New Goal for Human Resources:Establishing a Work Force of One

By Susan Cantrell
From The Wall Street Journal Online



When it comes to human resources, one size no longer fits all.

For years, companies used standardized human-resources plans for recruiting and managing workers. One set of rules dictated everything from the kinds of benefits and rewards the company offered to how employees were trained and evaluated. That approach made things easier for the human-resources department and ensured a degree of efficiency, equality and fairness.

Now some executives are finding that this model isn't adequate for getting the most out of existing talent or attracting and keeping new people. To be competitive in the marketplace and in the race for talent, companies must understand and address the diverse needs of their work force. In fact, they must treat each employee as a "work force of one."

Why is a new approach necessary? Competition for talent is tougher, and the work force is growing more mobile and diverse, in terms of culture, education and individual aspirations. Workers today, increasingly accustomed to more-tailored offerings as consumers, are more likely to be attracted to and remain at a company that provides more-tailored offerings to them as employees -- flexible schedules, for instance, or a customized career path.

In addition, the growing recognition that business results are largely attributable to employee performance is leading many executives to seek creative ways of significantly improving that performance.

Surveys and interviews with managers and human-resources executives at 51 companies showed four techniques that organizations are using to achieve high performance by better addressing employees' needs. Some companies group together employees with common needs and preferences and provide solutions that are tailored to each set, such as different schedules or compensation plans. Others give all their workers a range of options and let them choose what suits them best -- everything from their benefits to their work environment.

In some cases, these new plans involve replacing specific human-resources mandates with simple, broad policies that can be applied in a variety of ways to suit individual needs, such as flexible budgets that let line managers use their own discretion to set salaries. Other arrangements focus on general management practices that recognize the individual, such as coaching or mentoring.

What follows is a look at the four methods and how they can help companies -- along with a discussion of some of the hurdles companies may encounter as they put these plans in place. Some of the practices described here are now commonplace, and some are unique. But they are all examples of a growing trend toward a more individualized approach to people management. By applying one or more of the techniques, companies can create new and innovative practices that will keep employees satisfied and productive.

Segment the Work Force

Just as marketing departments organize customers into groups, human-resources departments can segment employees in different ways to boost worker productivity and satisfaction -- and make the organization more effective.

Segmenting takes a variety of forms. Procter & Gamble Co. uses segmenting when recruiting, crafting targeted messages for certain types of potential employees. Many companies, such as those in the consulting and advertising industries, provide customized offerings for employees -- consultants are often equipped to work remotely, for example, and writers and artists sometimes receive unique incentive schemes and work environments designed to elicit creativity.

In recent years, a number of employers have begun to segment based on the employee's value to the organization. Labeling certain employees "high potentials" or "A players" based on past or predicted performance has given way to segmenting employees based on their relative contribution to the company's performance. International Business Machines Corp., for example, offers specialized development opportunities to employees in critical job roles.

A number of employers are designing more unusual segmentation strategies designed to play to individuals' varied needs. One research-and-development group at a technology company created several distinct roles for its engineers based on their personality and interests. The standard role is designed for engineers who prefer to concentrate on one project at a time. But those who don't like that work style have a chance to become "parachutists," dropping in on projects and solving problems for short periods of time. Meanwhile, those who are good at representing the company's work to outsiders can become "ambassadors."

Although it is relatively easy to segment employees based on job characteristics, such as where they're located or how much they travel, companies must be careful when segmenting employees based on traits such as age or personality. Employment law protects many classes of people based on such traits. When segmenting people based on personal traits -- for example, giving special consideration to older workers who need flexible schedules -- companies should only suggest such considerations and offer employees options, never force them to make certain choices.

Offer Choices

An alternative way of creating customized employee experiences is to allow employees to choose from a standard set of choices defined by the human-resources department. In recent years, for example, a growing number of employers have provided full-time employees with "cafeteria" benefit plans, which allow people to pick the options they value most.

Now companies are becoming creative about offering choices in other areas. Sun Microsystems Inc. asks employees to identify the type of physical setting that suits them best -- a private office, team room, satellite center or their home office. Microsoft Corp. goes so far as to ask certain types of employees to design their own career paths. The company offers software engineers both a management-focused and technical-specialist career track and allows them to move back and forth between the two.

Be Flexible

Many companies are saddled with human-resources policies that are so specific that they are no longer relevant. They then become bureaucratic barriers to effective management and undermine performance. Increasingly, companies are creating more general human-resources policies that give workers greater discretion, within clearly defined limits, to apply the policies in ways that suit their unique needs.

"Broad-band compensation," used by Merrill Lynch & Co. and Nike Inc., among others, is a common example of such an approach. In this plan, companies use fewer, wider salary ranges rather than many specific job classifications and pay grades. This gives managers more latitude to compensate top performers, for instance, or to offer more money to land a star. Similarly, car-rental company Avis Budget Group Inc. allows department managers to control their budgets within pre-set limits. If managers want to reward one employee with a big chunk of that money, they are free to do so.

Some companies, meanwhile, are setting up loose, "cascading" performance goals for their workers. Clothing chain Men's Wearhouse Inc. establishes sales targets for its stores, but doesn't dictate how employees should reach those targets, as other chains may do. "There are a variety of ways that stores meet these goals," says Charlie Bresler, president of Men's Wearhouse. Some stores have a few "wardrobe consultants" who excel at selling, for instance, while other stores have their consultants sell in teams.

"Stores hit their goals in different ways, and that is not only tolerated but encouraged," Mr. Bresler says.

Some organizations are even redefining the norms around work. At Best Buy Co. headquarters in Richfield, Minn., about a third of the 4,000 or so employees are allowed to set their own work hours and to decide whether they work from the office or home -- provided they can get the job done on time. As a result, Best Buy says, it has seen job satisfaction and productivity rise.

Get Personal

The preceding options are all primarily driven by human resources. But employee performance can be improved just as much if not more by general management practices that recognize the individual. Managers might offer one-on-one coaching or mentoring, or redefine a job's focus to line up with an employee's strengths.

Men's Wearhouse has largely replaced traditional training methods with an apprenticeship model, which the company has found to be far more effective. Store managers are encouraged to demonstrate effective sales approaches and to coach employees to develop a personal style of their own.

Likewise, some companies are reconsidering how they approach performance reviews. In traditional settings, human resources controls how and when the performance appraisal takes place, and managers are directed to evaluate how well employees have mastered the fundamental requirements of the job. But as work becomes more team- and project-based, it is becoming more difficult to have a standard set of requirements.

So, many companies supplement traditional performance reviews with continuing discussions with employees about goals and progress. This has a number of advantages. Problems can be caught earlier on, and feedback can be much more specific than with a traditional annual review. And employees are more likely to learn from feedback if they receive it soon after a noteworthy event and in the context of their regular workday.

Microsoft, which has a similar program in place, supports it with an information system that lets managers and employees record informal feedback confidentially. The information isn't reported to human resources and doesn't follow the employee from job to job. Instead, employees and managers use the information for their own reference. This system makes it more likely that managers will say what they really think -- and thus provide helpful guidance to employees.

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Of course, these approaches come with a number of caveats.

For one thing, implementing any of these practices will mean big changes for companies with traditional human-resources departments. In some cases, human resources' primary role will be to support the line managers and employees who have the responsibility for carrying out the new plans, encouraging and facilitating good management practices and building a culture and work environment that support them. Software company SAP Americas, a division of SAP AG, makes sure that human-resources professionals focus on coaching managers on how to provide informal feedback to their employees through coaching or mentoring. Corning Inc. seeds some of its best people-managers throughout the organization to model and teach effective practices.

These practices can also require a difficult balancing act. In environments where managers treat individual employees differently, maintaining a sense of fundamental fairness is crucial. Managers need to take workers' concerns seriously, recognizing that negative feelings can be extremely harmful to the business.

The best way managers can respond to employee concerns is to be as open as possible about how they make decisions, and to have a clear rationale for decisions and policies. It's also important to be consistent about how decisions are made and to respond to questions in a sensitive, respectful way. And management should take steps to ensure employees that the company is strongly committed to equal opportunity and that legal protections against discrimination remain in place.

Finally, these practices work better in some contexts than in others. Government regulation is one critical factor. Many countries, such as Belgium and France, have strict labor rules that may make more customized practices difficult or impossible to introduce. Even in the U.S., some customized practices may bump up against rules about equal opportunity or retirement-plan security. Therefore, many companies use flexible policies to supplement, rather than replace, established programs.

In addition, some industries are more open to customization strategies than others. Advertising, consulting, financial services and entertainment, for instance, need highly independent and driven people to be successful. In return, these industries have been more than willing to offer work arrangements tailored to individuals to attract and retain top talent. Indeed, even particular departments inside companies are better suited for work-force-of-one policies than others. Positions that are knowledge-intensive, such as copy writing, tend to be a better fit for these policies than those that are more routine, or location-based, such as call centers.

The culture and history of the company itself also matter. Small, younger companies often operate without formal human-resources structures as a matter of course. The four techniques are thus more appropriate for larger companies seeking a way to introduce customization and flexibility without abandoning control and structure.

It's difficult to make the change from a one-size-fits-all approach to a more customized one. Doing so requires senior managers to discard familiar policies and practices and adopt a new, more responsive system from the ground up. However, companies that do it right will have unprecedented opportunities to develop the talent they need to become more competitive, high-performance organizations.

Executive Comp: Pay Without Performance

Out-of-control executive compensation schemes are “widespread, persistent, and systemic,” and new reforms won’t clean up the mess, argue law professors Lucian Bebchuk and Jesse Fried. Q&A and book excerpt.

by Mallory Stark

In the new book Pay Without Performance: The Unfulfilled Promise of Executive Compensation, Lucian Bebchuk and Jesse Fried make the case that the executive compensation system in the U.S. is fundamentally broken. We like to think that executive pay is the product of arm's-length negotiation, that the executive bargains in his or her own best interest, while the board of directors bargains for the best interests of the shareholders. Bebchuk and Fried argue that, in fact, soaring executive pay is the result of management power.

Complete article at HBR

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