Mastering Complexity

Max Blumberg, PhD

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Personal Introduction

2

Musician

Computer scientist

Accenture consultant

Technology start-up

PhD & Research Fellow at Goldsmiths

Consult globally: HR Analytics, Organizational & Sales force performance, CIPD

people strategy

The changing value of organizations

3

95%

5%

1978

Book value

Other value

28%

72%

2002

Book value

Other value

The enterprise capital framework

4

Asset/capital value

5

Resource Competitive differentiator?

Tangible assets e.g. technology; relatively easy to replicate

Financial capital Available to most organisations with a good plan

Intellectual capital

Customer capital Not really: most organisations have access to the same markets

Structural capital Yes but replicable in medium term

Human capital Yes: very difficult to imitate

Driving value creation and shareholder return

6

Total Return to shareholders

(TRS)

Spread

Return on Invested Capital

(ROIC)

Minus

Weighted Average Cost of Capital (WACC)

Growth

Organic Growth

Growth through M&A

Operating Margin

Capital Efficiency

Components of Value Creation and competitive advantage:

Spread: Competitive advantage derived from operational and capital efficiency and pricing strategy

Growth: Value from new products/services through innovation, M&A, market share, etc.

Ratio between them is a matter of competitive strategy

Quality

Innovation

Productivity

Customers

Human Capital

How much do we invest in people?

7

TMT 37%

Heavy manufacturing

25%

Light manufacturing

32%

Pharmaceuticals/Prof services

45%

Financial services

43%

CFO Research Services

Should we invest in people?

8

Generational conflict: The generations

9

Born Age

Silent generation <1945 70+

Baby boomers 1946 - 1960 54 – 68

Gen X 1961 - 1977 37 – 53

Gen Y 1978 - 1995 19 - 36

How do we invest in human capital (versus HR)?

10

£X programme Competencies (Knowledge)

Employee performance(Behaviour)

Contribution to organisational

objectives

Programme?

Recruitment

Development

Retention/engagement

Diversity

Compensation

Etc.

Valuing your Talent

cipd.co.uk/valuingyourtalent

Valuing your Talent

Objectives

1. Develop a broad framework of HR Metrics for measuring human capital.

2. Showcase current practice.3. Develop a tool / methodology.

Members of the steering group:

Findings 1. People and investment in them should be at the heart of the business model.

2. A new language for business is needed.3. HR should lead greater data integration across the

business.4. Value = People

Valuing your Talent - VyT

12

Human capital 2014

13

From capital to people (judging by company valuations)

Generational conflict because attitudes to work are changing faster than the organisational structures and processes used to manage them

Skills shortage which means employer branding is crucial

Transparency (data, technology) complicates everything

Recognising difference – career paths for e.g. “techies” and “leaders”

14

Generation Born Age Values at work

Silent/traditional

<1945 70+ Delayed gratification, loyalty, discipline, authority & hierarchy

Baby boomers

1946 - 1960

54 – 68

Teamwork, live to work, hierarchies, annual feedback

Gen X (latch-key kids)

1961 - 1977

37 – 53

Grew-up alone, esteem issues, independence (hate reviews), dislike hierarchy, value personal lives, pioneered flexibility

Gen Y 1978 - 1995

19 - 36 Highly nurtured, high self-esteem (believe they’re important), used to frequent recognition regardless of performance, always on peer-communication

Intergenerational conflict: The generations

Intergenerational conflict

15

Baby boomers are not retiring Retirement age is rising (Gallup = rising to 62 years old)

Baby boomers and Gen X must manage Gen Y with very different values

Gen Y wants to be where the action is rather than loyalty

= Leaders must plan to manage 3 or 4 generations, each with their own values (but difference can be an advantage)

16

Oldie’s jokes about Gen Y...

17

Intergenerational conflict: Actions

18

Culture: Promote flexible work/life balance, challenging work, openness, informal, entrepreneurial

Younger generations need the “why” before the “what”

Younger generations, frequent feedback – peer-based

Post recognition instantly & widely – use social media if possible

Employer brand: The Picture

19

Glass door:

“The advances made seem a bit superficial. They offered flex time, but it was always subject to approval. They assured reviews and raises, but they were tepid at best.”

Employer brand and transparency: The issues

20

Social media has made your brand transparent

Engagement is the new employer brand

Gallup (2014): 13% of employees are engaged Glassdoor:

– 51% of employees experience buyer’s remorse– 54% of employees would recommend their employer– 83% leave their employer in the first year

Employer brand: Actions

21

Developing skills and career paths

22

Technical skills are not enough

New organisational structures make it attractive to go solo

Career paths for everyone