Episode 11: The Role of the HR Business Partner in a Digital Age (Interview with Dave Ulrich, Co-Founder and Principal at the RBL Group)
The guest on this week’s show is none other than Dave Ulrich, the renowned university professor, author, speaker, coach, and management consultant. Dave is a Professor of Business at the Ross School of Business at the University of Michigan, and co-founder of the RBL Group. With his colleagues he has written over 30 books that have shaped the HR profession, defined organisations' capabilities, and shown the impact of leadership on customers and investors.
You can listen below or by visiting the podcast website here.
In our conversation, Dave and I delve into a multitude of topics, including:
How HR can increase its impact to leaders, organisations, and workers
We talk about the qualities that a great chief HR officer has, we actually even talk a little bit about some of the criticism of his infamous HR business partner model, and how the model has evolved over time
We talk about four phases of digital HR, efficiency, innovation, information and connection
We talk about the impact that technology and the future of work is having on strategic workforce planning
We also delve into some of the surprising, and perhaps worrying findings Dave's researchers unearthed on how companies are using people analytics
We talk about what Dave calls his new moonshot, an organisational guidance system that could herald the dawn of next generation HR, and increase the business impact of the function by several multiples
Lastly, we look into the crystal ball, as we do with all our guests, and look at what the role of HR will be in 2025
This episode is a must listen for HR professionals looking to increase their business impact, as well as business leaders looking to get more out of their HR teams.
David Green: Welcome to a very special edition of the Digital HR Leaders Podcast. We're live in New York, and I'm delighted to be joined by Dave Ulrich, the father of modern HR. Welcome to the show.
Dave Ulrich: It is such a delight to work with you.
David Green: Thank you.
Dave Ulrich: I mean, you say welcome to New York, that's Saturday Night Live.
David Green: Dave, would you like to say a few brief words to introduce yourself, and let listeners know what you're up to now, because I don't think you need much of an introduction?
Dave Ulrich: The things that matter most is, I'm a grandfather of 10, a father of three, a husband of one wife, and professionally I'm still a Professor at the University of Michigan, and trying to do a little bit of writing, and continued thinking.
David Green: When I look at Harvard Business Review, it seems that 80% of the articles are now really about HR, or very closely related to it. It seems that HR finally has this seat at the table that everyone has been talking about. I'd be really interested to hear what's your view of HR. What do you think the purpose of HR actually is?
Dave Ulrich: It's really interesting. I have the luxury of doing conferences, not as many as you obviously, but I have the luxury of doing conferences.
David Green: I don't know about that.
Dave Ulrich: And I often start with a question with business leaders or HR leaders, what's the most important or best thing HR can give an employee? It's an interesting question, because it triggers a dialogue. And the answers are usually, a sense of purpose, a sense of belonging, opportunities learned, compensation, teamwork. And my answer is, you've missed it. The most important thing HR can give an employee, is a company that wins in the marketplace. And so when you say, where is HR headed, I think one of the evolutions is from inside the firm with our customer being our employee and the stakeholders inside to outside the firm. That what we do in HR is not because of... It's not what goes on inside, it's how we add value to customers, to investors, to communities.
And my sense is, business leaders are beginning to sense that, that this is not HR yesterday, this is HR today that creates real value for the business, for the investor. And you see that showing up for the customer, for the community. And when HR is about outside the business, we're going to get much more visibility.
David Green: And if we look at HR, and we're probably generalising a little bit now, where is it today against that vision that you've painted?
Dave Ulrich: That's a great question, and you visit a lot of companies, and I visit a lot of companies, and my hope is, HR is never caught up to the vision we have, because there always should be an aspiration that exceeds our capability. And if our aspiration matches our capability, we're not moving forward. So my hope is, there's always a set of aspirations that continue to push us forward. I see some HR organisations, and you work with them, they use your wisdom and that's maybe why they're there, who are doing incredible things. And you hate to start mentioning them, because next year they may not, right? But they're doing incredible things. Some are terrible.
There was an article a number of years ago, Why I hate HR, and I was interviewed about that. And I said, "If you want to find some bad HR people, I can help you. If you want to find bad camera people, I can help you. If you want to find bad finance, marketing, manufacturing." There's always bad, but I think in general HR is getting better. And if we want to find good, we can find it quickly.
David Green: And do you agree that, actually, HR is probably more important than it's ever been, given all the change that's going on at the moment?
Dave Ulrich: Yeah. I mean, you say, what does a business need to do to win in the market place? We need money. Well, you know you can find money today. In a global world, capital is transient, it goes across global boundaries. We need a strategy, whether it's blue, pink, purple or green ocean. We've got to figure out where we're going to compete, and how we're going to play. To be honest, that's not impossible to create. We need operating systems, that's the technology, the systems, supply chain manufacturing. We've got it. What's the differentiator? It's organisation, it's people, it's talent, and that's why I think HR is moving into a more prominent position. Not because HR people are more intelligent, smarter, but the business is requiring that in the world that we live in.
David Green: So that probably leads on to the skills. So we did some interesting research at myHRfuture early this year, and we actually asked HR professionals, what are the skills that you want to learn moving forward. And they told us the things that we kind of expected around people analytics, strategic workforce planning. And we're going to talk about that later, because I know you've got a take on strategic workforce planning as well. Design thinking, digital. But then softer skills such as consulting, and influencing, and stakeholder management, which kind of lends itself to that business impact that you've been talking about. Now, I know you've done a lot of research over a number of years around the skills that HR people need, what are you finding out there?
Dave Ulrich: And it's always interesting, and this is a point of view that I started with. Our point of view it's not about the skills, whatever those skills are, digital, analytics, information processing, managing change, it's will those skills drive outcomes that matter? And so, we think the bigger issue is to say, what are the outcomes HR should be co-creating around personal reputation. So you're seen as legitimate, you get to the table, whatever that metaphor is. Around building customer and investor confidence in the company. Around business results. And so, what we're finding is, it's not just about the skill set you've got, it's how those skills will drive outcomes that make a difference in what matters.
We have found for example, right now, if I want to be seen as personally effective as an HR professional, zero to a hundred, how good is David? 99. Well, why? It's credible activist, it's not... We used to call it, trusted advisor, but it's credible. I enjoy working with you, I trust you, and you have a point of view. You're willing to push me, you're willing to challenge me. That's an interesting skill set that drives an outcome. Once you get invited to the business discussion, then we call that strategic positioner. It's not knowing the business, that's kind of a baseline. I know finance, marketing, how do I take that knowledge and help me win in the marketplace with customers, with investors? How do I take my business knowledge, and help me anticipate what's next? That's a strategic positioner.
But the one that drives business results the most, is paradox navigator. Which is a really interesting idea, because it says, what do you need to know and do in HR so that the business is more successful? And the outcome of our research was, navigate paradox, which means, manage tension. Tension is a good thing, we should agree to disagree. We should have tension without contention. We should disagree without being disagreeable, whatever metaphor you want. Good HR folks engage in that dialogue, and they create teams that engage in the dialogue, so that they respond better to a new world. And that's what we found drives.
Now, in the future... And this is way too long of an answer, and I apologise, but it's something-
David Green: Oh, it's fine, keep going.
Dave Ulrich: ... I feel passionate about. One of the things we found is, what drives results, and with results, we want to create a company that wins in the marketplace. Is it talent, or is it people? That's people, talent, or is it systems? And one of the things we found is that, what wins in the marketplace more is not the individual talent, but the organisational systems. So we think HR people need to be increasingly competent at building the systems, or the culture, or the capabilities. Not just the workforce, but the workplace. Not just the people, but the process. So it's managing those systems that we're going to start exploring this year. How do you build that organisation as a system that helps it succeed in the marketplace?
David Green: And I think you've said on a number of occasions, HR isn't about HR, it's about the business.
Dave Ulrich: Yeah, yeah.
David Green: And I think that really lends itself-
Dave Ulrich: And that's a critical one. So in your world, what set of skills do you see HR people requiring? What's missing for them?
David Green: Well, I think we're always asked around analytics. What's the first thing I should focus on? And I say, "Well, focus on the business challenges."
Dave Ulrich: Yes.
David Green: It doesn't need to be the most sophisticated analytics in the world, as long as it's something that's actually important to the business, and goes-
Dave Ulrich: So where do you find an understanding of the business challenge? Where do you... If I'm an HR person, where do I find that?
David Green: Well, speaking to people in the business is probably-
Dave Ulrich: Super.
David Green: ... a good start. Actually, meet with the business stakeholders, the people running the business, ask them what their challenges are, and then actually start to think what the people elements of that are.
Dave Ulrich: The one piece I might add to that, and I agree, where does HR start? It starts with business leaders, the relationship, the understanding. We often saw in the HR field that strategy was kind of the mirror. Here's the strategy the business leaders have, build your HR. I'd encourage you to also go meet with some customers. Go meet with some investors. And a lot of HR folk are like, "Oh, I can't meet with the customer." Well, go meet with your key customers, what... Because business is about winning in the marketplace. "Customer, what are you buying for, who are you looking at other than us. Why did you pick us? Why did you pick them? What is it we could give you? Is it finance?" "No, your prices are the same." "Is it product quality?" "Your prices are the same." "What is it we give you?" "Well, you give us service, you give us trust, you give us relationships." "How do we then build an internal organisation to meet your customer needs?"
And so, one of the things when you say, "Where is HR headed?" I hope it's not just headed inside the firm, which I totally agree with, go meet with your business leaders because you contract with them, you partner with them, you ally with them, but go beyond them, meet with the customer, become a customer. Somebody once said, if you're going to do a job in HR, you've got to be a customer of the company and find out how you're treated, and find out how other customers are treated. Then bring that knowledge into your business conversation.
David Green: Yeah. I think that's... Yeah. And we probably don't do enough of that in HR to be honest.
Dave Ulrich: I don't think we do. One company that did some of that was Harley Davidson Motorcycle Company. They decided with some coaching, all of their HR people needed to attend one or two rallies a year. So the rallies are... Imagine Harley people, the stereotype, along comes a head of compensation for Harley riding a motorcycle, and she shows up at the rally. They don't care she's in HR, she's from Harley. And so they're telling her, "Joey, my manifold doesn't work well, this doesn't work well." She takes notes, she's with the customers, she comes back as the head of comp, and she calls the manifold folks and says, "Look, I'm hearing from customers, we've got to be doing this better."
I think that's cool, because now when she gets into compensation, the standards, the criteria, she envisions that customer riding that bike saying, "I need this to be better," and she builds a comp system against that set of criteria.
David Green: So some of the work that you're probably best known for, is the human resource business partner model that was part of your human resource champions book back in 1997. I think it's fair to say it's had quite an impact, and actually changed HR. Now, some of the critics of the model say that it's not relevant to today's business world, what's your response to that?
Dave Ulrich: If I were sitting with that critic I'd say, "Pull out your cellphone. That cellphone is not 1997."
David Green: It certainly isn't.
Dave Ulrich: "What was your cellphone in 1997? You had a flip phone..."
David Green: It was a big brick -
Dave Ulrich: - big and it had a stem. And if you showed up today with the big thing and the stem, or the flip phone, they'd go, "What are you doing?" That's changed. It was great for its time, that model was appropriate for its time. Time has changed, my phone is different, my TV is different. The leading technology of the day was Sony Game Boy or something, that had 128K. Well, with 128K, your son couldn't play his video game today.
David Green: He wouldn't.
Dave Ulrich: Pac Man... Do you remember Pac-
David Green: I do remember Pac Man.
Dave Ulrich: We're gone. And so when people say that, I think, "You're missing the whole point." HR is evolving, and we're continuing to evolve. Now, some of the principles are the same. I mean, you've still got to help business win, and we talked about that, but the evolution of that is tremendous. Back then we talked about the four roles, and by the way I don't get asked this very often, but when I do, today it's not about four roles, it's about principles that will help HR deliver victory in the marketplace. And that's a big shift that we've seen, which I think is healthy.
David Green: Well, I wanted to give you the opportunity to respond. And actually, you've been filming a course with us today actually on the HR Business Partner 2.0 Model. So we're not going to go into a huge amount of detail now, because obviously we've just recorded that course, but if you were to give the highlights of the 2.0 model, and encourage people to maybe actually take the course, what would you say?
Dave Ulrich: My sense is, there's four buckets of highlights. One is, some assumptions about HR, and we just talked about one. Your assumption was, I go visit the business leaders. My assumption is, I go visit customers. So the assumption is outside in. The assumption is, the biggest thing or best thing HR gives a company, is not commitment of employees, meaning, purpose, belonging, it's winning in the marketplace. The stakeholders of HR, this is the assumptions, are not just the employees or the customers, the investors, and we've got to broaden our view.
The second bucket of stuff, is what do we uniquely deliver? In the HR field, and you've been around it, it's people, talent. And so, we do people analytics, we do talent analytics, we deliver the war for talent, we win the war. I think we've got to broaden that. It's not just about talent, it's about organisation, and our research shows that the people can win a... people can be a champion, but organisations win championships. That it's the organisation, and we should be bringing in HR wisdom, insight, analytics, not just about people, but about organisations and the systems we create.
So you've got a bucket of assumptions, a bucket of deliverables or outcomes around talent, leadership, and organisation. You've got a bucket of stuff around how do you run the HR department? And where I'm coming out more recently, is you've got to have role clarity. How do you manage your relationship? You have a relationship. I mean, sometimes in the HR, governance issue, it's not about your centre of expertise. You're the service centre, you've still got to have roles, you've got to have experts, you've got to have administrative stuff, you've got to have integrators, but how do you have relationships?
So bucket A is assumptions, bucket B is deliverables, bucket C is how we do HR within HR. And bucket D are some of the emerging tools, and this is where you are literally a thought leader. Tools around analytics, let's not make decisions without data. And let's make sure that the data is not just our data, but the business data. Let's use technology. Technology's changing the world, let's use it in HR. Let's get the tools of our trade that enable us to do those things. So I think in being a business partner, you've got to change your assumption, your unconscious bias, you've got to get outcomes around talent, leadership, organisation. You've got to get HR working within HR, and you've got to get current in the tools.
David Green: So moving off the HR business partner now to the CHRO. Now obviously, it's a critical role, and how have you seen the changes in the responsibilities of that role as we've moved forward?
Dave Ulrich: Well, and I'd love to hear your views as well, but let me share some research we did out of data from Korn Ferry. Big search firm, they have tons of data about business leaders. They had, I think it was 15 dimensions or competencies of business leaders, and they profiled the top 20% in terms of success of CEOs. So here's the profile of a CEO in 15 dimensions. Then they did Chief Information Officer, Chief Marketing Officer, Chief Financial Officer, and Chief HR Officer. Top 20% in terms of performance, which is a simple measure of compensation, control for it. And they said, "Here's the CEO 15 competencies, here's the profile. Chief Marketing Officer, Chief Information Officer, Chief Financial Officer, Chief HR Officer, which one most matched the CEO?" And it was Chief HR Officer.
David Green: Right, okay.
Dave Ulrich: Which is really counter intuitive. You'd assume it's marketing, or finance, IT you can get around. Here's what we found, is the best... We found in their data, the best heads of HR had the same leadership profile as the best CEOs. Now, we published that... I found that fascinating. So what does that say about the Chief HR Officer? You're not here to do HR, you're here to help the business win, and you should have the skills of a CHRO. What we also found, that we ended up not publishing, is when you looked at the medium, the average HR person, the average marketing, the average IT, they were the biggest gap against the CEO. What it says is, at the top of our HR field, we have some exceptional folks.
You've interviewed some, and you hate to share names because they may rise and they may fall, but you've interviewed some of that top crème de la crème. I'm assuming you are finding they are phenomenal. They're thoughtful, they're good. You've shared with me one that she may become CEO. I don't want to go who she is, but these are great folks. The average HR person sometimes has a gap, and part of our job, your job and my job, is to raise the tide to get the next generation better. That's a long answer, but that's some kind of interesting data about the CHRO.
David Green: It's good, and you're right, we don't want to unnecessarily call people out, but there are some inspirational CHROs out there, which I think that can act as... inspire the rest of the field really to really -
Dave Ulrich: Absolutely. Now, they're not going to be a CEO in my view, unless they know finance and marketing, and business, because you can't... If I'm an investor, and they say, "Oh, this is a great interpersonal person," I'm going, "Yeah, I really like you," and we'll go to dinner, but I'm not going to put my resources behind you. But when they know finance, when they know marketing, when they know how business operates, and they bring those profile skills that differentiate the good ones, I think we're going to see more of those HR folks in CEO positions.
David Green: And I think we're also seeing more people coming into the CHRO role now, from outside. We talked about another example who'd actually worked in the sales part of the business at one of the big organisations. And there are other examples now, I think the CHRO of Adidas, she'd never worked in HR before, but she came into the CHRO role bringing in some of that marketing part, which is obviously that focus on the customer that -
Dave Ulrich: Yeah. If you were coaching that new CHRO, who doesn't have HR experience, what would your coaching be?
David Green: Well, I think the business experience is probably more important.
Dave Ulrich: I think it's really critical.
David Green: Because you've got... I knew people in HR with HR experience.
Dave Ulrich: Well then that's what I'd say to that new CHRO, I'd say to her, "To be really good as a CHRO, you've got to know business, which you know, but you've also got to know HR. There is a body of knowledge here. Go to compensation, go to training, go to staffing, go to org design, and you've got to know change." I would advise her to say, "Surround yourself with some really bright HR experts. Really bright ones who you can trust to say, "But when we get into compensation decisions, there's a body of knowledge. When we get into learning and training, there's a body of knowledge. Don't assume because you're the CHRO, you know that knowledge." So you've got business expertise, surround yourself with some really bright folks." And Adidas has done it.
And I hate to start mentioning companies, because the clients we all love we didn't mention they're going to be upset, but if you're our client, we love you and we're thinking of you right now, but also change. So I think some of the companies or CHROs are saying, "When I populate my HR group, I got a third business, a third HR, and a third change." That's not a bad pneumonic to begin to play with.
David Green: And also, you can't be a great conductor unless you've got a great orchestra, can you sir?
Dave Ulrich: That's a great line. That's a great line. That's a great line. By the way, if you bring in a head of HR who comes out of the HR legacy, you say to him or her, "Get out to know the business." Do what you just said, "Go muse with your business leaders, go spend time with customers and investors. Get on every investor call, because you need... You bring great HR wisdom, but you need to get great business done."
David Green: So for the next part of our discussion, we're going to dip into some of the articles that you've published recently on LinkedIn, and I know you publish an article every two weeks, so I do encourage people to read them. Firstly, I want to focus on an article you published recently around digital HR. Firstly, how much of the stuff we hear around digital is hype, and how much is reality?
Dave Ulrich: What would you say, what percent?
David Green: I think there's a lot of hype. I think actually there's reality and-
Dave Ulrich: I think there's both.
David Green: ... I think we should embrace it.
Dave Ulrich: I think there's both. And it's not because it's about HR, it's about the world we live in.
David Green: Yes.
Dave Ulrich: I mean, for me, technology is a means to create digital information. And what digital information does, it allows us to make more informed decisions. My metaphor is, if I have an analogue watch, I can tell time, but if I have a digital watch, suddenly that watch becomes a communication device for the world. It measures my health, it measures my intake, it measures my steps, it measures... it allows me access to e-mail. The digital world just opens up a world of information that we never had before, and that's not going to change.
David Green: And of course, it's not about putting digital processes, or digital technology on analogue processes.
Dave Ulrich: No.
David Green: We need to actually-
Dave Ulrich: That won't work.
David Green: ... use it as an opportunity to change our processes as well.
Dave Ulrich: Yeah. So you do a lot in the digital space, what's your greatest enthusiasm and greatest fear about digital HR?
David Green: I think the best thing... The oppportunity for me is that, we can actually give some of the data back to the people providing it. So the workers. Give them insight that can help them improve their wellbeing, and their performance, their career.
Dave Ulrich: Nice.
David Green: I think that is the biggest opportunity for me, as well as creating great business outcomes of course as well. I think the biggest fear is, is that companies will misuse the data.
Dave Ulrich: That's interesting.
David Green: And we'll start to see similar scandals in the workplace -
Dave Ulrich: Is that some of the privacy issues, and-
David Green: Yeah. I think it's more just people misusing the data. I think if there's a transparency, and we're very clear with employees what data we're collecting-
Dave Ulrich: That's really nice.
David Green: ... and why we're collecting it, what the benefit is to business, and what the benefit is to them, and I think it's great. But if we don't have that open conversation, then I think we could go-
Dave Ulrich: That's really nice.
David Green: ... get into some dark places.
Dave Ulrich: I mean I can see that. So in doing a 360, simple thing, we've all been involved, we don't want to know who filled that out. Because if I know that you filled a 360 out on me, and I filled it out on you, we've got bad data. And Josh Bersin and others say, "You've got to start information with good data," and I think that's a really good insight.
David Green: Yeah.
Dave Ulrich: We found as you look at digital, it has a business impact, and that's why it's not going to go away. Every industry I know is being shaped by digital information, from automotive, obviously the driverless car, to taxis, to lodging, to entertainment, to education. Everything is digitised. In the HR field, we sort of identified four phases of digital. Phase one is efficiency. Take your HR process and get it digitised, and you see that happening with the big players. The Workday, the SAP, the Oracle. That's happening, and you see it everywhere.
Phase two is innovation. I just had the privilege of seeing Josh Bersin, I think he said there are 2400 new innovative companies around people, performance, information and work, doing all kinds of innovation. You must run into that all the time?
David Green: I do.
Dave Ulrich: The latest and greatest-
David Green: He actually manages to track them all though, which is amazing.
Dave Ulrich: Yeah. I don't.
David Green: I don't know how he does it.
Dave Ulrich: Have you ever seen any of those new apps that you just scratch your head and go, "You've got to be kidding me?" But they're happening. It's a plethora of innovation and apps. The one I joke about, I got asked, and you probably get asked to endorse. They said, "We will take a picture of your face, and based on your forehead, nose, eyes, we will tell you your leadership strengths." I remember writing them back and I said, "Have you seen my face, because it's not going to be..." Anyway. But phase one is efficiency, phase two is innovation. I think that's where 80 to 90% of HR digital is right now, and I think we need to move beyond it.
Phase three for me, is information. So how do we get more information out of this digital age about people, and performance? IBM's done some great work on that. Who's likely to leave? And some of those are simple processes, but how do we get a guidance system about what do we need in terms of talent, leadership and organisation to win in the marketplace? And we need that information, and that's not a simple act.
Phase four is where I don't know where to go. It's the issue in the world with technology, that technology that should connect us often isolates us. That the research shows among adolescents, teenagers, the more time they spend on SnapChat, or Instagram, or FaceTime, the more depressed they are, the more isolated they feel, the more anxious they feel. There's someone I know whose really thoughtful, and he has an eight year old and a ten year old, and when that eight year old and ten year old son and daughter start getting hooked on technology, and spending more of their time on technology, they get distant from the world. And so I think one of the issues we've got to face in HR, is how do we use this incredible technology, that should be connecting us, to not isolate us? So that's around the experience.
But where I see the field right now, is doing a lot around innovation and efficiency. Hopefully more coming around information and guidance around strategy and goals, and then I hope we're going to see more innovation in that connection experience space.
David Green: And do you see that connectivity is usually that it's HR's biggest challenge in embracing these new technologies, or do you think it's-
Dave Ulrich: I see as one of the biggest, because I think technology that allows me to work from home, that allows me to... The first book I wrote, we dedicated to the Toshiba Laptop Computer without whom we could not have written the book, because we wrote it while we were travelling on airplanes. That's an isolating technology, working at home, working in my basement. I think we need to find a technology that connects us.
Now, people have argued, "Dave that's because you're old, I'm next generation. I connect through technology." There's something to be said that you and I have connected through LinkedIn for 10 years, but there's something different when I meet you, when I see you, when I sense who you are as a person. And I think we shouldn't lose sight of that relationship piece.
David Green: Yes.
Dave Ulrich: And I'm a huge introvert. I mean, it's hard for me... When I'm done with a class, I go hide. But there is something to be said for technology that connects us, and how do we use that to celebrate successes? Technology enables relationships, and boy, do I hope we can see more of that.
David Green: And of course another fallout from digital technologies is this whole challenge around skills. And you wrote a really good article recently again about... you talked about a shift from workforce to work task planning. Can you just describe that to listeners?
Dave Ulrich: It is such a simple idea that's already happening, all I did is create a word that goes with it. When you go to a grocery store, they used to have you'd always go through the checkout lane, and the checker would take your thing and swipe it. And any time a job is about transferring information from your product in your basket to the payment, that job's going to be done through technology. So I'm assuming in the store where you shop today, a lot of it you can swipe yourself. What we need then, is less a focus on the workforce, and the tasks that need to be done. And so we worked with a quick service restaurant who says, "We have 25 employees in our restaurant." A lot of the restaurant job, is information based, digital based. We don't need people to do that, and so we're going to have restaurants with 15 people, and their job is to do the relationship.
And I think we're seeing that in a lot of industries. We see it in hotels, check in yourself. We see it in restaurants, place your own order, and that's the task. And so, HR's been excited about the workforce, full-time, part-time, gig-economy, contract, yes, yes, yes, yes, and add another dimension. Are robots, is automation going to be able to do some of those tasks? I don't think it can do what we're doing here, because we're building relationships, and we're working. Anytime the task is about information sharing, there's a chance that's going to be done through technology.
David Green: So it's kind of that shift from focusing on jobs to focusing on skills?
Dave Ulrich: Absolutely. And what work needs to be done, and then how can it best be done.
David Green: How can it best be done, yeah.
Dave Ulrich: And it's interesting, I was in a company that does a lot of manufacturing. They said, "We're going to move to robots, we know it's coming." Right now robots are a bit expensive, and we know that robots are going to bring our cost of operations down, and people are going to stay high. Somewhere we're going to make that cross. Right now it's cheaper to have people, labour market, workforce, than it is to have robots. As the cost of robots comes down with technology and digitisation, that cost is going to come down, people costs, we're going to cross that line." And you look at... I think we'll see that in almost every industry.
David Green: That's going to be interesting, isn't it, because if we go back in history, which is normally a good predictor of the future, every industrial revolution, yes, jobs were replaced, but new jobs were created.
Dave Ulrich: In fact, I... What do you think, do you think there'll be more jobs, or fewer jobs? I think there may be more.
David Green: Yeah.
Dave Ulrich: But they're going to be-
David Green: I'm an optimist.
Dave Ulrich: I am too, but they're going to be different. And then it becomes an interesting collaboration between government, education, industry. Whose going to take the stewardship to give those employees, who are being displaced... If your job is transferring information from a to b, I hate to say it, you may be replaced. So someone's going to have to help re-skill you, and you're going to own it, I believe in personal accountability, but is it the company, is it the government, is it the education, is it labour? Somebody's going to have to help those people, because I think there are going to be more jobs not fewer.
David Green: Yeah.
Dave Ulrich: We saw some work on robotics and artificial intelligence, and it said, "The human brain has 100 trillion synapsis. The latest robots can do a billion. And between a billion and 100 trillion, is a way before the robot will replace humans." But that billion, for example in our HR area, we have 1000 applying for a job. We can match our skill requirements with their Facebook, with their e-mail, with all of their data, their resume, and we can go from 1000 down to 100. Then we can do a second level of analysis, and get from 100 to 10, that's robots. But to get the 10 to the three we hire, requires a sense of human touch, that's the billion to 100 trillion synapsis. I think that's really a great example.
David Green: Well, you wouldn't expect me to be doing a discussion without talking about people analytics, so we are going to talk about people analytics now. And again, it's a recent article, I think, it's some research you did about over a year ago now. You did some analytics on people's analytics, and you found some interesting findings.
Dave Ulrich: It shocked us. This is why I think analytics are so helpful, because you find insights that you didn't expect. So here's the study we did. We went to about... now I've got to remember, about 4000 HR professionals, and we had a 360. So we had data from about 30,000 people, and we said, "To what extent do you know how to do people analytics?" And we rated them on about six dimensions. Then we took that result, again, for 4000 people from 26,000 raters, and we correlated it with business outcomes. So we had an indicator of business outcomes for the business you're in. We would assume, wow, those who know analytics have great business impact. Of the eight competence... Of the nine competence domains, it was the eighth in impact, it had almost no impact.
David Green: Interesting.
Dave Ulrich: By the way, that set me back, because I thought, "Everybody loves information, then we've got to use the information and insights to do predictive analytics." But our data showed, and you can't walk away from... I mean, you can walk away from three pieces of data, but not 30,000, that when HR people did people analytics, they got in trouble. Here was our takeaway, it would be fun to get your take, HR analytics should not be about HR. That the baseline... I did a book called, The H... I co-authored a book called, The HR Scorecard, about 15, 20 years ago. Today I should be shot, because it's not about an HR scorecard.
And what we found is, when you looked at information and HR people who know "people analytics," the HR pieces of that doesn't drive business results. But, when you look at information that connects the marketplace to the company, it had the single biggest predictor of business results as an organisational capability. We called it, External Sensing, and Wayne Brockbank as the thought leader, he said, "When HR can create external sensing that looks at market opportunities from customers and investors, bring that into the company." That's the biggest driver of organisation that creates business results.
So we did an article, tongue in cheek, with Thomas Rasmussen, who's brilliant.
David Green: Great article by the way.
Dave Ulrich: The analytics on analytics are not very positive, and they went, "Oh, I'm mad." And then we said, "But be careful, when you link analytics to the business, it has huge impact." I'll give an example, and I'd get in trouble for this, there's a big movement in our field with the movement of names, and ideas, and shiny objects, employee experience. My take is, employee experience is not the issue, it's how does employee experience correlate with customer experience? And what I'm not as interested in is, what drives employee experience, I'm interested in what drives that causation and correlation.
So what's your take, where is analytics going to have the most impact in the people organisation space?
David Green: Again,-
Dave Ulrich: What would you say?
David Green: ... I think it's focusing on the business. And I think the article that you wrote with Thomas Rasmussen, I think it was something entitled and in danger of being a fad. And then you outlined some specific examples that Thomas had worked on, I think at Merck and at Shell, of how they had actually tied it to the business. They correlated engagement with performance, with safety on oil rigs for example, big, big things for a company like Merck and for Shell.
Dave Ulrich: With Shell, yeah.
David Green: So yeah... And I think you're right, I like the employee experience, lot's to talk about that. But what are the elements of employee experience that drive customer experience, and -
Dave Ulrich: Or investor confidence.
David Green: ... or investor confidence?
Dave Ulrich: I mean, I was in a workshop today, and said, "How many of you are working to get measures of employee experience?" Everybody is. I mean, some legacy engagement measures, productivity, et cetera. "How many of you are attending investor calls, and sharing that data?" Almost no-one. To me that's what makes HR so cool, is that... I believe in employee experience. I'm in HR because I really do believe that organisations are the greatest setting in the world to help people fulfill their potential. I believe that in my gut, personally and visually, but to sustain that agenda it can't just be a social agenda. That's where your analytics work and others is. If you get better employee experience, and the investor gives you a 10% premium, and your stock value is worth 10 billion pounds/dollars, 10% is $1 billion / billion pounds. That argument is really compelling, and it creates then a virtuous cycle.
We're not doing employee experience to make employees happy and delighted, and bring a pet to work, we're doing it so that our investors can give us a premium, and the company will win. And then we can do some incredible things with our employees. And that virtuous cycle is the one that really excites me. It's the employee indices, whatever they are, experience, engagement, commitment, can correlate with the customer indices, and we've studied that, we've seen it.
And so when I sit down in HR with a business leader, I'm not saying, "Let's go build the employee experience," I start by saying, "What would happen in this company if our customer experience went up 10%?" "Wow, they'd buy more products, they'd buy more services, our stock price would go up, our cost to capital that would go down." "I have a way to get you that." "Really?" "Yeah, and it's not going to cost you a ton of money." Because much of employee experience is not compensation, it's opportunity, it's belief, it's impact, it's how we frame our story. I think that's where HR needs to begin.
David Green: Yeah. Is there any other research that you've been involved in recently that you'd like to share with listeners?
Dave Ulrich: One of the problems is, I love research, because I love data. My PhD is in statistics, that's... I love data. Analytics is not new to good HR, and I'm going to ask you the same question by the way. I continue to look at where does HR add value. So I see investors looking at HR in a more rigorous way. So we've created a leadership capital index. It's like there's a Moody's index about an investor valuing a company because they're confident in their financial return. I want investors to value a company because of their confidence in the quality of leadership. So we're exploring that.
We're trying to create a sense, what is it that this employee experience or connection is about? We're doing research on three things, believe, become and belong. We did a book called, The Why of Work, which had seven things. I think, those three, does my company help believe, become, we're doing research on that. But all of it is around creating organisations that win over time, so that the employee experience becomes a virtuous cycle of helping the company win and the employee have a better experience.
What are you doing, what are some new things for you?
David Green: Well, you won't be surprised to know it's around the analytics space. So Johnathan Ferrar and I created a model, funny enough, Nine Dimensions, of excellence in people analytics. And as part of that, we created a short survey, seven questions, seven critical success factors. And what I'm finding is that, most people that respond to it, they score very lowly around ROI. So actually, we determine that the ROI of our analytics projects, and the average score is around, I don't know, two and a half or three out of five. Maybe it's quite simple, maybe at the outset of an analytics project, maybe actually sit down with finance and actually work out how you're going to calculate what the return on your investments going to be from that.
Dave Ulrich: Great idea.
David Green: It's quite simple. And this is the whole thing that maybe HR hasn't been so good at doing, is quantifying its impact. You need to be able to quantify your impact, it's not always about ROI of course, there are other measures that you can do that. But that is one measure that-
Dave Ulrich: Well that ultimately has to come into a finance statement, either top line or bottom line, has to come into a market segment. The customer buys more or less, or has a higher net promoter score. And when you can build the linkages to those outcomes... For example, one of the things we've done with ROI, we've called it, the right ROI is, Return on Intangibles. Because when you go outside the company and look at shareholders, an increasing percent of shareholder investor value in a company, is not the financial numbers. Amazon gets a premium, the most valuable firm in the world, not just because of their cash, but because of their intangibles. And the big intangible, is people-
David Green: Of course.
Dave Ulrich: ... organisation, and leadership. The investors look at Amazon and say, "Bezos is a great individual leader, and he is creating leadership and a culture that will outlive him, and we're going to bet on that premium." Boy, so that ROI is... And that's kind of leadership capital logic, that we want to create those ROIs, investment, return on investment, or return on intangibles, that really drive sustainable organisations, because then they can do great things for their people.
David Green: I'm now going to ask you the question that we ask all our guests on the Digital HR Leaders Podcast, which is, what will the role of HR be in 2025?
Dave Ulrich: I mean, our '97 book that I said, we've moved beyond, the principles are the same. HR in 2025 has got to add value.
David Green: Of course.
Dave Ulrich: That's a principle. It's got to deliver talent, leadership and organisation. I mean, those are the levers that we're going to use to add value. What's going to change? I'm not exactly sure. I think technology is going to replace... Something I'm pretty sure about, I think over the last 20 years we outsourced the administrative work to the big outsource providers in different parts of the world. I think through technology that's going to come back in. We don't need to outsource, we can in-source. Some of the big outsource providers in India are shrinking, because the technology brings it in. I think we're going to see HR an increasingly differentiator at the business, because of their talent, leadership and organisation skills.
I don't know how HR will be structured, and I think we're going to find that those intangible relationships really do count inside an HR group.
What would you say?
David Green: Yeah, I agree. Clearly there are elements of HR that are going to be automated. Probably the more repetitive boring work, and doesn't that perhaps allow HR to be... have even more impact by focusing on the stuff that's really important. But again, it's tied to all the stuff that we've been talking about, isn't it?
Dave Ulrich: So are you then an optimist, or a pessimist -
David Green: Again, I'm an optimist. I think-
Dave Ulrich: Why?
David Green: Maybe because I'm just always an optimist, I don't know. I see lots to be positive about with HR. I think we're getting some really great leaders coming into the space. I think analytics is helping drive it forward, and I think, hopefully, that we'll harness this digital technology to our advantage. And yes, create business value out of it, but also drive customer experience through driving employee experience.
Dave Ulrich: Nice. For me, I care about people. I got into the field because organisations don't think, people think. And that was... My mentor drove that into me. I honestly care that people have wellbeing, that they have a sense of personal belonging and belief. I think organisations today are the setting to get it. We get in families, there's no question, we may get it in neighborhoods or social groups, or experiences. We may get it through religious groups, but we spend a lot of time in the organisations where we live and work. And it could be a small organisation. You could be starting up a small group with you and your partners, and you're a team, and you find a connection there. It could be a big organisation with hundreds of thousands of people.
If we can create organisations that give people that experience, that then virtually connects with winning in the marketplace, and investors, I think we create a place where, and this is a little naïve and it's a little Utopian, where people have a better life experience. And it changes what happens at home, it changes what happens in other parts of our lives, and that's... People say, "Why do you stay in HR?" And it's not because of what's wrong, it's because of what's right.
I mean, finance tracks what's happened, HR creates what can be. And I still have that naïve hope that we can create these organisational settings that have worked for me. So I assume you're leading one right now with your partner? You have relationships that work, that give you a sense of meaning and a sense of fulfillment. I hope we can create that in companies.
David Green: That's a wonderfully positive way to end our discussion.
Dave Ulrich: Thank you.
David Green: Dave, thank you very much. It's been an absolute pleasure. How can people stay in touch with you?
Dave Ulrich: I'm on LinkedIn, I try to post... there's a lot of posts. I don't know how often... I post almost every day, but I post a new article every Tuesday. One is short, 100 words, 150 words, and one is 1000 words. So every Tuesday I post an article. I've done that for a year and a half. I enjoy that, because it's an outlet for ideas. That may be the best space. Or e-mail, I may be old fashioned, you can find my e-mail, it's firstname.lastname@example.org.
David Green: Well Dave, it's been an absolute pleasure. Thank you very much for your time.
Dave Ulrich: You guys are great.
David Green: Thank you.