The people strategy translates the organization’s business strategy into what is required of the employees, contractors, and partners.
It may be cliche for organizations to say that people are their most precious resource, but truly no strategy can be well executed without appropriate people strategies. The people strategy is one that needs to cascade throughout the entire organization — with each level aligning to the one above but focused on the specific needs of that team.
The people strategy has to reflect what is needed to execute the organization’s strategy in terms of the culture and human capabilities required. This should also explicitly translate into clear direction on staffing levels, organizational structure, and insourcing vs. outsourcing. It should also explicitly address how employees will be compensated and rewarded to attract/retain the right employees and to incent the right behavior. The strategy will guide specific recruiting and staffing decisions, investments in training and development, and performance management including promotions and corrective actions. It will also guide the creation of appropriate outsourcing and partnering relationships.
Scope: The entire organization and any team within the organization
Key Stakeholders: Upper Management/Board, Team Leaders, Partner Organizations, Human Resources
Decisions Involved: Culture, Critical Capabilities, Staffing Levels, Organization Structure, Sourcing Approach, Compensation/Rewards/Benefits Approach
Example Tools/Approaches: Core Competencies, Core Values
Decisions Enabled: Recruiting/Staffing, Training & Development, Outsourcing & Partnering, Performance/Promotion/Correction, Mergers/Acquisitions/Divestitures
Competing for the Future¹ by Hamel and Prahalad is one of my favorite strategy books. In that book, the authors define a core competence as, “a bundle of skills and technologies that enables a company to provide a particular benefit to customers.” The concept is critical in their view of strategy and they expound at length on what is and what isn’t a core competence. A competence isn’t a single skill or technology, but a bundle of skills and technologies. To be a core competence, that bundle has to contribute significantly to creating value for customers (even if they don’t see the underlying competence itself), be competitively unique or differentiated, and must be extensible to new opportunities.
In the book, Hamel and Prahalad use Canon as an example and provide a table showing how the company’s core competencies of precision mechanics, fine optics, microelectronics, and electronic imaging were applied to the company’s products at the time the book was written. For example, Canon’s basic cameras leveraged the first two competencies, their plain paper copiers leveraged all four, and their calculators only leveraged their microelectronics competency. Since the book was published we can see how Canon’s core competencies enabled them to be a survivor as the photography industry shifted to digital.
Strategically more interesting, the authors also introduce a 2x2 matrix they call the “Competence-Product Matrix” as a means of thinking about opportunities to leverage existing competencies and opportunities to establish or acquire additional core competencies. Similar in many ways to the Innovation Landscape Map, this matrix looks at new and existing competencies applied to new and existing markets.
Hamel and Prahalad call the lower left quadrant “Fill in the Blanks” to represent the opportunity to leverage additional competencies the firm already has to strengthen their position in markets where they already compete.
They call the top left quadrant “Premier Plus 10” to drive the question of what new competencies will be required to be considered the premier provider in their current markets in 5–10 years.
We typically use the term “White Space” to describe new opportunities that no competitors are yet pursuing, often because the new opportunities fall between existing industries. The authors use the same term for the bottom right quadrant rather to encourage companies to identify markets they aren’t currently pursuing in which they are likely to be competitive given their portfolio of core competencies.
Finally, the authors call the top right quadrant “Mega-Opportunities,” not because these are obviously a great fit for the firm, but rather to make the point that an opportunity had better be sufficiently attractive to justify the cost, effort, and risk of acquiring or building the competencies required to pursue an unfamiliar market.
Right Way/Right Results at The Williams Companies
When I worked at The Williams Companies in the 1990s, there was tremendous focus on the corporate culture and core values. One catchphrase that was emphasized at the time was “Right Way/Right Results.” In fact, I have a small desktop sculpture given out in a leadership program attended by all officers around the end of that decade with four phrases on it: “The best way to predict the future is to create it,” “Leading Through Our Values,” “Right Way,” and “Right Results.”
One way in which this focus was implemented was in the administration of annual salary adjustments. As with many large corporations, a target merit increase percentage was set and passed down through the organization. Based on that target, each manager had a pool of dollars to work with. What I found unique at Williams was the tool provided to managers in distributing that pool within their teams. In fairly standard fashion, Williams had managers rate employee performance on a scale of 1 to 5. However, managers actually rated employees on a 1 to 5 scale on two dimensions: Right Results (did they hit their performance goals/expectations) and Right Way (did they do so in a manner consistent with the company’s core values). Managers were given a matrix with recommended merit increases based on the combination of the two ratings. An employee that hit or even exceeded their goals, but did so in a manner inconsistent with Williams’ culture should not receive a merit increase, while an employee that came close to hitting their goals, but was perfectly aligned with the company culture might receive a reasonable increase.
In searching online for more details about this program, I came across an internal brochure dated 2019 explaining how to use the company’s new performance management system. That document includes this quote: “Right Way/Right Results philosophy remains — Performance is defined by what gets done (results) and the way in which that work is accomplished”². Apparently the concept is still in place 20 years and multiple CEOs later.
Bottom line — there’s no way to accomplish any strategy unless you have the right people, with the right skills, focused on the right activities, and motivated to deliver results in the right way. An organization’s people strategy may be the most important key to the success of every other strategy.
¹Hamel, Gary, and Coimbatore K. Prahalad. Competing for the Future. Boston, MA: Harvard Business School Press, 1994.