Aligning people leadership with business strategy: How an organization should best integrate human capital issues into strategic planning

Charlie Coffey, O.C.
Executive Vice President
Government Affairs & Business Development
RBC Financial Group
Executive Breakfast
Co-hosted by the Human Resource Management Association of Manitoba and Canadian Association of Management Consultants, Manitoba Chapter
Delta Winnipeg
Winnipeg, Manitoba

Wednesday, November 9, 2005

Keith, there's no way I can top your warm Winnipeg welcome and introduction - it sure brings back marvelous memories about our families - the early years - and life in this great city, not to mention our connection to Shad International, commitment to community leadership and mutual interest in the extraordinary value of human capital. But you're not off the hook yet…I'll have more to say about you in a couple of minutes!

First of all, it's always a treat to visit Winnipeg - I arrived on Sunday night for a speaking engagement on Monday and have been making the familiar rounds since then. The late Carol Shields once said: "Winnipeg is the optimum size for a city. Some days I feel like I know everyone I meet downtown." Well, I feel that way about Winnipeg too. And I particularly enjoy seeing Winnipeg and Winnipeggers making leadership news and putting the city on the map - I mean how many of us watched David Letterman's Late Show, just to see Dr. Gordon Giesbrecht of the University of Manitoba (becoming widely known as "Professor Popsicle"), submerge himself in a pool of ice water to show the effects of cold on the human body?

Speaking of leadership in Winnipeg….I recall a comment that Christopher Dafoe, columnist with the Winnipeg Free Press, made - believe it or not - in 1992 (I was working in the city at the time). He said: "When someone suggested that "the new Canada" - if it even comes into being - might be wise to select Winnipeg as its seat of government, a great hoot of laughter was heard across the nation. Winnipeg! The very idea had them rolling in the aisles." Christopher would likely agree that the tables have turned in Winnipeg's favour thirteen years later. For example, a magnificent meeting place for human rights leadership - the Canadian Museum for Human Rights - will be built in the geographic centre of Canada. Talk about monumental news for WINnipeg, Canada and the world! This brand of leadership, not only puts Winnipeg on the map again, it speaks volumes about the importance of investing in human capital…which brings me to why I'm here.

When Keith invited me to talk about aligning people leadership with business strategy - and integrating human capital issues, I remembered saving some good material on this topic - one of the articles is an interview piece from the web site workplace.ca. In part, it goes like this:

(Human resources - HR) "people need to understand and develop an appreciation for the business they are in, to be able to contribute to that business' strategy. It's not a matter of whether you can take your HR skills and practice them anywhere. You need to be able to understand the dynamics of the business, of the marketplace, the customers, the competitors and so forth, and contribute in terms that relate to customers' needs, as opposed to simply a formula for an organizational structure or system." Now those words likely ring a bell to someone in this room…little did Keith Sinclair know that I've kept track of his HR perspectives over the years!

Let's take a closer look at the dynamics of people leadership and business strategy for a few minutes, with a focus on research and stories revolving around three critical human capital issues - leadership, diversity and talent management. Then we can open up the forum to questions.

Research shows there's a direct link between an effective people strategy and a company's competitive advantage. According to Watson Wyatt Worldwide's latest Human Capital Index study, "a successful people strategy is not merely linked to market value; it's a leading indicator of increased shareholder value (and stakeholder value). This study demonstrated that high-performance HR practices are key to attracting and maintaining top talent and improving a company's productivity and profitability."

Duncan Brown, assistant director general of the Chartered Institute of Personnel and Development in the UK says: "Any business that wants to compete successfully needs to ensure that its work force has the right mix of people, with all their skills and experiences, to fit the needs of its business. "HR is taking on new importance as companies realize shareholder value is not what gets people out of bed." Business, it appears, is coming to the HR function. But the HR function is also going to the business…being found in two words: business partner." Some recruitment ads are sounding like this: "As an HR business partner…you'll be turning business objectives into people plans, driving changes in organization and working practices and transforming the way we deliver customer service." It's about aligning people leadership with business strategy.

Hewlett-Packard's Gerard Brossard, vice president of global workforce planning and management sums it up well: "The (executive) team…pushed our business groups to create a strategic workforce plan that aligned with their business plan. I had to put my HR hat aside and work to understand the benefits it would bring to the business groups. That was the key. I asked them specifically: "How can we help you understand what the human capital implications of your business strategy are going to be?" rather than just, "How can the businesses help HR be more successful in its work?" My team then defined a workforce-planning framework for the business groups to complete. The business groups now recognize that HR contributes significant strategic value." Again, it's about aligning people leadership with business strategy.

As you're aware, we're seeing a greater emphasis on the term human capital, rather than human resources - the key difference being a much stronger focus on "people leadership, development programs and initiatives that are linked to business strategy, improved business performance and greater strength of capability." In the article from Outlook Journal's October 2004 issue, Making the Right Investments in People, the Accenture Institute for High Performance Business analysis indicated that human capital strategy - aligning people initiatives with overall business strategy - "drives important business capabilities like workforce performance and employee engagement; these capabilities, in turn, have a significant impact on key drivers of organizational performance such as innovation."

So whether you're Darlene Ball of Ceridian Canada, Cindy Epp of Ernst & Young, David Leschasin of St. Boniface General Hospital, Karen Milani of The North West Company or Dennis Nord of Louis Riel School Division, aligning people leadership with business/organizational strategy really matters to clients, employees and stakeholders, to the entire operation and to ultimate success.

We've all heard about the importance of building a strong corporate culture, establishing a strategic reward system, hiring the right people and the right mix, staying armed re the "war for talent," creating sound policies and practices and of course, developing a learning and development plan. The differentiating factor every time is the alignment and integration of people leadership and business strategy. Let's look at the importance and value of diversity (a human capital issue) to illustrate this point by first positioning the changing face of Canada:

  • Approximately 229,000 new immigrants arrive in Canada each year versus 330,000 Canadian births. Long-term trends indicate immigrant arrivals will exceed Canada's natural birth rate.

  • Canada's overall population will grow 3.3% from 2001 - 2017. The visible minority population will grow by 76% reaching 7.6MM.

  • 13% of Canada's population are visible minorities and that will reach 21% by 2017.

  • Top source countries for new immigrants are China, India, Pakistan and Korea and top source countries for new business immigrants are China and Korea. 96% of new immigrants are destined for metropolitan areas.

What does this mean for people leadership strategies - diversity priorities - or recruitment approaches? It means that we grow as individuals and as organizations by respecting and leveraging our similarities and differences. It means that by drawing on the resources of our businesses, markets and people, we generate ideas and solutions that break new ground. And it means that we create more productive workplaces, build an environment of inclusion, attract, retain and engage talented women and men, gain a competitive advantage and provide superior service to clients. In other words, it means we must work smarter to align people leadership with business strategy.

Research also shows that investing in work/life leadership - building and embedding a culture in the organization, through practices and resources, that helps all employees better meet the competing demands of work and interests outside of work, is a significant investment in human capital. And the launching pad is a commitment to linking diversity and talent management - as "talent management is about behaviour - the thoughts and actions that, consistently over time, become organizational culture."

Today's executives are spending more time than ever before thinking about the people side of their organizations. Yet how many of us can provide more than a surface understanding of the return on human capital investment. Don't worry, you're not alone. "A survey by CFO Research Services and Mercer Human Resource Consulting (in 2003) found that companies, on average, spend 36 per cent of their revenues on human capital expenses. But only 16 per cent (that's one in six) of financial officers have more than a moderate understanding of the return on that investment and 14 per cent said they had NO clue as to whether that money was spent effectively."

What's the good news? "Senior executives and their teams are moving quickly (or are being moved quickly) into roles of greater strategic responsibility. Managing human capital is no longer the domain of HR professionals alone - it must be a strategic responsibility for all leaders. All of us need to be engaged by these (human capital) issues -- first in our own teams -- then working with senior HR counterparts as strategic partners for the entire company (or organization). From customer satisfaction to innovation to service delivery, the quality and quantity of investment we make in our people has real consequences for almost every aspect of business profitability."

RBC's Canadian and North American business strategy is founded on building strong and lasting relationships with our clients - "earning the right to be our clients' first choice" - and human capital is our greatest asset in making this happen. Our new leadership model focuses on leading with integrity, building enterprise excellence, working strategically and driving shareholder value. It's also a model that pushes the envelope on alignment and integration. The RBC value, "diversity for growth and innovation" makes good business sense and is the right thing to do for employees, customers, communities and shareholders alike. Our focus on work/life leadership and talent management is about fostering a diverse workplace that builds employee capability and engagement to help achieve business goals - more ways to align people leadership with business strategy.

We know that diversity is a journey. We know that focus makes a difference. And we know that integration, although challenging, increases the likelihood of success - so changes in roles, capabilities and approaches are a constant. Lead people. Manage things.

Our organization has invested heavily in leadership development over the years. In the December 2004 Harvard Business Review article, "How to Grow Great Leaders", Douglas Ready (author and President of the International Consortium for Executive Development Research in Lexington, Massachusetts) chose RBC as a case study. He says: "Despite the hundreds of millions of dollars invested, the leadership development programs weren't producing leaders with the capacity to manage the inherent tensions between unit and enterprise considerations. That's because, as with most companies, RBC's leadership development efforts were piecemeal, focused on particular skills and challenges, and therefore didn't prepare employees to take on broader roles. Development was confined within the organization's various silos. Every time a key position became available in one of the company's platforms or functions, the only candidates offered up were managers who had already worked in that area. So rising executives never had a reason to venture outside their silos." Listen to our President and CEO Gord Nixon's words, to discover how things are changing:

"You either believe that developing leaders is important or you don't. There are so many variables that could be used to either make or break your argument for leadership development. We are not going to play that game. We firmly believe it's important to grow leaders who can run their businesses, their functions, and their regions, yet who can lead with an enterprise-wide perspective. People make this business happen, and we will let our performance speak for the importance of developing leaders."

Ready goes on to make the following observation: "Competition has changed, as have customers' expectations. Leadership development has not kept pace. Many companies have created new organizational structures to accompany the need for a broader perspective on the business, but the vast majority of leadership development initiatives still take place in the very silos the organizations are trying to transform. When people are trapped in business units, functions, or regions, they're at risk of becoming prisoners of zero-sum thinking."

I can't stress enough how critical it is to align the human capital agenda and related issues with business strategy. Although the "how to do this" will be different in every organization, I can assure Linda Romsa of RBC, Eileen Kirton of KWA Partners, Sherri West of Palliser Furniture, Alora Sinclair of The Harris Consulting Group and John Ferris of Loewen - if only there was time to mention all your names - that it starts with leadership at the top and that ongoing success has a great deal to do with diversity and talent management. Remember, a leader creates more leaders.

And this is why I'm pleased that Kirk Dudtschak joined us this morning - as some of you are aware, Kirk is RBC's newly appointed Regional President for Manitoba, Saskatchewan and northwestern Ontario, based in the city. He's definitely the right leadership in Winnipeg!

In closing, special thanks to Keith Sinclair, Rick Klimczak of Ernst & Young, Lori Fenn of the Human Resource Management Association of Manitoba (plus a whole host of people I'm sure) for organizing this breakfast. Stephen Covey has it right. "Leadership is a choice. Some people have natural gifts, but all people have the natural potential…the power lies in the choice." The power lies with human capital!

Thank you…now it's your turn - let's hear from you!