of the "Living Organisation" s

Who’d want to be an HR Leader today?These are tough times for executives who lead people! If you’re having difficulty in figuring out where the market and your business is going - can you imagine how difficult it must be for your people who may not have the benefit of your perspective and understanding?

It’s not an easy gig to be the leader of people or the HR leader right now. You face three important challenges that have to be addressed in order to take the organisation forward:

1. how will you plan the organisation’s future capabilities in these uncertain times?

2. what are you doing to develop an innovative and agile organisation?3. how will you shape a culture that supports the business strategy moving

forward?

These are some of the questions that we have to answer to move our organisation forward in these tough and uncertain times.

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Dr Norman Chorn | norman.chorn@centstrat.com | www.normanchorn.com

Three Questions to ask your HR Leader in Uncertain TimesThe challenges are tough for HR leaders in these uncertain times.

The key questions relate to how we understand the future and plan our capabilities.

By understanding how the future will unfold, we can build an agile organisation and supportive culture.

Plus case study

Facing the challengeThere are ways of answering these questions. They relate to the way in which we do our capability planning; how we can increase agility and innovation in our organisation; and how to shape culture so that it aligns with the future business strategy. We’ll deal with each in turn.

1. How to plan forward in uncertain times?It’s clear that conventional planning doesn’t work in times of great uncertainty. Most conventional planning regimes are based on a series of assumptions that are made at the outset of the process - these assumptions effectively try to predict the future. As soon as the assumptions prove invalid (as they often do in changing markets and conditions), the plans become irrelevant and are usually ignored.

An alternative approach is to build a series of alternative futures facing the business (we call this FutureBuilding), and then to identify the capabilities required in each of these futures. Once these capabilities have been identified, we backcast to the present - and here we notice an important feature of this approach. Notwithstanding the divergent nature of the alternative futures, there is usually some 25 - 40% overlap (commonality) in the capabilities required for the different futures.

These common capabilities will be required in any of the alternative futures. Accordingly, we can now commence building these capabilities immediately, since we will require them in any of the alternative futures facing our organisation.

Our case of a major building and construction materials business illustrates the FutureBuilding approach. The high Australian dollar made imported product cheaper for their customers, and the uncertainty surrounding economic activity made it difficult to predict building and construction activity. Accordingly, the business was struggling to understand future market conditions and the source of future growth.Through an exercise of FutureBuilding, four alternative futures were identified over a five-year horizon. These related to the relative strength of the Australian dollar and the different levels of economic activity. A simplified version of the four futures is outlined below:

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‘Dog%fight’%

‘Choice%fruit’%

‘Building%basics’%

‘Boom%9mes’%

High A$ (high imports)

Low A$ (low imports)

Low economic activity

High economic activity

Figure 1

‘Boom times” reflects an extremely favourable outcome for the industry, with high levels of economic growth coupled with low levels of imports. Local producers fare really well in this scenario.‘Choice fruit’, on the other hand, represents a situation where the attractiveness of lower cost imports means that only the premium end of the market is available for local producers.‘Dog fight’ is a market where high imports are combined with low levels of economic activity. The local producers are effectively involved in a dog fight for survival.‘Building basics’ is a market where imported product is too expensive, and the low level of economic activity means that the local producers operate to provide low cost solutions for the basic requirements of the building and construction industry.

Faced with these alternative futures, the business identified a ‘winning’ strategy and distinctive capabilities under each scenario. The capabilities were then ‘back-casted’ to the present, and the common capabilities were identified. These then formed the basis for the capability plan moving forward.

Common%future%

capabili1es%

(Dog%fight)%

• Winning%strategy%

•  Required%capabili1es%

(Choice%fruit)%

• Winning%strategy%

•  Required%capabili1es%

(Boom%1mes)%

• Winning%strategy%

•  Required%capabili1es%

(Building%basics)%

• Winning%strategy%

•  Required%capabili1es%

2. How to develop an innovative and agile organisation?In general, innovation and agility are strongly related to the way in which leaders are able to engage staff in the thinking about the future. This is not to say that the organisation’s systems and processes cannot shape the innovation ecology of the organisation (see my earlier article “How to drive innovation through your organisation”), but there are ways in which we can stimulate innovation and agility even though the formal organisational systems and processes have not been specifically designed to support it.

When using a process such as FutureBuilding, it is important to recognise that monarchies seldom foment their own overthrow - ie: leaders don’t often envisage a future in which they play no role within the organisation. And so, it is more useful to use groups of staff who are close to the customers and technology, and who do not

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Figure 2

necessarily hold senior management positions. We call these Pathfinder groups, and they are specially convened for this purpose.

The Pathfinders are engaged in a structured process of developing the alternative futures faced by the organisation. By drawing on a broad cross-section of staff, we get a richly diverse set of perspectives that can then be crafted into a series of quite divergent scenarios for the future. We have found that once an individual has been involved in a scenario planning process such as FutureBuilding, they develop new perspectives and insights. Apart from learning much about the organisation and its business, they forge new perspectives and insights from the interactions they have with other members of the group.

These new perspectives and insights develop greater innovation and agility in their thinking and the way they see the future of the business. Importantly, they now have a ‘picture’ of the alternative futures and some of the key features for each of these scenarios. These key features might be likened to a set of leading indicators - indicators that allow them to understand which of the alternative futures are unfolding before them. An example might be an astronomer who is able to recognise different constellations in our heavens - whereas to the untrained eye it appears just as a random pattern of stars.

Our experience is that involvement in a FutureBuilding exercise produces a series of benefits such as higher levels of innovation, more thinking agility, and a better level of understanding about the environment and how the organisation needs to respond.

In our case study, the initial Pathfinder group was divided into four teams, each focused on understanding and developing one of the four scenarios. Over a series of workshop, the four Pathfinder teams:

• generated a model that represented four alternative futures faced by the business (see the model in fig 1 above)

• developed a particular scenario of the future and presented this to management

• devised the ‘winning’ strategy for that alternative future• together with management, developed a set of capabilities to successfully

implement the winning strategy.

This has resulted in significant benefits for the business. Management reports much higher levels of understanding of the market and strategy. Importantly, the business has developed increased responsiveness to changing customer requirements and changes in market conditions. As the CEO said, “..its almost as if we had practiced this in a dress rehearsal! ”

3. How to build a supportive cultureBuilding a culture to support business strategy has been a long sought after goal for leaders and their organisations. It depends, in part, on recognising some key principles about culture and its relationship with strategy.

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These key principles include:

a) Culture shapes organisational capability and strategy. We’re not suggesting that culture is the only driver of capability and strategy, but rather that it shapes a significant portion of it, particularly in knowledge-based organisations.

b) Each strategy has a corresponding culture. This suggests that certain cultures fit certain strategies, and not others. So, a culture that supports one strategy will not necessarily support another. There is no single universally “best” culture - as there is no universally best strategy1.

c) Some aspects of culture don’t mix well with others. Culture is made up of a series of “behavioural and psychological opposites” that don’t mix well within the same part of the organisation. In these cases, they are best separated by a purposeful organisation design2.

d) Organisations seldom have ONE culture - they are usually made up of several cross-cutting cultures. This is contentious, as leaders often desire a single culture running through the organisation3 . However, as culture shapes capability, it makes sense to recognise that the organisation may need different cultures to support different strategies in different parts of the environment.

Given these principles, culture is linked with strategy in the following way:

Once we have identified the value proposition and distinctive capabilities that are required, we can then determine the appropriate culture(s). If there are different sets of distinctive capability and strategy required, we will need to accommodate the correspondingly different cultures within the organisation design.

The relationship between value proposition, distinctive capability and culture is illustrated in our case study.

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1 See Strategic Alignment, N Chorn, Woodslane Publishing, Australia, 2010

2 See my earlier article, A question of focus, not balance.

3 Our research shows that a single culture is not only very difficult to achieve, it isn’t necessarily desirable. Culture is NOT the glue that binds the organisation together. It is the strategic vision and common purpose that holds the different parts of an organisation together.

Scenario / future The environment and conditions within which the organisation operates

Value propositionThe strategic response to this environment - ie how does the organisation add value to its environment

Distinctive capabilityWhat the organisation does particularly well that delivers the required value proposition into the market

CultureThe patterns of behaviour, values and assumptions that shape the particular organisational capability

Once the four teams had worked out the details of the alternative future scenarios, they outlined the winning strategy for that scenario. The winning strategy was represented in each case by an underlying value proposition, ie - the core value add offered to the market in that competitive environment.From there, we worked with each team to identify the distinctive capabilities that delivered these value propositions, and finally, the supportive cultures.

The final piece was to identify the common capabilities and cultural requirements across the four scenarios. In summary, these were4:

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4 The solution pointed clearly to (at least) two separate units - each focused on a different value proposition

Scenario

Strategy / value proposition

Distinctive capabilities

Culture

‘Dog fight’ ‘Choice fruit’ ‘Building basics’ ‘Boom times’

We take your risk away and keep the costs down

We work closely with you to add value in the important parts of your project

We offer low cost solutions and are easy to deal with

We provide a suite of solutions for your low cost as well as your specialist, high value projects

• Lowest cost supplier

• Standard range with short delivery times

• Strategic partnerships with customers

• Specialist designs and products

• Lowest cost supplier

• Web-enabled ordering for ease of ordering

• Standard range with short delivery times

Two business units with different capabilities:a) Low cost,

standardised solutions

b) Premium solutions with specialised products and designs

• emphasis on action, responsiveness and speed

• willingness to go the extra mile

• explicit processes and operating procedures

• measurement and systems orientation

• focus on creativity, innovation and entrepreneurial behaviour

• proactive approach to identifying and solving customer problems

• focus on people and teamwork

• participative, consensus based decision making

• explicit processes and operating procedures

• measurement and systems orientation

• focus on people and teamwork

• participative, consensus based decision making

Two cultures to be accommodated in the organisation design:• emphasis on action,

responsiveness and speed

• explicit processes and operating procedures, and:

----------• focus on creativity

and proactive approach to solving customer problems

“A” “B”

Capabilities lowest cost supplier; small, standard range

premium design capability; specialised solutions and products

Culture explicit processes and standard procedures; systems orientation

proactive approach to customers; participative and consensus decision making

What does this all mean for people leadership?To answer this, it is best to return to the three questions at the outset.

1. How can we plan forward in uncertain times?We need different approaches to strategy and planning in uncertain times. Rather than pursuing conventional business planning (SWOT analysis, setting objectives etc), our approach should embrace uncertainty and recognise that the future can unfold in different ways. By defining our winning strategy in these alternative futures, we are well placed to consider our future capability requirements.

2. How to develop an innovative and agile organisation?By deploying a wide range of staff in a FutureBuilding process, new perspectives and insights are developed. These new ways of looking at the business and the environment foster greater innovation and thinking agility. Once someone has been involved in scenario planning, they seldom view the organisation in the same way. And the creativity spawned by the diversity in thinking has its own benefits!

3. How to build a supportive culture?Recognising the clear linkages between strategy and culture helps us to understand that one size does NOT fit all. The culture should be designed to support the specific capabilities and value propositions delivered by the organisation. Organisations are made up a several cross-cutting cultures and these differences should be accommodated by purposeful organisation design. Furthermore, a clear common purpose and vision is the best integrator of a diverse organisation.

These are important guidelines for leaders and organisations in these difficult and uncertain times. As difficult and complex as these approaches might be, they pale into insignificance when compared with doing more of the same.

Norman conducts workshops and mentoring in planning and building capabilities for the future.

Contact: norman.chorn@centstrat.com

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