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“Aligning Human Capital with Business Strategy” by Michael H. Michell and Nick Bontis In: Jack J. Phillips and Dede Bonner (editors). In Action: Leading Knowledge Management and Learning. American Society for Training and Development, 2000. pp. 73-86. Summarized by: Caycay Roxas
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Case 1a: Foreign Bank (Phase 1: Attracting Human Capital)
Background: Foreign Bank offers a full range of financial products and services, has reported assets well in excess of $100 billion, and has approximately 15,000 employees worldwide. This case illustrates the recruitment challenges an organization faces when doing business in a highly competitive foreign market.
Problem: Foreign Bank was having difficulty attracting and retaining key talent needed to complete in the aggressive U.S. financial marketplace. New product opportunities were often missed due to the lag time needed to get the sales organization up to speed with technical product knowledge and customer selling applications. By the time the sales organization was trained, the competition was already on the next product innovation.
The human resources (HR) team, headed by the CKO, made specific recommendations about committing a substantial investment in training and distance learning. On that basis, the company ramped up a very aggressive recruitment and retention strategy. Within 18 months, the company became a respected force in the marketplace. The results of the new strategy yielded increased quality of new hires and increased retention of key employees. Foreign Bank soon became the most productive and profitable business unit outside the parent company’s home country.
These results were accomplished by evaluating how well business objectives were linked with day-to-day employee activities and customer demands. An internal HR team determined that strategy, knowledge sets, work outputs, and customer needs were not aligned in several ways. In addition, senior managers’ naïve perception of the highly competitive recruitment market showed they had an unrealistic view of prevailing workplace needs and realities.
The first priority was to understand why employment offers were being rejected and why certain types of targeted candidates were not interested in accepting an initial interview. It was rumored that U.S. candidates generally did not admire foreign banks. Potential candidates perceived that selecting a foreign bank was detrimental career move. Furthermore, candidates assumed that foreign banks would offer compensation packages that would be significantly lower than those from U.S. banks. These results were not popular with senior management staff at Foreign Bank. They believed that everyone wanted to work for their company.
Solution: The CKO had been hired specifically to help solve this human capital issue. Although he came from the HR side, the CKO also had a strong background in business and strategy. This project was very early in the CKO’s tenure and laid an important and credible framework for future initiatives.
In this case, the CKO’s primary objectives were to meet the needs of the recruitment market, gain the commitment of senior management to a new strategy, and support the current demands of the business, all at the same time .
The CKO began by asking three important questions:
In sum, the CKO transformed the perceived weakness into strengths by identifying, linking, and selling these key values to a specific market segment of qualified candidates. In the end, the views of senior management and the needs of the business were aligned with the needs of a highly competitive recruitment market. The result was that Foreign Bank hired several new, top tier, knowledge-intensive bankers. An effective mechanism for human capital development was now in place.
Review: This case illustrates the role a CKO played in what was traditionally the sole domain of the HR department: recruitment. The fact of the matter is that selective recruitment is the primary methodology for increasing the knowledge base of an organization (Bontis, 1996).
It is important that senior management recognize that a CKO’s role in increasing the knowledge base of a company is not easy. All the available knowledge in the world is accelerating at a phenomenal rate. Information library researchers predict that by the year 2010, all the world’s codified knowledge will double every 11 hours.
Recent research conducted at the Institute for Intellectual Capital Research (IICR) supports the hypothesis that the CKO s. position will soon flourish in the corporate world. The organization surveyed representatives from 53 of the top executive search firms in Canada and United states about their perceptions of the future prevalence of CKOs. The responding headhunters conducted specialized searches in a variety of areas including accounting finance information technology (IT), engineering, and top executives. Of those surveyed, 45 percent were indeed familiar with the position of CKO.
More important, 72 percent of the respondents expected a significant increase in CKO searches in the future. The implication of these results is that although searches for CKOs have not yet materialized in great numbers, the executive search industry is preparing for increased demand. Another explanation of the interim results is that most CKO appointments thus far have been done internally where no external search firm was required.
Further results from the study predicted
that CKOs would have no particular functional alignment but their staff
would be dispersed and embedded in business processes.
This speaks to the importance of intellectual capital management as a corporate-wide
initiative (Bontis, 1999). The early trajectory of an evolutionary cycle
in intellectual capital management is now under way.
Case 1b: Foreign Bank (Phase 2: Leveraging Human Capital)
Background: Once Foreign Bank addressed the challenge of attracting new talent to the organization, the CKO’s role turned to leveraging the human capital base to its fullest potential. In other words, the
CKO was also responsible for making sure that the organization tapped the talent and knowledge inherent in each employee. This case highlights the disconnection between an aggressive business plan, an ill-equipped sales force, and a highly competitive and fast-paced marketplace.
Problem: Senior management’s analysis of critical success factors showed that product innovation and financial engineering were key elements in the customer value chain. It was also apparent that Foreign Bank’s sales force was not well equipped to compete at this level.
Thankfully, the recruitment efforts were paying dividends, and the recruits were adding many innovative product and service elements to the business mix. However, the process of getting the sales and customer support teams up to speed on these new offerings was laborious and ineffective at best. A clear misalignment was occurring, and the value offering to the customer was lost.
Solution: Foreign Bank needed to increase organizational learning and the speed of execution. Organizational Learning is defined as a firm’s ability to improve its actions through better understanding. Attitudes toward the accelerated pace and the "going back to school" program also needed to be dealt with since the push-back (that is, increased tension) from existing employees and managers was pretty strong.
The new recruits were leading the cause and demonstrating a clear linkage between knowledge, skill, speed, and winning business. Their support laid a framework for an aggressive plan to build a significant technology platform to support instant learning, 24 hours a day, in any time zone. Over a 12 month period, Foreign Bank invested $6 million in a computer-based training video conferencing, bricks and mortar, software and people.
These technological initiatives created capacity to keep the sales organization up to the minute and connected to the latest product buzz. The changes contributed to the doubling of revenue in 18 months, which clearly justified the investment.
Review: Foreign Bank’s CKO developed alignment of what people needed to know and do each day to properly support selling opportunities with the company’s strategy and growth objectives. In this case, knowledge management and the investment in technology is a winning combination and clearly demonstrate the power of a CKO’s role in driving value-based performance gains.
The authors believe that these types of strategic alignments should clearly fall under the responsibility of the CKO. The CKO must envision the whole integrated strategy regardless of organizational lines or personal responsibilities. The power of alignment in this case came with linking recruitment, knowledge management, and technology. Attempted separately, each initiative would likely fail.
In today’s world of bits and bytes, a CKO must have a strong grasp and appreciation of technology. A CKO’s minimum responsibility is to be cognizant of the operating functionality of the tools in the following four technology categories (Bair and O’Connor, 1998).
Case 2: Luxury Retail
Background: Luxury Retail is a multi-site retailer specializing in exclusive high-end jewelry and gift-oriented merchandise. Within five years, the company had impressive growth from $600 million to over $1 billion in revenue. Luxury Retail has 5,000 employees operating in 120 locations in 20 countries.
Problem: Luxury Retail faced several challenging business growth objectives:
Many of the service processes were Old World (such as detailed hand engraving by artisans whose average age was more than 60.) There was no apprenticeship program in the works. These processes would certainly not stand up to the pressures and productivity demands of an aggressive worldwide expansion strategy.
The fact was that service and sales standards were falling, and sales growth was coming primarily from new store expansions and an unpredictable tourist trade. Customer’s complaints were on the rise, and senior management agreed that these circumstances had to change.
Solution: The company undertook several integrated and innovative steps to achieve its growth objectives. To date the results have been miraculous, and demonstrate exactly what a CKO and a senior management team can do, when they pull together. Same-store sales increased 15 percent per year, and site locations expanded into 22 countries. The brand is stronger than ever, and earnings continue to grow at record levels.
Enterprise-critical business issues often require solutions that involve aligning and integrating strategy with the organization and its people. These types of solutions are ones with which most senior executives seem not be comfortable and where more tactical HR solutions can fall short. This organizational void is perfect for the CKO or senior HR executive to fill.
One of the early initiatives the newly recruited CKO undertook was the reengineering of the sales organization to develop consistent, high quality selling approach and an unequaled customer-service experience. Reengineering was a critical business issue facing the company, and yet no one on the senior team had stepped up to offer a solution or strategy. Here, the CKO filled the void.
The goal was to develop and retain lifetime customers, especially in local markets around the world. There were several pieces to the proposed strategy as follows:
A key goal was to attain a higher percentage of business from repeat customers. The sales associates specifically defined what they did to develop and retain clients, often from generation to generation. Could this be bottled? A strategy was forming, with the idea of codifying what these best-in-class associates did, their daily activities, and how well they did it. The CKO could then programmatically proliferate this knowledge to all new and existing associates. Ultimately, the CKO was able to define the value-driven job activities and measure their impact on business performance. It formed the basis for knowledge and skill requirements, technology applications, coaching, performance measurement, and rewards.
Review: This strategy of linking knowledge sets and learning to work activities, which are in turn linked with business goals, is at the root of CKO’s raison d’etre. After this has been accomplished, technology can be implemented to deliver the speed element for keeping current with changing business and market conditions. When properly applied, this formula provides an important, positive contribution to sustained competitive advantage.
In this case, the focus of training and knowledge-based delivery shifted dramatically away from the classroom and right out of the shop floor. Senior management’s job also transformed from manager and administrator to developer and coach. It was also these day-to-day strategic shifts in focus and job activities that did more, to influence and change the selling culture, than anything else. Senior management needed to reinforce these changes with words and deeds, but real change occurred because of the day-today changes. The CKO spearheaded organizational learning behaviors incrementally, one day at a time.
It was clearly early on that this new knowledge codification process could easily get out of control and become too complex and cumbersome. It was important for he CKO to bring focus to the key job elements that drove value. The rest would come in time. Line managers and sales associates alike kept saying the new process had to be simple and not complicated. The willingness to change and adapt the program to their needs went a long way in building support and usage.
CONCLUSION
The CKO should own and be accountable for the achievements and outputs of human capital. The CKO should be responsible for the ongoing value created by innovative and strategic human capital design. Human capital design means the organization, its culture, policies, practices, workflows, processes, and knowledge-and-learning based technology applications.
Through the authors’ professional experiences and research, we have found that it does not seem to matter whether the CKO’s role is rooted in HR, IT or somewhere else. What matters is the skill of the incumbent and senior management’s willingness to take some risks, do things differently, and foster an organizational mindset around strategic renewal and innovation.
The CKO should be able to create a significant trail of lateral value by properly conceiving and executing alignment strategies. These alignment strategies will ultimately benefit customers and shareholders as well as the ongoing well-being of the entire company. Also, a CKO must treat his initiatives with the same measurement rigor that an accountant would.
Having the distinction of being named
a CKO of an organization requires an individual to represent all that is
current in knowledge management. Thus, the CKO often acts as a symbol or
icon that other organizational members look up for guidance. In the end,
a CKO’s most important activity is to strategically leverage the knowledge
an organization creates for sustainable competitive advantage.
Go to article:
Dede Bonner. “The Knowledge Management Challenge: New Roles and Responsibilities for Chief Knowledge Officers and Chief Learning Officers.” Phillips and Dede Bonner (editors). In Action: Leading Knowledge Management and Learning. American Society for Training and Development, 2000. pp. 3-19. Adam Gersting, Bill Ives and Cindy Gordon. “A Human Performance Approach to Knowledge Management: Andersen Consulting”. in: Jack J. Phillips and Dede Bonner (editors). In Action: Leading Knowledge Management and Learning. American Society for Training and Development, 2000. pp. 23-38. Nick Milton. “Managing Knowledge in an Oil Exploration Office”. in: Jack J. Phillips and Dede Bonner (editors). In Action: Leading Knowledge Management and Learning. American Society for Training and Development, 2000. pp. 39-53. Verna J. Willis and Gary L. May. “Strategy and the Chief Learning Officer”. in: Jack J. Phillips and Dede Bonner (editors). In Action: Leading Knowledge Management and Learning. American Society for Training and Development, 2000. pp. 55-70. Michael H. Mitchell and Nick Bontis. “Aligning Human Capital with Business Strategy”. in: Jack J. Phillips and Dede Bonner (editors). In Action: Leading Knowledge Management and Learning. American Society for Training and Development, 2000. pp. 73-86. Case Study in Online Knowledge Exchange Community: Entovation International Ltd. (Debra M. Amidon. “Leading through Strategic Conversations”. in: Jack J. Phillips and Dede Bonner, editors. In Action: Leading Knowledge Management and Learning. American Society for Training and Development, 2000. pp. 101-114. Gary Jusela and Nick Nissley. “Action Learning and Organizational Design”. in: Jack J. Phillips and Dede Bonner (editors). In Action: Leading Knowledge Management and Learning. American Society for Training and Development, 2000. pp. 133-145. Lynne Hambleton. “Supporting a Metamorphosis through Communities of Practice”. in: Jack J. Phillips and Dede Bonner (editors). In Action: Leading Knowledge Management and Learning. American Society for Training and Development, 2000. pp. 147-156. Michael Horst adn Theresa Snavely. “Assuming the Role of CLO in a Hospital Setting”. In: Jack J. Phillips and Dede Bonner (editors). In Action: Leading Knowledge Management and Learning. American Society for Training and Development, 2000. pp. 189-203. Ruth Ash and Maurice Persall: The School Principal as Chief Learning Officer: Seven Exemplary Schools” in: Jack J. Phillips and Dede Bonner (editors). In Action: Leading Knowledge Management and Learning. American Society for Training and Development, 2000. pp. 205- 220. Robin Lackey and Richard Brehler: “Dismantling and Rebuilding Learning Processes” in: Jack J. Phillips and Dede Bonner (editors). In Action: Leading Knowledge Management and Learning. American Society for Training and Development, 2000. pp. 221-233. Dave Snowden. “Storytelling and other Organic Tools of Chief Knowledge Officers and Chief Learning Officers”. in: Jack J. Phillips and Dede Bonner (editors). In Action: Leading Knowledge Management and Learning. American Society for Training and Development, 2000. pp. 237-252.
