It helps employees make more
informed choices with respect to their careers & certainly better business decisions.

An example of non-transparency can be illustrated in the first organizational process that every employee experiences – the job interview. Most organizations desist from sharing a ‘reject’ decision & the reasons for it with a candidate – primarily due to the potential nuisance value of having to explain, and the rejected candidates who are likely to contest the decision & are unwilling to take ‘No’ for an answer. So a candidate has to assume ‘not selected’ based on a lack of response from the organization. In such a scenario, while the candidates themselves feel unfairly treated, they cannot be vocal about it for fear of jeopardizing their chances just in case it’s a ‘Yes’, but has been delayed for reasons not visible to him. However the situation is very different when this candidate is an ‘internal referral’ case, as the referring employees reacts quite aggressively and demands to know “what happened?”. This referring employee’s sense of fair-play is hurt due to the lack of transparency in the hiring process. Hence nuisance avoidance is not a good enough reason alone for avoiding transparency in hiring decisions. Organizations serious about being transparent do need to design & carry out a recruitment process with a high degree of transparency.

Organizations need to look at all internal processes with the above perspective if they ever hope to create a sense of fair-play amongst their employees.

Also, if I do not understand clearly as an employee how & why I got selected by the organization, if there is no clear feedback from the interviews I cleared in the process of getting the offer letter, how would I understand that meritocracy is at work?

Meritocracy:

Transparency alone will only accentuate the gaps in organizational processes – confirming the worst fears of the employees. Hence the need to create a meritocratic organization. If the perception that gets created is that there are other than meritocratic considerations at work, it will lead to behaviors like power plays, group-ism, and ulterior transactions etc. which harm the organizational fabric. A perception of meritocracy on the other hand would lead to behaviors that create virtuous cycles for the organization.

It is good to remember that Employees are Human Beings. Human Beings are generally fair in their judgment, and more often than not, they take ground reality into account before firming up their perceptions. Their expectations are reasonable. Most ‘Leadership’ driven organizational cultures tap into this fact & do well.

If your organization has got these first three elements right, is it time to relax? Not yet. The next three ‘transactional elements’ are equally important, and take a huge effort to implement on the ground.

Speed:

So your organization is Fair – it realizes that you should be getting paid more, and it is transparent in sharing this fact with you, and it is determined to change this in accordance with its meritocratic nature. But it has to wait till the next salary review.

I know very few people who will happily wait six months for a well-deserved salary correction.

It is important that organizations respond to people issues with alacrity and speed, transaction after transaction. And that they need to design internal processes for optimal turn – around – time.

Let me illustrate this with an example. Anyone who has had occasion to get a Demand Draft made in a bank till a decade back – has experienced this. You needed to physically go to the Bank, search for the correct form to fill up (sometimes they ran out of those forms too!), then line up at the ledger entry to collect a token. Then wait for the token number to come up at the cash counter, deposit the cash, collect the counterfoil & be told to come back and collect the draft at 4 p.m. More often than not, when you got back at 4 p.m., there was still a ‘signature-pending’ on the draft, and it took another 15 minutes of waiting till the draft got ready. The customer was put to significant inconvenience in order to meet the internal process requirements of the bank.

One bank surveyed the customers and found that the average time they were willing to wait for a draft was 7 minutes. They created a process to respond to that – which simply was to dispense the pre signed drafts through the ATMs, on which the Customer could enter the details directly by using her ATM card. This is powerful stuff, and it incorporates the principle of ‘self – service’.

Flexibility:

The Organization can strive hard and put all the above four elements in place. And then respond with ‘speed’ to an employee request with a “no”! Because “Policy doesn’t allow it”.

Organizations need to take a more holistic if not common-sense view.

For example:

As a Sales Engineer based in Bhopal, traveling to Indore was a regular feature for me and my other 10 colleagues. Pithampur is an industrial area about 30 kms from Indore. The organization’s policy said that a sales engineer alone cannot hire a taxi unless the distance is more than 50 kms.

There were ways that the sales engineers got around this, one of which was that they traveled together – hired a taxi and one waited for the other at a Client’s place. This reduced their productivity by at least 50%, and doubled the duration of their stay at the hotel. Each additional day’s stay at the hotel cost the company three times as much as taxi hire for a day! No two situations are alike, no two contexts are the same. Organizations need to be prepared to be flexible and responsive to the challenges faced by its people by constantly re-evaluating & realigning their stance on policies. They need to see each issue as an opportunity to further refine an existing practice.

Policies written in stone are like carvings and artifacts inside the Pyramids. They might help the mummies in their afterlife, but certainly not those who toiled to make them!

Tolerance:

There is no short term view when it comes to people. Stock markets and quarterly reporting be damned. One cannot sit in judgment on an employee and write her off one fine day because she made one mistake at work. It is exactly at this point in time that she needs help and support!

Organizations need to demonstrate tolerance (if not compassion), and support their employees as they go through personal challenges and ups and downs in life. When an organization says employees are ‘Family’, they need to demonstrate that in practice. If they want employees married to the organization, they need to demonstrate their support ‘through thick and thin’.

People are different. Some are off the block early, some take time. Some change and adapt, some struggle. It helps to stretch and accommodate as long as the basic organizational values are not compromised. Otherwise realize that there is no emotional bond with the employer, only mercenaries working for you.

This is a critical element in an organization’s HR foundation, and most organizations either underplay its importance, subordinate it to the “business-interest” of the organization in terms of “cost”, or simply have no patience with “people” in their quest to be “more efficient money-making-machines” for their investors.In my experience, the organizations that have the highest ‘tolerance’, are also the ones that can attract & hold together the most diverse & talented people, and deliver brilliant products & outstanding services.

Integrity:

I may as an organization create and practice all the above six elements, and I still may not be able to pass through the eye of the needle.

Does my organization make candidates wait in a queue under the sun for getting interviewed? Does it make vendors run around to collect their cheque? Does it do whatever it wants to, and then covers up through window dressing – ensuring that it doesn’t get caught in an audit?

As an employee, I will get to observe all this firsthand, and so make up my mind to never trust the organization; because if I happen to be at the organization’s mercy, I know that I will be trampled upon.

One such experience is still vivid in my mind, and perhaps the reason I chose to be an HR professional: My first day at work in an American Multinational, at a high-tea organized to welcome the new batch of Graduate Engineer Trainees, the Personnel Manager – with a London School of Economics pedigree, his clipped Oxford accent, was very impressive…until he said, “this is exactly the place where I used to hang the workers upside down & beat them through the night when we started the Factory ten years back”! A silence fell amongst the young & enthusiastic Engineers, and a chill ran down their spine. The message was designed to convey the Manager’s autocracy abundantly clearly. Sure, it took more than a year for every single one of these Graduate Engineer Trainees to choose to leave the organization, but they did. Jobs were not as easy to come by in those days.

What is the message that my organization is broadcasting to its members through its words & actions? An outstanding organization cannot but aspire to align with the highest ideals & norms of human values. Anything less than that, and it will miss the boat; as employees will know instantly.

In conclusion:

An organization can manage only what it can measure. It is not easy to measure and hence manage these elements directly as they are derived & interpreted factors. That said, wisdom of the organization’s Leadership & HR professionals in initiating action on the workable aspects of these seven basic elements is a good start.

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