Athabasca University

The Development

Of A

People Strategy

For

Small Organizations

By

Elizabeth Stevenson

Abstract This study is intended to gain insight into how small companies are currently developing their people plans, identify some of the ways that they are robbing themselves of the ability to grow effectively as a result of their lack of a formal approach to a people strategy and provide a framework from which they can develop effective strategies to deal with this critical aspect of business.

The first challenge in working with small business to develop people plans is convincing them that they are big enough to devote resources to this initiative. Commitment of the leadership is required and diminishing what they perceive to be some of their control is a big roadblock to overcome. In addition, much of the available literature on people strategy is either very complex for adoption by small organizations or is so basic as to provide no strategic context.

This study undertakes to expose the limitations of current behaviour and instill an understanding of the need to develop a strategic approach to managing a company�s largest asset, its people. Traditionally, most small organizations have not got to this aspect of their business as yet because they are not sure how or where to start and they are inherently skeptical of the cost to benefit realization. By exposing current limitations to growth and providing a basic framework for developing people strategies that are aligned to business strategies it is believed that an effective and simple management tool will evolve. The approach taken in the study was to engage in conversations with numerous people across multiple levels within small organizations and then extrapolate some of the work presented by various people strategy experts in a simplified way for application in small environments.

Key Reference:

Kaplan�s and Norton�s The Balanced Scorecard was used to provide the means to link business strategy to people goals. The model presented by the authors can be as complex or as simple as one makes it and is highly adaptable to the needs of small business.

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Table of Contents

Background Information ....................................................................................4

Small Business Defined.................................................................................5

The Problem ........................................................................................................6

Research Questions ...........................................................................................7

My Approach .......................................................................................................8

Limitations to the Approach ............................................................................12

Conversations...................................................................................................13

Initial Conversations � The Development of the Organization .....................13 Conversations Focussing on Current and Desired Future State..................15 Conversations to Assess Current Use of Outside Resources......................16 Conclusions .................................................................................................21

People Strategy: The Basis..............................................................................23 Understanding Change................................................................................28

People Strategy: The Framework ....................................................................30 Impact of the External Environment.............................................................31

People Strategy: The Methodology.................................................................34 Organizing Work ..........................................................................................34 Selection and Deployment ...........................................................................36 Work Environment .......................................................................................39 Clarity and Communication..........................................................................40 Accountability and Flexibility ........................................................................41 Rewards and Recognition............................................................................42 Learning and Development..........................................................................43 Performance Management ..........................................................................46

People Strategy: The Last Word.....................................................................51

Sample Survey: ...........................................................................................52

Appendix ...........................................................................................................54

Bibliography......................................................................................................55

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Background Information Numerous of the small companies with which I have worked do not have a people strategy. Many such organizations have evolved from a good idea and through the sweat equity of the founder. As these organizations grow, little attention is paid to the growth in the number of employees and how to manage their efforts, coordinate their activities and capture what is being done well. In any organization, leaders can have difficulty converting a business� mission, vision and strategy into people goals and in integrating the two. In a small organization, this difficulty is compounded by many potential issues including sharing access to confidential financial information, primitive systems that impede communication, scarce resources that impede sharing and learning, reluctance to delegate or share control and a real lack of understanding of the need to create and share a common understanding of goals and every individual�s prospective contribution to these. Rarely, in small organizations is there any understanding beyond a select group of the company�s vision and goals, any meaningful communication that will help clarify goals, encourage change, help define roles, identify best practices, encourage creativity or assist in the sharing of knowledge. Further, very few are aware that they would benefit from any of this nor do they have the remotest inkling of how to effect a synergistic link between business and people processes. Not every organization�s goal is growth; however, most want to achieve the mandate established in their mission and vision, intend to survive and ideally achieve some level of prosperity while responding to the needs of their various stakeholder groups in varying degrees of importance. Globalization, fierce competition, access to information and increased technology are forces that have impacted businesses of all sizes and the relationships between employer and employee. My investigation to date has revealed that most literature on human resource plans advocates methodology that is not easily scaleable for small organizations, appears to be too complex for easy adoption and requires a significant time commitment. Government sources of information that are designed specifically for small organizations are limited in their scope and although very useful as a tactical guide to basic human resource planning information do not facilitate the development of full blown people plans. In addition, there frequently exists a void in understanding the significance of the relationship between business and people planning. Rarely, is any one person charged with responsibility for initiating a people strategy and, as a consequence, ad hoc policies that contradict each other and leave large gaps in development result. Business owners with whom I have discussed the issue claim that they cannot afford the luxury of managing people in addition to managing business as it distracts them from

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activities perceived to be more important, is costly, ineffective and virtually not measurable in terms of results achieved.

Small Business Defined There appears to be no conclusive definition of a small business. Industry Canada�s definition of a small business includes manufacturing companies under 100 and service companies under 501, while Statistics Canada lumps small and medium sized businesses (SMEs) together and defines these for purposes in its Small Business and Research Policy white papers, as manufacturing firms of 20 to 249 employees and with annual revenues less than $50 million.2 For the purpose of this paper it was felt that there should be an ownership criteria, that was tied to the definition and it was also felt that $50 million in revenue provided too broad a field. As such, small business is defined as a business that is privately owned either through a corporation, sole proprietorship or partnership, has no more than 100 to 150 full time employees and has revenues of $10 million or less. However, in some of our participating companies revenues may exceed $10 million but meet the other criteria.

1 www.ec.gc.ca � CPPIC - Business 2www.strategis.gc.ca, Small Business Research and Policy � Key Small Business Statistics

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The Problem Small companies are potentially robbing themselves of the ability to grow effectively, to measure and improve performance, to capture the tacit knowledge resident in many of the tasks performed by their employees; in effect, to achieve their potential. They are hampered by a lack of simple, flexible methodology to allow development of an effective people strategy framework that is easily understood, that can be easily updated, and can be applied universally across the organization. I suggest that small businesses do need a people strategy and that it can be formalized through the development of a methodology and tools that will define an approach that provides immediate value and progresses the organization to its desired state. Unfortunately, goals are frequently not articulated well and many small companies fly by the seat of their pants, reacting to change rather than planning it, reacting to opportunities rather than creating them and not understanding the potential that employees have to add real value. The challenge remains one of convincing small businesses that they are big enough for a formal people strategy and developing a practical application that invites commitment and excites the user by its realistic approach and measurable outcomes. The environment in which any organization operates today has changed exponentially over the last few years. As Drucker (1999)3 states, it has only been in about the last hundred years that anyone thought to document how work was done and productivity improvements that could be made by making changes. Yet, the amount of literature generated and the evolution in its thinking since technology made its mark on the world is overwhelming. Access to information has created an entire new focus on knowledge � by consumers, competitors, lobby groups and employees alike and if organizations are to exert influence on any of these stakeholder groups. Particular attention must be paid to employees, whose intellectual capital has assumed a far more critical position than the fixed assets that were once seen as the primary value in a business.

3 Drucker, Peter F. (1999) �Knowledge Worker Productivity: The Biggest Challenge�

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Research Questions The following key questions will focus the direction and required research that this People Strategy project will require:

• At what point does/should an organization need to begin formulating its people strategy?

• How do people policies evolve in a small organization? • How do small organizations assess their �as is� and desired future state and

utilize their people to move forward? • What are the basic roadblocks to achieving an effective people strategy? • What success factors might be attributed to an effective people strategy? • How will an organization manage the risks associated with implementing a

people strategy? • How can the principles of overall business strategy be applied to/integrated

with people strategy in a small organization? • How are the people objectives in a small organization defined and how do

they contribute to an organization�s culture and values? • What key factors attract good employees, impact individual contribution and

assist with retention of high performers? • How do individuals understand and measure what is expected of them? • How is contribution to corporate goals measured/rewarded? • How are training needs identified and training value assessed?

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My Approach I have included several organizations, some of which I have worked with in the past, and whose agreement I had in principle to use them as subjects in the trial and development of a people strategy framework that is useful to organizations of their size. I believed it was important to use more than one organization in my study in order to ensure that the framework can cross industry boundaries easily. In assessing the fit of potential candidates for participation in my study of small to medium sized organizations with limited to no people planning resources there were a number of criteria that I sought. These include: • No formal people planning strategies or at an early/basic stage in the

development of people strategies as they relate to other business strategies; • Recognition by participants that they may benefit from participation in activities

to develop more comprehensive people strategies and that may involve participation by those outside the senior management group;

• A willingness to share openly some of the problems encountered in attempting to develop and manage the human side of the organization;

• A willingness to participate from the beginning to the end of the project understanding that while time commitments will be minimized to the extent possible, it is critical that key people be available at previously scheduled times for meetings lasting no longer than time specified;

• An understanding that the various inputs from discussion discussions will be published in the final study document and that information will be shared with other organizations that participate; and,

• A willingness to allow me to have informal discussions with individuals in the organization. It is understood that no formal interviews or surveys will be conducted in gathering information.

The study involved numerous conversations over the course of the project with employees at various levels in the organizations to collect information and, against which, to test ideas and ultimately formulate and test a plan. Initial conversations focussed on gaining insight into the participants� current state, understanding of the relationship between business planning and people planning issues and determining common themes in the development of people plans in small organizations. Research was conducted into resources that are available to small businesses through various provincial and federal government agencies and those advisory bodies sponsored, at least in part, by government. In addition, various professional human resource association websites were explored to determine the level of support available to small business either without cost to them or on a very limited fee basis. Trials were conducted to determine the ease of access to information, assess the user friendliness of various websites and the

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completeness of information, tools and templates for building comprehensive people plans. Much of the formal research carried out focuses on organization design and theory as presented by numerous respected experts on these topics. Although there has been significant research done in this area and there is much methodology available with respect to people strategy, there is little that is focused on the specific needs of small business. However, I maintain that a great deal of the work done can be adapted and simplified. As a result, I have reviewed the work of numerous human resource and business strategy experts and included some of what I felt to be applicable as a basis for building a scalable framework for use by small businesses. This does not represent a claim that what I have utilized is the best work done as there is much that is excellent. The following provides a brief overview of the work that some of these experts have completed that I feel is of specific relevance and whose theories or models will be drawn from in developing this study. Additional authors, whose work has also added value to this study but that has not contributed significantly to the framework, are listed in the attached bibliography. Kaplan�s and Norton�s The Balanced Scorecard provides an excellent means of linking business strategy to personal goals and can be as complex or simple as one wishes to make it. Kaplan�s and Norton�s Balanced Scorecard can be used to establish relevant measures and force thinking about alignment through the adaptation of a simple model that focuses on the development of employee performance goals, establishes measures, provides for feedback, learning and development and is associated with a reward process. Brian Becker, Mark Huselid and Dave Ulrich have expanded on Kaplan�s and Norton�s Balanced Scorecard approach in their book, entitled The HR Scorecard: Linking People, Strategy, and Performance. In their work they have capitalized on the measurement system outlined in The Balanced Scorecard to effectively provide a means for human resources to assess the contribution they are making through people in the organization to strategic goals of the organization. The lense through which the book is written focuses the reader to visualize human resources as a strategic asset whose contribution can be measured effectively, and isan ideal link between people strategy and Kaplan�s and Norton�s approach for use in this study. John Kotter has done a great deal of research in the area of change, one of the most difficult things to achieve successfully, anywhere. His books Leading Change and Corporate Culture and Performance document some of this work. Kotter�s commitment to the views that effective leadership and leadership�s dedication are critical to effecting change of any kind, a company�s culture must reflect its business (and people) strategy and relying on communication to create understanding are all concepts that can be utilized in building a people strategy for small businesses. Kotter�s points on leadership and leadership�s need to buy

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in are of particular importance in the case of small businesses, many of which are still led by entrepreneurs who are often reluctant to loosen their grip on decision making and share power. His premise that a compelling need for change must be established is another powerful point that we will draw on as we develop our own model. Chris Argyris (1994) presents a very interesting view of some commonly used forms of communication in organizations. We are all familiar with such approaches to improved communication as using focus groups, employee surveys and �management by walking around� to name a few and many of us can cite examples of success with these tools. However, Argyris argues that these approaches �will actually inhibit the learning and communication that twenty first century corporations will require not just of managers but of every employee�.4 His point is that such communication will not elicit the insightful thought and creativity required of each and every employee but rather perpetuates the contribution of simple answers to specific questions asked and reinforces traditional behaviours that result in employees simply following orders. Argyris has developed a theory of learning that he has termed single-loop and double-loop learning, concepts that we will find very useful later as we discuss creating a learning organization and developing an effective approach to performance management. Cross, R., Davenport, T., Cantrell, S. (2004) engaged in a study of high performers to assess the impact between performance and use of knowledge gained from various sources. From this research they extrapolated numerous approaches for gathering and utilizing knowledge effectively and being able to weed out interference from true knowledge. Peter Drucker (1999) highlights the need for every organization to create a learning and knowledge based organization, emphasizing the evolution from manual work to knowledge work in every industry. He stresses that people are the new valuable asset and that it is paramount for organizations to devise a means to capture the knowledge walking around in their employees. This attitude is one we promote in our people strategy and that we believe is critical to the survival of all. Donoghue, Harris, & Weitzman (1999) present an interesting framework for knowledge management that looks at the type of work that is done and the degree of interdependence between them that is required, highlighting the fact that there is no one right approach. This is a concept that we build upon as we discuss various aspects of our model and one that is borne out by other research that we have done and that will be referred to.

4 Argyris, C., �Good Communication That Blocks Learning�

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Christina Evans (2003) addresses the barriers to developing effective teams and knowledge sharing within teams. In addition, Evans draws on Charles Leadbeater�s principles for creating a knowledge sharing organization and acknowledges the difficulty that managers and other individuals in an organization may have with them given the degree of trust upon which they based. It is some of these roadblocks as well as moving to a new paradigm that is required of all small businesses if they want to move to developing effective people strategies. Jai Ghorpade and Milton Chen (1995) emphasize the complex nature of performance appraisal systems and the need to be extremely diligent in determining appropriate measures necessary for accuracy given the impact such systems have on individuals and organizations. Appraisal systems must reflect organization structure and goals and be realigned if major strategies are changed. Izzo and Withers (2000) maintain that due to the growing sophistication of workers of all kinds, they demand partnership in decision making in organizations today. This is something of a contradiction to much research that has been done that maintains that employees will react to what they are given rather than demanding. However, on the other hand we must agree that we have all seen evidence of disgruntled employees who leave organizations for the promise of something better when they do not feel involved in their role. As such there is a place for much of what Izzo and Withers present and many of their observations provide some interesting bases for developing a people strategy

McLagen and Nel (1996) caution against using vision and values as the means to create common goals and build teams between management and workers and suggest that most individuals are going to resist change that they perceive threatens their own position. They emphasize the importance of ensuring organizations have the right structure, culture and systems in place to support any change. This highlights the importance of performing an �as is� check prior to implementing new strategies.

Jeffrey Pfeffer and Robert Sutton (1999) discuss the significance of the problem resulting from the fact that the large amount of time and money spent on training is often ineffective. They explore the dilemma surrounding the amount of research that is conducted by business schools and others that is never translated into practice. This was certainly borne out in the discussions we had with small business people regarding use of government and other resources they make use of in developing people plans, an area where they know there is a problem. In their research, Pfeffer and Sutton elaborate on the knowing-doing gap5, a concept that emphasizes the difference between information and knowledge, a distinction that is frequently confused. They offer eight guidelines 5 �Knowing "What" To Do Is Not Enough: Turning Knowledge Into Action�

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for turning knowledge into action that include such important imperatives as measuring what matters, a theme that is of great important to small businesses. Robert Schaffer and Harvey Thomson (1991) emphasize the need to focus on results rather than simply implementing activities that may be the hot improvement activities of the day. Their premise, and one that is consistent with much of the other literature we have researched in order to develop our people strategy framework, is that any attempt at implementing an improvement program must be measurable and short term enough to provide evidence to all who are participating and that it does not and should not need to break the bank. This point, at least, is of interest to most small business leaders with whom we have had discussions. The key points in Schaffer�s and Thomson�s results driven programs will help in providing the foundation we are building in our people strategy.

Limitations to the Approach

Due to the relatively short time frame available within which to complete the study there are limitations to assessing the effectiveness of the tools and templates developed for use by small businesses. Although all participants were enthusiastic about contributing and attempted to be as honest as possible in all discussions held throughout the project, it was impossible for them to fully apply and assess outcomes of using the templates in the time available. That remains a work in process. It is important to remember that, as with any change, there will never be wholesale embracement of new systems and processes, but rather a gradual buying in of new things as small wins are achieved and celebrated. In considering the limitations to the implementation of such drastic changes as what a new people strategy might imply, I recall the following passage by Margaret Wheatley entitled �Change, Stability and Renewal�: �It is natural for any system, whether it be human or chemical, to attempt to quell a disturbance when it first appears. But if the disturbance survives those first attempts at suppression and remains lodged within the system, an interactive process begins. The disturbance increases as different parts of the system get hold of it. Finally, it becomes so amplified that it cannot be ignored. This dynamic supports some current ideas that organizational change, even in large systems, can be created by a small group of committed individuals or champions. Certain conditions support this process of change in both molecules and people. The revolutionaries cannot be isolated from one another. They must keep a firm grasp on their intentions and not let them be diffused into the larger system too early. And they must have links to other parts of the system. While this prescription reads like a 1960s handbook on revolution or more recent texts on organizational change, it is, in fact, the governing principle by which self organizing structures evolve. In some ways it is humbling to realize that we have not invented our strategies for change; we have merely discovered them.�6 6 Wheatley, Margaret J. �Leadership and the New Science: Learning about Organization from an Orderly Universe�

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Conversations One of the critical components to the analysis of how the cross section of small companies selected for this study grew was to engage in conversation with some of the employees in each organization. The purpose of these conversations was to determine whether there are similarities in the pattern of development in the relationship between running the business and managing the people in the organization; assess the extent of usage of government sponsored resources and other external sources of information in developing people processes; observe the degree of involvement of employees in decision making, goal setting and communication; to evaluate the level to which systems and processes are formalized; and to determine the organization�s leaders and employees level of satisfaction with the existing people processes in place and/or whether they feel the need for more. Numerous conversations were ongoing throughout the course of the study as premises were tested, options developed and feedback from participants considered. However, the following three rounds of conversations were had prior to engaging in the development of possible workable strategies to ensure I had a reasonable level of understanding of current state, future state and some of the perceived roadblocks in getting to a desired future.

Initial Conversations � The Development of the Organization Initial conversations were with individuals in organizations who were responsible for managing the overall people issues in the organization. The corporate structures of the SMEs that participated in this study were far from uniform and titles and roles fluctuated widely. As a result, the individuals with whom conversations were held ranged from human resource managers to general managers to finance managers to CEOs. Although all are at diverse stages in their corporate and people development, a pertinent starting point appeared to be gaining an understanding of how they have got to the point where they currently have. The questions that we believed it was critical to get answers to in the initial round of conversations were designed to provide a sound bite of the journey that the organization has embarked on thus far and include the following. • How would you characterize your organization in general? • How would you describe the extent to which your organization currently

develops people plans or manages human resources? • What are the formalized aspects of your people planning processes? How

effective are these? • What caused you to develop those processes that you do have?

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• How would you describe your people planning process relative to your business planning process? Are they integral to your short and long term business plan?

• How did you get to where you are today in terms of your people management? Generally, those that we engaged in conversation with believe that their organizations have at least a basic level of strategic direction, have well developed financial objectives and have some operational and marketing planning strategies in place to assist in the attainment of corporate goals. Few have a mission and vision statement and in most cases, where they do have one, only a limited number of employees appear to be aware of it. Human resource planning has been the last area that any of the organizations investigated has addressed. Several respondents indicated that their typical approach to people issues is to �shoot from the hip�, having no standard policies for dealing with any people issues. In many of the organizations in which we communicated with people, job descriptions are missing, there is no standardization with respect to hiring and firing policies, training decisions are haphazard, no process exists for managing or appraising performance and there is little relationship between decisions regarding people and those pertaining to business. Few have formalized any aspects of people planning as yet, claiming that rapid growth has got in the way of dealing with people and that more pressing issues such as responding to customer needs, developing manufacturing and supply chain processes and generally attending to operations are much more critical. Many also agreed that, in addition to feeling that people issues are not central to the businesses� functioning, they are unsure how to proceed and keep getting hung up on linking processes together, lacking clarity on what they should be measuring and not seeing a clear way of measuring the value or effectiveness of people plans. Further, because of the nature of many of these organizations, in which transient, seasonal or unskilled labour is frequently used there is a belief that significant investment in people will be wasted. Interestingly, it appears that only when evidence has been observed that supports employee behaviour detracting from business goal attainment have decision makers admitted some type of intervention needs to occur. Often, their impression of appropriate intervention seems to be an employee handbook that would provide standards for basic behaviour. Actions taken at the point at which managers feel that the need for change is pressing varied immensely with the group with which discussions were held. One participant commented that change in his organization is still fragmented and although he is aware that the organization needs to change, he isn�t sure at what point that need became imminent, indicating that the company had grown from three to 35 employees very rapidly and he had been unable to keep pace with the people management needs over the course of that growth because he

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was too busy working on sales growth initiatives. Some hired consultants to help them assess their needs and have begun to develop plans around recommendations from outside resources, some hired a human resource manager to lead the development and others have continued to apply a haphazard approach. In only one or two instances are decision makers intent on linking their people development plans to their business development plans, either not seeing the need to do this or afraid that they will shift the balance of power or provide employees with knowledge of the business that may be valuable to competitors.

Conversations Focussing on Current and Desired Future State Further conversations were necessary to determine some of the issues standing in the way of additional progress and will be useful as templates are developed to move people planning beyond its current barriers. Keeping in mind that people planning is not top of mind in most of the organizations participating in this project, many of the following questions have not been answered at this juncture but will be revisited further in the process. • What are the most important issues facing your organization? • How do these issues affect you and your ability to focus your team? • What can you do to address these issues or the roadblocks to addressing

them? • What support is currently in place to facilitate your doing your job and leading

your team? • How would you evaluate HR support currently? • What would you describe as the core competencies required by your

employees? • How do you ensure these are built on? • What do you need to do to attract top calibre employees to your organization? • How would you describe the current performance management process in

your organization? • How are people rewarded for excellence? • Describe the current system of communication in your organization? How

effective is it? • How do employees respond to change? Conversations were held at various levels in the organization to assist in the quest for greater understanding of how people practices are viewed. There is general agreement among participants that the major issues they are facing relate to competition, quality service, making best use of scarce resources, creativity and innovation and clarity and congruence of goals between departments. There is very little time to focus on team building and because there are no, or limited, formal people plans in place and typically no human resource expert, there is a great deal of frustration in the time it takes to manage

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employee issues, set individual goals, measure these and communicate results to individuals. Because individual goals are often not established, performance is not measured or rewarded objectively and there is an overwhelming fear that many high performers may be at risk of leaving. Change is often received with scepticism and viewed as �the flavour of the day�. Without exception, no one was able to articulate necessary core competencies beyond such general statements as customer service oriented, good work ethic, honest, and a team player and there are no measures for assessing these either during the hiring process or on an ongoing basis. However, there is general consensus that high calibre employees are sought and most are worried about ensuring they are able to retain these high calibre employees. In most instances employees below a senior level are unaware of the businesses� goals, how they contribute to the attainment of them and do not feel they participate in decision making. However, based on conversations with employees, on an individual level, many are satisfied that they have good rapport with their supervisors, believe that communication exists between themselves and supervisors, are proud of the work that they do and are committed to customer service. Very few feel it is their responsibility to reflect on and possibly refine how what they do really contributes to growth, believing rather that their contribution ends at performing their role well and getting paid in return. Izzo and Withers (2000)7 would argue that today�s workers are clamouring for partnership in decision making, demanding independence and ownership for the contributions they make. On the other hand, Argyris (1994)8 maintains that management gets the responses it wants, citing differences between single and double loop learning as being at the root of employee response to management. Where management views the employee population in a traditional hierarchical way, there is no incentive for employees to venture outside of their comfort zone, taking a risk that offering an opinion may raise. Both Izzo and Withers and Argyris would agree, though, that if organizations are to survive in today�s competitive environment, that absolute responsibility for behaviour is critical at every level. I offer that, the conversations had to date for this study, lead to the conclusion that management typically has conservative opinions of the extent to which employees impact the business and their attitude towards employees perpetuates these beliefs through continual reinforcement of an isolated approach to people planning.

Conversations to Assess Current Use of Outside Resources After observing feelings of participants as they relate to current and future desired state and having gained a taste for some of their frustrations, we were curious to assess the extent to which decision makers� act upon their view of their organizations� gaps in people strategy. This round of conversations was to 7 Izzo and Withers, Values Shift, Ch 7, �The Expectation of Partnership� 8 Argyris, C. �Good Communications That Block Learning�

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determine the extent to which these builders of people plans utilize and respond to the various resources available to them and which resources they are most frequently drawn to and to understand why. Some of the questions asked in the course of these discussions held with the individuals include the following. • Are you aware of any of the tools provided through federally sponsored

programs in the development of human resource plans? Have you ever done a key word search to find any of these? Why/why not?

• Would you consider using any of these tools? • Have you ever investigated any other resource pool such as CAFE (Canadian

Association of Family Owned Enterprises), university run incubator centres or small business centres for excellence or bank sponsored small business centres for excellence?

• What resources have you used in the development of the people plans that you do have in place? How would you characterize the effectiveness of these?

Before engaging in any conversations regarding use of outside resources, numerous government sponsored and other websites were investigated to gain understanding and provide some context for answers received and to enable informed discussions with the individuals. Following is a summary of those sites visited and a brief overview of findings.

Federal, provincial and numerous municipal governments all promote online support mechanisms that have been developed by them for access by business. In fact, there is a maze of websites, many of which are linked to others. At first glance, there appears to be a plethora of accessible information for use by small and medium sized enterprises (SMEs) in the development of human resource plans and people strategies. Numerous hours were spent book marking what were perceived to be useful websites that could be accessed to assist in the development of comprehensive people planning templates for use by the small to medium sized clients whose needs are the focus of this project. This was a frustrating exercise that, in general, provided limited access to useful information or tools without having had invested many additional hours in research. This point was borne out in conversations with potential users of the various websites in their quest to access information for building their organizations.

One website that appeared to be a comprehensive approach to human resource planning was that sponsored by The Alliance of Sector Councils (TASC) whose mission is: • To promote the value of sector councils • To provide a forum for sector councils • To help sector councils link to governments and other relevant organizations • To collectively carry out sector council decisions of common interest.9

9 The Alliance of Sector Councils; www.councils.org

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TASC is funded primarily through Human Resources Development Canada and its membership is comprised of organizations from 29 different industry sectors from across Canada. TASC�s resources appear to be somewhat piecemeal in spite of the fact that they have been in existence for over 10 years. A key word search for Human Resource Planning revealed a cross-industry document that was available in French only and identified one for the environmental sector available in English only.

Various regionally sponsored sources included Business Development Corporations funded by numerous city governments that contained basic business information and links to local resources for additional support and advice for small organizations as well as providing basic business planning templates and some, usually dated, statistical information. The Government of Canada sponsors one such initiative in Atlantic Canada, for example, through the Atlantic Canada Opportunities Agency (ACOA) which provides company profiles and case studies but is only as current as 1995.

It quickly became obvious that the Government of Canada has and does provide extensive funding for numerous websites devoted to small and medium sized businesses. However, it also appears that there are few guidelines and little criteria for ease of access, applicability and currency of the information that is ultimately provided and maintained. That said, further searching did lead to a couple of additional sites that are reasonably user friendly, provide excellent links to related websites and in themselves are quite comprehensive and which lend themselves to facilitating the development of an excellent, albeit basic, people plan.

One such resource that exists is through Industry Canada, which provides a comprehensive resource; http//www.strategis.gc.ca is a business and consumer website devoted to various aspects of being involved in business in Canada from either side of the labour force. Specifically, our area of interest was the various links that appeared applicable to employers and related to managing people. The website�s approach to business topics is a tactical one that provides basic information necessary to address in developing a human resource plan. Its section entitled �Human Resource Management� appears to be a concise reference tool that provides an overview of the recruiting process, e-learning options, administration issues, employee relations, and making major decisions.10 Each of these individual subject areas contains useful information and provides easy links in each. For example, the recruiting portion provides information on the use of e-hiring aids and provides links to various e-recruitment vendors as well as automating in-house practices. In addition, this section addresses such issues as hiring summer students, the immigrant work force and seasonal employees. The e-learning segment highlights the efficient use of resources in applying such training methods as well as elaborating on statistical information regarding use of training by SMEs. It also provides a link to the 10 Government of Canada; www.strategis.gc.ca

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Canadian Federation of Small Businesses, the source of statistical information that may be of use to small business owners. Unfortunately, for access to the Federation�s surveys and other resource information the business is required to become a member of the federation. The useful information contained in each of these links that can be pieced together to assist in building a framework for a human resource plan is quite impressive. Most intriguing and at a more strategic level than many of the other sections was the �Human Resource Planning� piece that is subdivided into four areas: Overview of Human Resources Planning; Forecasts and Trends by Occupation; Forecasts and Trends by Industry; and, Options for Addressing HR Issues. The overview is quite impressive with information on the need to address people requirements, developing job descriptions, steps in developing a plan, competency requirements in one�s workforce and how to determine and assess these and, interestingly, use of diagnostics in human resources to assess human resource capability against other strategic measures in the business. The diagnostic is easy to use, provides an excellent tool for use by employees across an organization and that could be used to aid in a gap analysis in an organization�s human resource plan. Results from the answers to the questions submitted by the respondent are provided within seconds. The �Options for Addressing HR Issues� section provides links to flexible work options, job quality indicators including issues pertaining to rewards and recognition, work load issues, satisfaction and demands on work-life balance to name a few. All contain access to survey and other statistical information compiled from the results of relevant and current studies in each of these areas. In addition, very specific assistance with labour market information such as developing job descriptions, regional pay scales, hiring and firing information, training and development, health and safety, payroll and numerous other related topics is provided through various links. There are no charges for participating in any of the diagnostic exercises, accessing information gathered through surveys or obtaining factual information, rules or laws as they relate to hiring and firing and other workplace issues The strategis website link to labour market information, an interactive tool that provides access to language pertinent to building job descriptions, provides wage scales for regions across Canada and highlights availability of types of skill, promises to be a useful link for many day to day issues in small business. However, this link has been inaccessible for several months now, stating that the Labour Market Information website is currently undergoing maintenance which is quite frustrating as it could be a significant resource for building a great deal of the tactical components of a human resource plan . The Business Development Bank of Canada (BDC) provides a more limited source of free information. The BDC appears to have a significantly different

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mandate and encourages visitors to contact a BDC consultant to formally advise on business and people planning issues. As such, the website provides access to consultants who can assist the interested business to build the necessary plans it requires to succeed, grow or compete but provides little in the way of hands on tools for use internally by the business with the exception of basic business planning templates that are available to download onto one�s own hard drive but that do not elaborate specifically on the importance of developing a comprehensive human resource plan and people strategy as part of this critical business tool. However, the BDC site does provide links to numerous of the Government of Canada, strategis websites and related tools discussed previously. Discussions with our key individuals revealed that without exception, from the most unsophisticated, in terms of systems planning and implementation, to the most sophisticated, all are aware that there are sources of government assistance and information from which people plans can be developed. However, very few of them use these resources extensively and many, almost never. Those who do use government sponsored websites use them for specific, tactical purposes only including employment standards policies and related issues, information regarding privacy legislation, information regarding grants for hiring immigrants, regulations regarding seasonal employees and summer students and laws around pay for statutory holidays worked. As a quick reference resource, all believe that government and related websites are an ideal source of information that can be relied upon and are viewed as current. When asked about use of tools for building people plans all agreed that they did not consider government websites a good source of planning tools. One significant negative feeling raised in discussions was that users believe the tools lack the flexibility necessary to recognize different needs based on unique industry and growth needs and which include focus on competitive pressures, economic factors, labour market constraints and the impact of technology in their environment as these issues relate to people. In addition, relative to the value created, they felt that the use currently made of the information was as far as they will go due to the fact that using these websites any more extensively becomes very time consuming, one needs to be able to articulate exactly what one wants and yet is still likely to gain limited insights when researching complex issues. Hence, unless one already knows what the components of a potential people plan may contain and is clear on the words used in a key word search, the websites are unwieldy and frustrating. When planning tools such as the �people diagnostic� and linked reference and planning sections were pointed out, the general feeling was that they would be uncertain what to do with the results and believed that the advice offered through the website assumed the user already had a significant level of familiarity with people planning. Very few other formal resources are used with the exception of a few of the respondents who have a human resource background and who are members of various human resource associations. These individuals find that

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their associations can sometimes be a valuable source of information. Interestingly, consultants are used quite frequently by most of the small businesses participating in the study for various business needs including people planning. However, conversations with at least two individuals revealed that they had so many consultants engaged, providing piecemeal advice in so many diverse areas that their businesses seemed to be running less, rather than more, effectively. That said, a few have effectively utilized consultants to assist them to initiate the development of a people plan but also cited fees as being a deterrent to significant engagement, fearing that the cost will override the benefits in an environment where cost control is important. More striking than cost constraints is a general belief that people are not as high on the list as other aspects of business compounded by a fear that many aspects of a people plan will dilute power through greater access to what is perceived to be confidential information. Those individuals whose role is as a conventional human resource manager rely on their network of other human resource professionals for advice both through their membership in professional associations and through private networks that they have established. Interestingly, in most instances, where a human resource manager has been hired, it is due to the advice of consultants who had been engaged previously. The singularly, most frightening plan for human resource development as identified by respondents is that of trial and error. All agreed that it is probably not the ideal way to proceed; however, given the lack of expertise, perceived or real lack of attainable resources, shortage of time and other �best� uses of money it appears this approach will prevail in many instances.

Conclusions Many of the individuals with whom conversations were held are frustrated by their organizations� inability to attract and retain outstanding people, poor communication, inability to develop effective teams, lack of consistency in performance management, non-existence of hiring and firing policies and inconsistent pay rates and reward systems. In addition, they are frustrated by employees� lack of commitment to excellence in the work they do, lack of knowledge sharing, sense of team and contribution to corporate goals. However, either they do not see the broad impact that these issues, which they have clearly identified, have on the businesses� success or the relationship between the two or they are sceptical of introducing yet another attempt at �quality improvement�. As Schaffer and Thomson (1991)11 maintain, improvement programs in organizations are often conducted in isolation and are activity based rather than results based, the rewards from which do not materialize and typically culminate

11 �Successful Change Programs Begin With Results�, Schaffer and Thomson

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in even further frustration and significant expense. This point is borne out in the statements made by participants in the survey whose experiences with implementing disjointed measures such as developing employee handbooks, hiring consultants for piecemeal projects, and enrolling staff in various training courses has resulted in frustration. In addition, there is a common belief that the only way to attract top talent is to pay top dollar and in order to keep them, they must continue to throw money at them. Most agreed they are not in a position to engage in a bidding war with large employers and cannot perceive that there may be other ways in which to attract and retain. Consider Westjet Airlines, though, an employer of choice that is well known for paying below market rate for most positions. Most of the individuals with whom we spoke appear willing to make some changes. They realize they have hit some kind of wall that increased sales, the addition of technology and increased advertising have not provided them with the means to scale. They are well positioned to change. The leaders understand business issues. They talk a common language, one not unfamiliar to any business person and found in most business texts. They start out with the right approach � the mission and mandate are articulated by the leader, often the founding entrepreneur; the external environment is examined and helps determine the strategic direction the company will take to accommodate influences. All agreed that milestones are very useful in assessing goal achievement and are part of any sensible business plan. Measures include gross revenue targets, expense controls, profitability, resource allocation and mechanisms to adjust plan to actual. However, there are three glaring problems: infrequently do discussions regarding direction go below the senior management team, little attention is paid to the impact the internal environment has on strategy and there are no objective means to measure the contribution people make to goals.

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People Strategy: The Basis As indicated previously, the people inside an organization cannot be viewed separately from any other business decisions and most specifically a people strategy must complement an organization�s culture and values and be reflective of the organization�s mandate and mission. An organization�s mission can be defined as its reason for being, highlights the business it is in and provides the framework for what sets it apart from its competition. The mission is typically articulated by the president and board of directors and is communicated to the senior management team. It should be the credo by which the entire employee population is guided but all too often those below the senior level are unaware of the organization�s mission. An organization�s culture is a product of its collective values, ethics, beliefs and norms and is impacted by everyone in the organization whether they have a formal voice or not. For example, a seasonal worker in our health and fitness organization has the ability to impact how customer service is delivered through their interaction with members regardless of whether they understand or espouse corporate values. It is paramount upon corporate leaders to drive the organization�s culture and establish its values through example, communication and commitment to appropriate people programs. This is often difficult for the leaders in owner managed or entrepreneurial organizations as these people are typically very hands on, tend to micro manage, are running a mile a minute, have traditionally established a hierarchical communication channel and do not trust others with confidential corporate information. This was clearly illustrated in the culture observed at our distribution and sales company where the owner has fought to grow his company from three to thirty five employees in a very competitive market, has struggled to survive at times and is reluctant to relinquish control to someone he fears might put what he has achieved at risk. He worries that the bulk of his employees do not have the same commitment as he has to achieving the company�s financial goals, to realizing the same commitment to outstanding customer service and to putting the same degree of effort into resolving issues. At this point he should worry as he is communicating an expectation of performance to the employees in his organization of substandard contribution and for the most part they are and will continue to live up to expectations that are set. When any organization grows, change is required; change to the involvement that the leader has in the business, change to the way decisions are made, change to the way communication is handled and change to the way successes are measured and rewarded. However, the need for change must be recognized along with the fact that most people resist change. Senior management must acknowledge the need and commit to championing it. It will take time to develop trust and confidence; and communication is the glue that binds the alignment of people strategy with business strategy. There are a number of ways to

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implement change and there is not a right or a wrong way. One member of the human resource consulting firm that participated in our study lamented that the changes that they have made so far in response to their rapid growth has been too slow and caused far too many growing pains while another indicated that if they had gone a little slower they would have met with less resistance. Regardless of which approach is taken a few key points remain the same � share information, involve employees in decision making and celebrate successes. Celebration of success requires a measurable achievement. As we discovered in numerous of our conversations, attempts have been made to incorporate various piecemeal people programs into the many of our participant organizations� activities but with only limited success. In addition to full commitment by the leaders, acceptance by the workforce and ownership by both, it is necessary that the people strategy has a basis that is grounded in measurable results if any party is to buy into it as most were unclear as to whether the benefits outweighed the costs. This requires that a system be developed that links human resource goals to larger strategic business goals and provides tangible measures of success. It is not enough that our high tech organization claims that it has a goal to hire only the best and most creative. It must determine what the measures of that goal will be and what attributes, skills or competencies define best and most creative. Kaplan and Norton (1996) developed an approach to measurement that went beyond traditional financial measures in what they termed the Balanced Scorecard approach and which requires that leaders focus on what drives these financial results. The Scorecard presents four distinct perspectives that provide the balance required in assessing and driving performance. These include financial, customer, internal business processes and learning and growth.12 Kaplan and Norton maintain that it is much more effective for businesses to focus on multiple measures and that contrary to popular belief this way of thinking contributes to the development of a holistic organization rather than detracting from it as many believe and which is a common attitude among our study participants. The following is a somewhat simplified illustration of the approach that Kaplan and Norton advocate in specifying the specific drivers that contribute to financial success and articulation of which are critical to the effective use of the tool that is the Balanced Scorecard. The illustration utilizes some of the objectives that were stated as important in discussions with one of our participants. Although one of this organization�s objectives is to increase revenue, its strategy is not one of low cost sales leadership but to maintain and build on its existing customer base through exemplary customer service. An organization�s choice of strategy is a key point to remember as people plans are developed, given that strategy is very closely linked to all aspects of such plans. This will become evident as we begin to populate the various sections of the people strategy. 12 Kaplan, Robert S. and Norton, David P., The Balanced Scorecard.

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Figure 1: Strategic Drivers

Process Learning &Growth

CustomerFinancialVision

&

Strategy

Objectives

Measures

Targets

Initiatives

Increase revenuesIncrease efficiency andtimeliness of transactionprocessing

Increase customer knowledgeand awareness

Improve customerservice

�Sales improvement

�Cost reduction

�Reduce variable expenses 6%

�Increase sales 10%

�Engage in waste reduction plan

�Focused marketing initiative

�Improved purchaseorder processing

�Improved billings

�Reduce order timeby 15%

�30 day turnaround

�Initiate interdepartmentalcommunication

�Implement new process

�Greater familiaritywith products

�Update skills

�12 hours product knowledge per employee

�$20k for leadershiptraining

�Monthly lunch and learnsessions

�Team building workshops

�Repeat business

�Fewer returns

�Repeat customersup 10%

�Reduce returns 15%

�Initiate cross sellingprogram

�Reward quality ideas

Adapted from Kaplan�s and Norton�s Balanced Scorecard, 1996 We have not identified the specific costs associated with each of the initiatives identified in the illustration above. Although this is an important step according to Kaplan and Norton, we do not have enough background on any one of our participants to calculate this. However, as long as targets are measurable, cost of the initiatives should be relatively easy to extrapolate. Becker, Huselid and Ulrich (2001) have developed a very useful parallel between Kaplan�s and Norton�s Balanced Scorecard and the human resource function. They state that: �To integrate HR into a business-performance measurement system, managers must identify the points of intersection between HR and the organization�s strategy implementation plan. We can think of these points as strategic HR deliverables, namely, those outcomes of the HR architecture that serve to execute the firm�s strategy�..These deliverables come in two

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categories: performance drivers and enablers.�13 There is not a standard set of performance drivers. Rather, these are based on each organization�s strategy. Therefore, if we consider our previously cited participant�s strategy of building its customer base through exemplary service, a performance driver for their organization might be motivated employees. The enabler that supports this driver might be hiring and training practices that identify such attributes as team work and decision making. If we carry this one step further and refer to the Initiatives section in Figure 1, if the initiatives are developed with input from employees at all levels in the organization and if the purpose of each is clearly communicated and progress is recognized we should see both the enabler and the driver working positively in a synchronized manner. I recall some work that I did with one of Canada�s major financial institutions a few years ago in which my role was to assist management with a downsizing initiative that had been planned. When I enquired as to the reason for the massive downsizing I was told that the bank�s focus was changing from one of customer service to sales and that, after considerable observation, all those whose employment was being terminated were not selling a sufficient number of new services. These employees were continuing to focus on what they had always done and performance had always been measured on customer satisfaction and accuracy. Although they had been told repeatedly that the focus must change, the corresponding enablers had not. Let�s consider this relative to the enablers that Becker, Huselid and Ulrich have brought to our attention. When these people were hired, hiring decisions were not based on their ability to sell, but rather their ability to process transactions efficiently and accurately; training programs had always been based on transactional activities and many employees were unfamiliar with the new services the bank wanted them to sell; supervisors did not know how to counsel them to change their behaviour; and, rewards were still based on accuracy. If we link this example directly to Kaplan�s and Norton�s model it is evident that initiatives had not been put in place that linked the new strategy, measures or targets to a successful outcome. Very little in this scenario supported a change in behaviour that would have resulted in increased sales providing the evidence that the development and implementation of initiatives (the people part) are critical to moving strategy forward. In addition, and a point which I made earlier when I briefly introduced the concept of change, communication is critical as an ongoing activity in this model if people are to understand what the initiatives mean to them and how they can participate in the development of ideas that will lead to initiatives that work. The following model14 provides us with a high level view of the people management process as it relates to corporate goals and forms the framework for the development of a process template. This also illustrates how individuals can be aligned with the organization to establish interrelated goals and is quite similar to the model developed by Becker, Huselid and Ulrich. 13Becker, Huselid & Ulrich, The HR Scorecard, pg 30 14 Adapted from KPMG Process Improvement Methodology, 1998

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Figure 2: Linking Business and People Strategies

Mandate and missionas articulated by CEO

Communication:Share with employees

Objectives & strategies

Communication:Share with employeesWhat is their expected contribution?

Critical success factors

What do we need to do well?What skills and expertise doour people need?

Knowledge sharing

Performance measures& targets

Key initiatives &resource allocation

Establishing �SMART�objectives, personal development plans

Feedback, fine tuning,training

Relationship Between People and Business Goals

Source: KPMG Process Improvement Methodology Here, we have taken the basic principles around organizing business goals on the left and aligning them with the people perspective on the right. One of the keys to developing an effective human resource system is to continually look at both together to ensure that they are in concert with each other. Once senior management has recognized the link between the two, communication of the need for change can begin and employees can be involved in the change process to ensure that they too buy into the change and that they are bringing their knowledge of workflow and its processes to bear in the development of appropriate measures. For example, while it is possible to apply this template to any organization that is change ready and the identification of critical success factors is important in any environment, these will likely be very different in each organization. In any case though, front line employees will have valuable knowledge to impart as to what these critical success factors are as well as a good understanding of what some of the skill gaps are in achieving these. Detailed discussion of critical success factors and the identification of how they pertain to the development of individual performance plans along with the establishment of performance measures and feedback mechanisms will be left until a later section in this paper. At this point, my emphasis is on building the necessary framework to encourage this, to illustrate how individual and corporate

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plans are linked and to ensure that the identification of the need for change is established.

Understanding Change As with any change, it is critical that there be a sufficient sense of urgency created to generate a belief that change is necessary.15 Kotter (1995), a leading expert on organization transformation, suggests that this step in any change initiative, while appearing simple, takes a great deal of preparation and commitment. The cooperation of many is required, communication is essential and a champion who has respect and clout must be identified. Change typically does not happen quickly as �(m)anagement�s mandate is to minimize risk and keep the current system operating. Change, by definition, requires creating a new system, which in turn always demands leadership.�16 The entire senior management team including the founding entrepreneur must be ready and committed to making a people strategy work. The founding entrepreneur is likely to have the greatest difficulty given his or her emotional ties to the organization that they built and their reluctance to share control with others. This team must be willing to explore the relationship between people management and business goals and corporate strategy in order to clearly understand it themselves prior to promoting the plan throughout the organization. If we consider the case of the high tech firm, whose new CEO we had some discussions with, we can find a prime example of the need for strong leadership in leading a change initiative. This is the case of an organization that came close to failure in spite of the fact that it was a pioneer in its field and manufactured only the highest quality product. The senior management team knew the company was in trouble: sales were down due to the influx of new competition and profitability was declining. The decision was made to increase marketing efforts, increase productivity and reduce the time spent on researching potential new products, at least in the short term. The former CEO and founder of the company was a gifted inventor and loved to research. Unfortunately he made two serious errors with respect to the necessary change. He was unable to change his own focus from research and development to the new sales orientation and he neglected to communicate the sense of urgency to change that was required. Without the CEO leading the change and not understanding the magnitude of the problem, the company continued to falter to the point that the Board of Directors replaced him, cut staff by half and the organization is currently attempting to rebuild itself. Kotter has identified eight such significant errors that are typically made when organizations fail to make the changes they need to make and has developed an eight stage process to ensure the creation of successful change indicating that if the barriers that result in errors are not addressed well, the desired change will 15 Kotter, �Leading Change: Why Transformation Efforts Fail�, 16 Kotter, pg 60

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not happen. The following model (Figure 3) provides an illustration of Kotter�s process for success. Figure 3: The Eight-Stage Process of Creating Major Change

2. Creating the guiding coalition: put together a group powerful enough to lead and get the group to work as a team

1. Establishing a sense of urgency: examine competitive realities and identify crises and opportunities

3. Developing a vision and strategy: create a vision to direct the change effort and develop strategies to achieve

5. Empowering broad-based action: get rid of obstacles, make appropriate changes to systems and structure, encourage risk taking and creativity

6. Generating short term wins: plan for visible improvements in performance (wins), create wins, recognize and reward

7. Consolidating gains and producing more change: use new credibility to effect incremental change, develop those who can implement the change vision, reinvigorate with new projects, themes and change agents

8. Anchoring new approaches in the culture: create better performance, leadership and management, articulate connections betweeen new behaviours and organizational success, engage in leadership development

4. Communicating the change vision: use every communication vehicle possible and ensure leadership team provides example

Adapted from John P. Kotter, �Why Transformation Efforts Fail�, Harvard Business Review (March-April 1995)

Kotter cautions that the process must be followed sequentially, that steps cannot be missed and that the whole exercise is not a race. His change process highlights the need for structures that support, effective leadership, communication and celebrating successes which are all consistent with the requisite conditions we have discussed so far in our study of developing an effective people strategy.

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People Strategy: The Framework An overall people strategy consists of a number of people system levers. Each of these levers relates to a specific category that defines the needs and wants of employees. There are basic people programs and systems included within each category that can be tailored, with a minimum of effort, to the specific environment of any small organization in designing its people strategy. The categories within a people strategy are characterized in Figure 4. Figure 4: People Strategy

Rewards&

Recognition

OrganizingWork

Accountability&

Flexibility

WorkEnvironment

Selection&

Deployment

PerformanceManagement

Learning&

Development

Clarity&

Communication

PeopleStrategy

Source: Stevenson Frail Associates, 2005 Prior to reviewing the various people programs and systems that might reside within each of the people strategy nodes it is important to understand why there may be fine tuning requirements for each program depending upon a number of factors but most specifically on the external environment in which the organization operates and the culture that exists internally. Following is a summary of how the external environment may impact plans and an organization�s ability to succeed. Cultural impact will be discussed in a later section.

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Impact of the External Environment Daft (2004)17 maintains that an organization�s external environment has a significant impact on how the organization chooses to react and that the internal environment and the organization�s overall strategy and structure should respond accordingly. The area that an organization chooses to operate in is defined as an organization�s domain and consists of those external sectors with which the organization must interact in order to carry on its business. Typically, an organization�s domain consists of task environment sectors with which the organization relates directly and general environment sectors which influence the activities of the organization indirectly. The following illustrates the domain as Daft sees it. Figure 5: Domain

Inter-nationalSector

Socio-culturalSector

GovernmentSector

EconomicConditions

Sector TechnologySector

FinancialResources

Sector

MarketSector

HumanResources

Sector

Raw Materials

Sector

IndustrySector

Organization

Task Environment

General Environment

An Organization�s Environment

Source: Based on Richard Daft, Organization Theory and Design, Thomson Southwestern, 2004. • The international sector impacts almost every organization today given the

aggressive competition from companies in other countries, is not limited to infusion of product but could also include entry into new markets or acquisition of a competitor. For example, one of our participants, a chain of small retail stores in the sports industry in a resort town faces growing competition from large U.S. chains that see the town as a lucrative place.

17 Daft, Organization Theory and Design, Ch 4

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• In the industry sector, another of our participants that is in the sports and recreation facility business has seen aggressive growth into related areas by several of its competitors and is at risk of eroding its membership base unless it can remain competitive.

• A retailer participating in our study has had increasing trouble assuring delivery of product (their raw material) that has been ordered because better and easier terms can be assured with larger stores.

• The human resource sector, and the focus of our study, is of increasingly significant concern to all employers. One of our participants, operating in a niche market in the high tech industry is struggling with extreme competition for highly qualified workers.

• Another of our participants, a manufacturer and seller of fitness equipment is struggling to compete with chains such as Wal-mart in the market sector that, through aggressive pricing and hard line demands on their suppliers, have introduced lower priced equipment.

• The financial resources sector is a major focus of concern for all our participants, a few of which are still in start up mode but all of which have financial stakeholders to answer to. This is also a sensitive area for many, given that they may not want to share financial information with employees.

• Technology is a sector that is growing in its influence and Daft�s model, although developed as recently as 2004, may already be outdated given the impact of technology is increasingly becoming such that this sector should perhaps be included in the task environment. Technology impacts many of the other sectors including human resources, market and international. For example, it is very easy for employees to compare their salaries to the salaries of others in a similar role due to the growing number of websites through which anyone can access salary survey data.

• Economic sector conditions require the ability of all companies to engage in ongoing planning that will enable them to adapt to changes. One of our participants in the human resources consulting sector and which focuses on career transition for individuals who have lost their jobs must assess its ability to develop and deliver other human resource consulting services given the very low unemployment rates that currently exist across the country.

• The government sector has had a growing impact on most organizations and without exception, participants in our survey have commented on the additional constraints and work imposed as a result of privacy legislation recently introduced in all jurisdictions in Canada.

• A number of our participants operate in an industry that is related to health, fitness or recreation in some capacity. As baby boomers age, each may need to investigate the impact of the socio-cultural sector on their markets.

The previous illustration of the impact of the external environment on organizations will allow management to assess the degree of complexity and change within which they are operating and design their strategy and structure accordingly. Depending upon the intensity of change and the environmental complexity within which an organization operates, the organization must consider

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how agile and flexible it must be. For example, our retailer in the resort town operates in an environment that is constantly changing and with a high degree of unpredictability due to the steady influx and outflow of competition, their relationship with the fashion industry and ebb and flow of seasonal help but also operates in a very simple environment as the external elements with which it must interact are relatively few. As such, its structure would be best suited to a flat, relatively informal hierarchy that facilitates the participation, communication and knowledge sharing among groups required to ensure the flow of ideas and observations among employees. Daft cites Burns and Stalker when he summarizes such a structure as organic, in which there are few rules and there is a great deal of flexibility around task ownership, relying on teamwork and an expectation that employees throughout the organization have an important contribution to make. Unfortunately, though many of the organizations with whose members we had conversations have a flat hierarchy, they do not take advantage of the dexterity that the characteristics of an organic organization offers, remaining wedded to the more traditional mechanistic approach where authority is centralized and tasks are clearly defined with little or no encouragement of significant contribution by those below the senior management level.18 This is not to say that there is only one appropriate design but rather to point out that organization design issues have many facets including people that should be considered. Such an assessment is not devised specifically for human resource planning. The point here is that business planning includes human resource planning and that any people strategy should, by its very nature, be linked. No planning is effective if it is piecemeal. However, when this type of assessment of an organization�s environment was discussed with study participants, they admitted that with the exception of such aspects of human resource planning as attracting employees in a competitive labour market they had not thought about people in these terms. Certainly, in the case of the retailer, they agreed, when asked, that they typically review and assess the impact of the various factors in their environment when making business decisions such as they relate to aspects like buying, marketing and expansion but have never considered how or why their people planning practices come into play.

18 Daft, pgs 148-149

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People Strategy: The Methodology This section focuses on the detail behind the people strategy framework illustrated in Figure 4, the intent being to elaborate on the people programs and systems that populate the framework. Although the illustration is circular, perhaps indicating that there is no one starting point, the intent here is to indicate that, once started, there is no stopping point. The process is continuous and requires ongoing fine tuning. As such, we have started with what we believe is an appropriate chronological order of attention in our discussion of the various nodes on the wheel.

Organizing Work There are a number of ways in which work may be arranged in an organization. Primarily, how work is organized depends on the structure that the organization selects as most appropriate for its culture, strategy and values. In the case of all the small companies from which representatives engaged in discussions with us, corporate structure has evolved from early beginnings in which there were few employees but a defined hierarchy populated with a senior management team that made decisions and employees that carried out specific assigned tasks. With a few exceptions, in most instances a traditional hierarchical model remains in place in those organizations with which we have had contact in this study. This may or may not be compatible with the organization�s direction today; however, it is more likely that this is a remnant of earlier days when size made this structure quite appropriate. In reality, this may now hamper the company�s ability to be agile, a competency that most organizations need in this competitive global marketplace. Such a structure is not conducive to collaboration, team effectiveness, or unsolicited ideas from below that may lead to creative solutions to issues, all of which must be kept in mind as leaders think about the potential interrelationship between people strategy and the larger business strategy. There are numerous structures to consider in designing the most appropriate for an organization. Structure is primarily used to define formal relationships between members in an organization, identifies the grouping together of employees into work teams or departments and includes some kind of mechanism for communication between departments.19 For the most part organizations structure more vertically or more horizontally depending upon the need for interaction and team work between groups. There are also variations of the vertical or horizontal structure that include a matrix or modular grouping of cross functional and/or geographic members; a functional structure where employees are organized into groups by the type of work they perform such as marketing or production; a divisional structure where people are grouped

19 Daft, pg 86

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according to product mix; geographically; or in a hybrid structure that is some combination of these. The organic structure that was highlighted in the section entitled �Impact of the External Organization� is an example of a horizontally oriented workplace that lends itself to a fast paced environment where change is constant and new ideas must be created and shared. An organic structure is characterized by collaboration, communication, innovation and risk taking while a mechanistic structure is designed with efficiency in mind and is best in a stable environment where little collaboration or innovation is required. The key in determining appropriate structure for a small company is to assess the operating environment and organization goals to determine the amount of agility required. In addition, appropriate communication channels must be identified regardless of the structure selected if groups are to be successful and achieve what is expected of them. Finally, the leadership must be ready to share some of the decision making that a less hierarchical organization requires if it is to make any changes at all. Corporate structure should be revisited regularly to ensure that it is designed and remains appropriate to effectively support the organization�s desired culture, its strategy and enable it to respond to the forces exerted by the external environmental. In some instances this will require a dismantling of the existing structure that potentially inhibits the achievement of new goals. Organizations must be steered to the state they desire rather than evolving in a potentially harmful way. Following is a story paraphrased from a discussion we had with one of our participants from the human resource consulting firm. It highlights the importance of structure to the goals and strategy of the organization, along with the need to ensure appropriate communication, the fact that any change takes time and that the organization�s culture often must be redesigned. The current organization structure in the consulting firm is very new and likely still evolving. It appears to be somewhat complex and is definitely confusing to a number of employees. The intent of the new structure is clear. The old structure was not aligned to the organization�s strategy. Symptoms included practice area silos, overlap of services and competition between geographical groups in the organization, duplication of administrative practices and lack of consistency in titles, compensation structure and other related issues. The new structure is designed to integrate the silos into one �go to market� firm, provide opportunities for contribution to innovative and creative new service offerings, provide expert support to regional offices and provide a platform for future growth. The new structure consists of both a matrix and geographical design. The old structure contributed to competition between groups, which was not healthy either internally or externally. The competition led to rivalry and undermining each other internally which resulted in dysfunctional behaviour at times. From an external perspective, the best quality service was not always delivered � some clients had to settle for mediocrity because consultants had sales and positive

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variance targets to meet. With the new structure, the old silos have been dismantled but it remains to be seen whether new silos will replace the old. The CEO has articulated that, in addition to designing and implementing a new organization structure, it is critical that a new culture be created to ensure the employee population is an engaged and motivated group aligned to the organization�s strategic direction and that is customer oriented. Unfortunately, the underlying strategy is to increase sales as the CEO believes that sales are the basis for success in any organization. In addition, performance continues to be measured by the magnitude of sales generated by individuals and recent promotions were given to those people who achieved specific sales targets. One might question how the new structure will contribute to innovation and creativity when new measures of success have not been introduced and when the strategy remains sales focused rather than customer focused. Although this may be the first step in designing an appropriate structure much work still remains to be done. If the combination of the matrix and geographical structure is to be effectively applied, attention must be paid to a cross section of capabilities of those assigned to the various matrices from across the country; measures of assessing performance and rewarding actions must be adjusted to reflect new goals; new hires whose capabilities lend themselves to contributing to the new teams must be made; and, the CEO must change his own views and communicate his commitment to innovation and team work by continuing to make changes to the entire people strategy if the new structure is to work effectively and contribute to his vision.

Selection and Deployment In assessing future people needs in the organization it is important that, once strategic objectives have been assessed, significant thought be given to the type of behaviours that are necessary to meet these goals. This requires that an inventory be made of the skills that already exist in the organization, a process which is tied to the performance management and appraisal system, an aspect of people strategy that will be discussed in a later section. In the inventory taking process it will be necessary to determine what behaviours are critical to aligning employees� activities with business strategy and what means we want to use to measure those behaviours. For example, measurement may be competency based indicating the need to assess such characteristics as decision making, team orientation and customer focus or may be strictly skill based indicating the importance of mechanical attributes, financial acumen and computer programming knowledge. In any case, whatever appropriate measurement system is selected, it can be used to determine the extent to which people in the organization are currently equipped and to assess desired behaviours in new hires on a go-forward basis. It is important that a job analysis be conducted for each position to determine what job qualifications are required for each role and from which job descriptions

36

can be developed. An excellent source for developing job analyses and descriptions is available at http://www.bizmove.com/personnel , one of the federal government sponsored links identified earlier. Examples of job descriptions for numerous jobs can be found on the federal government�s own website, http://www.hrmanagement.gc.ca and provides a useful template for development of an organization�s own job descriptions. Once these two steps have been completed, salary ranges for specific jobs can be determined that are based on industry and regional standards and the organization�s desired position on the pay scale relative to other benefits that may be offered. Although many large organizations have the financial resources to participate in and/or to purchase access to salary surveys, this can be prohibitive for small companies. Once again, the federal government�s website, the link for which is noted above, provides useful information on salaries and wages that correspond directly with all job descriptions in its dictionary. Before recruiting begins for any position, whether the recruiting is internal or external, individuals who are involved in the process must be trained in what to look for in potential candidates, both through their resumes and in any interviews they may conduct. Probing about past behaviours is typically an effective tool for determining likely future behaviours and can be very effective in weeding out those examples that may be embellished. Recruiters must understand how to recognize evidence of desired behaviours, skills and competencies that have been identified as critical to the role and to rank candidates accordingly. After all, hiring decisions will be based on the perceptions of those involved in the recruiting process and so it is critical that common grounds be established for assessing candidates. For this reason it is best if more than one person is involved in the interviewing process, preferably at different levels within the organization but with whom the interviewee will potentially work. In the selection process it is important that attention be paid to specific employment standards legislation that may apply including any questions that may not be legal to ask, minimum wage standards in each province, overtime pay requirements, legal vacation, safety requirements, mandatory severance requirements and numerous other issues that are related to hiring. Information on all these legal standards is available through Human Resources and Skills Development Canada or one of its related websites. These types of issues can become particularly important in situations where shift work is the norm, part time workers are employed, it is common to work on statutory holidays or potentially hazardous work is performed, many of which were characteristic of the small organizations that we observed in this study. We have alluded to the importance of culture in an organization and an effective means of introducing employees to the culture and how they can contribute to it is through engaging in an orientation process very early in their life in the company. At the very least, orientation will result in some degree of sense of belonging earlier in the employment process than if a person is left to their own

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devices. Several of the individuals with whom we had discussions indicated that they would have felt much more familiar with rituals, processes and cultural aspects of their organization if they had been formally oriented to both department and corporate dimensions of their workplace. Orientation can range from participation in a process that is comprised of just a couple of hours to something much more formal and lasting as long as a number of months. One effective approach is to complement formal aspects with a buddy system that also contributes to the growth of a knowledge based organization, an important aspect of people strategy that we will explore in depth later. Unfortunately, not every hiring decision is a successful one and there are numerous reasons that employment must sometimes be terminated. Such termination may be instigated by the employee who is no longer satisfied in an organization or it may be instigated by the employer. It is very costly when an employee leaves an organization and termination of employment should never be engaged in lightly. That is not to say there is not a point at which the cost of attempting to rectify a bad situation is not a possible outcome. In any case, it should be understood that each leaving employee is an alumni of the organization and every attempt should be made to ensure that they are treated with respect and dignity. In the case of an employee choosing to leave an organization of their own accord, this is often the result of their perception of limited growth opportunities, a poor relationship with their boss, the promise of something better elsewhere or perceived lack of involvement in decision making to name just a few. Many of these reasons can be eliminated or at least managed if there are effective learning and development opportunities and an effective performance management system that is designed to meet personal career path aspirations. These will be discussed later. When termination of employment is related to an involuntary action on the part of the employee this creates a difficult situation for everyone. The employee typically experiences a range of emotions that may not be pleasant towards the employer, remaining employees feel badly for their former colleague and often the terminating manager experiences significant stress. One of the participants in our study described their feelings after terminating the employment of one of her direct reports. Intuitively, she recognized that the fit was not good and that the individual was not a team player. However, she was not convinced that she had done everything that she could or should have prior to letting the individual go. There was no formal policy in place through which to establish remedial action, nor was there a performance management in place by which the employee�s performance could be effectively measured and suggestions for improvement made. Activities that the manager engaged in were unstructured and appeared to confuse the individual about expectations even more. The end result was that both were frustrated, the individual was shocked and the remaining staff had mixed feelings about the course of action. If a policy and a

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process had been in place by which the manager and individual perhaps along with others could work together, all would have been much more satisfied with the resulting outcome, whatever that might have been. The point here is that it is critical that policies exist to deal with deficient behaviour. The process, of course, should start with an effective performance management system but should also contain a means of dealing with disciplinary issues, skill deficiencies and termination guidelines. Once again, specifics around involuntary termination of employment and the various rules and protocol surrounding it can be found on the HRDC website at http://www.hrmanagement.gc.ca . It is important to keep in mind that the government legislates minimums and every organization should develop its own policies which are often in excess of legislated minimums.

Work Environment Health, safety and life-work balance are all important themes within the internal environment that must be addressed. Certainly, in manufacturing environments, there are standards of safety required by law and these must be addressed in developing policies. However, we have also seen a rise in cases of injury to sedentary workers such as repetitive stress syndrome and chronic eye fatigue from computer screens. All employees should be committed to contributing to the safety of themselves and each other. The challenge is to ensure that this attitude is the norm and that each and every individual assumes responsibility for contributing to a safe environment. Arthur Sawchuk, President and CEO, Du Pont Canada Inc. noted in a recent paper that it is �(t)he every day habits and care that go into making a safe, healthy workplace (and that) are part of the pride and satisfaction that employees have in their work.�20 Izzo and Withers (2000) maintain that by treating all employees as partners, they will better understand the organization�s core values and be more inclined to participate in decision making. Undoubtedly such behaviour would contribute to the sharing of knowledge that would broadcast improved ways to increase safety. It is important to develop an attitude towards health and safety that stems from the organization�s culture and values. Culture is defined by Daft as �the set of values, norms, guiding beliefs and understandings that is shared by members of an organization and taught to new members as correct.�21 Daft asserts that culture is what provides employees with an identity, is prevalent throughout the organization, is typically developed through the direction of the leader and yet is largely unwritten and often not even thought about. Culture operates on two levels � that which is visible to the public and that which is invisible but impacts behaviours. Culture is very important to how the organization is perceived by internal and external stakeholders and it is critical that leaders guide the organization�s culture in the direction they desire.

20 Pgs 430-431, Human Resource Management 21 Pg 361, Daft

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Clarity and Communication We have identified the need for clarity and communication as a separate node on the wheel that forms our People Strategy framework. We have done this to ensure that it is not omitted in the development of a plan. However, in reality communication is a thread that runs through the entire plan. Communication is an integral part of an organization�s culture and the form that communication takes is typically a reflection of the culture, structure and values of the organization. Staff will feel a greater or lesser degree of involvement in decision making depending on whether they feel they are being heard, acknowledged and respected. They will feel a higher degree of involvement if they feel that their suggestions are being implemented. How leaders communicate and what they communicate will be determined by how much they want to share and how much input they want from employees. Typically, one gets what one asks for and if the expectation is set that managers will manage and workers will do as they are told then that is the outcome that will occur. As such, it is not a simple point to advise on a communication plan. However, it is important to keep in mind that in most organizations knowledge resides in the deepest corners, decisions often need to be made quickly, those closest to the action often have the best answers and without a connection between departments nothing will ever run smoothly. It is through communication that such things will get shared and, upon which, informed decisions can be made. In many organizations knowledge will remain buried in corners unless specific attention is paid to developing mechanisms for the sharing of that knowledge. Each department may work as an efficient unit but that does not mean that quality customer service, quality products or overall efficiency will ever be achieved. In one of my many conversations, a senior manager lamented that some customers were frustrated because purchase orders that they had placed were taking several weeks to arrive when they had been promised receipt within a week. When pressed, sales people indicated that they were placing orders with the warehousing group within a day of receiving them from customers and expected they would be processed immediately. However, warehousing was processing orders based on their own priority, which was obviously different from that of the sales force. No communication was taking place between the two groups to determine a common priority, individual sales people had no idea how backlogged the warehouse might be and the warehouse was unaware of promises made by sales people. This is symptomatic of the silo mentality that often occurs when there is insufficient communication, coordination and cooperation between departments. Communication mechanisms such as regular meetings to review status in each department, establish common goals based on organization strategy; brainstorming sessions to raise awareness of issues and potential problems; instant communication to alert various departments when

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such things as major orders are anticipated; and, regular feedback indicating how well the cooperation is working would be useful tools inside this company. In another conversation, an individual indicated that they were aware that there was not sufficient communication among management and staff but that they found ongoing communication very difficult. The organization for which this individual works employs numerous seasonal and part time workers, many of whom work shifts, perform manual labour, do not have access to email and are frequently not at work when town hall meetings are held during the day. As a result, many of these people do not feel engaged, never have the opportunity to share their stories and are unaware of how they contribute to the realization of company goals. Such factors do make communication difficult but the payback for trying could be significant. A company intranet could be accessed by employees from computers anywhere by means of a password that could be issued during orientation and deleted from the system when other exit documents were processed. The intranet could contain information relating to any new events, programs or issues relating to the employee population, could be used to access information regarding specific issues an individual might have and also be a forum for answers to employee questions. In addition, regular newsletters could be published to help keep employees up to date on new initiatives and rather than having town hall meetings only during the day, smaller group meetings and brainstorming sessions could be held during any shift.

Accountability and Flexibility Consideration of increased sharing of decision making has been a major theme throughout this study. However, a key point to remember if the scope of decision making is to be broadened is that new parameters for accountability and responsibility must be set. In addition, accountability and flexibility are closely linked to communication because, without communication, it is impossible to develop such attributes in employees as empowerment, partnership, leadership, responsibility, risk taking or decision making. The extent to which open communication is encouraged along with the development of a knowledge sharing organization and a performance management plan will impact the degree of accountability any employee will accept in contributing to corporate goals. Izzo and Withers, in �The Expectation of Partnership�, emphasize the importance of work teams being able to make decisions quickly which requires that everyone feels they have an ownership stake in the decision making process and has the necessary knowledge to participate and to achieve a high level of commitment. It is only through communication and effective sharing of information, knowledge and ideas that this will happen and this will not happen overnight. This too will evolve out of increased involvement, communication and sharing. If such changes in direction happen too quickly, employees may feel they are being tricked or set up to fail. Izzo and Withers maintain that flexibility and experimentation are critical attributes and that a flat hierarchy is mandatory if real

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ownership is to be felt. In addition, a flat hierarchy is more conducive to these attributes. Finally, Izzo and Withers stress that the ownership or partnering that they support requires communication, open books, performance based pay and egalitarian leadership. A key requirement that they highlight is the commitment of executives to engage in face to face communication with employees at all levels. This can be done in small group sessions if the employee group is widely dispersed, too large or time pressures are too great.

Rewards and Recognition Rewards must be compatible with the culture that the organization intends to create. For example, if an attitude of ownership and decision making is promoted, then rewards must follow. Employees cannot be expected to assume more risk, responsibility and accountability for decision making if rewards are not compatible with the new expectations. A study by the Royal Bank of Canada that was cited by Izzo and Withers indicated that if greater expectations are placed on employees, they want to share in the gains. Profit sharing is receiving increasingly more attention and variable pay is becoming a larger percentage of total compensation further down the corporate ladder. Some examples22 of innovative reward programs that Izzo and Withers have identified include: • Cash balance plans that replace traditional pension plans, payable upon

leaving; • Bonuses paid to people with skills in high demand or for innovative ideas that

are capitalized upon; • Stock options paid for long service and that vest over specified time periods; • Share granted upon commencement of employment; and, • Stock options to everyone in organization and immediate bonuses for

exceptional contribution. Not all rewards need to be monetary. Recognition is often all that is necessary. A thank you for a job well done may take the form of a personal message from the president, mention in the monthly newsletter may be appreciated or a day off following participation in a particularly demanding project is often easily rewarded. Izzo and Withers also emphasize that whatever reward and recognition program is established, employees should be consulted and their preferences taken into account in determining effective rewards. Dr Beverly Kaye, a leading expert on career issues in the workplace, described a number of opportunities for career development in Up is Not the Only Way (1985). This book highlights the fact that given the new reality in the workplace � flatter organizations with fewer layers of management � the promise of promotion can no longer be held out as the carrot to entice employees to strive to

22 Izzo and Withers, �The Expectation of Partnership�, pg 16

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contribute. Dr Kaye introduced the concept that this might even be acceptable to employees and that there are other equally satisfying rewards that people might strive to achieve. These rewards include opportunity for enrichment, lateral moves within the organization, realigning one�s career direction, exploration into other areas in the organization and, if all else fails, relocating outside of the organization. Dr Kaye has engaged in numerous studies to support her concept and I have observed several of these in which individuals completed a series of tests that, when scored, indicated which of these rewards would have the most meaning for that individual. On every occasion that I observed, no more than 10 percent of the population chose promotion as their most favoured path. These findings should encourage individuals in those small organizations who lament the fact that because the company is small they cannot possibly keep their star performers for long as opportunities for advancement are limited. What is critical, however, is that appropriate individual career development plans identify and map out opportunities that individuals have articulated as being important to them.

Learning and Development The success of any organization lies not only in the excellence of the products and services that it delivers to its clients but in the support that the company and the employees offer each other in terms of growth, challenge and learning opportunities. Formal training programs are the easiest of any learning and development plan to implement but are also very easy to get out of control if not closely linked to personal growth and performance management plans. In addition, they are not always seen as fairly applied across the organization. For example, discussions with some of our participants indicated that training courses are sometimes used as rewards for jobs deemed to be well done and/or that may have no relationship with an individual�s current job or anticipated career development. That is not to say that it is not appropriate for an inventory clerk to attend a team building workshop but it is important that this be linked to a personal goal such as improving communication and team effectiveness between inventory and sales for the purpose of improving customer service through increased efficiency of delivery. However, it is not possible to set goals like this unless there is a personal performance plan in place for every individual and unless employees across departments understand how their departmental goals must be congruent with those of other departments and that the entire organization is part of a team. The management of knowledge is complex, is elusive and is frustrating in that there is not a process by which we can really measure its success or effectiveness. There is not one readily accepted definition of knowledge management that can be written in stone and provide the credo by which an organization lives. Rather, it is an ongoing leadership commitment that provides the means for the organization to grow in a specific way through a culture that is supportive of knowledge sharing and individual growth through sharing; that

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provides an environment in which the customer and customer service is the focus in the organization; acknowledges and respects all team members as leaders in their own right; establishes values that are based on respect and trust for each other; and, provides the technology, processes and systems to support both organizational and individual growth and prosperity. Any organization can become a community of knowledge workers if the members are committed to making it happen and the culture provides the right environment for its incubation. A shared vision that is reinforced by communication and team work must be emphasized. Guiding principles and objectives should be established. Activities that include the growth of external networks, communities of practice, team sharing, decision making and risk taking should be supported. Databases can house customer, product and service information and provide a repository for standard processes. Story telling should become an integral corporate activity, self consciousness must be checked at the door and open communication has to be part of the backbone of the organization. Christina Evans (2003)23 identifies five core principles upon which to build a knowledge based organization: • An entrepreneurial attitude is required across all levels � every individual has a

responsibility to take an active interest, to be constantly looking for opportunities for success;

• Reward systems must be developed that support the new sense of ownership; • Develop deep pools of knowledge utilizing the skills of experts within the

company from which knowledge can be drawn; • Encourage a holistic attitude that draws on the knowledge that resides outside

of the organization in the hands of competitors, industry experts and others; and,

• Engage in collaborative leadership in which the key role of the traditional leader(s) is to provide direction, encourage others, communicate values and continually raise the bar.

In any organization, each employee comes with their own biases, bad habits, preconceived ideas and personal needs. However, if backed by culture and values with a strong leadership committed to steering the organization to the desired state the stage can and will be set for supporting personal growth, challenge and learning opportunities that contribute exponentially to corporate growth. It is up to the leadership to determine to what extent it wants to go in terms of creating a culture intent on creating knowledge. Some examples of knowledge based activities include the following: • Databases provide a great repository for important information for effective

customer relationship management, standard operating processes and methodology, a summary of employee benefits, performance management

23 Evans, Christina (2003), �Towards a blueprint for building a knowledge-centric culture�, Chapter 3, Managing for Knowledge: HR�s Strategic Role, Butterworth Heinemann, Amsterdam.

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tools and recent success stories to name a few. The important thing to remember is that information and knowledge can be two very distinct and different things. Information usually relates to the explicit knowledge that comes from the formal sharing of processes and methodologies and seldom captures the tacit knowledge that comes from individual contact with customers, machines or involvement in specific projects and that is often anecdotal in nature and not published anywhere.

• Team meetings to discuss problems, successes, new initiatives, the status of ongoing projects and review projects or sales completed can be utilized effectively to capture and share knowledge that may otherwise remain unshared tacit knowledge. Meetings can be formal or informal lunch and learn sessions and depending on how work is organized in the organization may be cross functional or cross divisional. Collison and Parcell (2001) advocate a learning before, during and after process that will continue to encourage sharing knowledge through commitment to discussion, structured reflection, review and assessment, identifying and leveraging the expertise and knowledge resident in the organization and that provides a conduit for making knowledge sharing a habit. Such techniques as those outlined in Collison�s and Parcell�s summary of the U.S. Army�s After Action Review will ensure a level playing field is established from which all can participate, will encourage double loop learning through questioning and will capture the key elements of discussions for embedding in future knowledge practices.

• Personal networks that each person should be encouraged as they add intelligence found outside the organization that can strengthen knowledge important to making informed decisions and reduce the likelihood of unnecessary risk taking. Networks are important aspects of remaining current through the involvement of others� perspectives without having to wade through realms of paper or internet research. They also add a dimension of diversity that may not otherwise be available inside a small organization. Wenger and Snyder (2000) emphasize the importance of these �communities of practice� to an individual�s personal knowledge management plan. Personal networks should be built with thought and individuals should remember they must give as well as get; and that the network must be based on trust and confidence in that network�s knowledge on specific issues.24

• Team work and team building are important factors in creating good knowledge repositories. Through teams, increased participation in idea generation and decision making often occurs naturally. Open communication is a critical component of team work and decision making as the risk of making mistakes is exacerbated if team members are attempting to make decisions without sufficient input from others.

• Individual training and development plans are a critical component of a learning or knowledge building organization and can form a solid foundation upon which other aspects of knowledge are based.

24 Cross, Davenport, Cantrell, �Rising Above the Crowd�

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Learning and development plans and the performance management plans are very closely linked and it is paramount that managers be able to coach and mentor individuals by offering ongoing appraisal, feedback and fine tuning suggestions that will enhance learning. In addition, individuals should be encouraged to take responsibility for their own learning to the extent that they solicit feedback and make suggestions for their own improvement as well as seeking opportunities to participate in new challenges. In a true learning environment there are no boundaries between people in terms of sharing knowledge and promoting learning. Betinger (2000) elaborates that coaching is not one way, is not prescribed and is successful when it provides alignment and insight.25 Learning and development is everyone�s responsibility and as the supporting culture develops it will become engrained in the organization.

Performance Management Implementing a performance management system likely means major change in the way most small organizations guide and assess performance. Therefore, as we have stressed with many other aspects of our People Strategy, the first step in developing the system should be in creating awareness of the need to make a change that more closely links the actions of its people with the strategy and goals of the organization. In their discussion of the knowledge society, Awad and Hassan (2004) comment on the fact that knowledge management involves and depends on the overlap between people, technology and organizational processes. Gephart and Van Buren (1996) also emphasize that high performance workplaces, which have specific common people elements, must also integrate and align these with all other business systems including technology and various organizational processes. Both sources cite effective change management, open communication and employee involvement as being critical to the success with which organizations change their cultures to be most effective in today�s world. As such, Kotter�s eight step change process (Figure 3) is an appropriate backdrop given its emphasis on the ongoing process rather than a one time event. As applied to performance management, this means new approaches can be incrementally adopted over time as communication and trust increase. This is all part of the evolution of culture that supports values of trust, respect and honesty; and, where guiding principles that include communication, innovation and collaboration will be embraced. Figure 6, which is a high level illustration of the performance management process, provides us with a reminder of the fact that the process is not static and that as organization goals change so too will the strategic performance orientation as it relates to individuals.

25 Betinger, D., �Boundaryless Coaching�

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Figure 6: A Strategy for Performance Management

Cla

rity

and

com

mun

icat

ion

Establish strategicperformance orientation

Develop employeeperformance goals

Individual learning &development plans

Guidance, coaching& appraisal

Rewardachievement

Performance Management

It is critical in developing a people strategy that effective methodologies be selected for such key activities as performance management that will provide the link to measuring the success of the business plan. Methodologies such as the Balanced Scorecard approach developed by Kaplan and Norton and adapted for people planning by Becker, Huselid and Ulrich will provide a means of assessing the organization�s progress towards stated goals and objectives using quantitative and qualitative data; will provide a tool to facilitate management and communication; and, focus on outcomes that address all of the organization�s goals. The key here is to keeping the methodology as simple as possible, ensuring that it is understandable and useful across the organization; and, that individual goals follow the �SMART� guidelines and be specific, measurable, achievable, realistic and timely. It is important to determine what to measure and agree with each employee what their expected contribution will be. Part of this process involves assessing current skills both collectively and individually, identifying gaps in expertise and developing individual development plans to ensure employees have the necessary skills, expertise and confidence to make decisions and accomplish their goals. If we consider the use of the four strategic drivers (financial, process, learning and growth and customer) illustrated in

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Figure 1 and determine how we can apply these to individual objectives, measures, targets and initiatives we have the basis for linking each employee to the organization�s strategy. By way of example, let�s look at one of the strategic drivers which were highlighted in Figure 1 and develop corresponding individual goals. Consider what the section of a personal performance management plan of a senior sales person whose results are typically above average may look like as it relates to �Customer�. Figure 7: Linking The Balanced Scorecard to Individual Performance Customer Corporate Drivers

Individual Plan (SMART)

Objectives • Improve

customer service

• Mentor junior staff � assume coaching responsibility for two first year sales staff

• Increase frequency of follow up with customers � within week of sale/ quarterly on ongoing basis

Measures • Repeat

business • Fewer returns

• Maintain and develop greater relationships with 50% of own customers and promote new products

• Engage in discussion of features and benefits of products that will lead to greater management of customer expectations resulting in reduction of returns with all own customer base

Targets • Repeat

customers up 10%

• Reduce returns 15%

• Engage at least 10 customers in repeat business totalling $50,000

• Improve relationship with manufacturing group by hosting monthly cross functional team meetings to ensure improved quality of product; and educate customers as to expectations in order to achieve 15% reduction

Initiatives • Initiate cross

selling program

• Reward quality ideas

• Develop relationship and establish cross selling teams with other product lines to ensure sales calls are teamed where appropriate. Target of $70,000 in cross selling initiatives

• Develop one sales incentive plan for roll out to customers by 2nd quarter

In developing this action plan for achieving these performance objectives, the senior sales person in conjunction with his or her manager might identify that there are some gaps in required skills. Such gaps might include lack of coaching skills, leadership and/or team building skills. This may precipitate mentoring by the manager or engagement in an outside course designed to build such skill.

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Appraisal of individuals/ performance must recognize limitations in the organization.26 For example, if a team approach to problem solving has not yet been initiated, our sales person in the illustration above may not be able to influence the production group in reducing the number of substandard items manufactured and goals should reflect such gaps in cross functional relationships. The appraisal process should include ongoing assessment, feedback and fine tuning and must also include a formal aspect that spells out utilization of specific tools along a timeline. Where participation in projects or involvement in cross functional teams occurs, feedback should be given at both the team and the individual level at specific times. Where the project is of short duration, feedback can be part of the overall debrief otherwise, appropriate feedback intervals should be determined at the outset. In all instances the appraisal process should include input from a number of sources. 360 degree feedback is an excellent way to appraise successful goal achievement in every instance. 360 degree feedback may include input from peers, subordinates, superiors, customers and supplier as appropriate. For example, in a customer centric organization, feedback from customers will be very important in assessing individual as well as corporate goals. By soliciting input from customers regularly, such feedback can be used in the appraisal loop to identify potential issues. As Ghorpade and Chen (1995) point out, care must be taken with any appraisal as it can be subjective � swayed by personal like or dislike of another individual, employees tend to compete with each other and there are always political implications to consider. Employee appraisal leads back to review of learning and development plans and is used to develop new performance goals. In both instances this gives the opportunity to establish new priorities, provide additional guidance around those that remain to be achieved and redirect as required. In instances where performance goals are not achieved, the appraisal process provides the necessary picture to develop the appropriate action plan. Depending on the structure in place and whether or not work is project based, the appraiser may be the project manager or may be an individual�s direct supervisor. It is important that every individual knows who will be involved in their appraisal, to whom they can look for formal coaching and mentoring and on what basis they will be appraised. The following provides an outline for applying an effective Balanced Scorecard performance management system. We suggest piloting the process first in order to allow changes to be made with disruption to the whole organization. However, we recognize that some organizations may not be large enough to warrant a pilot program. 26 Ghorpade, J. & Chen, M., �Creating quality driven performance appraisal systems�, 1995

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Design • Design a high level scorecard framework for use by all groups within the

organization. • Design a detailed level scorecard for individual within each group. Detailed

accountabilities may differ for both different functional areas and employees at different levels of seniority within each functional area.

Pilot • Select an appropriate group for the pilot. Consider work groups that will be

receptive, will give relevant feedback and are visible to others in the organization.

• Refine and enhance the scorecard based on learnings from the pilot group. • Document any additional communication, process requirements and

measurement adjustments necessary to quantify feedback. • Plan the roll out. Roll out • Develop a strategy for cascading the plan throughout the organization. • Develop the information technology systems required to support the

performance measurement system. • Begin the roll out, assessing and fine tuning constantly. • Integrate the business planning process with your scorecard.

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People Strategy: The Last Word Although this is our last word, this section could really be called �Getting Started� as it provides an excellent starting point for any small organization that wants to initiate a people strategy modeled on that which we have described. Argyris, who has been highlighted as a valuable contributor to many of the conclusions we have drawn regarding the development of a people strategy, would argue that employee surveys are not conducive to eliciting the full range of feelings employees have regarding their organization; do not encourage creative thinking because they are not a format for spontaneous answers because they are closed ended questions; and, they inhibit innovative solutions because they focus thoughts in the direction determined by the survey designer. Keeping these potential drawbacks in mind, surveys can still provide a meaningful starting point when going in a completely new direction. Our assumption is that, in most cases, any organization using this tool is embarking on a new journey � that of initiating a People Strategy plan � and that it is critical as such to identify what will engage employees in the very early stages if it is hoped that they will participate in and contribute to the plan throughout. Respondents must feel that the survey is confidential and that their identity remains anonymous. In addition, they must believe that something positive will happen as an outcome. The following survey will:

Provide a forum for confidential and honest feedback on the beliefs and perceptions of employees;

Gain employees perspectives on what they perceive as issues or gaps in the current people strategy;

Better understand how employees see and experience the organization, and solicit input to provide heightened awareness of what may need to be changed or improved in the future.

In the sample Culture Survey, we have devised 28 quantitative statements. We have based these statements on the eight key strategic drivers addressed in our People Strategy. The statements may be changed to more closely reflect the issues most critical to the organization.

Clarity and Communication Organizing Work

Work Environment Performance Management

Accountability & Flexibility Selection & Deployment

Learning and Development Rewards & Recognition

We suggest that a scoring system of one to five be used:

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A score of 1-2 demonstrates satisfaction and results in �engaged employees�;

A rating of 3 suggests employees are �on the fence�;

A rating of 4-5 implies �disengaged� employees and may impact productivity, job satisfaction, retention and perception of the organization as a good place to work.

Following the survey, action must be taken to ensure that employees feel that the exercise they just engaged in was of value. Follow up may take the form of publishing the results and indicating what next steps might be including such activities as appointing cross functional teams to generate ideas for populating various parts of the People Strategy.

Sample Survey: Please consider the following statements and indicate the extent to which you agree or disagree with each by placing an X over the corresponding number. 1 represents highest degree of agreement while 5 represents the highest level of disagreement. 1. Clear direction is available from your manager 1 2 3 4 52. You understand standards for quality service 1 2 3 4 53. You know the values of the organization 1 2 3 4 54. You receive the information and communication to do your job well

1 2 3 4 5

5. You have a good understanding of all the products/services your company provides

1 2 3 4 5

6. You feel comfortable discussing workplace issues with your manager

1 2 3 4 5

7. Your supervisor is responsive to your ideas 1 2 3 4 58. You feel valued 1 2 3 4 59. Problems that you identify get resolved 1 2 3 4 510. You proudly recommend the organization as an employer of choice

1 2 3 4 5

11. Customer service is important to you 1 2 3 4 512. You take personal pride in the work that you do 1 2 3 4 513. You are involved in decisions that affect your work 1 2 3 4 514. New ideas are encouraged 1 2 3 4 515. Reasons for change are communicated clearly 1 2 3 4 516. Systems/procedures are modified to support change 1 2 3 4 517. The pace of change is manageable 1 2 3 4 518. You understand what your responsibilities are 1 2 3 4 519. There are opportunities for learning and professional growth 1 2 3 4 520. You receive honest and timely feedback on your performance

1 2 3 4 5

21. People who make positive contributions get recognized 1 2 3 4 5

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22. Performance reviews are objective 1 2 3 4 523. You received adequate orientation when you were hired 1 2 3 4 524. You are familiar with the company�s hiring and termination policies

1 2 3 4 5

25. You know how and where to get information regarding employee benefits

1 2 3 4 5

26. You know who to go to if you have a payroll question 1 2 3 4 527. You have an employee handbook 1 2 3 4 528. You are fairly compensated 1 2 3 4 5

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Appendix

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Ghorpade and Chen (1995). �Creative, quality driven performance appraisal systems�, Academy of Management Executives (32 � 41). Harvey, Eric L. �Separating Employee Development from Salary Systems�. Human Resource Professional, March-April, 1995. Izzo, J., and Withers, P. (2000). �The Expectation of Partnership� from Values Shift: the New Work Ethic and What it Means for Business, (pp123-146). Fairwinds Press. Kaplan, Robert S. and Norton, David P. (1996). �Linking the Balanced Scorecard to Strategy�. California Management Review, Volume 39, No 1, Fall 1996. Kaye, Beverly. (1985). Up Is Not the Only Way, Jossey-Bass, New York. Kotter, John P. �Leading Change: Why Transformation Efforts Fail�. Harvard Business Review, March-April, 1995. KPMG (1998). �Business Process Improvement Methodology�. Lemaire, Katie and Reissman, Larry (2002). �Managing Performance�. HayGroup Working Paper. McLagen, P and Nel, C. (1996). Selection from The Shift to Participation. Perspectives on Business and Global Change. (pp48-60). Muller, A., Valikangas, L. & Merlyn, P. (2005). Metrics for Innovation: Guidelines for Developing a Customized Suite of Innovation Metrics. Strategy & Leadership, 33, 37-46.

Pfeffer, J. and Sutton, I. (1999) Knowing "What" To Do Is Not Enough: Turning Knowledge Into Action, California Business Review, Vol. 42 No. 1, pp. 83-108. Schaffer and Thomson, (1991). �Successful Change Programs Begin With Results, Harvard Business Review. Troy, Kathryn. �Recognize Quality Achievement with Noncash Awards�. Personnel Journal, October, 1993. Wenger and Snyder, (2000). �Communities of Practice: The Organization Frontier�, Harvard Business Review, January-February. Wheatley, Margaret J. �Leadership and the New Science: Learning about Organization from an Orderly Universe�, Berrett-Koehler Publishers, 1992.

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Wright, K. (2004). �Developing a Personal Knowledge Management Strategy�. Zingheim, P. K., Ledford, G. E., Jr., & Schuster, J. R. (1996, Spring). Competencies and competency models: Does one size fit all? ACA Journal: Perspectives in Compensation and Benefits, 56-65.

Web Based Sources www.acoa.ca/e/business/entrepreneurship: Atlantic Canada Opportunity Agency. www.bdc.ca: Business Development Bank www.cebi.ca/resourcecontent: Industry Canada. www.findarticles.com: Entrepreneur Magazine, September �04; HR Magazine, April�05; Nation�s Business, October �96. www.hr.com: includes various articles on human resource planning issues relevant to small business. www.strategis.gc.ca: Industry Canada. Small Business and Resource Policy