Taking the Long View - a Practical Human Resources Perspective
Business strategies in newspapers, magazines, TV shows and books are dissected, analyzed, proselytized and change as often as the latest poll in a US Presidential campaign. Each one offers the next great solution to the dilemma facing a business, but never seems to be the answer after publication of the company’s next financial report. Pressure builds from outside forces solely reflecting on share price, and then change comes again.
My experience as an HR Director and petrochemical business leader has seen different business strategies tried, tweaked and then change again with a shift in senior management. However, with the benefit of hindsight, the successful business strategy taught to me in my early years stressed to look at the horizon, not the next signpost, as the way to conduct business. With the company I worked for, its success was measured by an increase in our asset base, greater community employment, stable dividends and an increase in employee engagement through company share ownership. If you built up your own team’s skill and talents, this too would result in increased share price, profit and business success over the long term.
This reflection was spurred by reading the article “Encouraging your people to take the long view” (September 2012: Toby Gibbs, Suzanne Heywood and Matthew Pettigrew) in the McKinsey Quarterly. It offers the thesis “when people don’t have real targets and incentives to focus on the long term, they don’t. Over time, performance declines because not enough people have the attention, or the capabilities, to sustain and renew it.” Examples were given of companies that have stepped back and instituted metrics to measure long term sustainable targets on their desired corporate culture. For instance, safety performance, employee development etc. It was also stated that compensation practices, in particular executive compensation practices, have had the opposite effect on looking at the long term view related to organization culture and have been used only as a “top-up” measure to their executive plan. The article offers three processes that companies should follow: 1. Root out unhealthy habits; 2. Prioritize the company’s values; and 3. Keep the metrics simple, but meaningful.
In summary, company culture must be reflected in the long term view using measures and taking the appropriate time, and will need to be developed by management. The article’s message of keeping metrics simple is vital to having long term success. This task will require Human Resources to be a key player and leader in this process. This will stretch the HR and management leadership to refocus the company on new horizons and to recognize when they get there. Process is important as any meaningful change occurs when high employee involvement is used to assist the analysis and ultimately get the critical buy-in from all stakeholders. From a Human Resources’ perspective, once the process has been agreed to then some HR areas for change in the current business environment would be as follows:
- Recruitment and Retention: Resources and monies have been poured into finding, enticing and paying new technical and professional employees. Companies are using aggressive recruitment programs, social media, head hunting, big salaries and other means to fill positions to meet critical business objectives. Yet, companies are often on the short end of the stick and have to push back project objectives or pay a premium to use third party firms. These techniques are important to meet objectives, but if the business plan supports a longer view, then other strategies are required. These include developing a Human Resource risk strategy and implementing programs that utilize underemployed groups; for example, youth as this group is severely underemployed in every country. There are a lot of well educated but not specifically trained applicants in the job area but automated recruitment systems miss potential candidates due to the submitted technical screening requirements. Thus, it appears searches for a candidate come up empty handed. Human Resources can develop an “a second look” program in the recruitment process. Positions developed at the job description stage often over qualify a job. Post-secondary graduates, through work experience and skill training programs, can be fully proficient in doing the job within a year. Therefore, shortages can be alleviated, not with a “quickfit” hire, but rather by establishing an internal training program.
- Skill Shortages: Companies taking the long term approach will need a greater degree of responsibility in building up their own technical skill base. The answer is to look at, and perhaps reinstate, programs that have worked well in the past to meet current needs. One such solution is for the employer to resurrect a clear and meaningful apprenticeship program in their skill areas. There will be slippage due to candidates not meeting standards or job loss. If the apprenticeship pool is large enough and senior trades employees are committed, that will take most companies through project spikes. The same applies to on-the-job training – skills are not cemented once one leaves school; employees will improve their skill base if budgeted monies are planned and used to keep skills current. There are now many automated HR programs that can paint a clear picture as to the resources needed to keep the workforce on the leading edge.
- Safety and Health: This is a critical and often overlooked area that, by taking a longer view, will add to corporate results. There are some good metrics that establish whether safety measures are working, but to get the full picture absenteeism and disability programs need to also be included. Not only do these programs save a lot of money for companies by not paying for lost time, the demonstrated attitude for safety, health and family support programs by management will over the long term build a deep and lasting bond between the company and its employees. Payback comes not only in improved measureable time statistics, but in the attitude of loyalty and second efforts towards doing a job well or meeting a tight schedule.
- Compensation: If taking the long view, a change in compensation philosophy is likely required. Compensation systems will change but will remain competitive to the market. In terms of executive and variable bonus measures, as discussed in the article, documentaries and studies for the best interest of the shareholder and long term success of the corporation have been downplayed to short term results. In certain industries government intervention has been required to save key sectors with an increase in regulation and stronger supervision of compensation practices as a result. Freedom to manage compensation is a key management right. Plans need be reviewed to look at enhanced employee stock grant or savings programs; option programs need revisions to ensure the horizon is the key factor, not a stock market swing that kicks in a stock option exercise; bonus programs can be paid not in the calendar year but in a 2-3 period to generate a better measure of fiscal return.
These are just some areas for looking at HR programs taking the long view, but how do companies meet the immediate need? One is the use of interim and contract staff to help fight the “forest fire” that companies face. Additionally, seasoned interim executives can pose the right questions and implement the plans to reposition the company to a point where the long view will keep it growing on a successful basis.