Strategy Masterclass 2: The rise, fall and rise of strategy

In the second in a series of three articles examining the strategic
challenges facing HR in the future, Professor Amin Rajan and Gary Storer look
at the way the strategic HR role has evolved and must devolve according to the
lifestyle of an organisation

At the start of the 1990s, the term "strategy" had a military ring
in the financial, professional and business services arena: these were tactics
to achieve pre-defined business goals. But with goalposts shifting
unpredictably in the past five years due to accelerating competition, strategy
as a plan is passé. Few business plans survive reality, according to our latest
study.

This is due to the chaos theory, which postulates that the vast majority of
business outcomes are never predetermined. Instead, they arise from the
repetitive actions of the individuals concerned. Each action produces a unique
situation, so the key is to exploit opportunistically the outcomes arising from
each situation.

So, strategy has now taken one of two contrasting forms – one highly
visible, the other equally intangible.

The first form concentrates on final process. It presents a grand design
emerging from a string of actions that permit intelligent inferences about the
desired outcomes. This was well articulated by a chief executive participating
in our research who said, "Every bank in Europe is contemplating its strategy
right now, which is a euphemism for saying they are all thinking about either
buying other banks or being bought themselves".

The second form focuses on means. It seeks to build the capability to cope
with an ever-changing environment. As another chief executive put it, "Our
strategy is not to have a strategy: we just build ‘shock absorbers’ that give
us more resilience." To him, strategy is about organisational development
– no more, no less.

The old-style business plans are still produced for budgetary, regulatory or
PR purposes. Full of hype, they create a momentary glow, but not much else.
While HR professionals have continued to participate in this annual ritual, an
increasing number realise that the textbook model, linking HR activities to
business goals, is too simplistic. It didn’t work for the Kremlin even when it
set business targets five years in advance, rigged the markets and faked the
figures.

This growing realisation runs with the grain of the ever-unforgiving market.
It is manifested in two ways.

Raising effectiveness

It is now widely accepted that the term "strategic HR" has been
much used, misused and abused. If strategy is about producing effective means
to achieve indicative ends then it is necessarily a variable concept.

As we argued in our first strategy masterclass "The New Business
Models" (Feature, 3 April), delivering the value proposition for customers
and shareholders is about raising the effectiveness of tangibles such as
organisational structures and business processes, and intangibles such as
culture, leadership and employee mindsets.

But HR practices used in the process have to vary with the life cycle of an
organisation. After all, like humans, organisations go through three clear
phases of evolution – growth, maturity and decline. But that is where the
similarity ends, for organisations have one advantage in that they can initiate
a fourth stage – of renewal.

The great companies of today have been through successive phases of renewal
over time, in ways that are not yet possible for humans.

The key message is that strategic HR constitutes different activities,
depending on where an organisation is in its life cycle (see figure above).

Needless to add, the list is indicative, not definitive. In any event, it is
possible that activities in any one phase may unexpectedly become important in
another, thanks to the chaos theory.

So, it is about creating structures, cultures and behaviours required by
each stage. It is less about a seat at the top table or hitting business
targets. The latter two are best deemed as outputs, not inputs. In the past,
this lack of clarity produced excessive hype that became a substitute for
action.

Creating partnerships

Another manifestation of this realism is evident in the emerging partnership
between HR professionals and line managers.

Each of them is now getting increasingly involved in areas which used to be
the preserve of others until the mid-1990s. For example, HR professionals are
now more involved in areas such as performance management, quality orientation
and leadership coaching. For their part, line managers are becoming more
involved in recruitment, remuneration and training.

Furthermore, the structures within which this partnership is evolving are
themselves being revamped through one of three progressive approaches –
incremental, structural or virtual.

Taking them in turn, two out of every three organisations in our sample have
adopted a piecemeal approach. This has involved improving the skills base of
the existing HR organisation, enhancing its networking capability with line
managers and providing self-service tools for employees and managers alike.

The structural approach, adopted by one in five organisations, has notably
involved new entities and roles in three identifiable tiers:

– A shared service centre which handles first-level routine enquiries in
real time from line managers and employees. More than 80 per cent of the issues
raised are tackled in this tier

– The rest get "escalated" to the second tier, comprising subject
matter experts with specialisms in areas such as employment law, outplacement
and compensation and benefits. These experts also work on consultancy projects
commissioned by different lines of business, at home and abroad

– The top tier comprises HR-business partners, working with managing
directors in business units. Using the total capability of the HR organisation
worldwide, they assist in providing local solutions.

Finally, the virtual approach has involved the wholesale outsourcing of all
HR activities, as carried out by BP last year. This is still rare in
fast-growing services covered by our study. US banks such as JP Morgan and Bank
of America were moving in this direction before their respective mergers. But
these were exceptions.

So much for the new approaches. They reflect the growing power of the
marketplace. As our next and final article will show, however, it is one thing
having a new organisation for a new age, quite another making it work.

HR professionals and their line colleagues will have to work at continuing
to develop the requisite mindsets.

The magnetism of the past remains all too evident. The transition has been
painful.

This article is based on Tomorrow’s Organisation: New Mindsets, New
Skills, available from Create.  More
details on 01892 526757, fax 01892 542988 (price £49.50 inc p&p).

Amin Rajan is the chief executive of Create create_uk@compuserve.com). 
Gary Storer is the managing director at K learning, KPMG’s Financial Sector
Learning Practice gary.storer@kpmg.co.uk
)

*The study is based on a survey of 247 organisations in seven industries
in the financial , professional and business services sector, including
face-to-face structured interviews with senior executives in 48
organisations.  It is the subject of a
conference in the city on 12 June, details available from Create.

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