ROLE OF AN ADVISORY BOARD - BDC Study

ROLE OF AN ADVISORY BOARD ACCORDING TO AN SME BUSINESS LEADER

It is not unusual for the CEO of an SME to be a “one-man band,” personally seeing to every detail and micromanaging his business. Isolated, he tends to manage everything himself. According to Jean-Yves Sarazin, CEO of the Delom Group, an advisory board allows entrepreneurs to break free from their isolation and to have a sounding board to validate their strategies. An advisory board allows business leaders to question themselves and forces them to reflect. The mission of an advisory board is to ask the most relevant questions and delve deeper into underlying issues. It can also help compensate for weaknesses. An entrepreneur who lacks financial expertise can benefit from the recommendations of an advisoryboard member who has financial expertise. Moreover, an advisory board forces theleader to be prepared, triggering the thinking process: [Translation] “When preparing, one often self-corrects one’s strategy. Having an advisory board builds discipline.”

BENEFITS ACCORDING TO LEADERS

As a governance tool, advisory boards are not common among Canadian SMEs. However, according to business leaders who have set them up, they yield tangible benefits. When asked to rate the advantages on a scale of one to 10, they responded that the advisory board:

·         is an essential tool                                                                        8.2

·         is like having a sounding board                                                    8.1

·         is a support for the owner/management team                              8.1

·         allows you to develop a broader vision                                        8.0

·         strengthens the management team’s convictions                        8.0

·         forces management to look at the company                                7.5

·         challenges the company’s management team                            7.5

·         brings rigour in to the company                                                   7.2

·         is a driving force for the growth of the company                          7.1

            In particular, the existence of an advisory board allowed them to:

·         improve strategic business choices                                             8.0

·         broaden the universe of knowledge and skills                             7.8

·         develop new ideas                                                                       7.8

·         put in place a better management structure                                7.4

·         improve company reputation and image                                      7.3

·         reassure shareholders and investors                                           7.2

·         avoid costly mistakes                                                                   6.7

·         break down the isolation of company executives                         6.4

·         ensure succession of the company                                              6.1

IMPACT OF ADVISORY BOARDS

Most (86%) respondents who have benefited from the advice of their advisory board believe it has had a significant impact on their company. In particular, respondents note that advisory boards had a direct, positive impact on:

·         company vision                                                                            7.7

·         innovation within the company                                                     6.9

·         risk management                                                                          6.8

·         company profitability                                                                     6.8

·         company survival                                                                          6.6

·         sales growth                                                                                  6.6

·         labour relations                                                                             6.5

·         hiring the best emp                                                                       6.2

These results clearly show that an advisory board improves the company’s vision and enables better strategic decisions. Moreover, an advisory board encourages entrepreneurs to think long term and define a direction for their company.

Seven Things Great Employers Do (that Others Don’t)

For most people, paid work is unsettling and energy-sapping. Despite employee engagement racing up the priority list of CEOs (see, for example, The Conference Board’s CEO Challenge 2014), our research into workplaces all over the world reveals a sorry state of affairs: workers who are actively disengaged outnumber their engaged colleagues by an overwhelming factor of 2:1. The good news is that there are companies out there bucking the trend, and we’ve discovered how.

Over a five-year timeframe, we studied 32 exemplary companies (collectively employing 600,000 people) across seven industries including hospitality, banking, manufacturing, and hospitals. At these companies, the engaged workers outnumber the actively disengaged ones by a 9:1 ratio. To understand what drives that tremendous advantage, we looked for contrasts between them and a much larger set of companies we know to be struggling to turn around bland and uninspiring workplaces.

We found seven elements in place at the companies with spirited employees which are notably lacking in the others. Are all of the seven causes of high performance?   No doubt at least some of them involve virtuous circles. But as a recipe for an engaged workforce, these are ingredients we feel confident in recommending:

Have involved and curious leaders who want to improve. Leaders’ own attitudes, beliefs, and behaviors have powerful trickle-down effects on their organizations’ cultures. Leaders of great workplaces don’t just talk about what they want to see in the management ranks – they model it and keep practicing to get better at it every day with their own teams. By displaying a little vulnerability and visibly working on improving themselves, they signal that such engagement is how one gets ahead.

Have cracking HR functions. The best HR people have a gift for influencing, teaching, and holding executives accountable – this is important because many executives rise through the ranks despite not being very good managers. HR experts teach leaders and managers to stretch and develop employees in accordance with their natural capabilities. By the way, when you find cracking HR leaders, hold on to them for dear life: they are as rare as hen’s teeth.

Ensure the basic engagement requirements are met before expecting an inspiring mission to matter. When employees know what is expected of them, have what they need to do their jobs, are good fits for their roles, and feel their managers have their backs, they will commit to almost anything the company is trying to accomplish. Conversely, if these basic needs are not met, even the most exalted mission may not engage them. People simply don’t connect with proclamations of mission or values- no matter how inspiring these might sound in the head office.

Never use a downturn as an excuse. The excuse we hear the most to explain away a lousy workplace is the state of the economy; in periods of belt-tightening, engagement inevitably takes a hit. The experience of the 32 exemplary companies we studied calls this rationalization into question. With few exceptions, they have also had to respond to flat or declining top lines – with structural changes, redundancies, and declining real pay and benefits – and yet not only have they maintained their strong cultures, they’ve improved them. They have achieved this by being open, making changes swiftly, communicating constantly, and providing hope. The truth is that employee engagement is one of the few things managers and leaders can influence in times when so much else is out of their control. Great employers recognize this and they go about managing it in the right way.

Trust, hold accountable, and relentlessly support their managers and teams. The experiences that inspire and encourage employees are local. Strong teams are built when teams themselves size up the problems facing them and take a hands-on approach to solving them. Exemplary companies lavish support upon their managers, build their capability and resilience, and then hold them and their teams accountable for the micro-cultures they create. (There is an important corollary here: the good intentions of a CEO can backfire if he or she charges all over the company trying to fix things personally.)

Have a straightforward and decisive approach to performance management. The companies in our study with the highest engagement levels know how to use recognition as a powerful incentive currency. Indeed, a hallmark of these great workplaces is that they are filled with recognition junkies. These companies see recognition as a powerful means to develop and stretch employees to new levels of capability. Meanwhile, they see tolerance of mediocrity as the enemy. Any action or inaction that doesn’t produce appropriate consequences adds to workplace disillusionment and corrodes commitment.

Do not pursue engagement for its own sake. As it becomes increasingly possible to measure and track engagement accurately, some companies start “managing to the metric.” Great employers keep their eyes on the outcomes they need greater engagement to achieve. One of the best examples we can cite is the Hospital for Special Surgery in Manhattan. Ranked number one in the U.S. for orthopaedic surgery by U.S. News & World Report, this hospital needs a high-octane culture to meet patients’ demands. Senior Vice President of Patient Care and Chief Nursing Officer, Stephanie Goldberg, told us that patients expect miracles and her nurses would struggle to get through a single day if they themselves did not feel that they mattered to the hospital. HSS’s nurse turnover is lower than the industry average, let alone the average in hospital-rich New York.

There they are, then: the magnificent seven. Now note how different the list is from the tactics most companies are pursuing as they try to create great working environments. Many make the mistake of prioritizing the easy, shiny stuff – hip office space, remote work arrangements, and inventive benefits – over the elements that will strengthen emotional ties and connect employees more deeply to their managers, teams, and companies. Pity them: If they manage to survive and compete, it will be despite their miserable and confused staff.

Pity their employees more. Our research into a representative sample of nearly all the world’s adults shows that a job has the potential to be at the heart of a great life, but only if its holder is engaged at work. Copious amounts of prose has been devoted to how to make this happen – by making work more fun, funky, and even meaningful – but companies still fail. The exemplary companies we studied have figured out how to establish emotional connections with their staff. It isn’t easy, but if you focus on the magnificent seven, you too can create a company where people love their work.

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Peter Flade is Gallup’s Managing Partner for Europe, based in London, and a member of the firm’s executive committee. He works with company leadership teams to increase organic growth and productivity through a better understanding of employee and customer needs.

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Jim Harter, Ph.D., is Chief Scientist of Workplace Management and Well-Being for Gallup’s workplace management practice. He is coauthor of the New York Times bestseller 12: The Elements of Great Managing, an exploration of the 12 crucial elements for creating and harnessing employee engagement. His latest book, Wellbeing: The Five Essential Elements, is based on a global study of what differentiates people who are thriving from those who are not.

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Jim Asplund is Chief Scientist focusing on strengths-based development for Gallup and coauthor of Human Sigma: Managing the Employee-Customer Encounter.

So Many Leaders Get This Wrong

By Jack and Suzy Welch

We've always said that human resources should be the most powerful part of an organization. So why, in reality, is its impact more often felt in a negative way?

Because human resources, unfortunately, often operates as a cloak-and-dagger society or a health-and-happiness sideshow. Those are extremes, of course, but if there is anything we have learned over the past five years of traveling and talking to business groups, it is that HR rarely functions as it should. That’s an outrage, made only more frustrating by the fact that most leaders aren’t scrambling to fix it.

Look, HR should be every company’s “killer app.” What could possibly be more important than who gets hired, developed, promoted, or moved out the door? Business is a game, and as with all games, the team that puts the best people on the field and gets them playing together wins. It’s that simple.

You would never know it, though, to look at the companies today where the CFO reigns supreme and HR is relegated to the background. It just doesn’t make sense. If you owned the Boston Red Sox, for instance, would you hang around with the team accountant or the director of player personnel?

Sure, the accountant can tell you the financials. But the director of player personnel knows what it takes to win: how good each player is and where to find strong recruits to fill talent gaps. Several years ago we spoke to 5,000 HR professionals in Mexico City. At one point we asked the audience: “How many of you work at companies where the leader gives HR a seat at the table equal to that of the CFO?” After an awkward silence, fewer than 50 people raised their hands. Awful!

Since then, we have tried to understand why HR has become so marginalized. As noted above, there are at least two extremes of bad behavior.
 
The stealthy stuff occurs when HR managers become little kingmakers, making and breaking careers, sometimes not even at the leader’s behest. These HR departments can indeed be powerful, but often in a detrimental way, prompting the best people to leave just to get away from the palace intrigue.

Almost as often, though, you get the other extreme: HR departments that plan picnics, put out the plant newsletter (complete with time-in-service anniversaries duly noted), and generally drive everyone crazy by enforcing rules and regulations that appear to have no purpose other than to bolster the bureaucracy. They derive the little power they have by being cloyingly benevolent on one hand and company scolds on the other.

So how do leaders fix this mess? It all starts with the people they appoint to run HR—not kingmakers or cops but big leaguers, men and women with real stature and credibility. In fact, managers need to fill HR with a special kind of hybrid: people who are part pastor (hearing all sins and complaints without recrimination) and part parent (loving and nurturing, but giving it to you straight when you’re off track).

Pastor-Parent types can come up through the HR department, but more often than not, they have run something during their careers, such as a factory or a function. They get the business—its inner workings, history, tensions, and the hidden hierarchies that exist in people’s minds. They are known to be relentlessly candid, even when the message is hard, and they hold confidences tight. With their insight and integrity, pastor-parents earn the trust of the organization.

But pastor-parents don’t just sit around making people feel warm and fuzzy. They improve the company by overseeing a rigorous appraisal-and-evaluation system that lets every person know where he or she stands, and they monitor that system with the same intensity as a Sarbanes-Oxley compliance officer.

Leaders must also make sure that human resources fulfills two other roles. It should create effective mechanisms, such as money, recognition, and training, to motivate and retain people. And it should force organizations to confront their most charged relationships, such as those with unions, individuals who are no longer delivering results, or stars who are becoming problematic by, for instance, swelling instead of growing.

Now, considering your negative experience with human resources—and you are hardly alone—this kind of high-impact HR activity probably sounds like a pipe dream. But given the fact that most leaders loudly proclaim that people are their “biggest asset,” it shouldn’t be.

It can’t be. Leaders need to put their money where their mouth is and get HR to do its real job: elevating employee management to the same level of professionalism and integrity as financial management. Since people are the whole game, what could be more important?

Jack Welch is Executive Chairman of the Jack Welch Management Institute at Strayer University. Through its Executive MBA program, the Jack Welch Management Institute provides students and organizations with the proven methodologies, immediately actionable practices, and respected credentials needed to win in business.

Suzy Welch is a best-selling author, popular television commentator, and noted business journalist. Her New York Times bestselling book, 10-10-10: A Life Transforming Idea, presents a powerful decision-making strategy for success at work and in parenting, love and friendship. Together with her husband Jack Welch, Suzy is also co-author of the #1 international bestseller Winning, and its companion volume, Winning: The Answers. Since 2005, they have written business columns for several publications, including Business Week magazine, Thomson Reuters digital platforms, Fortune magazine, and the New York Times syndicate.
A version of this column originally appeared in BusinessWeek Magazine.

Posted by:Jack Welch

How CEOs Can Transform HR into a Revenue Driver

 

As I visit with big companies and organizations all over the world, it’s clear that most CEOs realize they need to make some dramatic changes in how they recruit people, align and manage performance, make compensation decisions, and optimize talent.

What’s not so clear to them is how they make that happen. While HR leaders and their teams are supposed to bring alive the cliché that “people are our most valuable asset,” many CEOs are not yet leading the way in giving those HR leaders the tools, authority, and organizational opportunity they need to unlock the value of the organizations’ talent pools.

Paradoxically, that lack of support from top executives is occurring even as 60 percent of CEOs surveyed by PwC say they’re concerned about not having enough talent, and/or the right mix of talent. As a result, those CEOs say, that talent gap is presenting them with some significant challenges:

• 31 percent said they couldn’t innovate effectively;
• 29 percent couldn’t pursue attractive market opportunities; and
• 24 percent had to cancel or delay a strategic initiative.

In many companies, a lack of CEO-level support for the HR organization and its mission keeps the HR team walled off from the ultimate sources of value in a company—revenue generation and customer engagement. This prevents HR executives from joining the rest of the company in using modern technology to gain new insights, make data-driven decisions, and engage with employees and customers more intimately and productively.

And that tricky situation will surely be compounded over the next few years as rapidly shifting demographics lead to a surge in millenials among your workforce: while millenials will comprise 36 percent of the workforce in 2014, they’ll make up almost half of it—46 percent—by 2020, according to a study conducted by the business school at the University of North Carolina.

The impact these young digital natives will have on your company isn’t limited to their sheer numbers. In fact, the biggest influence they’ll have is their demand—not their request, mind you, but their requirement—that the technology they use at work provides them with the same degree of social immersion, accessibility, and collaboration as the technology they use in their personal lives.

So the simple truth is that unless your company is offering these sorts of tools—indeed, these sorts of “workstyles”—then you’ll be sending a clear signal to recruits and new employees that you’re really not interested in hiring or keeping them.

For those companies that are willing to embrace the new social and mobile imperatives, you’ll find that modern HCM systems will improve employee engagement, productivity, and collaboration across the organization. By having social and mobile capabilities embedded in the key context of HR processes—from social sourcing, performance, and learning goal-setting and career management—these millennial-friendly companies will create engaging, two-way environments that don’t just allow but help people connect with each other and build mutually beneficial work relationships.

These are significant changes, and they require full support from the very top of the company. CEOs have to take ownership of this issue to ensure the ongoing viability of their companies. Otherwise:

• If your HR team lacks the tools to exploit social technologies to find excellent new recruits, how can your company find and hire the best people?
• If your HR team lacks the tools to identify high-potential stars within your organization and help create new high-impact opportunities for them, how will you retain top talent?
• If your HR team lacks the tools to tie compensation decisions to business strategy and real-world results, how will you be able to keep up in today’s ultracompetitive marketplace?

Let me offer a before-and-after example.

Let’s say Company XYZ has 100,000 employees, with annual compensation and benefits costing about $10 billion. At the annual budget meeting, everyone turns to the head of HR as the CEO asks, “What’s our plan for raises for next year?”

The HR leader squirms and looks a bit uncomfortable and says, “Our consultant says we should give 4 percent raises across the board.”

The CEO asks, “Why 4 percent?”

“Uh, well, because that’s what the consultant recommended, and we’ve used this consultant for the past five years.”

“I get that,” says the CEO, “but why 4 percent?”

And the head of HR swallows hard and says, “Because the consultant thinks 5 percent is too high and 3 percent is too low.”

Believe me, even if that conversation seems a bit silly, it’s pretty darn close to what’s happening within a lot of companies. And what they need to understand is that the HR leader doesn’t want to give such a vague answer—rather, the HR leader simply lacks the business insights and data-driven analysis to offer a more precise and relevant response.

Remember, in most big companies, compensation and benefits are the single biggest expense in the entire cost structure—by far! For company XYZ, we said its compensation costs are about $10 billion—so the 4 percent raise would equate to a new cost to the company of $400 million. That’s a significant cost to the business. Yet, the HR leader doesn’t have the modern technology necessary to make an insightful and business-driven decision on whether or not that level of spend is correct or will have the desired outcome on the business!

In the “after” scenario, an HR leader equipped with a modern HCM system could have answered that question about raises very differently by saying, “Let’s step back one second and look at the overall situation that will eventually include what type of raise pool we want for next year.

“Our attrition rate for the past 18 months has been 10 percent, which means we had to replace 10,000 people this year. But because of our rapid growth, we also had to hire an additional 4,000 people to handle that growth and sustain our momentum. So this year, we had to add 14,000 new people.

“And I’m pleased to be able to tell you that with our new recruitment and onboarding system, we were able to bring on 14,000 terrific new people—more on that in a moment—and with our new talent management system, we were able to create more than 1,500 growth opportunities for our brightest people. All in one year.

“On top of that, our performance management system tells us that those 14,000 new employees are not only costing us less than average—they come in at a cumulative 93 percent of midpoint—but more than two-thirds of them are performing in the top 20 percent quintile. We’re bringing in better performers while spending less money—and because of that, I’d like to recommend that we completely rethink our old concepts of ‘annual raises’ and use our data-driven analytics to find a better way.”

Hey, it sounds great—but that type of insight simply will not come to pass if HR leaders are left behind with an old, brittle, and incompatible hodgepodge of inflexible systems that make it impossible for the HR to deliver quantitative insights, forward-looking analyses, and revenue-driving decisions.

Those insights are absolutely essential for companies to be able to unleash the full potential of their people and begin to deliver employee experiences that parallel the terrific new customer experiences that today’s business environment demands: socially driven, optimized for mobile, and seamlessly consistent across smartphones, tablets, and PCs.

As an example of great business leadership and HCM strategy, let me mention what our friends at British Telecom (BT) are doing. One of the world leaders in communications services and solutions, BT has just decided to install a full suite of Oracle HCM Cloud applications to support the company’s growth agenda and help deliver its business strategy to more than 87,000 employees in 170 countries.

BT believes that its new HCM applications – with everything from recruiting and talent management to workforce-deployment optimization – will help the company increase productivity, accelerate business performance, and empower its people to innovate, grow, and delight customers.

Yes, those are lofty ambitions, but they’re also essential in today’s consumer-driven global marketplace where social-mobile lifestyles are disrupting not only how people shop and consume, but also their decisions about where they’ll work and why they’ll work there.

So it’s up to the CEO to drive HR transformation and help HR leaders become business-centric and data-driven enablers of revenue, innovation, and superb employee experiences.Posted by:Mark V. Hurd