At organizations all over the country, doors are being thrown open and executives are being brought in to make changes—sometimes sweeping changes—to company HR functions. In fact, a recent study from Mercer Human Resource Consulting, Transforming HR for Business Results, found that half of the 300 HR professionals surveyed work at an organization that is currently undergoing a transformation; of those, 30 percent say the makeover is due to a new HR leader.
For HR executives tasked with shaking things up, it can be an exciting time. It also can bring significant challenges. Just ask Ronald McKinley, SPHR, vice president of human resources at Cincinnati Children’s Hospital Medical Center, who was hired in early 2001 to improve the hospital’s delivery of HR services. The hospital is nationally ranked for pediatrics and strives to be the nation’s leader in child health care; McKinley was brought in to make the organization a leader in the HR field as well.
It was a task that required modifications to the existing HR function. “HR was not well regarded within the organization as a support entity, and so my job has been to kind of re-create HR,” McKinley says.
As the experiences of McKinley and others who have successfully transformed HR demonstrate, outsiders must possess certain key skill sets to effectively shake up an HR function. They also must balance the need for speed with an inclusive, collaborative approach that meshes new techniques to the company’s vision—and allows existing employees the time and opportunity to buy into the new ways of working.
There are several reasons that a new HR executive, most likely an outsider, might be brought in to change HR.
Sometimes, the entire organization is undergoing change due to a merger or acquisition or the arrival of a new CEO. Other times, it’s for tactical reasons, such as a heightened focus on return on investment and cost-cutting. Increasingly, company leaders want to make HR a truly global function or more of a strategic business partner.
“One thing I hear an awful lot of today is our HR function is more transactional, but we need to be more transformational,” says Ben Rosen, the Hanes Professor of Management at the University of North Carolina’s Kenan-Flagler Business School in Chapel Hill.
CEOs often want HR to help shape organizational culture, or to place more emphasis on executive development and succession planning, Rosen says. Companies are increasingly asking HR to be more of a business partner—and seeking external HR executives who possess change-management and big-picture skills.
Even when internal candidates possess these skills, an outsider can provide a neutral perspective that is free of prior entanglements. “Sometimes you go outside because you think that the people you might call on from the inside are too imbedded in the politics of the time and won’t be able to free themselves from the political forces to do something really dramatic and different,” Rosen says.
Just because the CEO is ready for a change doesn’t mean everyone else is ready to accept a transformation.
Change can be stressful and disruptive for anyone. Any agent of HR change must be prepared for resistance, at least until others in the company get their mind-set in line with the new framework.
John Sullivan, a professor in the management department of the College of Business at San Francisco State University, learned just that when he took a year’s leave in 1999 to be chief talent officer for Agilent Technologies, based in Palo Alto, Calif. The first day, he heard the common refrain, “Oh, we love you; we’re really looking forward to changing.”
Two days later he was told, “John, I’ve been here 20 years, and this is how we do things.”
“I ran into resistance with people saying, ‘Who are you as an outsider to tell me what to do?’ ” Sullivan recalls. “I had been told specifically by senior leadership that they wanted HR shaken up because the war for talent was on and the old model wasn’t working. But, even if you get that message from the CEO, the people at the director level often haven’t heard that message or they don’t really believe that’s what you were told because their premise is ‘We have been doing fine.’ ”
Lesson learned? “Don’t assume they believe your mission,” says Sullivan, “and don’t start making changes until they buy into the fact that HR must change and that it’s not you causing that change, but that you’re just the weapon that senior executives are using.”
Executives tasked with transforming the HR function must accept the fact that it’s human nature to accept change somewhat slowly, if at all. Isaac E. Dixon, SPHR, who was hired three years ago as VP of HR to help change the business direction and culture of Unitus Community Credit Union in Portland, Ore., says that even when change is for the better, people typically respond by grieving, much as one might grieve the loss of a person.
As a result, says Dixon—who oversaw changes at Unitus relating to policies, compensation, benefits and the HR function itself—expect people to go through the different stages of grief. “There’s shock and anger, and then you get the grudging kind of buy-in where employees may stand around the water cooler using not-so-flattering terms to refer to HR,” Dixon says. “Last, but not least, people get to a stage of resignation and acceptance. But it takes time for that to happen.”
It also takes the right skill sets and an approach that balances speed with inclusiveness and collaboration.
The Right Stuff
The attributes needed to effectively change HR are often the same ones you’d seek in any senior management leader: integrity, a proven track record, leadership skills, the ability to capture the respect of other business leaders and a vision for what HR could be. All of these are tools HR executives will need to effectively manage change, Rosen says.
Other important traits to possess include financial acumen and strong presentation skills. After all, you need to paint a picture about where HR and the company have been, and where they’re going.
In some cases, CEOs seek external HR leaders with certain specialties to drive a specific change in company direction. Case in point: In 2001, Kathy Brooks, vice president of human resources and organizational development at Green Mountain Coffee Roasters Inc. in Waterbury, Vt., was hired for her organizational development and training background.
Brooks says that when you’re coming in from the outside, it’s critical to have strong analytical skills to assess whether what has been said about the HR function—both good and bad—is truly the case.
And Brooks and other HR professionals who have successfully managed transitions—including HR executives McKinley and Dixon—say that collaboration skills are critical.
“To be effective, you need to be collaborative and have an inclusive approach,” Brooks says. “Engaging everyone in the system is key if you want change to be sustained.”
Change in Action
To implement substantial change, HR executives must first learn the organizational culture and assess its problems, says McKinley. At Cincinnati Children’s Hospital, McKinley’s first objective was to get a pulse on the organization and to develop relations with hospital staff. Since the hospital ranks third nationally among pediatric centers in research grants from the National Institutes of Health, he focused initially on key scientists and met with about 30 of them individually.
One of the people he met with was Dr. Jeffrey Whitsett, chief of neonatology, perinatal and pulmonary biology. Whitsett was a key player in the development of a synthetic lung surfactant, which has significantly reduced the number of premature babies who die due to breathing problems.
“When I went to visit him,” McKinley recalls, “he said, ‘This is the first time in 20 years that someone from HR has come to say hello to me.’ He didn’t have any regard for human resources and saw it as an impediment to what he wanted to get done,” such as specialized recruiting.
Such meetings were the first in a series of steps McKinley took to revamp the HR mission of the medical center, which has grown from 4,000 employees in 2001 to more than 8,400 today.
McKinley also did a needs analysis, then aligned the HR vision with the medical center’s vision—to be the leader in improving child health—by setting a goal to be the leading HR function in health care. That effort was made more challenging by the fact that the hospital has three missions: health care, research and education. The organization also has at least four different cultures: research scientists, physicians, nurses and management. “They don’t speak the same language, so we assessed that and developed strategies,” McKinley says.
Together, they developed a special committee made up of both scientists and human resource professionals specifically to address human relations issues involving the faculty and the research community. “This included exchanges of information at staff meetings for both research and HR, and the development of a list of issues that needed further translation and analysis to ensure that we were all on the same page,” recalls McKinley.
Other changes included hiring business consultants who are now located with major clients and report in a matrixed environment to HR and the business unit. “All of the outstanding issues and misunderstandings between HR and the research community have been addressed to everyone’s satisfaction,” McKinley says. “There is now a formal mechanism in place to ensure that real communication takes place and the research folks get the support they need to help improve the health of children.”
What lessons did McKinley learn? Communication, tenacity and skill to execute the plan are critical. “You need a really good plan and to communicate that plan very well to many different constituencies many times,” McKinley says. “You need to enlist people to make sure the message is communicated and let them have input into the final product. And then you have to stay the course and have patience to deal with the fact that it won’t be a straight line” from conception to implementation.
Paving the Way
Like McKinley, Dixon spent his first days on the job researching. He studied five years’ worth of strategic plans at Unitus Community Credit Union and met with the CEO, board of directors and employees.
“I had some interest in the rituals, symbols and things that were important to people,” Dixon recalls. “I wanted to know how they thought about the kind of member services they deliver, what kind of processes and systems got in the way of doing their job, and, most important, I asked them how they see the HR function, and what role it plays in their day-to-day lives, and how they rate our service.
“It wasn’t pretty,” Dixon continues. “We were seen as bureaucratic, slow and a stumbling block by managers.” From there, he held small focus groups, had hallway conversations and triaged problems. He began making some changes within 30 days.
“I didn’t have much time,” Dixon recalls. “The CEO gave me a folder full of stuff and said, ‘Fix this.’ ” Dixon decided what things were a priority and relatively easy to fix, such as cleaning up the payroll process and using human resource information systems to push responsibility for routine transactions to managers and employees. “There were some things that had been annoyances for some time, and they were relatively easy to fix and made the HR function look like a hero.”
Such an approach can pave the way for tackling larger problems at a later date, says Rosen of UNC. “Sometimes there’s low-hanging fruit and things that obviously can be improved. When you do, you build credibility and it makes it easier to push for bigger changes later on,” he says.
Dixon also worked with the executive team to wed the change-management process to the organization’s strategic objectives, and then engaged staff in frank discussions about the need for change and their role in it. “We engaged the staff via a series of small-group and all-staff meetings,” he says. “We also utilized our intranet and employee newsletter to help drive our message home.”
Dixon says the organization’s compensation and rewards are now aligned with key business objectives, and regular discussions are held with all employees about the state of the business and their role in its progress.
The chief lesson Dixon learned: “The most important thing is never underestimate the power of the culture you’re about to change, and don’t underestimate the importance of being clear, concise and consistent,” he says.
In the end, Dixon says success as a change agent depends in large part on the capabilities and strengths of your in-house HR team and its credibility with employees, leaders and management in the organization.
“Leading organizational change is not easy and takes experience and skill, and, quite frankly, as a profession we haven’t done a good job of giving people enough opportunities to lead and sustain organizational change efforts,” Dixon says.
For her part, Brooks believes the changes at Green Mountain have worked—proof may be the company’s two-year ranking on the Best Medium Companies to Work for in America list from the Society for Human Resource Management and the Great Place to Work® Institute Inc. In accepting the awards, CEO and President Bob Stiller said they recognized a culture that embraces progressive and socially responsible initiatives.
“We have a very strong ownership culture where all employees are involved and engaged,” Brooks says. “Our HR team has been doing a great job working on more-instrumental, transformational projects that impact our business.
“One of the unique things is that many new HR projects are done throughout the company with participation beyond the walls of HR,” Brooks adds. “We engage employees in all parts of the organization as active partners in change.”
Change also has been positive at Cincinnati Children’s Hospital Medical Center, which, in April, was ranked fourth in the nation in U.S. News & World Report’s list of top hospitals. The magazine in July also ranked Cincinnati Children’s the eighth-best pediatric hospital in the United States. The medical center was not in the ranking prior to McKinley’s arrival but has moved up every year since.
Cincinnati Children’s also won the Best Place to Work in Cincinnati Award for 2005, sponsored by the Cincinnati Business Journal.
Meanwhile, scores in a recent employee opinion survey improved more than two standard deviations from two years ago, with a total of 98 percent of employees saying they’re proud to work there and 70 percent reporting they’re happy with their pay, McKinley says.
But perhaps the most encouraging day was when McKinley learned recently that an associate chair of the department of pediatric medicine—in a monthly closed meeting with colleagues that McKinley did not attend—said, unsolicited and spontaneously, “HR is doing a very good job.”
“I can’t tell you what a significant event that was here,” McKinley says of the praise. “It’s kind of like getting a phone call from the Queen of England, and she knows who you are.”