Transformative HR moves organizations forward, creates sustainable advantage

Deutsche Telekom, Shanda embrace principles of evidence-based change
By Amanda Silliker
|Canadian HR Reporter|Last Updated: 10/15/2012

Transformative HR: Tracey Malcolm, a director in Towers Watson’s talent management and rewards practice, spoke at a recent Strategic Capability Network (SCNetwork) event in Toronto. She explained how an HR team can successfully implement the concept of transformative HR and its 5 key principles to achieve organizational goals. For more information, visit www.scnetwork.ca. (Scroll down to bottom of this story to view video of Malcolm discussing transformative HR.)

Is evidence-based change HR’s new panacea? (Strategic Capability)

Approach finally gaining definition, credibility (Leadership In Action)

Application of all 5 steps can play critical role (Organizational Effectiveness)

A few years ago, Deutsche Telekom was having difficulties with succession planning. Each business unit had very different systems and practices in place and did not want its talent moving to others areas of the organization, according to Tracey Malcolm, a director in Towers Watson’s talent management and rewards practice in Toronto.

“It became recognized at the management and board level that something’s broken — each business is doing its own thing and, when you look within the business, the talent looks good but we’re not pulling together and really talking through succession planning and creating a talent pipeline,” said Malcolm, speaking at a Strategic Capability Network (SCNetwork) event in August in Toronto.

To deal with the issue, the HR team at the Bonn, Germany-based company decided to try a new approach and considered the underlying, logical framework that could be applied to succession planning at the organization. The team came up with the metaphor of considering the organization as a supply chain.

“If you think about supply chain as a logical framework, all our inventory management is completely different — your widget, my widget — and we have no idea what types of assets we have across the organization nor can we move that inventory,” said Malcolm. “That’s not to say we compared human capital to boxes and nuts and bolts, but the logical framework worked.”

From that analogy, the business leaders and board began talking about how the company could work together to move talent through a common process, she said.

This logic-based approach is the first key component in transformative HR, according to Malcolm.

Transformative HR is an approach that affords human resources the opportunity to do things differently, to move the organization forward and help achieve sustainable advantage, she said.

It showcases five key principles of evidence-based change, which was inspired by the evidence-based medicine movement. This approach encourages doctors to determine which treatment is the most effective, based on well-grounded evidence rather than gut feeling.

The first principle, as seen in practice at Deutsche Telekom, is logic-driven analytics. This concept encourages HR to look past the available data and think about the context — it’s a blend of quantitative and qualitative data, said Malcolm.

The second key element in transformative HR is segmentation. This is about discovering the strategic categories of employees and taking the point of view you can’t continue to deliver the same for all, said Malcolm.

“You can’t spread peanut butter evenly. Businesses don’t run where they’re investing equally for all,” she said. “Segmentation is really not talking about treating different segments better, but it is making for unique deals for pivotal areas.”

To do this, HR needs to think about the return on performance for various employee categories. For example, airline pilots need to reach competency very quickly, so when HR is considering that segment, it needs strong programs around onboarding and improving pilot capability immediately upon starting work, said Malcolm.

When it comes to flight attendants, they use a lot of discretionary judgment over time in terms of the customer experience, so their return on performance looks very different and can continue to increase over a longer period of time, she said. The programs for this segment would be unique and need to be developed over time.

The third key component is risk leverage. Organizations should determine where risk-taking is going to help versus hurt, said Malcolm. Risk can be analyzed, planned for, managed and exploited to the economic benefit of an organization — taking the right risks is often as vital as avoiding the wrong ones, said Malcolm.

“It’s actually determining where we can take risks because that deviation from the expected outcome is OK, rather than clamping down and saying, ‘Risk is bad.’”

The fourth key principle of transformative HR is integration and synergy. This refers to how programs integrate and build upon one another for improved outcomes.

Shanda focuses on retention

Shanda, an online gaming company in China, was having issues with retaining employees, so the president decided to create a passion for work similar to his employees’ passion for gaming. He devised a gaming structure where employees earned points related to their job performance and tasks — and a defined number of points was needed to be considered for a promotion.

“It’s all a tightly woven, integrated experience and it actually drove engagement,” said Malcolm. “It’s a really interesting, exciting example of, when you think about it, how well that’s tied to what Shanda is trying to do in terms of their day-to-day business.”

The final aspect of transformative HR is optimization. It’s about investing where it makes the biggest difference and having the courage not to invest where it doesn’t make a difference, said Malcolm.

HR needs to think about the optimal value exchange between the organization and a particular group of employees, she said.

“Are you really thinking about the HR programs as a portfolio of services — differentiating how they are distributed and (considering) ‘Will a change in investment really make a difference?’” said Malcolm.

“You could be paying a lot more for a program but hindering engagement, or making small-level investments and getting a huge uptick in engagement and performance.”

HR shouldn’t wait until there is a challenge or a business objective on the table to consider how it’s adopting transformative HR practices — it should meet at least once per year to have these discussions, said Malcolm.

“HR has a business to run — it’s the business of HR — but is HR ever taking a step back and fundamentally looking at not just the data and results from the year but to look forward and say, ‘What are the implications for HR?’”

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SCNetwork’s panel of thought leaders brings decades of experience from the senior ranks of Canada’s business community. Their commentary puts HR management issues into context and looks at the practical implications of proposals and policies.

Is evidence-based change HR’s new panacea? (Strategic Capability)

By Matt Hemmingsen

To paraphrase former American president Ronald Reagan: Here we go again. The concept of evidence-based change is now being touted as a new approach for HR leaders to make better, rigorous decisions regarding human capital investments.

By embracing this discipline, it is suggested organizations gain a sustainable advantage and create an engaged and committed workforce. Originating in the evidence-based medicine movement of the late 1990s, these principles are now being adopted by leading global organizations such as Coca-Cola, Deutsche Telekom, IBM and, here in Canada, RBC.

It is imperative for organizations to bring “rigour and science to the making of HR decisions much in the same way as finance and marketing have long had decision support systems, tools and processes with a clear sense of what the outcomes will be from their decisions,” according to Ravin Jesuthasan of Towers Watson and co-author of Transformative HR: How Great Companies Use Evidence-Based Change for Sustainable Advantage.

Predicated upon five key principles — logic-driven analytics, segmentation, risk leverage, integration and synergy, and optimization — it provides a road map for HR leaders to move beyond the “balanced scorecard” and embrace an “analytical discipline and sophisticated systems thinking” to contribute more effectively to sustainable business strategies and the development of value-added people initiatives.

So, is this really a new and radical approach for consideration by leaders in the HR community?

I recall a similar hypothesis put forth by Phil Rosenzweig in his book The Halo Effect some five years ago. Rosenzweig wrote of a company’s need for critical thinking — the ability for objective assessment and a realistic understanding of key business drivers. Given that strategies are built based on assumptions and future scenarios, Rosenzweig felt it was absolutely imperative the thought process behind their construct be rigorous.

For an organization to gain a sustainable advantage, it must perform at a higher level, one that reflects a regimen that is more exacting than its competitors — in essence, maximizing and leveraging its human capital at every turn.

In this regard, where does HR start? HR must partner with the business, agree with the strategy, set the priorities, understand the risks and maximize its people investment. Does it require a disciplined approach? Absolutely. Does it need to adopt a formula-driven approach used by others? Not necessarily.

At a minimum, HR must possess strong business acumen and a perceptive understanding of what drives the business. Sometimes we overlook the obvious — HR does not necessarily need to develop the best solution or program, but one that instinctively works best for the continued sustainability of the organization.

Isn’t that the appropriate panacea?

Matt Hemmingsen is a commentator on strategic capability for SCNetwork and managing partner at Toronto-based Personal Strengths Canada. He can be reached at mhemmingsen@personalstrengths.ca, (888) 927-7347 or visit www.personalstrengths.ca for more information.

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Approach finally gaining definition, credibility (Leadership In Action)

By Trish Maguire

Six years ago, IBM suggested the amount of data in the world would be doubling in size every 11 hours by the year 2010. Perhaps that’s why some HR leaders feel the paradox of drowning in data while, at the same time, searching for more relevant information to support key HR decisions.

The main reason many leaders struggle between knowing what to do and doing something about it is because they fail to understand what they should know and misidentify what is relevant, according to Jeffrey Pfeffer and Robert Sutton, authors of Knowing ‘What’ to Do is Not Enough.

Research and consulting experts Peter Tingling and Michael Brydon make the interesting observation that many managers believe their organizations are practising evidence-based decision-making but, in fact, are unintentionally applying decision-based evidence-making.

Is it possible, therefore, that for some HR leaders, evidence-based decision-making is about how to convert knowledge and put it into action to improve performance results?

Tingling and Brydon’s answer would be an emphatic no. The key differentiator lies not in just improving performance but in the ability to mine an organization’s data and information, gain new insights faster than the competition and turn those insights into good decision-making.

The question for many HR leaders may be: “Is it possible that with the greater availability of data, critical information is simply being overlooked?”

How many times has your HR team made disgruntled comments such as “It’s obvious they’ve already made up their minds, so why are we bothering to research and analyze the data and information when we know it’s going to be ignored?”

No doubt many of us have similar examples, all of which suggest there is great potential for HR leaders to better leverage their team’s rational and analytical decision-making techniques to better direct decisions.

Tracey Malcolm, a director in Towers Watson’s talent management and rewards practice, substantiates current examples where prominent organizations are using evidence-based decision-making to ensure they collect the most relevant information to support key HR decisions. Seemingly more leaders are beginning to practise this approach to make sure the right information is provided to the right people at the right time to support their organization in sustaining a competitive advantage in the market.

Whether you agree or not that as an HR leader you intuitively know the best decisions are supported by good data, the evidence suggests there is an increasing need to focus on how to do it better.

It’s no coincidence, then, for us to see the emerging discipline of evidence-based management becoming a best practice for HR leaders. It may not necessarily be a new concept, but it is timely and an approach that is finally gaining a new level of definition and credibility.

If you are sincerely committed to a transformative HR strategy, the approach deserves serious consideration.

Trish Maguire is a commentator for SCNetwork on leadership in action and founding principal of Synergyx Solutions in Nobleton, Ont., focused on high-potential leadership development coaching. She has held senior leadership roles in HR and organizational development in education, manufacturing and entrepreneurial organizations and can be reached at synergyx@sympatico.ca.  

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Application of all 5 steps can play critical role (Organizational Effectiveness)

By Barbara Kofman

The promise of delivering transformative HR is a powerful one we’ve heard before, but what really constitutes a viable formula? According to Tracey Malcolm of Towers Watson, the answer lies in applying five principles to support human capital decisions to ensure they are based on legitimate evidence:

• logic-driven analytics

• segmentation

• risk leverage

• integration and synergy

• optimization.

Logic-driven analytics: Rather than getting buried in the data, it’s important to look beyond the numbers to the context in which they take place.

A case study at the SCNetwork event examined two units at a hospital with survey results that were poles apart on leadership and organizational effectiveness indicators. A closer examination revealed these two units played very different roles, paradoxically confirming the diametrically opposed results were the desirable ones for each unit.

When we consider this in connection with employee survey or 360-feedback results, logically we should be — if we aren’t already — applying the same principle in evaluating results. Specifically, we ought to clarify the context in which the work is done before drawing conclusions.

Segmentation: The key to segmentation, according to Malcolm, is to be vigilant about not using a one-size-fits-all approach with regards to the way different departments at an organization choose to effectively deliver and value contributions.

This does not discount the importance of having a common framework across an organization. Rather, segmentation is about striking a balance between rigid standardization (conceivably best embodied in the extensive policy and procedure manuals that were once the calling card of HR) and mass customization.

Many successful organizations have long understood the importance of this step, as demonstrated by the variety of ways they allocate budgets and invest in different functions. Still, it’s a good reminder that this step should not be overlooked if companies are looking to maximize investments in key personnel.

Risk leverage, integration and synergy, and optimization: As with logic-driven analytics and segmentation, these three steps tread on familiar ground:

• The risk leverage step focuses on the role of calculated risk-taking and emphasizes how critical it is to develop a rational framework for determining what constitutes an acceptable risk.

• The integration and synergy step highlights the benefits of merging HR practices with the values inherent in an organization’s product and services, suggesting this will, among other things, attract and retain the best employees.

• Optimization proposes the cumulative gain from applying this evidence-based change model is it provides leaders with the courage to invest in parts of their organizations differently, as they now have the capacity to clearly explain why these distinctions are necessary.

This session was positioned as one that would share breakthrough research on the five proven principles that explain what some of the world’s most admired organizations have done to be successful.

To better illustrate and promote understanding, it would have been useful to have had one case study to clarify how the application of all five steps played a critical role in an organization’s resultant success, particularly as each of these steps, taken in isolation, are ones many of us have employed in the past.

The “groundbreaking” part is in the validation that these steps, applied together, constitute critical parts of a linked chain of actions and decisions that we can now apply as we strive to make our organizations more effective.

Barbara Kofman is SCNetwork’s lead commentator on organizational effectiveness and founding principal of CareerTrails, a Toronto-based strategic coaching and HR Solutions organization focused on enabling individuals and organizations to resolve their work-related challenges. She has held senior roles in resourcing, strategy and outplacement, and taught at the university and college level. She can be reached at (416) 708-2880 or bkofman@careertrails.com.

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