Human Capital Management - Mba Crash Course Module 2

MBA Master of Business Administration

Crash Course “To reach our greatest potential, we must set our sights clearly and embrace the unknown confidently”

The National Organization of Certified Public Accountants An association of institutional, professionals, and OFWs Riyadh Chapter, Kingdom of Saudi Arabia Riyadh, Kingdom of Saudi Arabia

MODULE 2 HUMAN CAPITAL MANAGEMENT

TALENT REALITIES Business success is more people dependent Marketplace for TALENT is increasingly becoming global Expectations and desires about employment relationship is more complex Employees are more sophisticated now Loyal to themselves and on the move TALENT is a scarce source

ORGANIZATIONAL CHALLENGES De-motivated staff Lack of Job Fit Decreased productivity Increased pressures to produce High levels of stress Ineffective training plans and programs (costs, ROI!) Etc…

ORGANIZATIONAL CHALLENGES NORMALLY CANDIDATES ARE:

Hired for qualifications

But, Fired for Behavior

ORGANIZATIONAL CHALLENGES FIRING as a result of WRONG HIRING Has major negative impact

FINANCIALLY

OPERATIONALLY

CORPORATE CULTURE

WHY PEOPLE FAIL?

With COMPANY CULTURE

With JOB

INCOMPATIBILITY

With PEOPLE

DO ORGANIZATIONS HAVE HUMAN CAPITAL STRATEGY IN PLACE

HUMAN CAPITAL INTELLECTUAL CAPITAL (knowledge, skills, and talent)

+

RELATIONAL CAPITAL (connections and relationships with customers, peers, vendors, and external associates)

= ACHIEVEMENT OF

ORGANIZATION’S GOALS

The ability of people to innovate – to create new products and new services, and to improve business process.

HUMAN CAPITAL

P

M

I SH

O TI VA TI O N

LT U

EN T

K

ER AD LE

RETENTION

T EN PM

RE CR UI TM

CU

OR W AM

RE

TE LO VE DE

EMPLOYEE LIFE CYCLE

HUMAN CHARACTERISTICS As organisms not mechanisms (Idiosyncratic) Bio-Logic not Machine-Logic UNDERSTANDING

BETTER MANAGEMENT OF PEOPLE

HUMAN ATTENTION-CRITICAL CURRENCY 4 TOP PRIORITIES MASLOW’S HEIRARCHY OF NEEDS Davenport and Beck,2001

BELONGING Connection Intimacy SAFETY Shelter, Trusted Friend Family SURVIVAL AND REPRODUCTION Food, Shelter, Sex, Protection, Offspring

FOCUS ESTEEM Achievement Competence Approval Recognition

Understanding Dynamics = Effective Management

EFFECTIVE MANAGEMENT DR. RINSES LIKERT

EMPLOYEES SEEN AS PEOPLE – OWN NEEDS, DESIRES AND VALUES MOTIVATION TO WORK - MODERN PRINCIPLES vs REWARDS & THREATS TIGHTLY KNIT AND HIGHLY EFFECTIVE WORKFORCE - COMMITTED TO ACHIEVING GOALS SUPPORTIVE RELATIONSHIP WITHIN GROUP - MUTUAL RESPECT

NEW PSYCHOLOGICAL CONTRACT INDIVIDUAL

EXPECTATION

safe/hygienic work conditions job security challenging and satisfying jobs equitable policies & procedures; participation in decisions implement best practice Dev’t & career progression; respect Understanding & consideration

ORGANIZATION

accept organization’s ideology to work diligently not to abuse goodwill shown by management uphold the image of the organization show loyalty not to betray positions of trust standards of dress and appearance

IMPORTANCE OF CULTURE IN PEOPLE MANAGEMENT

UNDERSTANDING CULTURE THREE LAYERS VALUES

PARADIGM (Cultural Web)

Strategies

Mission

BELIEFS

Business Objectives

UNDERSTANDING CULTURE CULTURAL WEB SYMBOLS STORIES

• Looking Busy • Untidy work area • Prestigious offce POWER

STRUCTURES

• Fun place to work • Salary Levels • Working hard

• Leadership • Power Distribution

PARADIGM ORGANIZATION STRUCTURES

RITUAL/ ROUTINES

• Meetings • Mechanistic • CommunicationsCONTROL • Organic • Parties SYSTEMS • Formal/Informal • Procedures • Rewards • Punishment

UNDERSTANDING CULTURE DIMENSIONS OF CULTURE - (Hofstede) POWER DISTANCE –

Management Style – Willingness of subordinates to disagree

UNCERTAINTY AVOIDANCE – Extent of threat in unusual situations

INDIVIDUALISM –

Individualistic

or collectivism

MASCULINITY characteristics

–Masculine

UNDERSTANDING CULTURE CULTURAL VARIANCE & WORKPLACE BEHAVIOR (Dutch Writer – Fons Trompenaars)

RELATIONSHIP & RULES – Employee’s Flexibility to situations

INDIVIDUALS/COLLECTIVISM – Individualist/Family EMOTIONAL SOCIETIES – Display of emotions in workplace

DIFFUSE CULTURE –Take time to build relationship

UNDERSTANDING CULTURE CULTURAL VARIANCE & WORKPLACE BEHAVIOR (Trompenaars)

ACIEVEMENT BASED – Accomplishments

TIME ELEMENT –

Present performance for future success.

ENVIRONMENTAL DIFFERENCES – Impact of environment to attitude

EMPOWERMENT

EMPOWERMENT Energizing people to achieve further progress and success. Power is a route to power. Major support for business turnaround

EMPOWERMENT - CHALLENGES Habit Fear of Anarchy Personal Insecurity Lack of Skills Pragmatism empowerment does not solve everything

EMPOWERMENT ROLES OF MANAGERS Counselor/Coach understand and manage situation

Vision Articulator Encourage participation of employees

Goal Definer Define goals and give feedback-Agree target, let team decide how to meet them

Challenge Creator Talent Developer Develop employee’s talents-provide opportunities

Resource Obtainer Availability of resources

EMPOWERMENT ROLES OF MANAGERS Leader - Controlling Leader select the right product select the right employees define processes, procedures, standards set objectives and guidelines.

- Enabling Leader encourage cross-training appraise performance continuously promote communication build and nurture the team encourage employees coordinate direction procure resources represent the team when needed

LEADERSHIP

LEADERSHIP LEADERSHIP central to exercise of management MANAGER

VS

LEADER

How Things Get Done

What Things Meant to People

Do the Right Thing

Do Things Right

LEADERSHIP In a study of nineteen insurance companies, the climate created by the CEO among their direct reports predicted the business performance of the entire organization: In 75% of cases, climate alone accurately sorted companies into high versus low profits and growth.”

LEADERSHIP “If climate drives business results, what drives climate? Roughly 50 to 70 percent of how employees perceive their organization’s climate can be traced to the actions of one person: the leader. More than anyone else, the boss creates the conditions that determine people’s ability to work well.”

MANAGEMENT VS. LEADERSHIP FIVE DIMENSIONS (By Kotter)

1.DIRECTION 2.ALIGNMENT 3.RELATIONSHIP 4.PERSONAL QUALITIES 5.OUTCOMES

MANAGEMENT VS. LEADERSHIP DIRECTION MANAGEMENT

LEADERSHIP

Planning & Budgeting

Creating vision and strategy

Keeping an eye on bottom line

Keeping an eye on the horizon

MANAGEMENT VS. LEADERSHIP ALIGNMENT MANAGEMENT

LEADERSHIP

Organizing and staffing

Creating shared culture and vision

Directing and controlling

Helping others to grow

Creating boundaries

Reducing boundaries

MANAGEMENT VS. LEADERSHIP RELATIONSHIPS MANAGEMENT

LEADERSHIP

Focus on objects/ products

Focus on inspiring people

Selling goods and services

Motivating followers

Acting as a boss

Based on personal power Acting as coach, facilitator

MANAGEMENT VS. LEADERSHIP PERSONAL QUALITIES MANAGEMENT

LEADERSHIP

Emotional distance

Emotional connection

Expert mind

Open mind

Talking

Listening

Conformity

Non-conformity

Insight into organization

Insight into self

MANAGEMENT VS. LEADERSHIP OUTCOMES MANAGEMENT Maintain Stability

LEADERSHIP Create Change – often radical

LEADERSHIP APPROACHES TRAIT APPROACH

BEHAVIORAL

CHARISMATIC

TRANSFORMATIONAL

LEADERSHIP APPROACHES TRAIT APPROACH

ARE LEADERS BORN OR MADE?

LEADERSHIP APPROACHES TRAIT APPROACH Broad Range of Characteristics Intelligence Height Health Socio- Economic Status Initiative & Enthusiasm

LEADERSHIP APPROACHES TRAIT APPROACH Effective Leaders Supervisory Skills Occupational achievement Intelligence Decisiveness Self Assurance Initiative

LEADERSHIP APPROACHES BEHAVIORAL

Behavior (learned phenomenon) and not traits (inherent attributes) that determines the effectiveness of a leader.

LEADERSHIP APPROACHES BEHAVIORAL Rensis Likert (University of Michigan)

CONTINUUM

Exploitative/ Authoritative

Benevolent/ Authoritative

Consultative

Participative Groups

LEADERSHIP APPROACHES LEADERSHIP GRID – TASK VS. PEOPLE HIGH COUNTRY CLUB STYLE (9,1)

TEAM STYLE (9,9)

MIDDLE OF THE ROAD STYLE (5,5)

PEOPLE IMPOVERISHED MANAGEMENT (1,1) LOW

PRODUCER OR PERISH (Authority-Obedience) (9,1) TASK

HIGH

LEADERSHIP APPROACHES CHARISMATIC CHARISMA – Gift of Favor THREE (3) PERSPECTIVES LEADER CENTERED FOLLOWER CENTERED INTERDEPENDENCY

LEADERSHIP APPROACHES TRANSFORMATIONAL Ability to change attitude/perception of members; create vision that inspires people

COMPETENCIES AND STRATEGIES Capacity to encourage/motivate others Capacity to accept challenges & take risks Self awareness and self knowledge Personal persistence and commitment Willingness and motivation to go on learning Ability to learn and profit from failures and mistakes

LEADERSHIP CONTINUUM Tannenbaum and Schmidt’s Leadership Continuum (How to choose Leadership Pattern, Harvard Business Review)

Boss Centered Leadership

Manager makes decision and announces it Manager sells decision

Subordinate Centered Leadership

CONTINUUM

Manager presents the problem and seeks ideas

Manager presents ideas and invites questions Manager presents potential solution

Staff acts freely in set limits

Manager defines limits and asks group to decide

LEADERSHIP

In challenging waters, the leader must be the rock that provides stability, the shield that offers safe harbor, and the compass that points the way.

MOTIVATION

MOTIVATION

Persuading people to do what needs to be done and achieve pre-set goals/objectives.

MOTIVATION RESEARCHES/STUDIES MASLOW’S HEIRARCHY OF NEEDS Assumption that one people have satisfied a certain level of need, they will want to move to the level above .

CHALLENGES - Every individual has different needs. - Need to know the person in the hierarchy. - Multiple needs satisfied at the same time.

MOTIVATION RESEARCHES/STUDIES DOUGLAS MCGREGOR X & Y THEORY Assumption that one people have satisfied a certain level of need, they will want to move to the level above .

Theory X - People need to be controlled and threatened. - Human prefers to be directed. - People need more than financial reward.

Theory Y - Mental/physical effort = play/rest - Control/punishment not only ways to work - Job Satisfaction = Commitment - Imagination/creativity solve work problems.

MOTIVATION RESEARCHES/STUDIES FREDERICK HERZBERG’S TWO FACTOR THEORY Hygiene – Organization & Work Environment - Organization - Policies - Supervision - Working Condition

- Interpersonal relations - Salary - Status - Job Security

Job Motivators - Achievement - Recognition - Growth/Advancement - Interest in the Job

MOTIVATION RESEARCHES/STUDIES HAWTHORNE EXPERIMENT – ELTON MAYO Work is a group activity. Recognition, security, sense of belonging are important in employee morale and productivity. Complaint – sign of disturbance of status/position Attitude & Effectiveness – affected by internal and external environment. Informal groups – with great impact to individual worker. Group collaboration – must be planned & developed

MOTIVATION RESEARCHES/STUDIES EMPLOYEE IMMATURITY/MATURITY THEORY – CHRIS ARGYRIS Bureaucratic/Pyramidal System Poor, shallow and mistrustful relationship. Humanistic/Democratic Relationship Trusting, authentic relationships will develop among people - result in increased interpersonal competence, inter-group cooperation, flexibility, and the like and should result in increases in organizational effectiveness

MOTIVATION RESEARCHES/STUDIES MANAGEMENT SYSTEM AND STYLES – RENSIS LIKERT Exploitive- Authoritative System Threats – High level mgt responsibilities. Benevolent – Authoritative System “Master – Servant Trust” – Reward System Consultative System Leadership by superiors Partial Trust in subordinates Reward system

MOTIVATION RESEARCHES/STUDIES MANAGEMENT SYSTEM AND STYLES – RENSIS LIKERT Participative Group System Leadership by superiors Complete Trust in subordinates Reward system - Economic

MOTIVATION RESEARCHES/STUDIES ACHIEVEMENT MOTIVATION – DAVID MCLELLAND Intense need to achieve – distinct among other needs.

TEAMWORK

TEAMWORK

PEOPLE WORKING TOGETHER TO ACHIEVE A COMMON GOAL

TEAMWORK BUILDING BLOCKS TO EFFECTIVE TEAMWORK Balanced roles. Clear objectives and agreed goals Openness and confrontation. Support and trust. Cooperation and conflict. Sound procedures. Appropriate leadership. Regular review Individual development. Sound inter-group relations. Good communications.

WHAT IT TAKES TO ATTRACT, RETAIN, AND ENGAGE EMPLOYEES

TOP GLOBAL DRIVERS ATTRACTION

Competitive base pay

Recruiting the Right People

Challenging work Career Advancement Opportunities

RETENTION Keeping the Best People

Salary increases linked to individual performance Learning & development opportunities Organization’s reputation as good employer Caliber of co-workers

ENGAGEMENT

Organization’s financial health.

Securing Discretionary Effort

TOP GLOBAL DRIVERS ATTRACTION Recruiting the Right People

Satisfaction on organization’s decision Manager understands what motivates people Organization’s reputation as good employer

RETENTION Keeping the Best People

Low-or-no stress work environment Opportunities to learn and develop new skills Fair compensation

ENGAGEMENT

Effective communication of career opportunities.

Securing Discretionary Effort

TOP GLOBAL DRIVERS ATTRACTION Recruiting the Right People

Opportunities to learn & develop new skills Skill & capabilities improvement Organization’s reputation as good employer Input into decision making in the department Organization’s focus on customer satisfaction

RETENTION Keeping the Best People

Fair & consistent salary criteria Good collaboration across units Appropriate decision making authority to do the job well.

ENGAGEMENT Securing Discretionary Effort

Senior management’s action to ensure longterm success Senior management’s interest in employee well being.

RECRUI TMENT MANAGEMENT

COMMON RECRUITMENT CHALLENGES Typical Selection Process

WHAT EMPLOYERS SEE KNOWLEDGE EXPERIENCE

SKILLS

TRAITS INTERESTS VALUES MOTIVATION

WHAT EMPLOYERS GET

IS THERE A BAD- GOOD PERSON?

NO BAD-GOOD JOB\ORG. FIT!

THE CHALLENGE The Target Job

Role & Responsibilities Growth-Productivity Your Pool Of Potential Candidates

Competencies Personality (Behavioral Traits)

Good Fit

Interest

Marriage

Thinking Capacity

Bad Fit

Cultural & Value Fit

Termination-Law Suits

Leadership and Management Style Fit

COMMON RECRUITMENT CHALLENGES

Study: “Retaining Talent, Retention and Succession In the Corporate Workforce” “85% of Executives reported the single greatest challenge in workforce management is creating or maintaining their companies’ ability to compete for top talent.”

COMMON RECRUITMENT CHALLENGES

“Chances are good that up to 66% of your company’s hiring decisions will prove to be mistakes in the first twelve months.” PETER DRUCKER “Revered as father of Modern Day Management”

COMMON RECRUITMENT CHALLENGES A Recent Study 30-40 percent of all applicants misrepresent themselves on their resumes 10-15 percent of all applicants have unfavorable records 52 percent of resumes have discrepancies

COMMON RECRUITMENT CHALLENGES

“ 63% of all hiring decisions are made during the first 4.3 minutes of an interview.” Society of Human Resource Management Study, reported in USA Today

COMMON RECRUITMENT CHALLENGES E X P E C T A T I O N S

1 st Quarter

2nd Quarter

3rd Quarter

TIME

MANPOWER COST C TR OST AI O NI F NG ?

ER TP COS E? HIR

WH IC OF CO H E ST GED CO GA S? NE NT MPL EN EE G AT RIBU OYE DIS PLOY IVE TE E EM LY ?

TIM E PO TO FIL SIT ION L ?

F TO COS IRE? -H MIS

GOAL: IMPROVED PERFORMANCE

ENGAGEMENT The degree to which employees connect with their work and feel committed to their organization and its goals.

CHARACTERISTICS OF HIGHLY ENGAGED EMPLOYEES Feel excited and enthused Less aware of the passage of time Devote discretionary effort to the activity Identify with task – describe themselves with others in the context of task. Think about questions or challenges posed by the activity during spare moments. Resist distractions and find it easier to stay focused. Invite others into the activity

EMPLOYEE ENGAGEMENT WORLDWIDE 2006 STUDY

• • • • • • • •

Belgium Brazil Canada China France Germany India Ireland

• • • • • • • •

Italy Japan Mexico Netherlands South Korea Spain United Kingdom United States

EMPLOYEE ENGAGEMENT WORLDWIDE Highly Engaged

0%

10%

Disengaged

Moderately Engaged

Global* 14% Mexico Brazil U.S. 21% Belgium 18% Canada 17% Germany 15% Ireland 15% U.K 12% Spain 11% S. Korea 9% France 9% Netherlands 8% China 8% Italy 7% India 7% Japan 2

62% 40% 31%

24% 51% 9% 62% 7% 16% 63% 15% 17%

67% 66% 70% 70% 65%

15% 15% 23% 25% 20% 23% 19% 25% 29% 56%

64% 71% 68% 73% 67% 64% 37% 57%

20%

30%

40% 50% 60% 70% 80% Source: Towers Perrin Global Workforce Study

41% 90%

100%

RETENTION & TURNOVER PATTERNS HIGHLY ENGAGED EMPLOYEES 2% Made Plans to Leave

3% Actively Looking

31% Open to Offers

5% Plans to Retire

59% Intends to Stay

Source: Towers Perrin Global Workforce Study

RETENTION & TURNOVER PATTERNS MODERATELY ENGAGED EMPLOYEES 4% Made Plans To Leave

6% Plans To Retire

8% Actively Looking 35% Intends to Stay

47% Open to Offers

Source: Towers Perrin Global Workforce Study

RETENTION & TURNOVER PATTERNS DISENGAGED EMPLOYEES 7% Plans To Retire 9% Made Plans To Leave 24% Intends to Stay 21% Actively Looking 39% Open to Offers

Source:

Towers Perrin Global Workforce Study

SUMMARY WHO’S WORKING IN YOUR ORGANIZATION? 19% Actively Disengaged 55% Unengaged

26% Engaged

75% PAYROLL LOSS

THE NEW WORKFORCE Demographic Group

Year Born

Traits and Values Hierarchical, loyal to institutions, and motivated by financial rewards and security

Traditionalists

1928-1945 (62+ Yrs Old)

Baby Boomers

Idealistic, competitive 1946-1965 (42-61 Yrs Old) and striving to achieve

Generation X

1966-1981 (26-41 Yrs Old)

Generation Y (Millennials)

1982-2000 (7-25 Yrs Old)

Self Reliant, willing to change rules, and tribal and community oriented

Confident, impatient, socially conscious, family-centric and technology-savvy.

Learning Styles Traditional, instructor-led, reading, homework “teach-me”

Traditional, group effort, expert-driven, selfdriven, “lead me to information” Team Driven, collaborative, “wisdom of crowds”, peer-to-peer “ connect me to people” Give context and meaning, make it fun, search and explore, entertain me “connect me to everything”

YOUR CHALLENGE

To ensure that every “people” decision—whether hiring, promotion, or development is aimed at achieving “superior” performance”.

WHY DO PEOPLE PERFORM AT A “SUPERIOR” LEVEL?

ACHIEVING JOB MATCH Checking the Past

Reviewing the Present

Skill Match

Company Match

Education Training Experience Skills

Values Demeanor Appearance Integrity

? What predicts future “superior” performance?

THE MISSING THIRD IS.. Checking the Past

Reviewing the Present

Skill Match

Company Match

Education Training Experience Skills

Values Demeanor Appearance Integrity

Job Match Thinking Style Behavioral Traits Interests

…in predicting “superior” performance

PERSONALITY MEASURES AND PREDICTORS OF JOB PERFORMANCE

14%

Interview

26%

Reference Checking

38%

Personality Testing Abilities Testing

54% 66%

Interest Testing 75% Job Matching 0

Sources

Assessment Tool 10

20

30

40

50

60

70

80

Prof. Mike Smith, University of Manchester. John E. Hunter and Ronda F. Hunter. Validity and Utility of Alternative Predictors of Job Performance. Psychological Bulletin. Robert O. Tett, Douglas N. Jackson and Michelle Rothstem. Personality Measures and Predictors of Job performance. A Meta-Analytical Review. Personnel Psychology. Winter. p 103 Michigan State University’s Schoool of Business

THE IMPACT OF JOB MATCH With Job Match

Without Job Match

24% 28%

46% 57%

5% 8%

25% 34%

High Turnover Industry % left / fired after 6 months % left / fired after 14 months Low Turnover Industry % left / fired after 6 months % left / fired after 14 months Source: “ Job Matching for Better Sales Performance,” Harvard Business Review, Vol. 58, No. 5.

Job Profile Summary Job Pattern: Sales Representative

Overall Job Match

94%

Thinking Style 7

Learning Index

8

Verbal Skill

Job Match Percentage 95%

8

Verbal Reasoning 7

Numerical Ability Numeric Reasoning

8

Behavioral Traits 8

Energy Level 7

Assertiveness

A Good Match

4

Sociability

Job Match Percentage 95%

8 6

Manageability Attitude

7

Decisiveness

6

Accommodating

Distortion – 8

6

Independence

6

Objective Judgment

5

8

Occupational Interests I n t e r e st s Ra n k i n g

Top t h r e e in t e r e st s for t hi s posi tion 8

Enterprising 6

People Service Creative

Low e st t h r e e i n te r e st s f or t h is p osit ion 5

Financial/Administrative Technical

4

Mechanical

4

17

Job Match Percentage 91% The Job Matching process for Interests is concerned with top three interests of a Job Match Pattern and how a candidates top three interests match. The three top interests for this Pattern are indicated and ranked from top to bottom.

Job Profile Summary Job Pattern: Sales Representative

Overall Job Match

64%

Thinking Style 8

Learning Index

8

Verbal Skill

8

Verbal Reasoning Numerical Ability

9

Numeric Reasoning

Job Match Percentage 86%

7

Behavioral Traits 2

Energy Level

8 4

Assertiveness

8

6

Manageability

A Poor Match

Job Match Percentage 56%

3

Sociability

Attitude

5

Decisiveness

8

3

Accommodating

Distortion – 9

6

Independence

3

8

Objective Judgment

6

Occupational Interests I n t e r e st s Ra n k in g

Top t h r e e in t e r e st s for t h is posi t ion

Enterprising

2

People Service

2

Creative

1 Low e st t h r e e in t e r e st s f or t h is p osit i on

Financial/Administrative

4

Technical Mechanical

22

8

Job Match Percentage 35% The Job Matching process for Interests is concerned with top three interests of a Job Match Pattern and how a candidates top three interests match. The three top interests for this Pattern are indicated and ranked from top to bottom.

THINGS TO PONDER WHICH KIND OF MANAGER AND LEADER ARE YOU? OLD? Thinks of self as a manager 0r boss

NEW? Thinks of self as a sponsor, team leader, or internal consultant

Follows the chain of command

Deals with anyone necessary to get the job done.

Makes most decision alone

Invites others to join in decision making

THINGS TO PONDER WHICH KIND OF MANAGER AND LEADER ARE YOU? OLD? Hoards information

NEW? Shares information

Tries to master one major discipline, such as marketing or finance

Tries to master a broad array of managerial disciplines

Demands long hours

Demands results

CASE STUDY

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