For years now, we have talked about the HR function and speculated how it may change going forward. Talent acquisition (TA) is a good example of an area of HR that will likely change a lot going forward because it has several tedious and repeatable (automate-able) work steps. If the primary role of TA is to meet headcount objectives, then the time-consuming aspects of TA could be automated or outsourced. Our research indicates that about 25% of HR’s existing functions could be performed by automation (machine learning, etc.) by 2023. (TA represents about 40% of the automation opportunity.)
The Elephant in the room is that change is coming to HR and the function must reinvent itself to stay relevant.
The good news that HR is fully capable of transforming into a strategic business function. The rabbit hole is also in the room. HR can be the function that delivers increase business performance from the organization’s use of talent. Instead of just being a service to the BU’s, HR can also be responsible for optimizing the talent to achieve the revenue forecast. Why HR? Like Finance, HR is cross functional and is the only function where the hiring, developing, and retaining talent are core responsibilities.
In order to own the business performance from use of talent, HR needs new capabilities that are relatively easy to develop. First is understanding and managing the use of talent. To do so, HR needs to know (with data) what the talent is doing (the work) and how the work aligns with workers’ talent capabilities. For example, our research shows that top talent on average is only doing 30% top talent work. So, the first step for HR should be to help the BUs increase top talent work per top talent worker from 30% to 50%. The result is an increase in value creation and most likely a reduction is new headcount needed.
Secondly, HR needs to be able to establish and support value-based objectives inside the BUs. Like Finance uses budgets to control costs and minimize waste of financial resources, HR could use new tools and data to create talent “budgets” to ensure that talent is used efficiently. Current HR tools such as assessments, pulse-surveys, OKRs, and performance reviews focus on individual employees and their engagement. While important, there is no hard correlation between actual value produced and worker engagement. In order to drive workforce margin contribution, HR needs to establish objectives and provide services to the BUs that measure and correlate the use of talent with margin contribution to the company.
CollabWorks provides important capabilities needed to HR to become a strategic business function.
Our focus at DisruptHR SF is to present new ideas, innovation, and thought leadership that will help HR leaders transform HR into a strategic business function. We need your support and talent as executives, thought leaders, and innovators! Please apply to be a speaker. And please join our DisruptHR SF community and participate at our October 15 event.
As CEOs we often worry about talent. Can we achieve our objectives? Why are employees turning over? How competitive are we? Yes, talent is critical. But, the use of talent is what delivers value.
Why does talent use matter? Low Hanging Fruit to Improve Margins.
Talent is what delivers value and talent use is the efficiency of delivering that value. Wasting or misusing talent directly affects business value. We depend on managers to identify and allocate talent. We don’t do a great job of talent use because our headcount planning and allocation methods are crude, and we don’t have a reliable way of measuring talent use. Net profit (and cash flow) is directly correlated to talent use. The less talent needed to achieve the same revenue then greater the profit margin. As indicated, just a two percent improvement in revenue/labor will improve margin contribution (EBITDA) by 1-2%. If the planning process continues to improve talent use over current methods, then the margin contribution is cumulative! For example, 3 years of 2% revenue/labor improvement will produce a 5% gain in EBITDA. In addition to the financial benefits, effective talent use produces improved talent motivation and engagement.
What is the use of talent why alignment matters? Headcount Planning is Wastes Talent.
We define talent use as talent performing work. We relate talent value to the value of the work produced. For example, we pay more for an airline pilot than a stewardess because pilots require more talent and produces more value. Airlines optimize their whole routing system to optimize talent use. The problem with the headcount-based financial model is that there is no clear quantifiable data regarding the use of talent. Job titles, roles, and compensation are not connected to talent use unless the work is highly defined, and the talent use is highly structured. Assembly lines for example. For nearly all knowledge workers, it is the alignment of the right talent to the right work that optimizes talent use and margin contribution.
Use case: An engineering group increased top talent use. 15% gain in margin contribution.
A very high-performance technology group was experiencing frustration and turnover from their top talent. Why? They were required to perform work that lower level talent could perform, and they were required to interrupt their development to attend useless meetings.
As shown, the group using the CollabWorks management FrameWork identified their current use of talent and then executed on several management sponsored improvements that yielded a 15% increase in top talent use after 15 months. Since top talent work is considered high margin contribution per employee, then the management estimated an improvement in margin contribution of 55%.
Does size matter? No. The earlier you develop best practices the bigger and quicker the pay off.
When organizations are small it is easier to correlate the use of talent with achieving financial outcomes. As organizations scale we depend more on financial modeling and budgets to allocate talent and the effectiveness of talent use becomes opaque and talent waste and misuse grow. Even early round venture funded startups can yield poor talent use as intense demands on management leaves little time to focus on talent use. Developing early talent use best practices will pay off in business performance for both management and the investors. As shown, a D round investment can improve investor return by 19% by adding just 85% of the planned labor to achieve the same revenue.
The Impact of 5% in improved profit margin is strategic. Early adopters win, laggards lose. Times change, and we evolve. Most of us had not heard of Design Thinking 10 years ago. Now it is the new normal. The ability to manage and measure talent use is now available and will become standard management practices. The benefits over time are huge, yielding an unfair advantage for early adopters.
CollabWorks began with a simple concept: Optimizing talent value works best when both the individual and the organization benefit. Since then we have sponsored workforce innovation as thought leaders, sponsors of events, and developers of technology that will allow organizations to shift from managing labor cost to managing labor value.
We are all familiar with the outside-in management models practiced for decades where the organization functions from top-down. The workforce is defined by job descriptions and headcount. And, managers set objectives and manage individuals (you). The whole point of management is to keep the workforce focused on doing the most valuable work needed to meet the organization’s objectives.
|Results: Talent Misuse|
Outside-in organizations don’t scale well. Outside-in is the root cause of inefficiency, waste, and inertia that ultimately dooms many organizations as they become too slow and inefficient to adapt. The outside-in model assumes that a “job” performed produces value when in reality there may be little correlation between the job and value. It is the actual work that produces value that drives business performance. Those doing the work are the sources of the value. This is obvious and yet while organizations are spending billions to manage talent better, the waste, disengagement, and turnover continue, while talent shortages are rising.
|Shift to Inside-Out Management|
After three years of research, executive interviews, and many workshops, CollabWorks has concluded that the answer to workforce inefficiency is to start with a focus on the source of value creation and work backwards. If it is the work that produces value, then create a management model that begins with the individual and optimizes their ability to create value. We call this approach an inside-out management model. The inside-out model works well co-existing with traditional outside-in management. Instead of the “job” being the means of allocating work, the work and its value become the basis for deciding what individuals do. Inside-out means that each individual at all levels of the organization clarifies and manages their own work to the mutual benefit of themselves and the organization. To enable this shift, CollabWorks has created a technology and SaaS process that starts with the individual and provides a simple yet very effective means of clarifying and improving the value of the work performed. This revolutionary inside-out management model is called the FrameWork™.
|Managing from the Inside-Out|
The FrameWork starts with each individual (you) regardless of organizational structure, job, or type of worker. You set your objectives, priorities, and measure your outcomes. You identify improvements and initiate actions to improve your capabilities, use of talent, and address your desires and needs. The key metric is value creation, and the FrameWork provides you quantitative data to assist you in optimizing the use of your talent.
How do we know work has value? If we think of simple market mechanisms, let’s say of a farmer selling tomatoes to customers in a market. Depending on the quality of the tomatoes and the customer needs a transaction occurs when both parties agree on a value exchange. A premise of the FrameWork is that this kind of market value exchange applies to all forms of work. Value is attributed to the work when customer(s) (internal or external to the organization) confirm the work’s value. Another premise of the FrameWork is that all work can be described as services where each service is serving customer(s). The FrameWork provides you a simple means of defining your work as services and then to clarify the customers who attribute value to each service. Instead of your manager managing you, you manage your customer’s experience with your service. Your “job” is to ensure your work is addressing your customer’s current needs and to consider improvements to address future needs.
|All Services to Customers = Talent Use|
In most cases, you serve several customers such as a your team, other functions, lab partners, managers, or the entire organization. The FrameWork makes it easy to identify your entire service profile. The sum of your services represents the use of your talent. The value received by your customers represents collectively the value of your services.
|Agile Process of Managing|
Managers continue to play an important role moderating outside-in strategy and direction with inside-out empowerment and coaching of individuals (you) to better serve customers. Individuals own their service profiles and the creation of valuable work on behalf of their customers. By continuing to adapt to changing customer needs, individuals at all levels of the organization are using lean-like management processes. Managers set direction and focus priorities on business strategy. However, managers no longer need to distribute and manage tasks, then provide reports to their superiors as frequently occurs when work flows through a job structure. The management of the work is 80% owned by those doing the work. This liberates both the manager and their team members to focus on optimizing their own value. The FrameWork provides a simple consistent process with clearly defined roles. Managers can be traditional line managers, team or project leaders, or temporary. The result is a lean and agile focus on best means of serving customers.
|Agility Requires Ongoing Improvements|
Continuous improvement of services is built into the CollabWorks management FrameWork thus producing a more agile and resilient organization. As ideas are captured, those most aligned with objectives and needs are selected as potential projects. Gamification and voting are used to promote and select opportunities. Those individuals with the most passion and commitment to creating an improvement form teams who in turn create clears ROI plans and seek approval. The projects can be strategic or simply changes to eliminate low-value work, waste, or address business/worker needs.
|Ongoing Improvement Transformation|
The FrameWork maintains past, current, and future service profiles (work) for each individual and then rolls up the data for any team, group, function, and organization. Past profiles represent a history of services and changes which can demonstrate reduced talent waste, improved talent alignment, and capability growth (or not). Future profiles represent opportunities to better address customers, the organization, and the needs of the individual. The gaps between future and present are clearly identified and often include desired objectives, changes in services, and actions defined to satisfy the transformation. Trends and correlations can be seen providing insights and lessons to further optimize individual and team talent use and ultimately the whole workforce. The FrameWork supports all forms of change management such as design thinking, lean, and agile processes.
|Improvements By Teams/Groups|
The service profile changes at the group level are the sum of those service profile changes of the participants in the group. The FrameWork process is entirely transparent to the type of worker, group, or management structure. Thus, the FrameWork will blend into any existing organization and culture while providing an agile market-like process of responding to rapid changes in work demands and talent use.
|Measure the Increase in Talent Value|
Behind the FrameWork is a powerful mathematical model which produces customizable algorithms, metrics, and data to guide your decision making and to predict outcomes. The data model is rich with insights, benchmarking, and correlations – addressing issues such as service value versus compensation, the alignment of talent to services, relationship between personal growth and job satisfaction, applications for bots, and eliminating bias.
|You Have More Talent Than the You Think|
The inside-out FrameWork allows you, your teams, and the whole organization to clarify and improve the use of talent and the value provided customers. Financial modeling of the organization can now include a correlation of top-down financial performance with the value of the services driven bubble up by sum of individual, group, and functions. The cumulative margin contribution of the workforce can now be analyzed, predicted, and benchmarked to aid management decision making in optimizing the workforce. Current outside-in models waste talent. Inside-out models compliment outside-in models and provide the insight, motivation, and data to leverage the most valuable use of talent. Automation and bots are not the enemies of talent, rather they are the opportunity for you to achieve more including your compensation.
When “You win, then we all win™” is a natural outcome.
|Try IT: Increase Your Talent Value|
Experiencing the FrameWork is easy. In less than an hour, you can create your first services profile. You will clarify the services (work) you perform and for whom (your customers). You will assess the relative value of your work. Once clear on your current services, you can consider changes that would increase your value. You then can set objectives and identify improvements you want to achieve on behalf of yourself and your organization. The FrameWork makes it easy to quantify and track current and future service profiles and your outcomes of addressing objectives and improvement projects. Reviewing your progress takes minutes and is typically done monthly. The use of your talent is your biggest and most important asset. Spending 1-2 hours per month managing your talent will cause you to realize you a lot more talent then you think!
|Getting Started: Just Ask for a Log in|
CollabWorks is working with individuals who want to self-manage and corporations who want to grow rapidly and scale efficiently. Anyone can discover ways to increase their services value – including CEOs who frequently discover unproductivity habits and within hours are able to shift their time and focus to higher value work. Engineers appreciate the quantification and correlations FrameWork provides and the ability to clarify and address wasted work. HR managers see the inside-out model and an effective way to motivate employees while providing them data to help them optimize the use of talent.
The Framework is free for individuals and your success is our primary goal. As you improve yourself you will earn points and our plan is to reward you a share of our profits. At CollabWorks we live our motto – You Win, then We All Win. We are looking for passionate early adopters who want to reinvent the outside-in model of running corporations. Help us build an inside-out community of awesome self-managing achievers and let’s create a movement!