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The Age of HR Has (Finally) Arrived

After long watching other executive officers gain prominence in the C-suite, today's chief human resource officer -- thanks to the competitive advantage of organizational health -- has finally taken top billing.

Thursday, February 7, 2013
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I am convinced that there has never been a better time to be a human resource executive. Really. No other member of an executive team is better positioned today to help an organization realize a lasting competitive advantage. To understand why this is the case, it's helpful to take a look back at how various corporate functions have ebbed and flowed in importance over the past 25 years.

When I graduated from college in the late '80s, strategy was seen as the cutting edge of business, so it's no surprise that the most valuable human asset on a CEO's executive team was often the vice president of strategic planning.

As the '90s began, database technology and applications became key levers of competitive advantage, and the CIO assumed the most prized seat at the CEO's table. As the new century approached, HR seemed a likely candidate to become the key player on executive teams, but the extraordinary growth of the Internet and the wild focus on IPOs made CMOs and CFOs relatively more important when it came to differentiation and competitive advantage.

Today, however, something remarkable has happened. With the ubiquity of information and the access to ideas through the Internet, virtually every organization has become adept at using relatively sophisticated tools and concepts related to decision sciences such as strategy, technology, finance and marketing. These traditional, largely intellectual pursuits have become almost permission-to-play for any organization that wants to be relevant. They certainly aren't the levers of meaningful differentiation that they used to be.

So what does that leave as the primary opportunity for competitive advantage? A field that falls directly within the functional purview of the head of HR: organizational health.

Simply stated, a healthy organization is one that has minimal politics and confusion, extremely high morale and productivity, and very low turnover among high performers. These traits, more than any others, will separate mediocre or good companies from exceptional ones.

Some will be tempted to simply call this culture and dismiss it as nothing new. But organizational health is much more comprehensive and fundamental to business than culture. In fact, it is the very context within which culture -- and everything else in business -- sits. It requires no less rigor and discipline than finance, marketing, technology or strategy, though its impact is markedly greater than any of those pursuits.

Consider Southwest Airlines. What they've been able to do in a ridiculously difficult industry -- in terms of financial success, customer loyalty and employee satisfaction -- defies logic. What many people fail to understand is that what makes Southwest better than its competition is not its strategy. After all, that strategy is no secret; its competitors have tried to replicate it again and again, though without success (remember United's "Ted" and Delta's "Song"?). And Southwest's success is not about technology, because every other airline has access to similar tools and systems. The same can be said about marketing and finance, neither of which is magical at Southwest.

Don't get me wrong. Southwest is extremely good at each of these disciplines. A healthy organization usually is. But, as any of their fanatical employees or loyal customers will tell you, the secret to their success is centered around the healthy nature of their organization, which manifests itself in the way they do, well, just about everything.

Other companies could be substituted for Southwest as quintessentially healthy, such as Zappos or Nordstrom. Again, the key is that their success is not about being smarter than their competitors. And it isn't something culturally trendy such as innovative office space or organic food in the company cafeteria. It's about building healthy organizations.

Some might dismiss all of this as something soft or amorphous. But it's not. It's hard-wired along four specific disciplines that are immensely practical, rigorous and relevant to an organization's bottom line. The HR executive who understands how to help a CEO master those disciplines will become an organization's most valuable strategic resource.

The Approach

Making an organization healthy -- whether we're talking about a corporation, a department within that corporation, a small business, a school, a nonprofit or a church -- is a matter of mastering four conceptually simple but difficult-to-implement disciplines. Those include 1) building a cohesive leadership team at the top, 2) achieving intellectual clarity and alignment among those leaders around the answers to six critical questions, 3) over-communicating the answers to those questions to employees and 4) establishing simple, non-bureaucratic, customized human systems to reinforce those answers in every stage of the employee life-cycle.

Here's how it all works, and fits, together.

A Cohesive Team -- An organization cannot be healthy if the people chartered with running it behave dysfunctionally. To become functional, they must develop vulnerability-based trust with one another, learn to engage in productive conflict without fear, come to real commitment around decisions even if they initially disagreed, hold one another accountable for adhering to those decisions, and focus on the collective results of the team and the organization rather than their own departments or interests. Building cohesion among the leadership team is a critical first step because it makes the second (and perhaps most important one) possible.

Organizational Clarity -- In addition to becoming behaviorally cohesive, leaders of a healthy organization must achieve intellectual alignment. That means they have to be in complete agreement around the answers to six critical questions that guide almost every aspect of the business. Those questions are: Why does the organization exist? How do we behave? What do we do? How will we succeed? What is most important -- right now? and Who must do what? There can be no tolerance for ambiguity or passive disagreement around these issues, because that creates inevitable conflict among people deeper in the organization who want, more than anything else, clarity about how to succeed.

Over-Communication -- Once the six questions are answered, the leadership team's primary responsibility becomes the repeated, redundant and exhaustive communication of those answers. Members of the executive team must see themselves as "CROs," or "chief reminding officers," more than anything else. They must be constantly finding opportunities to help employees understand what the organization is about and how it works. The premise here, one that has been confirmed by researchers and great leaders for centuries, is that most people want to do great work, and that what they need more than anything is to understand why they are doing it and what is expected of them.

Reinforcement through Human Systems -- In addition to over-communicating the answers to the six questions, leaders must ensure that those answers are embedded into every process and system that involves employees. That includes everything from recruiting, hiring and orienting new employees, to performance management, reviews, and training and rewarding the existing employees. When human systems are placed within the context of organizational health, they are transformed from something that managers see as bureaucratic and administrative requirements into tools for protecting the company's competitive advantage. That raises the perceived and real value of what many people in HR do.

An organization whose leaders work cohesively, align around these critical questions, communicate them incessantly and reinforce them constantly has a very, very difficult time failing. That's because it sees problems early, rallies around them quickly, identifies opportunities in the midst of them, and emerges stronger and smarter as a result. All things considered, organizational health is an advantage that makes strategy and finance and marketing and technology look, well, relatively tactical.

The Role of HR

The good news in all of this is that HR, because of its functional association with leadership training and organizational development, as well as hiring, compensation and performance management, has the inside track at organizing these efforts around achieving organizational health. The other news, which is both good and challenging, is that the CEO must be the hands-on driver -- not merely a sponsor -- in order to make it work. And that makes HR the natural candidate to serve as the CEO's internal coach and consultant.

There are those who will say that the head of HR has always filled that role. But in reality, CEOs have too often seen human resource executives as counselors around a limited and disconnected number of issues -- the usual suspects being compensation, benefits, training and personnel. As important as these matters are, they haven't been addressed in an integrated, comprehensive and relevant context, something that is essential if leaders are to realize the benefits of organizational health. By helping the company understand that context and the benefits of making organizational health a reality, the head of HR will become nothing short of the CEO's primary adviser.

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How long does it take to make an organization healthy? Thankfully, it doesn't require years of work (though, like a marriage, it must be regularly maintained). It can come about in a few months, and meaningful results can be seen in days and weeks. Some of that depends on the size of the organization and the difficulty of the issues that must be addressed. But more than anything else, it comes down to the commitment of the leader and his or her team, and the ability of the head of HR to help them make that commitment.

The First Step

Regardless of the size, industry or level of sophistication of a given organization, the process for making it healthy always begins with -- you're not going to like this -- an off-site meeting. That's right. Every organizational-health initiative must get started by leaders spending a day-and-a-half or two days together. And, yes, the head of HR is going to have to convince the team that it will be worthwhile.

Thankfully, that off-site meeting will not involve people catching each other falling out of a tree or sharing their innermost secrets. Instead, leaders at an organizational health off-site will spend their time focused on the first two disciplines -- building a cohesive team and achieving clarity. That means they'll be wrestling with practical, vital, difficult and imminently resolvable issues related to strategy, tactics and team dynamics. They will spend their time analyzing, arguing, laughing and, most important of all, getting closure around real issues. And they'll walk away with a one-page, double-sided "playbook" or guide that will inform just about everything they do as a team. There is a darn good chance they'll also lament the fact that they didn't start the organizational-health process years ago.

Within a few days or weeks of that meeting, assuming the CEO and head of HR do their jobs, the team will notice a few major differences. First, their staff meetings will be transformed. Dry, unfocused, meandering discussions that end without resolution will become compelling, relevant and decisive. Really.

And the way team members talk to one another, both in terms of content and style, will be unrecognizable. What were once muted, indirect and passively political discussions will be replaced by frank, open and sometimes uncomfortable conversations that lead to clear decisions and genuine commitment. Really.

The result of all this will be true alignment and clarity around the most important issues that employees want and need to understand. From the practical concepts, such as the over-arching goals of the organization and the strategic differentiators that should inform every decision, to the more cultural ones such as acceptable behaviors and organizational purpose, the leaders will be able to start singing from the same hymnals, proudly and repeatedly, giving employees in all departments a sense that they really work for a single company with a common idea for how it will go about winning. Those employees will be dumbfounded and giddy. Really.

HR Renaissance

Building a healthy organization, in addition to the stated goal of making the company stronger and more successful, yields a side benefit for the human resource department; it provides the context for organizational communication and human systems. Activities such as company meetings, employee orientation and performance management will no longer be seen as administrative necessities and harmless nice-to-haves, but rather critical processes for maintaining the company's unique culture. Employees and executives alike, beginning with the CEO, will begin to see the HR department as protector of the organization's most critical strategic, competitive advantage.

Of course, all of this will require the head of HR to be courageous, humble and emotionally intelligent in the way he or she deals with peers on the executive team and employees in the HR department. Pride and the fear of momentary rejection, which every executive struggles with, will prevent even the most well-intentioned HR executive from bringing about change.

Yes, being the advocate of organizational health -- and the most important person on a CEO's team -- is a challenge. But for those who accept this challenge, it will be a fantastic time to be in HR.

Patrick Lencioni is the author of 10 best-selling business books and is founder and president of The Table Group, a Lafayette, Calif.-based management consulting firm focused on organizational health. Send questions and comments about his piece to hreletters@lrp.com.

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