THE PEOPLE ADVANTAGE

The People Advantage Improving Results Through Better Selection and Performance

Neville Bain and Bill Mabey

~IAC~ll LLA:\ Business

© Neville Bain and Bill Mabey 1999 Softcover reprint of the hardcover I st edition I999 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission.

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The authors have asserted their right to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act 1988.

First published 1999 by MACNULLANPRESSLTD Houndmills, Basingstoke, Hampshire RG21 6XS and London Companies and representatives throughout the world ISBN 978-1-349-14941-4 ISBN 978-1-349-14939-1 (eBook) DOI 10.1007/978-1-349-14939-1A catalogue record for this book is available from the British Library.

This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources.

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Formatted by The Ascenders Partnership, Basingstoke

Illustrations by Ascenders

For Charles and Mae Bain, Peter and Kathleen Kemp NEVILLE BAIN

For Trudy, Georgina and Stephanie- always supportive BILL MABEY

Contents List of Case Studies and Figures xii Foreword by Derek Wanless, Group Chief Executive, NatWest Group xiv Preface xvi Acknowledgements XX

PART I AN OVERVIEW 1

Chapter 1 Setting the Scene 3 People power 3 Achieving a productivity gain 5 The beautiful complexity of people and jobs 10 Honing your people resource 13 Summary 14

Chapter 2 Competencies and Attributes 16 The critical role of job analysis 16 Competencies and attributes 21 Using a differentiated model of competencies

and attributes 23 Whether competency models are adding value 26 Summary 29

Chapter 3 Selecting the Right People 30 The management case for examining selection 30 The right way to select 31 Cost against benefit 33 Comparative validity of selection methods 35 Usage of individual methods 37 - Personal interview 39 - Application formslbiodata 40 - Ability tests 42 - Simulation exercises 42 - Personality questionnaires 43 The appeal of good assessment 44 Summary 45

Chapter 4 Developing People in the Right Way 46 The practice of leading companies 46 Continuousleanring 47 The Human Resources input 49 Development of managers 50 The appraisal process 51 Appraisal practice 54 Management development and succession planning 56 Finding the talent 57 Assessing for potential 59 360° evaluation 62 Summary 64

Chapter 5 Optimum Use of the People Resource 66 The employee's perspective 66 The appraisal is central 69 The career review 70 Identifying the talent 72 Making managers accountable for their people 73 Making development bite 74 An effective organization 79 Summary 82

Chapter 6 An International Perspective 84 The cross-cultural context 84 The international operator 86 The implementation of an international assessment

process 89 Standardizing international assessment 94 - Differences in practice 94 - Standardization versus adaptation 96 - Country variations 99 Summary 101

PART II SPECIFIC ISSUES 103 Chapter 7 The Testing of Abilities and Personality 105

Growth in psychometric testing 105 Testing for abilities 106 - The concept 106 - Definitions and descriptions 107 - Overview of ability testing 109 - The need for professional standards 112 - Future prospects 113 Measuring personality 114 - The concept 114 - Definitions and descriptions 115 - The fundamental assessment problem 123 - Considering the options 124 - The case for questionnaire-based assessment 125 - The issue of faking 125 - A current overview 126 - Gaining acceptance for personality measurement 127 Summary 130

Chapter 8 Motivation 132 The case for motivation analysis 132 The reading of motivation 134 The Motivation Questionnaire 135 - Need Theories 135 - Reinforcement Theories 136 - Cognitive Theories 136 - An integrated model 137 Applications of motivation analysis 139 Motivational implications for the organization

as a whole 144 Summary 146

Chapter 9 Leadership 148 Background 148 What is leadership? 148 Leadership and management 149 Followers' perspective 151 Inspirational and perspirationalleadership 153 Successful leadership in practice 154 The cognitive approach 155

Identifying and developing leadership potential 157 Summary 160

Chapter 10 Further Applications - Creativity, Entrepreneurship, Stress and Communication 161 Creativity - an elusive resource 161 Identifying creative potential 163 Entrepreneurship - the management paradox 165 Entrepreneurship as a competency 167 Stress - a costly problem 169 The management of stress 169 The need for skill in communication 174 Critical role in management 175 Personal influencing skills 176 The process of influence 177 Summary 180

Chapter 11 Further Applications - Strategic Thinking and Knowledge 182 Strategic thinking 182 A key differentiator at the top of the organization 186 Measuring strategic thinking 186 Knowledge 188 Professional intellect 191 Summary 193

Chapter 12 Improving the Performance of the Board 195 The critical role of the board 195 The management of the board 196 The role of the chairman 197 The non-executive or independent director 198 Director selection 199 The board in interaction as a team 200 The assessment of new board candidates 201 Survey findings 203 Director development 205 The ongoing appraisal of board members 205 The directors' checklist 206 Evaluation of the board 207 Where the board can add value 210 Summary 210

Chapter 13 Looking into the Future 212 Imprecise but valuable 212 Changing job demands 213 Sharing knowledge 214 Communicating 215 Retaining top talent 215 Assessment and development practice 216 The HR management role 219 International development of HR management 220 Bringing the human barriers down 222 Summary 223

Chapter 14 Lessons Learned 224 A review of the main messages 224 What is value? 227 Latent assets 228 Measures 229 Measuring the capability of the people resource 229 People Advantage Health Check 231 A final thought 234

Appendix A Calculating the Financial Return of an Improved Selection Method 235

Glossary of Terms 238 References 242 Index 247

List of Case Studies and Figures

Case Studies 1.1 North American experience in gaining value from an investment

in people 2.1 Assessment centre job analysis 5.1 Unilever - Optimum use of the total people resource 6.1 Changing assessment in Asia Pacific 6.2 Country-specific assessment issues- New Zealand 8.1 Motivation profiles of a management team

10.1 Insurance sales- New Zealand 11.1 Knowledge and The Post Office (UK) 13.1 Hyundai- Selecting sales representatives

Figures 1.1 Productivity gain when an attribute predicts performance 1.2 Key areas of focus for improved performance 2.1 Part of a structured job analysis questionnaire 2.2 Differentiated model - competencies and attributes 2.3 Behavioural model of management competencies 2.4 SHL competency map 3.1 Relationship of ability test scores and management performance 3.2 Reasons for difficulty in assessing staff performance 3.3 Relative validity of assessment methods 3.4a Assessment methods used: large organizations 3.4b Assessment methods used: medium organizations 3.5 Competency-based interview structure 3.6 Competency-based interview rating form 4.1 Attributes of future leaders 4.2 Business processes and management development 4.3 Business process calendar

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List of Case Studies and Figures xiii

4.4 Key elements of an appraisal 4.5 Objectives of using competencies within the appraisal process 4.6 Ranking of cultures in giving and receiving feedback 4. 7 How good is the appraisal scheme at achieving its objectives? 4.8 Model of executive potential 4.9 Predictive potential of assessment centres 4.10 Purpose of current 360° use 5.1 Factors rated as important to the workforce in deciding overall

job satisfaction 5.2 Attributes of job satisfaction for those in managerial positions 5.3 Conditions for ensuring that development is achieved 5.4 The Unilever Work Level Model 6.1 Models of cultural differences 6.2 Maximizing an international job fit 6.3 Components of an international assessment and development

centre 6.4 Test use (for management) by country 6.5 International rating of the appeal of test factors 7.1 Main categories of occupational ability tests 7.2 Example items for a management-level ability test 7.3 Topics for test policy guidelines 7.4 Occupational Personality Questionnaire - OPQ® 7.5 OPQ® model of personality 7.6 Personality questionnaires- management objections and solutions 8.1 Motivation Questionnaire scales 8.2 MQ profiles of management team 8.3 Management checklist for motivational analysis 9.1 Five dimensions of leadership 9.2 Leadership and management in word pictures 9.3 Core ability and personality traits of leadership

10.1 Model for stress management 10.2 Sample profile of potential work stressors 10.3 Key areas for personal influencing skills 10.4 Model of influencing and selling style 11.1 Seven elements of strategy 12.1 Summary of SHL Board Fit Inventory structure 12.2 Assessment methods of candidates for board positions 13.1 Future trends and implications for managers 13.2 Past and future people issues 13.3 Evolution of the HR function 14.1 People Advantage Health Check

Foreword

Competition- at the level of the firm or the country -is ferociously tough today. Markets are turbulent places, full of risk and opportunity. Globalization has brought the prospect of massive rewards but it has opened up an unparalleled need for a deeper knowledge of customers and potential customers. And, because a revolution is moving apace in information technology and telecommunications, keeping in touch with what is possible is a challenge companies must get and keep on top of. Innovation and creative thought are needed.

We either achieve or we don't because of our people. They, in the end, differentiate us from our competition. Our strategy is formulated by people, throughout the organization. Our ability to harness technology depends on people. And implementation, so often the key to success or failure, is delivered by people.

Many of the constraints on today's business leaders are legacies of a past where inadequate attention was paid to thinking ahead; we deal with legacy systems, legacy structures and, often worst of all, legacy attitudes. Often, they were put in place by leaders who failed to think ahead and who failed themselves, and their people, by failing to prepare for the future.

Continued development for all is needed but thinking through how to do it is tough. It means thinking hard about people's competencies, their motivation and their needs. For a business, that means thinking hard about the organization's needs. For a country, it means thinking about where its advantages are going to come from.

Neville Bain and Bill Mabey understand all this and, reassuringly, they make it very clear that this book has no simple, single point. In a management book, that is refreshing. It avoids the tedium of one simplistic concept extended to fill a couple of hundred pages. And it will avoid the short life that any one simple notion is destined to have in the changing, complex organizations now needed to win against the world.

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Foreword XV

This is a book that recognizes complexity and promotes attention to detail. Careful and analytic in its methodologies, it promotes models of competencies which give a lot of material for thought; thought that managers should be putting into understanding the people they have, the people they will need and the way they can continually develop everyone in the organization.

Continual development, constantly and for all, well organized and well led begins at the top. You feel, throughout this book, that the writers practise everything they write about. We can all learn a great deal from it; reading it is one step in ensuring our own development is not neglected. Read it and think about what it means for you and for everyone you lead.

Derek Wanless Group Chief Executive NatWest Group

Preface

Putting the right people into the right jobs and encouraging the right development activity will enhance organizational efficiency, productivity and where appropriate, profitability.

This proposition should be self-evident and is indeed supported by a growing volume of research evidence. The management, and indeed macro-economic, implications here are substantial. If this proposition can be shown to be true for a job then it should equally follow for organizations as a whole and indeed for the economy at large. Apart from the general case for increasing productivity through people, we are now operating in a world environment of increasing competition, involving millions of new, well-trained, educated and recent technology supported workers. As organizations reduce numbers to compete, it becomes more critical to ensure that the remaining people are well suited to their roles and properly developed to give optimum performance.

And yet there are real problems in achieving this goal. The fundamental issue is that people are beautifully complex while jobs are multi-faceted and in many cases constantly changing. Understanding the relationship between the two is a daunting proposition. Not only must we deal with an individual's suitability for the key tasks required in the job but we must also cope with their fit to the corporate culture, the departmental culture, the boss, the subordinates, the cross-functional team, the internal clients, the external clients and so on. Then we must deal with the so-called 'paradoxes' of person-job fit- the many cases where ownership of a personal attribute may facilitate one aspect of job performance while obstructing another. Strong independence of mind, for example, may benefit an entrepreneurial role but hinder teamwork.

We have to be able to measure both people and jobs with precision and to be able to interpret the many links and permutations. This is arguably

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Preface xvii

a specialist field for the work and organizational psychologist but as George Miller observed in his Presidential Address to the American Psychological Association some years ago, 'It is time to give Psychology away.' Somehow we have to bring together the psychologist's disciplined understanding of people to interact with the manager's experience and understanding of business goals and objectives. For the most part management requires simple actionable methods. It wants to cut through much of the complexity that the psychologist understands to be inherent in selection and development decision making. If we can manage this move from the complex to the simple, we will make a major contribution to organizational performance.

Across the world organizations have begun over the past decade in particular to come to terms with the measurement and profiling of their human resources and to enhance the development process. There are clear examples of excellence in this respect. Yet there is a long way to go. Many organizations continue to spend more money per capita on tea and coffee for their employees than on assessing their fundamental abilities, personality and motivational characteristics. The interview - with its tendency to quick first impressions - is still excessively used in making the substantial investment that is the recruitment of a key staff member. Boards of companies are still pushing the assessment and development process away from themselves as if it only applies at lower levels of the organization. Top managers still tend to use vastly simplistic theories of occupational behaviour to guide their decision making.

The situation is further exacerbated by the need referred to above for organizations to reduce numbers to operate from a leaner, more competit­ive base. One of the implications of this reduction for many organizations has been a reduction in the size of the HR department. They have been trained in large numbers and have been developing pools of experience and expertise. Reducing the HR function has put even more pressure on the line managers themselves to be able to understand and use people data. The time that a manager - under increasing resource pressure - will give to developing an HR expertise is inevitably limited. Herein lies even more of an argument for finding new ways and means of bridging the gap between the complexity of the input data and the management goal of having simple, usable outputs.

A further implication of the slimming down of organizations lies in the growing requirement to be able to devolve decision making and empower subordinates to decide and act. If there has been one key lesson from research on empowerment, if has been that it only works if the empowered staff are competent to use their power. Here again the pressure is on to

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help management to understand the basis of managerial competence -how to identify it and how to develop it.

This book concentrates ftrst on the measurement of people's behaviour at work, for if we cannot properly understand the key elements of the human resource then we cannot properly apply it. It is deliberately not an academic text although it is based on theory and methods which have been academically researched. It attempts to guide managers in a practical, down to earth way in terms of both the assessment and development of staff. For those more interested in the background research a comprehensive bibliography is included as an appendix.

The main theme of the book is that the relationship between people and jobs is necessarily complex and often forces management in some desperation towards simple but unsatisfactory solutions. Yet for those managers who tackle and come to terms with this complex relationship, the potential rewards are substantial. The book contains many practical suggestions to facilitate this process.

There is a secondary theme to the book, which is that the assessment and development of staff is becoming an increasingly internationally focused activity. The problem here is to balance an organizational need for standardization of method and approach with the clear recognition that cultures are different and require a degree of adaptation in assessment and development practice. This book encourages an international perspective where appropriate. It is based in the United Kingdom but it draws on research and opinions from more than 30 specialists in the fteld of international assessment and development- including most of the world's leading economies. The book is also fortunate to be able to draw on the combined research experience over the past 20 years of the Sla Group plc1• The Group is essentially comprised of work and organizational psychologists operating in close to 40 countries world-wide. It is arguably the world's most broadly based organization specializing in assessing and developing staff at work. It has focused on the development of occupational models of behaviour and has extended that research across the many cultures in which it operates. At the same time this is not an SHL book. It draws on other models and the views expressed about optimum practice are those of the authors themselves.

The people advantage within an organization is achieved when the latent capability of the people within it is released, thus enabling it to reach its full potential. This book is intended to have a broad readership appeal. In addition to the Human Resource specialists both within and external to organizations across the whole spectrum of private, public and not-for­profit sectors, it will also have wide application with general managers

Preface xix

committed to increasing effectiveness of their organization. Given the practical approach, which is strongly based on empirical evidence and theory, the book is intended to appeal internationally to general managers, to those people studying management on advanced learning courses, as well as being a valuable textbook for those training for the specialized field of Human Resources. We have attempted to write the book in an easy to read style, and the reader can dip backwards and forwards into the topics included in each chapter. The summary at the end of each chapter is intended to provide a convenient refresher of the main points included.

The book is in two parts. Part I is designed to take an overview of the main ways in which an organization can take a competitive advantage through its people. The focus is on providing practical advice for ensuring that the right people are recruited and then subsequently on ensuring that the right development occurs. Part II examines a number of specific issues relating to people, such as motivation, leadership and communication, that we believe to have an important impact on the organization's productivity.

The book does not have a simple point to make. It is full of ideas, models and propositions which should challenge the reader in considering the optimum use of people in the workplace. The book's final thought is for those who put a value to businesses. It is a challenge that now is the time to bring the people factor into that valuation and we have the means to make that happen.

Neville Bain & Bill Mabey

1. Founded by Peter Saville and Roger Holdsworth in 1977

Acknowledgements

It is inevitable that a book of this kind which attempts to cover such a breadth of human performance should draw on the knowledge and experience of many colleagues. It sometimes seems unfair that authorship should be down to two individuals. At least we can record here our sincere appreciation of all those who have contributed in one way or another.

Professor Rick Jacobs of Landy, Jacobs and Associates and of Penn State University was helpful with his insights into demonstrating the real value of good selection practice. His case study is included in Chapter 1. Brian Dive of Unilever went to the trouble of providing the detailed case study for the optimum use of the total people resource in Chapter 5. Mike Hall similarly provided helpful case study experience from The Post Office (UK) relating specifically to the management of knowledge. Valuable case study inputs were also contributed by Marco Kim in Korea, Deborah Negus in New Zealand and Neil Cowieson in Hong Kong as well as several other international members of the SHL Group plc.

Helen Baron and Sue Henley made important contributions to the chapters on motivation and stress management. Professor Christine Farrell made a variety of suggestions in the areas of competency mapping and 360° assessment. John Mahoney-Philips was the stimulus for a useful preparatory discussion on international assessment. All at the time were working within the SHL Group plc. Professor Roger Gill of The Leader­ship Trust helped us in our consideration of Transformational Leadership.

The management of SHL is due a substantial general vote of thanks for making much of its research and survey data available for this book and allowing access to its specialist staff of psychologists. We hope all those involved will allow an overall note of our appreciation here.

The book went through several drafts. The first draft not surprisingly needed most attention. We are grateful to those who worked their way through it and gave careful comment, including Professor Peter Saville,

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Acknowledgements XXI

Roger Holdsworth and Lisa Cramp of SHL as well as John Roberts and Jerry Cope of The Post Office. Stephen Rutt of Macmillan Business Publishing is experienced in this process and made a number of very valuable suggestions for reshaping the second draft.

The final draft was read by some of the busiest people around but we have valued their comments and have included some of them as a guide to potential readers. Derek Wanless, CEO of National Westminster Group, was kind enough to make the time to review the book in detail and to write the Foreword. We are extremely grateful to him for his interest and help. Valuable review points and comments were also received from Sir Dominic Cadbury, Chairman of Cadbury Schweppes; Tim Melville Ross, Director General of the Institute of Directors; J Adair Turner, CEO of the CBI; Professor Tom Cannon, Chief Executive of the Management and Enterprise Council; Mike Kinski, CEO of Stagecoach and Professor Ivan Robertson of UMIST.

Professor Jeffrey Pfeffer of Stamford University Graduate School of Business is an acknowledged expert in the field of optimizing the output of people at work. We are pleased to have been able to quote his work and are grateful to him for his positive comments on the final draft.

We have tried to broaden the book by making reference to the research and models of selected other authors. We would especially like to thank the following for their permission to use specific material:

• Ann Marie Ryan of Michigan State University who directed the international survey of assessment practice referred to in Chapter 6;

• Professor Paul Evans of INSEAD for his pertinent comment on competencies included in Chapter 2;

• SHL Group pic for the use of the OPQ® Concept Model profile chart, the Inventory of Management Competencies profile chart, The Motivation Questionnaire profile chart and the models of Influencing Style and Potential Work Stressors.

Of course, the production of a book of this kind is not possible without the disciplined hard work of those who type the drafts, make the inserts, do the corrections and then see it all substantially rewritten. Susan Deehenderson bore the brunt of this work and the high standard of her initial production saved us much time. We are very grateful to her and to Pearl McLeod who assisted with the general administration. Finally, our thanks go to Trudy Mabey who had the unenviable 'proofing' job of trying to find some editorial consistency from two different styles and stubborn views on acceptable grammar.

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It would not have been practical to list everyone by name who helped in one way or another with this book but we sincerely acknowledge all the contributions. While we fully recognize the input of a wide group of people, the final work is, of course, the responsibility of the authors. If we have been able to use all that assistance to help and encourage organizations to enhance the use of their people, then the project will have been well worthwhile.

Neville Bain Bill Mabey