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John W. Boudreau Center for Effective Organizations Marshall School of Business

Evidence-Based Management as a Decision Science: Considering the Mental Models of Leaders. SIOP Annual Meeting New Orleans, LA April 2, 2009. John W. Boudreau Center for Effective Organizations Marshall School of Business University of Southern California 213-740-9814

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John W. Boudreau Center for Effective Organizations Marshall School of Business

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  1. Evidence-Based Management as a Decision Science: Considering the Mental Models of Leaders SIOP Annual Meeting New Orleans, LA April 2, 2009 John W. Boudreau Center for Effective Organizations Marshall School of Business University of Southern California 213-740-9814 john.boudreau@usc.edu

  2. IPO Investors Miss the HR Connection Companies whose investor communications indicate people are important: At Time of IPO Priced lower Five years later Valued higher Survival is higher • Average HR value 70% survival • High HR value/rewards 92% survival • Low HR value/rewards 34% survival Theresa Welbourne & Alice Andrews (1996)

  3. Manufacturing or technology company High-growth potential in the long term Strong market demand Constrained resource: Project engineers to customize the products to the needs of the clients Example: Managing the Right Asset?

  4. Complete certain projects Add six new project engineers Traditional Budgeting Objectives Goals: Actual: • Completed projects • Only added three new engineers

  5. Completed all objectives Expenses under budget Most systems would reward budget goal Typical Performance Appraisal But, the expenses saved are minimal They are in a weaker position – compared with if they had staffed as planned

  6. Meet the operating budget for the region Fill the vacant GM positions Actual Example from a Retail Organization Goals: Actual: • Met the operating budget • Hired only GM’s who did not require paying more than target salary

  7. HR At the Table But Traditional HR Considered Very Important for its “Strategic Contribution” by 67% of Executives • “Strategic Contribution” Is Defined Traditionally • Tools for Attraction and Retention • Succession Planning • Consistency in rewards, training, etc. Source: High Performance Workforce Study, Accenture, 2003

  8. Leader Talent Sophistication(Lawler & Boudreau, “Achieving Strategic Excellence” 2008)

  9. Applying Supply-Chain Principles To Retention Are Turnover Rates Too Dangerous to Share with Non-HR Leaders?

  10. Typical Turnover Analysis Logic Spend months defining the right turnover rate Benchmark against industry competitors Report turnover rates and benchmark levels to non-HR leaders Hold leaders accountable for bringing turnover down Calculate the costs of separating and replacing employees to show the millions of dollars saved

  11. A More Complete Turnover Logic Effect of Acquisitions Quantity of employees added X Quality of Employees added Starting Workforce Value Quantity of employees X Quality of Employees Ending Workforce Value Quantity of employees X Quality of Employees Change in Workforce Effect of Separations Quantity of employees removed X Quality of Employees removed Minus the Transaction Cost of Processing the Separations and Acquisitions

  12. Talent Supply Chain: Sourcing and Screening Labor Pool Applicant Pool Candidates for further evaluation Offer Candidates New Hires Productive Employees Potential Labor Pool Building and Planning Improve the number and quality of individuals that might become candidates Screening Screen for predictors of performance: Universal metrics as well as specific criteria by company. Recruiting Identify the number of qualified candidates that best suits your organization’s recruiting needs.

  13. Talent Supply Chain: Selecting, Landing and Retaining Labor Pool Applicant Pool Candidates for further evaluation Offer Candidates New Hires Productive Employees Potential Labor Pool Offering and Closing Objective is to close a high percentage of the highest potential candidates. Selecting Metrics that provide consistent predictors of performance and reduce human variability (error) On-Boarding Establish new person in their position and retain them. How long must employees stay to payout the recruiting costs?

  14. Recurring Theme: The Relationship Between Talent and Organization Quality, and Strategic Payoff

  15. Talentship Approach:“What is Pivotal? Where would improvements in talent quality or quantity make the biggest difference in the most pivotal processes for the Disney theme park business?

  16. AlignedResponses “What employee behaviors make the biggest difference?” • Sweepers • Stop sweeping and talk to guests • Give accurate information • Create delightful encounters • Fix problems before they occur • Bring information to product design teams Example: Sweeper at Disney

  17. Pivotal and Important Are Different Best Mickey Mouse Strategic Value Worst Mickey Mouse Best Sweeper There is more value in improving Sweepers than Mickey Mouse. Worst Sweeper Performance

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