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Board Corporate Governance

Corporate Governance can sometimes be likened to a mad hatters’ tea party.

Good governance models are relatively straight forward so why is it often poorly applied? The shareholders/owners elect the Board which provides the corporate directives to the CEO/Management. The performance framework and corporate risk analysis provide the foundation for reporting back. What could be difficult about this and why do organisations have difficulty in applying such a simple but absolutely crucial model?

While we find a number of commercial organisations, including listed entities, have challenges applying and maintaining good corporate governance principles, spare a thought for the member-based organisations, cooperatives, smaller family based companies as well as the not-for-profit support and research organisations, all where the Board members have to wear multiple hats and making decisions in extremely difficult situations that can have direct impact on themselves or other associates.

When you are working with these co-operatives or not-for-profit organisations you quickly realise the complexities of these organisations and the critical need for good governance procedures as the responsibilities can be enormous. Whether you are a commercial cooperative like fruit packing or dairy product manufacture, a not for profit providing services to specialised groups using government funding or a member organisation providing services to a range of member interests good governance is as important in these organisations as it is in any large commercial entity.

Take for example, a Supplier Board Member in a co-operative; they are an owner/shareholder receiving a dividend, a supplier receiving payments and a part of the Board ensuring commercial sustainability of the cooperative. During any Board meeting they might be involved in decisions involving shareholder dividend payments, supply rates and decisions involving the sustainability of the co-operative organisation, like capital expenditure that in the [...]

Infrastructure and Asset Maintenance is failing us – who is to blame and does HR have a role.

Professionals Australia provided a link (as part of their Better Infrastructure campaign) to a very humorous YouTube clip from the US Last Week Tonight with late night talk show host John Oliver: Infrastructure (HBO) Mar 2 2015.

This topic would be funny if it was not so serious but what has it to do with human resources? The clip raises the question, who is John Oliver really making fun of, is it just those maintenances engineers or is he criticizing the organisation’s broader “good governance”.

The John Oliver clip is brilliant at getting across the message of the importance of infrastructure maintenances from a retention of the value and safety aspects. While it is probably not difficult to find a measure like Return on Assets (RoA) or something like this in most organisations, it is not as easy to find measures on how well we are looking after those assets. In a Human Capital Management approach to organisational management it is critical to have a balance between all the measures. While the John Oliver clip highlights the obvious importance of looking after the infrastructure, it is the practical setting of the level of this maintenance and monitoring that we find is essential, but unfortunately often missing. In organisations Maxumise often find two (2) gaping holes when it comes to asset management. The first hole is the human asset value – why isn’t this included as a real and significant assets in all organisations? Secondly there are rarely any maintenance measures for the assets including infrastructure, plant, equipment and yes the human assets who also need to be maintained.

Professionals Australia describes John Oliver clip as “an informative and humorous insight [...]

Is your Succession Planning driving the status quo or driving business change?

Succession planning is still critical in organisations; however it has evolved over the past 10 years where today succession planning is more about planning for the future and ensuring “Organisational Readiness”. Research at the Australian Graduate School of Leadership has identified the importance of organisations developing transitional and future structures. This is supported by the Maxumise strategic planning process that often identifies transitional structures that have quite different contributing elements (positions) to those that currently exits.

In modern Human Capital Management, succession planning is about “organisational readiness” and involves:

a) Managing the structure and knowing what the future and transitional capability needs are and what this will translate to in structure design (Strategic Planning);

b) Specifying the role/position descriptions which define the current and future contributing elements in the structure and

c) Determine the competency match between the current employees and the respective positions in the transitional structures.

Traditionally, succession planning is about employees being ready to fill, or at least apply for, positions that are, or may soon become, vacant in the current structure. Using this traditional approach, organisations find themselves focussing on maintaining the status quo rather than using succession planning as a key driver of business growth. These business growth drivers consist of firstly, the generic drivers that maintain the organisation on a steady state of growth whether from a competitive pricing, legislative change, product or service offering etc. Secondly, the deliberate growth or what is often referred to as interventional growth.  This interventional growth is identified largely through a structured strategic planning process that incorporates generic growth as well as the interventional growth over the next 3 to 5 years.

Two (2) key outcomes of the strategic planning process are, firstly the performance framework and secondly the capability [...]

Performance Management Systems

Is this the way to manage employees out or manage employees up?

At a business meeting this week, an HR professional suggested that, in his mind, performance management was linked to how to “manage an employee out of the organisation”.

This mindset is, no doubt not an uncommon one, perpetuated by poor and unwieldy performance management or “performance appraisal” systems and the need to provide evidence to “manage an employee out”.

From Maxumise perspective, what is lacking is an understanding of the power of a good performance management system which is used as a tool to empower and develop staff.  We have seen these work miracles.

How you ask?

To begin with measuring and reporting on anything regularly creates change, just ask Jenny Craig!  Set some achievable and meaningful goals, measure and report on these regularly, support and motivate the people, and miracles can occur.

The same process can be applied to any organisation.

Look at the strategic goals for your organisation and set some performance measures in place to achieve these.

Make the measures realistic and achievable, with a little stretch added. Using some well sourced benchmarks can assist to set good measures, ensuring achievable targets.  Good measures are ones that are well defined and unambiguous in terms of how they will be measured.  They will also state the scope of the measure e.g. the team, department, individual etc.  They will be easy to obtain; a measure that takes more time to collect the information than it is worth is not a good measure.

Make sure that the people are in control of the outcome of the performance measure.  It is no good setting a measure which a person cannot directly influence the outcome.  For example: the receptionist has no influence over [...]

Yes there is a replacement for the old “Job Evaluation”?

New age role sizing and position evaluation has been around since the first competency modelling developed around the early 1990’s. The preciseness of these systems have improved over the years and we can now confidently pay the right base salary, differentiate between position and incumbent and even place the HR asset value on the balance sheet (note).

 

The old “job” evaluation and the psychometric basis for sizing “jobs” has really been dead for a number of years. The point-factor job evaluation and processes like starting employees off at 85% and progressing to 115% of an imprecise number to start with would raise a few challenges – yet we still see remnants of this approach. The Productivity Commission study into executive remuneration questioned the processes used to determine the salaries that executives were paid and obviously market forces create the creep resulting in the salary levels we see today. What is critical is the not so much the package paid to specific appointments (this is a P&L expense), rather it is the value of the contribution of the position to the organisation. This is the value of the HR asset that should go on the balance sheet.

In modern human capital management the base salary is calculated precisely for the position. With an ideal position design then the applicant, incumbent or promotion candidate (s) can be assessed against this position and also valued. The new quantitative position evaluation uses competencies (outcome based competency vs behavioural) and this sets the position value and also used as the valuation on the individuals.

Competencies designed appropriately will have dimension such as a starting and finishing complexity as well as a significance to the position to deliver the critical outcomes. With over [...]

Can we trust our workers to perform?

Not only do we need to set up a system where the employee knows what is expected of them, we need them to understand and provide feedback on the results. They need to be empowered.

Progressive organizations are embedding the performance measures into the position descriptions using an outcome-based approach. The quantitative performance measures empower employees to manage their own performance and report back to the manager/supervisor- obviously with the necessary checks and balances. It applies from the CEO or even Board right down through the organization e.g. delivery driver which can be by shift or 6 weeks whatever.

This human capital management approach provides the definition of expectations in a quantitative way, empowers the employee, encourages motivation & innovation and rewards the employee for effort above and beyond the normal expectations (position target performance measures). The organization also knows they are getting a positive return on the performance pay – this is a win win situation.

With the performance envelopes in place the employees can interpret the data as quickly as the supervisor. As an example, in 1990’s this was introduced at Kellogg Australia and, just taking the Cooking Team, they could not only tell you whether the cook was in specification, they could also tell the supervisor why it was in spec. or tending towards the “out” and what needed doing to fix it. The supervisors moved to another site where they receiving feedback but more importantly spent time focusing on their own performance measures (which included an accumulation of the teams at the plant).

This empowerment was a new concept in the 1990’s but today it must be the approach we adopt if we are to become a progressive organization. We have to utilize and [...]

Making 2015 a year for moving forward in a structured way

The world is and will continue to be an ever changing place bringing with it the uncertainties and risk which can cause us to bunker down and remain in our normal comfort zone. This cautious and sometimes defeatist approach is reflected in a number of the electronic discussions that featured in 2014 and focussed largely on dealing with the negatives in a largely reactive way.

Maxumise believes that we are missing opportunities and that in 2015 we should be taking a more proactive and progressive approach. While the uncertainties will not go away, at least we will be taking more control of our organisations destiny.

The proactive approach will need to be strategically driven with a clear and common understanding of where we want to be in say 3 to 5 years as an organisation and identify the corporate risks that need to be monitored. In the current global climate of “what’s going to happen next” and governments struggling to take control and drive their countries forward it is easy for an organisation to lose focus and start to pull in different directions. We had the opportunity to ask 6 Directors and a CEO to write down what they saw as the organisations one “core business”. We ended up with 7 different answers and while 2 were similar the answers were largely quite different. This meant that every time a decision was to be made around the Board table each member’s decision was based on a different “business” – no wonder decisions could not be reached or took a long time to be reached. Each Board member was “rowing” in a different direction. It was not surprising that this confusion was also reflected the operations and [...]

Behaviour versus Competence

As we come to the close of another calendar year it is a good time to reflect on our organisations performance and whether we have the right people in the right positions.  Once we know we have designed the positions correctly and have the right competence in the employees then we will have the “people power” we need.   The obvious next question is: “are we paying our people correctly?”  – this role sizing and position evaluation will be the subject of another blog.

You will probably have noticed the global trend of focussing on “behaviour” of the employees including a recent AHRI LinkedIn “… Dealing with Employees Defensive Behavior”.

Maxumise has found that in most cases the “behaviour” issues are a result of a lack of competence.  The lack of competence often comes from, firstly a poorly designed position and therefore not recruiting the “right position”.  Then once the ideal position is designed properly we can recruit the right person or assess the incumbent to see if we have the right person in the right position.  If gaps exist (and they often do) then we provide and/or arrange for the competency development.

The defensive or other behavioural issues is usually directly associated with a lack of competence and the employee compensating for this lack of competence.  We recently completed an assessment and development program for potential “CEO’s” in an organisation (sponsored by the Board) and when the assessment results came out one Manager was written-off due to the gap in competence but more for the low attribute score – aggressive.   It was decided to continue with phase 1 of the development (largely competence development).  As we developed the competence in this manager the attitude changed dramatically to the extent CEO, Board, customers and even family members commented on the change over [...]

Job, Position and Role Descriptions

What do these terms mean in modern Human Capital Management?

The term “Job” description is an old terminology and needs to change as “Job” refers to a piece of work.  This was OK in the days of narrow focussed task based activities rather than the broader outcome based work specifications.  The terms that seem to be emerging is “role” as the generic definition and “position” as the specific role in a structure i.e. location specific.  Take the installation of a Water Heater;  it used to involve a plumber, electrician, gas fitter (if gas) and even a brickie to put in the base.  Today it is installed by a “Water Heater Installer” or as we came across “Appliance Installation Technician”.  The outcome is in broad terms “hot water supplied”.

With an outcome based approach (which Maxumise recommends) the performance measures are integrated into role and position description (defined in role description and quantified in position description).  This then provides the link to the competence which again should be part of the position description i.e. the competence required to produce the outcomes at the standard set by the performance measure.

As described above, the outcome is what is produced for the “customer” but could involve a number of “jobs” (as discusses above).  The outcome is easier to measure and put into a Position Description.  If this position description incorporates the measures then it is both informing the position holder of the expectations as well as empowering them to produce the outcomes at or better than the standard set in the performance measures.  This leads to continuous improvement and therefore the position descriptions need to be updated at least annually or if there is a new recruitment.

We recommend that the terms that [...]

Performance Management and role of Balanced Score Card

Performance Management

The Balanced Score Cards has been around a long time and seems to go through resurgences and corresponding declines over time. There is nothing wrong with the balanced score card approach as a tool but in the modern world of human capital management it is no longer the end program. Today organizations need modern quantitative and integrated programs that recognizes the value of the human resources at all levels i.e. traditional employee relations through to business market capitalization.
A kit-bag of separate non-integrated tools is not going to deliver the human capital management solutions we are seeking. When balanced score card was developed we had a host of personnel programs that were anything but integrated and supportive; these included the performance appraisal (which was enhanced when BSC was introduced), old “job” evaluation that reinforced the incremental system, numerous instant recruitment and selection tools, incentive programs and the list goes on. Other than the fact that this were separate and sometimes conflicting tools, the key drawbacks were that firstly they focused more on what was being done rather than adequately defining what is needed as an ideal contribution or need. Secondly they were not strategically driven, outcome based i.e. they were focused on achieving the activities rather than producing an outcome that contributed to the organization in a defined way. The integrated HCM is often missing and therefore we do not get the alignment between the organizational needs and the people, whether new recruits or existing employees developing along with the changing needs of the organization.
Performance management is about defining the outcomes and then identifying the controllable measures against those outcomes which applies whether we are looking at the strategic direction over the [...]