Embed Size (px)
Citation preview
HUMAN CAPITAL The science of valuing people on
the balance sheet Slavery is illegal. People are the greatest asset of the
business. Then how is the value of people, the human capital value, recognized in the assets of the
business?
Graham Little
1
Human capital The science of valuing people on the balance sheet
By
Graham Little PhD
Founder The Institute of Theoretical and Applied Social Sciences (ITASS)
Auckland, New Zealand [email protected]
LinkedIn profile www.linkedin.com/in/grahamrlittle
Original notes www.grlphilosophy.co.nz
Social Science Research Network author page http://ssrn.com/author=2572745
Business web site www.opdcoach.com
Contact [email protected]
2
Published by Institute of Theoretical and Applied Social Sciences
Auckland New Zealand [email protected]
A reaching for infinity book
Copyright © 2016 Graham Little
Fifth Edition September 2016
ISBN 978-1-877341-35-9
Graham Little asserts the moral right to be identified as the author of this work.
All rights reserved. Except for purpose of fair reviewing, no part of this publication may be reproduced or
transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or any information storage or retrieval system, now known or
hereafter invented, without permission in writing from the publisher.
A catalogue record for this book is available from the National Library of New Zealand
3
Contents
Executive Summary ............................................................ 5
Definitions, references and intellectual foundation............ 7
Defining the question ....................................................... 13
Strategic science as the new standard of intellectual quality .......................................................................................... 17
Organization design .......................................................... 25
OPD theory ....................................................................... 26
OPD-HCD™ .................................................................... 32
The theory of psychology ................................................. 38
If OPD theory is fully science, can it ever fail? ............... 41
Strategic human resource management (SHRM) ............. 43
Definition of SHRM ......................................................... 49
Summary of SHRM under OPD theory ........................... 53
OPD definition of human capital ...................................... 55
The use of human capital value (HCV) ............................ 58
Measuring human capital value ........................................ 61
Training & development .................................................. 75
Performance management ................................................ 77
The role of HR .................................................................. 78
Governance ....................................................................... 80
Change management ........................................................ 81
Definitions within OPD-Theory™ ................................... 83
4
Human capital and society ............................................... 88
Frequently asked questions .............................................. 95
5
Executive Summary
OPD-Theory™1 is the only thoroughly scientific theory of organizations, grounded on in-depth intellectual analysis. It is derived from the only general theory of psychology2 itself derived from the revision of global social science3. OPD-HCD™ is the team leader practical technology4 derived from OPD-Theory™5.
OPD positions HRM as the key driver of business results6 and is a direct link between daily citizen work behaviour and the national economy7. As such it offers the potential to improve organization EBIT, improve staff work fulfilment,
1 The trade mark is not registered, it refers to organization, human capital
development, strategic human resource management, with the OPD overall system of thought. Largely elaborated in writing of the author, Social Science Research Network author page, www.ssrn.com/author=2572745 and the posts and essays at the linked profile, www.linked.ocm/in/grahamrlittle.
2 Little, Graham Richard, The Origin of Consciousness (July 26, 2016). The Origin of Consciousness, Institute of Theoretical and Applied Social Science, New Zealand, Sixth edition, March 2016. Available at SSRN: http://ssrn.com/abstract=2814742
3 Ibid. ‘Origin’. 4 Brochure attached. 5 Little, Graham Richard, Organization Design: Linking Mind to Its Agreed
Organization Role as a Foundation of Economics (July 31, 2016). Available at SSRN: http://ssrn.com/abstract=2816604
6 Little, Graham Richard, The Mind of the CEO (September 1, 2016). Institute of Theoretical and Applied Social Science, Auckland New Zealand, Fifth Edition, August 2016. Available at SSRN: http://ssrn.com/abstract=2833571
7 Little, Graham Richard, The Exciting Promise of Human Resource Management (HRM) (August 7, 2016). Available at SSRN: http://ssrn.com/abstract=2819810
6
lift the status of HR in organization leadership, and lift status of HR in social development and political economic management.
Crucial principle in epistemology is to understand the necessary depth of intellectual analysis. Strategic science: That the discussion of any topic is bounded by what is known of the issues underlying the topic.
From this comprehensive intellectual foundation is derived the exact nature of human capital in the organization.
Dynamic human capital value, in the skills and judgment of people.
Standing human capital value, in the precision and aptness of the definition of the behavioural structure relative to strategy.
Both types of human capital value can be measured in capital asset.
Only standing capital value belongs to the organization and may be capitalised on the balance sheet.
7
Definitions, references and intellectual
foundation.
Preliminary definitions
OPD theory: the organization design theory derived from the revision of social science methodology8. Refer the paper Organization Design in SSRN9.
OPD-HCD™: The organization design and operation technology derived from OPD theory10. The trade mark is not registered, and signifies human capital development within OPD theory.
Foundation references to all points and argument
All comment in this book is founded on the research and theory creation of the author, researched details of any comment can be found at the Social Science Research Network author page, www.ssrn.com/author=2572745, and the essays, books and posts at the LinkedIn profile, www.linkedin.com/in/grahamrlittle.
For a full discussion on OPD-HCD™ refer to the book: Little, Graham Richard, Executive Pocket Guidebook
8 Little, Graham Richard, The Origin of Consciousness (July 26, 2016). The
Origin of Consciousness, Institute of Theoretical and Applied Social Science, New Zealand, Sixth edition, March 2016. Available at SSRN: http://ssrn.com/abstract=2814742
9 Little, Graham Richard, Organization Design: Linking Mind to Its Agreed Organization Role as a Foundation of Economics (July 31, 2016). Available at SSRN: http://ssrn.com/abstract=2816604
10 www.opdcoach.com.
8
(December 12, 2016). Available at SSRN: https://ssrn.com/abstract=2883985
Intellectual foundation
• Essential intellectual position, refer Little, Graham Richard, Through the Glass Darkly (July 19, 2016). Available at SSRN: http://ssrn.com/abstract=2811861 and Little, Graham Richard, Redefining Science as the Social Extension of Human Nature: A New Intellectual Position Derived from the Proposition that We Can Only Interact with Perceptual Fields (November 27, 2016). Available at SSRN: https://ssrn.com/abstract=2876338
• Applying the essential intellectual position to redefine the methodology of social science and to build the first scientific general theory of psychology, Little, Graham Richard, The Origin of Consciousness (July 26, 2016). Institute of Theoretical and Applied Social Science, New Zealand, Sixth edition, March 2016. Available at SSRN: http://ssrn.com/abstract=2814742
• OPD-Theory™.
o Complete theory linking people to the organization, and underlying the construction of organizations. Refer, Little, Graham Richard, The Exciting Promise of Human Resource Management (HRM) (August 7,
9
2016). Available at SSRN: http://ssrn.com/abstract=2819810 and, Little, Graham Richard, Organization Design: Linking Mind to Its Agreed Organization Role as a Foundation of Economics (July 31, 2016). Available at SSRN: http://ssrn.com/abstract=2816604
o The foundation of the national economy linking daily citizen conduct to economic success, community health and personal fulfilment. Refer: Little, Graham Richard, Why Work (July 19, 2016). Available at SSRN: http://ssrn.com/abstract=2811954
• OPD-HCD™ the human capital development team leadership technology (table 1). Refer, www.opdcoach.com.
Practical application.
• OPD-Theory™ is after the ‘entrepreneurial’ decision, that is after the strategy is determined, the system enabling complete, apt and accurate rollout of strategy.
• OPD-HCD™. There are nine team leadership processes (see table 1).
• The nine factors are the only factors a team leader need develop with a person in order for that person to have greatest chance of greatest work success.
10
• The cultural audit in the team assesses the effectiveness with which the team leader applies the processes of OPD-HCD™, and guides the team leader decide what action to take to develop the performance of team members.
• Applying OPD-Theory™ across the organization changes every aspect of how HR fits and is applied across the organization.
• Learning the nine team leader factors is like learning to ride a bike, awkward at first, but then becomes simple and second nature, once learned always remembered, always applicable.
Payback
• The final scientifically valid set of processes for roll out of strategy. Complete, requires no additional HR processes or structures. Simple, once learned. Fully supported by OPD International.
• Thorough application of OPD-HCD™ means that should the strategy fail, it is due the strategic decision, and not due team effort.
• The only scientific and accurate direct link between the mind of staff and actions arising from within that mind, and the profit and loss of the business.
• Emergence of a professional culture exhibiting greatest commitment and engagement.
11
• Development of people satisfied and fulfilled in their work life, enjoying their time at work.
• Increased EBIT, depending on the existing profit to sales ratio, profits increased by 30%-60%.
For background reading and intellectual depth, refer Social Science Research Network author page: www.ssrn.com/author=2572745 and refer books and papers at the LinkedIn profile, www.linkedin.com/in/grahamrlittle.
Summary point of Human Capital
That the sum of all the role specifications, the set of ideal actions underlying any strategy, defined as the behavioral structure, specifies the ‘perfect game plans’ that if perfectly acted out enables the greatest chance of greatest success. The aptness and accuracy of the behavioral structure reflects the skill and investment of the leadership in precisely defining what the organization needs to succeed.
Specification of the behavioral structure is owned by the organization. Therefore, the cost in actual dollars and the investment of time by leadership is reflected in the quality of the written behavioral structure and is an investment reflecting the importance attributed by the leadership of the human capital of the business. Given the time and effort that went into the definition of the behavioral structure, it is then assumed that similar time and investment will invested in guiding the careful defined behavioral structure is acted out: Perfect game plans perfectly delivered.
12
Therefore, the balance sheet value of human capital is accepted as reflecting the value of people to the organization.
13
Defining the question
Capital: of or relating to capital; especially: relating to or being assets that add to the long-term net worth of a corporation.
Human: of, relating to, or characteristic of humans: Typical of people. (Definitions from Merriam-Webster Online
Dictionary.)
What emerges from the common definition of the two terms is that there exists an aspect of people that can be represented as ‘capital’ in the assets of an organization.
Further, since capital in organizations contributes to the performance of that organization then it follows that the idea of ‘human capital’ also contributes to the results.
The idea of human capital is that the contribution of people to the organization can be quantified as an organization asset.
This much is ‘sort of’ understood and accepted. I say ‘sort of’ because of the ease we slip from these very loose notions into thinking we can deal with something that is concrete and particular, when in fact we cannot. There is a major problem.
Slavery is abolished in all civilized communities.
Therefore, no organization can own people. It follows that if human capital is to be a valid term it must refer to some ‘aspect of people’ it cannot refer to the whole person since that would imply slavery. The problem is
14
compounded by the fact that people come in indivisible complete units. For example, an organization is not able to own just the skills of a person, since to enjoy the benefit of the skills the whole person must be present. Therefore, to ‘own’ just the skills again implies slavery, which is illegal.
We are left with two issues:
1. What exact ‘aspect of people’ does an organization own? Further, what exactly does the term ‘aspect of people’ mean? Since if no ‘aspect of people’ can be owned by the organization then the term ‘human capital’ is a misleading generalization that needs to be dropped from management and economic vocabulary.
2. In what way does that ‘aspect of people’ contribute to the improved performance of the organization?
Now, we have the questions clear. We must be able to define ‘human capital’ in such a way that it meets the criteria above or if we are not able to do that then we must modify our use of the term.
There are valid economic alternatives. For example, people may ‘own’ themselves. It follows that in any specified society, then the people in that society ‘owns’ the human capital of that society. Any organization operating in the society can then rent in purely economic terms the human capital of society.
This relationship between ‘human capital in society’ and the ‘organization’ are similar to an organization renting
15
office space. Any improvement, for example, is not capitalized especially if any clause in the lease states that such improvement is to remain when the organization vacates. In the case of human capital, the renting relationship is reversed, and it is the person who has the right to vacate the organization. The organization is only able to exert demands on the person while they accept the rental arrangement and remain employed or under contract.
This rental analysis appears simple, but it is not. An organization renting people from society implies the person and the organization are separate. This leaves the difficult question of what exactly is ‘it’ that is doing the renting? What is an organization if it is something separate from the people?
We cannot naively assume the organization is the same as people.
All this may seem intellectual and outside the scope of a practical manager seeking results. But it all relates to and intimately entwined with an everyday garden variety management term such as ‘human capital’.
It is accepted that better science builds better engineering and hence build better bridges, airplanes, computers, washing machines etc. The question is, ‘If we clarify and
make more precise that which we understand are we given
the opportunity to act more effectively?’
The answer of course is an unqualified ‘Yes’.
16
Our ability to do things more effectively and with greater speed and precision depends on our clarity and insight. The longevity of our clarity and insight depends on the depth of our understanding and the soundness of our base thinking.
Management, leadership and organizations are aspects of social science. As a result, they must be approached with the same attention to detail, clarity and refined definition as any other aspect of science if we intend to find better insight and understanding. We are then able to act with greater precision and effectiveness.
17
Strategic science as the new standard of
intellectual quality11
It may seem unusual to discuss questions of epistemology in a book devoted to human capital in business. But, to understand OPD theory it is essential to understand why the intellectual issues track back so far as so invoke consideration of the nature and understanding of cause in science.
The science of people is social science, therefore discussions on any and all management and organizations that do not relate back to the core ground of social science must be regarded with skepticism.
It is essential to have the correct tools: I was salt water fly fishing in the Bay of Islands New Zealand, by the famous ‘hole in the rock’. The fish school was huge, several hundred meters in every direction. I was catching a fish every second cast. I was catching five Kawhai to one Trevally using a small silicon fly with a wiggly tail. As I fished the tail got eaten off and became just the silicon stub on the hook. Then the ratio changed and I began to catch five Trevally to one Kawhai. A quite subtle change in the tool reversed the ratio of fish being caught. I learned a lot about salt water fly fishing that day.
To do the job properly you need the right tool. This
11 Ibid. ‘Organizational design. Also, ‘Origin’.
18
applies in intellectual endeavor as much as in fishing. The tools used are the ultimate and immediate effects of W Ross Ashby12, and the process of primary operations.
The Ashby tools are intellectual tools applied to the analysis of ‘systems’, Ashby himself applied them to identify the fundamental structure of adaptive behavior in Design for a Brain, the origin of adaptive behavior. The tools produce what I call Ashby diagrams consisting of variables linked in the manner one variable has an effect on another. The process is definite, clear, simple and objective, with a precise link between ‘theory’ and any actual situation.
For example, the theory of a simple pendulum at sea level is T=K√L, time of period equals square root of the length. This can be written as an Ashby diagram L→T, that is change the length and the period changes. The Ashby diagram can be converted into an equation and vice versa.
To determine the period of any actual pendulum, in Dubai or New York or London, one must go to the place measure the length and place the data in the theory.
All Ashby diagrams are theory relating how variables that describe any system relate one to another. All Ashby diagrams have the exact same relationship with all actual empirical circumstances.
12 Ibid. ‘Origin’ for full discussion on social science methodology.
19
All theory can only describe which variables to measure and how to relate one variable to another so that we can calculate the answer.
Reproducible understanding needs to be causal: If our theories are to provide managers with tools that work every time, then they need to be causal13. If not, then we can have no confidence that when we apply the theory it will work.
These significant intellectual complexities will not be explored in-depth this paper which is dedicated to the consequences of this in-depth intellectual understanding. Having said that, the ideas in this paper are ethically constructed therefore have intellectual integrity, which means all in-depth issues related to or potentially able to influence understanding of the issues discussed in this paper are fully accounted for. That is, the strategic scientific issues underlying this work have been all accounted for, all first things have been done first. This standard of scientific endeavour is significantly beyond the standard of ‘peer review’ so popular in assessing the quality of intellectual and scientific effort, despite significant studies that conclusively show peer review is an unreliable standard. Popperian falsifiability is not an absolute, but if any system claiming to protect the integrity of our intellectual endeavours consistently fails to do so, we need take great care in continuing to rely such a standard.
13 Ibid. ‘Origin’ for full discussion on a theory of causality.
20
Precisely the standard of strategic science is ‘discussion
of any topic must be bounded by what is known of the issues
prior to, but able to impact, the topic’. So if any issue exists that could if resolved influence discussion on the topic, this then bounds what may be said on the topic if one intends the discussion to meet standards of strategic science. If any issue that could if resolved influence the discussion on the topic, and that issue remains unresolved, then to retain integrity this must be declared at the start of the discussion. So for instance, the declaration could take the form … in
this discussion on … (such and such) … issues … (A, B and
C) … remain unresolved. If resolved such resolution could
influence the discussion. Therefore, in the absence of such
resolution we speculate that…
To understand the issue of strategic science, or first things first14:
• Imagine a business plan for a new product launch.
• Now, imagine it did not include any market analysis. Clearly this would have an impact on the plan. And to do first things first it needs to be included. So we can now grasp what it means when we say ‘discussion on any topic must be bounded by what is known of the issues prior to the topic that when resolved would influence the topic. The business plan on a new product without consideration of the market is loose
14 For a full discussion refer ‘Origin’, page 339.
21
and cannot be taken seriously.
• But the regress does not stop there… what is the pricing of competitive product. Imagine it very much less expensive that our proposed product. Is outs over engineered? Do people really require the quality design as put forward by our engineers? So, first things first carry us back further.
• And further… do we have the equipment to engineer then manufacture down to the user requirements…? As a result of drilling back into the issues, should we be entering this market at all?
This type of drilling back applies in all endeavours… it is exactly as building a house, if you do not get the foundations right then watch later in the first serious storm…The principle applies in science, and in all intellectual endeavour as much as it applies in business.
Discussion in the historical literature have proceeded with no theory of causality, no general theory of psychology, no general theory of knowledge nested in a general theory of psychology, and with no clarity on the tools and methodology which enables a clearly defined theory separate from empirical data pertaining to that theory15. While various attempts have been made to define
15 Little, Graham Richard, Through the Glass Darkly (July 19, 2016). Available at
SSRN: http://ssrn.com/abstract=2811861 (Note: Submitted, but not yet accepted).
22
those topics, those attempts have not been successful. And frequently discussion on topics have continued without reference to the lack of understanding of underlying intellectual issues.
The consequence of applying this standard is to invalidate due inadequate intellectual standards much of historical discussion in social science literature, including economics, sociology, psychology, and management. At very least such discussion where the standard of strategic science has been ignored must be reconsidered in the light of this rigorous standard of strategic science. For example, the work of Marx, Adam Smith, Durkheim, Freud, Jung, Skinner all need be used carefully and sparingly… volume of work, and popularity of works is not a measure of the quality of the work16. Such application of this new standard to historical work is perhaps unfair, but necessary if we are to apply rules of engagement to protect the quality and integrity of our intellectual endeavour.
People produce organizations, they are NOT independent of people in the manner of a tree or a photon. There is Reality, the external world, and reality independent of us, the perceptual field generator17, and reality our
16See the 2005 paper, Toward a better standard of judgment than peer review.
http://www.grlphilosophy.co.nz/BetterStandardofJudgement.htm also, the appendix in ‘Origin’.
17 Ibid. ‘Glass’ paper.
23
psychological image of Reality18.
We act, or we orientate ourselves to Reality assuming our reality is congruent with Reality. This assumption can be wrong in two ways, first Reality may be generating a perceptual field that in interaction with our sensory preceptors may lead us to draw the wrong conclusions (clear air white out, Ganzfeld, and virtual reality)19. Second, we may have ideas which do not accurately relate to the Reality, and we project those ideas onto our immediate perception and so misinterpret Reality building a reality that is inconsistent with Reality20. In short, we misjudge Reality and make mistakes in our orientation to it.
The methodology, and in particular first things first of strategic science21, forces back to very fundamental questions. An organization exists independent of people therefore:
• What is the internal structure of an organization?
• What is the internal structure of a person?
• How does the organization link to people and vice versa so that we can understand how to get consistent
18 Ibid. ‘Origin’ for a comprehensive discussion on the existence of the external world and definitions of Reality and reality.
19 Ibid. ‘Origin’
20 Ibid. ‘Glass’ paper.
21 Please understand I refer to it as ‘strategic science’. But the principle of first things first applies to all types of endeavor, and all types of intellectual endeavor. Hence is perhaps best referred to a ‘strategic effort’.
24
high level of human performance, and within the theory gain insight into the nature of ’human capital’?
• How exactly do organizations emerge from with the causal factors in the system person in their environment?
• What exactly is the link between the organization and the mind of the person?
• What exactly is mind?
• If we ‘see’ via ideas, what exactly is an idea, how does it exist, and how does it influence what we do?
I could go on… but I will not and hope I have made the point.
In short, due the rule of strategic effort, all historical discussion on organizations must be viewed with caution, and regarded as tentative, subject to the dictates of a causal general theory of psychology giving rise to a theory of organizations. All discussion of OPD theory has bought to account all prior issues and is thus ethically constructed and has intellectual integrity22.
22 Ibid. ‘Origin’ for a full discussion and definitions of ethically constructed, and
intellectual integrity.
25
Organization design23
Organization design is a new aspect of organization study that has arisen due linking the organization to individual psychology and the direct link it enables between daily staff behaviour to organization strategy, which in turn is linked to the national economy. Traditional global best practice of HR and organizational development does not achieve that link, or does so due only fortunate accident.
Thus organization design refers specifically to the scientific details24 of the solution to the first Ashby equation in linking the daily activity of a person to the national economy, SHRMsuccess→ organization success25. Should the person deliver to standard the actions identified in the organization design link, then that person can be said to have ‘done their bit’ in contributing to the organization achieving its strategy (refer to Why Work for further discussion).
I suggest the term organization design be a restricted very precise term referring specifically to the foundation
23 Ibid. ‘Organization design’. 24 Scientific details must include all aspects of resolving prior issues, such the
resolution is reproducible and consistent. Such reliability and consistency is the core of the difference between this scientific approach to all other available approaches.
25 Little, Graham Richard, Why Work (July 19, 2016). Available at SSRN: http://ssrn.com/abstract=2811954
26
issue of identifying the scientifically26 valid direct and clear link between a mind and the strategy of the business. I suggest this because of the significance of this link as a foundation of western democracy free market economics.
OPD-HCD™ is the only system of organization design available globally. Given the depth of intellectual foundation of OPD-HCD™, it is difficult to imagine that the link between individual mind and the organization strategy can be constructed in any other way27.
OPD theory28
Organizations are created to realize a common end called strategy.
Imagine a collection of minds, each separate and unique; each person likely to act according to their own interests and desires. Now, imagine the group aiming to achieve a common goal. It is the common goal that turns a ‘group’ into an ‘organization’.
Organizations consist of jobs with each job being defined by the goals expected to be achieved with each goal derived from the strategy.
26 The standard implied by the term ‘scientific’ is the standard of strategic science
involving resolution of all first issues. This standard is significantly higher than the standard of peer review. This is discussed in the paper.
27 As with all science, a better theory is always possible, and would replace OPD-HCD™ if it meets the quality and methodological standards.
28 Ibid. ‘Organization design’.
27
Then due the goal-action principle, underlying every goal (KPI) are ideal actions. The set of ideal actions referred to the behavioral best practice structure (behavioral structure). Leadership judgment determines what needs to be done beginning with strategy then leadership effectiveness guides it to be done. The processes derived from the concept delivers higher levels of human performance than enabled by any other process.
In a group each mind is separate, diverse, and unique. No integration. Now imagine each mind ‘sees’ a task relative to the common goal and then ‘see’ each person with a different task relative to the goal.
By each doing that which each is assigned the goal is achieved. The start, the very first step, is to ensure what each person needs to do is clear and coordinated with the actions of every other person.
Leadership judgment is the act by the leadership structure of conceptualizing what needs to be done in each role to enable the greatest chance of greatest strategic success.
Once it is clear what needs to be done, then the task is to oversee it gets done.
Leadership effectiveness is guiding each mind to see clearly what they need to do in their assigned roles so the ideal actions in the role are acted out with more precision.
OPD-SHRM harnesses human performance to the benefit of the organization.
28
OPD as the harness guides and directs performance, but as the harness it can blunt performance. Imagine a husky dog sled, two lines of dogs, each behind the other. Now, what is the view like of each dog except the lead dog…?
People need balance between the disciplines of achieving the future goal and enjoying the trip now. It is an important aspect of leadership to keep the balance between discipline and fun.
OPD theory is the view of organizations arising from the general theory of psychology created from the redesigned methodology of social science29 summarised in the following propositions.
1. Ideas are causal factors in human mood and conduct (refer ‘Origin’). The fundamental of human nature is to create ideas and apply them in survival, the intensity of the impact of any ideas determined by the intensity of emotions associated with the idea30. In order for this to be human nature then the body-mind problem must be fully resolved, with detailed analysis of how ideas exist and how they impact people. To build the general theory of psychology there had to be
29 Little, Graham Richard, The Origin of Consciousness (July 26, 2016). Available at SSRN: http://ssrn.com/abstract=2814742 (Note: Submitted, awaiting final approval.) Referred to as ‘Origin’.
30 There is also the factor of the human spirit, but emotions associated with ideas are a reasonable initial correlation with the intensity with which an ideas impact an individual. Refer ‘Origin’ for further discussion.
29
transparent methodology and intellectual tools to enable an appropriate intellectual structure31.
2. An organization is an idea that shapes human mood and conduct32. This definition is not possible without the fundamental analysis in the opening proposition.
3. From Popper, ideas expressed in a form that carries the idea beyond the mind of the originator have an existence of their own (Karl Popper, Worlds II and III).
4. All objects that exist in their own right have an internal structure33. Therefore, organizations have an internal structure independent of the people who populate the organization.
5. All organizations are formed by the founders and carry the implicit purpose of those founders34. And while organizations may fail, the normative operating assumptions within OPD theory is that the inherent purpose of the founders is for the organization to
31 See ‘Origin’ for extended discussion on resolution of the body-mind problem and on both the formation of ideas and the manner in which they causally influence people. Also, see the paper, Through the glass darkly for a summary discussion of the influence of ideas on people.
32 In ‘Origin’, human nature is defined as the capacity to create ideas and apply them in survival. ‘Organization’ is one such idea that humanity found useful in its survival and development. See ‘Origin’ for more detailed discussion.
33 The current exception would be a photon. However, the validity of that assumption is challenged in ‘Origin’.
34 Initially written up in 2003, and published at the personal web site as People and Profits. http://www.grlphilosophy.co.nz/People_and_profits.pdf
30
succeed, not fail.
6. The explicit purpose of the organization, its raison d’etre, is expressed in its current strategic intent35.
7. Since organizations exist, and people exist, there has to be a relationship between them, linking one to the other. The proposition is that better science builds better technology that leads to better results, therefore if the relationship between people and the organization is clarified using better science, that will enable better technology which will enable better management of people in the organization and produce better results from the point of view of the organization and for people. OPD-HCD™ is thus the technology arising from OPD theory as enabling better management of the link between a mind and the organization.
This fundamental theory of organizations is not possible without being able to define an organization as an ‘idea’. And ideas are not possible without a fundamental general theory of psychology within which ideas are a prime causal factor in human activity, and that is not possible without clarity on such issues as causality, reflexive links between knowledge, causality and a general theory of psychology,
35 Further discussion of the relationship between strategy and a role specification
goes beyond the intent of this paper. Suffice, that the organization design must act as a ‘funnel’ so when people look to the goals they are assigned in their role, they can ‘see’ their contribution to the strategy and ‘see’ it precisely in the form of ideal actions.
31
understanding of ideas and how they exist in mind related to brain36etc.
36 Discussed in the article posted at LinkedIn, Do our genes determine who we
are? https://www.linkedin.com/pulse/20140928233534-7640385-do-our-genes-determine-who-we-are?trk=mp-reader-card
32
OPD-HCD™37
OPD-HCD™ begins with the strategy of the organization which is distributed through the organization in the goal cascade and then into the ideal actions derived from the goals and from implementing the business processes38. The trade mark is not registered, it defines that the human capital development (HCD) processes are from within OPD theory of organizations, and no other system or approach to organizational design is implied or in fact used or referred to.
OPD-HCD™ is the human capital development technology arising from within OPD theory. It consists of the following well-defined steps39.
1. Goal-action principle.
For every goal there are actions (called ideal actions) that must be delivered if the goal is to be achieved. Ideal actions are of the quality that doing them does not guarantee
37 Ibid. ‘Organization design’ paper. 38 There are issues in setting up the team and role structure beginning with
strategy. This goes beyond the intent of this paper. Suffice, the organization structure of teams and roles is the process of mapping the strategy onto its target market. See the paper Goal setting is old hat. Why do we need KPIs? For a discussion of the role of goals in coordinating the behavior of staff in a common endeavor. https://www.linkedin.com/pulse/20140826215656-7640385-goal-setting-is-old-hat-why-do-we-need-kpis?trk=mp-reader-card
39 For comprehensive discussion on OPD-HCD™ from multiple points of view within the organization, refer to the material at the LinkedIn profile www.linkedin.com/in/grahamrlittle.
33
success but not doing them guarantees failure. Ideal actions offer greatest chance of greatest success.
2. Business strategy.
Strategy is a complex goal. In any accounting period, strategy reduces to specific goals (KPIs) in each role. (A role is a unique set of actions and attitudes. A job may consist of several roles.)
3. Organization development.
Defining the role specification, namely the ideal actions underlying each KPI including integration into business process, philosophy and values. The complete set of role specifications underlying a strategy is referred to as the ‘behavioural structure’ relative to the strategy.
The behavioural structure defines the ideal actions needed to achieve results, namely if the behavioural structure acted out to standard, then organisation strategy has the greatest chance of greatest success40.
4. Theory of psychology:
People act according to how they ‘see’ the circumstance
40 Organization design is the manner in which people are connected to the
organization, in this and previous papers I have shown this connection, when scientific and precise, is the foundation of economics and a major aspect of social development in our modern world. Organization design is NOT organizational structure, which is the manner the strategy is mapped onto its market, and is the reporting relationship between roles. The foundation of the organization lies in organization design regardless of the nature of the organizational structure.
34
with how they see it being a detail embedded within their broader psyche. The intensity of action and feeling determined by the emotions associated with the ideas used to ‘see’ the situation. A game plan is how the person ‘sees’ some circumstance. A game plan consists of goals and ideas of how to achieve the goals. Emotions associated with a game plan determines the thrust, engagement and performance of the person in delivery of the game plan. This underlying psychology is summarised in the equation (focus + accuracy) + (engagement) = result. Focus plus accuracy is clarity of goals in the role and the action that offer greatest chance of greatest success in achieving those goals. Engagement is the type and intensity of the emotion associated with the ideas ‘what I do at work’, as defined in the focus and accuracy. The game plan of the person is thus the combination of ideation plus the emotions associated with that ideation41.
There are two aspects to ‘motivation’, which is understood as positive energy associated with an idea applied in seeing some situation. (1) Intrinsic motivation: The person choosing not to let themselves down, to deliver the agreed ideal actions to the best of their ability. (If the person does not feel they have the skill, then the emotions
41 It is rather more complex in that the formula refers to each mental set as defined
in ‘Origin’. Thus the final mind set of the person may only partly arise from these direct work psychic structures, and may also arise form closely associated structures, such as if they have strong views on class conflicts, or on profits, etc. Full details on implementation are beyond the scope of this paper.
35
will be tentative). (2) Team motivation: The team and team leader ensuring the person having fun delivering the agreed ideal actions42.
Steps 1 -3 define management as the activity to ensure behavioural structure clear and apt, expressed in the role specifications defining every role.
Leadership is defined as linking the management effort to the mind of the people. Leadership is to ensure every person has a clear and focused game plan with which they are positively engaged, committed to doing it, and is having fun striving for perfect performance.
The effective blend of management and leadership result in the organization having greatest chance of greatest strategic success.
There are detailed analysis of implementing OPD-HCD™ from the point of view of the CEO43, the redesign of all aspects of HR44, the impact of OPD-HCD™ on team
42 For a more extended discussion on motivation from with the general theory of
psychology refer the paper Understanding and managing motivation. https://www.linkedin.com/pulse/20140821050453-7640385-understanding-and-managing-motivation?trk=mp-reader-card. And for a discussion on translating that into company policy see the paper An integrated motivation policy. https://www.linkedin.com/pulse/20140822025012-7640385-an-integrated-motivation-policy?trk=mp-reader-card
43 Little, Graham Richard, The Mind of the CEO (September 1, 2016). Available at SSRN: http://ssrn.com/abstract=2833571
44 The role of Human Resources in the Modern Organization http://www.slideshare.net/Graylit/the-role-of-human-resources-in-the-modern-
36
leaders throughout the organization45, analysis of the technical details in rolling out of strategy, supported by the insight that roll out of strategy is the same process as performance management against the role specifications, with both focused on the effectiveness with which the behavioural structure is delivered46. Finally, a detailed discussion of human capital value within the firm, what it is and the extent it can be capitalised in a balance sheet thus proving a foundation of the economic value of staff in organizations within the national economy.47
A diagram of the theory is below. And a summary description at the web site: www.opdcoach.com.
organisation-wheelers-pdf and the newsletter, All proactive HR changes, http://www.slideshare.net/Graylit/16-all-proactive-hr-changes
45 Modern Team Leadership, http://www.slideshare.net/Graylit/modern-team-leadership-wheelers-pdf.
46 Little, Graham Richard, Rollout: Improving Rollout of Business Strategy (September 6, 2016). Available at SSRN: http://ssrn.com/abstract=2835794
47 Note, all books are free in PDF, available from the LinkedIn profile, with some available at the Social Science Research Network, author page http://ssrn.com/author=2572745
37
Strateg
y
Team
stru
cture, ro
les in
Ideal actio
ns to
achiev
e go
als
Goals, K
PIs
OP
D-S
HR
MIS
M
on
itorin
g
team
leader
implem
entatio
n
of
OP
D-S
HR
M
pro
cesses
Psy
cho
log
ical targ
ets
Lead
ership
actions 1
S
et up
architectu
re L
eadersh
ip actio
ns 2
Bu
ild p
erform
ance cu
lture
Lead
ership
actions 3
M
aintain
su
perio
r p
erform
ance
En
gag
emen
t C
larity
of
go
als, K
PIs.
Visu
alization
of id
eal actio
ns.
Co
mm
itmen
t P
ersonal ch
oice.
Pro
fessionalism
.
Team
leader su
pp
ort.
Bu
ild o
wn
frame o
f p
rofessio
nal m
ind
. B
uild
fram
e o
f referen
ce for w
ork
.
Man
age
com
munity
fram
e of referen
ce.
Th
e OP
D th
eory
of
strategic h
um
an reso
urce
man
agem
ent
38
The theory of psychology48
The full analysis of the system ‘person in the environment’ is in The Origin of Consciousness. The theory of psychology that emerges is an Ashby diagram of a person in the environment describing the variables that define the system and the links between those variables. The theory of adaptive behavior developed by Ashby is the basis for the psychological theory but refined by myself to better describe humans.
The points below are the relevant psychological points as they apply to linking understanding of human psychology to organizations.
a. If left to its own devices the energy flow in the brain will seek the lowest available energy paths referred to psychologically as habit. The distribution of the lowest energy routes for neural energy in the brain is called the ‘entropic state’ of the brain. The entropic state of the brain is to the brain as a balance sheet is to a company.
b. The mind operates in sub sections called mental sets which have a cognitive component (knowledge/ideas), an emotional component, and a ‘slant’ referred to as attitude. Within the theory mind is defined by thought, emotion, and attitude.
48 Ibid. ‘Organization design’ and ‘Origin’.
39
c. Ideas are built by using language to classify events of perception according to the properties of those events. Once created, then the ideas are used to classify subsequent events. Related ideas form linked mental set structures within the psyche.
d. Knowledge is created and exists as a whole by ordering ideas in relation to the topic. For example, the five wise blind men describing an elephant, each holding a different part of the elephant, so one describes the elephant as long and thin with hair at the end, another as solid, round and firmly on the ground… etc. Each has a correct idea on the elephant, but each limited, knowledge of the elephant lies in the relation between all of the ideas.
e. Changes in a perceptual field generate changes in our brain. The changes in our brain we interpret using ideas and knowledge stored in our brain. This perceptual process including interpretation leads to the understanding ‘we see with our mind not our eyes’. We can build a model of this psychological structure by imagining as box of ‘frames’ behind our eyes, we look through a frame and thereby interpret what we see. The frame is a model of our psychology, what is on a frame is the ideas we use to understand and orientate ourselves to the world.
f. Self exists as a linked system of clearly defined mental sets referred to collectively in the theory as ‘I’, inverted commas intended.
40
g. ‘I’ is the seat of consciousness, self-esteem, spirit, and free will. Our spirit exists within our brain which exists within our body.
h. Free will is ‘I’ applying the attention mechanism to alter the entropic state of brain to reroute flow of neural energy in brain.
i. Only consciousness can choose a course of action outside that immediately available to the system. Only consciousness can make water go up hill and stay there.
Summary of the cause of human mood and conduct
The brain operates on entropy which determines the set lowest energy routes available. The entropic state of the brain directs habit.
The mind is guided by choice. Only through our conscious mind can we make happen the course of action we choose.
The fundamental human condition is the tension between conscious choice through attention and habit arising from the operation of entropy in the brain.
The ethical position underlying OPD is that every person has the right to choose, and due respect in that choice.
41
If OPD theory is fully science, can it ever fail?
There are two points of failure of the theory. OPD theory posits all HR as after the strategic decisions, and the proactive aspects of HR involve the roll out of strategy. Thus OPD-HCD™ as the roll out of strategy may be done fully and correctly, but if the strategy is poor, then the business will still fail.
Failed architecture: OPD will fail if the goal cascade and ideal actions derived from strategy are poorly conceived or grouped to form a poor organizational structure. A poor architecture will have people doing the wrong things at the wrong times. It will result strategic failure. This is fully leadership failure beginning at the top. A person at the bottom of the organization may be delivering agreed ideal actions to standard and with verve and commitment, they are successful in their role, but the leadership has guided them to do the wrong things and hence the results are not achieved, but they cannot be blamed for the poor result. This failure can be separated from poor choice of strategy or of infrastructure tactics for realizing strategy, by asking: Have people done the agreed ideal action to standard? If so, responsibility for the failure rests with governance and executive.
Failed choice: OPD will fail if people do not choose success at work and fail to discipline themselves relative to the agreed ideal actions and act out those actions when at work. I suggest this failure is common to any system of
42
organizational design and operation. Failure of choice is NOT a failure of leadership. Only the person has access to their mind, only they can decide to act out ideal actions or not. If they choose to not act out ideal actions because of they do not like the team leader, this again is a choice.
Within the ‘Origin’ theory of psychology49, the key driver of all human activity is choice. The person and the person alone is responsible for the choices they make, no one else has access to their mind.
A key aspect of choice is the extent work behavior is a fundamental driver of community health50 which means the choice of individual and their professional commitment to their work is an issue much, much broader than whether or not they like their team leader or the company.
49 Ibid. ‘Origin’. 50 Ibid. “Why Work’.
43
Strategic human resource management (SHRM)
The current global received wisdom is that strategic human resource management is about the link human resources makes with strategy of the organization.
Within OPD theory, all human resource (HR) considerations are after the strategic choice. HR issues come to account in the strategic decision as costs, for example, wage costs, recruiting cost and training cost often estimated as one overall expense. More detailed considerations may occur if for example there were serious concerns at the availability of skills or even the availability of people willing to work.
In OPD theory, HR is an operational issue involving the roll out of strategy.
Considerations on the term ‘strategy’
It is sometimes assumed that there is only one strategy in a business. However, this narrow approach is inconsistent with the definition of the term and with what the term implies51.
Strategy is taken to mean the overall direction. Elsewhere I have explored the term and the quantification of strategy
51 Private exchange at Unitec, Auckland New Zealand, where it was argued there
is just one strategy and terms like ‘sales strategy’ are misnomers.
44
in any given accounting period52.
To ensure precision, I shall use the term strategy to apply to any aspect of some plan where the term conveys the direction, and then quantification of strategy is the detail of how much of the direction will be realized in any specified accounting period.
Therefore in pursuit of an overall business strategy it is legitimate to consider sales strategy, operational strategy and human resource strategy. The terms conveying that the specified functions had definite directions and in any given accounting period the strategy could be quantified to specify how much to be achieved in that period.
These considerations mean that strategic human resource management is a legitimate. But what exactly is it?
The nature of functional strategies
It is important to be aware of how we think. Sloppy thinking leads to loose actions which lead to a result less than we could have achieved if we had been more careful with our thoughts. As said by Einstein, ‘We become what
we think most of the time’.
How exactly do we need to understand strategy as it applies to HR?
In sales for example, we all understand it as the process
52 See discussion of details of OPD-HCD™ in the newsletters in the summary
section of the LinkedIn profile, www.linkedIn.com/in/grahamrlittle.
45
of introducing new people to the product and encouraging them to buy. We understand the overall aim, but there are many means whereby we may achieve the aim. The manner we choose to implement sales is the direction we will take in sales. It is intrinsic to sales, not an addition to sales … it is the direction adopted within sales for achieving the sales aim intrinsic to the overall corporate strategy.
The general point is that the strategy of any function is intrinsic to the function, not an addition to the function. But then what about HR?
The constraints on functional strategies
Imagine launching a new product into an English speaking market with the brochure and advertising written in Mandarin. Would you expect strong results? Hardly!
The general point is that the range of options in the selection of any functional strategy, such as a sales strategy, is limited by various constraints many of which are obvious and even silly, like the example above, but none the less real.
We can now ask a more general question, namely are there any intellectual constraints that have been assumed or overlooked in selection of strategies in HR?
Constraints on HR strategy
HR deals with people in organizations which I refer to as ‘authority systems’. The term authority does not merely refer to human authority, but also to the demands on people
46
that they act consistent with the needs of the organization. When engaged with the business of the organization people are not free agents and are not able to act exactly as they please. Therefore the organization itself exerts authority on people, not merely people exerting authority on people.
Organizations are created by people who act within the organization. There is a major social complexity here…this complexity immediately implying all the issues raised and considered in the derivation of the OPD theory. For example:
a. Is the organization separate from people?
b. How does an organization exist?
c. If we are to analyze this social complexity what intellectual tools do we have and what sort of knowledge do those tools create?
d. Any analysis is necessarily an aspect of social science, therefore are there any aspects of science that must be bought into account before our analysis is valid?
e. If the organization is separate from people then what is the internal structure of the organization?
f. And what is the link between the internal structure of the organization and people?
g. How does this analysis of people in organizations then relate to the economy and then to people in communities?
47
The answer to any one of these questions will profoundly impact the understanding and practice of HR in the organization. These questions implicate considerations in social science.
The nature and role of HR in organization can only be clarified by resolution of these theoretical issues in social science. Our full understanding of HR in business depends on development of a scientific theory of HR which gives rise to a set of HR processes.
The OPD theory arose by this exact process providing clear and definitive links between the organisation and people.
The conclusion is that the OPD theory defines a new and more scientific link between people and the organization, and these links enable a set of strategic HR processes that enable improved management of human performance as a strategic factor in results.
Conclusion on the constraints on HR strategy
HR strategy is severely constrained by a range of complex intellectual factors not previously bought to account.
The OPD theory is the resolution of the intellectual issues which underlie HR strategy and leads to one and only one intrinsic strategy for HR.
Within OPD theory, the activity of strategic human resource management (SHRM) is to identify the behavioral
48
structure and guide its delivery. This activity is an intrinsic aspect of HR arising from full understanding of the link between the organization and people.
The activity of SHRM is the alignment of the actual behavior of every person with those actions that offer greatest chance of greatest strategic success. The roll out of strategy is the responsibility of the CEO. The overseeing of SHRM throughout the organization is delegated by the CEO to HR Department in larger organizations, but the alignment of actual behavior with ideal actions is the key HR focus of all organizations.
Within OPD theory human resource management separates into administration, essentially that which is done now, and strategic human resource management, the proactive aspect of HR that drives all organization success53.
53 Little, Graham Richard, The Exciting Promise of Human Resource Management
(HRM) (August 7, 2016). Available at SSRN: http://ssrn.com/abstract=2819810
49
Definition of SHRM
Within the OPD theory the aim of strategic human resource management (SHRM) is the identification of the behavioral structure of the organization and supporting every team leader in achieving delivery of that behavioral structure in every team role.
OPD-SHRM then refers to the set of HR tools that enable the team leader and HR partner to achieve that aim.
Definition of SHRMIS
Strategic human resource management information system (SHRMIS)54 is the capture of KPIs and ideal actions in every role (behavioral best practice structure or architecture).
SHRMIS is capturing of the behavioral best practice structure in such a way as to make it readily accessible to those expected to act it out. The SHRMIS system defines the organizational architecture, and integrates key SHRM factors such as cultural audits, customer satisfaction audits, engagement, coaching and training, records performance management, and working ‘in’ and ‘on’ the business.
54 Terminology can be SHRMIS or HCDIS, and where the HCD system is derived
from OPD, then OPD-HCDIS. A complete SHRMIS system records and integrates HR actions. For example, cultural audits and customer satisfaction audits, measure of Human Capital related to budget achievement, etc., for a full overview of a OPD-HCDIS contact [email protected].
50
HRIS only administers HR
Existing HRIS systems are all derived from the administration of HR. There has been work done on identifying aspects of the administrative data and how to use that data to advance human performance and to increase results. However, it is based on intellectual foundations that are incomplete, uncoordinated, with many issues unresolved. If we have a decision making process that is flawed, then no amount of working harder with it can surmount the flaws. We need change the system. So it is with HR.
HRIS is without intellectual foundation and will always be surpassed by any system based on theoretical understanding that does not have the flaws and underlying inadequacies.
SHRM as the proactive driver of success55
The OPD theory provides a clear and coordinated focus of HR throughout the organization, with the HR function separated into two components.
1. Administration of HR. The data secured can then be analyzed to assist improved HR practice, but it is
55 Refer posts on HR as the driver of success at
www.LinkedIn.com/in/grahamrlittle. Also: Little, Graham Richard, The Exciting Promise of Human Resource Management (HRM) (August 7, 2016). Available at SSRN: http://ssrn.com/abstract=2819810 and other papers at Author page: http://ssrn.com/author=2572745
51
intrinsically grounded on theory and models that are not coordinated or lack definition and precision. Administration continues what is currently accepted as the function of HR, the current set of issues surrounding compliance, unfair dismissal, leave provisions, absenteeism, wages, contracts and contract administration, collective agreements, industrial relations, long service, retirement, pension provisions, etc.
2. Strategic human resource management (SHRM): As defined within OPD theory, partnering with team leaders to proactively identify the behavioral structure underlying the strategy then guiding delivery. Integrated into SHRM are engagement, performance management, cultural development, moments of truth, management by walking around, coaching, training, disciplining, rewarding both financially and emotionally/psychologically, results, organizational success and personal success.
The OPD definition of strategic human resource management (SHRM) places HR processes at the very core of successful roll out of strategy, which is at the core of organizational success. This proactive role for HR processes in driving organizational success is not delivered by HR, but by team leaders. HR within this model is the technical resource, the advisor, the partner to the team leaders enabling them to apply the clear and systematic
The administration (1 above) is done by HR itself. None
52
of SHRM (2 above) is done by HR. To repeat, SHRM is done by the team leaders, with HR as the technical advisor, the internal consultant, an active and supportive partner.
The HR Department also administers/oversees SHRMIS to improve standing human capital value. As a crucial aspect of administration of the SHRMIS the HR department provides regular reports and feedback from the audit functions within the system on the delivery of the OPD-SHRM processes in each team. SHRMIS reports are then used by senior executives to provide feedback for team leaders and ensure all the OPD-SHRM processes are being fully implemented in all teams. This ensures the organization has the greatest chance of greatest success.
53
Summary of SHRM under OPD theory
Strategic human resource management, OPD-SHRM™
56:
= roll out of strategy;
= identifying and guiding delivery of the behavioral structure relative to strategy for a specific accounting period;
= proactive aspects of managing people in the organization such as to enable achievement of the organization results, satisfaction of people;
= managing the contribution of the organization to the wealth and health of the community in which the organization embedded;
= daily/weekly performance management relative to goal achievement and people fulfilment and satisfaction;
= enabling the organization the greatest chance of greatest success;
= enabling the people greatest chance of greatest work life satisfaction;
= enabling the community greatest chance of greatest
56 Little, Graham Richard, Organization Design: Linking Mind to Its Agreed
Organization Role as a Foundation of Economics (July 31, 2016). Available at SSRN: http://ssrn.com/abstract=2816604
54
wealth;
= enabling the community greatest chance of greatest health, as a community as and as individuals in the community;
= achieving team member flow57 and fulfilment from their work life;
= achieving team results.
Under OPD theory, an OPD-HCDIS system guides application of the team leader processes and records all necessary data on audits, team development plans and result, as measured in audits, role specifications and individual development of skills against the ideal actions, records talent assessments, and regular performance management. The HRIS system records the associated staff administration of salaries, leave, sickness, absenteeism, hours, etc.
Both OPD-HCDIS and HRIS are regarded as necessary.
57 Csikszentmihalyi, Mihaly (1990). Flow: The Psychology of Optimal
Experience. New York: Harper and Row. ISBN 0-06-092043-2
55
OPD definition of human capital
Once the ideal actions are agreed, with people choosing to be successful and deliver them, then people are assuming personal accountability for their actions at work, and to significant degree accountability for their own motivation. People are then held to account for the one thing they can be held accountable for, namely their own conduct at work.
Defining success under OPD theory
There is no tension between personal and organizational success. There is not issue of seeking ‘goal’ overlap the ‘organization’ and people both seek ‘success’.
Organizational success: Achieving the numbers.
Personal success: Delivery of ideal actions to standard.
The major difference between OPD and current HR practice is that under OPD people are not accountable for the goals and goal achievement. Nor even fully accountable for the ideal actions which are decided by the person, the team leader, and the team leader’s team leader.
In OPD it is ultimately the CEO who is accountable for the roll out of strategy, hence it is the CEO who carries the final responsibility of the definition of the behavioral structure, but delegates the work of definition to the leadership team supported by the HR department. .
56
Each person is accountable for how well they acted out the ideal actions as agreed … if those action then fail to deliver the results, but the person delivered them fully and with commitment, then the person remains personally successful and cannot be disciplined nor in any way chastised. They did exactly that required of them.
Dynamic Human Capital
The competence of people makes a difference. Two people, both sales people - one skilled, one not. The skilled person will consistently achieve a better result than the unskilled. This much is common sense and obvious.
But as we have already considered, slavery is illegal in the civilized world, therefore the competence of people is not able to be registered as an asset of the business. But staff competence makes a difference. Therefore the quality of staff competence is an important measure of human capital.
The measure of staff competence under OPD theory is called dynamic human capital. The qualification ‘dynamic’ makes clear the nature of the measure; it is not an organizational asset, it is a rented asset and is ‘capital’ in the same way that money from the bank is capital.
In the OPD cultural audits, dynamic human capital is measured in the goal clarity (focus), clarity of ideal actions (accuracy), commitment, and relationship with the team leader. It is also measured in the extent the team leaders apply the OPD-SHRM system.
57
Placing dynamic human capital on the balance sheet has significant complications in that it is the asset (the person) itself that can choose to leave. The organization has no control over a person’s choice to leave. For this reason, which is due the free will implicit in any human asset, it is not recommended that dynamic human capital is shown on any balance sheet and is best discussed as an important topic in documents such as the annual report.
Standing human capital
The SHRMIS system captures the details of those actions that offer the greatest chance of greatest success. This is fully owned by the organization, it remains when people come and go, and it reflects and captures the learning of the organization over time, even decades.
For example, imagine a very good sales manager; they were exceptional and very sharp. They helped define quite exceptional insight into the ideal actions that guided sales people to be more effective than any before.
Over fifteen years several sales managers came and went. They all used the same ideal actions as the standard for their teams and all were successful. All agreed it was a wonderful helpful insight. Not only has the SHRMIS system captured the way of doing it that offers the greatest chance of greatest success, it captures for all to follow the insights of the best of the leaders the organization ever recruits. It is truly ‘organization learning’.
58
Ownership of human capital
We can now answer the question asked in the first section. The organization cannot own any ‘aspect of people’ but it can own the crucial definition of the behavioral structure that offers people the opportunity for perfect human performance. Specifically the organization owns the SHRMIS.
The use of human capital value (HCV)
Human capital value measures the extent the leadership have qualified the ideal actions underlying the strategy plus the extent people are delivering those actions.
The first is called standing human capital the extent the organization has defined the actions needed that offer the greatest chance of greatest success.
Imagine a top sports team going onto the court with a game plan that directs the overall pattern of play to deal with the opponent. The better the game plan the greater the chance the team will win. Standing human capital value is an estimate of the quality of the game plan.
Dynamic human capital value measures the extent people execute the game plan. To continue the sports analogy, the better the game plan, and the better it is executed then the greater the chance of success.
For any sports team, the more effectively it drafts the game plan of what it needs to do to defeat the opponent, and the more effectively the team deliver the game plan, then
59
the greater chance of success.
Within OPD theory: As in sport so too in business.
Standing human capital measures the quality of the game plan. It follows that the clearer the organization is on its game plan the greater the chance of having that game plan enacted. Dynamic human capital is the measure of the extent the game plan is delivered.
HCV measures future profitability
For any established business there is typically some inherent momentum that will persist even after a mistake is made. For example, a machining mistake can be absorbed for some time by existing stocks and a customer service mistake absorbed by customer good will. For this reason, human capital value is a leading indicator of business performance.
A fall in human capital value does not immediately translate into a fall in results, but will eventually show up in results.
An increase in the HCV is a leading indicator pointing to improved future results.
The HCV of the business is a leading indicator of the future profitability.
HCV does not measure the quality of the strategy
Within the OPD theory all HR management occurs after the strategic decision. All aspects of HR are implicated only
60
in the roll out of strategy.
HCV does not measure the quality or aptness of the original strategic decision. HCV only measures the effectiveness with which human effort is harnessed in pursuit of strategy.
It follows that a business with a high HCV score, but a poor strategy, can still fail.
In psychological terms HCV measures the coordinated discipline of staff in pursuit of the combined goal of strategy. If the strategic direction is poorly selected, people doing the wrong things, then no amount of discipline, no matter how well people do those things, the business may still fail.
61
Measuring human capital value
Human capital value (HCV) measures the effectiveness with which the leadership has determined the actions needed to ensure greatest chance of greatest success, plus the extent the staff are delivering those actions.
The higher the human capital value the better the result.
A strategic human resources management information system (SHRMIS) 58 captures the behavioral structure and captures effort by team leaders in guiding delivery of that structure.
Factors in standing human capital value
Standing human capital value (SHCV) is the starting point to achieving strong results since SHCV measures the definition of ‘perfect’ human performance to which the organization aspires.
The factors assessed in the standing human capital value are:
a. the quality of leadership judgment of the organizational structure59,
58 Currently the only SHRMIS system as defined by OPD theory is that supplied
by OPD International Limited: Further information available via [email protected].
59 Organizational structure maps the strategy onto the target market via teams and roles in teams.
62
b. goal cascade60, c. Identification of ideal actions61.
Standing human capital value, as stated earlier, does not measure the quality of the strategy; standing human capital value is solely focused on the effectiveness with which the leadership conceptualizes rollout of strategy offering the greatest chance of greatest success. Standing human capital value is assessed by addressing the following questions.
1. Organizational structure.
1.1. How well does the organization structure cover the target market?
1.2. How effective is integration/coordination between teams in the structure?
1.3. How effective are business processes so that activities and effort in one team is relayed to other teams potentially impacted or able to use the information?
1.4. How well coordinated is planning across the structure?
1.5. How clear are roles within teams?
1.6. How well do internal team processes coordinate individual effort within teams?
60 The purpose of each role relative to the strategy defined in the KPIs assigned the
role. 61 Those actions identified as enabling greatest chance of greatest goal success.
63
2. Goal cascade.
2.1. How clear is the purpose/aim of each role relative to the strategy? - Has each role clear KPIs that quantify the purpose?
2.2. Is there good balance between KPIs, ‘like with like’ to define the role, so that the underlying behavioral structure is realistic and does not expect a range of competencies in a person that is unrealistically too broad?
2.3. Does the number of KPIs enable concentration on the critical performance factors that drive success, or is concentration diluted by too many KPIs?
3. Ideal actions (behavioral structure of the role).
3.1. Does each KPI have clear actions that if delivered then the KPIs have greatest chance of being achieved?
3.2. Do the team leader, team leaders team leader and the people assigned the role all agree that if the ideal actions represent the greatest chance of greatest success in achieving the KPI?
3.3. Are the ideal actions clear and can someone be ‘seen’ doing them?
3.4. Are the critical ideal actions that most drive KPI success clear and well defined?
3.5. Are ‘moments of truth’ identified?
64
Measuring standing human capital value
Each question in each factor is rated out of 10, then the average taken without weighting, since questions are regarded as equally important. Then the average of the three factors can be taken to give an overall assessment of the standing human capital value for the organization.
The absolute value is less important that the relative value. So if judgment of some factor is 8 out of 10, then what must be done to get it to 8.8 out of 10? The point is to improve the standing human capital value which enables improved results.
This assessment is best done by the HR Department, who should adopt a detached, objective view rating the quality of the standing human capital value in each division and team.
Once team leaders grasp the link between standing human capital value and their results, then they will be more eager to work with the HR Department in assessing the quality of the SHCV in their team. The focus of the team leader is on improving SHCV, so then by guiding more effective delivery of ideal actions they improve the results from their team.
Role of CEO in driving human capital development
The CEO has a crucial part to play based on the simple idea that once we agree what to do, then the next step is to see it gets done. The CEO must have the vision of goal-
65
action expressed clearly in the OPD paradigm.
Leadership judgment: Goal cascade, role structure and identification of ideal actions in every role.
Leadership effectiveness: Closing the performance gap.
It is important for the CEO to be committed to building organization-wide insightful understanding of how to best rollout strategy.
Once the leadership judgments are agreed then focus shifts to guiding full and committed delivery of the ideal actions identified in each role.
Creating and managing our professional mind
Elsewhere I have discussed the idea of ‘frames’ as crucial understanding of the structure of our psychology.
Imagine a set of power point frames behind your eyes. The frame is a simple model of how our psychology works. On a frame are the ideas we use to ‘see’ and ‘understand’ and thereby ‘relate and act upon’ the circumstance to which the ideas relate. Emotions become associated with the ideas, and give them force and weight in the formation of our mood and conduct.
The ideas on frames are the personal theories we use in the construction of our understanding of the world in which we live, which in turn gives rise to Reality, the world beyond us, and reality, the world as we see it. We create our vision of Reality - our reality, using our ideas and attitudes, which I call ‘our personal theories’.
66
The operation of ‘our theories’ in this way makes a scientific theory of the same psychological status as our personal theories. A scientific theory is merely subject to a more rigorous process of testing and assessment. Hence: There is nothing more useful than a good theory.
The second major proposition is that our personal mood and conduct arises mainly from within our mind. The third is that we can choose the ideas or personal theories we use via which we ‘see’ and thereby relate to Reality.
Our personal success begins in our mind. We and we alone have access to our mind.
Through this series of simple and logical steps we arrive at the unsurprising proposition that we can choose how we think. We can choose the ideas on the frames we use via which we ‘see’ work, organizations, our place and role in our community and the role and place of work and the organization in our community.
If we choose, we can build parts of our mind to better match our circumstance. If we choose success at work, we can build a ‘work’ or ‘professional’ mind containing our agreed ideal actions. We can choose to ‘see’ work through this set of ideas on frames and use it to guide our conduct at work.
The psychology of performance
We can now ask: What are the necessary and sufficient factors for performance at work? I list five below.
67
In six years of discussions with team leaders and executives all have agreed these do reflect a necessary and sufficient psychological base. The part of our mind we construct in order to support and guide our work effort, I call our ‘professional mind’. The proposition is that the necessary and sufficient structure of the professional mind is as follows:
Focus: Clarity of goals and clarity of importance of goals in the organization.
Accuracy: Clarity of ideal actions needed to achieve goals.
Commitment: Willingness to exercise self-discipline and commit to do the actions needed to get the results.
Leadership support: Sense the person feels supported by their team leader to deliver the actions and get the results.
Business processes support: Business processes assist people to deliver the actions and achieve top results.
We can now begin to imagine a frame within the professional mind of the person. On that frame are a list of ideal actions with the qualities of focus and accuracy that the person is committed to enact. The person is confident of their team leader support and is confident of the business processes which form the platform for their efforts. They
68
are also confident those processes effectively coordinate their effort within the broader organization.
The focus is very much on the individual mind, with the organization seen as a collection of minds harnessed in relation to the strategy. Now consider, would the thorough implementation of this in every mind in your organization represent a step forward in the professional performance?
If it works in one mind it can work in any number. Success with clients in Auckland, New Zealand has already established it works in scores of minds within organizations.
It works across social cultural boundaries: Caucasians, Maoris, Polynesians, Asians and Arab being some of the cultural types where the system has already proved its success and effectiveness.
Cross cultural success has to do with the people choosing to harness their individual minds to deliver the actions agreed at representing the greatest chance of greatest success.
People make a choice…their cultural background is largely irrelevant to that fundamental choice; details are not, so avoid asking people to deliver ideal actions likely to be culturally unacceptable.
Experience has shown that if people choose to so perform, they themselves will help recast the ideal actions into a form they find acceptable, and in their choice to build greater clarity their performance improves.
69
Factors in dynamic human capital value
If we choose to be successful in our work life, what is the most productive way to manage and construct our mind?
Think of frames as ‘glasses’ in our mind that we can put on and take off. When we put on different glasses we see differently, we see relative to the nature of the glasses we are wearing.
The theory from which this insight emerges shows our mind is not continuous, it exists in segments, so home, work, friends, etc., are all different segments, or ‘psychological structures’ in our mind. Sets of ideas and attitudes exist in structures so we can speak of nested sets of frames.
We can now seek to build a better professional structure in our mind so that we achieve greater work success. Where do we start?
Back to frames: Above I sketched the ‘ideal actions’ frame, perhaps better thought of as ‘what I do at work’ frame. This is the frame whereby the person ‘sees’ what they do at work. In addition they should be able to visualize themselves doing the ideal actions. Visualizing performing ideal actions I define as engagement. It is exactly the same as in sport; it is the person readying the body to do the things needed to get the result.
This is a different definition of engagement than in current HR theory and practice, but a stronger definition.
70
The stronger someone can visualize themselves doing the ideal actions increases the likelihood they will do those actions better. In this way engagement is linked directly with job performance.
The ‘what I do at work’ frame will not exist on its own. It will be nested in other key frames, such as ‘Do I want to be successful at work?’, ‘What is the role of work in my life?’, and ‘How do I feel about organizations and wealth generation and my community?’
Within OPD processes the steps for dealing with this set of nested frames is as follows.
1. Team cultural professional base. People choose the following.
1.1. To be successful at work.
1.2. To manage their minds to build success.
1.3. To approach what they need to do at work with professional objectivity.
1.4. To cooperate with their team leader in building their professional mind.
2. Sign off of ideal actions in role. People agree the KPIs are appropriate and that the ideal actions represent the greatest chance of greatest success.
3. Performance contract. People choose success in the assigned role and agree that professional committed delivery of the ideal actions is personal success for them.
71
4. Build ‘what I do at work’ frame. People agree the
necessary and sufficient factors for performance as listed above and agree to build in their mind the list of ideal actions.
5. Business process review. Person and team leader review all business process that underlie the role and agree changes/compromises to improve operation of processes and integration of person into the broader organization.
6. Engagement. The person advises the team leader that they can see themselves delivering all ideal actions with no negative emotional reaction.
7. Performance management. The person and the team leader agree to a monthly one-on-one meeting where the person will advise the team leader:
7.1. Where they saw opportunity in their own behavior to make that behavior closer to the perfect human performance in the role. progress,
7.2. Where they let themselves down and did not deliver ideal actions to standard in last month, and what they will do about that, and
7.3. What ideal actions will be improved upon in coming month?
Performance management as it emerges within OPD theory is done monthly. It is people assessing their own performance against the agreed standard of perfect human
72
performance. The team leader is a sounding board and mentor in the person’s striving to be successful in their work life.
The more effectively the ideal actions are delivered, the more successful the person. The more secure and content they feel about work and the better the result, so both the person and the organization win.
Measuring dynamic human capital value
The key issue is whether or not the team leader has guided each team member to build a professional frame of mind involving the ideal actions, objective focus, and flexibility of thinking, so ideal actions are seen as the role and not seen as personal, commitment to personal success at work. Cooperation with the team leader and in return feeling supported in striving for success gains respect and understanding of business processes and the desire to do them properly.
The professional mind in each team is monitored every 3-5 months, via a cultural audit questionnaire that surveys focus, accuracy, commitment, attitude to team leader, attitude to business processes.
This cultural audit effectively audits if the team leader has done their job in guiding development of the professional mind in their team members.
As with standing human capital, the cultural audit should be done by the HR Department who then advises the
73
executive of the result and, as needed, meets with team leaders to review how the result can be improved in their team.
Measuring human capital value, concluding comment
Measuring standing human capital value requires more judgment and is less systematized than measuring dynamic human capital value. However it is a crucial beginning point of defining the ‘perfect’ standard against which actual human performance is to be measured.
With multiple inputs from experienced people, and with the HR Department adopting a detached ‘internal consultant’ role, then there is no reason why the leadership cannot reach a sound judgment on the quality of its standing human capital.
Dynamic human capital is systematically measured by team/cultural audits every 3-5 months. The audits focus on accuracy, commitment, sense of team leader support and confidence in business processes in the team.
Perfect human performance is where standing and dynamic human capital value is scored 10 out of 10.
Standing human capital value is scored 10 out of 10 if and when the leadership and HR Department agree and are satisfied the ideal actions are as good as they can ‘see’. This does not mean the organization cannot learn, it only means that based on what the organization knows now, it has judged the situation the best it can. This means that if the
74
behavioral structure (all ideal actions) is acted out with commitment, then the leadership judges it has given the organization the greatest chance of the greatest success.
The measure of dynamic human capital in a team by an audit should never be 10 out of 10…as reality seldom matches perfection. I have never encountered a team or person where the ideal actions could not be acted out more effectively. The times when I have encountered cultural audits of 10 out of 10, in those instances the team members involved had scored higher due to internal team relationships, such as being nice to each other and the desire to ‘show the boss’. In one instance the team leader and assistant team leader were both dismissed due to their personal relationship distorting the entire team performance. In another instance, a challenge of the status quo was sufficient for some objectivity to be restored.
When measuring dynamic human capital value, focus and accuracy are fully intellectual items. They involve no emotion, therefore in principle could be memorized 10 out of 10. However in practice this seldom happens. All other factors involve some level of emotional content and seldom scored over 9.
75
Training & development62
The purpose of training is to enhance delivery of the ideal actions.
The purpose of development is to open up a person’s mind, free from emotional constraints and equip the person to function in higher positions. A closely associated purpose is to develop the person’s intellect, since higher positions always involve greater intellectual and or creative demand. Both training and development, when conducted effectively, increase human capital value. The difference between training and development cannot be overstressed.
Training: An exercise in focus and discipline where the end result is more constrained behavior in the form of tighter and more effective delivery of the ideal actions. The person knows they can do it; they are being guided in how to concentrate to do it better than they currently do. Immediate payback from the training delivers increased performance and better results.
Training key words: Focus, discipline, tightened behavior, improved results now.
Development: An exercise in opening the mind and the intellect to think differently and to understand how to ‘see’
62 Refer, CV of Dr Little, for detailed background and experience in design and operation of human development with authority systems, ‘corporate L&D. www.linkedin.com/in/grahamrlittle.
76
things differently, to be able to adopt different positions and be able to ‘see’ more complex situations clearly. Very likely the person does not know they can do it already, a key aspect of the development is the development of self-awareness and that they are capable at a higher organization job level.
Development key words: Expansive, increased self-awareness, opening of mind and intellect, improved opportunity in the future.
Training is for everyone, developing skills at delivery of ideal actions.
Development is a key part of talent management, developing the intellectual, broaden vision, and build awareness of intellectual capacity.
77
Performance management
Performance management is closing the gap between actual human performance and perfect human performance.
The key process is coaching, listening and offering guidance on how to deliver ideal actions more effectively.
The output from each one-on-one review is an agreement between the team leader and the team member of which ideal actions the team member will improve before the next review meeting.
One-on-one performance management/coaching reviews are done at least monthly.
Performance management has two aims.
1. Working in the business: To ensure the person retains the agreed ideal actions ‘top of mind’. The team leader must listen as the person discusses how well they delivered the ideal actions last month and how they will improve delivery in the coming month.
2. Working on the business: To review the ideal actions in the role and identify what has been learned, and where the ideal actions can be improved.
If people decline to accept and deliver ideal actions, they are declining to work and the company has the right to decline to retain the person.
78
The role of HR
Within OPD theory, the aim of HR is in to identify the behavioral structure and guide its fullest delivery.
HR is delegated the task of partnering with team leaders to assist identify perfect human performance relative to strategy and then assisting team leaders to close the gap between actual human performance and perfect human performance. I have considered in detail the role of HR elsewhere63 and summarize the issues below.
1. Administrative HR management and practice, including but not restricted to:
1.1. Legislative and regulative compliance.
1.2. Salary and wage advice.
1.3. Recruiting advice and support.
1.4. Personal grievance advice and support.
1.5. Social cultural management advice.
1.6. Training and development advice.
1.7. Talent management guidance and advice.
2. Strategic HR management and practice: To bring actual
63 The role of human resources management in the modern organization
http://www.amazon.com/resources-management-modern-organization-ebook/dp/B0050I57BO/ref=la_B001K8CWJI_1_7?ie=UTF8&qid=1351128000&sr=1-7
79
human performance closer to perfect human performance.
2.1. Identifying standing human capital value that offers greatest chance of strategic success (within an agreed accounting period).
2.2. Guide building dynamic human capital value.
Within the OPD theory, HR becomes the crucial proactive driver of results, and becomes the crucial department with which all other departments align since it is HR that can guide team leaders how to best strategically manage human performance and ensure greatest chance of greatest success.
80
Governance
The notion of goal-action is deceptive, resulting in a major rethink in organizational design. The concept of human capital as developed, arises from the rethink in organizational design and demands a significant shift in HR philosophy, policy and processes.
The OPD theory provides an improved intellectual base for organizational design offering HR processes that generate a better result than any other set of processes available.
The governance decides on the strategy and directs the choice of organizational design. It is the executive, under the guidance of the CEO, to then carry out that policy.
81
Change management
OPD-SHRM builds cultural and administrative structures that enable change.
1. People are comfortable with retaining a ‘professional mind’, central to which are ideal actions. They understand that their success is delivery of ideal actions. Their emotional position is detached, but committed, exactly as a top sports person might be. People understand ideal actions as their personal game plan derived from strategy.
2. The SHRMIS system captures the architecture. Therefore any change to policy, or team structure, or focus in a role is first drafted in the time budgets captured in the SHRMIS. The time budgets are a detailed specification of what ideal actions agreed that offer greatest chance of greatest success.
3. The revised time budgets are then discussed with the people involved. The collective insights are then captured in the new time budget.
4. People adjust their ‘professional mind’ adapting to the new ideal actions.
5. Delivery of the ideal actions is then reinforced and supported by the team leader in the monthly performance management meetings.
If change involves redundancy or the threat of redundancy then people will be nervous and distressed.
82
There is no system or process of change to alleviate this distress. The only solution is to support and guide people to identify a secure financial future for themselves as rapidly as possible.
83
Definitions within OPD-Theory™64
1. Business decisions, signed off by the Executive, CEO and finally by the governance.
a. Agreed business strategy.
b. Organization structure. The mapping of the strategy onto the perceived market.
c. Business plan. The setting of KPIs (goals) derived from strategy in each agreed role in the organization structure as the quantification of strategic achievement in the accounting period.
2. Strategic human resource management. HR partners with Executive to achieve apt and accurate SHRM.
a. The identification within each role of the ideal actions derived from the KPIs defining the role within the organization.
b. The drafting of the role specification involving ideal actions derived from KPIs and ideal actions as part of the business processes whereby the role is integrated into the operation of the whole organization65.
3. HR works with Executive to undertake organizational development (steps 1 and 2) and change management
64 Refer table at end of web page, www.opdcoach.com for summary. 65 Note: Steps 1 and 2 are the definition of ‘organizational development’ within
OPD theory.
84
when deemed necessary.
4. Team leadership. HR partners with team leaders (including Executive) to achieve.
a. Gaining agreement of the people assigned the role that the role specification defines what needs done in the role to achieve success in the role.
b. Performance management.
i. Daily maintaining ideal actions top of mind.
ii. Regular review with team member of their delivery of ideal actions to standard.
c. Motivation. Team leaders avoiding actions that demotivate while ensuring people having fun doing agreed ideal action to standard.
d. Working ‘on’ the business. Regular review with team that current agreed ideal action still offer greatest chance of greatest success.
e. Cultural audits. To assess frame of mind of team and take action to lift team frame of mind to improve results.
f. Learning firm: shared among team leaders the best ideas offering greatest chance of greatest success. HR ensures all ideas are fully
85
documented and recorded.
g. Training and coaching. Develop skill with ideal actions in each team member.
h. Talent identification and management. People with the discipline and application identified and given greater opportunity.
5. HR works with Executive to assess both standing and dynamic human capital value.
a. HR is accountable to the CEO for the final quality of the behavioral structure relative to strategy and the delivery of that behavioral structure to standard. While the full responsibility for team achievement rests with the team leader, HR shares that accountability and is expected to advise the division Executive then the CEO should any team leader be failing to implement the system to standard.
b. HR is accountable for the value of the human capital expressed in the balance sheet. Therefore, HR is accountable for the delivery to standard of agreed ideal actions. If the delivery of the behavioral structure to standard does not result in strategic success due other market forces, then that is responsibility of the CEO and governance.
86
Role definitions of key players within OPD-HCD™
CEO: Clarity that if the behavioral structure relative to strategy is identified and delivered to standard, the strategy has greatest chance of greatest success.
Executive team: Support and encourage the culture of perfect game plans perfectly delivered.
HCD Committee: Accept delegation from CEO for supporting and partnering with team leaders to identify and deliver the behavioral structure that enables greatest chance of greatest success.
HCD Manager: Support team leaders in identifying and delivering the behavioral structure.
Team leader: Guide development of game plans for each person and support delivery of those game plans to the highest level. Ensure team members have game plans top of mind, and that they are enjoying their day at work, having fun and feeling appreciated and a useful part of the team.
Team member: Seek work life success and fulfilment. Support development of game plans, accept support and encouragement from team leader, work with team leader on development to role specifications, conducting oneself such that each morning when looking in the mirror, they like the person looking back at them.
Community: No direct role. But succeeds when its economy succeeds. The organization aiming to serve the
87
community by its success and hence each person serving the community by delivering the agreed game plan to standard.
88
Human capital and society
I wish to explore how business performance relates to social health and wealth. Before doing so we need consider the intellectual tools whereby the links are made.
Intellectual tools for social science
The tools are from the British cyberneticist W Ross Ashby66. The process of Ashby is as follows:
1. Define the system under study.
2. Select the variables judged to represent the operation of system.
3. Apply a change to one variable in the system and follow the flow of this change through the other variables of the system. The process called ‘primary operations’.
4. Separate the links between variables into immediate effects where the change in one variable has an immediate effect on the other, and ultimate effects where the change in one variable has an ultimate effect the other via intervening variables (although the intervening variables may not be immediately known to us). For example if A→B and B→C are immediate
66 W Ross Ashby. Design for a Brain: The origin of adaptive behavior. Chapman & Hall, London, 1960. Introduction to Cybernetics, Chapman & Hall, 1956. See http://en.wikipedia.org/wiki/William_Ross_Ashby accessed 6 & 7 January, 2013.
89
effects, then A→C is the ultimate effect. The converse can also apply, namely where we identify A→C, then identify it as the result of A→B→C.
5. Draft the understanding into diagrams where the boxes are the variables and the arrows precisely mean ‘has an effect on’. The arrows are either an immediate effect or an ultimate effect.
I refer to the process above as ‘Ashby tools’. Applying Ashby tools results in diagrams as sets of variables and relations between those variables (I call Ashby diagrams).
An Ashby diagram is knowledge of known properties and definite rules of construction. It describes variables and relations between variables that relate to the operation of systems.
The Ashby diagram is the systematic description of the operation of the system distinct from the value of the variables in any actual situation. No variable can set its own values as a matter of principle. This draws a firm line between science and the empirical circumstance where science enables prediction.
Science is theory of operation of systems as in Ashby diagrams. Content is the values of variables in any circumstance used to predict the output from the system. Ever tried learning a card game by reading the rules… same as here, an example makes it simpler.
For example, the time for period of a simple pendulum at
90
sea level is equal to a constant multiplied by the square root of the length. T=k√L. We can now ask: What is the period
of a pendulum in Auckland, London, Boston, Manila, or
Dubai? Answer, go to each place, measure the length and place the value in the formula and calculate the result. The formula is the theory, the actual pendulums the ‘empirical circumstance’. The theory gives us the relationship between variables and tells us what detailed information we need to measure. But we know nothing of any actual situation until we go and get the necessary data and place it in our theory.
The relationship between Ashby diagrams and an actual situation is always exactly as the relationship between the theory of the pendulum and any actual pendulum.
Relationship between HR success and organization
success
Below is summary equation or sentence stating that the greater the HR success in the form of the delivery of ideal actions the greater the organization success.
(1) HR success → organization success (OPD theory)
This is an Ashby diagram, it is very precise. The arrow has the meaning ‘has an effect on’. This diagram or sentence is derived from the idea of goal-action that is if those actions the offer greatest chance of greatest goal success are delivered more effectively then the result, goal output will improve. This much is common sense. However there are always other factors not embraced in the equation, such as competitor activity or state of the economy. But, always we
91
can state that better delivery of ideal actions offers greatest chance of greatest success, and not doing the ideal action ensures a result lower that could be gained by focused delivery of ideal actions.
Hence no matter the state of the economy or of competitor activity it is always best to identify the ideal actions and delivery them with conviction. Then and only then can we say we are giving the business the greatest chance of greatest success.
Link between organization success and community
wealth and health
In society, the economy consists of organizations, it follows that the greater organizational success the stronger the economy. This relationship is summarized:
(2) Organization success → economic success
It is economic success that drives community wealth, summarized as:
(3) Economic success → community wealth
Finally, it is community wealth that drives community health that is without wealth there is not enough water, education, health, policing, and food; and there is poor quality housing. This relationship is summarized:
(4) Community wealth → community health
The equations 2, 3, and 4 are Ashby diagrams formed by applying Ashby tools. These are formal conceptual diagrams, the arrows are meaningful. In the 3, for example,
92
it states that the wealth in the community has a direct impact on the health of the community, this is a verifiable scientific proposition it is not some loose proposal up for discussion.
Linking HR success with community health
If we now apply step 4 of the Ashby tools that is if A→B and B→C are immediate effects, then A→C is the ultimate effect.
We can now directly link the first variable of equation 1, HR success, with the last variable of equation 4, and create the ultimate effect below.
(5) HR success → community health
This equation states that HR success has a direct effect on the wealth of the community and hence on the health of the community.
There are many social insights and implications in this equation, and I explore several below.
Implications of the link between HR success and
community health
To recap the logic: The ideal actions relate to the goal. Organizations are collections of goals. Therefore a set of ideal actions called the behavioral structure underlies every organization.
Achieve disciplined delivery of the ideal actions then the organization has greatest chance of greatest success.
The economy consists of identifiable organizations.
93
Equation 5 now states that by achieving disciplined delivery of the ideal actions across the organizations in the economy then community health will improve.
We can now argue in reverse. That people in a community declining to focus on delivery of ideal actions are eroding the health of their own community.
There are significant ethical issues involved, for example how wealth is distributed, ideas on ownership and the commitment of the organization to the community. These ethical issues are summarized in the ethical question – does the community serve the organization or should the organization serve the community? Exploring this ethical question is beyond the scope of this book.
The fundamental behavioral structure of society
The linkages leading to equation 5 also imply that the fundamental structure of society has not changed and is the same today as it was thousands of years ago, the social insight that complexity hides the reality.
Imagine a village ten thousand years ago. People understood they had to do certain task if they are to survive. We can identify those actions relative to survival and social health, and refer to them as the ideal actions that underlie that small ancient society. The people in the village understand that they survive only by disciplined commitment to those actions.
Modern society is more complex. But there is an
94
economy, and if that stalls everyone suffers. The economy consist of organizations the success of which determined by disciplined delivery of the ideal actions that underlie the business strategy.
The link between effort and community health is less clear in modern society, but it is there. Modern society is no different from the ancient village. Unless there is disciplined commitment to deliver the actions that enable survival then community health will suffer.
Again, I stress, there are significant ethical issues in the structure of modern society and they revolve around the ethical question does the community serve the organization or should the organization serve the community? This question is arguably the most significant ethical issue facing modern society.
95
Frequently asked questions
How can this approach to human capital be
implemented?
Standing and dynamic human capital arise from within a particular approach to organizations and the role of people within the organization, called the OPD theory.
The organization is created by its founders, the authority of the founders becoming invested in the directors, who govern the organization toward the success anticipated by the founders. The implicit value of the organization hence is one of success.
The governance is expected to be aware of goal-action, and that every job in the organization is defined and dominated by goals derived from the strategy. The governance recruits the leadership team and delegate the task of ‘roll out’ of the strategy. The leadership team then adopts the task of identifying the best organization structure and goal cascade to define roles and teams in that structure. The organization structure is defined by two key factors; first, the need to effectively map the strategy on to the market; and second, that like goals are grouped with like goals in every job so that the underlying set of ideal actions are not too broad as to be impossible for one person to deliver.
Once the structure and goal cascade are defined, it follows that in every job there are ideal actions derived from the goals that offer the greatest chance of greatest goal
96
success. Identifying the ideal actions in every job in the organization defines what the organization needs. The structure, jobs goals and ideal actions define the architecture of the organization.
The leadership now knows what to do. Standing human capital value is now established, 10 out of 10, being the best judgment by the leadership of what it ‘see’ needs done to ensure greatest chance of greatest success.
The leadership now need oversee it being done; that is to build dynamic human capital.
The leadership recruits people. During induction each person must declare their intent to be successful in their work life and in the job assigned them in the organization. This declaration then achieves a complete overlap between the values implicit in the organization and the people who are then said to populate the organization.
Personal success is committed delivery of the ideal actions. The set of ideal actions in the job is referred to as the game plan for that person. The nature of the reasoning above ensures that every game plan in every job is directly linked to the strategy. This link is referred to as each personal game plan being derived from the corporate game
plan.
Organization success is delivery of the effective and committed ideal actions in every job. It is delivery of the ideal action that drives the numbers, drives success.
97
When people succeed, the organization succeeds.
Implementing this system, derived from the OPD theory, redefines every aspect of leadership, management, engagement, performance management, coaching, training, development, etc. It refocuses HR effort in particularly, and redefines the role of HR and defines the necessary relationship HR must make with every team leader if the implementation is to be successful.
For more information on implementation of OPD-SHRM and the potential difficulties contact [email protected].
Why does it get results?
As a summary of why it works: We see with our mind not with our eyes, so we can imagine each person ‘seeing’ in relation to the ‘glasses’ they wear in their mind through which they interpret the world, this interpretation then guiding their actions. If a person then ‘sees’ more clearly, more precisely what they need to do, they have the opportunity to do it better.
The OPD-SHRM system is precisely a system of processes whereby people are enabled to ‘see’ the role they are assigned more clearly, more effectively, more precisely, so enabling them to act out the role better than they could otherwise. The supporting recording system, called SHRMIS, then captures the behavioral best practice and also integrates the many aspect of culture and human performance to enable better leadership judgment on the best interventions with an individual, such as to guide
98
improved results.
It gets results because of the psychological reasons. But also, the OPD theory integrates all aspects of governance, leadership and human effort into success at achieving the common goal of strategy. This integrate is new in the field of management, organizations and especially HR.
What is the payback?
There are two crucial factors in payback.
First is the link between the ideal actions and the goal from which the ideal action is derived. The theory assists leaders to make better judgments as to what needs to be done to ensure greatest chance of greatest success. In short, leaders are guided to achieve better human capital value.
It must now follow that if there is an increase in the effectiveness, intensity or volume with which the now clearly identified ideal action is in fact acted out, then the result must improve. This is common sense, if you know what to do to succeed and do more of it, then you expect more success.
This link between increasing effectiveness of ideal actions and results is called the OPD profit profile link (OPDPPL). Then OPDPPL is normalized to a 1% improvement in delivery of the ideal actions, typically for each 1% gain in delivery of ideal actions the OPDPPL is between 0.2 and 0.4%. That is, a 1% increase in delivery of ideal actions improves sales by 0.2-0.4% and reduces costs
99
by 0.2-0.4%.
The second factor is moving actual human performance closer to perfect human performance. Typically, when asked on a scale of 1-10, what is the assessment of human performance, team leaders say 7-8%. A typical program would then move that assessment by 10-20%, so once OPD was implemented, human performance is expected to lift over two years to as high as 8.4-9.6%, and now being compared to perfect human performance. The second factor is the extent actual human performance can be moved closer to perfect human performance.
We can now put the two factors together and apply them to the profit and loss.
Assume a that actual human performance can be moved closer to perfect human performance by 10%, and that for each 1% gain the results improve 0.2%. The OPD profit improvement factor (OPDPIF) is then sum of the gain in human performance by the OPDPPL, in this case 2% (10x0.2).
Now assume that applies in each line of the profit profile as below.
Sales $1000 100% +2% $1020 100% Costs $900 90% -2% $900 88.2% EBIT $100 10% $120 11.8%
The people are more focused, with actual behavior more tightly aligned with the ideal actions needed for success
100
results in a modest gain in sales and modest reduction in costs. Because of the financial multiplier, with profits being the small difference between the larger numbers of sales and costs, then the result of small change in these large numbers can have a remarkable impact on profits.
The net result is an 18% gain in profits, the conversion of 1.8% of sales revenues into operating profit that is earnings before interest and tax (EBIT).
Experience with clients to date is that an increase in bottom line of between 1.5% and 3% of sales revenues is achieved. OPD does not yet have experience in large organizations that is say with over 1000 staff. However, it is now proved that OPD-SHRM works in scores of minds, and that there is no reason it cannot work in any number of minds, regardless of social cultural circumstance.
For an organization of say $1 billion revenues, I would expect results to be in line with the table above, namely a profit gain of some $20 million.
How much does it cost?
The total cost, both external fees and internal resource costs varies depending on the size of the organization. For smaller organizations, say under 500 staff, the cost is between 10-15% of the payback that is payback is 6-10 times the cost. For larger organizations, say over 1000 staff, indications are that the cost falls to as low as 5% of payback, that is the payback is 20 times the cost.
101
How much time does it take?
The time involved is in set up, operations, maintenance and administration.
Time is person-days estimate per hundred staff.
Set up:
Role definitions Training Ongoing team leader training
5 days 6 days 6 days over 12 months.
Roles defined by consultants. Training of team leaders (1 day) and staff (5days). Then 12 half days over 12 months for team leaders.
Operations:
Team leader monthly meeting
10 day total between 10 team leaders
One day per month per team leader one-on-one with team member, 15 minute per meeting.
Admin 0.5 days/month
Change to role specification, audits, and team changes.
102
Maintenance 1 day/month Assume 5% turnover, then 1 day per month induction and set up.
Initial set up takes about 3 months, then there is twelve half days over twelve months training program for team leaders.
Results are expected to improve after five to six months, and then build steadily as the organization learns more about how to focus fully on those actions that most drive success in its market.
To date, there has been no difficulty with time commitment, in any of the organizations, especially once the returns are seen and accepted.
How difficult is it?
It is not difficult. It places no great demand on team leaders or on staff.
The greatest difficulty is all levels of staff letting go of the pre-existing ideas on leadership and HR.
To be successful, like everything else, it needs to be done properly. The real wrestle is stopping people jumping into the current systems and processes. For example, implementing a performance management system across and additional to the system embedded in OPD-SHRM. Or doing a ‘satisfaction audit’ in addition to the OPD-SHRM
103
cultural audit then looking to act to build ‘satisfaction’.
Current received wisdom on HR works but only to a point, the reason is that it has no sound underpinning, it can only go so far due the intrinsic limitations of current global thinking. It is the thinking itself that is flawed.
Why has it not been thought of before?
Good question. In general intellectual development in social science has lagged behind physics for several solid reasons. The academic community, especially in social science, quite rightly was reluctant to forge ahead with views not able to be supported by adequate underpinnings. Fundamental issues in social science, of the body-mind problem and free will, tended to hamper intellectual development of the disciplines. And with physics so powerful, making such strides, then the physical interpretations tended to hold strong sway…ideas like dualism without solid solution to the body/mind problem were quickly countered and rejected.
Second, management was typically treated as if separate from social science, so often the issues of social science were not carried into discussion of management, etc. This has to be a criticism and is not really excusable. Limitations in development of management and organization thinking were a flow over from the limitations of social science itself.
Over 30 years ago I resolved to develop a framework of social science thinking that rested on sound fundamentals; including resolution of the body-mind problem and its
104
relationship to free will. I believed my will free, therefore how, why and could it be explained?
Had I understood then how long it would take, and how hard it would be, I may have not selected the path? But, once 15 years in, I was too committed, the project had to be completed. In 1998 I almost gave up, thinking the solutions were beyond me, but serendipity intervened and I discovered to my surprise I was much further ahead than I realized so I continued.
The OPD-Theory™ is not possible without the intellectual framework of social science I developed which I call theoretical social science. From that framework I then built general theories of psychology, epistemology and causality. And within the intellectual structure I solved the body–mind problem and resolved the nature of free will and why it is often so difficult.
I believe better science enables better thinking, which enables better actions, which enables better results. I had developed, in my judgment, a framework of better social science. In brief exchange with Karl Popper he said interesting ideas but they need proved. I cast about, and selected the practical social problem of improving how we operate our organizations.
Proof of OPD-Theory™ is proof of the general theory of psychology from which it is derived, in turn proves the intellectual platform and revised social science methodology from which it built.
105
For a full discussion on the depth of this intellectual background, refer:
• Little, Graham Richard, Through the Glass Darkly (July 19, 2016). Available at SSRN: http://ssrn.com/abstract=2811861
• Little, Graham Richard, Redefining Science as the Social Extension of Human Nature: A New Intellectual Position Derived from the Proposition that We Can Only Interact with Perceptual Fields (November 27, 2016). Available at SSRN: https://ssrn.com/abstract=2876338
For information on cost and payback of implementing OPD-HCD™ in your organizations, email [email protected].
For further information of the OPD system products, refer the brochure at the Linked profile, www.linkedin.com/in/grahamrlittle,
