The HR Value Chain
Lessons Applied

 Summary prepared by David H. Rodbourne ~ Vice President
Minnesota Center for Corporate Responsibility

Dave Ulrich "blitzed" through four topics in his workshop.

Too often executives skip directly from designing future strategy to taking action (doables) -- hiring, staffing, training, etc. They skip the analysis of what capabilities (deliverables) does the organization require to fulfill that future strategy. HR can help executives understand how capabilities need to change in order to win in the future. You can’t win in the future with organizational capabilities designed for the past.

Ulrich’s metaphor for organizational capabilities is personality or DNA. You don’t change a personality just by changing actions. You don’t change an organizational culture or set of capabilities by just taking random actions. They don’t sustain change. Change arises from thoughtful, connected, integrated actions.

You can use a simple "More of / Less of" exercise to identify what things need to change and what can be measured assess whether you are moving toward those new capabilities. Put a team together and ask the question – "If I walk in here six months from now, what will I see more of and what less of in very specific terms." That gives you a framework.

Ulrich starts from two premises:

• people are self-interested, and

• you motivate people by helping them achieve their goals not your goals.

Start with their goals and values. Understand what they value and want to achieve. Then, show them how following your proposals will help them achieve their goals. The logic applies whether you are work with an executive or employee. Ulrich called it the "give and the get" or the "employee deal." And, he linked this concept to the strategy of "mass customization" or "personalized employee deals." You will get want you want (flexibility, telecommuting, etc.), if you produce. That’s the deal. But, if you don’t produce, we change the deal. Too often, he argued, firms give but don’t measure performance. There must be a link.

Premise: there is almost always a "customer value chain." HR designs work/life programs because they ultimately have an impact on customers. Typically, however, HR spends far too much time on the front end of the value chain – perhaps 70% on designing programs and 30% with line implementation and rarely any time on customers. Ulrich wants HR professionals to go further out the chain. Invest more time in understanding customers and their needs. Then work your way back to the employee. Create a "pull strategy" that shapes employee program design and organizational culture in terms of customer needs.

Ulrich framed four levels of customer intimacy. From low to high intimacy they are: a simple transaction or sale, marketing and market research to identify needs, partnering or anticipating need, and creating demand through innovation of products or services. As you go up the customer value chain, margins and profits rise. Ultimately we achieve higher levels of intimacy by involving customers in our HR systems (hiring, training) and in sharing values and helping to shape the culture of the firm.

As two examples, he cited Southwest Airlines’ practice of involving customers in selecting flight attendants, Northwest Airlines’ practice of engaging customers in giving bonuses to employees for excellent service.

Managing change

Ulrich argues that today the issue is not change but the speed of change. The key is how do you change quickly. He laid out four tools:

1. get rid of stupid bureaucracy,

2. build a disciplined process for managing change, a checklist,

3. get rid of viruses in the firm - orthodox ways of doing business, sacred cows (the things we do by assumption not by thought), and

4. manage governance.

Governance deals with the speed of decision making and is often a critical barrier. You need to ask – is there clear accountability, a clear decision, a clear timeline? Although he didn’t use the term, this discussion echoes themes in the work/life discussions around "work redesign.

The Speaker: Dave Ulrich is professor of business administration at the University of Michigan. He is editor of Human Resource Management Journal and has been listed by Business Week as one of the top ten educators in management and the top educator in human resources. He has consulted and done research with over half of the Fortune 500 companies.

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