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Atomic Conversations: Dave Ulrich on reinventing HR for the modern workplace

A conversation with Dave Ulrich on the major aspects of HR today, including handling uncertainty and the need to create value for all stakeholders.

We’re thrilled to present to you the Atomic Conversations, where we speak to HR, IT, or business leaders who are shaping the world of work as we know it, on what it takes to build exceptional digital employee experiences of the future.  

Our first guest is Dave Ulrich, 'The Father of Modern HR'. Even after being ranked as the #1 management guru by Business Week, profiled by Fast Company as one of the world’s top 10 creative people in business, a top 5 coach in Forbes, and recognized on Thinkers50 as one of the world’s leading business thinkers, he is one of the most modest leaders you’ll ever meet. He has grand ideas that can—and have—changed the face of top organizations for over 35 years now.

In the inaugural special episode, Dave talks about the major problems HR is facing today, the role of HR technology, lessons from the downturn, and the need for HR to create value for all stakeholders. Dave stresses the importance of adapting and navigating the new world of work and what HR needs to do to keep up.

Here’s the link to the podcast, if you’d prefer to listen to the entire episode instead. For the readers, find the key insights from our conversation with Dave, edited for clarity and comprehension, below.

HR and value creation

The number one principle for me, is HR has to create value.

If HR is not creating value, it's not going to be sustainable. HR is not just about human resources. HR is about the creation of value for all key stakeholders, and not only for those inside the company.  

HR doesn't just serve the employees and business leaders, it also serves the customers today. If a company doesn't succeed in the marketplace, there is no workplace and HR should help build success in that marketplace. HR should serve the investors. That could be debt or it could be equity. It could be a parent company. But if the investors don't invest in a company, there's no more company. HR should serve their communities.  

One of the evolutions in HR is the creation of value for all the stakeholders and that broadens the HR agenda.

A second step in evolution is what HR focuses on. For the last 40-50 years, HR has been focused on everything to do with people - hiring, training, development, paying, employee experience, and retaining.  

Today, HR is also worried about the organization and the culture. It's not just the workforce, it's the workplace. It's not just the individual, it's the team. It's not just what happens to the competencies, it's the capabilities. We call that HR's agenda of human capability.  

Dave Ulrich's Integrated Human Capability Framework
Integrated Human Capability Framework
  • Do we have the people that our customers will be delighted to work with?
  • Do we have an organizational culture that reflects the brand’s promises to our customers?
  • Do our leaders behave in a way that is consistent with customer value?

These are some of the questions HR need to keep tabs on, when they create value for stakeholders.

So the first step is to infuse a sense of value creation into HR. The second step is to create that value through human capability, talent, organization, and leadership.

Always start with the business

There are two keys to a great HR department that creates value in the business.

  • We have a clear purpose. Our purpose is to help the business succeed. Call it mission, vision, values, or whatever you want to call your HR purpose. But we're here to help your company succeed.  
  • We have great working relationships. We know how to work with each other. We support each other, we build each other. It's not about the roles, it's about the relationships that connect us with each other.  
These are the two premises that make the difference - Are we shaping the business’ success? And are we managing the relationships that make that work become key?

Let me give an example for the first one. I teach a two-week course at the University of Michigan for HR executives. After one of those courses ended, the executives were getting ready to go home. And they're all excited.  

One of them says, “I'm excited. I'm going to talk about the new ideas on leadership when I go to my business team.” Another says, “I'm going to talk about diversity”, and another goes, “I'm going to talk about culture, and a skill-based organization”.  

And I stop them and I say, “We have failed you.” They were confused.

When you go into a business meeting as an HR professional, do not start with leadership, diversity, technology, or culture. Start with the business. What does our business need to do to succeed?

I had a call today with a CHRO in a very good company and she said, “Let me show you my HR plan for this year.” She held it up and I said, “Let me ask you a question. On the first page of your HR plan, does it have the goals of the business?”

I said to her, “I'm going to bet your HR plan starts with HR. Don't start with HR. What's the business issue that we're wrestling with today? Is it cost? Is it innovation? Is it distribution? Is it technology? Is it supply chain? What am I going to do today in HR so that a customer will be more likely to buy my product tomorrow? HR’s job is to help make that happen.”

We want to succeed in this marketplace. We want to be innovative through this kind of innovation. We want to make this kind of money. We want to grow this market share. We want to have this kind of community reputation.

They all start with a simple question.  

People. Am I hiring the people who my customer wants to have a relationship with?

Culture. Am I building a set of values that create value for my customer?  

Leadership. Are my leaders doing the things that my customer wants us to be doing?  

When we can begin to make that logic happen, that's where HR really builds more value.

Great employee experience begets great customer experience

One of the things that we love to look at is employee experience. Everybody believes in good employee experience. I mean, who doesn't believe people are a critical part of any company?  

Employee experience is what drives that people fuel. That's the fuel that drives the company.

The ultimate goal of a business is to succeed with customers. I want my customers to feel that I'm meeting their needs in a very effective way. And employee experience drives that customer experience.

When we create more committed employees, we have more committed customers.

For example, a while ago, I went to a grocery store. I went through a checkout line, and the woman at the counter looked at me and she said, “How are you tonight? Are you having a good day?”  

What a silly, simple comment that took less than 30 seconds. But that created a connection.  

I think that the employee enjoys her job because she felt like she was connecting with these customers even while packing their food in bags.  

And it left me with a good experience.  

When you fly through Singapore and you go through their customs line, the customs agent almost always will say, “Welcome to our country, we hope you have a great experience here,” with a smile. I don't get that in a lot of other countries, and I travel quite a bit.  

In some of the countries I’ve been to, it would feel like the customs person’s job is to stop me from stepping into their country. “Who are you going to meet? Where are you going to stay? Do you have any edible items in your baggage?”  

I think the way we build our employee experience is a lead indicator of what we want to be doing with our customer experience.  

We have to manage that from the outside in - I want to build a strong customer connection through my employee experience. And when I do that, both sides succeed.

I want my people to have a great experience at work, so that my customers have a great experience, so that my business earns more revenue, so that my investors have a better experience. And the more we can begin to build that virtuous spiral, the better off the employee is, the better off the customer is, and the better off the investor is.  

That's the hope.

When it comes to reinventing HR there are two major activities.

  • Outside-in HR, which, as we discussed above, is about creating value in the marketplace through human capability.  
  • Building the right HR department, the right HR practices, the right HR analytics, and the right HR people.  
You’ve probably heard the metaphor - The cobbler's children have no shoes. I’ve seen that play out in many companies.

When we model our HR function the way we want the outside world to operate, we are likely to be more successful.

There’s this line from a religious leader in the 1100s, “We preach the gospel. And sometimes we use words.” When HR preaches human capability, they have to model it too.

We don't preach it with mere words. We preach it by being an example. And that's the true reinvention of HR.  

HR Tech is an inevitability

Technology has been changing everything about our world, and HR is no exception.  

The challenge, though, will be about using the technology to create value in the marketplace. We see that in marketing, with customer information. We see that companies now know customer preferences with some degree of detail, and they get that through Google and Amazon, and all those databases.  

I think we're going to see that with employees. The technology will enable us to personalize the employee relationship and really know their interests, their style, and what works for them. Technology is clearly one of the key HR enablers.

It's not just hardware or software, it's mindware.

Technology enables HR to prioritize and focus their energy on activities that matter.

When we have so many options - we can either hire people, train people, incent people, communicate with people, or restructure hybrid work, technology helps us with the complex analysis of the alternatives and then a simple distillation of what we should be doing, through the data we collect.

This is the image I used to teach in the 90s. You have three circles that created HR - the business, change processes, and HR delivery. The ability to make money, the ability to manage change, and the ability to manage people.  

Three circles that created HR - the Business Knowledge, Change, and Strategic HR

And now there's a fourth circle added to the chart and it's IT.

  • It deals with business data - where are we going and how do we succeed in the marketplace
  • It deals with HR tools - how do we hire, train, and develop the organization
  • It deals with change tools - how do we implement change
The updated version of the previous chart, with the four circles that created HR - Business Knowledge, Change, Strategic HR, and IT/HR Technology

You can't just do IT and HR without a business strategy. You can't do IT and HR without the ability to implement changes. You've got to manage all four pieces – business, change, HR, and IT.

One size doesn’t fit all

In the information age, we've seen four stages in HR development.

Stage one is benchmarking. How do I compare with someone else? What's my employee ratio? What's my morale ratio? What's my turnover ratio?  

The second stage is best practices. What's the company I should go study? 

The third stage is predictive analytics. What makes a best practice, a best practice? Here's some data. Here's who's good, and here's why they're good.  

I think the fourth stage is guidance for your company. In that simplified complexity of all the things you could focus on, what will work for you?  

Now the problem is, when it's not my company, it doesn't make sense to benchmark to be as good as somebody else. I don't want to copy a best practice somebody else has.

Here's an example. Those who know me and have followed me, know that my weight's gone up and my weight's gone down. I've had that problem for much of my life. I have a great friend, one of my closest friends, and he said, Dave, you should run more and it will help you be healthier. That's a best practice.  

And I look at my friend and I say, you know, that works for you. You should do that. It doesn't happen to work for me for a whole host of reasons. It doesn't work for me the way it works for you.  

Somebody else's best practice doesn't need to be mine.

And technology helps you identify your  best practice that would suit your genetic makeup, your conditions, and your bias. My best practice is not to run as much, it's to do some other things with exercise. It may be biking, it may be wrestling, it may be weightlifting, and it may be something else.  

I think in HR, benchmarking is not a bad idea. We know who's good.

Following best practices is not a bad idea. We know what others do.

Doing predictive analytics isn’t bad either. We know why they are good.

But what I'm really interested in, is what I need to do to get better. And we call that guidance.  

And I think that's where the HR field is beginning to head.  

We want to guide a company based on their specific goals and what they want to accomplish.

Lessons from the downturn

There are always economic cycles of growth and decline. And I'm old enough to have been through many of these ups and downs.  They're inevitable. They're a part of business.

And there are lessons learned about managing productivity in a downturn.  

One, look for opportunities.

Some of the most poignant times of gaining market share are when markets are down, because well-managed companies can invest and grow while others may be declining. So, see that as an opportunity.  

Two, if you need to let people go, be gracious. Be kind.

Treat your people well, but also be bold and aggressive. One company a few years ago had to downsize and they announced in January that in June they’ll let 8% of their people go. Well, between January and June, 50% thought they were the 8% and the top 10% left. If you've got to downsize, do it quickly, do it fairly, and do it equitably.  

Three, take care of those who stay and reinvent your organization.

A company once ended up cutting 20% of its labor force. But what happened is the 80% of the people who stayed had to make up the 20% work. Use the downturn as an excuse to get rid of work; don't just take out people. What's the stuff we're doing that isn't creating value for our customers? Use the downturn as an excuse to re-invent yourself.  

Some companies have brilliantly handled the downturn. For example, in some companies, everybody takes a 10% cut and they keep everybody employed. Great idea. Love it. Don’t do that forever but those kinds of ideas are really creative because you want to use the downturn as an opportunity, you want to be bold, you want to be fair, but you want to make sure you manage those who want to stay.

The more things change, the more they stay the same

There's a great line in French, and I'm sure it translates into your language as well. Plus ça change, plus c'est la même chose - the more it changes, the more it's the same. Some aspects of the world we live in today are timeless.  

People work, they have motives to work, and they decide where they work. And so, a lot of things that we refer to as the new normal, are what we've already done before. We're just managing some of that differently.  

There are some contextual changes, however. Obviously, the pandemic has affected billions of people in a colossal way. It was a major, major shift in the world. Now, post-pandemic we're seeing emotional malaise, mental health issues, employee privacy challenges, and the advent of new technology to handle all that and more.  

Pre-2020 I didn't go on a lot of zoom calls or video calls in general. And now, we're seeing more of those. We live and work in our offices. We have hybrid work. We're seeing an increased sense of responsibility for the environment, ESG is getting a lot of attention.  

All of these changes for me are around the theme of uncertainty.

We don't know very well what the next step may be. Will it be inflation? Will it be a recession? Will it be growth? Will it be global? Will it be local? Learning to navigate in that new world becomes the real shift for all of us.

Find your certainty

Let me share a personal experience from a year ago. It was January, and my wife and I are trying to renew and reconnect with each other because we have been quite busy. So, last January we were sitting in this rental house near the ocean and we were talking about how the world was uncertain. Were we going to see growth? Were we going to see a decline? Were we going to travel? Were we not going to travel? What kind of work is she going to do? We were obsessed for a week or two, with uncertainty.  

And a year later, I was sitting in the same house, and it hit me. Don’t chase the uncertainty. Start with certainty.

Political conditions in the US, economic downturn, deflation, globalization, health - everything may change. But no matter what happens, what are you certain about, based on your values and what matters the most to you?

I’m certain that I want to learn.  

What’s going to happen in the future? I have no idea but I am going to learn.  

My health may go bad, my friends’ health may go bad, some tragedy may happen, the economy may become good, it may go bad, an idea may work, or it may not work, I’m going to learn from it all.  

For me, my certainty is, my commitment to learning in a way that helps others get better, in a way that creates value for them.  

If I were giving you some advice, I’d ask you to find your certainty.  

What are you personally certain about, no matter what happens with your family, your job, your career, or your faith?  

The same goes for your organization. What are we as a company certain about? We treat people with dignity. We’ve to let them go, we will do it with dignity.

In a world of more uncertainty, we have to have more certainty. We have to know the things that are a part of who we are and hold on to them.

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Atomic Conversations is hosted by Sairam Krishnan and brought to you by Atomicwork, where we're building the smart employee experience platform for the modern enterprise.

Every fortnight, we interview a top HR, IT and Business leader about the new world of work that we're now a part of, and try to find how to build digital employee experiences (DEX) of the future.

Do you want someone to be featured on our next episode? Let us know.

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