The essential role of human resources in times of crisis - Dave Ulrich [Interview]

About Dave Ulrich

Dave Ulrich is the co-founder and principal of the RBL group. Dave has written over 30 books and over 200 articles. He has shaped the HR profession and been called the "Father of modern HR” and “HR thought leader of the decade” by focusing on HR outcomes, governance, competencies, and practices. He is ranked as the #1 management guru by Business Week, profiled often by Fast Company as one of the world’s top 10 creative people in business, a top 5 coach in Forbes, and recognized on Thinkers50 as one of the world’s leading business thinkers. We are extremely happy to have Dave on our series here today.

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Nayan Jadeja

Hello everyone and welcome to another series of leadersHum. I am Nayan Jadeja from the peopleHum team. Just a quick introduction of peopleHum. It is an end-to-end, one-view, integrated human capital management automation platform, the winner of the 2019 global Codie Award for HCM, which is specifically built and crafted for employee experiences and the future of work with AI and automation technologies.  

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We run the peopleHum blog and video channel, specifically targeting leaders and young leaders through our leadersHum series, and today it is an extreme honor for me to welcome Dave Ulrich, our guest today.

Nayan

And I'm extremely privileged to be talking to Dave. So Dave, welcome.

Dave 

Thank you. I am so delighted to have a conversation with you and welcome to my office. There's bad things with the Coronavirus and remote working. There's good things. I don't get to have people visit my office very often and welcome to my office. 

Nayan

Great. Yeah, absolutely. 

So Dave, since you kind of talked about it, let's begin with something which is obviously top of the mind for people across the globe, right? The pandemic and let's touch upon some of those aspects. And obviously for the first time ever, we are facing something that is unprecedented. Nobody has kind of been prepared for this and there's obviously a lot of talk about trying to see the opportunity in a crisis, right? But I believe most of our audience would probably say, that's easy to talk about, right? Looking for the crisis or looking for the opportunity in a crisis. 

But in your opinion, how does one actually go about trying to identify these when you are facing such tough times across the globe?

Dave

There's so many places we could go with that great question. 

In January of this year, everybody was worried about the future of work, and you would see people putting a new number on it. I'm 2.0, I'm 4.0. I was going to write an article, the future of work 99.0 to just blow that up. And it was all about digital and technology and shaping the world of work. And then this crisis hit and it has affected us in so many ways. It's global. It's changing our assumptions physically, emotionally, socially. And there's a saying that I really like, it's not mine and many have said it, “Crisis is a terrible thing to waste.”

“Crisis is a terrible thing to waste.”

That out of a crisis there are two options. You can feel a threat and I think a lot of people do. I feel a personal threat. I feel uncertain. I feel ambiguous. I have an organizational threat. I don't know how to respond. I don't know what to do. I have a leadership threat. I don't know what to do or you can discover opportunity. 

And what I love is to say, how do we discover and discover is a verb, it's not an answer. How do we discover opportunities in the middle of that crisis? In fact, I just wrote a column, a crisis is a terrible thing to waste. Here's my new answer, crises because I think we're seeing a series of crises. We have the global pandemic, in the United States we've had racial strife, and we see that in other countries. Hong Kong again has racial strife and now we have an economic recession. I think we're seeing waves of crises begin to hit and in those crises is an opportunity to lead. Because if we look at it as an opportunity, we see what's possible. We can tame our fears and replace those apprehensions with opportunities.

“If we look at crises as an opportunity, we can tame our fears and replace those apprehensions with opportunities.”

What's the future? What can I do new? Where can I start? What can I control? And so, while I recognize that a crisis affects us all in very, very different ways. For example, obviously my wife and I in my office are older, we have three children. Oh, and I can even show a picture in my office. Hang on. I got a picture. There is our family. I can't do that at a conference. So we're at Disney World. We have three children who have children, so we have grandchildren. They're affected by this crisis very differently. 

In the United States, they're having to home school. They can't have playdates with children. In fact, one of our granddaughters unfortunately was just tested positive, so they were quarantined, not ill. There's no illness at all, but they're quarantined whereas for my wife and I, it's very different. And so where do you find opportunity? By looking forward, by facing your apprehensions, by controlling what you can control, by driving innovation and by finding what can I do new that I didn't have the opportunity to do before? So I hope in this crisis we can discover opportunities rather than be burdened by threats.

“I hope in this crisis we can discover opportunities rather than be burdened by threats.”

Nayan 

Right. Well, I definitely hope your granddaughter recovers soon, and I'm sure she would want to go back to Disney World and have her grandad take her back over there. 

Dave

So true and it will happen. It's really interesting. There is this great fear of being tested positive. She had a fever for 10 hours. That was it. And that was a week ago. She's had no, nothing since. But we all have to now be very careful because this pandemic can be difficult. 

Nayan 

Right. No, Absolutely, absolutely right. 

And as you were saying, I mean, I'm sure, going into 2020 every company had their strategy laid out, the plan defined, communicated to the entire organization. And here we are, I'm sure all those plans are out of the window and organizations are struggling to either grow their business, find new customers in certain cases and in certain cases trying to figure out how to bring down their expenses and so on. 

So what advice would you give the top-level executives in terms of how do they go about trying to handle these tough times? 

Dave

And by the way, the crisis is affecting firms differently. A good friend of mine became the chief HR officer at Zoom last November. Her timing was excellent because Zoom is zooming, we’re on a Zoom call. In the technology space and in other spaces, opportunities are there and it's keeping up. If I were advising executives today, I’d come to the assumption that strategy, leadership, people doesn't start with people or strategy or leadership. It starts outside in. 

So, I would say, pay careful attention to the external factors facing your business. What's going on in the marketplace? The best thing HR or leaders can give an employee is an organization that succeeds in the marketplace.

“The best thing HR or leaders can give an employee is an organization that succeeds in the marketplace.”

And sometimes in HR, we get all excited about employee morale and believe, become, belong and take care of our people. But if we don't win in the marketplace, there is no workplace. And so my advice to executives is get very, very sensitive to what's the context. The externalities. What's happening socially in my business, in my industry? Technologically, politically, environmentally, demographically. What are the factors outside that are shaping my world? 

For example, in our world of education, the new world is going to be virtual. I mean, people are not going to conferences. They're not attending conferences in person, and we don't know how long that will stay. I think it will come back, but we don't know. So, given that external reality, use that as a pole to create opportunities for innovation, for reinvention. 

This is an example. In January, the idea of me sitting in my office, you sitting in Bangalore, and I'm not sure if you're in your office or at home, we would never have even considered it, but there's opportunities. I can show pictures that I couldn't have shown before. I can tell personal stories. And I hope executives start outside in. What's the marketplace in which we operate? And then how do we position ourselves to differentiate in that market opportunity? 

Nayan

Right. So, Dave, I've heard some of your talks where you’re talking about the future of HR, you talk about HR having a very strategic impact on the organization by focusing outside in, looking at customers, stakeholders and so on. But in reality, right? And I've worked in organizations both small and large. 

Wouldn't you agree that HR hasn't been able to establish itself as a very strategic part for most organisations? I'm sure there are exceptions, I'm sure there are certain people who have been able to do that. But if you look across most companies, probably that is not a case, at least that's my personal, whatever I have been exposed to. Why is that the case and what has stopped HR from really having a strategic impact on an organization? 

Dave 

Great observation. Let me provide three comments. Number one, we love data. I love data. Oh, I'll show you another picture. I don't get to do this very often. This is my dissertation from U.C.L.A. My dissertation is on numerical taxonomy. Taxonomy is the science of statistics to create simplicity out of complexity. I'll just show one other thing, and then I'll quit sharing, but I think it's fun. I found these when I started doing webinars at home. 

There's a company called University Microfiche that used to produce and sell dissertations. My dissertation sold and I made $11.85. So for two years of work, I made $11. But I love data. I love analytics. 

Three comments. We studied HR professional skill sets over 30 years with about 120,000 respondents receptive in waves of data. What we've seen is the skill sets of HR professionals have increased dramatically. For example, in knowing the business, in 1987 the skill was 3.1 out of 5. Today, it's 4.1 out of 5. So I take a little issue with personal experience. When we look at large data sets, the skill sets of HR have moved up very dramatically. 

Second, I believe in every profession there's a normal distribution, that's not very complicated. So you got 20% who are exceptional. You got 20% or 10% who are terrible and then 60% in the middle. To be honest, I tried to ignore both twenties. The 20% who were good don't need my counsel because they were already good, probably because of their mother and their father and their history and themselves. The 20% who are terrible may never get there. I like to focus on the 60% and back to point one. Our data says they're moving forward, they're getting better. 

Third, I don't think we can do strategic work until we can do the administrative work well.

“I don't think we can do strategic work until we can do the administrative work well.”

In fact we, I haven't reported this data but we just collected data this week and in fact, I just saw it the last couple of days. We found the correlation between administrative work and strategic work very low. What that says is some companies do good administrative work, but that doesn't necessarily mean they do strategic work. The two don't go together as much as you might think. 

What we also found is that to deliver success, you’ve got to do the administrative work well. If you have bad administrative work and good strategic work, you're probably not going to be very successful. Administrative work of HR, that's foundational. It's getting the trains to run on time. It’s hiring people and user groups like peopleHum and leadersHum to give us the discipline to do the administrative work well. Then we can build on that and kind of like stacking credentials and then do our strategic work. 

So sometimes I have probably made a mistake by saying, be strategic, be strategic. But I've not reminded people that “you've got to be foundational in order to be strategic.” That's my third point. 

Nayan

I see. 

And is it just that doing the administrator work well, kind of even establishes or in the eyes of your peers sets you up for higher-level strategic kind of conversations because you're doing the administrative work very well. So is that kind of? 

Dave

Absolutely. I mean, it's interesting as I saw that data this week, and it's a small data set, so we're not gonna go too public with it. It's a pilot data set of a 100 and some companies, but we're trying to build that data. 

I remember a setting years ago, and it's what I used to teach. I was in a group of HR people and talking about doing strategic work, helping your company learn how to start a business in Singapore, in India and Sri Lanka, in China. And the CEO came to the meeting and after he listened to me for a minute, he stood up and he said, “Yes, that's all important.

But last week we interviewed a new vice president of marketing and we wanted to hire that person. So we sent out a letter that I signed, but I didn't read the letter. It came from HR and you got the decimal point wrong on the salary. So instead of 120,000 year, it read 1.2 million a year and the person we offered the job to called me quickly and said, ‘Thank you. I accept. I'll take the job.’”

And he said, ‘I was embarrassed. I can't trust you to help me build business in Russia or in Brazil until you know how to manage decimal points.’ And I think sometimes in HR, we forget that. 

Nayan 

Oh yeah. Absolutely. 

So, just another follow up in terms of again, on the topic of trying to change the perception of HR. Do you think the onus is kind of with the CEOs of the other C-levels? Or is it the HR professionals and those that need to be able to kind of earn the seat at the table. So to say.

Dave

Great question. I think to some extent most HR people now have a seat at the table, which means you have access to the executive. Here's the issue. When I sit down with the executive, what's my conversation? Let me do an old and a new. Old conversation- ‘We're going to do a training program, and here's what we're going to cover in the five days of the training program.’ Nice. 

Here's the new rule. I'm at the table and my conversation is- ‘Our industry is trying to create success by moving into new markets globally. We want to move into Brazil. We want to move into Sri Lanka. We want to move into the Philippines.’

To the CEO, what do you think is required of leadership to accomplish those business goals and you talk about it and then say, ‘could we then use a training program as a mechanism to enable the business goals?’

So part A, we're talking about what we do. The old measure of HR success. What percent of people got 40 hours of training? Well, that's a stupid measure, because the training could be really stupid. I mean, it could be a relevant training. 

Now the issue is, what's our business trying to accomplish? Is it geographic growth, is it customer share, is it digital execution? How does HR enable those outcomes? And that changes the conversation. 

I love to do a test, and I'll give it to Nayan and you could do it. I love to talk to senior HR people and say, ‘Tell me about your biggest business challenge.’ Our biggest challenge is managing succession. Our biggest challenge is compensation. Our biggest challenge is training or staffing. Guess what I've just discovered. Their mental model is business equals HR. That's bad. 

What's our biggest business challenge? Cutting costs in a post pandemic world where our customer and market shares are reduced. Our biggest business challenge is creating more innovative products and services. Our biggest challenge is getting a higher net promoter score with targeted customers. 

And so that stupid, simple test of telling me your biggest business challenge tells me the mental model of the HR group I'm working with. I think and I don't have data on this, probably five or 10 years ago 70, 80, 90% the challenge was compensation, training, staffing. Today it's still probably 50%. But I think we're getting progress with the middle 60% in the middle. The top 20% get it. The bottom 20% will never get it. In fact, what I love to say is the greatest HR thing you can do is place someone in that bottom 20% in your competitors and tell them to keep doing exactly what they've done. 

You are such a perfect employee for my competitors. Keep doing what you've done over there. No, that was a joke obviously. You were asking some great questions. Thank you. 

Nayan

Oh, absolutely. It’s a pleasure sir. 

So okay, again, I wanted to kind of touch upon, because it's quite unique, when you talk about this again outside-in focus, right? And you talk about customers and investors and employees. If an HR person comes to you and says, I'm kind of confused.Is there a priority amongst these or so what would your answer be to those people who say I don't know which one to focus on first and how do I go about that? 

Dave 

It's a very good question. You said I've written 30 books. Trust me, nobody has seen all 30 books. The only person with all 30 books is my mother, because I send them to her and in her house, she has a shelf. Nobody else has ever seen them. 

In my early books, I did a book called, my first book was called ‘Organizational Capability’, competing from the inside out and what that says is build the internal capacity and then connect it outside. So, never look at employee experience in isolation. Look at it as an indicator of customer experience.

“Never look at employee experience in isolation. Look at it as an indicator of customer experience.”

One of the last books we did is competing from the outside in. Start from the outside. What is it that customers want in terms of their value added to their brand and bring that inside. So my takeaway is I've started both places, inside and outside. 

The challenge is wherever you start, connect the two. We did some research and again, I don't want to bore you with research but we said, think of five stakeholders you've got. If HR is in the middle, you've got the employee, you've got the business itself through leaders inside, you've got customers, investors and communities. 

Where should HR allocate its attention to help a company be most successful? We got five stakeholders. What we found was 20,20,20,20 more or less. You've got to pay attention to everybody. If all we pay attention to is the employee, we may have great employees, we may have a great place to work, we may have high employee engagement, but it’s not driving value to customers. 

One of my second favorite question to the HR people. Who are your customers? 80, 90% the employees, the line managers, they’re inside the company. The customer of HR is the customer of the company, and we've got to begin to link those. So a research found 20,20,20,20. Our biases find HR people are still often focused inside. 

Nayan

Alright. Yeah, absolutely. When I hear this all the time where people say, let's take care of our employees and the employees will automatically take care of the customers, and the customers will bring the business and that way. 

Dave

Yeah, that's the virtual cycle. The correlations were actually quite powerful. If you look at employee experience, which is the new buzzword for engagement or commitment, the correlations are often 0.6 to 0.8. And what we find is that there's about a three to nine month lead with the employee, followed by the customer. So the statistics show that there are good correlations between those. 

One of the interesting findings is that if you look at three levels of employees, the front line employee who interacts with the customer, middle management, and senior management. The strongest correlation between employee experience or engagement that I know you measure very well and customer is the front line employee, which makes sense. My attitude about a hotel is not the headquarters of people. It's the local people. And so often we invest in HR and training and development and careers with the senior people, not the local people.

"My attitude about a hotel is not the headquarters people. It's the local people. And so often we invest in HR and training and development and careers with the senior people, not the local people."

In fact, somebody said, ‘Dave, one of the implications is, if you have an employee with a negative attitude, the best thing to do is put them in corporate because they can do the least damage.’ But the front line employee is the one that drives that customer experience. 

Nayan

And have you actually experienced or seen data that actually directly correlates kind of the employee satisfaction and the customer net promoter score to see, this goes up and…

Dave

Absolutely. A lot of data. There's the first part that I love, the evolution of data. David Bowen did his dissertation on that about 20 years ago with Ben Schneider, and what David found in financial organisations, banks was that in a branch of a bank, if you measure the employee sentiment or employee engagement, the way you do that through peopleHum.

I have to say that twice. But if you measure a branch and their employee engagement, you'll see a 3 to 6-month lag or nine-month lag in customer engagement. And so that correlation, we've done it in retail firms, we've done it in banks. In any service firm, you're going to see some of those relationships. 

Nayan 

I see. Thank you. No, absolutely. It’s indeed an honor and a privilege to talk to you Dave. I think this was absolutely fascinating. I learnt a lot and I’m sure our listeners and audience is also going to learn a lot from this session. So, thank you immensely for spending so much time with us and all your learnings and teachings, really with us. 

Dave

Thank you. What a privilege. Thank you

Nayan

Mention not Dave, thank you.