Leading in a volatile business environment
How do HR leaders need to adjust to complex, ever-changing landscapes?
By Liz Bernier
It’s tough enough for HR executives to hold the top spot — but what happens when the ground they’re standing on is continually shifting beneath their feet?
Today’s business environment is increasingly volatile, uncertain, complex and ambiguous — a “VUCA” environment, if the acronym developed by the military is applied.
So how can HR leaders adjust to achieve success in such difficult and uncertain terrain? That was the central question of a 2015 global Aon Hewitt study of 45 CHROs entitled Learning to Fly.
There’s no denying we are living in a very volatile environment, said Neil Crawford, partner and Canada talent practice director at Aon Hewitt in Vancouver.
“We think things are going fine, and then they change on us. And I think that’s the essence of the conversation today is how do we cope in that kind of environment?” he said at a Strategic Capability Network event in Toronto.
The study is a good stepping-off point for that conversation, said Crawford. In consulting with a group of HR leaders, the key question asked was “Are we setting ourselves up for success within HR?”
“Maybe we need to go and spend some time looking at this question, looking a little bit at where things are and where we might be going,” said Crawford.
“In 2015, we talked to 45 CHROs, a good gender balance… 33 per cent of the global Fortune 500 was included in this study, representing over three million employees,” he said.
“We covered a lot of industries, we covered a lot of ground in terms of understanding what the perceptions of current CHROs look like, where they think there are concerns, and what success looks like and what are the key capabilities.”
The study indicated that out of all the behavioural competencies required for future CHROs, “thinking strategically” ranked as the most important at 84 per cent, followed by “business knowledge” at 65 per cent, “driving change” at 65 per cent and “influencing others” at 59 per cent.
One of the key findings was this concept of a VUCA environment, said Madeline Avedon, associate partner, talent, rewards and performance at Aon Hewitt in Toronto.
“CHROs all felt they were dealing with the impact of a VUCA environment, and in a more predictable environment, the human capital strategy, the HR strategy they were working on could support and follow a business strategy. But in a VUCA environment, that is just not possible and it’s not successful.”
They talked about having an integrated human capital strategy with the business strategy, she said.
“There are so many interdependencies that are created in a VUCA environment, so really it was about understanding the capabilities and needs of the organization, thinking future-focused, and being able to create that integrated HR and business strategy,” said Avedon. “Basically, in a VUCA environment, the need for HR is just that much more.”
So what does it take to be a successful HR leader in that environment? There were four themes that came across all the interviews in the survey, she said. Those four themes were different HR experiences, global mindset, exposure to the business and changing industries.
Having global experience stood out as a key factor that helped many leaders learn how to cope with volatility and uncertainty, said Avedon.
“You don’t know the network, you don’t know the contacts and you really need to understand how to network differently and what the rules are, because they’re different. So that was a really career-defining experience for many of them,” she said.
It’s about looking at the business agenda and saying, “What’s the HR piece of that?” said Crawford.
“And how can we function at this level to fashion the right agenda to move forward? How do we integrate the HR and the business knowledge? And analytics is really about that. It’s about bringing data that we haven’t brought together and getting new insights from it,” he said.
“There is a really important piece here around networking with the board and some of those relationships, and around people having exposure to the board early in their career… It builds the confidence.”
What do leaders have to say?
An important hallmark of an HR leader is the ability to question, said Adrianne Sullivan-Campeau, vice-president of HR at AllState Canada in Markham, Ont. During her interview process, the CHRO said, “Your job is to question,” she said during an executive panel at the Strategic Capability Network event. “That shifted the mindset for me to say, ‘You are not contributing as an HR person, you are contributing as one of my executives, so my expectation is that you bring to the table everything is your arsenal.”
Despite the dramatic changes that have been seen over the past few decades, there are some elements of being an HR leader that have stayed the same, said Emree Siaroff, senior vice-president and CHRO at Stantec in Toronto.
“I don’t think things have changed… I think a lot of the whats and the hows have changed, but what I don’t think has changed is the whys,” he said. “If we continually look back to why we do the things that we’re doing… when I look back 20 years ago… the whys were the same.
“As long as you keep your eye on the why, and all this stuff is swirling around you, you’re going to get through it. You might need to learn a new tool or a new way, but as long as you stay focused on the why… you’re going to get through it.”
HR leaders take risks every single day, said Karen Trenton, senior vice-president of HR at Sherritt International in Toronto.
“It’s taking that risk to really put yourself out there to understand the business,” she said. “Challenging people to put themselves out there and really learn the business is where the value is.”
Over the last 10 years, each business judges success based on the HR person in place, said Sullivan-Campeau. In that way, the business tolerance for risk might be tied to the individual HR competencies.
But it is industry- and people-specific, said Siaroff.
“Some industries totally get it and see the value, while others, leaders think, ‘What’s the big deal?’” he said. “When you can show the value and you can show the outcomes, that’s when people say, ‘I get it. That makes sense to me.’”
The biggest change relates more to evolving board accountability, expectations around people and how the human capital of the organization has changed, said Trenton.
“Each (board member) that comes in comes in with a very different idea of what the human capital makeup should be, and they’re also looking out very much for the shareholders and have very different expectations than they did eight years ago.”
CHRO role requires balance, decisiveness
By Michael Clark
This May’s SCN session centred on unpacking Learning to Fly, Aon Hewitt’s 2015 study of 45 CHROs. The intent of the study was to answer the question “Is HR developing its own leaders to tackle the challenges of a dynamic (VUCA) environment?”
The key finding of the study, “Developing the Next Generation of CHROs,” was a definite “no.” Human resources is, in fact, doing an awful job preparing HR professionals for the C-suite: “The number of people taking on the CHRO position without any background in the function is alarming.”
Now, an attendee at the SCN event could be forgiven for not knowing this because, like any good consultant, Aon Hewitt repurposed their study (full disclosure: I’m a consultant). At the session, the study was instead used to answer a different, implied question: “What are the characteristics of (45 presumably successful) CHROs in this VUCA environment?”
The individual characteristics identified by the study will not be new to anyone tracking the qualities and trends of HR executives, but the compilation and categorization of the findings is impressive. A model emerges of a role that requires — simultaneously — balance and decisiveness.
Your human capital strategy needs to be integrated into business strategy, not parallel to it. Be close to the chief experience officers, but not too close. Understand the business and promote collaboration between your peers — but not so much that you forget to champion yourself and the HR function. Lead in all directions simultaneously: up, across, functionally, externally and internally (yourself).
Balance and decisiveness are indicative of what organizational psychologist Elliott Jaques referred to as stratum-five thinking. This is the level at which you must leave behind zero-sum games and trade-offs. Rather, the role calls for decisiveness within a constantly shifting internal and external environment of variables, actions and consequences too complex to control outright.
The CHRO must sense the interaction between these forces, including their second- and third- order effects, all the while moving things forward by constantly re-imagining the means to do so. Contrast this with a stratum-four vice-president of HR role, whose task should be that of orchestrating the complicated rather than re-imagining the complex. It is a world of trade-offs between parallel paths of people’s own making, and controlling a changing yet finite set of resources that they must constantly shift from one path to the next and back again to maintain overall progress.
So, what does Aon Hewitt’s report have to do with organizational effectiveness? Well, if most of OE is a function of having the right people, and having the right people is a function of having the right HR, and having the right HR is a function of hiring the right CHRO, then it’s a good a place to start. You might as well. As the report says, HR isn’t going to help you.
Michael Clark is director of business development at Forrest & Company. Forrest is an organizational transformation firm with over 25 years experience in developing the organizational and leadership capacity in organizations.
What does VUCA environment mean to HR?
By Karen Gorsline
Apparently, the U.S. Army War College introduced the term VUCA — volatility, uncertainty, complexity and ambiguity — to describe the world post-Cold War. Use of the term in business settings began in the 1990s.
The three speakers at the recent SCN event shared some of their experiences with change and how they addressed them.Many practical tips were shared, but one comment stood out in contrast — one speaker said things really had not changed.
While the “what” and “how” might have changed, the “why” had not. The challenge is to stay focused on the “why” and to learn new tools as needed.
This prompted me to think about whether VUCA is really relevant to HR and to businesses, and to look for some other perspectives:
“It’s become a trendy managerial acronym: VUCA, short for volatility, uncertainty, complexity and ambiguity, and a catchall for ‘Hey, it’s crazy out there!’” wrote Nathan Bennett and James Lemoine in “What VUCA Really Means for You” in the January–February 2014 Harvard Business Review.
“It’s also misleading: VUCA conflates four distinct types of challenges that demand four distinct types of responses. That makes it difficult to know how to approach a challenging situation and easy to use VUCA as a crutch, a way to throw off the hard work of strategy and planning — after all, you can’t prepare for a VUCA world, right?”
The authors present a guide to identifying, getting ready for and responding to events in each of the four VUCA categories based on how much people know about the situation and how well they can predict the results of your action.
Roger Martin then touched on the issue in “The Big Lie of Strategic Planning” in the same issue of the Harvard Business Review:
“All executives know that strategy is important. But almost all also find it scary because it forces them to confront a future they can only guess at. Worse, actually choosing a strategy entails making decisions that explicitly cut off possibilities and options. An executive may well fear that getting those decisions wrong will wreck his or her career.
“The natural reaction is to make the challenge less daunting by turning it into a problem that can be solved with tried and tested tools. That nearly always means spending weeks or even months preparing a comprehensive plan for how the company will invest in existing and new assets and capabilities in order to achieve a target — an increased share of the market, say, or a share in some new one. The plan is typically supported with detailed spreadsheets that project costs and revenue quite far into the future. By the end of the process, everyone feels a lot less scared.
“This is a truly terrible way to make strategy. It may be an excellent way to cope with fear of the unknown, but fear and discomfort are an essential part of strategy-making. In fact, if you are entirely comfortable with your strategy, there’s a strong chance it isn’t very good. You’re probably stuck... You need to be uncomfortable and apprehensive: True strategy is about placing bets and making hard choices. The objective is not to eliminate risk but to increase the odds of success.
“In this worldview, managers accept that good strategy is not the product of hours of careful research and modeling that lead to an inevitable and almost perfect conclusion. Instead, it’s the result of a simple and quite rough-and-ready process of thinking through what it would take to achieve what you want and then assessing whether it’s realistic to try. If executives adopt this definition, then maybe, just maybe, they can keep strategy where it should be: Outside the comfort zone.”
In general, I find VUCA smacks of a “The sky is falling” reaction to change. From looking at history and talking to people about change that they, their parents and their grandparents have experienced, it would be hard to make a case that dramatic, unsettling change and upheaval is a recent phenomenon.
Is application of early post-Cold War military thinking to business or human resources needs really appropriate — especially in a world that has evolved far beyond that era?
Taking a scenario approach to stimulate thinking and expand consideration of options just makes common sense. HR, for all kinds of practical reasons, focuses on putting programs and systems as tools in place, but in terms of strategy, perhaps HR needs to venture further “outside the comfort zone.”
Karen Gorsline is SCNetwork’s lead commentator on strategic capability and leads HR Initiatives, a consulting practice focused on facilitation and tailored HR initiatives. Toronto-based, she has taught HR planning, held senior roles in strategy and policy, managed a large decentralized HR function and directed a small business. She can be reached at firstname.lastname@example.org.
Taking the lead in a volatile business world
By Trish Maguire
“Hear how HR executives are leading HR and driving business success in today’s VUCA environment” was the compelling draw at a recent SCN meeting.
VUCA is an acronym that emerged from the military in the late 1990s and stands for volatility, uncertainty, complexity and ambiguity. The term unmistakably depicts our ever-increasing, unstable and rapidly changing business world.
In late 2014 to early 2015, Aon Hewitt interviewed, surveyed and assessed 45 CHROs in the United States, Europe, Asia and Australia about their journey to the CHRO position. The question in the study that the SCN event focused on was “Is HR developing its own leaders to tackle the challenges of a dynamic environment?”
The study concluded HR leaders need to master five critical capabilities: leading self, leading the function, leading up and leading across. (To learn about the fifth, people need to download the survey from their website.)
The model certainly provides a framework for HR professional development; however, how the four/five capabilities drive business success in a VUCA environment is not exactly clear to me. To learn how and what HR leaders and talent managers are doing differently to drive success in a VUCA business world was the real attraction.
Hearing from the three HR executives about how HR was leading the change by adapting HR strategies would have been invaluable. However, no mention was made about expanding leadership expertise and behaviours that encourage greater understanding, precision, adaptability and agility.
No examples were offered on how HR is changing its strategies and supporting leaders in championing a vision for change and reinforcing the ability to adjust quickly to local and global trends. Nobody talked about how HR is taking or needed to take the lead in replacing traditional hierarchies with efficient networks and building new levels of interconnection, collaboration and interdependency.
I’m certain that in this new “chaotic norm,” meaning the VUCA environment, HR leaders are finding conventional leadership skills are becoming increasingly outdated. It seems to me that a VUCA business world requires leaders to think and act in entirely new ways if they are to make sense of the unforeseen, supposedly unsolvable issues and convoluted challenges they face.
Without a doubt, leaders in the VUCA world are expected to make relentless shifts along with speedy decisions. Somehow, the Aon Hewitt study doesn’t really address the original question put forward by SCN.
Naturally, I wonder if it’s possible that, unintentionally, for some leaders and organizations, VUCA has become an overwhelming dilemma in their business world. Is it also possible some leaders find the state of uncertainty so distressing that any efforts with flexibility, innovation and transparency have stopped working?
Here’s where I believe HR leaders can and need to seize opportunity. By taking the lead, HR needs to ensure leaders learn and practise newfound behaviours, skills and mindsets to adapt, respond, navigate and succeed in today’s VUCA environment.
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 human resources and organizational development in education, manufacturing and entrepreneurial firms. She can be reached at email@example.com.
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