Hell is other people.

Jean-Paul Sartre

In a nutshell

Businesses are run by people. Great businesses are run by talented people, at all levels. The challenging job of managing this human resource mix belongs to all managers, not only HR professionals or the CEO. Just as with the operations function, your job is to ensure efficient implementation of what is needed right now while at the same time preparing and planning to be able to deliver the future strategy.

Although there is consensus that people are vital to the success of a business, there is no agreement as to what that actually means. This chapter will provide background and structure to what is often a complex topic.

In this chapter you will:

• trace the historical development of managing people
• examine the external and internal contexts of the HR function
• study corporate culture and the evolution of the employment relationship
• investigate the role played by people in managing quality

Managing people in a modern organisation

Organisations have always relied on finding, developing and keeping the right staff to carry out all the functions of the enterprise, but what this means in practice has changed in the different eras of management.

• Nineteenth to mid-twentieth century: the age of the Personnel Department, where people are a resource that can be quantified and costed, their output measured and their recruitment prepared for. This view has its roots in the rapid expansion of workforce need during early and middle stages of the industrial revolution in Europe. Partly in reaction to this new economic model, this revolution was also the age of social reform and the unionisation of labour in many parts of the world.
• From mid-twentieth century: the age of organisational behaviour (OB) and human resource management (HRM), where people are an essential expression of the culture of the organisation. The entry into the workforce of many more women during the Second World War helped change definitions of labour, and heralded an age in which the development of the transnational or multinational company, sophisticated performance management systems, mass production and, more recently, the shift from manufacturing to service and knowledge-based economies have all played a part. Later, there was mass privatisation and a reduction in unionisation, as well as a movement towards collaboration and empowerment for individuals at work.
• Twenty-first century: in developed economies, a new age of partnering with stakeholders, fuelled by globalisation and enabled by technology. People are seen as the source of creativity and innovation. Long gone are the days of the monolithic corporate personnel function; HR is now decentralised, and knowledge capital and inter-connectedness are the priorities. In emerging economies, population demographics have begun to exert a drive of their own.

It is the line manager’s job to get things done. This is impossible without people, but that presents unique challenges because this is a topic soaked in theories and counter-theories from psychology and sociology. At first, ‘people’ seems like a topic that lacks the crisp, neat edges MBAs are often so fond of. But, all other things being equal, organisations can be differentiated only by their talent. For this reason, HR has a vital link to strategy.

Over the last 25 years line managers have taken direct control of traditional HR functions such as scoping job requirements, running recruitment, performance review and reward, employee motivation and promoting organisational culture. HR professionals are now more likely to act as specialists or consultants to be called on when needed. It is middle management – already under pressure to take on work and respond to every interruption and stimulus – that has added managing people to an already long list of responsibilities. The result is a core area of management where everyone has first-hand experience (and opinions) but rarely any formal training.

The external context: macro-culture

National culture is often the topic of description and opinion, but rarely of insight. Many organisations now recruit and work across many borders so the need to manage an international, diverse resource has also grown. Perhaps the most famous attempt to study the interplay between regional/national cultural preferences and corporate culture (initially, that of IBM) is by Geert Hofstede.¹ Given the free flow of human resources around the world and the global nature of management as a career, you might think about how these apply (or will apply) to your own experience.

There are six dimensions of values in his theory:

Power distance: How a society handles inequality in the distribution of power and resources. Large power distance accepts hierarchies in which everyone has and knows their place. In low power distance countries, people look for equality and minimisation of power.

Individualism vs. collectivism: Which takes prominence, the ‘I’, or the ‘we’? Individualism is a preference for looking after your immediate circle. Collectivism stands for a tighter expectation of loyalties to an extended family or wider social networks.

Masculinity vs. femininity: Masculinity as a dimension represents a societal bias for success as being competitive achievement and material rewards. The other aspect, femininity, values success as cooperation and consensus and an aim for quality of life.

Uncertainty avoidance: The extent to which you and those in your society feel uncomfortable with the unknown, or with ambiguity. Hofstede sees this as being an orientation to the uncertainties of the future – resulting in either strong codes of behaviour that do not tolerate dissent (high), or social norms that are more open to ‘bending the rules’ (weak).

Pragmatic vs. normative: A pragmatic society is one where people accept that there is a lot of complexity in life which may be impossible to explain fully. The purpose of life is to live it, and truth is contextual, material things transient. Under a normative orientation there is a wish to find in explanation the objective ‘truth’. Traditions and the past are treasured, spending is encouraged and adaptability is valued.

Indulgence vs. restraint: The sixth, and most recent, dimension contrasts indulgence, in which a society pursues happiness freely as a basic human motive of having fun, with restraint, in which such an urge is regulated or suppressed by social norms.

The interesting thing about culture is that we only really know ours by contrasting it with another. On a small scale this is obvious – we frequently see differences among the people, families and organisations around us. We take a lot of things for granted, and correctly locating our perceptions of the world, especially if we are managers, is much more difficult. Sensitivity to cultural values and norms is important, but as a manager you need to be aware of what is happening in a wider context. Consider how each of the following affects you in your workplace:

The political and legal environment: In the European Union (EU), for example, member countries have agreed to subordinate some national legislative decision making and this has had an effect on employment laws and the free flow of people to work. The legal framework governing ethical behaviour is also important.

Demographics: In the next 50 years the global population will climb to, and probably peak at, 10 billion. Despite a falling fertility rate globally, some countries will struggle to meet the demands of their ageing populations, while others will have to contend with rapidly expanding populations moving into ever-larger urban areas.

Education: Policies that prepare future generations for work require educational systems that align.

Globalisation and international careers: The proven ability to work well across borders and cultures, and in increasingly diverse teams, will be one of the tests for talent management in the future.

We’ve looked at those things outside the organisation, the ones that set the parameters for how an organisation behaves, and now we will look at the manager’s tasks at the organisational level – that is, those things that affect your daily job.

The internal context: organisations and micro-cultures

Details and circumstances may vary from company to company, but when it comes to employing people there are really only two constants that make a difference:

1. A contract of employment between the organisation and the person.
2. The contribution of the contract to our sense of identity, achievement and purpose.

We might spend more than a third of our lives at our places of work so it is no surprise that we feel an attachment that cannot be explained merely by being paid. For many, the idea of culture as a shared set of behaviours feels like common sense.

What is culture? Some describe it as ‘the way we do things round here’. The veteran American organisation expert Edgar Schein sees organisational culture as operating below the surface, but evident at three levels:²

Level 1 – artifacts: The physical locations, interiors, uniforms (formal or informal) or outward signs of branding.

Level 2 – espoused values: The norms and shared beliefs carried by the employees (articulated occasionally in a mission statement, but often more evident from procedures and rules).

Level 3 – basic assumptions: The sub-conscious of the ‘corporate person’, deeply held values, the ultimate test being how much tolerance there is for diverse types of behaviours or decision making.

American MBAs place people management under the umbrella of ‘organisational behaviour’. It sounds as though an organisation can ‘behave’ just as an individual person can. This could reflect a pattern in the employment contract between a firm and an individual that is part of the national culture in the US, but actually the idea of OB travels quite well. The organisational design template for many multinational companies follows a similar set of beliefs about hard work, independence and the rights of the individual. It’s not hard to see why many managers regard good management of their human resource as a source of competitive advantage (see Chapter 7). However, HR practice is often less than sophisticated. When a human resource issue is mishandled, an otherwise competent manager can find themselves in hot water very quickly, and talented staff can be left demotivated, disillusioned and looking elsewhere.

In fact, studies of what managers actually do at work are a fairly recent phenomenon. It was Henry Mintzberg who pointed out that managers don’t spend their time in secluded luxury issuing commands. He observed them being put under pressure, being interrupted and dealing with things as they came up. He did, however, identify three main management roles:³

1. Informational: internally, sometimes as official spokesperson and sometimes informally, act as mentor and the driver to disseminate communication in the organisation, as well as be the channel for information to the external environment as liaison.
2. Decisional: get things moving and implement change projects, adjudicate disputes and handle conflicts or unexpected situations decisively, allocate resources and negotiate with external stakeholders.
3. Interpersonal: be a symbolic figurehead or motivational leader, and build a connecting network of information sources external to your organisation.

Managing people means managing the one resource that is everywhere in your organisation. Your ability to analyse the multiple and complex factors influencing this organisational balance is terribly important and it certainly helps to have on hand some tools and techniques to help you cope with this. A robust diagnostic first step for this is to use the McKinsey 7-S framework (see Figure 4.1), a matrix very often applied by MBAs.

FIGURE 4.1 The McKinsey 7-S framework
Source: Peters, T.J. and Waterman, R.H. (1982) In Search of Excellence, McKinsey & Company. Reproduced with permission.

The matrix consists of:

Strategy: The overall objectives and the requirements to meet them.

Structure: The hierarchy, organisation of tasks or functions and divisions of labour.

Systems: The processes and operations used to get things done, e.g. the supply chain.

Shared values: The original intention of the organisation, its founding purpose and resulting core beliefs.

Style: More or less equivalent to Schein’s level 2 of culture, the unwritten rules.

Staff: The potential represented by the collective of people in the organisation.

Skills: What the organisation (not the individuals in it) is good at.

The 7-S framework is a little harder to apply than it looks because it supposes all the information you need is easily accessible, and clearly some of these factors are intangible. You will also need honesty in admitting where there are internal contradictions in your organisation.

Using McKinsey’s 7-S as its framework, Tom Peters and Robert Waterman’s 1984 book In Search of Excellence for a while was seen as having all the answers when it came to company culture and corporate success.⁴ Many of the companies showcased in the book failed in the years that followed, and the lure of culture and ‘excellence’ as predictors of success faded. The lesson from this is that to understand culture you must link it to performance and value creation (and usually this means the bottom line). The fundamental question remains: how do you as a manager best represent the interests of the founders and owners?

When it comes to managing people, value can be quantified in terms of productivity. The classic ingredients for this are measurement of what people know and what they can do.

Measuring productivity in people management

As we’ve seen, in the old days HR was about job analysis and the processes needed for selection of personnel with the right qualifications. This is still needed, but what is different is these activities now have to align talent to strategy. The individual desires and wants of employees are not the driver, though shaping the organisational culture means managing a delicate balance between all stakeholders and making everyone feel valued and informed. HR professionals work to exert this cultural influence with three tools:

• Recruitment and retention: selecting for cultural fit, because ‘not fitting in’ is arguably a more common reason for leaving a job than a lack of talent or dissatisfaction with pay.
• Training and development: from induction onwards, training and internal communication need to enable people to understand the cultural norms and engage emotionally.
• Motivation and rewards: the balance of give and take in an organisation, of which money is only one aspect, is crucial in communicating values and purpose.

These things matter to you, too. A manager is there to get things done, and as soon as the work to be done exceeds the resource available to do it, workforce planning becomes a part of every general manager’s role. To undertake this you need to gain a basic understanding (at least) of:

• organisational design and structure (luckily, you’re in one, so you can at least study that)
• job design, recruitment, selection and role development (using the HR professionals to assist and guide, plus your own reflections)
• talent retention and management.

Cisco has chosen to centralise its transactional HR functions such as compensation, staffing and learning and development (L&D) into a purely operational ‘employee experience’ pillar that is shared with IT services. HR strategy, policy and innovation, however, remain part of a specialist HR function. What do you think of Cisco’s move?

Performance and reward

HR specialists are probably still the ones, even in smaller organisations, who take first responsibility for recommending financial rewards and they may also oversee the development and deployment of policies to evaluate employee performance. But what these practices and policies look like will vary depending on national location and culture, company history and strategic intent, and without doubt the organisation will want you to pay most attention to performance. When you are in tune with the policies of your organisation, all this can be a very smooth ride. When you’re not, it will dramatically interfere with your job, though you will have no one else to blame but yourself if that happens. I’ll consider management involvement in performance from three perspectives – motivation, teamwork and the individual’s performance.

Motivation: job satisfaction and happiness at work

American psychologist Frederick Herzberg’s two-factor theory of motivation and satisfaction prompted a change in how we understand people’s engagement with their jobs.⁷ Herzberg agreed with the idea that human beings have a set of needs and desires and that achieving these is what motivates us. Abraham Maslow had earlier presented a hierarchy of needs, arranged in a pyramid with basic physiological requirements such as shelter at the base and self-actualisation (never fully defined) at the summit.⁸ Herzberg thought, however, that motivation was a bit more complex. Basic needs demotivate us when they are absent but do not add to our happiness when present. Higher-level needs provide true satisfaction and these are what we truly seek. Herzberg saw two independently functioning factors:

• Motivators: these include being challenged by our work, receiving recognition, achievement or personal growth. When present in our workplace they give us meaning. They are also all concerned with carrying out tasks. When absent, they tend to make us feel less worthwhile and less competent, which is deeply dissatisfying.
• Hygiene factors: these are necessary because, when present, they prevent demotivation. However, they do not intrinsically lead to motivation when they are present. Examples include salary, fringe benefits and bonuses, and these will form the context of carrying out tasks, but not what brings us real satisfaction.

If this sounds like common sense, it may be that it is. But like many basic business concepts, ‘the devil is in the detail’, and in the infinite variation that each particular situation (remember Schön and his swampy lowlands) produces dilemmas for you as a manager. For example, how important do you think praise is for a job well done in motivating a team? In some people and teams it won’t be valued, while for others it may be more significant than pay. Maslow and Herzberg’s are theories that point to motivation towards desirable goals or ends. Other theories focus on means, or the processes of motivation. Vroom’s expectancy theory says that people will choose a way of acting depending on their expectation of the result (the end dictates the means), so managers must remember that motivation is the relationship between effort and result in people’s minds.

It’s not a big jump from this to the idea known as the psychological contract (see Figure 4.2), which is a way of measuring how employer and employee see their mutual obligations in employment. At one end of the spectrum it is as a social exchange, where psychological well-being, belonging and loyalty are highly valued. At the other end, it is as an economic exchange, a transaction of time for money with no expectation of an emotional or long-term attachment.

FIGURE 4.2 The psychological contract
Source: Adapted from Rousseau, D.M. (1995) Psychological Contracts in Organizations: Understanding written and unwritten agreements, Sage Publications, Inc. Reproduced with permission.

The world of work, however, is undergoing rapid change – a rate of change unprecedented since the very first days of the industrial revolution. We’re now used to flat and matrix management structures, the movement of services and jobs around the world, and the pressures on equality and diversity in the workplace, but these are trends from the past acting on the present.

In the future, what will managing people be about? Well, we can expect the following to feature (and also expect some surprises):

• lifestyle career choices
• gap years at all ages, not just between school and university
• lifelong learning
• a move from corporate social responsibility to social enterprise (Chapter 11)
• social networking
• more interest in talent and succession management
• a lot more virtual team working.

The last one on this list, teamwork, is a perennial MBA topic, second only to leadership as an object of scrutiny. From talking to executives about their experiences at work, my opinion is that organisations are cautious about the future. They will want managers who are confident with virtual working, willing to be flexible about how and when they work, and committed to putting their personal development goals on hold if possible. Not great news for the self-directed, lifelong learner, who will be looking for balance between work and home. Technology will blur the lines between work and ‘life’ even more in the future, which means that building networks will be the key skill.

Teams: working with and through others

First-line managers will be expected to demonstrate a willingness to become part of them; middle managers a proficiency in leading them; senior managers a command of the subtleties of managing people in them. With increasingly flat management hierarchies and matrix reporting structures, teams and teamwork have become a ubiquitous feature of large organisations in the last 30 years. Even small to medium-sized enterprises (SMEs) often construct work around them. Teams and groups interest academics, too, and have been studied for decades. Influential psychologist Kurt Lewin coined the term group dynamics in 1945, and the subject has filled the pages of management textbooks ever since.⁹ Our study of group covers many scenarios, including a workplace team. All teams must have a specific reason (or charter) for their existence, but there are really two basic types:

1. Collaborative: any group whose aim is achievement of one shared goal or output; in other words, the output can be achieved only by working together.
2. Cooperative: any group whose aim is for everyone in it to reach their own goal; in other words, each person’s goal is personal but will be reached more easily with the help or support of others.

Despite its popularity in organisational settings, the direct benefit of teamwork is hard to measure. In addition, teamwork is quite hard to get right. The model of group formation that has outlived most others is Bruce Tuckman’s four-stage model, first developed in the 1950s and shown in Figure 4.3. Tuckman’s language has entered management speak as shorthand for any group’s theoretical navigation from first contact to task achievement.

FIGURE 4.3 Tuckman’s stages of group development
Source: Adapted from Tuckman, B. (1965) ‘Developmental sequence in small groups’, Psychological Bulletin, 63(6): 384–399. Reproduced with permission of the American Psychological Association.

American management consultant Patrick Lencioni suggests that teams need to overcome five dysfunctions (each with a remedy below):¹⁰

1. Absence of trust: team members need to be open to each other.
2. Fear of conflict: trust allows disagreement and questions.
3. Lack of commitment: early conflict and opinion sharing allows for genuine buy-in later on.
4. Avoidance of accountability: commitment allows teams to hold each other accountable for decisions and actions.
5. Inattention to results: overcoming all of the above lets the team focus on the charter (collective goal).

In the 1980s Meredith Belbin concluded that an effective team needed a balance of different types of behaviours over the life of a project and that different people tended to prefer to play (or to prefer avoiding) a combination of nine team roles.¹¹ The nine roles are:

Implementer: Someone being disciplined, reliable, conservative and efficient. Turning ideas into practical actions.

Team worker: Someone being cooperative, mild, perceptive and diplomatic. Listening to avert friction.

Plant: Someone being creative, imaginative, unorthodox and solving difficult problems.

Resource investigator: Someone being extrovert, enthusiastic and communicative. Exploring opportunities and developing contacts.

Shaper: Someone being challenging, dynamic and thriving on pressure. Being courageous to overcome obstacles.

Coordinator: Someone being mature, confident, a good

chairperson. Clarifying goals, promoting decision making and delegating well.

Monitor evaluator: Someone being sober, strategic and discerning. Seeing all options and judging accurately.

Completer-finisher: Someone being painstaking, conscientious and searching out errors or omissions. Delivering on time.

Specialist: Someone being single-minded, self-starting and dedicated. Providing task-specific knowledge and skills in rare supply.

Tuckman’s theory and Belbin’s work with management teams in the 1980s and 1990s are examples of the type of modelling of team processes used on MBA programmes. A high-performing team (HPT) is any group that achieves and then exceeds the goals it has been set while at the same time respecting and facilitating the individual objectives of its members. HPTs are difficult to build and even more difficult to maintain, and even Tuckman observed that teams frequently slipped back to earlier stages of formation and that the final ‘performing’ stage may be short-lived.

Is there anything wrong with this whole approach to teamwork? It might be said that managers often prefer the simple solution to the complex one, even when the complex is the more insightful. In other words, MBAs love short cuts, academics like categorising the world and practitioners enjoy getting results. Theories about teamwork are rarely questioned critically in business schools and while sometimes a shorthand rule of thumb can help, the reality is more complex.

Performance of the individual

Traditionally, performance has been about improving employee productivity through systems of motivation and reward, but this is a dynamic field that has changed enormously over the last 30 years in many parts of the world. Changes in legislation covering the rights and responsibilities of employers and employees, expectations of higher economic wealth and also of access to either full-, part-time or flexible working, as well as macroeconomic cycles of relative prosperity and austerity, have all influenced the pay and reward systems organisations use to manage performance.

This topic may appear in an organisation in the following ways:

• Strategic: as part of forward planning (and linked to strategy). In practice, many organisations see this as a cycle of activities and processes. It encompasses recruitment, reward and pay, generic training and development, pipeline, talent development and succession planning, and establishment of policies to monitor and maintain standards of process.
• Tactical: as part of regular or systematic reviews for individuals delivered usually by line management.
• Ad hoc: dealing with situations where something has gone wrong. Unfortunately, this is usually approached in terms of a need to fix the employee rather than a need to fix the system, even though in the majority of cases it is the context that is causing the issue. A great employee can be swallowed up in a poor system.

We’ve already seen that theories of motivation play a big part in understanding how to manage performance levels, but it remains a difficult concept to measure. Bonus cultures and corporate pension schemes have begun to face more criticism and restrictions, and reward systems in the future may need to find original and flexible mechanisms for remuneration.

Developing an HR strategy

In the previous chapter I said that the operations function always has one eye on managing the present and the other on planning for the future. It should be the same when it comes to managing the people who run, organise and contribute to any organisation. The strategic side of managing people is about two things:

1. Making sure that the right human resources will be in place in the future. This future focus is strategic because it requires hedging against a scarcity of labour. In free-market economies people are free to come and go and – despite constraints of political, social and economic circumstances – organisations must develop policies that will supply quality staff. Globally, the shortage of qualified personnel in the health sector, for example, is so acute that strategic HRM is often a governmental priority.
2. Negotiating the right systems of motivation, rewards and contractual control to meet the uncertainties of a contingent future, and of maintaining a balance in the tension between operating profitably while respecting the rights and responsibilities of employing people around the world.

Strategic HRM in the next 20 years will need to keep pace with the speed of change in other areas of business.

Putting it together: HR takes a Bath

One framework that brings all these messages together in one place, and links them to strategy, is the Bath model of people and performance, shown in Figure 4.4.¹² Concluded from in-depth studies of 12 different companies by a group of researchers based at Bath University, the model was:

• an attempt to understand the relationship between all the factors involved in a competitive and sustainable competitive advantage in HR strategy, and
• an explanation of the motivational impact of ‘discretionary’ behaviours on performance.

The research revealed three things:

1. Organisations need to embody their ‘big idea’ in their HR practices. A clear sense of ‘what we stand for’ emerges in the relationships between the various elements.
2. Front-line managers are the ones who bring these relationships to life.
3. The 11 policies in the model all link to satisfaction, which links to performance, which in turn is linked to value. But different roles and levels in an organisation need different combinations of those policies.

FIGURE 4.4 Bath model of people and performance
Source: Purcell, J., Kinnie, N., Hutchinson, S., Rayton, B. and Swart, J. (2003) ‘Understanding the People and Performance Link: Unlocking the Black Box’, with the permission of the Chartered Institute of Personnel and Development. London (www.cipd.co.uk).

The story of human resource management as a function first went from study of structure to study of culture formed in the structure. Now it is moving again from culture to a study of the relation of culture and structure as a dynamic and open system. The learning organisation is now a byword for good management practice in managing people.

Further reading

A classic text:	The Peter Principle: Why things always go wrong by Peter, L.J. and Hull, R. (1969), Pan Books. Before Dilbert, there was Peter. It’s amazing how this insightful and humorous book, written in another era, still has so much to say that is relevant today.
Going deeper:	Strategy and Human Resource Management by Peter Boxall and John Purcell (3rd Edition, 2011), Palgrave Macmillan. A comprehensive textbook, pitched at the right level for MBAs and mid-career managers.
Watch this:	‘Drive’, Dan Pink’s engaging 2010 talk on human motivation, animated by the RSA: www.thersa.org/events/rsaanimate/ animate/rsa-animate-drive

Notes

1 Hofstede, G., Hofstede, G.J. and Minkov, M. (2010) Cultures and Organizations: Software of the mind, Third Edition, McGraw-Hill Professional.

2 Schein, E. (2010) Organizational Culture and Leadership, 4th Edition, John Wiley & Sons.

3 Mintzberg, H. (1971) ‘Managerial work: analysis from observation’, Management Science, 18(2): B97–B110.

4 Peters, T. and Waterman, R. (2004) In Search of Excellence: Lessons from America’s best-run companies, 2nd Edition, Profile Books.

5 www.cisco.com/web/about/ac40/univ/programs/gbs.html, Cisco Systems, Inc. Quote reproduced with permission.

6 http://talentmgt.com/articles/divide-and-conquer, MediaTec Publishing Inc. Extract reproduced with permission.

7 Herzberg, F., Mausner, B. and Snyderman, B. (1959) The Motivation to Work, 2nd Edition, John Wiley.

8 Maslow, A.H. (1943) ‘A theory of human motivation’, Psychological Review, 50(4): 370–396.

9 Lewin, K. (1947) ‘Frontiers in group dynamics. I. Concept, method and reality in social science; social equilibria’, Human Relations, 1: 5–40.

10 Lencioni, P. (2002) The Five Dysfunctions of a Team: A leadership fable, John Wiley & Sons.

11 Belbin, M. (2010) Team Roles at Work, 2nd Edition, Routledge.

12 Purcell, J., Kinnie, N., Hutchinson, S., Rayton, B. and Swart, J. (2003) Understanding the People and Performance Link: Unlocking the black box, Chartered Institute of Personnel and Development.