One organisation which epitomises the dichotomy between acclaimed HR practice and well-documented disastrous decision making is the Royal Bank of Scotland. The business experienced both the highs and lows of the credit bubble in completing many acquisitions during the bull market before being unceremoniously bailed out by the British Government. Taken from a recent PwC case study of RBS, Tony Williams, Head of HR shared services (1) stated “HR is a business, just like any other part of the RBS group. We provide products and services to the Group and our people, and we have to deliver them professionally and efficiently. Broadening the HR professional’s understanding of business drivers and external markets is key to adding shareholder value, and to the success of today’s HR function.”

In a recent article, Richard Donkin (2) offers a different perspective . “So were we all wrong? I think the answer is 'no'. The HR team headed by Neil Roden at RBS has done some pioneering work in performance management. The bank's recent decline in fortunes tells us not that HR is ineffective, but that HR's value may be less than is sometimes claimed. It couldn't halt a slide in investor confidence as the bank was engaged in consolidating an expensive purchase of Dutch bank ABN Amro.”

What is interesting and that emerges from the above issues is the assumed resourcefulness of HR departments in general on the one hand and the desire, as Jon Ingham writes in his blog, to see HR challenging poor management and poor behaviours on the other. Not only does this imply that there can be a direct link to the bottom line but that the opportunity to demonstrate value is timely to say the least.

Leadership and Human Capital
Common ground about reforming systems and regulations to avoid a repeat of the credit crunch and minimising the impact of the recession is in abundance. From a leadership and human capital perspective however, at best you would be gently stretched and at worst it would be near impossible to find a comparable discussion.

Given this situation, it is perhaps healthier to see the glass as half full. Deloitte present some thoughts in their piece ‘Cash or People, are people really your most important asset?’ (3) Focusing on the people perspective, they suggest “Short term… [and] long term success hinges on getting - and keeping - talented people” and the more provocative “Guess what? People are your competitive edge.”

In ‘Where next for HRM? Rediscovering the Heart and Soul of People Management’, Professor Mick Marchington writes “I believe HR needs to reconsider its roots… This means the HR function adopting a problem-solver role… and learning that what really matters is how line managers put HRM into practice”(4) .

Perhaps the most insightful piece comes from Richard Donkin who in the same piece as the RBS example writes(5) “the credit crunch demonstrated that a business is not people alone. Nor is it a building or the services it provides. There are abstract, human, emotional, constituents - trust, love, anger, panic. We can never truly value these things. They will remain the hidden, perilous, measures of performance.” While these views and thoughts around ‘people are our greatest asset’ prompt(6) debate(7) , perhaps the area of greatest appetite lies in new thinking around the intangibles that Donkin refers to, namely, people, relationships, networks and culture.

What if we could value, or at least have better measures of the more intangible and abstract aspects of our organisations? How would we benefit from this new information?

New Directions, New Emphasis
Whilst a consensus around a leadership and human capital response seems some way off, there are a number of emerging themes that may help shape new ideas and perspectives going forward. To help get something of a handle on developments, I would suggest a focus on the following four areas; self awareness, relationships, systems and culture.

Self Awareness
There is no shortage of self assessed questionnaires, psychometrics, 360 degree feedback processes, performance reviews, mentors and coaches. All intended to, amongst other things, raise self awareness.

In terms of adding a new perspective, work from psychologists Daniel Gilbert and Daniel Kahneman suggest that the subconscious (or non-conscious) is a key factor in our thinking and corresponding levels of self awareness(8). The point being that despite the proliferation of tools and techniques above, few take explicit account of both the conscious and subconscious in decision making.

Gilbert writes(9) “that judgements are generally the products of non-conscious systems that operate quickly, on the basis of scant evidence, and in a routine manner, and then pass their hurried approximations to consciousness, which slowly and deliberately adjusts them.” In practice however, something less than perfect tends to happen. Kahneman follows up with the observation that (10)“people are not accustomed to thinking hard and are often content to trust a plausible judgement that quickly comes to mind.”

Turning to coaching, an interesting piece via ABA Journal and an anonymous blog entry(11) states that; “narcissistic leaders report that while it’s exciting at the top, it’s also frequently lonely. Many may welcome the candid support of an objective, disinterested outsider to provide practical advice on how to deal with other personalities. One powerful coaching client has labelled this “consigliore [sic] coaching,” saying, “I’m not looking for a hug or a school teacher. I’m looking for a confidential outside sounding board who can help me translate my ideas into effective action, and also cover my back.” The anonymous blogger follows up with “reading the above quote, the “coach” assumes the narcissist is “lonely” and has an emotional need. Read the quote again: there’s no emotional need. It’s pure utilitarian: someone to cover his back.”

Given the observations above, one wonders how much connection exists between the conscious/subconscious paradigm above and the ‘narcissistic coaching’, or any other ‘behaviour’ that fails to serve either ourselves, or the greater good? In light of recent events, the temptation to speculate is enticing and questions around the motivation and thinking of people like Bernie Madoff (12), B Ramalinga Raju (Satyam)(13) Jerome Kerviel (14) (Societe Generale) or David Ross (15)(Carphone Warehouse) and more historic examples like Jeffrey Skilling (Enron)(16) and Nick Leeson (Barings) (17)can’t help but be asked(18) .

Relationships
Gaining the complete understanding of a relationship is always difficult given the fact that relationships co-exist in both public and private spheres. In looking at the role of internal relationships on organisational performance, it is important to bear in mind that given modern management’s command and control Taylorist legacy and the notion that as an organisation’s headcount increases by 10%, productivity falls by 6% (19) , the challenge of optimising relationships and productivity increases.

While it is difficult to suggest a direct link between internal relationships and either the credit crunch or the recession, one might argue that based on the figures above, the highest profile casualties had the greatest relational challenges. Given the nature of large organisations, is there any overlap between the underperformance of the organisation and levels of correspondingly low performance from relevant relationships? Historically, organisations such as Arthur Andersen, EADS, IBM, Marks & Spencer, Sainsbury’s and Sony have all experienced periods of underperformance or have even disappeared completely. To suggest that this is in part due to poor relationships is intriguing given that at the time, such firms were either the largest or close to being the largest in their respective markets.

The never ending popularity of team building and emphasis on collaboration suggests importance organisations place on interaction. Further, relationships and their understanding are gaining greater focus in certain quarters. For example, Jody Hoffer Gittell’s work on relational coordination suggests that a focus on relationships provides a better method of increasing efficiency than either skills or employee engagement(20) .

Systems
Speaking in October 2008 at a Congressional Hearing, Alan Greenspan said “this modern risk-management paradigm [that] held sway for decades, the whole intellectual edifice, however, collapsed in the summer of last year(21).”

From a leadership and human capital perspective, one could argue that a systems view is highly complex in that people are capable of the greatest degree of variability (changing our minds, differences in perception, going with the group, dealing with difficult relationships etc.). After all, people are the only conscious aspects of an organisation or system that we need to manage; everything else is either an inanimate object, fauna or flora!

While Paul Wilmott(22) and Nassim Nicholas Taleb (23) have recently commented explicitly on proposed changes in the financial world, perhaps the most salient comment and call for a new system around people comes from Dave Snowden who, writing in 2003, called for(24) “[a model] of human behaviour able to encompass multiple dynamic individual and collective identities acting simultaneously and representing all aspects of perception, decision making and action.”

Even though a proven model such as the one that Snowden outlines is some way off, there are a number of initiatives and tools which offer glimpses of progress. Malcolm Gladwell’s recent Outliers acknowledges the role of social context in success(25) . Similarly, Value Network Analysis and Social Network Analysis seek to make tangible that which is inherently intangible(26) , namely apparently hidden connections, motivations and networks of relationships which are capable of delivering innovation, collaboration and developing a coherent organisational identity.

Furthermore, organisation’s like Group Partners(27) have introduced a systemic approach for dealing with ‘Wicked Problems’. Kim Warren’s work (28)in applying system dynamics to strategy and HR(29) is also worth a read. Even our own model, 4G, helps understand and predict the behaviours, relationships and culture in a given context, ultimately creating a systems perspective of the human factors to complement the individual components. Finally and very pragmatically, Laurie Ruettimann suggests (30)‘dumping’ automatable HR processes, generalists and compensation and focusing on recruiting, technology, social media and development.

The point of the examples above is not so much to judge each and every one, or to see them as magic wands. Instead, the intention is to introduce a new way of thinking which explicitly acknowledges the complexities of leadership and human capital.

Culture
Of the four perspectives, culture is arguably the most nebulous and most difficult to change or even define in the first place. While there has been much talk of ‘greed’(31) and ‘short-termism’ (32), it is perhaps useful to reflect on the distinctions and contrasts between financial and human values(33) . Understanding the values that motivate an organisation’s people and their respective financial and cultural descriptors goes a long way to helping define and influence the ‘rationalisation’ for actions that occur within any particular business. Put another way, while financial values may appear to be the most obvious motivators in an organisation, the more subtle, but equally significant influence can be the social and human values that are either consciously constructed or created in an ad-hoc fashion.

Historically, academics like Trompenaars (34) and Hofstede(35) have influenced thinking around culture and their work on its various dimensions have undoubtedly enhanced our understanding. More recently, Jim Good has written of ‘Level 5 Leadership’(36) and Bob Sutton wrote of his ‘No Asshole Rule’(37) , both of which offer varying degrees of cultural insight and tools to further a cultural agenda.

Likewise, Umair Haque, writing a blog on the Harvard Business School website, has made various interesting comments; “Growth will not reignite until new DNA organizes the economy. New DNA, for example, that makes profit meaningful again” (38) or “the point is this. We cannot organize tomorrow's businesses - or economy - like yesterday's. What do I mean? Simple. How should we organize and manage how firms interact with consumers?” (39)

By definition, culture is a reactive and relatively abstract component. As much the product of workshops and mission statements as informal conversations and water cooler moments, culture is often ‘easier said than done’. That said, the commentator’s above have all suggested and inevitably influenced future directions and only time will tell which changes will stick and which will fall by the wayside.

Tying it all together
As mentioned at the beginning of this piece, the seeming lack of a meaningful response to the recession from the leadership and human capital community creates an opportunity for those who value such topics and their outcomes. Having explored a variety of different themes, the questions below are an attempt to seed thought and discussion about some new directions with a mix of practical and theoretical factors;

• Self awareness – Does a better understanding of subconscious thinking and even free will help us make better decisions?
• Relationships – Can we systematically improve communications and human efficiency within organisations?
• Systems – Can we enhance our analysis and mental models to reduce the risks from complexity?
• Culture – Can a change in economic and human values create more sustainable or improved rates of growth?
  
  

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Bruce Lewin is with Four Groups Ltd. Bruce works with major companies to help enhance the relationship between HR and the business. He also authors the Four Groups' blog.

1 http://www.pwc.com/extweb/newcoatwork.nsf/docid/f92dba57dbcb700b8525712f00590f94
2 http://www.humanresourcesmagazine.co.uk/news/search/864783/Dont-ignore-trust-anger-panic/
3 http://www.deloitte.com/dtt/article/0,1002,sid%3D205755&cid%3D237306,00.html
4 http://www.employment-studies.co.uk/pubs/report.php?id=wp20
5 http://www.humanresourcesmagazine.co.uk/news/search/864783/Dont-ignore-trust-anger-panic/
6 http://clive-shepherd.blogspot.com/2007/03/executive-slogan-writers-are-our-most.html
7 http://donaldhtaylor.wordpress.com/2007/03/20/people-are-our-greatest-asset-%E2%80%93-you-just-can%E2%80%99t-say-it/
8 By way of background, there are numerous references and works on the subconscious throughout the history of psychology and psychiatry. While Carl Jung may be seen as a founding father, there are many more studies, articles and books on the subject, Gilbert and Kahneman being just two recent scholars pursuing ongoing work in this field. A similar example would be work by Pouget at http://www.brainmysteries.com/research/Our_unconscious_brain_makes_the_best_decisions_possible.asp
9 http://www.theage.com.au/news/opinion/think-before-you-leap/2008/05/11/1210444242976.html?page=2
10 http://www.theage.com.au/news/opinion/think-before-you-leap/2008/05/11/1210444242976.html?page=2
11 http://neurologicalcorrelates.com/wordpress/2008/11/12/narcissistic-leaders-remove-them-dont-coach-them/
12 http://www.forbes.com/2008/12/12/madoff-ponzi-hedge-pf-ii-in_rl_1212croesus_inl.html
13 http://blogs.zdnet.com/Howlett/?p=561
14 http://en.wikipedia.org/wiki/J%C3%A9r%C3%B4me_Kerviel
15 http://business.timesonline.co.uk/tol/business/industry_sectors/retailing/article5305879.ece
16 http://en.wikipedia.org/wiki/Jeffrey_Skilling
17 http://en.wikipedia.org/wiki/Nick_Leeson
18 More information and research on this can be found in Szczerbak, D., & Conchie S. (2008). Confidence in, and commitment to decision concerning financial and relational risks. Unpublished raw data.
19 http://www.cybaea.net/Blogs/Journal/employee_productivity.html
20 http://web.mit.edu/sis07/www/gittell_slides.pdf
21 http://www.nytimes.com/2008/10/24/business/economy/24panel.html?_r=1&hp
22http://www.wilmott.com/blogs/paul/index.cfm/2008/12/12/Magicians-And-Mathematicians
23 http://uk.youtube.com/watch?v=ABXPICWjFIo
24 Snowden, D. & Kurtz, C. (2003). Cynefin; Sense-Making in a Complex & Complicated World. IBM Systems Journal, 42, 3.
25 http://socialcapital.wordpress.com/2008/05/20/malcolm-gladwells-new-book-the-outliers/
26 http://thebusinessofknowing.blogspot.com/2008/11/value-network-mapping-and-analysis-way.html
27 http://www.grouppartners.net/
28 http://www.kimwarren.com/2008/12/strategy-a-troubled-discipline/
29 http://www.strategydynamics.com/info/hr.asp
30 http://punkrockhr.com/2008/11/20/shrm-kennedy-blowing-up-human-resources/
31 http://www.thisisderbyshire.co.uk/news/Credit-crunch-Thatcher-legacy/article-352881-detail/article.html
32 http://www.guardian.co.uk/commentisfree/2008/jul/05/marksspencer.banking
33 http://www.fourgroups.com/blog/archives/29/linking-financial-values-and-cultural-values/
34 http://en.wikipedia.org/wiki/Fons_Trompenaars
35 http://en.wikipedia.org/wiki/Geert_Hofstede
36 http://wikisummaries.org/Good_to_Great:_Why_Some_Companies_Make_the_Leap..._and_Others_Don%27t#Chapter_2:_Level_5_Leadership
37 http://www.amazon.com/No-Asshole-Rule-Robert-Sutton/dp/1847440002
38 http://discussionleader.hbsp.com/haque/2008/12/profit_really_is_an_illusion.html
39 http://discussionleader.hbsp.com/haque/2008/12/how_not_to_treat_your_customer.html