Strategic HR - Think like a business, act like a business, win like a business
by RUSTY LINDQUIST
Rusty Lindquist is a seasoned product and product marketing executive, with almost 20 years experience inventing, building, managing and marketing products (esp. SaaS) and over 10 years managing product and product marketing teams.
Rusty has had the opportunity to manage the delivery of over 20 products to market, across multiple industries, most generating tens of millions annually, with millions of users.
He has managed teams large (60+) and small (startups), and had full P&L responsibility for business units, with leadership responsibility and matrix authority over multiple departments (including support, development, QA, sales, and marketing). He has both created departments from scratch, and came into existing establishments to create order and introduce product discipline.
Rusty's specialties include: Product strategy and innovation, focusing on creating sustainable value and defensible market positions; Product positioning and messaging to create strong product narratives; Go-to-market and product-launch strategies; and thought leadership.
He is a strong group leader, and vision evangelist, who unites teams in a shared vision, and helps them see their ability to make a difference.
Rusty has spent extensive time studying and building products and solutions for the real estate and education industries (including education technology and education marketing solutions for K-12 and higher ed non-profit and for-profit schools).
Speaker 1: Rusty is the Vice-President of HCM Strategy and IP at Bamboo HR where he studies the intersection of organizational behavior, business and HR strategy. Before that, he spent 18 years as head of product and technology companies in the learning and development and technology industries. Rusty is also a writer and public speaker focused on human performance engineering both for individuals and organizations. Bamboo HR is focused on empowering strategic HR in small to medium sized business. And now please welcome to Elevate 2015, Rusty Lindquist.
Rusty: All right, everybody, welcome to today's session. We're super excited to present to you. Today we're going to be talking about strategic HR, how to think like a business, act like a business and win like a business. By way of introduction my name is Rusty Lindquist. I'm Vice-President of HCM strategy and intellectual property at this awesome company called Bamboo HR. And I study the intersection of human capital management, performance management, HR strategy and all within the realm of small to medium-sized business.
Before I did this I've been running product groups for about 15 years. And I'm just super excited about human capital management and I can't wait to talk to you about some critical stuff today. But this is my family. I have seven kids, in case you can't count that high. And I know what you're probably thinking. You're probably thinking that I'm insane and I will say yes, I am insane. But insanity only came after. I was actually fine going into this whole thing. No, actually, having seven kids especially having teenagers in the house has taught me to redefine my definition of insanity. This is what I now believe insanity is. Insanity is the expectation of appreciation.
If any of you ever have teenagers, you'll know exactly what I mean. But if you're in HR you probably also know exactly what I mean because HR is dealing with this value perception crisis. HR plays a critical role in an organization, but it's too often underappreciated or undervalued. Just recently in the Harvard Business Review, which is a magazine that sets the way people, especially business leaders, think about things. This is some of the recent article topics that, just going back a few months, it's time to blow up HR and build something new. Rethinking HR, why we love to hate HR, what will it take to fix HR? It's time to split HR.
HR faces a crisis of credibility in the boardroom and HR is our favorite corporate punching bag. This is, again, a magazine that sets public perception. And this is the perception that HR is facing. This is what we are here to change. This is what we have to change. Its incumbent upon us.
But you shouldn't feel too bad about it because there is historical precedence. It turns out that as you look back historically from the beginning of when HR came to be, back when it was called personnel, over this period of time it turns out that sentiment towards HR tracks proportional to how well the industry or how well the economy is doing. And that makes sense because when the economy is booming, when things are going really, really well, there's really a lot of demand for HR because there is a talent deficit. It's harder to get people. You have to work to keep people engaged and motivated.
You have to work to retain people because there's all these options. And so the sentiment towards HR is usually lower when the economy is booming because they are viewed as not solving meaningful problems. But when the economy is suffering and all of a sudden there is a deficit of jobs and a surplus of talent, well then, the jobs that HR solves are easier because it's not hard to keep people in an organization. It's not hard to keep people retained. It's not hard to keep them productive because they all are anxious to keep their jobs. And so this historical precedence tells us that, well, at least we know that going back into the past, this negative sentiment towards HR has a precedent.
But we have to change it. More and more...here we are just rebounding from this economic recession and now we are in this sustained booming economy. And now all of a sudden Burson recently just said that perhaps more than in the last 20 years, human resource jobs are some of the most important roles in business, forcing HR to up their game. So more and more companies are now starting to recognize the importance of HR because HR is...we're in a booming economy and now all of a sudden people don't have to stay in an organization. They can go anywhere and they can go as fast as they want. There's a war for talent right now and we're dealing with millennials who are coming, flooding into the workforce and baby boomers who were leaving.
And there's contingent workers and remote workers. And there's all these shifting dynamics in the workforce. And that's creating a perceived need for a focus on talent. In fact, there was a recent survey that was done among CEOs. Actually it's been done the last four years. And the last three years of those four years, the number one concern of CEOs was talent.
That's human capital. And four years ago it was only their number two concern. So there's recently this new-found perception that talent matters that we need to do a better job managing our talent. And so the question is who's going to step up and fill this role? And more and more organizations are realizing that they're not the ones that create value. Organizations don't create value. People create value and within every organization there is a department that is a hundred percent dedicated to its people. And unfortunately, it's usually the department in the organization that is the most ignored. And that's HR. And that's what we have to change. And it's a perfect time to change it because of this new booming economy. Alfred Marshall who is considered one of the grandfathers of modern-day economics, he said organizational power goes to the group that deals with the biggest problems.
Today, increasingly, look back again at that CEO study, the biggest problems as seen by leaders, by the CEOs of organizations, three years running, is human capital. So it's a great time to be in HR. It's a great time to step up and fulfill this larger role. But we have to change our behaviors because right now we are seen as having a deficit of stepping up into that capacity. In fact, nearly one-half of respondents in this recent study showed that their HR department is not ready to re-skill itself to meet today's business need and only 8% of HR leaders have confidence in their HR team skills and abilities to meet those business demands. And that's what we have to change.
We have to prove and demonstrate to the organization that HR is the best suited to step up and manage its human capital resource. And so there's this chart that we like to use that really demonstrates the evolution of HR as a company grows from micro to small to mid and then to a large and enterprise organization. In fact, what you see if you were to build a scatter plot of HR activities, is that in very small companies all of those activities are very, very operational in nature. It's only when an organization grows and it becomes the midsize, some upper small and midsize that it starts to behave a little bit more strategically. And then, of course, in the larger enterprise organizations there are lots of strategic activities.
Well, the problem with this is, is that the need for small to midsize companies to start behaving strategically is now happening right now because of this war for talent because of this booming economy and because of all of the changing nature of the workforce and the workplace. There is a pressure on us to shift our organizations from transactional HR where HR is viewed as a cost center to high impact HR where HR is viewed as a strategic investment in the organization. And it turns out that's not necessarily a component of organizational size. Instead, it's a component of organizational maturity in the HR organization. So some research that we did, showed that HR spends less than 15% of its time as a strategic business partner and spends most of its time dealing with the implementation and administration of HR policies and practices.
But according to Forbes, when HR is involved, organizations function better and are much more successful. So it's critical that we escape the operational so that we can focus on doing this more strategic work. Sorry, that last slide was Forbes. This is the study that we did which showed that 71% of the people that we surveyed demonstrate or said that employee management was their number one concern, the number one thing that took up their time. 54% of people said that the number two thing that took up their time was company policies and 42% of those we surveyed said the number three thing was recruiting. None of these, as you can see, are the strategic types of roles that HR could play.
They're all important. They're all urgent. They're all vital. They're all mission-critical. But we have to escape the focus on only being operational because as long as an organization or as long as our departments only focus on operational activities, then all we'll be seen for is operational. And as long as we are only seen as operational, we are seen as replaceable.
So we've got to transition out of that. So what we need to do is we need to focus on elevating HR out of the operational, the mud that we're mired in so that we can start contributing greater business value earlier in our lifespans, earlier in our organizations' histories because we cannot wait until we're a large enterprise organization. The need to be strategic with our human capital, our organization's most important capital asset, is right now. So how do we do that? Let's talk about how do we do that. We have some steps that I want to talk about.
To lead into our first step, I want to tell you about an experiment that was conducted. A while ago some psychologist researchers were trying to understand human behavior. So what they did is they stuck some monkeys in a room and then they put a ladder in the room with the monkeys. And then they came in and they stuck some bananas on top of the ladder. And as you'd expect they're monkeys, they saw the bananas and they were like, bananas. They were really excited and so they tried to climb the ladder to get the bananas.
But as soon as they did, the researchers turned on cold water and sprayed the monkeys. And the monkeys were like, what's going on? And it turned out that every time the monkeys tried to climb the ladder to get the bananas the researchers would spray the monkeys until all of a sudden the monkeys stopped trying to get the bananas. They had learned. They had learned behavior and now they would just sit there when the bananas were placed on the ladder. Well, when this happened, the researchers decided that they needed to change things up a little bit. So what they did is they got rid of one of the monkeys and replaced it with a new monkey, a monkey that had never been sprayed with water.
And of course, they put bananas on top of the ladder and that monkey was like, bananas. It had never been sprayed. So the monkey tried to climb the ladder, but as soon as it did the researchers never even got an opportunity to turn the water on because one of the other monkeys came and knocked the monkey off the ladder. It had learned that if you try to get the bananas you got sprayed with water. Well, they did this a few times and all of a sudden, well, pretty soon, the new monkey had realized that if it tried to get the bananas it was going to get beat up.
And it didn't like to get beat up so it learned also, even though it had never been sprayed with water, it had learned to not go get the bananas. Well, so the researchers finally decided that they would put new monkeys in. And the same thing happened. And the new monkey would try to go get the bananas. He would get beat down and finally none of the monkeys would go get the bananas because they had learned not to. Well, the researchers took one last step and they decided to take all the old monkeys out of the room and put new monkeys in.
So now none of the monkeys in the room had ever been sprayed with water. And as you can guess, when they put bananas on the ladder, one of the monkeys tried to climb it and the other monkeys knocked it off not because they knew they were going to get sprayed with water. They had just learned the behavior. Well, there is this principle called the Law of Inertia, which is that mass at rest tends to stay at rest and mass in motion tends to stay in motion. And this principle of inertia applies to our organizations. It applies to our personal lives.
It means that we tend to be carried forward in life by the inertia of our past and too often, in our organizations, in our departments, in HR, we tend to do the things that we've always done not because they meet some existing need today, but because they're an artifact of the inertia of our past. A good example of this is performance reviews. Performance reviews are broken and we know they're broken. And there's abundant research that tells us they're broken. I'm not even going to read all these, but you can read them yourself later. The best one though is at the top left, 30% of performance reviews actually end up decreasing employee performance.
They have become antithetical to their very purpose. They're broken. In fact, recently in the Harvard Business Review, there was an article that said that performance appraisals are perhaps the most reviled standard practice in all of management. Yet HR departments throughout the world continue to enforce and practice these old performance reviews. But these performance reviews are a disease and we have got to stop infecting our organizations with this disease because what happens when we continue to perpetuate these old practices that don't meet today's needs, as we continue to erode the perceived value of HR and what HR can do, so the world has changed and with this change we have to change. Our behaviors have to change.
Our practices have to change. Our perspectives have got to change. So let's talk about how to do that. Well, thinking back of the monkeys. One of the things we have to do is we have to eliminate the unnecessary. We have to shed all of the dead weight like a boat that is brought out of the water and stuck up on dry dock and you have to carve off all of the barnacles that of have created so much drag in the water.
And then you put it back in the water and it's able to sail smoothly. We need to analyze our activities that consume so much of our department's times and we need to ask ourselves which of these activities are merely a continuation of past needs and which of them are actually necessary today. And shed those that aren't. Sometimes the best way to increasing our value is not by adding activities, but rather by removing activity so that we can focus on what matters most. A good example of this taken from the business of product management is that when you're building a product and businesses, know that there's a perception that...so that if you look at this chart, you've got features along the bottom and you've got perception of value. And what you think would happen is that as you add features you would think that your perception of value increases.
Well that's true, but only to a certain point. And they call this principle the "suck threshold," unforgivingly so. And what happens is for a little bit of time your product sucks because it doesn't do enough. But instead of continuing to increase in perceived value, there reaches a tipping point where all of a sudden your product sucks not because it doesn't do enough but because it tries to do too much. And so the actual result is that your perception of value goes down even though you're doing more. Now in HR we, and in our personal lives, in all aspects, in all of our organizations, we tend to suffer from this.
Our approach to our activities tends to only be additive instead of subtractive, instead of asking ourselves what can we remove not to dilute our focus so that we can focus on what matters most? And we need to find what this is in HR. We need to ask ourselves what matters most and what to say no to. And the more clear we are with those objectives, the more value we actually create for our organizations by not trying to do more than we should. There's a common framework in business that helps us identify when you're looking, especially at a product, what are the activities that are worth investing in and what are the activities that you should probably remove. So there's this chart that shows that you've got mission-critical on the bottom and market differentiating on the left, and things that are low in market differentiation and not mission-critical, who cares about those?
Get rid of those. Eliminate those if they're mission-critical and they don't differentiate you in the market. Now applied to HR, this is a little bit different. What this means is that how hard would this be for this role or this activity to be done outside of HR, outside of your organization? What we're trying to do is we're trying to insulate HR against either automation or removal so that we can focus on being strategic. So those things that are mission-critical, but not market differentiating, we just need to do to parity.
These are things like payroll. So payroll is mission-critical but it doesn't differentiate us. We could have payroll done outside the organization. Those things that are market differentiating but not mission-critical, we should partner with those because those are not our core competencies. The things that in HR, in our departments, in our organizations that we should focus on are those things that are mission-critical and that differentiate our departments, meaning that they can't easily be replaced. They align with our core competencies.
Those are the things that we need to focus on. There's a slight twist to this which shows that the activities that we should focus on should have high value to the market. And in this case, in the terms of HR, our market is our organizations. So we need to focus on the activities that add high value to our organizations and are difficult to reproduce, meaning that we can't find someone else to do these things. Normally, HR, if you think of the evolution of HR and that chart, what happens is we start out with operational. Well, this is low value to our organizations. It's of value. It's low value though and that it's not strategic and it's not difficult to reproduce.
Those are our first activities but we quickly need to add more value. Add activities that add more value to your organization. And this is critical to changing the way our organizations perceive our value. Then, once we have done that, we need to move up the pipeline and focus on those things that a truly evolved HR organization does activities that add high value to their organizations but are difficult to reproduce.
These are things like culture and performance done well. Those are the right activities to spend our time on. So step number two is that we need to...So reflect...going back, step number one is that we need to eliminate the unnecessary. Carve off those things that shouldn't be taking our time. Step number two is we need to automate the operational, to set ourselves free to do great work. And these operational activities which are the things that tend to consume so much of our time. These are things like payroll and benefits, time and attendance. These are our basic operational layers that you can think of Maslow's hierarchy of needs applied to HR.
And then you have the general operations layer, which is operational efficiency, HRIS, records, talent acquisition, compliance tracking, those types of things, those are the things that need to be automated so that our time and our resources and our attention, our focus, our innovation, our creativity can be applied to the strategic operations that add higher business value. These are things like culture and performance and engagement, satisfaction, employment brand, advising, talent management, succession planning and learning and development. And we can leverage technology to do this.
Technology has become a great driver of this lift, this elevation of the strategic value of HR in an organization because what it has done is the abundance of technology in HR has lowered the price making technology more accessible. Its become more palatable to organizations because we've also crossed this cost and usability threshold. So a while ago there was a gentleman by the name of Jeffrey Moore who wrote a best-selling business book called "Crossing the Chasm." And in it he introduced this concept called the diffusion of innovation or the adoption curve. And he showed that the innovators and the early adopters have to get on board with the technology. And what they care about, there's a different, there's a chasm of wants.
What they care about is that technology does new things and it's unique and they're trying to push the boundaries whereas everybody else, the early majority and the late majority, what they want is the system to simply be usable. They want it to be reliable. HR technology has now crossed that threshold. It's crossed that chasm. It's affordable. It automates our operational task to set us free to do greater, more strategic work and there is an abundance of it. So there's technology now that solves all kinds of HR's problems. We just have to go look for it.
Next, step number three, after we have eliminated the unnecessary, automated the operational, we have to maximize the business value of the remaining tasks. These are the activities that we've decided must stay. And these are the activities that we should maximize. For instance, performance done the right way, not the old-school way, but focused on the things that matter most, things like frequency and asking for feedback from the people who know, not just from the manager and recognizing, building a good strong recognition program and goal oriented programs, asking very simple questions, not abundant, not lots and lots of questions that are complex and building less time-consuming feedback systems and alerts that draw people into the system.
These have been the things that show how performance done well can actually powerfully drive performance in an organization. Especially, simply by increasing the cycle time of our feedback loops removes or eliminates what I call organizational waste because rather than letting...every time you have a performance review, your employee now is set on a trajectory. But immediately or very soon afterwards they start to depart because its human nature and rather than waiting until they depart six months or a year, what a frequent feedback system or increasing the cycle time does is it allows us to catch them earlier and bring them back in line faster so that we eliminate organizational waste. Because done well, according to research done by [inaudible 00:24:16], performance management actually leads to a 40% increase in employee engagement, 25% lower turnover, 18% growth in customer loyalty and a 15% boost of productivity. So if we simply reinvent, not necessarily eliminate all activities, but reinvent those that matter most we can drive strategic business outcomes.
On boarding is another example. On boarding, we could view as entirely operational, but it's not. On boarding done well, when you instead of just having the person fill out their paperwork and giving their documents to sign and making sure they have their computer and all of the operational stuff is done, but if you rather than just doing that, if you facilitate through the on boarding process the establishment of human connections with your employees then what happens is you get ...your employees are 69% more likely to remain up to three years. It leads to increased job satisfaction, organizational commitment, less turnover. There are positive results that can come out of simply reinventing our existing activities, those that we have decided should stay, but that should be reinvented. Next, measure and report.
HR needs to get really good at data, at analytics, at talking about measuring it's ROI into the organization. It's like internal marketing. Remember, the definition of insanity is the expectation of appreciation. We can't expect our organizations to appreciate the value that we provide. We actually have to get good at measuring that value and reporting on that value. Once we do that, what we gain for ourselves is internal capital.
It's respect. It's trust so that we can leverage that in order to fuel our future activities and initiatives. Measuring and reporting, five, we need to solve meaningful problems. It helps to think of HR like an internal business unit. So in business there's this business model canvas. This was a book that was written about seven or eight years ago by a gentleman who...by a couple of gentlemen who wanted to come up with a good way for organizations to sort of look at what they do and use this as a canvas to identify where their holes are.
Let's go through this, some pieces of this. Number one, you have to first identify your customer segments. So who truly is the customer in HR? Well, HR has multiple customers. Our employees are our customers. Our executives and our managers are our customers.
Our candidates are our customers and our company's customers are also our customers. We need to understand who those customers are. We need to even build personas for those customers because we can't solve our value perception problem unless we understand what the needs of our customers are. So start by understanding your customers, defining them. Build personas for them. Understand what their unmet needs are.
Next, have a way of measuring your customer relationships. Have a way of strengthening your customer relationships. If you don't have a customer relationship measurement and creation and building strategy, then you can guarantee that your perception of value will always stay low. We have got to not just understand our customers but we have to understand and have a strategy for building those relationships. Next is our value delivery channels. Simply creating value is not enough.
We have to perfect the way we deliver that value to our customers because if we don't then it negates the whole value that we create itself. Think of like purchasing something on Amazon. It doesn't matter how good their fulfillment and how good their products are if it doesn't show up at our door. We don't even care. We have to focus not just on what value we add and what customers we serve, but perfecting the way we deliver that value to our customers. Next, our value propositions, what should our value propositions be, knowing who our customers are and what their unmet needs are or what their current needs are.
We have to understand what is the value that we can provide. Some of those value propositions should include HR strategic outcomes which are things like culture, employee engagement, satisfaction, performance and productivity, retention, operational efficiency, organizational performance, employer brand and internal influence. These are some of HR's value propositions. Once you've identified and you don't have to do all of them at once. Simply choosing, one or two or three, focus on those then you can ask yourself the next question which are, what are my key activities. What are the activities I am engaged in to deliver this value through these channels to these customers?
Often, what you find when you have and you start to suffer from a value perception problem or your consumers, your customers are no longer either valuing or consuming your product is that you don't have adequate activities building that product. It helps to look and ask yourselves, okay, what are our proposed value propositions in HR? And then do an activity map and ask yourselves, okay, which of these are backed by activities today? What you often find is that you have really critical value propositions that should belong to your organization or your department, but they are not backed by ample existing activities. Those are the things you need to focus on. Next, who are the partners that we have in creating this value and working and building these activities?
Who are our partners because it shouldn't all be done by HR. Learning to use partners to create value for your customers is a critical part of your business. Next, what are my key resources? What do I need in order to create that value? Finally, what is the cost structure that we have? What is the costs involved to create these activities and to deliver, to create this value and to deliver it. And the point here is that you don't go to your CFO with costs.
What you go to him with is a business case. You go to him saying, I want to do, to provide the following value to this customer and here's how I'm going to do it. And if you back up that way starting with the customer and the value, that's the best way to approach a CFO for budget approval, to get budget approval for your activities. Finally, your revenue streams. You have to understand how your organization, how your customers give you value, how do they reward you. This is, again, the measuring and reporting because if you cannot quantify your impact, if you cannot quantify how your customers consume your value, then you cannot justify your activities.
We have to learn how to recognize the revenue that our customers give to us. So this is the business model canvas. It helps to use this as a lens to analyze our existing activities. Finally, step number six is that we need to keep the human in human resources. Yes, we need to automate the operational and eliminate the unnecessary. We need to maximize our business value of our existing activities.
We need to think like a business so that we are adding real value. But as much as we start to become a business we also have to remember that who we are dealing with, our customer is a person. The more we try to treat them not as a human, the more alienated our customers become from our organizations. Our employees become from our organizations. So as much as we want to also think like a business so that we're making sure that we are adding the right value when we have ample activities that align to the value propositions and well-established value delivery channels, we can't forget that it's not organizations that create value. People create value.
And it's the human touch in our organizations that creates the most loyalty, the most engagement and the most powerful cultures. One way to look at this, Simon Sinek, a little while ago, wrote a best-selling business book called "Start with Why." What he described is that people...you can often find people who can understand and describe what their companies do. Fewer still can describe how they do it and even fewer can describe why they do it. But what he found was that organizations that start with "why," that have a clear, powerful, strong sense of why we are doing the things that we are doing are the organizations that are remarkable. They are the organizations that succeed.
Their people are more engaged. They're more productive because there's intrinsic motivation and not just extrinsic motivation. When we are aligned, when our people are aligned to our organizations, we gain a strong ability to move forward in the marketplace. And HR has a significant role in doing this because the why of the organization, the mission, it's captured in our missions, in our values, in our beliefs, and our ability in HR, recognizing that the people who add value are just that. They're people. They need to be able to be inspired and to feel motivated and feel like they're fighting for a cause.
Our ability to tell a strong story, to tell...to capture in our values, in our mission and in our beliefs why we should come to work every day and why we should fight and why we should work and invest ourselves, the stronger we can tell that story, the stronger our employees are engaged in our organizations. And so thank you for joining us today. I'm super excited about the rest of this conference. I hope you enjoy it. Again, I'm Rusty Lindquist. I'd love to engage with you on social media, Twitter, LinkedIn.
Feel free to connect with me. Ask questions. Ask for the deck whatever I can do. Otherwise, thank you and enjoy the rest of your day.