30 January 2017 by Anthony Hilton
‘Appropriate business culture’ is the most overworked phrase, says Anthony Hilton
Technology companies see the world of business in a different way. The world’s largest retailer Ali Baba does not own any shops. The world’s largest hotel company Airbnb does not own any hotels. Similarly, the world’s largest taxi company Uber does not own any taxis and the world’s largest publishing company Facebook does not create any content. To underline further how rapidly the world is changing, none of these disrupters even existed 20 years ago.
If established companies are going to survive in the face of these and similar onslaughts, they are going to have to adapt with imagination and flexibility, which goes far beyond what they are used to – and the need in many businesses will be urgent.
As the digital revolution picks up pace some 20% of existing business models are likely to be obsolete in five years’ time, according to McKinsey. In a similar vein, futurologists say that 60% of the jobs to be performed by the current generation of schoolchildren when they reach working age have not yet been invented.
All such predictions need to be treated with caution because even if the direction of travel is correct, it is almost impossible to assess accurately how long events will take to unfold. Business and economic models that are widely thought to be unsustainable have a disconcerting habit of sustaining themselves for a lot longer than expected, often to the embarrassment of those energetically predicting their demise. Conversely, when the day of reckoning does finally arrive, the
pace of change (and collapse) is usually much more rapid than expected.
There are two strands to current thinking about how business can learn to live in a VUCA world – the military acronym that is used to describe the volatility, uncertainty, complexity and ambiguity of commercial life today. One is that a shortage of sufficiently talented and motivated people, rather than scarcity of capital, is likely to be the biggest single barrier to business expansion.
Second, the command and control hierarchies which have traditionally described how most businesses are managed will need to be replaced by much flatter structures with more devolved responsibility.
Instead of instructions flowing down and information flowing up, the new design is based on the idea that all information should flow freely in all directions, because the ability to react fast and with accuracy of judgement will be key to survival. No one can know in advance what specific nuggets of information and market intelligence are likely to be significant, nor which parts of an organisation will benefit most from being in the loop.
This will also require a new breed of business leader. The ability to inspire, motivate and manage will be far more important than specific product or functional knowledge, or experience in selecting the senior executives. The 20th century was the age of knowledge; the 21st century is the age of imagination.
Surveying this landscape, a visitor from Mars would probably assume that the human resources department would be at the core of this emerging people-centric world. Why would it be otherwise when the early identification of needed skills, the initial selection and subsequent retention of the right people, and their deployment, integration and development are all key ingredients of success?
But that is not how it looks in this world where few human resource departments even come close to fulfilling the above role. In a world where the creation of the ‘appropriate business culture’ is the most overworked phrase in the business lexicon, human resource departments rarely get a look in.
The brutal fact is that in many companies, the understanding of the role, the structures and the outputs of HR departments derive from beliefs and practices which are overly locked in the past and which are increasingly irrelevant to the working environment of tomorrow.
Few line managers think HR professionals have anything to say about wider business issues; and a major part of the challenge facing the profession is that a significant proportion of the HR cohort quite like it that way. Thus is more bizarre when it is the shortcomings of culture and working practices which so often create the wrong kind of headlines – poor outputs, poor treatment of customers and employees, systems failures, security breaches, data losses, corporate greed – which lead to reputational damage, regulatory interventions and red ink.
There is also huge pressure for change within the profession and some of its leading thinkers see a world where the support activities of HR will be combined with elements of finance and IT to become part of a wider businesses services function. This would free the HR leaders to become much more strategic in their thinking, to be much better versed in the needs and challenges facing the business as a whole and much more engaged in the way the business is run.
Their focus would be on organisational development and the creation of business structures which are fit for purpose in the modern world. In the words of one of the pioneers of this thinking, Andrew Lambert, an associate of the Corporate Research Forum, the HR leader of the future will be a change and performance specialist. Currently, chief executives seeking to move an organisation forward create a new position like chief transformation or innovation officer. Ideally this is what HR should be doing – not as a one off but on a continuing basis.