Maturity analysis is an accurate predictor of organizational value

Rolls Royce not good enoughAnalysing and assessing the maturity of an organization, particularly from a people or human capital perspective, might sound more art than science and IHRM is only too happy to admit that it requires both: along with a great deal of experience and understanding of how organizations work in the real world.  Maturity analysis represents a huge, paradigmatic step-up in organizational management thinking, after conventional management has run out of ideas.  It is probably the best predictor of long term, sustainable, organizational effectiveness.

When I wrote the first IHRM blog post to kick-off the Maturity Tales series I kept it short and to the point.  That brief anecdote (from 10 years ago) about the HR director at Rolls Royce plc might not appear, to the untrained eye, to reveal much about how this company operates but the experienced Maturity Analyst gathers a whole range of indicators, from different angles, in order to capture the complete picture.  Nevertheless, when a board of directors are happy to appoint an incompetent HR director, who has no interest in producing evidence, it reveals as much about the board as it does about HR.  Such insights provide an extremely accurate predictor of the way Rolls Royce manages its human capital.  For many years it has had serious people problems that it was not even aware of.  Only a few months after writing that piece, little did I realize that the problems would finally surface.  But that does not necessarily mean Rolls Royce executives appreciate the true nature of the underlying causes of their problems.

A headline in The Times (15th February 2013) declaring “It’s not good enough, says Rolls chief, despite record profits.” revealed that –

“John Rishton, a former executive at Rolls’ top airline customer British Airways and the chief executive of Rolls-Royce Holdings since 2011, said that aero-engine operating margins at 11.3 per cent, up from 9 per cent, were not good enough. “Our margins are not as good as some of our competitors’, our costs are higher than the likes of General Electric and Pratt & Whitney,” he said. “That enables our competitors to offer lower prices, it allows them to invest more in infrastructure and better training.”

At least Rishton knows the difference between profit and value. Maybe if someone at RR plc had put some serious thought into mature, human capital management 10 years ago it would have been Rolls Royce creating the most value now, through better margins, and not its main competitors.  So is there any evidence here that a more mature HR approach is on the horizon?  Well, Rishton’s background at British Airways will not help much because BA’s primitive employee relations culture over the last decade has cost the airline millions in lost business and customer loyalty.  Also, RR’s “new chairman, Ian Davis, a former McKinsey chairman … (who) saw action more recently heading BP’s response to the Gulf of Mexico oil spill had obviously not managed (as a non-executive director at BP) to change the culture that led to the BP disaster in the first place.  So here are three top UK businesses being run by executives who provide their own evidence of their low margins, poor employee relations and inabilities to avoid disasters waiting to happen. What they have yet to demonstrate is any understanding of the intricacies of the human dimension of managing large, complex organizations.

The main advantage of maturity analysis over any other form of organizational analysis, using searching questions to untangle intractable human issues with laser-like precision, is its ability to predict long term, deep-seated, whole system problems of culture, human capital strategy (or lack of it) and organizational configuration.  Accurate analysis and diagnosis, from a solid evidence base, followed by crystal clear definition of strategic and operational issues in terms of HR immaturity, has to be the first crucial step towards re-education at board level and, hopefully, enlightenment about how to release the full value of human capital .

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