How CEOs Get Results.

New HR management tools can help company leaders balance talent demands with business needs

Most experienced CEOs have seen command-and-control management come and go. They've been through downsizing and rightsizing. Now they're seeing most companies (their own included) working to recast themselves as "high-performing" organizations, with streamlined, non-hierarchical, fast-moving teams of "knowledge workers" trying to generate the greatest possible return on "human capital."

The New Economy has put that capital in high demand and short supply, particularly in IT and other high-tech fields. As a result, CEOs and their top executives find themselves facing a broad spectrum of new challenges: competing for top talent, designing jobs consistent with business goals, communicating strategy, sharing information, earning employees' trust and commitment, measuring and improving employee performance, moving them up and leading them onward.

"Being able to attract and retain is no longer just a human resources issue. It's a survival issue," notes David Stum, president of Ann Arbor, Mich.-based AON Consulting's Loyalty Institute. The traditional CEO, he says, convenes senior management and pounds the table about market share. "Our counsel," he adds, "is to convene senior management and pound the table about work force."

* ON THE HIGH-PERFORMANCE FRONTIER

There's no question that hiring and keeping top workers is increasingly difficult. A recent AON study, US@Work, showed that organizations can expect to lose half of their workers within five years. With technology workers in particular, "it's a seller's market," Stum notes. "In the U.S., there are one and a half million high-tech job openings every day. Demand is unbelievable."

And if companies do manage to hire a high-tech specialist, he or she probably won't stay long. "In the IT world, the average job lasts 18 months," says Erica Perry, president of Becker.net, a Miami-based recruiting firm specializing in IT professionals. "If you can keep an IT professional for longer, you're very fortunate."

Today's economy relies on employees' knowledge, creativity and special skills, and as demand for these kinds of workers has grown, so has the willingness to cater to their needs. Firms are doing a better job of selecting the best performers, and many companies are willing to pay a premium for certain capabilities, according to a recent Wharton Center for Leadership and Change survey conducted with Perform, Inc., a New York City-based application service provider. The survey lists four highly sought-after capabilities of e-managers: they are results-oriented, energetic and driving, fast decision-makers, and good at building teams -- both internally and externally. Similarly, research by Accenture, the global consulting company, has found that successful e-leaders must wear many hats: visionary, collaborator, role model, global thinker, customer relationship manager and business developer.

While compensation is an important component to attracting employees, it's only part of what draws them to -- and keeps them in -- a job. In the AON survey, respondents ranked "opportunity for growth" as the number one reason they took their current job. Workers want to learn and grow. They want to be part of a team, work in a comfortable environment, feel as if they are making a significant contribution, and be acknowledged and rewarded for it. They want to feel as if they are managing their own careers. They want to feel proud of their organizations. They want take part in the risk -- and the reward -- of building an enterprise. (If they're high-tech workers, don't forget the value of technology: "If I think my company is getting behind on providing me with the latest wizardry stuff to work with, then I'll leave," Stum says. "It goes with that field. If you're a techie, you want all the toys.")

Faced with unprecedented staffing challenges, CEOs are looking to their human resources teams for solutions -- and FIR managers, in turn, are demanding new tools to measure the impact of human resource management systems on business performance.

In The HR Scorecard: Linking People, Strategy, and Performance, to be published in March by Harved Business School Press, author Mark Huselid proposes new metrics along the lines of the "balanced scorecard" approach, which uses more than just accounting measures to evaluate business performance. Four areas are considered: the high performance work system, alignment with business strategy, human resources deliverables and human resources efficiency.

"Human resources has not done a very good job of measuring its inputs or its outputs, historically," says Huselid, a professor at Rutgers University's School of Management and Labor Relations. "And that's where we're going."

"From the employees' perspective, the software enables them to see how they're helping to achieve the company's goals," explains Andrus. "It also facilitates career development and enhances performance. From the company's perspective, it provides a window on what employees are accomplishing and where they're falling short."

Other HR management tools are the result of new technology that allows even more effective integration across all operations, according to HR specialist Carth Andrus, a partner in Accenture. A number of Internet-based tools, for example, can help focus resources and training, determine where new competencies are required and ultimately influence recruiting. Perform, Inc., working with Accenture, plans to offer its own suite of products, called Performance Advantage, this year.

ENSURING THE RIGHT MATCH

Obviously, the tight labor pool and the wishes of new hires mean companies should emphasize developing existing talent, rather than recruiting new talent. But when it comes to hiring, how do you know what your business needs are?

Perhaps it's best to start by understanding what competencies you already have. "I know from experience that many companies are just guessing," Andrus says. "You need a clear inventory of the skills your company has in the aggregate as well as by role and by individual -- and how that fits into achieving your business objectives."

New management technology allows you to easily compile such an inventory. It also enables you to search for employees with specific skills -- an especially valuable component if your organization is large or virtual or multinational. "You may not have had the opportunity to identify leaders -- sort of sleeping giants -- who can move into roles you need filled," Andrus adds.

When looking for new talent, one of the most common mistakes is hiring based on good looks and a polished resume, rather than delving into actual experience, personality and whether the candidate's work style is likely to fit with your company's. "People usually are hired based on their technical skills," says Perry, "and let go based on their performance."

Once you've made a match, you want to make sure your new hires stay. The key, experts say, is to find out how they're doing and what they need to do better. Then, make sure you're developing the competencies your business will require in the future.

"Ask yourself, 'If we believe that managerial competencies help drive this business, what are we doing to develop those competencies?'" Huselid says. "Where are we going to need to be in three or five years? And are we going to get there at our current rate of change?"

Traditional means, such as performance appraisals, have been static and historical, Andrus says, addressing performance that is already six months or a year old. Now they can be dynamic and real time. Using high-tech management processes, for instance, individual and collective appraisals can be made on an ongoing basis using a package of tools available to managers and employees, including goal management, knowledge exchange, career development, mentoring and coaching.

"As an employer, I can manage the careers of my people and manage my talent overall depending on my needs," Andrus says. "I can pinpoint training needs much more precisely and keep from wasting money on training that isn't effective. I can generate more feedback, and find out in real time if what I'm doing is working."

* INSPIRING TRUST AND COMMITMENT

Why are some firms still clinging to old modes of management? "Change management is a very difficult skill to master," Huselid says. "It's easy to get up and give a speech or go to a seminar or put out a memo, but basically leading change is a day-to-day activity that takes a lot of work, a lot of energy."

As we've moved into a knowledge economy, firms aren't differentiating themselves through physical capital the way they used to, he adds. "Knowledge and knowledge assets are increasingly the coin of the realm."

Today's online management tools facilitate the kind of two-way communication that helps knowledge workers feel empowered. It can help you systematically give employees credit for good ideas and build spirit. It helps you more easily let them in on strategic decisions and allows them to take greater responsibility. Perhaps most of all, it enables them to see that management understands, appreciates and supports what they are doing.

"They've got to feel valued if you plan on retaining them," Perry says. If you ask for new ideas and they do take the time to be creative, "you need to make sure to respond to their effort" -- at least to say, "we appreciate your feedback, we've decided to do it this way, and these are our reasons.

"It's like a marriage when you come in a job -- if you don't have that trust and respect for each other, it's not going to work," Perry continues. "Management often forgets that you have to earn that respect. And work hard to retain that respect."

According to the AON study, the primary driver for retention was a sense of affiliation -- employees who believe in their company, whose company creates a sense of spirit or pride, are more likely to stick around. Workers "want to feel part of a winning team," Shim says. People want a sense that they are members, not just workers in an organization.

"Unless and until employers build pride in their organizations," the AON study notes, "employees will continue to be 'short-timers'... employers must give their employees something to believe in."

The effect talent has on a company's bottom line has certainly given CEOs something to believe in. Perhaps the biggest difference in today's human resource management initiatives, Andrus says, is that they no longer are seen just as an HR function, but integrated throughout all of a company's operations. In the future, he adds, "whether we have a recession or the economy is booming, talent management is going to be at the top of every CEO's list of priorities. If you can't keep your talent, you're not going to be able to weather the storm, or in good times, you're not going to be able to take advantage of the advantage you've got."