Printed
with permission from TCI
Management Consultants. A group of senior-level management
consultants, offering strategic planning and marketing services
to a wide range of public and private sector clients.
The
8 Practices of Exceptional Companies How Great Organizations
Make the Most of Their Human Assets
by Jac Fitz-enz
American Management Association, New York, 1997
ISBN 0-8144-0348-4
Most companies give at least lip service to the notion that
'people are our greatest asset'. This book identifies companies
where this really is the case, and tries to distill out
from them their best human resource management practices.
"[This
book is] a discussion of our findings and opinions based
on research into how effective companies manage the "human
asset" the people whose efforts are the basis
of any organization's success. To manage as asset you first
have to acquire it, then maintain it, then in the
case of the human asset develop it and direct it.
Human asset acquisition involves work force planning, succession
planning, hiring, and orienting. Maintenance covers pay,
benefits, employee and labour relations, information and
communications systems, and retention. Development deals
with training, learning experiences of all types, and career
management. Direction has to do with scheduling, problem
solving and disciplining, and perhaps termination. Collectively,
these activities take up a large percentage of a manager's
time and, depending upon the type of business, consume anywhere
from 20 percent to 70 percent of revenues. The is what I
am going to talk to you about." (p. 2)
Fitz-enz
is the President of The Saratoga Group, a management and
human resources development consulting company located in
(where else?) California. Through intensive research in
to the human resources policies and operations of over 1,000
companies, Fitz-enz has identified eight practices of companies
that are outstanding in terms of how they manage their human
resources, and have demonstrated superb financial performance.
Companies that practice these he terms 'BHAMs' best
human asset managers. The book is full of references to
these BHAMs (of which there are thirty-five listed in the
Appendix). As well as several small and medium-sized firms,
they include British Airways, the Canadian Imperial Bank
of Commerce, Hewlett-Packard, and Texas Instruments.
These
eight practices that he discusses in the book are:
1. a
balanced focus on value both human and financial:
Here Fitz-enz examines the various aspects of value creation
within a company, and identifies three spheres that contribute
to value. These are: 1) the creation of human value (through
such things as benefits, bonuses, provision of employee
training, etc.); 2) the creation of production value (that
is, the value of the product or service produced to the
consumer as well as the cost-effectiveness of its production,
which is determined by such factors as product quality,
unit cost, and customer service standards); and 3) the creation
of financial value, which is the end result of good performance
in the first two areas. He argues that BHAMs have an equal
regard for creating value in each of these three areas,
rather than just focusing upon financial criteria.
2. long-tem
commitment to a core strategy : "BHAM companies make
a long-term commitment to a core strategy (e.g. shifting
the culture to participative, operating ethically, providing
the best service in the world, producing or marketing based
on the lowest price, or turning out a top-quality product...)
Once the commitment is made strategic and tactical plans
can be developed. Plans change yearly or more often. Strategies
endure. A plan is like making a reservation for a dinner
date on a Saturday night. A commitment is like getting married
for life. The issue is not the plan, it is the commitment."
(p. 51)
3. close
linkage between corporate culture and systems: Here Fitz-enz
makes the point that the culture of exceptional companies
and their operating systems should be aligned. If, for example,
the culture of an organization is very open and trusting,
then rigid and bureaucratic systems cannot be successfully
imposed upon the employees without causing dissonance, suspicion
and resentment, all of which negatively affects performance
and profitability. Conversely, "a strong corporate
culture can positively affect financial performance. It
accomplishes this, first, by aligning and linking people
through the values in the belief system. Second, it gives
them a common vision that bonds the group and sends it off
together in pursuit of the vision and goals. Third, it provides
a structure and form of control that make bureaucratic policies
unnecessary." (p. 87)
4. massive
two-way communication and information-sharing: Best human
asset managing companies employ what Fitz-enz calls 'massive'
communications, where information is shared both top-down
and bottom-up throughout the company, and systems and procedures
are put in place to facilitate this information flow. He
identifies the supervisory level within a company to be
the real hub of communications, as individuals in these
positions are often the 'gatekeepers' of information in
both directions.
5. effective
partnerships with stakeholders: BHAMs are characterized
by having relatively large numbers of partnerships in place
- with employees, with customers, with suppliers, and possibly
even other related institutions and organizations. These
are arrangements where both parties have a vested interest
in seeing something succeed, and there is a significant
reward to both if things work out. Fitz-enz points out that
such companies tend to have open, adaptive cultures which
are characterized by cooperation, enthusiasm, open-mindedness,
and a 'can-do' attitude - the perfect seed-bed for the development
of partnerships.
6. mutual
support and collaboration at all level: While the focus
of the previous point was primarily upon external stakeholders,
Fitz-enz turns here to the question of internal partnerships
and collaborative efforts. He defines collaboration as a
form of partnering that is centered within a function, but
involving individuals from other departments and functional
areas within the firm. "For example, when the compensation
group is planning on changing the structure of the pay plan,
in most companies compensation simply gets the approval
of the CEO and senior line executives and then tells the
recruiters, trainers and employee relations people what
is coming. In a collaborative environment the compensation
group reverses this process. It sets up an informal team
to review the issues involved in a different pay plan. Questions
fly around the room regarding the need for a new structure,
the effects it will have on recruitment, how employees might
view it, and what the trainers must do with their supervisory
and management courses to teach the new plan. In the best
cases, representatives of middle management and first-line
supervisors are also brought into the discussion as well.
You might think this is the norm if you hadn't experienced
the self-centered life-style of many organizations."
(pp.138,139)
7. the
will to innovate and take risks: The main point to be made
here is that companies that are successful are those that
are willing to take risks. Companies where employees are
punished for risk-taking are therefore not likely to be
successful.
8. competitive
passion and never being satisfied with the status quo: "Looking
ahead for what's necessary to do in the future is a hallmark
of the BHAMs. Never being satisfied avoids the complacency
of success. So many executives who drive their companies
to a dominant market position become arrogant. Their favorite
audience response is "How can you argue with success?"
The answer is "It's easy. That was yesterday and we
are only going to get paid for what we do tomorrow."
In 1995, gross sales of fifty-seven of the Forbes 500 declined
from the previous year. Ninety-four saw their profits fall.
And eighty-one watched their assets shrink.
Continuous
improvement is driven by the institutional value of never
being satisfied. It's part of the culture of the BHAMs.
Nothing is sacred in these firms. Everyone knows that they
can and should be reviewing all processes all the time.
This constant pressure to improve yields a continuous stream
of small and sometimes large reductions in expense or increases
in productivity, quality or service." (p. 191)
While
not startlingly fresh in approach or insights, The 8 Practices
of Exceptional Companies does provide a useful framework
to use to examine human resources and competitiveness issues.
The discussion of each of the eight areas draws extensively
upon examples and case studies for the thirty-five BHAMs,
which provides much food for thought. Also, each of the
eight areas contains a short opinion questionnaire where
managers or employees can rate their organization's performance
on each dimension, which is a useful tool for developing
a quick assessment of where the company is weakest on the
eight dimensions. For CEOs and mid-level managers alike,
this book may open the door to human asset management practices
that yield higher profits as well as more productive and
committed employees.
The
above summary has been provided to you compliments of TCI
Management Consultants
