Human Capital Planning
- Overview of Human Capital Planning
- Elements Human Capital Planning
- Overall Human Capital Capability
- Pyramid Of Corporate Health
- Appendix 1. 78 KEYS Questions for Measuring Motivation
- Appendix 2. Script for Strategic Planning Meetings
- Sources, References and Selected Bibliographic Information
It pretty much goes without saying that in order to have a high-performing innovative organization you need to have the right people working together in an innovative culture. The “What Is an Innovative Culture” figure highlights the dichotomy that exists within technical organizations. There is a fine line between what everybody wants and what you also need for success. One of the best ways to achieve this balance is to work towards stakeholders’ commitment behavior that resembles a ”Partner” as shown in the “Behavioral Organization Chart” figure. Thus the strategic direction for human capital planning purposes is to strive for all participants in the organization to behave as if they were partners. The processes to accomplish this are described more detail in the Chapter on HR Processes.
From a strategic standpoint there are some design considerations that will influence the Human Capital Strategic Plan. These are:.
- Organizations which view the environment as a source of inspiration are more likely to adapt to changes through innovations in design rather than short run problem-solving.
- The more turbulent the environment, the more important it is for innovative organizational adaptations to transform the environment as well as the organization.
- To affect change in the environment, actions taken by an organization must at least be as powerful as the forces that originally created the environment.
Responses to changes in the environment require resources proportionate to the significance of the changes.
- Environmental sensing devices should be at least as sensitive as the context which needs to be understood.
- The greater the influence of tradition on decision-making, the greater the expressed need to make rational versus creative decisions.
- The greater the perceived ability to influence the environment, the more innovative design decisions will be.
- The more turbulent environment the more difficult it is to understand how current trends differ from past experience.
- The more significant the adaptation to the environment required, the more difficult it will be to gain acceptance of new behaviors associated with the change.
- The greater the level of experimentation and organizational design, the greater the likelihood that learning will occur and lead to more effective future adaptations to the environment.
- The more involvement there is in the scanning process, the more commitment there will be to making changes in the organization to meet the challenges uncovered.
- The more energy is put into the scanning process, the more likely it is that attention will shift from exclusively internal to both internal and external opportunities for action.
- The more the design of the organization permits satisfaction of unfilled needs through work, the higher the level of motivation to work will be.
- Needs are neither static nor entirely understood. Therefore, the more flexible the organization design is, the more likely it is that continued motivation can be achieved.
- Needs are often socially determined. Therefore, organizations which both create needs and satisfy them will be more successful than organizations which act only in response to stated needs.
- The extent that organizations are designed to meet lower-level needs exclusively, higher performance is unlikely to occur.
- The greater the involvement of employees in the design process, the more flexible the resulting organizational design is likely to be.
- The greater the involvement of employees in the design process, the clearer the understanding of how behaviors lead to desired rewards.
- Designs created without the direct input of organizational members are unlikely to take into account the influence of unique population characteristics and reactions to design features.
- The greater the disparity between design features and needs of the stemming from unique characteristics of organizational members, the less successful the design will be.
- To the extent that the design of an organization is consistent with naturally occurring group processes, performance will increase.
- The successive group-based designs for work varies directly with the amount of attention given to making group processes effective.
- The effectiveness of groups and social technical systems is related directly to (1) The extent to which group members are technically proficient, and therefore, able to engage in technical problem solving; (2) The extent to which organizational reward systems promote cooperative behavior in the group; (3) The extent to which the group is provided with the training, support and resources required to accomplish its purposes; (4) The extent to which additions and departures to the group are well-managed; and (5) The extent to which the group is able to manage its relationship with its environment.
- The effectiveness of group designs varies directly with the extent to which: (1) The task of the group a stable; and (2) The knowledge differences among group members are small.
- To the extent group tasks are defined to encompass critical interdependencies in the work itself, group cohesiveness and performance will increase.
- The stronger the culture of the organization, the more it will constrain design possibilities.
- The more complexity in the external environment, the greater the potential for internal cultural diversity.
- The greater the cultural diversity within the organization, the more difficult it will be to achieve consensus on design parameters.
- The greater the cultural difference between management and labor, the less receptive employees will be to designs proposed by management.
- The better the fit between the organization’s culture and its external environment, the more effective the organization will be.
Generally speaking, the design of jobs will be more stimulating when the technology: (1) Demands a variety of skills on the part of employees; (2) Demands higher-level skills which require time to learn and master; (3) Requires higher levels of interaction among the employees; (4) Involves greater variability in inputs, conversion processes, and outputs; (5) Is subject to continuous change or modification; (6) Is designed to provide more direct and immediate feedback; (7) Allows greater flexibility and geographic movement in and work patterns; and (8) Leaves a significant degree of relevant decision-making to employees.
A great way to achieve the balance between what everybody wants and what is needed for success is to make learning a metric that matters most. Learning must be a part of an organization’s overall strategy. To support learning, as Peter Senge says, an accurate, insightful view of current reality is as important as a clear vision.
Shown in “The Learning Wheel” figure is a model developed by Sarita Chawla. It shows two complementary halves of a learning organization. On the left is a path of Innovation and Development and on the right is the path of Insight and Discovery. These paths can be applied organizational learning by addressing the potentials for development across nine interrelated domains of learning.
These nine domains can be viewed as follows: every human being has a deep yearning for the quality of life. To realize such a quality of life, we rely largely on ourselves and others to provide quality goods and services by doing quality work. In an increasingly interconnected world, doing quality work requires building and maintaining quality working relationships. These in turn reflect the quality of performance, efficiency, thinking, attention, depth of wisdom and compassion that each individual brings to their life and work.
Along the path of Insight and Discovery we access and gather information. On this path we live with questions, and engage in the process of research or inquiry that offers progressively deeper and deeper insight into the nature of things. Through penetrating systems analysis, deep inquiry and attention, insight illuminates many important patterns of relationships that were previously mysterious and unknown. Along this path insight deepens to unfold into innovation. The ability to walk this path is determined by both the quality of one’s analytical and attentional skills.
The Path of Innovation and Development provides a complement to the Path of Insight and Discovery. Along this path we give meaning to information by shaping it into images, ideas, communications, and actions. This path unfolds along a spectrum ranging from the most subtle idea on through the progressively more tangible stages of formulation, communication, and action necessary to put an idea into action. Following this path provides an individual, team, or organization with a sense of mastery and control that is balanced by the Path of Insight and Discovery’s sense of mystery.
Together the two paths form The Learning Wheel. Moving around this wheel generates the momentum of continuous learning and development necessary for any learning organization. The Human Capital Strategic Plan should incorporate elements from both pathways.
As David Hurst points out, optimal learning takes place when the gap between action and result is as short as possible in time and space. Then cause and effect can be closely linked and mistakes can easily be learned from. In practice, however, this virtuous cycle is interrupted by the alternating periods of growth and decline that characterize all economies. During periods of extended growth it is very difficult for managers to distinguish objectively between performance that is due to the up cycle versus performance that is due to genuine competitive advantage. In business booms, managers will naturally tend to take the credit for the excellent performance of their organizations. Their belief in their ability will almost certainly be reinforced by the workings of the formal compensation system and the applause of the investment community. The genius of the strategy will be confirmed.
Thus, periods of economic growth interrupt the feedback from performance to learning, preventing organizations from evaluating the effectiveness of their strategies. Healthy skepticism about managerial abilities is swept aside by the tangible evidence from what seems to be sustained success. This will be particularly true in organizations that emphasize financial performance over other measures.
The situation is just reversed in periods of economic decline. Now organizations are overwhelmed by feedback from every action taken during the long up cycle. Panic by the sudden reversal of fortunes, unable to assimilate all the information, yet still confidence in the appropriateness of their strategies, managers are likely to expend their efforts on frantic attempts to maintain performance rather than cycle through a learning process. Of course, the imperative to maintain performance will even be more urgent if the organization has taken on substantial financial commitments during the good times.
Thus, the long invariable delays between action and result, which are by-products of the business cycle, create conditions highly unfavorable to learning. The result is in many organizations, when studied longitudinally, display a pattern of apparently outstanding performance followed by a steep decline. The managerial challenge is to dampen this erratic progress to sustain performance. A key issue in this challenge is to both learn and protect the core value-adding processes.
From a strategic standpoint there are four insights about learning organizations to keep in mind:
- Insight 1: Don’t assume learner homogeneity. Different people learn most productively in different environments and formats.
- Insight 2: Time must be allocated for both students and teachers within an organization to transfer skills as well as time and travel support for individuals to attend professional society meetings and standard and government communities of practice.
- Insight 3: You have access to a variety of conference room settings and styles as simply changing the environment for the same attendees will result in a different learning experience.
- Insight 4: Failure must be viewed within the organization as a learning experience and leaders must walk the talk in this regard. This is particularly critical within Agile/Lean cultures.
The role of psychological safety in Agile/Lean methods is critical to getting the full performance benefits that Agile/Lean offers. The three areas to pay attention to are: (1) Cultural differences related to attitudes towards inclusiveness, (2) Cultural differences related to perceptions of trust and collective responsibility, and (3) Cultural differences related to openness and communication.
With respect to the first point regarding attitudes towards inclusiveness, in Agile practice, the organizational structures are flat rather than hierarchical, and decision making falls to the team, not to managers. The shift in authority and responsibilities from managers to team members often creates awkwardness and low productivity in meetings if participants are not used to being asked to contribute in this way.
With respect to the second point regarding perceptions of trust and collective responsibility, another one of the principles underlying Agile development is a prioritization of individuals and interactions over processes and tools. Agile team members are encouraged trust other team members hunches and suggestions as well as their own, even if accepting a teammates point of view means rethinking solutions or abandoning approaches. It takes a lot of work to build good teams which are made up of people with whom you can argue about a task but with whom the argument will never get personal.
With respect to the third and last point regarding cultural differences related to openness and communication, in Agile practice responding to change is more important than following a plan. This comes full circle back to the above argument for building a learning organization. Agile management stresses the value of communication (minimizing the risk of team members not being kept up to date), simplicity (taking one step at a time), feedback (providing input on why a plan is to be changed), and courage (stressing the value of exploration in reaching a project goal). Transparency is essential; information must be widely available so the team members can make informed decisions and members ought to be able to debate any aspect of the project.
The above three points set the overall direction for human capital strategic planning in Agile/Lean organizations.
People have defined and segmented Human Capital / Resources / Capabilities many different ways. Of these myriad of approaches the best approach for managing innovation and commercialization of sustainable businesses is to simplify Human Capital / Resources / Capabilities to three basic parameters. These are the skills of the individuals and organization, the motivation of the individuals and organization, and the level of thought (an expanded practical IQ metric) of the individuals in the organization.
The relationship between Human Capital and other Intellectual Capital of the corporation can best be visualized in the “Human Capital as One Element of the Corporation’s Intellectual Capital” figure. It is the human skills, motivation and level of thought that creates the know-how and other Intellectual Assets unique to the corporation. These Intellectual Assets provide for the long term sustainability of the organization.
To obtain the best probability of creating a high output innovative organization, a Human Capital Strategic plan starts with the Corporation’s Vision, Mission, Values, Business Strategic Plan and Technical / New Business Strategic Plans. These plans describe what projects the company needs to undertake to be successful. The Human Capital Strategic Plan looks at the requirements of these plans and ascertains how many people, with which skill level, motivation, and level of thought will be necessary to deliver on the other plans. Clearly companies that plan to follow the market leaders and conduct incremental innovation will be most cost-effective and productive if populated by individuals capable and motivated to do that type of work. On the other hand, companies whose strategic plans call for new-to-the-world products and services to achieve their strategic plan goals will need a completely different population of human resources as described by the skills, motivation and level of thought their employees and contractors possess.
Don Kash and Robert Rycroft provide a good starting point for setting a Human Capital Strategic Plan. They ask five questions that frame the skills, motivation and level of thought needed from Human Resources. Answers to these five questions should be found in the Corporation’s Vision, Mission, Values, Business Strategic Plan and Technical / New Business Strategic Plans. The five questions are:
1. Is your technology simple or complex? Simple technologies are those that can be understood in detail by an individual expert, i.e., can be described in detail and communicated over time and distance to another expert. Complex technologies cannot be understood in detail by an individual. Such complexity requires organizational networks that are managed by self-organized learning processes. Increasingly product and process technologies have become so complex that many of their subsystems and components also have evolved into highly complex technologies too. Complex technologies require broader skill sets and higher levels of thought be present in the corporation’s human resources.
2. In which technological sector or sectors are you innovating or going to be innovating? The innovation of complex technologies requires the synthesis of resources from different sectors. Especially important has been the integration of infrastructure technologies like advanced materials and information and communication systems. The skills the corporation’s personnel possess has to at least cover the technologies it intends to practice.
3. Is the innovation you are pursuing normal (incremental), transitional (major redesign), or transformational (first-of-a-kind)? For complex technologies the economic payoff comes from normal innovations, the capacity to repeatedly carry out incremental technologies (see the section on R&D Game Types). Some business plans however require transitional or transformational work. The skills, motivation and level of thought requirements will be different for each.
4. What mix of tacit and explicit knowledge is needed? In the case of complex technologies where rapid innovation is necessary, networks are essential because only very adaptable structures can provide the required diversity of tacit and explicit knowledge inputs fast enough to stay ahead of competitors. Tacit knowledge requires higher levels of skill, motivation and levels of thought are present in the organization.
5. What will be your major sources of knowledge? In addition to internal company resources, what level of academic, institute, trade associations, standard setting entities will be required? The more diverse the knowledge sources also require higher levels of skill, motivation and levels of thought are present.
Knowing the answers to these questions for the preponderance of projects undertaken by an organization lays the foundation for planning the skills, motivation and level of thought needed.
The first step in putting together a Human Capital Strategic Plan is to specify in detail the type and quantity of skills necessary to carry out the technology and business strategic plans. These skills include the technical knowledge and expertise is needed carry out the science and engineering aspects of technical projects. In determining number and type of skill sets required in an organization it is best to categorize them in three ways.
The first skill level is that of a technician who can carry out the directions of a senior technical expert or project leader. The second skill level is that of a technical expert or project leader who has demonstrated the ability to conduct incremental and next-generation projects. The skills include the layout of a project plan, gathering and organizing the necessary resources to create the solution and complete the project. It also includes interfacing with others in the organization’s marketing, sales, manufacturing, and legal to complete the project on time and on budget.
The third skill level is that of technical expert or project leader who has demonstrated the ability to successfully undertake breakthrough or radical innovation projects. This person possesses the same abilities as the second skill level individual, but at a more advanced level, working very independently and creatively in all areas of the project; i.e. business model, marketing, technical, production and legal to bring a new to the world technology and/or product to the market.
The number of individuals needed for each technical area in an organizations R&D, Engineering, and/or technical support functions can be derived from the Strategic Business and Technology Plans. In those plans the project needs have been specified and the Technical Leadership can translate those requirements into a “needs” matrix, an example of which is shown in the ”Example Inventory of Human Capital Skills Needed in a Technical Organization” figure.
The three “need” columns of the ”Example Inventory of Human Capital Skills Needed in a Technical Organization” figure are derived from business and technology plans. The three “have” columns are provided by the Human Resource and Technology Leadership teams. The ”Example Inventory of Human Capital Skills Needed in a Technical Organization” figure shows as green colors where there is sufficient or excess bench-strength, and yellow or red colors where there is a deficiency of resources to carry out projects. Recommendation is to update this table quarterly and renew the strategic plan annually.
A common flaw in most HR planning is to not account accurately for the skill levels needed. In particular a common problem is that break-through level projects are resourced by individuals not having the skill to conduct such work. Technical and HR leadership has to be honest in what resources they have, and if there are miss-balanced resources they need to be readjusted, typically with hiring and firing (as “personnel growth” is typically insufficient and takes too long to make the business and technical plans successful).
Motivation is a term that is often not well defined. As a way to make an individual’s and organization’s motivation visible, Teresa Amabile worked with the Center for Creative Leadership to create a “KEYS Survey” that looks at the work environment affecting motivation. The organizational results of individuals taking such a survey are shown in the “Example of KEYS Evaluation of the Environment Affecting Motivation” figure.
The Work Environment Inventory is a 78 multiple choice item assessment tool (see Appendix 1 at the end of this Chapter). The tool uncovers the stimulants and barriers to creativity that exist in a company, division, or work group. It is not a 360 degree instrument nor a leadership assessment for development tool. Rather it is a climate survey with the specific goal of looking at creativity and innovation in the work place. The major elements are defined in the “Scale Definitions of the KEYS (WEI) Instrument” figure.
By conducting KEYS (WEI) assessments on a daily, weekly (recommended frequency), or monthly basis, technical leadership can find strengths, weaknesses, opportunities and threats to its goal of creating and leading a strong innovative organization. Weekly trends in the results provide statistical process control insight into removing special causes of motivational decline as well as improving the overall environment to steadily improve innovation levels. It is a fast, easy to utilize tool that provides actionable information for improved performance. That said, senior technical leaders have to look themselves in the mirror if the results don’t meet their expectations and needs. Teresa showed in her research the strong impact of a Senior Technical Leader’s style and capability on work environment motivational factors.
when thinking about how to design work environments that are highly motivational, Jane McGonigal advocates that work should be structured as a game. This is because when you strip away the different genre differences and the technological complexities; all games share four defining traits also characteristic of highly motivated organizations: a goal, rules, a feedback system, and voluntary participation. When these four elements are present in a game or in a workplace, people will spend extraordinary amounts of productive time in this environment.
The GOAL is the specific outcomes that players will work to achieve. It focuses their attention and continuing orients her participation throughout the game. The goal provides players with a sense of purpose.
RULES place limitations on how players can achieve a goal. By removing or eliminating the obvious ways of getting to the goal, the rules push players to explore previously uncharted possibility spaces. They unleash creativity and foster strategic thinking.
The FEEDBACK SYSTEM tells players how close they are to achieving the goal. They can take the form of points, levels, a score, or progress bar. Real-time feedback serves as a promise to the players that the goal is definitely achievable, and it provides motivation to keep them playing.
Finally, VOLUNTARY PARTICIPATION requires that everyone who’s playing the game knowingly and willingly accepts the goal, the rules, and the feedback. Knowing this establishes common grounds for multiple people to play together. And the freedom to enter or leave the game at will ensures that intentionally stressful and challenging work is experienced as a safe and pleasurable activity.
Work environments constructed as games provide intrinsic rewards which are most essential to human happiness. Positive intrinsic rewards fall into four major categories.
First and foremost, we crave satisfying work, every single day. The exact nature of the satisfying work is different from person to person, but for everyone it means being immersed in clearly defined, demanding activities that allow us to see the direct impact of our efforts.
Second we crave the experience, or at least the hope, of being successful. We want to feel powerful in our own lives and show off to others that were good at it. We want to be optimistic about our own chances for success, to aspire to something, and to feel like we’re getting better over time.
Third, we crave social connection. Humans are extremely social creatures and even the most introverted among us derive a large percentage of our happiness from spending time with the people we care about. We want to share experiences and build bonds, and want to most often accomplish that by doing things that matter together.
Fourth, and finally, we crave meaning or the chance be part of something larger than ourselves. We want to feel curiosity, awe, and wonder about the things that unfold on epic scales. Most importantly, we want to belong to and contribute to something that has lasting significance beyond our own individual lives.
These four kinds of intrinsic rewards are the foundation for optimal human experience, and thus also a motivating workplace. These are the most powerful motivations we have other than our basic survival needs of food, safety, and sex. And what these rewards all have in common is they are all ways of engaging deeply with the world around us, with our environment, with other people, and with the causes and projects bigger than ourselves. Robust Human Capital Strategic Plans provide for each of these four kinds of intrinsic rewards.
The best practical model to assess Levels of Thought / Mental Capability was described in Executive Leadership by Elliott Jaques. High output organizations are characterized by clearly demarcated levels of authority and accountability, and ensuring the people at each level of the organization are mentally equipped to do their jobs. Elliott Jaques’ developed a Stratified systems Theory to explain organizational behavior and organize people into roles that match their mental capabilities.
The first step in this process is to define the task capabilities needed for each role in the organization. Fortunately there are only four classes of task capabilities and roles as relate to mental processing. They are shown in the “The Four Types Of Task Complexity” figure.
Excerpting from the Executive Leadership book, these four types of task complexity can be described in terms of the minimum that has to be done to cope with the variables that are encountered in solving problems related to the task.
Diagnostic accumulation: Problems have to be anticipated and resolved by sorting out and accumulating significant information and putting it together to anticipate problems and overcome
Alternative Serial Plans: Possible ways of carrying out a task have to be devised and evaluated, and one of the alternatives chosen and planned. That plan is then followed, always with the possibility of changing to an alternative plan if major difficulties are encountered.
Mutually Interactive Programs: The task requires that numbers interactive serially planned projects be undertaken, and adjusted to each other with regard to resources and timing as the work proceeds, so as to keep the total program on target.
Categories of Task Complexity
In addition to the four types of task complexity (as is also the case with the four cognitive processes discussed below), the four orders of information complexity (A, B, C, and D) have to be taken into account too. For example, a task that has to do with anticipating difficulties which are likely to be encountered in using a spoon to eat a bowl of soup (cumulative processing of the first order complexity of information (A) in a concrete world) will be substantially less complex than the task of anticipating difficulties which are likely to be encountered by a detective in solving a crime (cumulative processing of second order complexity of information (B) in a verbal symbolic world).
Thus (as was the case for the categories of cognitive complexity), combining each of the four orders of information complexity with the four types of task complexity, gives the same range of categories of task complexity running from category A- I to A-4, B-I to B- 4, C- I to C- 4, :lnd D-I to D-4. But practically these can be limited to B- I to B-4 and C- I to C-3, since these cover the world of managerial leadership in stratum-I to stratum-VII.
Second Order Categories of Task Complexity: The following are illustrations of the nature of task complexity in tasks to be found at stratum-I to stratum-IV.
Category B-1 task complexity (stratum-1): Direct action in immediate situation These are the kinds of task found at shop- and office-floor level. The task requires a person to proceed along a prescribed linear pathway to a goal, getting continual feedback in order to proceed. As problems are encountered, the person has to use practical judgment to decide what is wrong and then has to apply previously learned methods [or overcoming obstacles. If the methods are unsuccessful, the person reports back to his or her manager. Examples of such tasks would be: type this memorandum, coping with words which are difficult to read; drill holes with this jack hammer, and get around big rocks in the ground which are in the way of the drill.
Category B-2 task complexity (stratum-II): Diagnostic Accumulation. These are the kinds of tasks found at first line managerial level. An individual must be able to note things that might indicate potential problems and obstacles, accumulate such potentially significant data, and initiate actions to prevent or overcome such predicted problems as may be identified. Examples would be: design a new jig for this machining process, working out the design as the job proceeds, accumulating data on how various parts are most likely to fit together so that the whole will work well; use good detective procedures to accumulate the evidence necessary to find a hit-and-run driver.
Category B-3 task complexity (stratum-III): Alternative Serial Plans. Increasingly complex situations require alternative plans to be constructed before starting out, one to be chosen and serially progressed to completion, with possible change to another alternative if necessary. For example, a person in a computer company heads a team of four programmers on a project to create a program that will make it possible to translate material from one computer language to another. She constructs three possible paths to the goal: the first would be sure but would take much too long, the second would be excellent if it worked but would lead to an expensive project failure if it did not, the third is relatively sound and could most likely be completed in the time available although it might be slow and might create uncertainty in the early stages. She opts for the third.
Category B-4 task complexity (stratum-IV): Mutually Interactive Programs. These are problems still more complex because they comprise a number of interacting programs which have to be planned and progressed in relation to each other, and controlled by transfer of resources between them and by adjustment of resources and schedules so as to keep the overall program on target. Trade-offs must be made between tasks in order to make progress along the route to the goal. For example, a designer and developer of new venture products for a large corporation (who has four assistants to help her) has to construct and pursue simultaneously a number of development paths: a developing design of the product and product applications, an in depth analysis of potential international markets, the making and testing of models of the new product, and a sustained commercial analysis of its potential business value to the Corporation. A balanced focusing of attention upon each of them in relation to the others is essential yet difficult; the designer may require to change any of the pathways at any time and, in doing so, she will have to adjust each of the others, all in relation to one another.
Third Order Categories of Complexity: Corporate Strategic Levels. Here are some examples of the basic categories which show up in the conceptual order of ideas and language, second order of abstraction (category C-I, C-2, and C-3). This broad order of complexity characterizes the corporate strategic world.
Category C-1 task complexity (stratum-V): Situational Response. These are the kinds of task faced by presidents of strategic business units in large corporations. Practical on-the-spot judgment must be used to deal with a field of ambiguous conceptual variables, and to make decisions envisaging the second and third order consequences of those decisions. For example, a business unit president is driving half-a-dozen critical tasks to achieve a 7-year plan, and must continually pick up the important area of impact and the likely consequences of changes and events on customer attitudes, on competition and policies, on world commodity prices, on legislation, on third world countries, on tariffs, on technology, on his own R&D programs, on interest and foreign exchange rates, on availability and cost of capital, on cash flow, etc. In order to do so he maintains a continuous “what-if” analysis of business priorities to sharpen his judgments of consequences and of what has to be done at any given time. He must rely upon situational responses and direct action, as he steers the business in the surrounding environment, to keep his profits at a reasonable level while maintaining customer goodwill, high morale among his own people, and the survival of the business with a growing balance sheet value.
Category C-2 task complexity (stratum-VI): Diagnostic Accumulation. This is the level of corporate executive vice-presidents who must build up a picture of likely critical events world-wide, international networking to accumulate information about potentially significant developments to could affect the Corporation and its business units. In order to take sound actions, they must anticipate changes so is to forestall adverse events and to help to sustain a friendly environment for corporate trade. Thus an executive vice president, overseeing six full scale P&L account business units, sustains a worldwide network of information sources and pics on changes which may constitute unexpected threats are opportunities for any of his business units. He applies pressure to influence this environment, by such means as sponsoring or encouraging particular pieces of research at universities or research associations, and meeting with potential and government leaders and with senior executives of large customers. By means of accumulating significant conceptual information, and within corporate capital expenditure policies, he decides whether and when to make changes in the major resourcing of the business units, taking into account other corporate priority demands.
In the “CTO Critical Success Factors” figure, the elements facing a Senior Executive in charge of growing the company are shown as a mind map. It illustrates the complexity of elements in the thinking process and the way in which they might interact (positively and negatively) in complex and non-linear manners. Such is the world of a Category C-2 person.
Category C-3 task complexity (stratum-VII): alternative Strategies. This is the level of corporate CEOs working out strategic alternatives for worldwide operation, using complex conceptual information concerned with culture, values, and the business of nations and international trade.
For example, a corporate chairman and CEO is expanding his company, developing two additional executive vice president roles as a base for growing between five and seven new business units. Some of these are already partially grown within the company but are in need of capital infusions to enable them to grow into true P&L account subsidiaries. Others are to be developed based upon new products in new fields, and some are to be added by the acquisition of new small companies with interesting products and outstanding young potential talent — double gain. He’s worked on a number of alternative strategic alternatives, and has obtained support for them from the board and his senior subordinates, and is currently pursuing one of them that calls for penetration into related fields both at home and abroad. It is a program that is designed to see the Corporation well into the next century.
Because these categories are steps in task complexity or at the very heart of the requirements for the sound structuring of the managerial hierarchy they have been discussed in detail. They tell us just what the correct number of managerial layers ought to be (one layer for each category of task complexity). And because each category of task complexity has a corresponding category of cognitive complexity in human beings, it is possible to reap great benefits from being able to match task complexity in work with complexity in peoples’ mental capability. That match is discussed following section and gives an important basis for achieving managerial competence and effective management.
Time Span and the Measured Level of Work in a Role
A double check in defining the work to be done at each level of complexity in a company can be done by looking at “the target completion time of the longest task, project or program assigned to that role.” At stratum 1, the production line or the data entry operation, it might take a day to set up a lathe or 20 minutes to enter form information. At higher levels, tasks extend farther in the future: perhaps two years for a sales manager to rebuild a marketing organization for five years for a CEO to turn around a company. Field research showed that across all types of organizations people were consistent in their cut-off points for various stratums: Three months for stratum 1, one year for stratum 2, two years for stratum 3, five years for stratum 4, and 10 and 20 years for strata 5 and 6. Using these metrics helps refine role assessments for an organization.
Matching Human Capital to the Roles That Exist in an Organization
Elliott Jaques spent decades testing the cognitive abilities of people in various strata, and can now reliable predict their capacity to rise to various levels. This cognitive ability ranges from the very concrete (“hand me that broom”) to the very abstract, in which a person is capable of imagining several chains of possible consequences and relating one possible outcome to the others.
In their article “The Overlooked Managerial Competency: Observing Complexity of Information Processing (CIP) to Match People to Jobs and Determine Future Potential” Glenn Mehltretter and Michelle Malay Carter outline the process of measuring cognitive ability. Excerpting from their paper they define a person’s complexity of information processing (CIP) as the maximum quantity and complexity of information that can be processed by the brain at the present time. CIP was found to be a determining factor of the level of work, in terms of complexity, an individual can successfully perform. Becoming familiar with CIP levels was found to give managers a universal and consistent way of observing and discussing which employees would be suitable for varying levels of jobs. The process used by Mehltretter and Carter consists of examining both the structure and content of a person’s speech when he or she is fully engaged in arguing a point.
To show a simple example of how this works Mehltretter and Carter state the first four levels of CIP capability necessary for organizational work. Note how each successive level allows for increasingly complex approaches to problem solving. Sample interview excerpts of people demonstrating the various levels of CIP follow each definition. As you read them, pay particular attention to the way the subjects group and organize their information. This can be done by attending to the connecting words such as or, and, if, and then.
1. Declarative problem solving is the least complex. It is representative of the problem solving needed in shop and office floor roles. It does not include the ability to see things coming. In work situations, it involves following procedures and addressing “glitches” only as they are encountered. Solutions are formulated in terms of independent thoughts. There is no explicit connection between or among ideas. This form is akin to disjunctive logic of A or B or C. Common jobs requiring this level of problem solving are: Clerk, cashier, many administrative assistants, line worker, and many technicians.
When asked the question, “How can we improve productivity at our manufacturing plant?” a person (Assembly Line Worker John) using declarative problem solving might answer: “We need better equipment. It breaks down too much. Management should listen to line workers ideas more. We could help, but they don’t ask. They should rework the scheduling so we’re not so tired all the time from pulling long shifts.”
The speaker presents three independent ideas. The solution could be doing any one of these, as opposed to doing all three of these. There is no explicit indication that two or three of the ideas should be done together.
2. Cumulative problem solving requires one to accumulate bits and pieces of information and begin to see a pattern: in other words – the ability to see things coming and be proactive. Solutions are formulated in terms of an explicit accumulation of related thoughts. The proposed solution is the weight of the sum of the parts. This form is akin to conjunctive logic of A and B and C. Common jobs requiring this level of problem solving are: first line manager, some district managers, many retail or restaurant managers, entry engineer, scientist, or programmer.
When asked the same productivity question, a person (Assembly Line Manager Susie) using cumulative problem solving might answer: “Our equipment is ancient. It breaks all the time. We need updated equipment. Besides that, a suggestion box might help. The line workers have good ideas, but no one takes them seriously. The first suggestion I would put in the box would be for new equipment. And another thing we should do is make the schedules more consistent. We have people moving from day to night shift too frequently, and we require too many double shifts.”
The speaker presents the same three ideas as in the preceding example. However, its explicit that implementation of all three parts is intended.
3. Serial problem solving requires the ability to see a series of cause and effect relationships. Solutions are formulated in terms of explicitly stated sequences of at least three items. This form is akin to conditional logic of If A then B, and if B then C. A→B→C. Common jobs requiring this level of problem solving are: some district managers, some regional managers, unit manager, any manager of first-line managers, sr. engineer, scientist, or programmer.
When asked the same productivity question, a person (Department Manager Joe) using serial problem solving might answer: “Our equipment breaks down all the time. This wreaks havoc with our scheduling and requires we reschedule employees for other shifts and/or have them pull doubles when the equipment is working. So we need to get the equipment replaced and then create a more consistent scheduling plan. It might make sense to get the line workers’ input on what type of schedules they would prefer before doing the plan.
The solution is a three-fold sequence of events. Replace equipment → Seek scheduling input from line workers → Create more consistent schedule
4. Parallel problem solving requires the ability to see connections among multiple serial paths. Solutions are formulated in terms of explicit relationships between two or more series. This form is akin to bi-conditional logic of If A then B, but if and only if C then D. Note that Serial problem solvers can conceive of multiple serial paths, but they deal with them independently. Common jobs requiring parallel problem solving are: large plant manager (250-300 people), director, general manager.
When asked the same productivity question, a person (Plant Manager) using parallel problem solving might answer: “Well it’s obvious that we need new equipment to reduce downtime which kills our productivity. However, new equipment will call for much more electronics and computer savvy on the part of our maintenance staff. So, we need to begin to upgrade our maintenance department’s capabilities and to add staff now to prepare for the new equipment. At the same time, new equipment may make some line workers jobs obsolete. In order to minimize layoffs, we should see any line workers are interested in cross training in maintenance and eventually becoming part of the maintenance staff. Once all that settles down and all the training is done, we can make our scheduling more consistent. Our current scheduling is at the “will” of the equipment. I know it makes the associates angry and there’s no telling how many ways that impacts productivity.
The solution contains several explicitly connected series. The plant manager may need to slow down or speed up certain series in order for them all to come together at the step that is shared by all the series – Buy equipment. The end result of all these series being deployed interdependently is higher productivity.
Capital Investment Series: Buy equipment → Less down time → Higher productivity
Department Upgrade Series: Upgrade maintenance dept. →Hire more maintenance technicians → Buy equipment
Direct Labor Series: Find line workers who want to enter maintenance → Begin cross training → Buy equipment → Some line workers become maintenance staff
Scheduling Series: Buy equipment → Training → Scheduling overhaul → Higher productivity
There have been found two equally reliable and valid methods for judging mental capability potential – Direct Observation and Managerial Talent Pool Evaluation.
The method of direct observation of CIP described above allows evaluation of mental capability as people converse in a variety of everyday situations. Elliott Jaques scientifically validated that accurate results can be achieved through direct observation by a trained observer. When employee selection decisions are being based on the observation technique, the protocol is for interviews to be recorded, transcribed and examined on paper in order to ensure accuracy of the observation.
An alternative approach can be used when an organization desires to judge the current potential of current employees rather than outside candidates. This approach, the Talent Pool Evaluation process or TPE, involves groups of managers and managers-once-removed making these judgments following a facilitated group process. Results between the two processes correlate at the 0.95 level.
It should be noted that there is a strong correlation between cognitive ability and time horizons. That is the better we are at processing information, the farther we are able to project ourselves into the future. This becomes acutely important when a CEO’s cognitive abilities fail to match the level of hierarchy he or she occupies. In this case what happens is that he or she shrinks that company down to his or her own level.
These examples illustrate how people can have their mental capability (Human capability to process Information) assessed at a point in time. One’s ability to process information is not however static. It matures with age in a predictable manner. Therefore, once an adult’s current complexity of information processing is identified, his or her rate of growth (future potential) can be forecasted using Jaques’ empirically developed and longitudinally validated progression curves.
For reasons not yet understood, some people mature to a higher level of information processing capability by the end of their careers. This is why some people desire to move up the corporate ladder to more and more complex jobs (high potential mode), and others are content to stay within one job throughout their career (expert mode). A full appreciation of this concept can help managers use their employee training and development dollars most effectively. Knowing an employee’s progression path will point toward one of two developmental strategies: increasing depth of knowledge (expert mode) or breadth of knowledge (high potential mode).
Excerpting from Alexander Ross in the Canadian Business Journal, the biggest insight (and controversy) in this approach to Human Capital planning is the finding that each person has an inherent potential for cognitive development and thus equipped to rise only so high, and not higher, in an organization. Learning and experience will enhance their skills and knowledge, but no amount of positive thinking can change their potential to approach problems in increasingly sophisticated ways. This is illustrated in the “Progression of Mental Maturity of Individuals” figure.
The recommendation is that annually an organization assesses the roles that it has and will need over the next five years, then map the mental capabilities of its members to those roles. In R&D and other specialty organizations with non-transferable Skills, the mental capabilities for each Skill type must be kept separate in the planning process. Key is to provide high potential individuals (those destined for stratum IV and V) work challenges commensurate with their capabilities, or otherwise they are at high risk of leaving the company for another job.
Organization and individual performance is only as strong as its weakest link. As such it’s important to measure the overall skills, motivation and capability present over time. It makes sense that a person with very high technical skills but is not motivated is not likely to generate a commercial success from a project he or she is given. Likewise a very motivated individual who doesn’t have the technical capability to carry out a project will equally fail. Finally someone that can only serial process information is not likely to commercialize a global product that takes into account national influences in consumer desires, manufacturing practices, and taxes.
A good way to visualize the overall organizations capability in these three areas is to plot each skills, motivation, and capability as a percentage of what an organization has versus what the total is that is needed. The “Summary of Human Capital Capability” figure shows this as a bar graph.
In this particular example the organization needs to hire and/or replace individuals with the skills that have been identified as needed to succeed in delivering the business end technology strategic plans. When hiring these individuals they needed the same time to find people with increased mental capabilities. These can either be early career individuals with strong technical skills that show promise to rise to stratum III, IV, or V or more senior people with the same skills that have already demonstrated the mental capability needed for success.
To reiterate once more it is extremely important that all three of these human resource elements required for business success be addressed in the human capital / resources strategic plan. If the company is struggling versus its competition it is often helpful in the human capability strategic plan to put in best estimates of what the top competitors’ human capabilities are. This allows very senior management to determine if its own team possesses the necessary leadership to build out each of these three factors or if replacing members of its own team is necessary for success.
Just as human capital is only as strong as the weakest link between skills, motivation, and mental capability the overall corporate health is only as strong as the weakest link between corporate capital, complementary assets, human capital and intellectual assets. This is shown in the “Elements of Corporate Health” figure.
Key is to have them all at about the same level. Not too much and not too little. Don’t want human resource expenses to be more than needed. Don’t want capability to be less than needed. Human resources needs to gather semi-quantified information to assure the balance is correct.
Another key element in corporate health is to have a culture consistent with the company’s position in the lifecycle and its values. Geoffrey Moore uses a “Four Cultures Model” as shown in the figure. To keep up with the rapid shifts in market dynamics brought on by technology adoption lifecycles, corporations must unify themselves through a common commitment to a global culture. Specifically, executive teams need to understand the following and incorporate their desires in a robust Human Capital Strategic Plan.
1. There are four proven cultures that can sustain long-term competitive advantage strategies: cultivation culture, competence culture, control culture, and collaboration culture.
2. Each culture aligns with a different value discipline, as follows: cultivation culture (discontinuous innovation); competence culture (product leadership); control culture (operational excellence); collaboration culture (customer intimacy) .
3. Each culture shines at different points in the technology adoption lifecycle: cultivation culture (early market); competency culture (early market, bowling alley, tornado); control culture (tornado, Main Street); collaboration culture (bowling alley, Main Street) .
4. Each culture creates shareholder value in its own distinctive way: cultivation culture (infectious charisma); competency culture (fierce competitiveness); control culture (relentless improvement); collaboration culture (perceptive adaptation) .
5. Each culture declares itself through characteristic global focus: cultivation culture (shared vision); competency culture (measurement and compensation); control culture (business planning); collaboration culture (customer focus) .
6. When companies merge or acquire each other, managing the transition to a new declared culture is a critical task for preserving shareholder value.
7. When cultures age, they fall prey to context overtaking core and degenerate into the following parodies of their true selves: cultivation culture (cult); competency culture (caste system); control culture (bureaucracy); collaboration culture (club) .
The following questions are answered multiple choice with one of four responses:
- Never: never almost never true of your current work environment
- Sometimes: sometimes true of your current work environment
- Often, often true of your current work environment
- Always: always or almost always true of your current work environment
1. I have the freedom to decide how I am going to carry out my projects
2. I feel I am working on important projects
3. I have too much to do in too little time
4. This organization is strictly controlled by upper management
5. My area of this organization is innovative
6. My coworkers and I make a good team
7. The tasks in my worker are challenging
8. In this organization there is a lively and active flow of ideas
9. My supervisor clearly sets overall goals for me
10. There is much emphasis in this organization on doing things the way we have always done them
11. I have sufficient time to do my projects
12. I feel considerable pressure to meet someone else’s specifications on how I do my work
13. Overall this organization is effective
14. Overall the people in this organization have a shared vision of where we are going and what we’re trying to do
15. There’s a feeling of trust among the people I work with most closely
16. People this organization are very concerned about protecting their territory
17. There too many distractions from project work in this organization
18. New ideas are encouraged in this organization
19. Within my workgroup we challenge each other’s ideas in a constructive way
20. There is destructive competition within this organization
21. My supervisor has poor interpersonal skills
22. Performance in this organization is fair
23. I do not have the freedom to decide what projects I’m going to do
24. There are many political problems in this organization
25. People in my workgroup are open to new ideas
26. The facilities I need for my worker readily available to me
27. Supervisor serves as a good role model
28. In this organization top management expects of people will do creative work
29. In my workgroup people are willing to help each other
30. Procedures and structures are too formal in this organization
31. There are unrealistic expectations for what people can achieve in this organization
32. Generally I get the resources I need for my work
33. My supervisors expectations for my projects are unclear
34. People are quite concerned about negative criticism of their work in this organization
35. People are recognized for creative work in this organization
36. The tasks in my work call out the best in me
37. My supervisor plans poorly
38. The organization has an urgent need for successful completion of the work I am now doing
39. People in this organization feel pressure to produce anything acceptable even if quality is lacking
40. There’s an open atmosphere in this organization
41. There is a good blend of skills in my workgroup
42. Ideas are judged fairly in this organization
43. Top management does not want to take risks in this organization
44. In my daily work I feel a sense of control over my own work and of my own ideas
45. Failure is acceptable this organization if the effort on the project was good
46. The budget for my projects is generally adequate
47. My area of this organization is creative
48. My area of this organization is productive
49. People are encouraged to solve problems creatively in this organization
50. People are rewarded for creative work in this organization
51. My supervisor supports my workgroup within this organization
52. Overall my current work environment is conducive to my own creativity
53. I feel challenged by the work I’m currently doing
54. My area of this organization is effective
55. A great deal of creativity is called for in my daily work
56. People of this organization can express unusual ideas without the fear of being called stupid
57. I can get all the data I need to carry out my projects successfully
58. The people in my workgroup are committed to our work
59. My supervisor does not communicate well with our workgroup
60. I get constructive feedback about my work
61. This organization has a good mechanism for encouraging and developing creative ideas
62. People are encouraged to take risks in this organization
63. Have trouble getting the materials I need to do my work
64. I feel the top management is enthusiastic about my project
65. Overall this organization is productive
66. People are too critical of new ideas in this organization
67. There is free and open communication within my workgroup
68. My supervisor shows confidence in our workgroup
69. Overall my current work environment is conducive to the creativity of my workgroup
70. I feel sense of time pressure in my work
71. Overall this organization is efficient
72. My supervisor values individual contributions to projects
73. My supervisors open to new ideas
74. My area of this organization is efficient
75. The information I need for my work is readily obtainable
76. I believe I am currently very creative in my work
77. Other areas of the organization hinder my project
78. Destructive criticism is a problem in this organization
When calling individuals together for strategic planning meetings the following introductory script has been found useful:
- As you are well aware, we are accelerating change and I need your input prior to finalizing our strategy and implementation plans. I believe there is an opportunity for us to improve our understanding of the way we implement change.
- This session is intended to be the first in a series of dialogues to help us clarify the assumptions, programs, and responsibilities underlying the implementation of our key strategies. We have the view that only through the input from a larger group can we execute our changes in programs in a coherent and unambiguous way. The purpose of this two-day session is to gain understanding of each other’s view by thinking through the major issues facing us at this time.
- The session is not an attempt to make decisions as much as a setting to examine directions in the assumptions underlying them.
- We have a second goal. This is to be together as colleagues, leaving all our roles and positions the door. In this talent we should consider ourselves equal to still have the substantial of knowledge of the situations we are considering.
- We see this meeting as the first step toward establishing an ongoing substantial dialogue among us. Our experience shows that to engage in dialogue takes practice, and we should expect to be learning how to do this in the session. Several ground rules are helpful and we invite you to participate by following these as much as you can.
1. Suspension of assumptions. Typically people take a position and defend it, holding to it. Others take up the opposite positions and polarization results. In this session, we would like to examine some of our assumptions underlying our direction and strategy and not seek to defend them.
2. Acting as colleagues. We are asking everyone to leave his or her position of the door. There will be no particular hierarchy in this meeting, except for the facilitator, who will, hopefully, keep us on track.
3. Spirit of inquiry. We would like to have people free to explore the thinking behind their views, the deeper assumptions they may hold, and the evidence they have that leads them to these views. So it will be fair to begin to ask other such questions as “what leads you say or believe this?” Or “what makes you ask about this?”
1. “The Progress Principle: Using Small Wins to Ignite Joy, Engagement, and Creativity at Work”, by Teresa M Amabile and Steven Kramer, Brilliance Audio, July 2011.
2. “Creativity In Context: Update To The Social Psychology Of Creativity”, by Teresa M Amabile, Westview Press, June 1996.
3. “Executive Leadership: A Practical Guide to Managing Complexity”, by Elliott Jaques, Stephen D. Clement, Ronnie Lessem, Wiley-Blackwell, June 1994.
4. “Human Capability: A Study of Individual Potential and Its Application”, by Elliott Jaques, Kathryn Cason, Cason Hall & Company, 1994.
5. “Talent Pool Evaluation Process”, Mahltretter Associates, PeopleFit, Raleigh, NC 27612, http://www.peoplefit.com
6. “The Long View of Leadership”, by Alexander Ross, Canadian Business, May 1992.
7. “The Overlooked Managerial Competency: Observing Complexity of Information Processing (CIP) to Match People to Jobs and Determine Future Potential”, by Glenn Mehltretter and Michelle Malay Carter, White Paper, November 2002.
8. “Creative Leadership: Be Your Team’s Chief Innovation Officer”, by Judith Ross, Harvard Management Update, March 2007.
9. “The Role Of Psychological Safety In Implementing Agile Methods Across Cultures”, by Sara Thorgren and Elin Caiman, Research Technology Management, April 2009.<10. “A Curriculum For Change”, by Jeffrey Cufaude, PCMA Convene, May 2004.
11. “Map of Commitment Behavior”, by Idea Connections, Presentation, 1997.
12. “Making Innovation Work in Your Corporate Context”, by Gary Pisano, Research Technology Management, April 2019.
13. “Designing Effective Organizations”, by William Pasmore, Wiley, 1988.
14. “Intellectual Capital” Leif Edvinsson and Michael Malone, Harper Business, 1997.
15. “Crisis and Renewal”, by David Hurst, Harvard Business School Press, 1995.
16. “Working Wisdom”, by Robert Aubrey and Paul Cohen, Jossey-Bass Publishers, 1995.
17. “Paths of Change”, by Will McWhinney, Sage Publications, 1992.
18. “Reality is Broken”, by Jane McGonigal, Penguin Press, 2011.
19. “Learning organizations”, by Sarita Chawla and John Renesch, Productivity Press, 1995.
20. “The Social Life of Innovation”, by John Seely Brown and Paul Duguid, Harvard Business School Press, 2000.
21. “The Learning Edge”, by Calhoun Wick and Lu Stanton Leon, McGraw-Hill, 1993.
22. “The Fifth Discipline”, by Peter Senge, Doubleday, 1990.
23. “Leadership is an Art”, by Max DePree, Doubleday, 1989.
24. “The Faster Learning Organization”, by Bob Guns, Jossey-Bass Publishers, 1996.
25. “How to Find the Work you Love”, by Laurence Boldt, Penguin, 1996.
26. “Is Patience a Virtue”, by Parry Norling, Presentation, circa 1998.
27. “Managing your organization by the evidence”, by Keith Leslie, Mark Loch, and William Schaninger, The McKinsey Quarterly, 2006.
28. “Innovation Killers – How Financial Tools Destroy Your Capacity to Do New Things.”, by Clay Christensen et al, Harvard Business Review, 2008.
29. “Why Information Grows”, by Cesar Hidalgo, Basic Books, 2015.
30. “The New Organizational Wealth”, by Karl Erik Sveiby, Berrett-Koehler Publishers, 1997.
31. “Making the Invisible Visible”, by Robert Rosenfeld, Xlibris, 2006.
32. “Starting Something”, by Wayne McVicker, 2005.
33. “Executive Leadership”, by Elliott Jaques and Stephen Clement, Blackwell, 1991.
34. “Living on the Fault Line”, by Geoffrey Moore, Harper Business, 2000.
35. “Human Capital As One Element Of Intellectual Capital Of The Corporation” by ICM Group & Arthur Anderson, Intellectual Asset Management Roundtable Discussion, January 1999.
36. “To Manage Complex Innovation, Ask the Right Questions”, by Don Kash and Robert Rycroft, Research Technology Management, September-October 2003, pg. 29.
37. “Example Inventory of Human Capital Skills Needed in a Technical Organization”, White Paper from Avery Dennison R&D Human Resources, circa 1996.
38. “Example of KEYS Evaluation of the Environment Affecting Motivation”, White Paper from Avery Dennison R&D Human Resources, circa 1996.