Two recent articles reminded me of the challenging time that organizations continue to have in adapting to change. While this is not new it did reinforce my commitment to developing organizations where human capital is treated as a foundation for strategic thinking.

“Aligning the organization for its digital future” is an article based on the findings of a joint Deloitte / MIT Sloan study and research project[1]. To quote from the executive summary:

“Nearly 90% of respondents to a 2015 global survey of managers and executives conducted by MIT Sloan Management Review and Deloitte anticipate that their industries will be disrupted by digital trends to a great or moderate extent, but only 44% say their organizations are adequately preparing for the disruptions to come. Preparing for a digital future is no easy task. It means developing digital capabilities in which a company’s activities, people, culture, and structure are in sync and aligned toward a set of organizational goals. Most companies, however, are constrained by a lack of resources, a lack of talent, and the pull of other priorities, leaving executives to manage digital initiatives that either take the form of projects or are limited to activities within a given division, function, or channel.”

The study demonstrates the relationship between “organizational maturity” from a cultural perspective, and indicates that the more mature development of the corporate culture is, the more developed the capability to engage in digital transformation.

The other publication “Building a more intelligent enterprise” shares some aspects of the above and was also published by MIT Sloan in 2017[2] however this article delves deeper into the human aspects of developing organizational “intelligence” and makes the point strongly that it is the combination of human intelligence plus technology that creates a winning edge. The report demonstrates how effective leadership and management of the space where the “soft side” – human capability, and the “hard side” (computers) interact is the space that makes or breaks the ability to integrate technology as a core driver of strategic capability. There is an excellent four quadrant chart that seeks to demonstrate where humans and computers can be used most effectively relative to “data density.” For example the optimum blending of humans and computers, where there is a combination of high data intensity and highly unique tasks involved is in flying airplanes or optimizing the effectiveness of supply chains.

Both these articles strongly reinforce two core aspects of strategic renewal; first is the criticality of having leaders who understand that combining hard and soft skills are critical. In my book, co-authored with Dr. Peter Smyth “Reflective Leaders and High-Performance Organizations[3]” we demonstrate the combination of “task” and “relationships” as the foundation of this capability. Without strong leadership and ongoing leadership development, the culture of the organization will tend to bias towards task rather than relationships and as a result create a culture that is less human oriented than is needed in today’s knowledge economy. Measuring the number of hours of training that employees receive in a year is a much less important metric than knowing the degree to which leadership development is taking place, built around a strong understanding of corporate purpose and expected organizational behaviour (based on well-defined values).

The second aspect is the importance of human capital as a core strategic resource. For years leaders have paid lip service to “people being our most important asset” yet in reality most organizations approaches to strategy have failed to put those words into practice. In addition most human resources organizations have tended to focus on the task / process aspects of human capital rather than the increasingly important issue of collective behaviour. In some cases HR leaders see and understand this issue but are constrained by a lack of scope relative to human capital imposed by CEO’s or boards; more dangerously this limitation of scope can stem from either an unawareness of corporate culture as a strategic issue, or a belief that it is something that does not require to be managed strategically.

This is where the ground-breaking research and development work of the Maturity Institute (MI) can benefit CEO’s and boards. Using the OMINDEX methodology developed by MI, users can assess the holistic nature with which human capital is being placed as a core strategic aspect of an organizations approach to operational capability. The results from this rating provide a metric that can be used to demonstrate the risk inherent in current approaches and the potential to improve organizational performance especially in the effective adoption of enhanced technology (as well as partnering, out-sourcing and other strategic approaches).

Having an organizational metric that is based on the effectiveness with which the organization deploys its human capital together with its other capitals can significantly assist investors and shareholders, owners, boards, CEO’s and managers start to ask the right questions relative to building an effective culture. These questions will then lead to the development of approaches that create a climate through which the capability for change is enhanced and the foundation for the effective utilization of tools such as analytics, simulation, machine intelligence and other capabilities of a digital economy are built. Only by working on both the human side of organizational capability as well as the tools, processes and tasks, will organizational performance start to be optimized.

Nick A. Shepherd, Lead Integrated Reporting and Council Member, The Maturity Institute





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