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Digital Transformation -- is HR even part of the conversation?

Digital Transformation -- is HR even part of the conversation?

How the HR function should step up to initiate Digital Transformation and the need to embrace Digital.

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by Laurence Smith

For many years respected HR thought leaders, like Professor Dave Ulrich and others, have argued that HR needs a seat at the table, to be more closely aligned with the business, to be more effective business partners, and to be part of strategic decision making process. In the best companies this has largely been achieved, with the CHRO balancing the CFO as a valued adviser to the CEO.

In more recent times there has been an ongoing debate between Ulrich, Ram Charan, Peter Capelli, John Boudreau and others, as to whether we should re-invent HR, blowup HR, split HR, continue to hate HR or give HR another chance.

However I am forced to wonder if perhaps all this passion and debate is missing the point that matters most. Part of me wanted to call this article “Why is HR sitting at the wrong table?” in recognition that while HR does indeed now have a seat at the table, the conversation that matters has moved to another room. And that conversation is not about how to re-structure HR or be a better business partner, but is rather about how the whole world is going digital, how Fortune 500 companies are disappearing at an accelerating rate, how software is eating the world, how banks are having their Uber moment, and how companies are replacing customer facing relationship managers with robo-advisers.

While it is arguable that this digital disruption is most acutely felt firstly by Telcos, then Banks, and then Insurance (try telling that to employees of Borders, Kodak and Blockbuster), it seems that no industry or company is immune to the massive threat of digital.

Visionary leaders everywhere are trying to be the first to truly 'get digital' in their industry and really, deeply, understand digital in a way that allows them to be first to disrupt themselves andcannibalise their own cash cows (and even kill a few sacred ones).

Brett King, thought leader on technology disruption and best selling author, when recently asked 'Do you think traditional banks can cope with the tech disruptions taking place in the world of financial services?' Responded 'There are maybe a dozen banks around the world that can cope with this and embrace it culturally as a bank.' (Italics are mine).

And that's the point. I would argue that the single most critical differentiating success factor moving forward, for (almost) every organisation in (almost) every industry, is the speed and mental dexterity with which they can grasp digital. Success will be defined by which organisations can create a culture to 'get digital' the fastest – and I believe that HR has the potential to a key enabler in this transformation – but only if HR can 'get digital' first!

Disturbingly, I’ve just found real data* that confirms my concerns that HR is late to the game.

80% of CEOs state that:-

“HR is the function least able to help businesses transform.”

And only 20% said that HR enabled them to transform.

*  (Over 2,000 CEOs surveyed by Russell Reynolds in their Digital Pulse 2015)

So CEOs see HR not as an enabler – but as a blocker! This should deeply concern every HR professional.

What's the path forward for HR?

Dave Ulrich uses a model called 'STEPED' to help HR leaders be more effective'Strategic Positioners' (he and I wrote about it here). STEPED means that effective HR leaders need to consider the Social, Technical, Economic, Political, Environmental and Demographic factors that could affect the growth and success of your business. Digital is not just technology – in fact if you re-frame it to think of it as 'the digital world' - digital actually affects all the STEPED factors.

Use a blank STEPED template and think through the implications for your company. Then work out how you would have those conversations with your CHRO or CEO on how HR can help the organisation prepare for the digital future.

Digital World

Interestingly when our CEO changed his language from 'Digital Bank' to 'digital world' it became far more inclusive and far less threatening. In fact I would say this was a turning point in our adopting a more 'digital native' perspective on things. I believe it resolved a potentially dangerous split. Up until that point, the (majority of) people not in the new, cool, Digital Bank had been feeling excluded from the exciting new stuff – even worse, they were also delegating the responsibility for digital to the Digital Bank guys and seeing their own responsibility as simply continuing with business as usual. This re-framing from 'digital' as technology, to 'the digital world' we all live in, is incredibly powerful – and far less threatening.

How can you help your leaders become 'digital natives' and navigate this increasingly 'digital world?' While it is CEOs setting strategy, it should be CHROs right alongside that are helping articulate and develop the 'digital mindset' of the leaders in the organisation.

I am increasingly convinced, not only that 'digital mindset' is becoming the most essential competitive advantage moving forward, but that HR, often in partnership with Innovation, is the function most able to make this happen, and certainly the best positioned to scale it across the organisation.

So what's the dilemma?

But here's the dilemma, where in all of this is HR? It seems that HR is MIA(Missing in Action).

In the last two years as I've re-invented myself and created the Innovation Award winning #DBSHackathon series, I've read everything I could on Lean Startup and Design Thinking, on Agile, Scrum and Sprints; attended countless startup events, innovation conferences and taken almost every available module on startup innovation learning App SmartUp, I've tried to understand this brave new world of digital. And it's worked - BUT it's been lonely.

I've been lonely because even at large events explicitly designed to bring startup and corporate people together, I am always the only HR person in the room. There's plenty of business people (they get it), and of course loads of IT folks trying to re-invent themselves too (they get it), but never any HR people.

So where are all the HR people? Why are they not taking the lead, or at least an enabling role, in preparing the organisation and it's leaders to understand and take advantage of this massive digital disruption? We know CEOs want HR to step up.

Why is HR MIA?

The CHRO faces a similar dilemma to the CEO. For the CEO it is how to create an ambidextrous organisation – for the CHRO, how to create an ambidextrous culture.

The CEO's dilemma is whether to build the digital unit within the bank, where everyone is too busy and it will be overwhelmed with rules and restrictions designed to maintain the status quo. Or to build it outside and risk it being either abandoned as an orphan, or rejected by the organisational immune system when he attempts to bring it back in.

The CHRO's challenge then, is how to create a culture and leaders who can both run the bank and change the bank simultaneously. They need to be ambidextrous in thought and action, able to run day to day operations, safeguard compliance, manage risk and please regulators, whilst learning about digital, lean startup, and engaging in experimentation and innovation.

It is incredibly hard for HR to develop a digital mindset. HR, more than most functions is designed to reduce and manage risk and avoid failure. After all none of us would tolerate 'oops, sorry you didn't get your salary this month, we're running an experiment!' So engaging with lean startupthinking which requires experimentation and 'validated learnings' (failing fast) is naturally anathema to good HR leaders everywhere.

So how do you build an ambidextrous HR, which can then develop ambidextrous leaders to win in this digital world?

Understanding the threat responses.

First you need to understand why most HR people are not pro-actively stepping forward and engaging in learning about digital.

In the last two months I've received calls from about a dozen global firms who have heard about the work we've been doing on digital culture and I have been asked to share at firms ranging from pharma to film, from chemicals to devices. I have also been talking with dozens of other HR and learning leaders who are either trying to work out how to move forward because they've suddenly been given the mandate by the business, or are struggling to convince their own HR leaders that this is important. I am starting to see some patterns emerge in the defence mechanisms of HR leaders across different firms and industries:

  1. Overload: everyone is so busy with the transactional work of BAU (business as usual) that they have zero time to invest in considering tomorrow.
  2. Fear: people are afraid of what they don't understand, especially if it threatens to disturb the status quo – or their status. HR leaders are no exception.
  3. Denial: especially when your business is still doing well, denial is a great strategy for as long as possible.
  4. Symbolism: when you have no choice but to act, do something symbolically impressive, declare victory, and quickly move on before anyone asks questions you can't answer.
  5. False adoption: if someone in your team actually does something truly transformative, declare victory, tick the box, and quickly move on before someone asks you to do more of what you still don't get.
  6. Overload (Too): in case of 5 above, overload that person with so much transactional work that they can never have another threatening & transformative idea again. Repeat until thoroughly dis-illusioned and the person gives up.

It is sad to see even HR is not immune to this aversion to change and the instinctive threat response.

So how do we individually and collectively get past this threat response and step forward to become effective agents of change in developing the digital mindset and capabilities of our organisations? How do we flip those terrifying 80/20 statistics so that HR is seen as the function most enabling digital transformation?

Part 2 of this article will look at going from threat to opportunity. How to you prepare yourself and your organisation to survive and thrive in the digital future that is already now.

See here for an earlier article on Developing Future Ready Digital Leaders - parts 2 & 3 to follow soon!