As organizations get larger they get more and more complex.
So many different people pushing and pulling in different directions.
This slows an organization down and makes it hard to operate. It makes it hard to achieve the best results.
Human resources departments should be the ones who sort out this mess. The ones who make sure everyone is working toward the same goals. The department which facilitates the other departments to do their best work.
But for many companies, HR isn’t working.
According to McKinsey:
- 42% of HR professionals are not taking action against priority areas
- 65% of HR professionals are not pursuing innovative approaches
- and 68% don’t have confidence in their strategy
That’s why, in this Process Street article, we’re going to take this problem seriously and look at:
- What is HR management?
- What are the current HR best practices?
- How to manage digital transformation in HR
- Netflix and the modern HR revolution
- How to use Process Street for human resources
HR management – or human resources management – is the strategic approach to managing the people in your organization to make it run to the highest possible standards.
Effective HR management should help an organization gain a competitive advantage. This advantage is gained by recognizing the importance of the human capital of the organization and finding ways to make people more efficient and effective.
Different companies take different approaches to achieve efficiency and effectiveness. Some companies like Zappos or Buffer might pursue employee autonomy and happiness; freeing the creativity, drive, and entrepreneurial spirit of their employees.
A company like Amazon or Foxconn, on the other hand, might seek to manage their employees in different ways, with less consideration of employee happiness or fulfillment. A company like this might have an HR department with an aggressive and adversarial stance towards industrial relations.
In this article, we’ll be looking at somewhere closer to the Zappos and Buffer end of the spectrum. However, companies can tend to employ situational leadership theories when deciding their approaches to managing human capital.
In this approach, managers (or companies by proxy) interact with staff via either telling, selling, participating or delegating depending on the balance of the kind of work a particular employee does – what is their level of commitment and what is their level of competency?
This kind of thinking about management is pervasive and part of the reason why Amazon will be lovely to the developers who sit in offices while less nice to the warehouse workers punished for taking toilet breaks.
How you choose to run your HR management strategically is your call – but I’d consider one which treats your employees with respect and dignity.
It’s worth mentioning this distinction early on though as the fawning examples you’ll read later in the Netflix section unsurprisingly aren’t applied to their call-center and warehouse staff.
It’s impossible for us here to lay out exactly what the best practices are across all of HR or HR management and strategy, but we can touch on a couple of key themes.
So, let’s take the following areas for which HR is concerned:
- Workplace culture
- Employee benefits
- Diversity and inclusion
- Employee development
- Talent management
- Human resources innovation
- Leadership development
- Talent acquisition
Some of these are more recent additions to the essential considerations category, but they’re all important things to get right if you want your HR to run well.
If we take a look at the State of Human Capital 2012 report from McKinsey, we can see what the priorities are of the leaders in the field.
Top execs were asked about what their current priorities were and what their priorities will be over the next few years. The answers didn’t really change – it pretty much reads like this:
- Leadership development & succession management
- Talent acquisition and retention
- Strategic workforce planning
- Employee engagement
- Organizational design
McKinsey’s takeaway points from the report were:
- Anticipate and plan for the human capital of tomorrow
- Secure a steady pipeline for skilled workers – and tomorrow’s leaders
- Develop strategies to reenergize your employees’ attitudes towards what they do and what you stand for
- Ensure that human capital becomes more agile
Now, point number 2 covers priorities 1 and 2. Takeaway number 3 is priority number 4. And takeaways 1 and 4 apply to priorities 3 and 5.
We can quite easily see how things connect.
But in order to achieve best practice in these areas we need to go a little deeper. We can split things into two categories:
HR management: Hiring
In a further McKinsey article from Henri de Romrée, Bruce Fecheyr-Lippens, and Bill Schaninger, People analytics reveals three things HR may be getting wrong (2016), three points are highlighted in relation to hiring, retaining, and developing staff.
The first is in regards to hiring.
Some old ideas would have you believe that the best way to hire good workers is to hire from the best schools. One (unnamed) bank in Asia held this to be their policy for a long time. They hired across the company from a broad range of sources but focused on the top academic institutions when it came to hiring for more senior positions.
As every hypothesis needs to be tested, the bank undertook a huge big data study on itself and used machine learning to process the results. This gave the research team data on who top performers were and what routes they took when entering or progressing within the company. The results were interesting:
Whereas the bank had always thought top talent came from top academic programs, for example, hard analysis revealed that the most effective employees came from a wider variety of institutions, including five specific universities and an additional three certification programs. An observable correlation was evident between certain employees who were regarded as “top performers” and those who had worked in previous roles, indicating that specific positions could serve as feeders for future highfliers.
With this new understanding of the business, policies were changed and the results started flowing in:
The results: a 26 percent increase in branch productivity (as measured by the number of full-time employees needed to support revenue) and a rate of conversion of new recruits 80 percent higher than before the changes were put in place. During the same period, net income also rose by 14 percent.
What this shows us is that data can be leveraged to better understand human capital flows within your organization; leading you to optimize these flows for greater results.
The use of big data and machine learning can go even further. One professional services company in the report was receiving a quarter of a million job applications each year. By using similar techniques to the bank above, it automated the screening process to reduce the pool down to a much smaller pool of qualified candidates, providing huge time efficiencies in the processing of these applications.
The added positive of that report is that the company wanted to improve its gender balance and was able to effectively adapt the automated screening process to account for that – averting the bias that can sometimes be embedded in these kinds of algorithms.
Finally, we come to attrition. A major US insurer was having difficulty retaining managers and its traditional approach of offering more bonuses and compensation didn’t seem to be helping.
It, too, turned to data. It treated employee retention much like a SaaS company might treat customer retention – looking at strategies for managing churn.
It tried to understand what factors led to employees leaving and then to use that information to identify high-risk individuals throughout the organization.
By applying sophisticated data analytics, a key finding rose to the fore: employees in smaller teams, with longer periods between promotions and with lower-performing managers, were more likely to leave.
What were the results?
Once these high-risk employees had been identified, more informed efforts were made to convince them to stay. Chiefly, these involved greater opportunities for learning development and more support from a stronger manager. Bonuses, on the other hand, proved to have little if any effect. As a result, funds that might have been allocated to ineffectual compensation increases were instead invested in learning development for employees and improved training for managers.
Big data, yet again allowed the company to improve its practices, save money, and provide for more satisfied employees.
Best practice when it comes to hiring, developing, and retaining employees lies in the data. Well, to some extent. The data is simply a tool to better understand how your own organization is operating. It’s Confucian at its core; greater knowledge of self leads to a greater capacity for self-improvement.
HR management: Organizing
When it comes to organizing, we already know that the McKinsey State of Capital report refers to two key things: preparation for tomorrow and being more agile.
Those are pretty interlinked – as greater agile practices are likely to leave you more flexible and prepared for whatever is thrown at you.
We know from the hiring section that investing in technology to better understand your HR is vital, but what about trying to be more flexible via agile practices?
According to Martin Reeves, coauthor of Your Strategy Needs a Strategy, we can break down a series of approaches to flexibility which you can use to achieve best practice in each of the above areas of hr:
- The ability to read and act on signals: You need to act fast and knowing what signals should prompt change or action is vital.
- The ability to experiment: You’ll rarely get things right the first time. Testing and tweaking through experimentation will give you much more robust systems in the long run.
- The ability to manage complex multi-company systems: You need to think beyond working in your bubble and start building valuable connections with both customers and suppliers. You can all help each other.
- The ability to mobilize: Utilize organizational structure to mean you can react to changes quickly and shift the focus of your teams in a flash.
Here at Process Street, we try to be as agile as possible. Partly because it’s a good way to operate and party because our software is great for agile business process management – we’re superpowered checklists and we drink our own champagne.
Agile business process management is a great route for companies that need to make sure they’re operating in adherence with their procedures, while also wanting to be able to inject agile practices into their daily work.
We already know from the examples provided above how important it is to leverage digital tools and methods when creating a high-performing HR department.
But what exactly does that entail and how do we go about achieving it?
If we turn to the Cornell HR Review, we can see a series of benefits that should come from a successful digital transformation of an HR team. Understanding the desired benefits or end state is an important part of realizing what changes are required to get there.
Digital HR management benefits
- Creating a workforce for future needs – With the drastically changing digital era, there is a need to adopt new approaches that allow companies to build a workforce that meets the digital needs.
- Increase accuracy in dashboards and analytics data – HR digital transformation powers business to success. As a key stakeholder, HR transformation makes sure the business relies on accurate, latest data to make informed decisions enabling the company to double productivity, profitability and enhance employee engagement.
- Develop better employee experience – A digitalized HR department can develop a personalized, engaging experience that seeks to attain the needs of employees.
- Better management of the workforce – In order to be successful, organizations are required to manage their employees better, including part-time, extended and full-time employees.
- Improve efficiency and agility towards evolving business needs – Adopting digital transformation allows businesses to respond to changes quickly while at the same time ensuring excellent performance and superb customer experience.
These are all goals we want to achieve. In order to get there, we need to identify key areas for change and improvement.
What you do in your business might be slightly different from what another company does. Nonetheless, we can identify a few priorities which a department might want to work around.
Digital HR management priorities
- Real-time analytics: The department should strive to get real-time data and information that can be used by management to solve today’s business challenges.
- Intelligent solutions: The department should use digital technologies to create new ways of managing the HR processes and engaging the workforce to unlock the full potential of smart business.
- Natural language interaction: The department should ensure quick execution of operations by encouraging the continued use of HR digital processes like chatbots, messenger applications, and voice recognition capabilities.
Or, in simple terms: gather data, use new software, and make communication easier.
Well, nothing worth having comes easy. As Netflix would tell you…
We all know Netflix.
According to Patty McCord in How Netflix Reinvented HR (2014) in the Harvard Business Review, Netflix is The Good Place – for employees, at least.
You wouldn’t expect the online Blockbuster to have revolutionized HR but Stranger Things have happened. The old consensus on managing employees tumbled like a House of Cards.
[That was the last forced reference, I promise]
But how exactly did Netflix turn HR into one of its own original series?
Well, it’s pretty much summarized in this slide deck by Patty McCord and Reed Hastings – Hastings was CEO and McCord was Chief Talent Officer at Netflix when this deck was released and suddenly went viral.
Now, you could scroll through each of these 126 slides – and I recommend you do – but I’ll pull out a few key things we can learn.
The first thing to state is that Netflix had come to a decision that they only wanted to hire “A” players; that is, they only wanted to hire the best of the best. The goal was quality over quantity.
Patty McCord guides us through 5 key tenets of Netflix’s HR approach.
The 5 key principles of Netflix’s HR management
This section is comprised of selected quotes from McCord herself. I haven’t paraphrased or sliced but I have chopped out lots of detail. If you like what you see, go read the full article.
- Hire, reward, and tolerate only fully formed adults
Over the years we learned that if we asked people to rely on logic and common sense instead of on formal policies, most of the time we would get better results, and at a lower cost. If you’re careful to hire people who will put the company’s interests first, who understand and support the desire for a high-performance workplace, 97% of your employees will do the right thing. Most companies spend endless time and money writing and enforcing HR policies to deal with problems the other 3% might cause. Instead, we tried really hard to not hire those people, and we let them go if it turned out we’d made a hiring mistake.
- Tell the truth about performance
Many years ago we eliminated formal reviews. We had held them for a while but came to realize they didn’t make sense—they were too ritualistic and too infrequent. So we asked managers and employees to have conversations about performance as an organic part of their work. In many functions—sales, engineering, product development—it’s fairly obvious how well people are doing. (As companies develop better analytics to measure performance, this becomes even truer.) Building a bureaucracy and elaborate rituals around measuring performance usually doesn’t improve it.
- Managers own the job of creating great teams
Discussing the military’s performance during the Iraq War, Donald Rumsfeld, the former defense secretary, once famously said, “You go to war with the army you have, not the army you might want or wish to have at a later time.” When I talk to managers about creating great teams, I tell them to approach the process in exactly the opposite way. If you’re in a fast-changing business environment, you’re probably looking at a lot of mismatches. In that case, you need to have honest conversations about letting some team members find a place where their skills are a better fit. You also need to recruit people with the right skills.
- Leaders own the job of creating the company culture
I often sit in on company meetings to get a sense of how people operate. I frequently see CEOs who are clearly winging it. They lack a real agenda. They’re working from slides that were obviously put together an hour before or were recycled from the previous round of VC meetings. Workers notice these things, and if they see a leader who’s not fully prepared and who relies on charm, IQ, and improvisation, it affects how they perform, too. It’s a waste of time to articulate ideas about values and culture if you don’t model and reward behavior that aligns with those goals.
- Good talent managers think like businesspeople and innovators first, and like HR people last
During 30 years in business I’ve never seen an HR initiative that improved morale. HR departments might throw parties and hand out T-shirts, but if the stock price is falling or the company’s products aren’t perceived as successful, the people at those parties will quietly complain—and they’ll use the T-shirts to wash their cars. Instead of cheerleading, people in my profession should think of themselves as businesspeople. What’s good for the company? How do we communicate that to employees? How can we help every worker understand what we mean by high performance?
Now, as you may have noticed, Patty McCord is ruthless.
Thing is, as long as Netflix follows its guiding principle of only hiring the A-grade talent, it can be as ruthless as it likes. It offers great compensation packages, uncapped holidays, big parting compensation, and cares about whether its employees feel like they’re contributing.
Netflix has the position that it is being honest and the decisions it makes are what’s best for both parties.
The kinds of policies you’ll see in the slides are talked about as part of the revolution of HR, but really it comes down to honesty and abruptness – while compensating hire to accommodate that sometimes painful honesty.
Whatever lessons you’ve learned from this article, we can probably zone in on a few universal ones:
- Utilizing tech is important. Important for gathering data to inform decisions and important for improving operations to be more agile.
Okay, so that was just one lesson.
But that one lesson can be made actionable with Process Street.
Process Street is superpowered checklists. You build process templates and then run those templates as checklists.
You can create process templates for all your recurring processes and run them as checklists each time the task is undertaken. You can build in conditional logic, required fields, and rich work instructions using text and media files.
When you enter information into form fields, this gives you data you can pull out of the checklist. With Process Street‘s API, webhooks, or Zapier integration, you can make all of this data actionable.
Process Street is an agile business process management tool. You can edit your process templates in moments without any knowledge of code and redeploy the improvements live to auto-update every in-progress checklist (or only apply the new model to new checklists – your choice!).
If you want to get started with Process Street for your HR department then you should sign up for free today and play around.
You can choose from our huge library of premade templates to help you get started. We have a bunch of HR processes, but here are a few you can look through now:
- Accountant Job Description Template
- Ari Meisel’s How to Streamline the Hiring Process Guide
- Big Five Personality Test (Structure Template)
- Call Center Employee Onboarding Checklist
- Code of Conduct Policy Adherence Process
- Copywriter Job Description Template
- Customer Service Interview Process With Questions
- Customer Service Manager Job Description Template
- Customer Service Representative Job Description Template
- Developer Onboarding Checklist for Startups
- DISC Assessment (Structure Template)
- Diversity Hiring Process
- Diversity Initiative Quarterly Improvement Process
- Diversity Management Monthly Audit
- Diversity Questions Survey
- Diversity Training Process
- Enter Job Description Template
- Employee Background Check
- Employee Complaint Procedure
- Employee Discipline Checklist
- Employee Onboarding
- Employee Onboarding Checklist
- Employee Relations
- Employment Termination Checklist
- Graphic Designer Job Description Template
- Holiday Leave Application
- Holland Codes Test (Structure Template)
- HR Interview Process With Questions
- HR Manager Job Description Template
- Human Resources Pre Employment Screening
- IQ Test (Structure Template)
- ISO-9000 Structure Template
- IT Manager Job Description Template
- Job Application Form
- Job Description Template
- Marketing Manager Job Description Template
- Myers-Briggs Style Jungian Personality Test Template
- Office Conflict Resolution Checklist
- Performance Management
- Performance Review Template
- Project Manager Interview Process With Questions
- Ray Dalio’s Hiring Process
- Receptionist Job Description Template
- Recruitment Process
- Restaurant Employee Onboarding Checklist
- Retail Employee Onboarding Checklist
- Sales Interview Process With Questions
- Sales Manager Job Description Template
- Salesperson Onboarding Checklist For Startups
- Software Developer Job Description Template
- Standup Meeting Checklist
- The Ultimate Guide to Hiring an Intern
- Unconscious Bias Training Guide
- Web Designer Job Description Template
- Web Developer Interview Process With Questions
- Web Developer Job Description Template
Or check out some of our other HR management content from the blog:
- HR Templates: The Perfect Pack For Company Success
- 12 HR Management Tips to Run an Effective Business (and Prevent Total Chaos)
- How to Make Your Own Aptitude Test with Process Street (6 Free Templates)
- Inside the Recruitment Processes of 3 Tech Giants (and How to Improve Yours!)
- Behavioral Theory of Leadership: How to Be a Better Leader
- How to Conduct an Interview: A Full Hiring Process With 11 Premade Interview Processes
- Workplace Culture: What It Is and How to Make Yours Better (With Examples)
- Employee Engagement: How to Get a Happy, Productive Team
- What is Workplace Diversity? Improving Diversity in the Workplace (8 Free Templates)
- 3 Steps to Cultivate an Inclusive Workplace in a Conflicted World
- Burnout: How I Beat It, and How You Can Too
- Confronting an Employee? 11 Communication Mistakes Managers Make
- Offboarding: How to Make the Most of Letting Employees Go
- The Exit Interview Process: How to Get It Right Every Time
- 6 Ways How Automation and Artificial Intelligence will Transform the HR Process
- A Beginner’s Guide to Setting up HR Software in the Cloud
- What is HRIS? The Best Software for a Human Resources Information System
- Why HRMS is Becoming a Must-Have & How to Get Started
How do you approach HR management in your business? What would be your key tips and tricks? Let us know in the comments below!