“The dominant challenge of leaders is to create value through talent”
Dave Ulrich, Professor, Ross School of Business, University of Michigan
Leadership begins at the top. True enough, but what is the best way to reach top executives to fully engage them in the quest for optimal talent management? The quick answer: Give them the facts! And here, you are on firm ground. The solid empirical evidence demonstrates that People Equity drives important business and organizational results — period!
Some leaders, such as Ralph Izzo, CEO of 10,000-employee PSEG, grasp the importance of People Equity as soon as they hear about it. The only question they ask is, “Why haven’t I seen this before?” But in speaking to audiences across the globe, I am frequently told that many managers have difficulty getting their senior leaders on board and that some resist change or use only a fraction of the power of ACE.
In the first part of this chapter, I will discuss the nine important ways that top leaders can contribute to creating a high ACE organization. In the second part of the chapter, I will address the resistance frustrations that are holding many organizations back. Unless those are overcome, many managers and HR leaders will not be able to move forward.
Regardless of which type of CEO, owner, general manager, or top leader you are or that you work with, remember that most want to do the right thing and be successful. So if you can properly educate top executives, as discussed in Chapter 4, and compel the leadership team to explore the power of ACE, the next important step is to help them lead the ACE initiative from the top.
Even if your senior leader is “a Neanderthal,” as one HR leader commented privately to me, there may be hope. After all, even Neanderthals want to survive! While “acing” ACE without leadership support is impossible, it is possible to begin to move the organization toward high People Equity by, among other things, influencing positive changes in rewards, recognition, manager education, strategic clarity, and performance management.
In one global financial services company, we found a leadership desert at the top, but in one of its most vital business units, we found a president who wanted to significantly energize his organization. His embrace of ACE thinking helped propel his unit to far higher performance levels within eighteen months. HR too can play a central role in helping identify these pilot units, improving the management and human capital systems (we will discuss this topic in Section IV), sending the right messages to the board of directors, and engaging in as many of the methods in Table 5.1 as possible.
Table 5.1 lists nine ways in which leaders can drive a high ACE organization.
Table 5.1 Nine Ways to Lead a High ACE Organization
| 1. Generate excitement about the possibilities |
| 2. Send the right messages |
| 3. Model exemplary behaviors |
| 4. Reward the right behaviors |
| 5. Deploy good measures |
| 6. Support management systems that optimize ACE |
| 7. Allocate resources with ACE in mind |
| 8. Hold people accountable for ACE |
| 9. Integrate ACE into business planning |
Generate Excitement about the Possibilities
The best leaders get excited about the power of ACE to move their organization to peak levels. Take Terry Boston, CEO of PJM Interconnection, a regional transmission organization that manages the electrical grid for many areas of the eastern United States. When Terry was at the Tennessee Valley Authority, an energy provider with 12,000 employees serving nine million people in seven states, he learned about the ACE concept and immediately saw the performance difference of high ACE units compared to other units. High ACE units were accomplishing their goals much more frequently. Terry was sold, and he carried this enthusiasm to PJM when he was appointed CEO.
As one of Terry’s early actions, he asked his vice president of HR to contact us about measuring ACE in his new organization. His aim: Open the organizational hood to see how the company engine was running. Although Terry was a true believer in ACE, given his past experience, he let the data pull his executive team in by conducting an open-the-hood, fact-based assessment. When his senior executives got their first glimpse at the hidden ACE organization from the initial assessment, they began to understand and appreciate it. How can anyone not be intrigued by seeing and then understanding the crucial parts that make the organization hum.
Send the Right Messages
Beyond embracing the concept of ACE, effective communication is crucial. At WD-40 Company, Garry Ridge communicates frequently with his leaders and employees. His weekly messages are inspiring and often deal with the drivers of ACE. He addresses and gives examples of such things as goal achievement and living the values (Alignment), ways to exceed customer expectations (Capabilities), and recognizing people for exceptional wins (Engagement). This messaging lets the organization know where the leader stands and what he values.
Nothing is more powerful than to “walk the talk.” Referencing WD-40 Company once again, Vice President of HR Nancy Ely says, “We have to live the values; we value transparency and communication and Garry is the epitome of communication responsiveness.” When Kenny Moore helped Keyspan, an energy provider, move through a significant transformation of his company’s business, he was able to coach the CEO, Robert Catell, to model important values and messages. In their compelling book, CEO and the Monk (Moore was an ordained clergyman), Moore and Catell described conveying through actions the need for the organization to move to a new place (Alignment), yet honor the past with ceremonies such as a “burial” of the old business (Engagement).1 Involvement by the top leader in these symbolic actions is an extremely potent way to build trust and credibility.
CHRO Steve Ginsburgh of Universal Weather & Aviation reports that the company uses pictures of employees in teamwork situations or volunteerism as “corporate art” to communicate messages about ACE. Showing employees examples of high Alignment, Capabilities, and Engagement situations helps reinforce a strong People Equity environment.
Reward the Right Behaviors
Often we hear about an organization or team that got a lot right but missed the boat on rewards and eventually sunk as a result. Psychology teaches us that if you want good behaviors to continue, you have to reinforce them. This is exactly what BASF, a global chemical company operating in over 100 countries, is doing with their “Spotlight” reward and recognition program. Described by Judy Zagorski, Senior Vice President of Human Resources, these awards can be given to anyone for exhibiting desired behaviors that include entrepreneurial drive, innovation/change orientation, customer/ market focus, people and team leadership, and collaboration.
Some of their rewards are aimed at reinforcing entrepreneurial behaviors that challenge the status quo. People receiving such rewards are likely to think, “Wow! Leaders really do value this!” But the rewards system is also useful in extinguishing unproductive behaviors, partly through the absence of rewards and partly through coaching. If a manager keeps damaging Engagement through unfair treatment of employees, for example, his or her boss or an HR professional should feel empowered to withhold rewards and discuss the inappropriate behaviors.
Deploy Good Measures
I have actually devoted an entire chapter (8) to this subject. Without keeping score, it really isn’t a game worth playing. Measures are essential in successfully executing any strategy or change. Unless it is measured, you really do not know where you stand. With today’s new techniques it is possible to measure many of the intangibles involved in strengthening ACE.
Ralph Izzo, the CEO of PSEG, recognizes the value of ACE in enabling his organization to increase performance and reach its full potential. Izzo understands the importance of measurement and uses an ACE survey to uncover the hidden organization. With regular feedback it is possible for him and his executive team to monitor how well various programs are working, how quickly change is occurring, and where the opportunities are to close ACE gaps.
Support Management Systems that Optimize ACE
If management and talent systems are out of sync, ACE will likely be defeated. Senior leaders play an important role to bringing these systems in line. In most organizations, the leadership team partners with HR to do the following:
This policy architecture provides the boundaries within which supervisors and managers must leverage their talent. More time will be devoted to this issue in other chapters.
Allocate Resources with ACE in Mind
Top leaders are in a position to support or withhold resources for various initiatives in the organization. While some organizations have delegated many resource decisions, others require top executive support to commit resources to both measuring and improving ACE.
The implications of resource allocation decisions on ACE needs to be discussed, so that top leaders can make informed decisions about the consequences of allocating time, energy, and resources to one area or another. For example, during the last recession, many organizations had to reduce staff costs. Smart organizations used furloughs, rather than pay cuts or staff layoffs, because furloughs tend to be Engagement-neutral, whereas layoffs and permanent salary or benefit cuts typically have a deleterious effect on Engagement.2 Another outcome revealed during the recession is related to how organizations tackled the need for increased productivity. Organizations that focused resources on process improvement and bureaucracy reduction before cutting people or pay actually increased their ACE scores during a difficult economic period.3
Hold Managers Accountable for ACE
Making the tough decisions on hiring, retaining, and promoting (or not) aspiring leaders can be a challenge for many top managers in the organization. In my consulting experience, I have found many leaders missing the most fundamental step in talent management: driving accountability for strengthening ACE throughout the organization. “As leaders come to understand the importance of ACE as a driver of business or organizational results, it is important that they not only talk about it, they must also ultimately hold others in the organization accountable for living it,” says Steve Ginsburgh, Senior Vice President of HR at Universal Weather & Aviation. Too many managers who hit the numbers while destroying human capital should receive reduced variable compensation rewards or be removed from leadership roles.
Parallels between ACE and environmental sustainability exist. Being profitable is far easier when you can destroy the environment and not pay for it. The same is true for talent, another sustainable resource. Figuring in the real costs of using such capital is imperative. If a manager hits his or her financial goals but burns out 20 percent more people, damages customer relationships, or fails to build capabilities in the workforce, that manager should not be viewed as an “A” performer. Ultimately, the manager could actually be destroying value even though he or she is achieving short-term gains. Great leaders use the ACE framework to increase talent sustainability — to continuously develop leaders and to take action against leaders or units that extinguish human capital value. These factors should be key criteria in any succession planning process, including identifying high potentials for leadership roles.
Integrate ACE into Business Planning
One of the best ways to ensure that you are optimizing talent is to build ACE elements into your corporate goals, mission statements, values, and business and talent scorecards. A good strategy should address the people requirements needed for success, and mission statements are powerful ways to convey the role of talent. Johnson & Johnson’s Credo includes four elements required for success (see Figure 5.1), and talented people are one of them. The company maintains visibility of the Credo by conducting regular surveys and challenge sessions to assess if their more than 200 J&J companies are living the Credo.
Figure 5.1 Johnson & Johnson Credo
By using these nine precepts, leaders are far more likely to be effective in driving their organizations to high ACE performance levels.
Overcoming Resistance and Lukewarm Support
As I mentioned at the top of the chapter, we often hear about resistance of senior leaders to more strategic approaches to talent management: Some give lip service to employee engagement, do not model good behaviors, and do not fund more strategic people initiatives, and they stick too closely to the cultural status quo. My colleagues and I wanted to find out the reason for the resistance and decided to examine the issue through the eyes of both managers and some very talented consultants who have worked with such senior executives. We found an interesting variety of reasons that explain why executives are sometimes slow to get on board. But before we discuss these reasons, we should understand the leadership context in which we are trying to enact ACE.
View from the Top
Interestingly enough, most of the C-suite executives we interviewed for this book expressed deep concerns about their employees. The most frequent answer to what keeps them awake at night was the people in their organization. The majority also wanted to do right by their people. We know the following about senior leaders:
What does all this tell us about influencing the thinking of C-suite executives?
Overcoming the Hurdles
Now let’s take a look at the seven reasons why leaders often resist the talent changes related to ACE that are so important for their long term success:
This list certainly does not reflect the perspective of every owner, CEO, or leader, but it is a representative list of the frustration felt by the people who report to some of them. When thinking about galvanizing organizational support, go beyond the top job to reach out to key product leaders, functional heads, location GMs, country managers, and divisions heads — essentially those leaders whose support is needed to move ACE to the next level. The good news is that many of the resistance points can be dealt with by motivated line managers and human capital professionals who want to see progress, reduce frustration, and optimize their own careers.
Let’s take a look at each of the seven reasons senior executives are sometimes slow to get on board and support efforts to improve ACE in the hope that forewarned is forearmed:
Enacting the Necessary Changes Is Not on the Radar — They Are Too Busy
This first reason is perhaps the one we most frequently hear about. Try to get the attention of a CEO these days — and assuming you do not occupy an office on executive row — chances are you are competing for air time with your CEO’s trip to China to ink a deal, managing internecine warfare with the top team, worrying about the SEC, or meeting with top-tier clients. We are told by many who report to senior executives that it is tough to get them to sit still for five minutes to deal with anything but the most pressing crisis. And yet, they must explore new ideas if they want to stay competitive — and they must do so at an ever-increasing pace since the pace of change is accelerating.
HR and other advisors must find ways to help them gain new insights quickly. Vineet Nayar, CEO of HCL Technologies, describes what incredible insights he gained when he simply let his organization speak. “They knew so much more than I could know about various aspects of the business,” said Nayar.4
Even the busiest executives often have windows of opportunity for a meeting, such as during annual planning, right after a crisis has been solved, or during the occasionally canceled appointment. At such moments they are often willing to hold a short meeting for something truly important. If not, you are working for the wrong leader!
When you get that meeting, connect ACE to solid business issues and analysis:
When the time is right, seize the moment, but be sure to come prepared with a solid business case!
They Are Embarrassed at Not Knowing More
About Newer Human Capital Approaches
This reason can sometimes disguise itself as “never having time to discuss.” It helps to have someone whom the leader trusts open the conversation about ACE, perhaps by identifying some goals that are not being achieved. Many valuable tools were introduced in the past three decades that left more than a few leaders scratching their heads: quality circles, balanced scorecard, zero-based budgeting, six sigma, and so forth. Frankly, ACE is far easier to grasp.
The greater risk may be a ho-hum response and a “So, what’s new?” question, such as that leveled by a business unit head to an HR professional at a global pharmaceutical firm. At first he was taken aback because he did not think this executive was living ACE. But this question opened up a focused conversation about how Alignment may be obvious to the executive but not for his direct reports or their employees. Saying we want Alignment is easy, but it is another thing to get people across different functional silos to work hand in hand. The question also opened up discussion on the importance of A, C, and E in combination. Furthermore, this leader did not realize these factors can be measured and therefore managed.
They Mistakenly Adopt Top-Down Thinking
Some leaders think that if they get the strategy right and simply dictate the goals and direction, people will hit the mark. While the business strategy is significant, getting people to work together is even more so. Many more companies fail as a result of poor execution than because of poor strategy (unless you count not having an effective approach to execution as a poor strategy!). Top leaders tend to forget what it was like in the trenches; entrepreneurs may never have known what it was like. But without the right capabilities, motivation, and an understood direction, the organization will take wrong turns like a lost taxi driver in New York or Bangkok.
They Have Good Intentions but Never Get
around to Executing Actual Changes
For some leaders, expressing good intentions may be a smokescreen. Often leaders who dislike conflict commit to things they do not really want to do, and then just defer them. You need to challenge the possible reasons behind not getting started. If a leader really wants to focus on ACE, then the lack of felt urgency is most likely the culprit for the delay. I find that converting the impact of turnover, productivity lags, or poor quality into results with a timeline can be helpful in raising a sense of urgency:
It can also help leaders with a low sense of urgency to give them a step-by-step program for talent improvement. Here is the plan, here are the steps and timeline, here are the outcomes, and here is what I need you to do. Clear and simple steps can often help such leaders move ahead. This approach removes uncertainty and defines visible progress made.
They Want to Optimize Performance but Are Not Certain How
This is a variation of the second point, but it is more explicit. These leaders are asking for education (see Chapter 4) and perhaps guidance on who else has used ACE to optimize performance. It presents an ideal situation for HR professionals, a consultant, or some other expert to contribute. Having a willing partner and something of value to offer is a dynamite combination. Continue to emphasize results, and always be ready for the “What’s new about that?” question.
The Process Is a Lot of Work
No doubt, aligning, developing, and motivating people are hard work. However, when done right they are also very rewarding and profitable. Nevertheless, there are leaders — at every level — who simply may not see the value of devoting more attention on the people dimension or ACE, as opposed to, say, operations or customers. However, very few will not expend the effort once the payoff is clear. More often, this complaint is about return on investment. People only want to work hard for outstanding returns. And this is where they need to be able to show how the work involved in creating high ACE will translate into big personal and organizational wins.
Getting such resisters involved by gradual emersion can also help. Sales people refer to this as the “foot in the door” technique, and it has been shown in numerous studies to result in higher levels of compliance with a request.5 If the leader and organization are removed from high ACE today, there is no need to put them through a graduate course in People Equity, drown them in new behaviors, or demand large immediate investments. Instead, it is best to take a path that enables them to test out understanding, try a few new behaviors, implement a few new measures, and begin having conversations using the new framework. For example, select a pilot in one part of the operations that is a concern, perhaps because it is experiencing high turnover or customer issues. Give the leader a chance to see proof of concept in a more constrained case, and measure before and after a sincere effort to improve ACE has occurred.
It Cramps Their Style — They Do Not
Want to Change Their Behaviors
Sadly, there are leaders who simply want to keep doing things “like they always have” rather than adjust bad behaviors that kill ACE. Years ago, I met a guy named Sammy who yelled and screamed at people (killing Engagement), gave goals with no rationale (killing Alignment), and did not want people using company time to gain more knowledge (killing Capabilities). He expected the world to center on him and thought nothing of wasting other people’s time and knowledge. Even after discussing with him the negative impact of his behavior on those around him, he said, “If they don’t like it, then they can always leave.” If you are convinced that your Sammy understands the ACE fundamentals, but simply does not want to behave in ways that will improve it, I would look for another job.
Another style that can be debilitating to ACE is a command-and-control style. There are still some Theory X managers6 who believe that employees are not to be trusted and need strong controls. Managers with this mindset are almost impossible to change. Looming failure, though, is often a game changer. Missing goals, falling profits, departing customers, and a deep dive in the company’s stock valuation have a way of prompting behavior change.
I worked with one such manager in a manufacturing firm who was shocked to be summarily dismissed after a reasonably long career with the company. His performance numbers were dismal, and his boss did not think he could evolve to meet new market demands and the changing organization culture. I had the opportunity to coach the dismissed individual, and initially he still could not reconcile what had happened. His command-and-control style had worked for him throughout his career, during which he had mostly hit the numbers. However, his last assignment required aligning and motivating highly capable people in a high-tech environment. He ultimately crossed the line when he embarrassed someone with a public firing. The incident severely damaged his credibility not so much for the firing, but for the insensitive way in which he did it.
Once the manager acknowledged the role of his own behavior in the debacle and committed to reinventing himself, he went on to run several other businesses successfully. I admire him greatly because of his ability to turn the corner, but would not recommend that you defer raising levels of ACE while you await such a transformation.
The above resistance points are tough challenges, but most of them can be overcome with persistence, solid information, education, and the courage to speak up.
In the next chapter, I will turn to the role of the manager — anyone who has been given the responsibility for stewarding talent within, or in some cases outside, the organization.
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