According to a recent IBM study, almost 60% of organisations do not have the requisite people skills and resources to execute their business strategy[1]. This is because executive leaders cannot articulate the capability and skills required for future fitness.
Enter the People Balance Sheet – the diagnostic tool that provides the blueprint of where executives need to take their people in order to execute strategy by providing executives with an immediate bird’s-eye view of their people’s capabilities through the lens of ‘as is’ and ‘to be’ states.
Just as financial balance sheets are an indicator of an organisation’s financial health the People Balance Sheet provides a strategic overview of the organisation’s health from a people competency, capability and talent perspective, to deliver on the strategic business objectives.
Once strategy has been written, the leadership team should stop to deeply interrogate and ask: “Do we have the right people skills and strengths to execute on the strategy?”
Organisations struggle to define their People Balance Sheet in a productive way because they either neglect to measure what their current state is, focusing far too much on the future state, or vice versa. Without scrutinising the delta between where we are and where we need to be, we cannot formulate a roadmap for the future. A weak People Balance Sheet indicates that the organisation is poorly positioned to execute and will therefore result in mediocre strategy execution.
According to a recent IBM study, almost 60% of organisations do not have the requisite people skills and resources to execute their business strategy[1]. This is because executive leaders cannot articulate the capability and skills required for future fitness.
The disconnect between strategy and capability
One example is that of one client who had enjoyed market domination in their product leadership business with a ‘build it and they will come’ mantra that had stood them in good stead for over 40 years.
That was until the competition changed focus to a more personalised, client-centric approach. The client continued to tout their product en masse, while their competitors had heard the market’s needs and were coming up with more customised, intimate solutions to meet individual customers’ unique requirements.
Losing market share made the client realise they needed to change strategic direction, or face closure. But how do you change strategy overnight from a corporatised product leadership model to a customer-centric business? You don’t… and they didn’t. They realised that, to execute a customer-centric strategy, they needed their people to have customer-centric capabilities such as empathy, collaboration, relationship-building and listening skills and that their entire solution needed to be reverse-engineered, working backwards from what customers want. In other words, their People Balance Sheet, when overlaid over their new organisational strategy, was weak.
Adjusting the People Balance Sheet to one of strength and health
The People Balance Sheet has four iterative dimensions, none of which should be ignored:
Dimension 1: Document the current ‘as is’ state of capabilities within the organisation
Dimension 2: Articulate the future capabilities required to deliver on the organisation’s strategic objectives
Dimension 3: The gap between the ‘as is’ and the ‘to be’ states must be clearly defined and understood, because this gap becomes the tactical roadmap to enable strategy execution
Dimension 4: ‘To be’ states must align not only with organisational strategy and the operating model, but with each person’s career aspirations within the organisation.
All of this is underpinned by dimension 4, which is fundamental. You can’t force people into jobs that don’t resonate with their personal career aspirations and natural strengths. They need to feel that they can learn, grow, perform and therein feel that they belong, not only within their job role, but also within the organisation and its future plans for them.
If you can’t get that right for them, you will lose them. The war on talent has become a more silent one where people vote with their feet… by walking out of your organisation and into that of your competitors, taking their capabilities (and your investments) with them.
Speed of execution and agility underpin success
Speed of execution is another prerequisite for success when it comes to operationalising the People Balance Sheet. One of our clients tasked their HR team with formulating the People Balance Sheet for the entire organisation. Doing so manually, the HR team took nearly 20 months to complete this task for 30 job roles, so that by the time they presented it to the executive heads, the future state capabilities they had identified as critical, were already out of date.
The People Balance Sheet should be created using digital tools and global competency databases to ensure that data is captured quickly and can be easily updated. Using the correct methodology, systematised diagnostic tools and design, the People Balance Sheet can be executed more effectively and at much higher speed.
Business agility is also a key capability and mindset that must be developed in order to succeed at using the People Balance Sheet to execute strategy. Agility gives organisations the ability to quickly adjust plans in the flow of execution, according to feedback from the market or internal stakeholders. An agility mindset ensures that the organisation and its people are continually assessing themselves, the market, and their internal capabilities through the lens of an ever-changing world, making minor or major tweaks and adaptations whenever needed. Non-agile organisations that wait for their quarterly or annual strategy formulation sessions to make changes risk being left behind.
The proliferation of technology alone means that emerging capabilities are always evolving, and it requires agility in both strategic thinking and people and capabilities planning.
While HR can assist in the process, executive heads are the owners and drivers, because they are the ones that are ultimately accountable for successful strategy execution. The sole purpose of the People Balance Sheet is to ensure the organisation has the right people in the right jobs with the right capabilities to execute – this is simply not the domain of HR alone.
How having the wrong capabilities directly impacts business performance
Radical shift: if you can’t source the talent, create it
In an ideal world, organisations would simply task HR with finding the right people with the right capabilities in the recruitment marketplace. But with “64% of heads of recruiting having difficulty acquiring talent to support a change in strategy”[3], organisations need to look within, and create the workforce they need by upskilling and reskilling. “By 2030, the global talent shortage could reach more than 85 million people. To be clear, the issue is not a shortage of workers – but a shortage of workers with the right skills.”[4]
Creating the capabilities needed to execute strategy calls for a radical shift in thinking. IBM mirrors this sentiment: “Inside the organisation, build agile teams with heterogenous skillsets to enable experiential, peer-to-peer innovation, and create a culture where learning becomes viral. Create opportunities for job sharing and internal mobility that focus on skills development. Work across HR organisational boundaries to connect the dots, making skills the anchor point.
Identify the key skills needed for success and align your future skilling strategy throughout the entire employee lifecycle – from recruiting, to team formation, learning, career coaching, compensation, and retention. Share skilled talent across organisational boundaries.’[4]
This shift is already evident, with 46% of CEOs saying that their most important strategy to close the skills gap is significant retraining/upskilling.[2]
A workforce that’s fit for the future
When organisations find themselves in turmoil – as many South African firms currently do – it’s important to not overcomplicate matters, and instead go back to the fundamentals of sound strategy execution. Two decades ago, the likes of Kaplan and Norten introduced Competency Design and Strategy Maps as a way of executing organisational strategy, but these business basics fell out of favour. However, we are seeing a revival of these somewhat ‘retro’ concepts, which are now being boosted with their counterpart technology enablers such as IBM Watson and EMSI databases. The People Balance Sheet is not a new concept – it’s Strategy Execution 101, wrapped in sexier packaging and brought into the present with the use of technology.
Once executives understand the health of their People Balance Sheet, they can align the organisation’s strategic objectives with the capabilities needed across the organisation to deliver on those objectives. The gap between the capabilities they have versus the capabilities they need, is the blueprint of where they need to take their people in order to deliver on the strategy.
But organisations can even go one step further. Executive leaders, in partnership with HR, can predict emerging, evolving and expiring capabilities, using predictive modelling. This is the level of flexibility and agility required of executives to ensure that their organisations are truly fit for the future.
The skills crisis isn’t going to go away, and advances in disruptive technologies such as IoT, AI and cloud are only as strong as their human counterparts’ ability to extract and interpret the data meaningfully.
According to the WEF’s Future of Jobs Report[5], “…workers will need to have the appropriate skills enabling them to thrive in the workplace of the future, and the ability to continue to retrain throughout their lives. Crafting a sound in-company lifelong learning system, investing in human capital and collaborating with other stakeholders on workforce strategy should thus be key business imperatives, critical to companies’ medium to long-term growth.”
This is an exciting time for business, because organisations have the power to manifest success by creating the workforce they need to deliver growth. Get in touch to learn more about how People Balance Sheets unlock bottom line growth and ensure organisations are fit for the future.
How we can help
References:
- IBM Report The Enterprise Guide To Closing the Skills Gap, sourced from Unpublished data from the 19th IBM Global C-suite Study (IBM Institute for Business Value 2018)
- PWCs 22nd CEO Survey
- Gartner for HR: Analytics-Driven Talent Strategy
- IBM Institute for Business Value The Enterprise Guide to Closing The Skills Gap
- World Economic Forum: Future of Jobs Report 2018
