” H&M seeks FIPB nod” to invest Rs 720 crore in “Single-Branded Retail business in India” | EconomicTimes

Swedish fast-fashion retail giant Hennes and Mauritz OR H&M, has sought permission from the Foreign Investment Promotion Board (FIPB) to invest Rs 720 crore (approx US 100 million) in India to start a fully-owned company that will open 50 H&M stores. 

Faced with stagnating or slowing sales in key European and US markets, the world’s second-largest Apparel retailer by sales, has been eyeing Emerging economies, including India, for a while.

If the proposal is approved, India will be the 50th market for H&M that had sales of $18 billion in 2012 from its over 2,800 stores globally. The application was filed with FIPB, a unit of the Finance Ministry that clears Foreign Direct Investment (FDI) proposals, on Thursday through law firm Titus and Co.

The retail giant says in its application it will fulfill all conditions of the country’s single-brand retail policy that includes sourcing locally 30% of the total value of the goods purchased.

It also assured it will not retail goods using the e-commerce platform. During his visit in February, while meeting commerce & Industry minister Anand Sharma, H&M chief executive Karl-Johan Persson labelled India as a “very interesting” market.

“It’s a huge market. We are not there yet. More than a billion people live in India and in Sweden we are only 9 million but we have 150 stores (in Sweden),” Persson had said. 

H&M will engage in import, export, marketing, distribution, warehousing, manufacture, production and retail trade of products carrying the H&M brand. If its application is approved, it will sell 10 categories of products in India such as clothes, footwear, cosmetics, handbags and fashion accessories, home furnishing, home decoration, toys, kitchen utensils and cutlery among others.

In India, H&M’s biggest rival and world leader in sales, Zara achieved break-even within the first year of its launch and has annual sales of Rs 260 crore from nine stores. Several other brands such as Levi’s haven’t been so lucky and are still reeling under losses despite their decade old presence.

Experts feel that H&M’s global model is very similar to Zara and that of quickly duplicating and replicating fast fashion and a key reason why even the Swedish brand should click with the Indian consumers.

” They cater to the mid-premium apparel segment which is one of the fastest growing categories even with a high base. H&M’s global supply chain model is amenable to the Indian context from shorter cycle replenishment and local sourcing,” said Abheek Singhi, partner and director at Boston Consulting Group.

H&M follows in the footsteps of its Scandinavian peer, IKEA, which is currently waiting for the final approval to open 25 stores with an investment of Rs 10,500 crore, in India.

After six years of restricting foreign ownership in single-brand retail companies to 51%, India removed this sectoral cap in January-2013 and allowed global brands such as IKEA and Zara, which sell a variety of products under a single label to set up fully-owned companies in India.

The original policy change came with a requirement of 30% local sourcing, but the government diluted that condition after overseas firms said it was not feasible.

More than one dozen single brand retailers are said to be sizing up the Indian market for entry, many of them in various stages of researching, partner scouting or filing for government approvals.

Some of these are direct rivals of H&M including the largest casual wear retailer in the United States, Gap Inc, French apparel retailer Celio and Japanese fashion brand Uniqlo.

 

“The Long View” : How & Why CEOs are “Changing HR at the Top” | Russell Reynolds Associates

In the last five years, more and more CEOs have recognized the strategically critical role the human resources function plays in many of the issues they face, including mergers and acquisitions, corporate restructurings, talent management, increased board oversight, and new governance and reporting requirements. In response, many forward-thinking chief executives are making structural changes to how HR fits within their organizations—and significantly raising the bar regarding what they expect from their HR leaders.

To better understand how that move is unfolding and its implications for senior HR executives, Russell Reynolds Associates conducted in-depth interviews with nine CEOs who are leading the way in leveraging human resources in their organizations, to find out how they are aligning human resources with business objectives and what their expectations are of their HR leaders. Based on those expectations, our competency-based research and our consulting experience, we identified the skill sets needed to succeed in this more demanding environment. Finally, we examined the competency profiles of 100 top human resources leaders to assess the readiness of the existing talent pool in the face of these new requirements.

A combination of forces puts the focus on HR: 

Human resources’ elevated place on the CEO agenda is due to the convergence of two factors unfolding simultaneously in the global business arena. First, well-documented demographic shifts—the aging of the workforce, global economic expansion, a heightened demand for tech-savvy workers and a decrease in employee loyalty—are making the successful identification and retention of talent more difficult than ever and a powerful source of competitive advantage for those who can do it well. “

The cost of labor and benefits is horrific and there are increasing liabilities for all companies that employ large numbers of people,” observes Northrop Grumman Corp. Chairman and CEO Ronald D. Sugar. “How do you stay competitive? How do you treat your people right? How do you get people who want to work for you? How do you not bankrupt your financials by doing it? That’s an important challenge for HR.”

Second, boards are acutely aware that many of the issues for which they have oversight—from acquisition strategy to succession planning—succeed or fail based on the quality of the people involved. As Brian C. Cornell, CEO of Michaels Stores, Inc., notes,

“Organizations that have the highest-quality and highest-caliber members on their team are the ones that are going to win.”

Either one of these two factors would be enough to put human resources on the boardroom agenda. The combination, however, results in a talent supply-demand unbalance that is causing corporate leaders in all sectors to rethink this function.

  • That rethinking begins with the job description of the HR leader. Gone are the days when the role was defined by the minutiae of record keeping, benefits administration and the establishment of a vaguely understood “corporate culture. 
  • CEOs want the HR leaders. “HR executives should realize that they become valuable members of the executive committee and have earned a seat at the table not just by recruiting and retaining talent 

” HR has to play a more proactive role and not a reactive role,” comments Ronald E. Logue, Chairman and CEO of State Street Corporation…..Of course, these new demands are in addition to, rather than replacements for, the traditional skills and capabilities that have long been expected of HR executives “….

Campbell Soup’s Conant sums up the challenge facing today’s HR leader :

“ You have to be brilliant in the management of human capital and be very savvy in the ways of business. That’s a tall order.” 

New competencies for new opportunities: 

In order to assess how the competencies of the current crop of HR leaders stood up against these new standards, Russell Reynolds Associates’ Executive Assessment Practice examined the competency profiles of more than 100 senior HR executives assessed over the past six years. Results indicate that while HR executives tended to score higher in interpersonal skills when compared with a pool of executives across all functions, they scored lower on strategic vision, business acumen and global orientation—confirming that HR executives have significant catching up to do if they are to meet the requirements for a seat at the senior management table.

most important hr core competencies

“ Your head of HR has to be one of the best people in the organization,” says G. Kennedy Thompson, Chairman, President and CEO of Wachovia. “It’s one of the most critical jobs and affects the whole organization. If you don’t have great HR, it drags down every part of the organization.”

A culture that supports HR’s strategic role: 

CEOs recognize it is not merely a question of asking their HR leaders to rise to the challenge of new capabilities and responsibilities. If they want HR to deliver at a higher level, they have to create the environment that allows that to happen.

“ Historically, there’s been an issue where the HR person is the lowest member of the senior team and not a peer,” comments Eppinger. “Right off the bat, you’ve got a problem. You need someone who can carry themselves as an equal.” Corporate chiefs are employing a range of strategies to shake up such outmoded thinking. At The New York Times Company, for example, “The organization was restructured to accelerate a change in the culture, to increase accountability and to improve the goal-setting process,” says Robinson.

“That restructuring, which included expanding the Executive Committee, created disciplined HR initiatives that were led by the senior-level executives of the company. These initiatives were designed to drive performance and innovation and advance the company’s transition to a multi-platform media company.”

State Street’s Logue, meanwhile, made his head of HR a direct report and an integral member of the 10-person Operating Group that manages the company on a day-to-day basis. Logue also moved his HR leader just a few doors down from his own office and in close proximity to the other senior executives.

“You have to foster the communication,” Logue explains. “The other senior members of the team have to appreciate the value that is brought by the head of HR.”

Matthew Emmens, CEO and Chairman of the Management Committee of Shire plc, has successfully integrated his HR leader and the HR function. “I’ve been privileged in my last three positions to not only select the person in that spot but also to create the management structure around it,” he comments. “In doing that, I’ve made the person not just an HR professional but created an organizational structure and an expectation that that person participates as a full business partner.” In fact, “Every unit has a business partner from HR on its management team. We deploy them through our units,” he adds.

Henry L. Meyer III, Chairman and CEO of KeyCorp, also stresses the importance of integrating HR into the various business units within the company. “HR isn’t a floor or a bunch of offices. It sits with the business groups. Each business group has a generalist HR person who is an integral part of their strategy.”

And, as at many companies, the talent review process at Wachovia is driven by the firm’s HR leader. Critically, however, it is not siloed in HR but central to the firm’s strategic planning. “We’re two years into a talent identification and succession planning process where we assess and discuss the talent two to three levels below me across all of our lines of business,” says Thompson. “Each line of business talks about their people in talent review discussions with other lines of business so we know our talent more broadly, understand our collective bench strength and can move talent across lines as necessary to meet business needs. We also do succession planning three levels into the company within the lines of business.”

However the elevation of the HR profile occurs, it requires a commitment from the top. “Setting the tone about development as a CEO is everything,” says Hanover’s Eppinger. “A lot of people talk about that, but most companies don’t have an explicit commitment from senior management to make their people better. And that’s part of the contract here.” That commitment must also include the financial backing to support the success of HR in attracting, retaining and compensating top talent.

Meyer of KeyCorp puts it plainly : “My head of HR can’t run a top-flight HR organization if the company won’t spend money.” 

Solving a talent shortage: 

Not surprisingly, the demand for HR leaders meeting this stringent set of requirements far outstrips the supply. Appropriately, forward-thinking companies are finding that the solution lies in making the silos between departments more permeable. Promising HR executives are rotated out into line positions in sales, marketing or operations; returning to their home departments with a broader perspective, they codify and institutionalize their knowledge and thus bolster the HR talent pipeline. At the same time, some organizations are bringing in executives from sales, finance or marketing to take HR leadership roles, betting that they can get up to speed on domain-specific knowledge while leveraging their business perspective.

The latter approach has been used successfully at Northrop Grumman. “You take an operating executive of enormous potential and put them in a key HR role somewhere in the organization and allow them an opportunity to develop and mature from that position,” Sugar says. “It brings you immediately into the inner sanctum, and you learn what’s really happening, who knows what and who the key people are. And when you roll back out to run a business, you have some additional skills.”

Robinson at The New York Times Company agrees that HR leaders who have worked at companies that have “gone through monumental transitions” have a lot to offer. “I think you are advantaged when you attract people who enjoy rolling up their sleeves and view their positions as being agents of change,” she notes.

“I think transitions can bring out the best in HR professionals when they are willing and eager to step up to the challenges. They should view themselves as critical leaders in the change process,” Robinson says.

Seizing the opportunity: 

While a rapidly shifting and complex business environment is forcing talent management to the top of the CEO agenda, those CEOs are responding by driving change in a function that has been historically relegated to second-class status. They are elevating the HR function to give it full membership in the inner circle and are raising expectations accordingly.

HR leaders with the full complement of skills and perspectives necessary for success are in short supply, causing companies to develop innovative strategies for identifying candidates for positions that will not wait. At the same time, the human resources profession needs to apply its expertise to itself—expanding its skill sets, establishing best practices and developing a culture of knowledge sharing— to successfully grasp this opportunity. And in that challenging transition, the CEO may be HR’s biggest advocate.

“The HR person has a wealth of knowledge of the capabilities of the organization,” says Shire’s Emmens. “There are a hundred things they can bring to the table because they are, in many ways, the central nervous system of the company. They’re the eyes and the ears. They’re great observers. So they’re often aware of issues, problems and roadblocks ahead of the people in the room. And if you listen to them, I think you can make much more intelligent decisions around the human assets in a corporation.”

Perhaps Campbell Soup’s Conant sums it up best : “ If you believe that leading & managing your people is the most important thing you do, then not only does HR have to be at your table, it has to be at your right hand.”  

Six Ways You’re a Workplace Bully Without Even Realizing It

Leading with Trust

Mike RiceBullying has been on primetime display this week as basketball coach Mike Rice was fired from his head coaching job at Rutgers after a leaked practice video showed him pushing, grabbing, throwing balls at players, and cursing them with gay slurs. As a youth sports coach for over 15 years and the father of a 20 year-old college student, I was sickened at Rice’s conduct. There is absolutely no room for that kind of behavior in sports, school, or the workplace. Leaders have to be held to a higher standard.

Bullying is not just verbal or physical intimidation of someone. Especially in the workplace, bullying can manifest itself in many subtle ways. Any behavior you use to intimidate, dominate, embarrass, harass, or purposely make someone feel inferior could be considered bullying.

Here are six subtle ways you may be acting like a workplace bully without even realizing it:

1. You are condescending – When…

View original post 455 more words

“Boss’s favourite”, one of the “top-peeves” that employees have |by:Rashmi Singh | People Matters

It is natural for a boss to have a favourite employee. But, is it always fair ?? 

It didn’t take Manisha Shukla, Assistant Brand Manager in a media organization, much time to realize that her boss showered favours on a special team member. That didn’t matter until she started realizing that this colleague could loiter around in office without a single complaint from the boss, could come late to work, could choose his own deadlines while others would get snubbed for slightest of mistakes. She says, “Having a favourite isn’t a problem. The problem arises when people start thinking that they are being sidelined and not given fair treatment. ”

Employees do not bother it much if all the employees get equal treatment. In an article, writer Marjo Johne quotes Gayle Hadfield, principal at Hadfiel HR Consulting in Vancuover as saying, “Favouritism in the workplace happens because we are human beings. Some managers may not even realise they’re doing it.”

Beneficiary of ” Favouritism” isn’t always at advantage : 

Yes, it affects a boss’s performance too: 

Employees like to be in companies which give them fair treatment and growth opportunity. When a colleague gets preferential treatment other employees feel rejected and start nursing complaints against their supervisor.These complaints convert into a feeling of resentment toward the boss and the beneficiary, more so, when the favoured employee is a very average performer. If it persists for a long time it becomes a threat to a team’s unity. An article on Forbes quotes Ryan Kahn, a career coach, the star of MTV‘s Hired! and author of Hired! The Guide for the Recent Grad, “By not treating everyone equally, a manager is fostering a sense of resentment and separation that can de-motivate employees and damage team unity.” Moreover, favouring one person for reasons other than work leads to ignoring potential of other team members. In the longer run, this might have negative effect on a team’s performance, employee engagement, and trust on the fairness of performance reviews, the metrics against which a team leader’s performance is measured.

Employees don’t take favouritism well when they are treated inferior to someone for reasons other than performance. One fact is that the employee who has the boss’s grace might be alienated in the long run. More so, if a superior performer gets ignored and the ‘pet’ gets all the cream projects and accolades from the boss. So, bosses who believe undue favours make things easy for their favourite employee might end up putting him in a tight spot where he is envied by other team members. Teams grow un-supportive of such members and also lose trust in their team leader.

How to handle it !! : 

This is one tricky part. One universal fact is that nothing can stop bosses from developing fondness towards one of the employees. The reason is simple: More attachment to something or someone comes as a part of being a human being.

However, the reason of this fondness and the way it is expressed makes all the difference – 

1. In case you like one particular employee for reasons other than his performance, keep it out of office premises. 

2. All the work related discussions and decisions about responsibility sharing should be done in presence of every team member. 

3. Listen to every member during meetings. Do not try to support an incorrect statement of your favourite employee. The discussions should be fair. 

4. Do not share confidential information with your favourite team member. Favoured employees have a tendency to show the ‘boss’s favourite’ tag. Despite your trust on the employee, it might get leaked and spoil your reputation. 

5. Do not shower praises on your favourite employee. Your praises should be reserved for the most deserving person. 

6. Talk to every team member and ensure that no one feels alienated. There should be one rule for all. 

7. Do not let your favoured employees assume an air of superiority. Neither should they be used to convey your messages to someone in the team unless they hold that position in hierarchy. 

8. Be fair during performance reviews. 

 

“Hiring Wisdom”: Top-10 Ways to “Guarantee your Best-People will Quit (Not)”|by: Mel Kleiman | TLNT

Here are “10-ways” to guarantee that your best people will quit (NOT) :

10. Treat everyone equally. This may sound good, but your employees are not equal. Some are worth more because they produce more results. The key is not to treat them equally, it is to treat them all fairly.

9. Tolerate mediocrity.  A-players don’t have to or want to play with a bunch of C-players.

8. Have dumb rules. I did not say have no rules, I said don’t have dumb rules. Great employees want to have guidelines and direction, but they don’t want to have rules that get in the way of doing their jobs or that conflict with the values the company says are important.

7. Don’t recognize outstanding performance. and contributions. Remember Psychology 101 — Behavior you want repeated needs to be rewarded immediately.

6. Don’t have any fun at work. Where’s the written rule that says work has to be serious? If you find it, rip it to shreds and stomp on it because the notion that work cannot be fun is actually counterproductive. The workplace should be fun. Find ways to make work and/or the work environment more relaxed and fun and you will have happy employees who look forward to coming to work each day.

5. Don’t keep your people informed. You’ve got to communicate not only the good, but also the bad and the ugly. If you don’t tell them, the rumor mill will.

© vladgrin - Fotolia.com

4. Micromanage. Tell them what you want done and how you want it done. Don’t tell them why it needs to be done and why their job is important. Don’t ask for their input on how it could be done better.

3. Don’t develop an employee retention strategy. Employee retention deserves your attention every day. Make a list of the people you don’t want to lose and, next to each name, write down what you are doing or will do to ensure that person stays engaged and on board.

2. Don’t do employee retention interviews. Wait until a great employee is walking out the door instead and conduct an exit interview to see what you could have done differently so they would not have gone out looking for another job.

1. Make your on-boarding program an exercise in tedium. Employees are most impressionable during the first 60 days on the job. Every bit of information gathered during this time will either reinforce your new hire’s “buying decision” (to take the job) OR lead to “Hire’s Remorse.”

The biggest cause of “Hire’s Remorse” is the dreaded Employee Orientation/Training Program. Most are poorly organized, inefficient, and boring. How can you expect excellence from your new hires if your orientation program is a sloppy amalgamation of tedious paperwork, boring policies and procedures, and hours of regulations & Red tape?

To reinforce their buying decision, get Key-Management involved on the first day and make sure your orientation delivers and reinforces these THREE messages repeatedly :

A. You were carefully chosen and we’re glad you’re here;

B. You’re now part of a great organization;

C. This is why your job is so important. 

 

Delegating With “Trust” | by: John A Page | Executive Street

An old joke from a stand-up comedian went something like this : 

“ I was a para-trooper – not by choice. I was up in a plane, took a wrong turn, and slid out the bomb bay doors. The sergeant yelled after me, “pull the ripcord. The chute will open. There will be a truck down there waiting for you “…..“I pulled the ripcord, the chute didn’t open, and I said, ‘I bet that truck won’t be there either”….

Building trust with subordinates is a constant task for managers. Employees need to know that their bosses are backing what they do and can be relied upon to provide timely guidance and support. They also need to learn to be responsible for their work and to grow in independent judgment. The cumulative experiences that builds their professionalism usually involves making some mistakes and wrong turns from which they learn.

For the manager, this is a dilemma. The job (a delegated assignment or project) must be done and, hopefully, done well. In many cases, the boss knows the pitfalls and can guide the subordinate away from them. Yet, experience is the best teacher, and the boss knows that too much interference may destroy the sense of subordinate responsibility so necessary to confidence and success.

Trust, while brought about by action, is primarily a feeling. The subordinate who doesn’t feel trusted may become resentful and ceases growing in the job. Yet the manager who trusts too much may find that the work is not satisfactorily performed or that serious errors are made.

Here are some principles to help you gain – and maintain – an effective level of trust : 

1. Focus on results, not on methods –  The results are what count. Define objectives clearly. Give the initial guidance to your people regarding suggested methods and inform them of what methods are taboo, but leave them a wide range to determine their own directions towards a goal. While they may occasionally stumble, they’ll learn from the experience. Who knows? They may also discover some new and better methods.

2. Establish reasonable checkpoints in advance –  Set up a schedule for regular reviews and feedback, such as weekly reports or meetings. Stick to the schedule, both in terms of subordinate requirements and your availability. Make sure that employees understand that the purpose of the reviews is not to criticize, but to share information. It’s important not to appear obsessive in your need for information.

3. Resist the temptation to “ Spot-Check” –  Nobody likes a snoop. If the subordinate knows that you’ll be making surprise visits to ascertain that all is well, he or she will begin to feel persecuted. The inevitable consequence will be the withholding and the censoring of information. Nothing destroys trust so much as the feeling that someone is looking over your shoulder as you work.

4. Be available –  Trust isn’t built by managerial abdication. Let subordinates know that you can be reached at any time for consultation and coaching. Respond to such contacts in a timely fashion. Give advice and help, but don’t make your subordinates decision for them. Ask them to come to you not with choices, but rather with questions and comments on directions they have decided to pursue.

5. Have contingency plans – The more critical the assignment and the less experienced the subordinate, the more necessary it is to have some contingency plans in case something goes wrong. Establish in advance the critical point in time or cost that may require you to take action in order to avoid a catastrophe. Make a subordinate aware of these points and work together so that they don’t become an issue. But if they do, take the appropriate action.

6. Above all, be trustworthy yourself – Support your people in both your words and your actions. Follow through on your commitments to your people. Provide them with full information related to their work and answer questions thoroughly. Use every available opportunity to show them that you care and you want them to succeed.

Caution: trust does not maintain itself. You’re bound to make mistakes. Simple errors in communications can easily be mis-interpreted as a lack of trust. If that happens, deal with the situation immediately by acknowledging the mistake, apologizing for it, and rectifying the error. It’ll prove your human, and can be trusted to do the right thing.

The final word: in a trusting work situation, our paratrooper in the joke at the beginning of this article might have said. “I packed my own chute and it didn’t work. I’ll use the reserve chute my boss has supplied and I know there’ll be a truck down there waiting for me.” The story would no longer be funny, but it would describe a constructive manager-subordinate relationship.

” Tailored to the Bottom-Line”: People-Management Practices & Profitability in Companies | Deloitte

“People are billed as companies’ most important asset” so routinely that we should be surprised they don’t all sleep nights in  corporate vault. Yet, in the hard-nosed, bottom-line discipline of managing organizations, the “soft skills” of people management practices are more often an afterthought than a core strategy linked to superior business performance. And while workforce management practices have moved far beyond the personnel office of decades past—with its origins in managing masses of low-skilled workers in a pre-technological age—many have a long way to go to engage their people and connect these practices to shareholder value. Talent management for many, could be characterized as a less than ideal blend of new aspirations and old tactics.

Consistent with a bottom-line approach, it is fair to ask : How do people management practices impact the performance of a company? Have these practices in your company kept pace with the changes in your business?  Most importantly, which practices contribute to profitability ?

The road to useful conclusions is often paved with hard data. In our research, we found that answers to some of these questions lay in excellence in specific aspects of people management practices. The data suggest that certain practices help some manufacturers/companies outshine the rest. These companies have developed clear talent management strategies that align consistently with their overall corporate strategy and complement their culture and values in ways that point to improved results.

WHAT SETS THEM APART : 

Recognizing that larger companies have the scale and resources to develop more comprehensive talent management strategies, we focused our research on the largest 142 companies from our survey.

The most profitable large companies share THREE Practice Areas that differentiate them from the least profitable companies : 

  1. Defining a clear and explicit people strategy that is linked to the business strategy. 
  2. Performing formal succession planning across the workforce. 
  3. Linking employee pay directly with productivity of the company or to the respective manufacturing plant. 

People and the end goal : 

Any business strategy ultimately depends on people for its successful execution. Acquisitions, mergers, downsizing, off-shoring, partnering, you name it – people are central. But the people strategy needed to drive and support a high-end, intensive-customer-experience retail company is very different from that needed for a mass merchandise, low-cost discount retailer, and vastly different from a customized, specialty engineering and manufacturing aerospace and defense firm. Yet relatively few employers surveyed have developed an explicit and documented people strategy tailored to their business goals.

Of the largest companies that participated in the survey, 55 percent of those with top quartile profitability rated themselves “high” in linking people management strategy to business strategy, while only 30 percent of bottom quartile profitability companies reported similar performance (figure 1). Among all the survey respondents (regardless of size), the figures stand at 44 percent for the most profitable companies and 36 percent among the least profitable. In many organizations, the HR function does not participate in the strategy development process nor does it have complete visibility into corporate or business unit strategies.

As a result, corporate strategy and people strategy are developed independently and people management practices may be misaligned with corporate objectives. For example, an industrial products company may develop a strategy to increase its service revenues by 20 percent over the next three years, but if it fails to measure and improve service orientation among employees, it will likely fail to achieve that objective and may also find its employees demotivated.

The most profitable companies, the data would suggest, align people practices to corporate strategy. According to GE’s vice president of human resources for Australia and New Zealand, Sam Sheppard, rather than being an administrative function, HR initiatives, actions and priorities must be aligned with the business plan.

“There is no point being an add-on function, a reactive partner for the business,” Sheppard said. “It’s very easy sometimes to get sidetracked on what we would like to be doing, but if we can’t translate that into a bottom-line impact for the business, then that lessens our value to the organization”.

After struggling with lack of focus and losses in the billions in the early 1990s, Sears Holdings Corporation likewise overhauled its strategy implementation process. A senior management team incorporated the full range of performance drivers into the process. Then, they articulated a new vision: For Sears to be a compelling place for investors, the company must first become a compelling place to shop; and for it to be a compelling place to shop, it must become a compelling place to work.

Sears validated the vision with hard data, designing a system to objectively measure each of the three “compellings.” The team extended this approach by developing a series of related competencies that employees were required to hone and identified behavioral objectives for each of the “compellings” at several levels through the organization. These competencies then became the foundation on which the firm built its job design, recruitment, selection, performance management, compensation and promotion criteria. The company also instituted the Sears University to develop these competencies.

Recognizing that it is important for HR managers to be familiar with the broader aspects of the business, Coca-Cola rotates top-performing line managers into HR positions for two or three years to build the business skills of its HR professionals and thus make the function more credible to the business units. At Procter & Gamble, an HR manager is expected to work in a plant or work alongside a key-account executive to learn more about the business and its needs.

Formal succession planning across the workforce : 

Well-defined succession planning takes a long-term view of talent within the organization. It develops talent to step into key roles on a timeline consistent with anticipated—and unanticipated—vacancies. Lack of rigorous succession planning can hit companies hard. It takes them longer to replace critical talent and often at a higher cost from external sources.

Among the largest companies in our dataset, 45 percent of companies with top quartile profitability exhibit high ratings in formal succession planning while only 30 percent of bottom quartile companies performed similarly. Looking at all respondents (regardless of size), 36 percent of the highly profitable companies rate their current capabilities in formal succession planning as “high,” while only 20 percent of the less profitable companies rate themselves similarly. A majority have yet to establish an effective succession planning process.

Many organizations struggle when it comes to grooming successors for key positions. Succession planning, as traditionally conceived and executed, is narrowly focused on identifying employees who are ready for promotion, usually only at senior executive levels. A long-term talent management strategy should look beyond the C-suite to prioritize succession of all critical positions based on specific organizational needs and strategic direction.

According to Johnson & Johnson, the ability to groom future leaders is crucial to removing a potentially significant constraint to its future growth. Each year J&J’s CEO launches the talent review process with a letter addressed to executive vice presidents reinforcing the importance of leadership development and also highlighting a new area of focus for that year to emphasize succession management priorities. J&J uses bottom-up succession reviews to discover and grow talent first at the operating company level, then at the group level, and finally at the corporate level. As a result, talent review now takes place in every aspect of J&J’s business planning with continuous examination of capabilities and development needs of executives in the context of larger organizational needs.

Colgate-Palmolive also developed an innovative way to ensure that all levels of management make succession planning a priority. It instituted a program that mandates that all senior managers must retain 90 percent of their staff who have been designated as “high potential” or risk losing part of their compensation.

Linking employee pay to productivity : 

Among the largest companies in our survey, 58 percent with top quartile profitability ranked high in linking employee pay to productivity, while only 36 percent of bottom quartile companies performed similarly. Considering all respondents (regardless of size),55 percent of highly profitable companies rate their current capabilities in linking employee pay to productivity as “high” compared to only 41 percent of the less profitable companies.

Organizations are increasingly placing emphasis on rewards management programs and performance-based pay. Deloitte’s 2010 Top Five Total Rewards Priorities Survey reports that 66 percent of respondents plan to make changes in the design of compensation plans, with particular emphasis on performance-based pay and performance management tracking and administration.

Siemens successfully transformed its employee compensation system as part of its value-based management program. Before launching the program, performance-related pay was a small proportion of total compensation, even for the most senior executives. After the launch of the program, approximately 60 percent of the remuneration of the top 500 executives became performance-related. Siemens based this on current share price and investor expectations of the improvement in economic value added over the next year.

At Nucor Steel, employees involved directly in manufacturing are paid weekly bonuses based on how much their work groups—each ranging from 20 to 40 workers—produce. Typically, these bonuses are calculated on anticipated production time or tonnage produced, depending upon the type of facility. The formulae for determining the bonuses are non-discretionary, based upon established production goals. This plan creates pressure for each individual to perform well and, in some facilities, is tied to attendance and tardiness standards.

Nucor department managers earn annual incentive bonuses based primarily on the return on assets of their facility. Senior officers receive no profit sharing, pension or discretionary bonuses. Instead, a significant part of each senior officer’s compensation is based on Nucor’s return on stockholders’ equity, above certain minimum earnings. If Nucor does well, the officer’s compensation is well above average, as much as several times base salary. If Nucor does poorly, the officer’s compensation is only base salary and, therefore, significantly below the average pay for this type of responsibility.

BUILDING CURRENT STRENGTHS, MANAGING FUTURE PRIORITIES : 

Manufacturing companies need not only take stock of their current people management practices, but also to plan for the future importance of those practices. They should identify practices of continued high priority and those in need of improvement, given future business realities, while recognizing how certain practices are more impactful to their enterprise value.

Apart from the top three differentiators, our research identified several other people management practices to which the most profitable companies assign moderate to very high importance in the future and for which current performance levels suggest room for improvement: 

  • Conducting formal orientation of new employees including familiarizing them with corporate values.
  • Explicitly defining technical competencies and evaluating these while hiring.
  • Measuring and recognizing strong performance using clear metrics and methods of evaluation.
  • Willingness to pay top performers significantly more than average employees.

Emphasis on core values and corporate culture will remain important in the future. The majority of the most profitable companies already excel in that aspect. In addition, those companies will sustain their efforts with regard to:

  • Considering future talent needs in the recruitment process.
  • Evaluating problem solving skills during the recruitment process.
  • Explicitly defining non-technical competencies and evaluating these in hiring.
  • Sharing profits across the workforce.
  • Using a defined contribution approach to the employee benefit program.

These high-priority practices fall broadly into three categories: people strategy and culture, talent acquisition and development, and performance management.

People strategy and culture: 

High-performing companies align people management practices to the corporate culture (“cultural fit”) and to the business strategy and long-term objectives of the organization (“strategic fit”). This tight coupling of internal practices, culture and strategy remains unique for each organization and is difficult for competitors to imitate. While rivals can poach a few employees or can try to mimic some strategic moves, rarely will they be able to penetrate the lattice of internal fit, cultural fit and strategic fit.

Our research suggests that higher percentages of highly profitable companies excel in focusing on core values and corporate culture and on orienting employees to that culture (figure 2).

Companies that inspire employees can expect significant discretionary effort from their workforce, who in turn can help win and gain customers.

The Nokia Way defines Nokia’s core values. Nokia reviewed and refined these values in 2007 to engage employees and to reflect how the business evolved and changed. It asked employees to explain what was most important to them to help create a new set of values that define Nokia. Over 2,500 employees from around the world took part in 16 regional events to come up with the key themes for new values. Involving employees at every stage of the process helped Nokia embed a strong values culture throughout the business.

The new values, an evolution of the previous Nokia values, are :

  • “Achieving Together,” which reflects that the company increasingly works in networks.
  • “Very Human,” which builds on Nokia’s previous value of “respect.”
  • “Engaging You,” which includes all company stakeholders and not just customers.
  • “Passion for Innovation.”

Nokia now communicates these values to all its employees through videos and other information on its intranet and as part of its communications on company strategy. In May 2007, around 13,000 employees registered in the Nokia Way Jam, a 72-hour online discussion to decide on values and debate future business strategy. The collaborative nature of the Jam was an expression of Nokia’s culture and the value it places on “achieving together.” Nokia analyzed the results of the Jam and identified several key corporate initiatives to be included in future plans and several initiatives within its business groups. The Jam prompted new activity and changed some of Nokia’s business priorities.

Talent acquisition and development : 

Highly profitable companies do a better job in their recruiting process by thoroughly analyzing technical, non-technical and problem solving skills. These companies consider recruitment as a dynamic process that is closely linked to the people and corporate strategies. Thus, they work with the businesses to identify future needs in terms of skill sets and proactively recruit such people ahead of the competition (figure 3). 

These companies measure return on investment (ROI) in the recruiting function and use metrics and analysis to optimize the most effective sources, programs and methods.

Uncertain business conditions make workforce planning a tightrope walk for most organizations. To conduct robust planning in such uncertain conditions, some profitable companies borrow techniques from supply chain management, where the overall task is similar to workforce planning. These companies have shifted from forecasting to simulations. One large global chemical company started using standardized data from its enterprise resource planning system to produce manpower estimates for each location that could be aggregated for the company as a whole. Then it sought a university to develop an even more elaborate model, one that used the standardized data to generate estimates for each business unit. The simulation-based models incorporated a wide range of site-specific factors such as estimates of the political and business climate in each of its countries of operation, changes in labor and employment legislation, and business plans for the operating unit, which include targets for operating productivity.

Those forecasts were then aggregated into company-wide estimates. This helped answer “what-if” scenarios: What happens to fore-casted headcount if the economy slides below assumption or if new competitors enter a market? Simulation allows business leaders to see the implications of different strategies for talent, to anticipate how talent constraints could impact those strategies, and in some cases, to adjust their business plans if the talent requirements are too extreme.

To ensure the availability of highly skilled professionals, Caterpillar, its dealerships, and community and technical colleges work together to educate and train high school graduates to become Caterpillar dealer service technicians. The two-year “ThinkBIG” program—combining classroom work with hands-on learning in labs and in the field—teaches students how to service Caterpillar equipment using diagnostic and maintenance systems, advanced technologies and tools. Caterpillar tests candidates applying for operations jobs on well-defined criteria like numerical abilities, mechanical comprehension and information matching skills. After passing these tests, candidates are interviewed to obtain further information on their achievements and qualifications.

Performance management : 

An effective performance management system helps to develop the capabilities of individuals and teams to deliver sustained organizational performance. By systematically evaluating and effectively rewarding high performance, the most profitable companies succeed in retaining top talent. They are also able to align behaviors and competencies of both the team and individuals with that of the organization to drive strategy execution (figure 4).

The most profitable companies design performance management as an ongoing process, enhancing employee skills, competencies, knowledge and experience over an extended period of time by regularly evaluating performance and capability.

A key challenge that organizations face while designing total rewards programs is managing the trade-off between satisfying employees’ rewards preferences and working with limited resources. Given resource constraints, companies can boost total returns by emphasizing total rewards elements that increase commitment among critical workforce segments – employee groups whose retention and motivation drive a disproportionate share of company success. These are the people a company can least afford to lose, whether outright to a competitor or indirectly through lack of commitment, effort and productivity. Because of their disproportionate impact on the value chain, the specific views of these critical workforce segments should be weighed heavily in order to maximize the ROI on reward programs.

Procter & Gamble has used its business and people strategies as the basis for reviewing its long-term incentive (LTI) program for employees. The company has applied two fundamental compensation principles in guiding the review: to pay competitively and to support the business strategy. When P&G revisited its LTI program, it carefully examined its people strategy to ensure that the revised LTI plans would reflect the company’s build-from-within approach to talent management and the need for mobility of key people across the organization.

P&G looked at the employee value proposition (EVP) around work content, career, direct and indirect financial benefits and affiliation. It analyzed the impact of different LTI designs on diverse aspects of EVP across groups of employees with different salary bands and located in different key growth geographies. It ensured that the LTI designs adhered to a clearly articulated rewards strategy and that the strategic business rationale for the compensation plans, including thorough analysis, was shared with employees. For analyzing the financial impact, P&G looked at impact on cash flow and unwanted turnover. Then P&G leadership analyzed the sensitivity of the LTI designs under different business performance scenarios. For example, if performance were to exceed expectations, they determined the permissible maximum possible payouts and total payout costs to the organization. Thus, P&G was able to fully appreciate the implications of different LTI designs on the organization and on critical workforce populations. Finally, P&G was able to design an LTI which balanced the financial implications with the non-financial components of EVP.

CREATE AN INTEGRATED TALENT STRATEGY :

An effective talent management strategy is rooted in facts, not hunches or blind guesses. The starting point is understanding the organization’s critical workforce segments – jobs that drive a disproportionate share of key business outcomes, have the greatest impact on the value chain, and are in short supply from the respective labor market. These segments of the workforce must be protected and developed. This requires a workforce plan that analyzes and forecasts the talent needed to execute the business strategy and then defines specific plans to fill the expected gaps. 

No two companies—even those in the same sector—will have identical formulae for talent. Certain talent management capabilities are table stakes that are required just to keep the company operating smoothly. Others can differentiate a company from its competitors and provide a sustainable competitive advantage. Once a company has identified its critical workforce segments, it must pay special attention to the preferences of people in those segments by investing in tailored programs to develop and retain them and help them achieve a high level of productivity.

Manufacturers are facing unprecedented long-term business and talent challenges, a situation that offers tremendous opportunities for individual companies to separate themselves from the pack. Our research suggests that certain people management practices can help some manufacturers achieve superior profitability. Through talent strategies that are innovative, forward looking and closely aligned with the company’s overall strategy, a manufacturing organization can address its short-term challenges while positioning itself for long-term success.