Posted over 6 years ago by Professor Paul Sparrow

HR Insight: How Good are your Organisational Design Skills?

Executive Boardroom

​McDonald’s – which now looks at its measurement capabilities and its links to the field and operations management structures of the business with a renewed confidence – had gone through a journey. It learned to reject the simple – “employee engagement = business success” and figure out the complex.

It realised that sometimes being in a good performing unit makes you engaged, and not the other way round, as there can be reverse causation.

  • Sometimes performance effects only kick in at extreme levels of engagement.

  • Sometimes engagement works through intermediate outcomes (like job resources or design).

  • Sometimes engagement only works when it creates a collective capability – a bunch of individual “happies” doesn’t create the performance.

There are different employee segments – and different types of employee respond differently to the same conditions.

And of course engagement levels co-vary with lots of other things: relatively new to the organisation, young, gender, hours of work and pay patterns, country they work in, work for a core or a more peripheral organisational unit, treatment on pensions.

How good are your HR analytics skills? Why do I tell this McDonald’s story and what does it tell us about the way HR functions must develop?

What We Can Learn From Tesco & McDonald’s

First, it shows us that there is often a good story to tell when it comes to the strategic importance of HR. HR is one of the under-exploited business functions – once we “decode” its contribution to the organization we can see how we can improve performance to the benefit of all.

However, this raises questions:

  • Do all HR functions have the capability to make this kind of contribution? No, they do not.

  • Does the HR profession generally have the skillset to fit into this new world? No it does not.

  • Will it be easy for HR functions to continue to evolve and improve? No, not easy, but of course perfectly possible.

Why do I say this?  Let’s move the story on and look at what is now happening inside organisations and their HR functions.

HR has learned how to contribute to business performance inside organisations that are very customer service based – performance is so immediate you have to show you can contribute.

Now it is tackling the more long-term and fundamental performance challenges. And these will bring with them new demands on the function and new avenues for HR careers.

Innovation

Take for example the challenge of innovation.  We know that people, their creativity and their willingness to give of these skills to the organisation is important.  But will it be as simple as the story above – linking engagement to innovative performance and saying “job done”?

Of course not.

What does an HR leader have to contribute to the Board if the strategy is one that brings innovation to the fore?Quite a lot, but they need another set of skills and expertise.

How is innovation people-dependent?  In the following ways:

  • HR has to advise on how the structure and incentive system can be developed –  how the organisation can use of incentives and contractual systems to engineer the right behaviours between investors, innovators and employees.

  • HR have to become experts in organisation design.  You might build innovation in skunk works, or tighten the level of control over time, use internal or external venture capital models, develop innovation service units.  Then you have to expand the level of management skills as you shift resources from R&D, through production and marketing.

  • You have to cope with the challenge of competence destruction and reconfiguration of career systems – new businesses based on innovative developments inside the organisation threaten old power structures, make other expertise obsolete, create new career trajectories, and lead to problems of cultural fit.

  • You have to understand how your organisation can secure access to future skills – and how these new and important skills get formed.  As you start to future-proof your talent systems, attention shifts to long-term organisational capability.

  • What are the crucial skill ingredients such as advanced technological skills that might be resident in only handful of high-talent?

  • What are the bets or “options” on future skills that the organisation has to take out to ensure the success of business model?

  • What does all this mean for the subsequent HR solutions (the leadership model, team climate, and individual resourcing).  All of the HR solutions flow from the original organisation design choice – so HR needs to be in at the start and advise on organisation design.

How Good Are Your Organisation Design Skills?

To conclude, and to set up the discussion at the event, HR functions are facing an exciting future, but a challenging one.

It needs a very specific type of expertise now to be successful.  The way that key and traditional parts of the structure – HR business partners, centres of expertise, service and HR operations – will work is changing.

If you are making an HR move, what will you move into?  This is what we shall debate.