Capturing the people_advantage

Thought Leaders on Human Capital
Edited by Theodore Kinni, Ilona Steffen,
and Brenda Worthen
With an introduction by Richard Rawlinson,
Walter McFarland, and Laird Post
Capturing the
People Advantage:

A strategy+business Reader

Capturing the People Advantage

Thought Leaders on

Edited by Theodore Kinni, Ilona Steffen, and Brenda Worthen
Introduction by Richard Rawlinson, Walter McFarland, and Laird Post
Capturing the Pe


Human Capital
ople Advantage:

Chapter title 3

Published by strategy+business Books

Copyright © 2008 by Booz & Company Inc.
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Design: Opto Design
Cover art: Photograph by Jean Paul Endress/
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strategy+business Books
Publisher: Jonathan Gage
Editor-in-Chief: Art Kleiner
Executive Editor: Rob Norton
Managing Editor: Elizabeth Johnson
Deputy Managing Editors: Laura W. Geller,
Debaney Shepard
Senior Editors: Theodore Kinni,
Melissa Master Cavanaugh

Introduction: Capturing the People Advantage

Barclays PLC: Less Fluff, More Execution

John Boudreau and Jay Conger,
7

Center for Effective Organizations:
The Art and Science of Human Capital
18

Walking the Talk with Talent
Contents

30

E.ON AG: Ensuring Tomorrow’s Workforce Today

FedEx Ground Inc.: Where People Drive the Business
50

Kraft Foods Inc.: Raising the Talent Bar
54

Novartis AG: The Science of Talent
66

The PNC Financial Services Group Inc.:
82

Building Brands with Human Capital
by Richard Rawlinson, Walter McFarland, and Laird Post

94
by Christine Korwin-Szymanowska

106
by Laird Post

by Edward E. Lawler III

by Klaus Mattern and Sven Uwe Vallerien

by Jeffrey Akin and Andrew Tipping

by Jeffrey Akin and Gary L. Neilson

by Christian Burger and Klaus Mattern

by Thomas Starr

Contents, continued

Managing the Impending Workforce Crisis

C.K. Prahalad: HR Is Strategy

Royal Dutch Shell PLC: Learning as a Value Proposition
120

Satyam Computer Services Ltd.: Learning Drives Transformation
124

Saudi Telecom Company: HR’s Role in Radical Transformation
138

ThyssenKrupp AG: A Multifaceted Approach to Talent
150

Supporting Corporate Strategy with Management Development
164

Toyota Motor Sales U.S.A. Inc.: Driving the Toyota Way
176

Wachovia Corporation: Engaging Heads and Hearts
188

About the Authors
by Jeffrey Akin and Brenda Worthen

192
by Thomas Starr

206
by Andrew Clark

218
by Vikas Sehgal

by Bahjat El-Darwiche and Charles Saliba

by Klaus Mattern and Joachim Rotering

by Klaus Mattern, Joachim Rotering, and Ilona Steffen

by Cynthia L. McNeese and Thomas Starr

by Jeffrey Akin

by Richard Rawlinson, Walter McFarland, and Laird Post
Introduction:
Capturing the People Advantage

IMAGINE A MASSIVE , long-term partnership with a developing nation
that requires turning thousands of poorly educated citizens into a
highly skilled workforce. Or a government-controlled monopoly
transformed at the stroke of a pen into a public company in one of
the world’s most competitive industries. Or a merger so large and so
rife with change that, statistically speaking, not one of the combined
company’s 200,000 employees has the same job postmerger.
These are the kinds of business challenges that organizations
face today — challenges that require human capital solutions that
stretch far beyond the traditional transactional and compliance roles
of HR. Indeed, these are just a few of the challenges that the com-

Capturing the People Advantage 7
panies featured in this strategy+business Reader have faced and mas-
tered with innovative people-related strategies and tactics. (These
three stories are told in the chapters on Royal Dutch Shell, Saudi
Telecom, and ThyssenKrupp, respectively.) The companies in this
book are diverse in both industry and heritage: Some are long-
established companies in traditional industries, like Swiss pharma-
ceutical giant Novartis, with its 250-year history; others are relative
newcomers, riding the whitewater of recent technological revolu-
tions, like the Indian information technology services provider
Satyam Computer Services.
But their industry or heritage aside, these companies confront

the same realities. They compete in markets that continuously morph
as geographic borders fade away. They swim in the rapid flows of
global capital and technology. In responding to such challenges,
these companies have all recognized the compelling need to pay
attention to the value of human capital. They are devoting signifi-
cant resources and, more important, the thoughtful attention of
their leaders to redesigning their workforce-related practices. In this
way, they are developing their human capital as a critical source of
competitive advantage.
Some of the most pressing global challenges facing business
today are directly related to human capital issues. First are today’s
demographic trends. In mature economies, the overall aging of
the population has led to a brain drain of critical skills and institu-
tional knowledge in the workplace. Too many people are retiring,
and too few skilled people are available to replace them, especially in
critical sectors like energy and health care. Further complexities
stem from the willingness of people to migrate to regions where eco-
nomic growth creates demand for expert labor — places that cur-
rently include centers of oil production, such as parts of the Middle
East; booming emerging economies; and some industrially active
areas in Europe and North America. Companies whose facilities are

8 strategy+business Reader
located at the origin points of migration will have to cope with tal-
ent shortages; companies that attract workers will have to cope with
a greater degree of ethnic and gender diversity than they have known
in the past.
Skills deficits represent another pervasive challenge. In many
nations, education systems aren’t properly preparing young people
for work, and employers must pick up the slack. In 2003, according
to Newsweek, employers in the United States spent US$1.3 billion
to teach basic writing skills. Employers elsewhere report similar
problems. As C.K. Prahalad, a University of Michigan professor
who has written extensively about innovation in emerging markets,

The Differentiated Talent Market
notes, realizing the immense aspirations of the new global entrepre-
neurs of Asia, Africa, and Latin America will require an equally
immense acceleration of skill development. “How do you take farm
boys and create Six Sigma quality in four years?” he asks.
Finally, the changing needs and expectations of today’s work-
force are challenging traditional practices. Organizations need flexi-
bility, but employees have their own needs: Some are reluctant to
travel; others want flexible or part-time work; and still others want
a global career. “We need to create a work environment that enables
people to put their own personality into their job while understand-
ing that we prescribe certain behaviors,” says Neil Hall, the PNC
Financial Services Group’s executive vice president of retail banking.

• Applying a “market segmentation” strategy for managing human capital.
“And we need to realize that there’s freedom inside prescribed be-
haviors.” The real story in HR is not of a monolithic shift, or even
generational shifts, in employee expectations, but of variation in
individual expectations.

Companies are tackling these challenges in many different ways. For
this Reader, we asked distinguished business and HR executives and
academic experts in the United States, Europe, the Middle East, and

Asia for their perspectives on the trends in human capital and for
their view of their companies’ most effective people-related strate-
gies. We asked them what works in the real world, not just
in theory. Their answers provide valuable insights into the ways in
which people-related strategies can be a key differentiator in busi-
ness success.
Many of these new approaches are aimed at more effectively
attracting and recruiting talent:

Just as customer segmentation is the basis for modern market-
ing, employee segmentation is becoming the basis for modern

HR. To be sure, the basic standards of HR practice need to
be in place and applied to every employee. For example, every
employee needs to be treated with dignity and respect. But
just as marketing responds to different customer segments
with customized offers, so must HR create customized career
alternatives for a diverse workforce.
This means differentiation at the employee level. “When
somebody tells me he wants to move to France and work from
there for a year, I’ve got to say, ‘How can we make that hap-

• Attracting and retaining talent through employer branding. A strong
pen?’” declares Shannon McFayden, Wachovia Corporation’s
senior executive vice president for human resources and corpo-
rate relations. Shannon Brown, the senior vice president for
human resources at FedEx Ground, comments that “people have
very similar objectives when it comes to their work,” but then
he adds that “people want different opportunities at different
phases in their lives…. I think our work is going to be more
reflective of the individual.”
This also means that employers will end up prioritizing their
commitments to employees on a more individualized basis.
Different workforce segments contribute different levels of value
and merit different levels of investment. As Professor John

Boudreau of the Center for Effective Organizations at the
University of Southern California’s Marshall School of Business
says, organizations should manage human capital like a portfo-
lio, identifying their most “pivotal” talent segments and focus-
ing learning and development efforts accordingly.

employer brand can maximize an organization’s position with
the labor pool. Witness Novartis, the Swiss pharmaceutical com-
pany. In his interview, HR head Jürgen Brokatzky-Geiger told
us that the company hired 17,000 people worldwide in 2006,
but received more than 300,000 applications. “This is clearly an

• Creating unconventional talent acquisition strategies to look ahead and
act with prescience. In
extremely popular place to work,” he says.
The best employer brands focus on just a few key attributes,
often articulating a clear shared purpose that rises above

Leadership, Learning, Adaptability
the profit motive. Relatively few companies are taking full
advantage of the concept of employer branding, but those
that do will reap the benefits as they strive to attract and retain
talented people.

tight labor markets, accurately forecasting
and buying into future talent needs is an essential skill. E.ON,
a fast-growing energy service provider, realized this when a wave

• Recognizing that high performance requires great leaders. In this con-
of privatization overtook the power generation sector in central
and eastern Europe. “We have learned to launch an ambitious
and proactive recruitment drive in anticipation of those needs,”
says Chief HR Officer Christoph Dänzer-Vanotti.
Organizations must also be prepared to act whenever excep-
tional talent appears. ThyssenKrupp did this by establishing
a special hiring fund in its technologies business. “This budget
is for building our talent pool in that specific business, not
for traditional hiring,” explains Ralph Labonte, executive board
member and labor director. “When we find great people,

we’ll hire them first and then look around to see what they
should do.”

A number of the human capital–related strategies described in this
book involve the development and retention of people after they
are hired:

text, successful leaders are those who, as Satyam founder
Ramalinga Raju says, “can enable ordinary people to achieve
extraordinary results.” These leaders, through their example and

their influence on the culture, directly drive higher levels of
employee engagement and retention.
Some companies look externally for leadership talent. That
makes sense when speed and culture change demand it. For
example, Kraft Foods, newly independent in 2007 after decades
as a subsidiary of Altria Group, shifted its leadership develop-
ment strategy along with its business strategy. “In the past, we
always tried to build all our talent,” says Executive Vice President
of Global Human Resources Karen May. “But our focus on
growth means we don’t always have time to do that. So ramping
up our talent-buying skills has become an urgent matter.”
For many companies, the battle for talent is won or lost in
the field of internal leadership development. And the prevailing
view of leadership is evolving away from the headhunter mind-
set of the past, in which effective executives were hired from out-
side, not mentored and fostered from within. The old external
orientation, warns Jay Conger, senior research scientist at the
Center for Effective Organizations and professor in leadership
studies at Claremont McKenna College, can “undermine devel-
opment…. It sends a powerful message to promising junior
leaders about the lack of future opportunities.”

This is why leading organizations are designing rigorous
development processes to ensure depth on their executive and
managerial benches. ThyssenKrupp, for example, defined seven
key management competencies and built a standardized ap-
praisal process to create cross-segment transparency and consis-
tency. It also created a central placement process for its top 300
managers to promote mobility among its five business segments,
and to accelerate the development of leaders no matter where
they might emerge in the organization.
The goal is to create a virtuous circle: Sound human capital
development attracts high-potential leadership candidates, who

• Rethinking the connection between learning and strategic goals. We
deliver the consistently superior business performance that gen-
erates the profits needed to invest in better leaders.

know that high-quality learning programs can drive change,
innovation, and, ultimately, business value. It has been clear
for decades that an organization’s competitive advantage
depends on its ability to adapt new practices and innovations
to ingrained, habitual activity. Nonetheless, several decades
after the concept of a learning organization became widely
known, many companies still struggle to embed learning in their
organizations.
A common mistake is positioning learning as a stand-alone
function, with the proof of success being the establishment of
the function itself, rather than results in the form of business
outcomes. There are still many workplaces where corporate
learning programs have ambiguous ownership and an under-
developed support base of internal clients. In many companies,
the accountability for training expenditures is fragmented, costs
are not managed tightly, and business outcomes go unmeasured.
The cure is closer integration with the business. At Novartis,
for example, business units drive the content of learning pro-

grams to ensure alignment with strategic objectives. At Toyota
Motor Sales U.S.A., Chief Information Officer Barbra Cooper
aligns the strategic direction of the corporate university with
the needs of the retail network. Through linkages like these, the
learning function itself becomes more like a sophisticated adult-
education enterprise, focusing on efficient and cost-effective
delivery of learning services, to a segmented audience, with
measured outcomes and ROI.
Some companies also establish corporate universities at the
center of their learning functions. This facility serves as a hub
for executive and employee education, a center of excellence, a

• Emphasizing adaptability and resiliency in your workforce. “Change
vehicle for building relationships with suppliers and key cus-
tomers (who may be invited to send people to courses there), and
a visible symbol of the organizational commitment to learning.

management is at the very core of success these days,” says
Satyam’s Raju. Business today demands resilient organizations
that are able to adapt to many changes: the integration of acquisi-
tions, privatization and deregulation, globalization, shifts in

The Business Impact Imperative
technology, and the adoption of radical new strategies. This
resilience, in turn, depends on having people on board who can
quickly and effectively adopt new ways of thinking, working,
and behaving.
One company with a proven method for building the adapt-
able workforce is Kraft. This consumer products enterprise is
transforming from its old role as a cost-driven business unit to
an independent company “rewired for growth,” as Kraft’s May
puts it. She illuminates how she navigates change “by acting on
all our people issues, including current talent, recruiting, work-
force of the future, and culture, in the context of business strat-
egy as it relates to growth, innovation, and technology.”
In the best cases, the HR function can become a change

leader itself. For example, when Saudi Telecom was privatized
and job rotation was introduced to stimulate leadership devel-
opment, Vice President of Human Resources and Training
Salah Al-Zamil rotated the six general managers on his own staff
first, sending each of them for short periods of time to take on
the job of a peer in another HR function. Now, job rotation is
company policy.

Many HR professionals have not changed their performance or
practices significantly since they started their careers. “The field is

basically operating on a model that’s around 70 years old and has a
history of being wedded strictly to compliance,” observes FedEx
Ground’s Brown. “And that approach simply doesn’t work anymore.”
HR underperforms in companies where its capabilities, compe-
tencies, and focus are not tightly aligned with the critical business
priorities. “A major risk in HR is that we become seduced by the
theory alone,” warns Barclays HR Director Cathy Turner, speaking
of abstract ideas about human capital, leadership development, and
talent management. “[We] forget that the primary reason the com-
pany employs us is to enable business leaders to run their busi-
nesses better…. [At Barclays,] our driving principle is to avoid all
the ‘fluff ’ surrounding HR and focus on what we actually need to
do to help the business operate in a controlled and effective way.”
This business focus is particularly important because, as several
of the thought leaders observe in the pages ahead, the global HR
profession lacks the same kind of standard, widely accepted, and
proven methodologies that disciplines such as finance and market-
ing enjoy.
Pending the development of more consistent and accepted per-
formance frameworks, the only way for HR to prove — and
improve — its business impact is through business-aligned metrics.

The best HR organizations are building that precise capability. They
strive to measure their effectiveness by business outcomes, even
when that measurement is difficult. For example, they track the
performance records of people who have attended training and com-
pare them with those of people who have not, in light of desired
strategic business outcomes such as revenue or profit targets.
As the interviews collected here demonstrate, HR leaders who
restructure their function around business results are earning a “seat
at the top table,” as full participants in the highest level of executive
leadership. But the greatest value of innovative HR is not reflected
in the elevation of the leader or function. It is the elevation of

toward capturing the people advantage. +
an idea: that people are a primary asset and competitive advantage,
and that a compelling people strategy is required to realize their
value. This strategy will work by habituating high performance in
the people who work in every function, region, and business unit of
the company.
This is the message that comes through loud and clear in this
strategy+business Reader. The ideas, insights, and experiences of the
thought leaders featured within will challenge, stimulate, and
enlighten the human capital efforts in your organization. And you
will come away from these pages convinced that, in the end, with-
out a focus on human capital, nothing can change and no strategy
can be accomplished. Leaders who understand and embrace this
principle of organizational success have already taken the first step



Reporter: David Bolchover
Barclays PLC:
Less Fluff, More Execution

HR earns a privileged position by achieving
operational excellence in its transaction and
compliance roles, says HR Director Cathy Turner.

Human Resources Director
CATHY TURNER

Barclays PLC

Barclays PLC:
Less Fluff, More Execution

IN 2005, BARCLAYSPLC moved its headquarters from London’s
centuries-old financial district to nearby Canary Wharf, a fashion-
able high-rise development built on former docklands in the 1990s
and now populated by some of the world’s largest financial compa-
nies. The move was symbolic as much as physical. A more genteel
past had given way to the modern era of intense competition, hard-
headed commercialism, and open meritocracy at a bank that can
trace its history back more than 300 years.
Cathy Turner, who took over as the company’s human resources
director in the same year as the move, fits right in at Canary Wharf.
Her manner is matter-of-fact and direct, and her philosophy on the

value of HR is unabashedly commercial: If an HR strategy does not
clearly link to customer service and help the company’s bottom line,
then it is more than likely “fluff.”
Turner advocates “getting the basics right.” Her job is to ensure
that the very large and global Barclays workforce of 135,000 serves
its more than 30 million customers in the most efficient and cost-
effective manner possible.
Her approach to HR is a function of her background. Turner
cut her teeth in the consulting world, in the field of performance
management and reward, rising to become head of Ernst & Young’s
compensation practice. She says the experience of handing a bill to

her clients at the end of each week was a formative one that taught
her a fundamental law of business: You must provide a service of
demonstrable value to customers if you expect them to continue to
do business with you.
Turner joined Barclays in 1997 as executive compensation
director before embarking on a four-year stint as head of investor
relations, a role that enabled her to see the broader business
picture. Strategy+business interviewed Turner at Barclays headquar-
ters, where she expounded on HR’s connection to the corporate
bottom line.

S+B:What do you see as the principal role of HR at Barclays?
TURNER: Our driving principle is to avoid all the fluff surrounding
HR and focus on what we actually need to do to help the business
operate in a controlled and effective way.

S+B: What would you include in the fluff category?
TURNER: There’s a great deal of science underpinning HR practice,
but sometimes that science becomes an end in its own right rather
than a means to an end. Historically, HR was focused on managing
employee administration plans and maintaining a productive rela-

Barclays PLC 21
tionship with collective labor. As employee relations became more
streamlined and sophisticated, the influence of HR weakened. In
the 1990s, HR rightly focused more on leadership and talent as
a strategic imperative, but its success at operationalizing this has
been mixed.
Managing talent effectively and maintaining the quality of lead-
ership are critical business activities in which HR should play an
important role. If you ask me what I do every day, for instance, I
would say talent management. But “talent management” covers a lot
of sins. I often listen to presentations that sound, at first hearing, to
be rich in content. But when you actually break down each sentence

and ask, “Is there anything insightful there? What’s actually going to
get done, and how will it impact the bottom line or build capability
for the future?” you realize much of it can be platitudinous aspira-
tion with no solid foundation. One of the hardest things to achieve
is getting good talent management practices institutionalized in
ways that produce benefits to the business.

S+B: But there wouldn’t be such a market for fluff if a large proportion
of the HR industry rejected it. Why doesn’t it?
TURNER: Because the subject areas are fascinating, and intuitively,
all the theories sound right. So, for example, you can concoct an
entire theory that says something like, “Businesses that perform over
the long term have the best and most committed people, therefore
you should invest heavily in training and development, and you
should try to measure the engagement of employees.” Or, alterna-
tively, “The way to develop great business leaders is to analyze great
business leaders. You should dissect what it is that makes these lead-
ers great, and build competency frameworks that reflect those find-
ings. If we send our leaders away on programs that develop these
competencies, we will get great business performance.”
All this sounds great until you translate the words into action. If

you operationalize at the theoretical level only, you often build a
bureaucracy, usually owned by HR, that is quite divorced from what
internal clients are telling HR they need if they are to serve cus-
tomers brilliantly. A major risk in HR is that we become seduced by
the theory alone and forget that the primary reason the company
employs us is to enable business leaders to run their businesses bet-
ter. And in reality, much of what makes businesses run well is a lot
more mundane than grand theories.

S+B: What do you look for when you recruit HR staff members to help
bridge this disconnect between the profession and the bottom line?

TURNER: I don’t think HR always attracts the brightest and the
best, and that is sad given its central role. That doesn’t mean that
there aren’t excellent HR people — just not enough of them.
I look for intellect. If you haven’t got the intellectual horse-
power, then you are going to struggle from both a capacity and a
content perspective. There is a widespread misconception that HR
is just common sense and anybody can do it. But HR is very tech-
nical, so you need good mental acuity to excel in this field.
I look for technical HR skills, that is, people who have a tangi-
ble and measurable skill in some aspect of HR, whether it is in
employment law or recruitment or talent. The technically minded
can contribute something real to the business and can communicate
effectively with our senior managers. Talking in hard-edged, techni-
cal, commercial terms will help them develop the necessary credibil-
ity to get traction. If they are going to be truly credible, our HR
people need to develop a commanding knowledge of the overall
business, the customer base, and the products.
I also look for — and this is harder to measure — a capability
for relationship management. Most of what we do is serving others
in the business. Great service means instinctively and constantly ask-
ing, “How can I help you?” and following up with strong service

Barclays PLC 23
delivery. You need to interpret the human dynamics within the
organization and be sensitive to what is affecting people, always
thinking what you could do to help and protect them. Those peo-
ple who combine strong HR domain knowledge with excellent rela-
tionship management can make a big difference to a business.

S+B: As a result of these requirements, has there been much change in
the composition of your HR staff since you came in?
TURNER: Yes, there has been a good deal of movement in the
top HR leadership positions, and among the HR workforce in
general. Some of that is forced change; some of it is self-selected

change as people have decided that the vision for HR in Barclays
is not for them.
The task of improving the quality of HR talent is never ending
— the same challenge that our business leaders face with their
teams. This means not accepting second best and always seeking to
raise the standard of our work. In doing this, we have reduced a
great deal of cost, and the changes are leading to a fitter, leaner, more
business-aligned HR function than we had previously. The better we
become at this, the more likely it is that great people will want to
join the function.

S+B: What exactly is HR’s purview at Barclays, and how does it support
the bottom line?
TURNER: There are three main pillars of our HR strategy. The first
one is transaction services, covering a whole range of essential activ-
ities. We hire people, run key processes like pay reviews and per-
formance management, organize training, interface with unions,
produce contracts, and manage the onboarding and exit processes.
Given that Barclays employs more than 135,000 people, the HR
function naturally oversees a huge amount of transactional activity.
All that activity is essential to ensuring that people are in the right

place at the right time with the right skills and attitudes, and are
paid the right amount. Creating operational excellence around this
“factory” aspect of our function is critical.
The second pillar of HR is its role as a control function that
includes making sure that we comply with the legal system and
regulations in every country in which we operate. We need to pro-
tect both the company and the individuals who perform transac-
tions on behalf of the company. HR is also one of the key internal
control functions in that it sets and monitors compliance with inter-
nal policies.
Third, we act as advisors. The HR function ought to be pop-

ulated by respected professionals whom leaders feel they can
approach for counsel. That means working through issues at the
individual level, such as helping managers think through year-end
performance messaging, pay decisions, and talent development. We
can add value by helping to develop thinking, coaching individuals,
and challenging decisions. Acting as an advisor also means taking a
much broader perspective around how the organization should
evolve its human capital.
Great HR involves excelling at all three pillars. If you can
deliver on these dimensions over a sustained period, I believe that
you help build meaningful long-term business benefits.

S+B: One of the operational activities that HR administers is the entry
process into the senior executive group. Can you explain the nature of
HR’s involvement here, and what you look for in your senior leaders?
TURNER: We have a senior leadership group of approximately 20
roles. To become a member of this group, you have to occupy one
of the designated roles and perform it at a level that our executive
committee deems appropriate. The Barclays executive committee is
extremely committed to talent management and spends consider-
able time (typically 35 to 50 percent of their quarterly meetings) on

Barclays PLC 25
the governance and management of the talent agenda.
Typically, individuals in these key roles will be world-renowned
figures in their discipline and possess the personal attributes that
make for excellent leadership, such as drive, energy, intellect,
insight, and passion. We also look closely at track record. We are
committed to realizing a performance culture, which means that
continuous superior performance is required year after year to main-
tain a position in this population.
Individuals are under constant assessment. This is not a cozy
club, and there is zero tolerance for anything other than meeting
our standard.

S+B: As one of the world’s largest financial-services providers, Barclays
acquires other companies on a regular basis. What operational activities
does HR pursue during the merger and acquisition process?
TURNER: In a merger or acquisition situation, the premerger period
is often protracted and public. In such situations, staff can become
uncertain about the future. They understandably want answers to
some very specific questions: “Do I have a job? What will be my job?
Who will be my boss?” During such periods, communication is key,
letting employees know what is happening and the key dates for
decisions as early as possible.
Once an acquisition is agreed, pace becomes important. You
need to quickly decide how things are going to operate and who is
in charge. Give people clarity and certainty as soon as you possibly
can. HR should be at the forefront of both the organizational plan-
ning and the implementation.

S+B: HR’s role in compliance — the control function you mentioned —
tends to get downplayed these days. Why is it so important?
TURNER: This is a very important area given how much employ-
ment law differs from country to country. We need to be expert in
understanding the detail and excellent in implementation because if

we fail to comply, we lose our license to do business.
When I consider the diverse aspects of the HR arena —
pensions, share schemes, employee contracts, data privacy — and
the extent to which our core activities of hiring and motivating
employees are impacted by external regulations and internal con-
trols, it becomes clear very quickly that managing risk and being
in control is at the heart of HR. We take this very seriously
at Barclays.

S+B:In its advisory capacity, how can HR help shape the evolution of
human capital within the company?

TURNER: There are two critical elements here. First, HR needs to
run well and focus on the elements discussed earlier — achieving
this will strengthen the core business. Second, HR needs to be ready
to move quickly to capture talent when it becomes available from
market dislocations or competitor underperformance. If you are
great at the first, you can typically deliver the second.

S+B: How has your view of HR translated into changes in the function
during your three years as HR director?
TURNER: A major change has been the move from a quite central-
ized HR structure to a more decentralized one, in which HR people
are integrated within the business units they are supporting. This
places HR close to the business and our customers, which is impor-
tant given how integral people are to business success.
I have also focused on improving our transactional delivery. We
were not good enough at getting things done that really mattered to
our internal clients. Hiring did not go as smoothly as it should, for
example; training was not done properly; inappropriate decisions
were made in performance management; we had insufficient con-
trols; and so on. This all sounds like it should be easy to fix, but it
isn’t. The nuts and bolts of what we do are critical to a well-run busi-

Barclays PLC 27
ness and to securing respect for the function. We still have a lot to
do, but we have made significant progress.
And, as I have already mentioned, there has been the relentless
focus on talent within HR, leading to what I perceive to be a great-
ly improved standard in the quality and professionalism of our HR
teams globally.

S+B: What are your important objectives for the next three years?
TURNER: I have several, all aimed at strengthening our human cap-
ital base further. One of my main goals is to get a consistent IT
architecture in place to support HR. There are not many HR people

exciting work. +
around who have expertise in establishing IT systems and who
understand this area. Getting this right would create the biggest
transformational shift in the services the function provides and the
quality of the work we do in HR.
We have been making steady progress in this area, with business
units acknowledging a need to move toward a consistent company-
wide software and architecture. We have agreed on a pan-Barclays
HR IT strategy, and we are now implementing at pace. This is


by Laird Post

Reporter: Lawrence M. Fisher
John Boudreau and Jay Conger:

Professors John Boudreau and Jay Conger,
colleagues at USC’s Center for Effective
Organizations, describe how to cure
organizational attention deficit disorder
and cultivate human capital.

Center for Effective Organizations
JOHN BOUDREAU AND JAY CONGER

University of Southern California’s
Marshall School of Business
(RIGHT)

by Laird Post
John Boudreau and Jay Conger:

HOW CAN HR organizations foster leadership within their companies?
How do they gain and measure competitive advantage through tal-
ent development? John Boudreau, research director, and Jay Conger,
senior research scientist, of the Center for Effective Organizations at
the University of Southern California’s Marshall School of Business,
have devoted their careers to these questions.
Boudreau, who is also professor of management and organiza-
tion at the Marshall School and who was the founding director of
Sun Microsystems’ R&D Laboratory for Human Capital, is seeking
to reframe HR as a decision science that encompasses the same
discipline and accountability as other business functions, such as

finance. HR leaders, he wrote with Peter Ramstad in Beyond HR:
The New Science of Human Capital (Harvard Business School Press,
2007), must practice “talentship” by recognizing and making pivotal
strategic decisions regarding people.
Conger, who also serves as Henry Kravis Research Professor in
Leadership Studies at Claremont McKenna College and visiting
professor of organizational behavior at London Business School, is a
longtime advocate of internal leadership development as a strategic
necessity. He has written and edited 14 books on leadership; most
recently, he gathered state-of-the-art thinking on the topic as editor,
with Ronald Riggio, of The Practice of Leadership (Jossey-Bass, 2006).

Clearly, the kind of strategic leadership development that
Conger espouses goes hand in glove with the sophisticated manage-
ment of human capital promoted by Boudreau. In a wide-ranging
conversation, which took place at the Marshall School in Los
Angeles, strategy+business found the two scholars speaking in har-
mony, but with subtle differences in pitch.
Conger emphasizes the benefits of growing leaders from within
and of distributing leadership training throughout an organization
rather than reserving it as a perk for a few at the top. A heavy
reliance on recruiting talent from other companies also means rely-
ing on those companies to do a superb job of developing talent, he
says. A risky proposition.
Boudreau stresses the importance of attaching standards and
metrics to development practices so that the results generated can
be measured against an organization’s goals in meaningful ways.
One way to do that is to adopt the language and metaphors used
to describe other key business disciplines, such as marketing and
manufacturing, and use them in the science of human capital
management.

S+B: Why is it still so rare to see effective human capital and leadership

John Boudreau and Jay Conger 33
practices implemented in the real world?
CONGER: One factor is that organizations have attention deficit dis-
order, and although the human factor is important to them, it’s not
always in the foreground. It’s more often a background issue. With
the higher turnover in CEOs today, we also have enterprise agendas
with shorter lives. For example, you might have a CEO who is very
committed to talent management. But if this commitment is not
profoundly embedded in the company culture and processes, the
next CEO may head off in another direction, with talent manage-
ment dropping off the enterprise agenda.
Also, many executives believe that it is important to have

development programs, but they project from their own experi-
ences. They say to themselves, “I climbed to the top through job
assignments and hard knocks. These are the best teachers. Who
needs coaching and education?” In other words, they think twice
about an investment in formal development. When they must
choose between funding marketing and funding development, mar-
keting looks like the better return.
Another factor hurting talent development programs is that
many large companies are now recruiting outsiders for senior roles.
The thinking is that you can go outside and headhunt the best exec-
utives. This mind-set is facilitated by the rise of recruiting firms,
which have developed very sophisticated databases of talent. They
know how to find and trade talent across and within industries. But
this mind-set can powerfully undermine development. It is as if
the company is saying, “Why not outsource our talent develop-
ment? We’ll let companies like General Electric develop great lead-
ers for us.” As you can imagine, this thinking is full of pitfalls: It
sends a powerful message to promising junior leaders about the lack
of future opportunities; the externally hired executive or manager
who was so successful in one company may not be so successful in
the new company; and internal investments in talent development

appear less necessary.
The reality is that the companies with a sustained history of effec-
tive human capital management have it deeply embedded in their cul-
tures. This mind-set outlives each and every executive who runs the
organization. Their CEOs have a sense that as an executive, you are a
custodian of this institution. You are wired to plan for succession at
many levels. As a result, these organizations think more deeply about
talent processes, and they have a richer legacy of talent processes.

BOUDREAU: This notion of why best practices in human capital
haven’t taken hold has been a theme in my work for about 30 years.

I did my Ph.D. thesis on a return-on-investment model for optimiz-
ing employee turnover. I was struck at the time by the difference in
the approach that courses in areas like finance, marketing, and oper-
ations management took, which frequently was to help you learn a
language and a set of principles, and then have you take those and
apply them.
You never got out of a finance class without understanding
portfolio theory, and concepts like debt/equity, capital, risk/return,
and liquidity were part of the language you were expected to
know. There’s a professional discipline that says, “These are the
principles on which we manage the resource called money.”
We’ve all learned them. We’ve all been held accountable for under-
standing them.
A decision science really doesn’t exist in the area of leadership
and human capital. If you ask 40 executives for their definitions of
motivation, you get 40 different definitions. No one knows which
one is right.
Organizations today can be pretty rudimentary in the way they
manage people and leaders, because right now, none of their com-
petitors are any better at it than they are. That was true about finan-
cial instruments before the turn of the 20th century, and it was

true about a great deal of the marketing discipline before the 1940s
and 1950s.
It’s an evolutionary issue, and I think we’re about to reach the
point where the same things that came together to create disciplines
like marketing and finance will come together to create a non-
ignorable need for a decision science. This is more than just corre-
lating practices with outcomes. It really goes to a fundamental
understanding of how we compete with talent and how we compete
with leadership, in the same way that marketing answers the ques-
tion, “How good are we at the decisions we make about competing
for customers?”

S+B: Organizations still struggle to understand where their talent efforts
have the greatest strategic impact. How have companies identified the
real levers and created interventions to exploit them?
CONGER: Procter & Gamble, for example, is very strategic about
building deep relationships with the preeminent universities within
each country that it operates in. It focuses its recruiting efforts
on the top three or four universities. It has built deep individual fac-
ulty relationships, and it has established a strong employer brand
within those schools. So, for example, it’s able to get some of the top
students out of the best Chinese universities because of that relation-
ship building and brand building.
General Electric is very clever in its own way. It says, “We’re not
going to get the Harvard MBAs right from graduation anymore.
Instead, we want to find talent that will come to GE and build a
career with us. So let’s go to second-tier schools, particularly in the
Midwest. Let’s focus on folks coming out of the military, because
they bring cultural values that we like.”
For another example of a talent lever, consider the process of
socialization that Toyota uses to onboard plant managers in the U.S.
They take American managers who have run comparable plants for
their competitors and put them through a two-and-a-half-month

socialization process before they’re allowed to manage a Toyota
plant. Yet these are people who may already have 15 years of experi-
ence running a plant! But Toyota says, “The Toyota way of manu-
facturing is critical to our success. As the manager, you’re going to
have a very profound impact on this plant. We want to make sure
that you deeply understand the Toyota way. We’re going to take the
time to socialize you in this mind-set and process. We’re going
to begin by giving you improvement assignments working with
frontline workers in your own plant. Then we’re going to send you
to Japan to work in our world-class engine plant under the guidance
of a master coach.”

Another great example is Bank of America, which grew through
acquisitions but discovered that executive talent from its outside
acquisitions suffered a high failure rate. As a result, the company
now has a yearlong onboarding program for executives brought in
from outside as well as for executives promoted from within.
They’ve built this very sophisticated process that is designed to help
the individual succeed. On the day an individual begins the pro-
gram, he or she senses, “This organization, at the executive level,
really wants me to be successful.”
I would add that the best firms do not have dozens of levers that
they pull for talent management. Instead, they have focused on opti-
mizing a handful of human capital levers because those particular
interventions support most effectively the organization’s strategic
and competitive advantages.

BOUDREAU: In class, I have students read a case on GE’s talent
management system. Then I ask them, “Would you want to use the
GE method?” Almost everybody says they would, but in fact, when
you look closely, the GE system is really very well suited to the kind
of competition that GE is good at. So if you’re going to be a multi-
product conglomerate in which business leaders have to be corpo-

rate assets and you expect to move them a great deal between
businesses and you want the glue that holds everything together to
be fairly well understood and consistent, then what GE is doing
makes complete sense.
But there aren’t that many organizations that compete that way.
In a lot of organizations — take Berkshire Hathaway — you’re never
going to move a manager from one place to another. Those entities
are held as separate businesses, and that’s a great way to compete for
that type of organization.
The right question for organizations to ask is, “What is unique
and what makes a big difference in how we compete?” Those are

pivot points. “Where would a change in our competitive differenti-
ation make the biggest difference for us? Where are there talent gaps
at those strategic pivot points?”
The subtle but important difference is to not ask what’s impor-
tant, because virtually everything you’re doing usually is or else
you would stop doing it. It’s like asking what’s the most important
machine on an assembly line. That’s a silly question, because
they’re all important, and you wouldn’t have them there if they
weren’t. But it’s a very different question when you ask, “Where
would improving the capacity of a machine make the biggest
difference?” When you frame it that way, you have a pivot point
question.
I’m seeing companies start to do that around human capital.
They are asking, “What is the pivotal difference that talent makes?
Where are the pivotal differences in our strategies?” Rather than just
asking, “What are our important strategic objectives, and where
does talent connect to those?”

S+B: You write about the differences in the relative value created by
incremental improvement in the performance of a FedEx pilot versus a
FedEx driver or of a Disneyland sweeper versus the Mickey Mouse char-

acter. How does understanding pivotal positions influence talent man-
agement strategy?
BOUDREAU: There is a tendency to think that treating people
equally is the way to be fair, and it’s not an easy habit to break. It’s
analogous to talking about yield management in the 1970s, before
the idea emerged that customers could pay vastly different prices for
the same perishable good, like hotel rooms or airline seats, depend-
ing on what kind of customer they were and when they bought it.
At the time, marketing professors were saying, “This probably won’t
work in practice, because two customers sitting next to each other
on an airplane can discover that they paid hundreds of dollars’

difference in price. The one who paid more is going to think, ‘That’s
not fair.’”
Leaders didn’t have good stories to tell customers that justified
these very different prices for hotel rooms or airplane seats, but they
evolved. Organizations began to have good reasons for what they
did, reasons that they could articulate. So, I may not like it as well
when I fly an airline where I don’t have elite status, because it means
I’m going to board the plane last. But at least the airline can say,
“Well, this is what it takes to earn elite status, and this is why our
business depends on this segmentation.” The companies that are
doing talent management well are beginning to develop that kind
of language.
For example, GE treats all of its employees well and is commit-
ted to their development, but there are differences once you’re iden-
tified as belonging to the tier of leaders who constitute a corporate
asset. GE has a very good explanation for this practice, and it’s
embedded in the culture, so that employees know what it takes to
get there. And if you’re not there, GE has a system that’s remarkably
candid and explicit about saying, “Look, this is where you’re not
making it, and this is where you are.” It’s still probably dissatisfying
to people not to be in that elite group, but both the process and its

fairness provide an explanation and allow the system to work well.
It’s a matter of getting the language right when stating the dif-
ference between pivotal events and important events. A company’s
leaders need to say, “Everybody’s important here, but we treat peo-
ple differently depending on how pivotal they are to our strategy.
We do that with customers. We do that with machines. We do that
with money. Why wouldn’t we do that with talent?”

S+B: HR leaders who truly make a strategic impact in their organiza-
tions are rare. Are there elements in background, skill set, or expertise
that help predict the potential in HR leaders to play pivotal roles?

CONGER: One reasonably good predictor is people who have had
actual line experience running a field operation or a business unit.
These individuals tend to have a very well rounded perspective; they
understand the business, the customers, and the financials. They
understand the mentality of managers and of executives. They also
have an appreciation for systems that are simple because they’ve had
to implement them as managers.
I’ve asked HR executives, “What’s the one thing you wish you’d
had more of in your career?” And one out of two will say, “I wish I’d
had more business line experience.”
It’s a truism, but having a more strategic mind-set is also a good
predictor of success. If this strategic mind-set is linked to talent
management, HR people do carry more weight in executive discus-
sions. The best of the HR executives I know work extensively with
the company’s board members and have strong one-on-one relation-
ships with them. Another predictor is the extent of the network
of the HR executive’s relationships. The network should extend
far beyond the executive team to business unit heads and to the lev-
els below.

S+B: How do the most effective HR executives validate their role?

BOUDREAU: There’s often a currency that the more face time you’re
getting with the CEO or with the board or with the business lead-
ers in your unit, the more successful you are as an HR leader. That
creates a competition for connection and face time. There’s a lot of
effort put into acting as a trusted advisor.
Almost everybody will say they really like and trust and have a
confidant in an HR leader, but they don’t necessarily require that
about their chief financial officer. They don’t necessarily need to
have a personal trust relationship with their Six Sigma expert, and
yet their CFO and their Six Sigma expert are every bit as valuable
as their HR leader. The profession of finance or operations or mar-

keting has a certain consistency to it, and when you get a new
CFO, you know what to expect. Whereas in the world of human
capital right now, leaders must often rely on the particular language
or mind-set of the individual HR professional they work with,
because there isn’t a consistent language or mind-set for the HR
profession.
It’s understandable and important that leaders feel they must
have a confidant in the HR person they work with, that they have a
lot of trust in this individual, that they look to HR for gut checks.
At the moment, I think a lot of business leaders feel that people
issues are pretty soft and, in some ways, unknowable — so they need
to find somebody that they trust, like, and rely on for judgment
when they can’t use analytical principles.

CONGER: One of the traps for an HR executive is to be the primary
confidant of the CEO. It gives you this deep sense of self-assurance,
because you have the CEO’s ear. But I have often seen these individ-
uals end up primarily as the CEO’s arm for delivering bad news:
“I’ve got a problem with Executive X. Would you please go and deal
with that for me?” They are the right-hand cleanup guy versus the
HR executive who has strong relationships across the executive team

and the board.

S+B: So where should HR leaders be focusing now?
BOUDREAU: There was a compliance era for the profession, which
was “You have to do it this way or we’ll get in trouble, we’ll violate
the law.” Every profession from marketing to finance to operations
has gone through that era. It’s often the first place that a profession
gains power, whether it’s IT or legal or HR.
Then, there’s a services era that we’re in now. This is the imple-
menter role; HR as a function defines its success by the idea that
clients find its services valuable or strategic. A lot of HR leaders have

had their greatest success in the transformation from a compliance
to a services mind-set.
Neither compliance nor services will go away, but I think we’ll
see more reliance on consistent professional decision rules and
frameworks for thinking about HR.

S+B: How can organizations enable their leaders to make better people
decisions?
BOUDREAU: At GE, they have a pretty consistent decision frame-
work and a language for talking about what potential means,
what performance means, and what it means to have a leader be a
corporate resource, not just a business resource. Their answers are
consistent and logical. The systems that they use with regard to per-
formance, potential, and leadership careers, and the way they
connect to their businesses, are so ubiquitous and so embedded
in the culture that their leaders have a common way of thinking
about HR.
You also see it in P&G. If you talk to the HR leaders at P&G
and ask them how they think about talent, you find that they have
been adapting and applying concepts from marketing to talent
sourcing.

Sometimes the key is to find out what kind of models line lead-
ers are comfortable using. Is it a marketing metaphor? Is it a produc-
tion metaphor? By building on the mental model they already have
rather than imposing a new one, you take that logic and say, “How
can we help them think about talent more effectively?”

CONGER: If I look for companies that have gone from a weak talent
mind-set and supporting infrastructure to a strong one, I think right
away of Mattel and Bank of America. In both cases, you’ve got a
CEO who is deeply committed to talent development.
Both CEOs have HR executives who are strategic, well re-

spected, and persuasive. That’s another characteristic of these top
HR people: They have good persuasion skills. This partnership
between the CEO and the HR executive or leadership development
executive, from my experience in those two cases, has been pivotal
in instilling a talent development culture.
These companies then built a series of development and talent
identification initiatives. The first initiative was a leadership devel-
opment program. That was followed by a more rigorous per-
formance assessment initiative. And that was followed by a more
rigorous succession management process. So you have a series of
steps that unfolded over several years. Each step was designed to
build upon the previous one and to cascade down the line. These
initiatives themselves are about driving processes as much as they
are about socializing line managers in the importance of talent and
development.
In both cases, the CEOs modeled, through their own behavior,
how critical talent is to them. They also put themselves and
their own executives through rigorous talent processes. Over time,
the mind-set and the supporting behavior spread into the line
management.

BOUDREAU: Jay’s comments bring to mind an interview I did with
Joan Crockett, the senior vice president of HR at the Allstate
Insurance Company, and Edward Liddy, the chairman.
Joan takes Allstate’s mind-set about risk, mitigation, and return
of liquidity in the financial world and applies those ideas to talent.
What is the equivalent of the return we’ll get on this talent? What is
the equivalent of a risk factor in this talent? What is the equivalent
of being able to move talent around in different areas like the liquid-
ity of the financial asset?
Allstate began with a set of competencies that were developed
by an executive team and then realized that with more rigorous

approaches to those competencies, they could improve them and
make them the basis for an array of HR programs built around a
common language. This process was moved forward by Ed, who
modeled the idea: “We are going to use these competencies and be
accountable for developing people. Leadership progress at Allstate
will include and go beyond being a great insurance salesperson.”
It’s really through those leadership, performance management,
and goal-setting systems that you begin to embed in the organiza-
tion a common way of thinking about talent development and a
more rigorous way of implementing it.

S+B: Much has been written about employee engagement and the corre-
lation with business outcomes. How can companies improve the level of
engagement in their workforce?
BOUDREAU: There are lots of examples of the general idea of get-
ting employees to become personally committed and passionate
about the strategy or direction of the organization. But the whole
notion of what actually constitutes engagement is subject to discus-
sion and debate right now in the scholarly literature.
Sometimes it’s about employee attitudes, like satisfaction.
Sometimes it’s about employee commitment, like staying with the

company or working hard. Other times, it’s more about employee
alignment — as in, do I understand where we’re going and do
I understand my contribution to where we’re going? Those
three things are actually very different in terms of what you do
about them.
You do see organizations like Starbucks, for example, or
Medtronic, whose employees, top to bottom, really do seem to have
a strong passion about the direction of the company, a personal
desire to contribute, and a belief that they will be recognized and
rewarded for their contributions.
With Starbucks, I think it has a lot to do with the philosophy of

the organization and with the way they treat their employees. Entry-
level service employees are treated very well there.
With Medtronic, it’s certainly that they treat their employees
well, but it’s also perhaps even more about the mission of the com-
pany. You see this a lot in the medical industries — people just want
to be a part of that, and they really believe and can see that
Medtronic does things that change lives for the better. Every single
person believes that he or she is part of that mission.
The basis for engagement often varies, and savvy organizations
figure out a way to make that basis compatible with the particular
ways that they’re going to compete in the market.

S+B: Is it possible to have an organization that manages talent well and
builds leadership capability, but is not able to deliver on its mission?
BOUDREAU: It’s quite possible to do well at one level and have a lot
of individuals who are very motivated, very engaged — and yet lose
in the marketplace because you simply didn’t have the formal or
informal structure to make things happen. An organization can have
great people but, for example, while the world is turning toward a
more product- or brand-focused model, they’re still based on a
regional model. You might have great country managers, but they

cannot deliver the global brand that you need.

CONGER: I would argue that it’s not formulaic in the sense that in
some cases a centralized structure might actually be more conducive
to talent development. In other places, a decentralized structure
might be more conducive to talent development.
Look at Procter & Gamble, which is still built around an old
model of country managers. This model is fantastic from the stand-
point of grooming talent because younger people, in their 30s, can
get a general manager’s job. In the general manager [GM] role, they
have to worry about the economy, they have to worry about politics

and regulations, they have to worry about different functions, they
have to worry about finance. Early in their careers, they’re getting a
rich set of experiences.
Now let’s contrast this with another organization that says,
“Gosh, this is expensive, having all these country operations. Let’s
have global lines of business, and let’s wipe out this GM job at the
country level.” Well, if you look carefully, what this type of reorgan-
ization does is move up, by about a decade, the age at which you can
get a significant general manager’s role. So, you now go through a
functional line — marketing, finance, manufacturing, whatever it is
— all the way through your 40s. At 45, you get to be a GM over-
seeing operations for eastern Europe. But before you take this role,
your primary experience has been running manufacturing opera-
tions. You might have had one or two broadening projects, but that’s
about it. In this case, going from a decentralized to a centralized
organization, the company has actually wiped out talent develop-
ment opportunities.

BOUDREAU: That’s a great point, Jay. Not enough attention is paid
to decisions about structure as an effective opportunity for talent devel-
opment or for the enhancement of talent. It would be akin to not

improving our ability to develop suppliers, for example, as we change
our supply chain approach. Most organizations wouldn’t
do that.
I think organizations can do a lot better at thinking through
the talent development or the talent enhancement implications of
decisions they make around questions like “How are we going to
structure?” and what that does to the supply of development
opportunities.

S+B: Both of you are teaching tomorrow’s workforce. What are the impli-
cations for HR leaders as Gen Y enters the job pool?

CONGER: Gen Ys have more “transactional” mind-sets. They have
deeply ingrained beliefs that jobs and companies are stepping-
stones. The logic goes like this: The more you move across compa-
nies, the more you earn and the more responsibility you get. When
you ask a member of this younger generation, “How many compa-
nies do you think you’ll work for over your career?” their answer is
typically a minimum of five or six. The baby boomers might have
said two or three. Their parents would have said one.
If you want to retain them, the youngest generation of managers
love coaching. They love to have bosses mentor them. Early in their
careers, they’re definitely in high learning mode because they’re
thinking, “I want to be incredibly mobile. I want to learn as much
as I can.” The more you as an organization can deliver on that coach-
ing and learning, the longer, paradoxically, they’ll stay with you.
Gen Ys also need clear expectations. I find them to be a genera-
tion with whom you have to be very clear what your expectations
are and what work and project outcomes should look like. They
need more hand-holding, which also fits with the coaching mind-
set. They love doing things in teams. Many of them were on soccer
and baseball teams by age 5, so their lives are characterized by team
environments. They tend to be superb multitaskers, so they need a

lot of variety and stimulation in the job.

S+B: What does the Gen Y mind-set mean for companies whose models
call for bringing people in right out of school and trying to build long-
term talent pools?
CONGER: I think these companies can succeed provided they focus
heavily on development, project variety, and lots of teamwork.
I think young people also want to be with an exciting company
doing innovative work. Gen Ys have a social activist mind-set. They
want to work for companies that have a social mission and that
perform public service.

they are going to need at those pivotal points. +
Companies like General Electric, for example, with a strong
environmental orientation, can be very attractive for this generation.
So where Jeffrey Immelt is taking GE with all these green initiatives
[such as Ecomagination] is very appealing for them. This is also the
generation that grew up on community service, so the more that
companies integrate activities like Habitat for Humanity projects
creatively into their businesses, I think the more they are able to
attract and retain young talent.

BOUDREAU: Virtuality and globalization really do create options for
folks. It’s easier than ever to start a business or create a community
around an idea or a passion that could lead to a career. So the idea
that people may have options to traditional employment is much
more tangible now than perhaps it’s ever been, and I think those
options are only going to increase.
You can have a talent strategy that involves a long-term commit-
ment, but it will mean altering your definition of an organizational
career to encompass a sense of the options people will have and what


by Edward E. Lawler III
Walking the Talk with Talent

IT IS HARD to find a recently published book or article about man-
agement that doesn’t refer to the importance of people. Annual
reports, too, regularly contain messages from CEOs saying that peo-
ple are their company’s most important asset. Surveys of executives
confirm that many believe that finding and developing the right tal-
ent should be one of their top priorities. But if employees really are
an organization’s greatest asset, why is it that the actions of execu-
tives so infrequently match their words?
Very few organizations walk their executives’ talk when it comes
to talent management. Instead, most companies are designed and
operated in ways that downplay the importance of people. They

have bureaucratic structures that optimize the value of financial cap-
ital, machinery, equipment, and natural resources, at the expense of
talent development and the opportunity for people to use their
skills. Work processes are designed to create simplified, standardized
jobs, and individuals are controlled through well-defined hierarchi-
cal reporting relationships, budgets, and close supervision.
When executives in a company fail to live up to their rhetoric
about human capital, employees are, in effect, given two messages:
that the company is managing them incompetently, and that their
bosses know that this suboptimal approach is wrong. As a result,
executives come across both as hypocrites and as poor managers and

strategists, which in turn undermines their ability to lead.
Closing the gap between rhetoric and reality is not easy, but
it can be done. If leaders are interested in building an organization
in which people are treated as a valuable asset, then they must
focus on three features that are too often ignored: the board of direc-
tors, the human resources management function, and the informa-
tion systems.
When an organization values human capital, the board of direc-
tors should have at least one member who has a sophisticated under-
standing of the research related to human resources management,
organizational effectiveness, succession planning, and learning
and development. These are the anchors of effective human capital
management.
Board members should also receive regular information about
the condition of an organization’s talent and the way it develops and
deploys that talent. These reports should include information about
people’s attitudes and skill development levels, assessments of the
availability of backup talent for key positions, and evaluations of the
organization’s ability to attract, retain, and develop new talent.
Moreover, the board should spend at least as much time on
human capital issues as it does on the allocation of financial and

Walking the Talk with Talent 51
physical capital. It is particularly important that boards spend time
on succession planning for top-level management positions.
Nothing is more important for the future of an organization than
the type of talent it has available to fill its most senior positions.
In any organization that believes human capital is its most
important asset, it follows logically that the HR department should
be its most important staff group. This means that HR should con-
tain some of the top talent in the company, along with the best
information technology resources, and HR should be a valued
expert resource when it comes to strategy development, change
management, organization design, and talent management.

The HR function should be staffed with individuals who under-
stand the business — and who know the intricacies of human capi-
tal strategy and management systems. The department shouldn’t
be staffed solely with individuals who are pursuing a lifelong career
in HR; the HR department should also be seen as an important
career stepping-stone for anyone who aspires to a senior manage-
ment position.
HR department leaders need to be involved in business strategy
discussions. A seat at the strategy table is not enough; if human cap-
ital really is an organization’s most important asset, HR should “set
the table” for strategy discussions by framing the issues in terms of
the current condition of the organization’s human capital and what
talent is available in the market.
Finally, organizations that value employees as their greatest asset
must heed the old saying that what gets measured gets attended to.
Thus, the quality of an organization’s people will be a central focus
only if the company has HR measures that are as relevant, rigorous,
and comprehensive as the measures that pertain to financial assets
and physical capital.
To be effective, a human capital information system needs to
track the contribution of people to the organization’s most critical

and strategic objectives. It needs to provide a good indication of how
productive individuals are and how their productivity relates to
organizational performance. It needs to measure the condition of
the competencies and capabilities that the organization needs for
superior performance.
It is particularly important for the HR department to have
information technology resources that will enable it to produce
the kind of comprehensive, real-time quantitative data that can be
used by leaders in making fact-based decisions about talent man-
agement. HR leaders should not just generate and analyze this
data — they should apply it to most critical decisions. The execu-

talk about talent. +

Excerpted from strategy+business, Summer 2008.
tive committee and the board should do the same.
There are enormous gaps between the way corporate boards,
HR functions, and information and measurement systems are actu-
ally managed and designed and the way they would be managed and
designed if human capital truly were their most important asset.
Leaders should ask themselves how well they are living up to their

Walking the Talk with Talent 53


Reporter: David Bolchover
E.ON AG:
Ensuring Tomorrow’s Workforce Today

Shifting demographics and international
expansion require an employer brand as
powerful as the best consumer brands, says
Chief HR Officer Christoph Dänzer-Vanotti.

Chief Human Resources Officer
CHRISTOPH DÄNZER-VANOTTI

E.ON AG

E.ON AG:
Ensuring Tomorrow’s Workforce Today

largest private energy service provider, is a new
E . ON , THE WORLD ’ S

company with a long history. Formed in 2000 as a result of the
merger between two of Germany’s oldest and largest industrial
groups, Veba and Viag, E.ON has expanded rapidly through acqui-
sitions and organic growth. The company now distributes power
and gas in central Europe, the United Kingdom, northern Europe,
Russia, and the United States. Its natural gas business also takes
E.ON’s operations into the North Sea as well as into several coun-
tries around the world.
As chief HR officer of this fast-growing US$148 billion com-
pany (market capitalization at year-end 2007), Christoph Dänzer-

Vanotti is responsible for more than 80,000 employees. And, 30
years after earning his law degree from the University of Bonn, he
also finds himself on E.ON’s board of management.
The German native took on his current role at the end of 2006,
but he is not a newcomer to the energy industry. He spent nearly
two decades working for RAG (now Evonik), a German coal and
chemicals conglomerate, starting as an in-house legal counsel and
finishing out his tenure with a six-year stint on a subsidiary’s board
of management. Following this, Dänzer-Vanotti worked as a board
member for E.ON Ruhrgas before joining E.ON AG.
Clearly, Dänzer-Vanotti has devoted a great deal of thought to

the challenges for employees posed by the pace of E.ON’s inter-
national expansion. He is also acutely aware of the significance of
corporate responsibility within the energy company’s “people strat-
egy.” Getting E.ON’s image right is vital, and not just from the
consumer standpoint; the growing legions of the environmentally
conscious will inevitably include many current and potential
employees, the very people he spends most of his waking hours
thinking about.
In the course of his interview with strategy+business, Dänzer-
Vanotti drew on his long experience in the energy sector to talk
openly about some of the most profound people questions —
including employer branding, gender diversity, and the impending
demographic shortfall — that face his company and the industry as
a whole.

S+B: What are the major people challenges you are facing in your busi-
ness today?
DÄNZER-VANOTTI: One specific and pressing people issue we are
facing is a direct result of our demanding operational and financial
targets, which mandate a heavy emphasis on investment and growth
in the coming years. As part of this program, we intend to invest a

E.ON AG 57
great deal in building new, highly efficient power plants. But to do
so, we need highly qualified engineers with first-class experience.
Because we are witnessing a serious shortage of engineers through-
out Europe, recruiting them will not be simple.
On a broader, more strategic level, I’d highlight three of the
many people issues that we are actively addressing. First, we need an
employer brand that will reflect the exciting reality of the E.ON
culture and therefore attract the best people. This isn’t necessarily
so straightforward for a company with intangible products, such
as energy; it’s a very different proposition from establishing an
employer brand where the company products are glamorous cars,

for example. In addition, we are facing an often negative public per-
ception of all major electrical power and gas suppliers that is large-
ly inspired by environmental concerns. Against this background, it
is even more important to put all of our effort into establishing an
employer image that communicates the opportunities E.ON offers
to its employees.
Second, our rapid international growth has created both lo-
gistical and cultural people issues. We clearly need to get the best
people leading and working in our international operations and
very quickly come to grips with how different business environ-
ments operate.
And third, we need to deal with the demographic challenges
posed by a gradually aging workforce. In particular, the shortage of
engineers, whom we need if we are to realize our growth and invest-
ment program, is an issue we have to deal with in an urgent, serious,
and sustainable way.

S+B: You say that the environmental debate can sometimes harm the
public image of the energy industry. How do you overcome this in order
to build a positive employer brand?
DÄNZER-VANOTTI: Our best weapon against myths is the truth,

what we actually are and what we actually do. The reality is that our
efforts to reduce CO2 emissions and support environmental climate
protection are ongoing and thorough. We are far from being new-
comers in renewable energy, and we continue to make substantial
investments — € 6 billion [US$9.2 billion] by 2010 — in this sec-
tor. We are Europe’s most significant private generator of hydro-
power, and recently completed a large-scale acquisition of wind
parks. We are actively trying to grow our expertise in geothermal
energy, biomass, and solar technology. Geothermal energy, I might
add, is a dedicated area of interest at the E.ON Energy Research
Center at the University of Aachen.

Corporate responsibility is a managerial priority within E.ON.
We have a management team that is specifically responsible for deal-
ing with environmental and social issues arising within the com-
pany, and steering our efforts throughout the group. Our goal is to
be a pioneer in corporate responsibility and sustainable manage-
ment, and to live up to what is expected of us as a market leader.
It takes time to communicate all of this to potential employees,
of course, but we believe that our evident commitment in this field
will gradually seep further into the public consciousness if we con-
tinue to talk honestly and clearly about what we’re doing. The envi-
ronmentally and socially aware will want to join us, and they’ll want
to stay with us. Energy is a dynamic and fast-growing sector that
provides early and varied opportunities to our people. We just need
to get that across.

S+B: What is your employer brand and how did you choose it?
DÄNZER-VANOTTI: We set up a groupwide project to work out an
employer brand message. We conducted a large amount of internal
and external market research so we could crystallize in our minds
exactly what it is that makes E.ON stand out.
The message we settled on was “Your energy shapes the future.”

E.ON AG 59
This phrase reflects the huge difference that this company, and its
employees, can make for the environment and, consequently, for the
world in general. We are in a position as a company to influence the
direction of the energy industry and develop innovative technology
to protect the earth’s climate. For the individual employee, this pre-
sents a rare opportunity to make a significant personal impact
through highly challenging work.

S+B: Tell us more about the “early and varied opportunities” that you
mentioned. What do they actually involve, and how do they differenti-
ate you from other employers?

DÄNZER-VANOTTI: For one, we offer international assignments. We
now have an active presence in more than 30 countries, and we obvi-
ously need people to manage and work in all these international
operations, so we encourage our best employees to be geographically
mobile. To this end, we aim to double the number of E.ON employ-
ees on foreign assignments by 2009 to about 800 people.
Quite apart from the logistical necessity of filling these inter-
national positions with talented, qualified staff, opportunities like
this also happen to appeal very much to the Generation Y workers
who have been entering the workplace in recent years. As well as
being environmentally and socially conscious, they tend to crave
accelerated personal development and learning opportunities. We
are an expanding company in an ever-changing business environ-
ment; therefore we are in a great position to satisfy this yearning for
career progression.

S+B: Beyond promoting international mobility within your workforce,
how do you deal with the numerous staffing demands of E.ON’s inter-
national growth?
DÄNZER-VANOTTI: I can’t deny that this growth is a permanent
strain on our human resources function, so we have to handle the

challenge imaginatively and proactively.
We have to make adequate provision for the burgeoning people
demands of international growth, particularly after the privatization
of the energy industry in central and eastern Europe and our strate-
gic decision to expand into those regions. We quickly discovered
that we needed experienced, talented people to run those new units
and to coach and train their employees from Day One.
We have learned to launch an ambitious and proactive recruit-
ment drive in anticipation of those needs. This might cause a tem-
porary managerial “underload.” But when the rapid expansion
comes, we can hit the ground running.

Now, we don’t hesitate to invest in people development when we
launch an operation — this is an integral feature of our growth strat-
egy. When we invest in ventures or make acquisitions, we make sure
that we include professional training and development plans for
local staff as part of our negotiated agreements. And this emphasis
on training has been well received in these local units.
Underpinning our international people strategy, which is
named “OneHR,” is a focus on sensitivity to all the different work-
ing cultures we operate in. Our philosophy for OneHR is “think
globally, act locally.” The strategic framework might be decided
centrally, but the business units will know best how to implement
it locally.

S+B: Demographic change seems to have a particular significance for the
energy industry because of its comparatively aging workforce. How are
you dealing with the challenge of shifting work currently done by those
nearing retirement?
DÄNZER-VANOTTI: The aging population in Western societies will
undoubtedly affect E.ON. About 7 percent of our workforce is age
56 or older, so we can expect 6,000 employees to retire in the next
10 years.

E.ON AG 61
One thing we have done is to establish specific initiatives with-
in the framework of OneHR in order to create an environment in
which older employees can be most productive. For example, we
provide employees with lifelong learning, and offer older workers
opportunities to retrain for jobs that are less physically demanding.
We also offer a combination of extended employment and part-time
reemployment of retirees to keep on board those older workers who
still want to contribute. These initiatives help us lessen the immedi-
ate impact of demographic change and retain talent in the organiza-
tion for as long as possible.
We’re also taking steps to ensure that the knowledge of older

workers stays in the company after they retire. To address this,
we set up knowledge transfer programs.
The implementation of these programs is a prime example of
how OneHR works. We determine the overarching strategy, but
the local units devise their own specific programs, based on their
own understanding of the knowledge resources they require for
future success.

S+B: Are there enough younger managers to take on the work that those
people who choose to retire are leaving behind?
DÄNZER-VANOTTI: We’ve benefited from a considerable injection
of new talent because of the pace of our international growth. So
perhaps we are not in the same boat as other energy companies. And
as I have said, we have been busily recruiting so that we can run
these international operations effectively.
Aside from recruitment and acquisition, we also want to encour-
age internal mobility, not just geographically but also between busi-
ness units, so we can fill those areas with the most urgent needs.
We’re keen to increase the share of women in leadership posi-
tions to meet any lack of qualified employees and counter the effects
of demographic change, too. In Germany, for example, we have a

cooperative agreement with Femtec, an organization that works
closely with the business community and leading technical universi-
ties to develop programs for girls and women at all education levels.
The programs are designed to encourage women to study science or
engineering and to make it easier for female graduates to find a job.
Femtec helps E.ON to identify ambitious and highly qualified
women early on and then provide them with appropriate support
from the very beginning of their careers.

S+B: How do you identify those employees with high leadership poten-
tial, and how do you develop them?

DÄNZER-VANOTTI: Identifying “high potentials” is the responsi-
bility of the line manager with the support of HR. The annual
appraisal discussions between line manager and employee, and the
subsequent management reviews conducted by HR and the line
manager, specify development needs but also highlight those with
exceptional performance and potential.
We then provide these leadership candidates — we call them
“senior management potentials” — with tailored development pro-
grams. They all undergo an Assessment Center evaluation, an iden-
tical process wherever you are in the world. On the basis of these
findings, we work with them to design programs around their
unique development needs, revolving not only around the areas they
as individuals particularly need to focus on, but also around the spe-
cific requirements of the jobs they are designated to take on next.
Senior management potentials attend the annual E.ON
Campus, where they learn about E.ON’s current strategy, as well as
get an opportunity to build networks with their peers and share
their views with top executives in workshops and Q&A sessions.

S+B: What does E.ON look for in a potential leader in these appraisals?
Is there a set of characteristics, behaviors, or experiences that you believe

E.ON AG 63
predisposes an employee to become an outstanding leader?
DÄNZER-VANOTTI: We have just launched a project called
LivingLeadership@E.ON that asks the very same question. Fol-
lowing our strong international growth, we felt that we needed to
define more precisely, across different cultures, what leadership
really means.
In this respect, not only do we understand executive perform-
ance in terms of economics and market presence, but we also look
at leadership performance and qualities. This includes the ability to
collaborate and communicate, the accountability for what has been
achieved and for how the obtained results came about in terms of

communicated and lived values. We believe that when we recruit,
appoint, reward, and promote E.ON managers, we must not only
look at business results. We also assess how our leaders run their
businesses, how they manage change, how they lead and develop the
people who are entrusted to them, and how they contribute person-
ally to moving E.ON forward.
It is the major task of our leaders to enable our people and our
organization to achieve our company objectives.

S+B: Do you distinguish between technical and managerial leaders? Are
these separate roles at E.ON?
DÄNZER-VANOTTI: No, we hardly have any leaders who focus sole-
ly on the technical side of the business. It just wouldn’t work. The
nature of our business as a large-scale international service provider
involves daily contact with millions of customers, so all our leaders
must have a customer orientation. They also need to develop rela-
tionships with public authorities, as well as engineering and service
partners. As a result, we avoid developing leaders in functional silos
because that would leave them underprepared and unqualified for
the demands they’ll face. We ensure, therefore, that they frequently
migrate between national and international commercial, technical,

and staff functions as they develop.

S+B: And is this learning on the job your principal method of develop-
ing your leaders once they have been identified and are in position?
DÄNZER-VANOTTI: Yes, absolutely. Our culture, perhaps influ-
enced by our rapid growth and the resulting pressing staffing needs,
encourages our senior management potentials, our emerging lead-
ers, to assume responsibility at quite a young age, and with a large
amount of latitude.

S+B: Do these emerging leaders get more formal educational opportunities?

tional level above them, and E.ON Academy learning programs. +
DÄNZER-VANOTTI: We are very proud of the E.ON Academy. It
was founded a little more than five years ago, and in 2007, it served
30,000 E.ON learners worldwide. In 2008, we estimate it will sup-
port 70,000 learners. It was recently cited as a benchmark in a lead-
ing European commercial journal.
The academy has various facets. It supports individual develop-
ment programs for more than 2,500 top executives, senior man-
agers, and senior management potentials through both instructor-
led programs and distance learning. For the organization as a whole,
it provides a great variety of courses. Moreover, it is currently devel-
oping functional academies, such as Trading, Project Management,
Sales and Marketing, and Human Resources Management. The
academy also boasts the Electronic Learning Center, which manages
the learning platform “Academy Online,” our online management
library, and our in-house Web-based training for all E.ON units.
The E.ON Academy does not just serve to promote knowledge
and expertise. It also helps to achieve a consistency in approach that
contributes to our “OneE.ON” culture and helps integrate our
management teams across national and organizational boundaries.
But in a very real sense, we believe that people must take respon-
sibility for their own development. We don’t develop them as such,

E.ON AG 65
but we can help them develop themselves through on-the-job learn-
ing, the coaching and mentoring administered by the organiza-


Reporter: Sally Helgesen
FedEx Ground Inc.:
Where People Drive the Business

HR must learn to use its influence to create
robust corporate strategies and customized
careers, says Senior Vice President for Human
Resources Shannon Brown.

Senior Vice President for Human Resources
SHANNON BROWN

FedEx Ground Inc.

FedEx Ground Inc.:
Where People Drive the Business

FEDEX IS Aworldwide network of companies that provide customers
and businesses the broadest array of supply chain services, trans-
portation services, business services, and related information ser-
vices. FedEx Corporation generates more than US$36 billion in
annual revenues and has more than 290,000 employees and contrac-
tors. The company serves more than 220 countries and territories
worldwide. Founded by Fred Smith in 1973, it has been widely cel-
ebrated and recognized as one of the best places to work and most
admired companies in the world.
FedEx Ground Inc. is the company’s $6 billion small-package
ground shipping business, specializing in business-to-business deliv-

ery and residential service through FedEx Home Delivery and
FedEx SmartPost. The company was created through the acquisition of
Caliber System Inc. in 1998 and rebranded FedEx Ground in 2000.
Today, FedEx Ground alone handles more than 3.5 million pack-
ages each day in the U.S., Canada, and Puerto Rico with a work-
force of more than 66,000 employees and independent contractors.
As senior vice president for human resources for FedEx Ground,
Shannon Brown plays a key role in developing strategies that shape
the organization. Ebullient and astute, Brown radiates confidence
with a strategic stewardship that is not always apparent among
human resources professionals.

Capturing the people_advantage

Capturing the people_advantage

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