Some decades ago, HR was widely considered one of the best fields for ambitious people to pursue their careers at such high-profile companies as IBM, Pepsi, GE and AT&T. During a recent Wharton Global Human Resources Executive Summit, Wharton management professor Peter Cappelli noted that surveys taken during the 1950s showed that HR was viewed as “the most glamorous sector.” In many of the prestigious firms where people stayed for life, he said, HR people “decided everything,” including “where you were promoted. They were really important.”
Today, the glamor and prestige have faded, and often human resources departments are finding they lack the relevancy they once had in company decision-making. In the most sophisticated consulting and technology firms, for example, there is a substantial gap between HR and such newly-hot areas as Big Data and machine learning. “HR used to tell everyone everything,” but that is no longer the case, Cappelli noted. Rather than communicate with one another effectively, HR personnel and computer science staff are “talking completely past each other. The HR people know nothing about computer science, and the computer science people know nothing about HR.”
One reason for the decline in HR’s prominence is the condition of the labor market. When the economy is booming and labor markets are tight, HR comes to the forefront. “People start quitting, and HR becomes very important,” Cappelli pointed out, because it provides valuable expertise, matching up valuable talent that is hard to find with important job functions. However, during economic downturns, “everyone whales on HR [because] we are the only function telling other people what to do all the time…. We hate nagging people, but without our nagging of our managers, life would be so much worse.”
During the summit, which was titled “Becoming More Strategic in a Complex Environment,” Cappelli asked executives to provide their views about the challenges they face, and the challenges surrounding HR in general. The attendees broke up into groups to talk about what they were doing in their organizations, focusing on practical experiences rather than on theory. Each group was asked to address a single high-level issue, and to condense their answers to the most relevant comments, which were then presented to the entire room for discussion.
Some examples of the high-level themes proposed by the HR executives were:
- How do you develop leadership talent beyond training programs?
- What role does HR play in molding the overall company culture?
- How do we prepare successors for key roles?
- How do you enable leaders to define the right behavior?
- How can — and should — leaders be encouraged/enabled to take responsibility?
‘Get in Front of the Data Engine’
In an effort to help HR executives achieve greater influence and impact, Cappelli suggested that they “get in front of the data engine,” which has become such a vital component in the modern corporation. “Right now, the HR function is behind the data engine,” but HR should “try to get away from just nagging” and use the new data tools available as the foundations for important decisions. “We know that you shouldn’t just manage from your gut.”
“We hate nagging people, but without our nagging of our managers, life would be so much worse.” –Peter Cappelli
He advised HR executives to link up with “your own data person or find someone in your computer department who has skills in data [analytics]” or machine learning. Cappelli cautioned that executives must learn to distinguish between the more traditional discipline of statistics, in which models look at the relationships between variables using mathematical equations, and machine learning, a subfield of computer science and artificial intelligence that involves building systems that can learn from data.
“You see what the patterns are, some of which would be useful,” Cappelli said. “You have to get ahead of that. The way you get ahead of that is to maybe get your own data person. It could be someone right out of school; you don’t [necessarily] need somebody who has any experience. If you can’t do that, you can try to find the people in your computer science/IT departments so they can do it.”
It’s important that HR be involved in these processes, Cappelli explained, because if the ideas about how to improve the business of managing people are coming from the IT department, the company is in serious trouble. “Machine-learning people don’t know a thing about HR,” he added, and they should not be allowed to use their expertise in machine learning to decide how HR picks employees.
A Million Strategies
Another high-level consideration, noted Cappelli, is to realize there is no single strategy that works in each case. “The strategy guys were wrong; they thought you just had to pick one strategy, and that’s it.” Rather, “there are a million strategies, and they are changing all the time.”
In that regard, he added, “We [in HR] have to figure out how we can contribute to this [or that] business strategy. We can show other people what the research shows. HR can tell other departments: ‘I can’t make you change if you want to go with your gut,'” rather than consider what machine learning can teach us about which strategy has the best chance of success. HR personnel can explain why data analysis gives them a lot of confidence that a certain strategy won’t work, but it’s still up to the rest of the business to listen — or not.
To strengthen its role, HR “has to make a case about how we can contribute to [any] particular project,” Cappelli noted. “We have to have a point of view that there is a function for HR.” Finally, he advised executives to be mindful that “HR is not a popular function. One of the issues is that HR has a longer-term focus, but business in the United States has a short-term mindset.”
Owning the Culture
To gain an edge, HR executives also need to focus carefully on the culture they are creating. During the summit, Wharton management professor Sigal Barsade focused on the nature of organizational culture: How do we change it? How do we manage it — and for what reasons and benefits?
Barsade began by asking the executives to answer these fundamental questions: “In your organization, what is rewarded? What gets you promoted? What is punished and what is taboo?” These questions are critical because all human beings behave in accordance with the “pleasure principle.”
“Culture takes a really, really long time to change.” –Sigal Barsade
“Who owns the culture [of any organization]?” she asked. “The person who owns the structure of the organization.” However, “if your culture is not in alignment with your firm’s strategy and structure, [it will] not be help your company survive.
“Even if you have the best values,” she added, if your culture is not supported by your structure, those values are not going to serve you well. By way of example, she pointed to the numerous cases in which corporate leaders have specified that one of their values is to be “team oriented,” but the company’s structures — in the form of policies and rewards — contradict that notion, such as by ranking employees by performance, and then firing those who rank below a certain percentile.
A critical issue for HR managers is that “culture takes a really, really long time to change,” Barsade said. Usually, it takes at least three to five years before you can see any results. And senior leadership is really important in driving this process.
“Culture is like an iceberg,” Barsade said. Just as only the tip of the iceberg is visible above the water, the underlying assumptions of culture are vast, but sit unexamined under the surface. “[They] are so obvious that we do not question them,” she noted. We just take them for granted. In the case of organizational cultures, one such underlying assumption is the answer to this question: “Why are we in business?”
Behavioral norms are significant because when employees take them for granted, and manage themselves in accordance with those norms, the results are more powerful than when those norms must be repeatedly enforced from above or outside.
According to Barsade, cultural artifacts — such as visual icons — can act as powerful symbols, spreading awareness of important values. For example, AMD, the global food giant, uses a visual icon of an asparagus plant as a symbol of its commitment to developing high-risk, high-reward products. Asparagus, she explained, is a lucrative vegetable that is costly and difficult to produce. The head of AMD established an Asparagus Award for the best failed project of the year. “This sends a message that it is safe to take risks,” she said. Likewise, Airbnb’s logo incorporates symbols identified as “people,” “places” and “love,” into its marketing messages about the company.
Reflecting on such icons, Barsade asked attendees to consider what artifacts they have in their companies that employees could rally around to enhance their corporate culture.
Three Transcendent Values
How many of their cultural values should firms spell out in their HR and marketing materials? Barsade noted that some companies unwisely believe that longer, more comprehensive lists of cultural values are more impressive and more useful to their employees. She suggested that companies should generally express only “three transcendent values that everyone knows.” When an organization’s list of values runs to long, it’s hard for employees to identify — or retain information about — those values that really matter. Employees also may view a longer list as a sign of insincerity. A short list of three values concentrates on identifying what is distinctive for their particular company. For example, Philips Petroleum chose “safety,” “honor” and “commitment.”
“In your organization, what is rewarded? What gets you promoted? What is punished and what is taboo?” –Sigal Barsade
Other key concerns are an organization’s cognitive culture, which reflects how a culture values various outcomes (achievements, results, actions); its views concerning teamwork; how much it values respect, fairness and tolerance for individuality; how much it values attention to detail, innovation (risk taking), stability (security and predictability), and its orientation to customers.
HR leaders must also consider the invisible dimension of “emotional culture,” Barsade explained. “What emotions do you express or suppress in the organization?” she asked. “And to what degree to you see other people in your organization express these emotions, which include joy/enthusiasm, love, fear, anger and envy.”
Some major companies have enacted ambitious initiatives to encourage the open expression of their emotional cultures. Cisco stresses the value of having fun, while Southwest Airlines has long identified itself with love, encouraging its employees to display warmth while also meeting their work-performance goals. When properly managed by senior management and HR staff, such initiatives can lead to lower absenteeism and less burnout, said Barsade — metrics that are easier to measure than fun itself.
Strong, Successful Cultures
Summing up, Barsade said that all “strong and successful cultures” share the following characteristics:
- Their culture is congruent with the organization’s strategy and structure.
- Their employees “know what the culture is, and it is strongly and consistently reinforced in multiple ways, starting from the hiring process.”
- Senior leaders consistently display the managerial values.
- The culture fits its context, and
- The culture also helps the organization anticipate and adapt to changes in its environment.
When setting out to change the organizational culture, HR executives should pay attention to the following factors:
- Know what your current culture is, what you want your new culture to be and why you want it to be that way.
- Understand that the primary mechanisms for developing and sustaining organizational culture are the vision and leadership of the organization’s leaders. What matters most is what is rewarded by leaders; what leaders pay attention to, measure and control, as well as how well the team is aligned with the new culture.
- Consider that hiring and socializing new employees effectively is another key to changing the organizational culture. This means hiring individuals whose skill sets not only fit well with the jobs they take on, but whose culture matches up well with the new culture of the organization.
“There is no one perfect culture,” Barsade cautioned. Whatever moves they make, organizational managers must strive to align their strategy, structure, systems and policies with the new culture. “Management’s words, behaviors and organizational processes must be linked” with that new culture, she noted. Cultural awareness and understanding, as well as communication within the organization, are all critical factors.