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‘Father of modern HR’ Dave Ulrich talks business

Ulrich explained his 20-60-20 ratio, and his effective ‘HR from the outside in’ strategy

Hind Mustafa

Published: Updated:

Welcome to the world of Human Resources; the department where complaints, office politics and employee motivation reign supreme.

Al Arabiya News sits down with Dave Ulrich, a professor at the Ross School of Business, University of Michigan, and the “father of modern human resources,” a title he was given by HR magazine in 2012.

The expert comments on best HR practices in the Middle East, areas where Middle Eastern companies can better utilize strategic HR roles, and airs his view on the nationalization programs being championed by some GCC countries.

Ulrich has published more than 200 articles and book chapters, and over 25 books on best HR practices. He is a Fellow in the National Academy of Human Resources, and is a partner at RBL Group, an HR consulting firm that helps organizations develop their businesses through improving leadership and talents.

He is also the winner of Nobels Colloquia Prize for Leadership on Business and Economic Thinking, and has consulted and done research with more than half of the Fortune 200.

Q. What is the one message you try to send to HR professionals?

What happens inside of a company creates value outside. So, the way we treat our people, the way we lead a company and build our culture inside of an organization creates values for customers, investors and communities outside the organization.

Q. What is your strategy of ‘HR from the outside-in?’

Often when people manage their talent, leadership or culture, they look inside. For example, we want to be the employer of choice and a lot of companies have tried to do that. I think we should be the employer of choice of employees our customers would choose.

When we hire, train and pay people, all of the criteria for doing that well should be [measured] against meeting customers’ expectations, and that doesn’t happen very often. Most companies try to treat their people well, but they don’t bring the customer, investor and community criteria [into] how they should be treating their people.

What we need to recognize is that customer support may build a brand expectation in the marketplace, at Mobili this is what we want to be known for. [Or even] at one of the other great companies [such as] Saudi electric, or any of the companies. But unless that external expectation translates into internal action, it’s hypocrisy.

Marketing fails when their expectations don’t become practical, HR fails when their actions are not connected to the external expectations. So the customer focus outside and the HR focus inside need to be combined, so that when we promise a customer a particular kind of experience; we have then hired, paid and trained people, and built a culture, that will consistently deliver that experience.

Q. What are some strategic HR practices, and are they being practiced in the Middle East region, or is HR still marginalized and limited to administrative responsibilities?

There are basic HR practices that are administrative and have to be done. There is an administrative process for hiring somebody, to managing their career and managing their compensation, etc. But those same practices can be done in a more strategic way in four areas:

One is around people; how we bring people into the company? Are we bringing in the right people who have the skills and talent that will help us better serve customers in the future. Are we promoting and training the right people, and there is a work flow of practices around the individual people.

Secondly, there is a flow of practices around performances. Are we holding people accountable for the right things? Is there a set of clear expectations of what an employee should do, and are there positive consequences when they do it well?

Thirdly, do we manage information? Do we have very good communications systems so that information from top to bottom of a company [and] from the outside can be shared?

And fourth, how do we manage work? How do we organize work and assign accountability, how do we make decisions, how do we govern teams, how do we structure the company and how do we set policies.

So people, performance, information and work are four areas where human research practices can be used to make sure whether we have the right talent, the right leadership and the right culture.

Q. How many companies in the Middle East have recognized the strength of strategic HR so far, and have started utilizing it?

Generally I find [the ratio to be] 20/60/20. Twenty percent of companies and individual leaders are doing a very good job, and I find that almost in every part of the world. [Another] twenty percent will never understand it. We learn how to parent from those who parented us, and we learn how to lead from those who led us, and some leaders were led by leaders who don’t understand people and organizations, they just don’t, and they probably never will. [However], sixty percent are getting better.

That’s the number I use in almost every process of change; twenty percent are exceptional, and I think that would probably be true in the Middle East as well, sixty percent are working to improve in various stages, and [as for remaining] twenty percent – I’m sure we could find companies in the Mideast, Asia, Europe, Latin America and in America, who are just never going to get there.

Q. How do you find HR education and professional practices in the Middle East ?

I’ve actually not worked much with university trainees. I’ve had the real privilege of working with senior HR leaders in a number of firms in the Mideast; at Saudi Aramco, Saudi electric and at Mobili. What I find is that the thoughtful leaders of HR in the Mideast are true business partners, they understand that HR is an enabler of talent, leadership and culture, to help a business be successful.

The good leaders in the Mideast are as good as the good leaders anywhere in the world. The Mideast has a unique culture, there is a legacy of some cultural things, some of which are very good; there is warmth and gentleness. [However], some [cultural tendencies] are sometimes difficult.

For example, in the Mideast, and in some countries in Asia, it is not easy to give somebody negative feedback. So, when somebody [didn’t] perform well [for example], one of the leaders in the Mideast said: “one of the things I do with an employee who doesn’t perform well, I may know his mother, who might be my sister, [or] my aunt, and instead of telling the employee I will tell his mother and she will fix it.”

That’s a bad joke, but he told me that and I thought: that’s unfortunate because it’s much better, whether an employee does well or poorly, that the leader has the skills to go directly to the employee and have a conversation. That’s getting better as the companies in the Mideast become part of the global family of companies, leaders have to acquire the same set of skills the leaders in the rest of the world have and it’s clearly happening in many of the great companies in the Middle East.

Q. You said in a good practice HR would be treated as a business partner rather than a sub-section in the company. There has been a debate on HR’s exclusion from the boardroom, how far have we come about this in the region?

Again, it’s hard to stereotype in the region. We’ve just drafted a paper that‘s fascinating with Korn Ferry, the research firm. They looked at the profile of successful CEOs [globally] and the set of skills they had. They then looked at the profiles of leaders of staff functions in technology, marketing, finance and HR.

They found that the profile of chief HR officers matches the profile of CEO’s more than any other function, whether marketing, finance, technology or manufacturing. Here’s the take away: most CEOs today, or C-suite business leaders, have to have extra skills in finance, marketing, strategy and basic business skills.

But the thing that makes them good is being able to put those skills together and create an organization that has the right culture, build leaders throughout the organization who get work done, and manage their people so they get the most productivity.

The best CEOs need the skills that the best HR leaders have. In the leading companies, the top HR person, because their skill set matches what the CEO requires, is in a position to deliver enormous value to the CEO. So we see in the leading companies, the HR leaders, once they understand finance, marketing, strategy, manufacturing, [and learn] business, they can then bring some unique knowledge about talent, leadership and culture.

Now, there is still a whole set of HR work that is administrative. People have to be hired, they have to be paid, you have to have communications and you have to [calculate] benefits. Lots of that work is now being done with technology. So the best HR functions are not recognized for their administrative expertise, but for their business acumen and value-added business expertise.

Q. So on a global level, how close is HR to the boardroom?

Our data suggests that in the top companies, I would say 20 percent, they’re there [in the boardroom], because they have the skills that the CEOs require. The pressure on a CEO today is so enormous, it is so tough because you have financial pressures, customer pressures, government pressures and employee pressures; the failure rate of a lot of CEOs is quite high. The reason they often fail – it’s called derailment - is that they don’t know how to manage people. They may be able to read a balance sheet or an income statement, but they don’t know how to manage people’s choices or cultural choices.

Good HR leaders can come in to those conversations and bring unique expertise about talent; how do we get the most out of our people, how do we engage them, how do we help them feel good? [Regarding] leadership; how do build a shared leadership, and culture; how do we build an organizational culture and capability that helps us succeed?

Q. From an HR perspective, what is your take on nationalization programs taking place in some countries across the GCC?

The intention is marvelous, because what we want is to replace expatriates and outside knowledge with internal knowledge. Any country, or company, wants to have their local people learn the skills to do the job. So the intention is a wonderful idea and it’s a very wise investment of government funds.

Two thoughts, [firstly] a lot of investment has gone to building the supply of talent at the entry level. I think one of the challenges is to make sure that we invest accurately throughout the organizational hierarchy. For example, we may have 20 percent or 30 percent expats at the senior level, we want to reduce that; so some of that localization investment should go to leadership investment, some of it should go to middle-management development [and] the technical development.

A lot of it right now is going to entry-level development. I would encourage, from an organizational and human resource point of view, investment in localization at each level of the company, so that we develop locals who have skills on all levels.

Secondly, we can create the supply, so we train people to go to universities to get educated and have skills, [but] we also have to create the demand, and one of the challenges in companies is [that] even if an employee is well-trained… if there is not a job that will use their skills, then they have these skills and they’re not being used.

So part of [nationalization] is to not just build the skill set [and supply the employees], but also to use some of that budget to make sure we build the demand side. What that means is identifying products and services that don’t just sell within the company or in the region, but also sell globally. Because when the demand goes up, then the opportunities for employment go up for those who have been well trained.

Q. What about when there is a demand but not enough supply?

The demand should match the supply, if the government is investing in nationalization programs, somebody should make sure that the nationalization investments match the demand of particular skill sets. So, if IT, research or manufacturing are missing skills, then we ought not to have students [obtaining] their degrees in language or literature or sociology, we ought to make sure the money is spent in a wise way.

[Secondly], getting people through what’s called career stages is not just [about] education, it’s also [about] experience. One of the challenges we’ve sometimes seen in the Mideast is that if we promote somebody too quickly, and they jump three or four levels in a company because we want to have a local person in that job, they may have the title and the education, but unless they get their experience, they’re going to be in a job for which they’re not fully qualified.

We’ve been doing a little bit of work about rapid development. How do you find, for those employees who you want to move up quickly into key jobs, a chance [to get experience in a shorter amount of time.] What that means is giving them job assignments, job postings and a social network where they don’t just get an assignment because of their tribal connection or because of their education, but we rapidly get them experiences that enable them to successfully move up. That becomes part of the nationalization effort that may be under-invested in.

Q. Like a crash course?

I would use “crash experience,” because some of these skills you can’t learn in courses. [For example,] giving somebody an assignment with customers is very difficult. So, you give people those crash experiences…so that they learn from them, and then become prepared to move into those jobs.

Q. You previously called for HR people to work externally with customers, investors, etc. What do you mean exactly?

That’s probably going to be three to five percent of an HR person’s time. For example, HR people often design a training program for leadership or communication, and they sit amongst themselves and talk. I would love to have them invite a customer [from] outside the company to that discussion.

We say we want to have a leader who’s more effective in our company, and the customer says “well these are the things we need from your company; I need better service, I need better responsiveness, [etc.],” those expectations from customers should be what we then [include] in the leadership training program.