The New Era of Capitalism??

Over 100 years ago, a Scottish businessman, James Wilson, once pointed out that a melancholy reflection “while wealth and capital have been rapidly increasing” and science and art “working the most surprising miracles”, all classes of people were marked “by characters of uncertainty and insecurity”. Wilson’s solution was freedom. He committed his venture to the struggle not just against the protectionist corn laws but against attempts to raise up “barriers to intercourse, jealousies, animosities and heartburnings between individuals and classes in this country, and again between this country and all others.”

The U.S. government has invested over $250 billion into its banks to save this country from going deeper into “depression.” Other governments in Europe, Asia, and Australia are re-regulating their financial systems to prevent this crisis from escalating further or occurring again on same or similar terms. Over the past 100+ years, capitalism has been beneficial for billions of citizens worldwide. The parts of the world where it has done extremely well have prospered; the parts where it has shrunk have suffered. Capitalism has always created crises, and always will due to the leadership style and the above mentioned variables i.e. jealousies, animosities, etc. The world should use the latest financial crisis, devastating though it is, to learn how to manage it better. Sadly another lesson of history will only be talked about for decades unless our leaders step up and lead by example – but what example??

The Race Is On...

On Sunday, Porsche Automobil Holding SE announced it had 74.1% stake in Volkswagen AG and leaving it just 0.9% short of the 75% level needed to log Volkswagen's revenues and assets in its own books. Porsche vowed to continue with its aggressive move to reach the 75% in 2009 and achieve a “domination agreement” despite the disagreement between its family owners who are indecisive whether or not to support such a move. VW’s leadership continued to welcome Porsche’s investment while the VW’s labor unions “fiercely oppose” Porsche efforts because they see a great deal of threat to workers’ rights. I will continue to follow this development and I am excited to find out what is VW’s priority: 1.) Provide adequate levels of leadership and ensure that employee’s right will be guaranteed and will remain the same, if not better or 2.) Ensure maximum profits through any mean and allow the executive board to continue to receive gigantic paychecks. The race is on between the VW Golf GT and the Porsche GT…TBD who the real winner is…

CEOs agree to Pay Cuts

This is probably one of the toughest downturns in economy since the Great Depression. During the times of uncertainty, executives are acknowledging the difficult circumstances their employees are facing and agreeing to pay cuts if their organizations are not performing based on shareholder expectations. For example, Russ Smyth, chief executive of H&R Block Inc. agreed to a pay cut if the company was to hit bad times. Russ says he accepted the new contract provision because “I believe in leadership by example.” Correspondingly, David Barger, CEO of JetBlue Airways Corp. and the CEO of First American Corp. also cut their pay. These contract provisions are not very popular among many executives but the number is steadily increasing. Currently, some agree to such contracts while others abandon them.

Managing Change through Innovation – A New Opportunity?

In the beginning of the semester, Dr. Kelley, our HR Leadership professor asked the entire class to participate in HR leadership blogging. I know I am a little late for this introduction but it’s never too late to blog. So let me assure you and express my sincerest interests and desires to keeping up with this blog because I see a lot of values in doing so. However, as you may have noticed, I already missed a blog past Saturday. Not that I am seeking any excuses but I really had to study for my HR in the Global Environment midterm. I’ll make it up…promise :-)

This week has been one of the most challenging weeks in my professional career as I was informed that my position is directly affected by the downturn in economy and that my position is being eliminated effective October 31 leaving me with a two-week advanced notice to look and find another job. What would be your initial reaction? What would you do as a leader? I decided to stay calm and use my professional network of colleagues, classmates, HR societies and LinkedIn. I think I start networking harder than ever before in my life but I knew that with every organizational change and challenge there would be another great opportunity – just need to be patient. Sometimes being patient is easier said than done but the time has come to challenge my competencies in the area of “dealing with ambiguity and composure.” While I should probably still be freaking out about this situation, I decided to take it with ease and write this blog. Wish me luck in my job search and I’ll be sure to keep you posted on the outcome…

Leading and Managing Human Capital

In this blog I will cover the most significant challenge organizations face in today’s business environment: Engaging senior leaders to manage human capital. In recent years, engaging senior leaders to manage human capital has become a hot topic because of the challenges many organizations face. One of the main causes for the challenge is the ongoing and rapid demographic shifts. The Baby Boomer Generation is approaching their eligibility for full retirement. This is of course making workforce and succession planning strategies necessary. Smith and Thompsen (2005) warn that,

In the coming fiscal year, some estimates show that approximately 493,000 people – 31 percent of the federal workforce – will become eligible for retirement. A high concern reported by 87 percent of public sector leaders in a recent study was the need to grow leaders from within the current ranks. (p. 2)

Engagement of organizational leaders and their ability to manage human capital is key to effective “strategic” human resource management. Simple things need to be taken into consideration in order to be more successful. It is also important how an organization aligns its human capital, better known as the workforce, with business goals and strategies while strongly promoting senior leadership engagement with front line employees. Today, we live in a fast-paced, highly-driven business environment. It is no secret that the success of any organization is driven by those individuals with innovation, great leadership and abilities to align business goals with business needs. How do we achieve these organizational goals while maximizing the performance and outcome? Organizations should take the approach of leading by example, that is, engaging organizational leadership with employees while communicating effectively to best manage their workforce. Eichinger et al. (2004) advised, “Much more can be accomplished through others than by oneself. In our years of collecting data on managers and executives… getting things done through others is key to success as a manager. That’s the cycle of inspiration” (p. 173).

Unfortunately, in the past it seems as if organizations mistakenly focused only on bottom-line profit gains. What mattered most was not the employees’ contributions, their motivational factors, drive for success and so on, but rather the efforts of producing high quantity goods and generating profit gains. Quickly, many employees lost their interests in those characterless organizations which in the end caused more harm to that particular organization through the high turnovers. In 2008, Eitelberg, Kazemi and Susseles completed, “The study found that the biggest driver of turnover for employees under age 40 (all of whom are in Generation X and Y) is dissatisfaction with job content and career opportunities” (p. 5). There are many reasons for the trend and some are move obvious than others. This includes low compensation, training and development opportunities, lack of recognition, or untrained supervisors. However, the main cause is still the lack of leadership engagement with line employees. If you do not have such engagement, you will never understand their contributions, motivational factors or dissatisfaction, and true reasons for turnover. Turnovers are very costly for an organization and often harm the motivation of other employees. Organizations ought to take a closer look at their turnover rates and why they exist. What are the root-causes? How do we attract and retain talented workforce? How do we improve internal relations? The main cause is driven by the lack in approach and engagement of senior leadership with its workforce. Eichinger et al. (2004) advised that,

today's business environment is quickly shifting its gears and often requires new leadership and management practices. If you want to lead, you have to act the part. Lack of confidence, inability to handle push back, and hanging back don’t project the presence necessary to lead change. People need to know you are around and what you stand for. Presence creates receptivity in others. They will stop and listen. (p. 196)

It is important that we leave the past behind us and focus on an innovative future. If the organization wants to attract and retain a talented workforce and compete for new markets, I say organizational leaders must step up, lead by example, and become more engaged with the workforce while using strategic methods and tools to best manage the human capital.



References
Eichinger, W. R., Lombardo, M. M., and Raymond, C. C. (2004). FYI For Talent Management: Based on the Choices Architect 2nd Edition. Minneapolis, MN, (pp. 54, 173, 196).

Eitelberg, C., Kazemi, H., and Susseles, R.E. (2008). Segal Survey: Benefits, Compensation and HR Consulting – Winter 2008. (p. 5) The Segal Group, Inc., the partner of The Segal Company. Washington D.C.

Smith, E. P. A. and Thompsen, A. J. (2005). Building Leadership Bench Strength: Current Trends in Succession Planning and Management. (p. 2) AchieveGlobal, 2005.

Leadership Analysis of Abraham Lincoln

Kouzes and Posner established a leadership model as a framework for analyzing the leadership credibility of great leaders. They defined Six Disciplines of Credibility. I decided to select a past president that has contributed a great deal of leadership to help shape our nation that it is today. Abraham Lincoln was the 16th President of the United States and a popular icon on the $5 bill.

I admire Lincoln a lot because he was not afraid to pursue his vision, communicate it, and empower people to be creative and innovative. He also engaged in a process he believed would help our nation in the years to come. But most importantly, he understood the challenges and stood up to them by appointing the best and brightest to his cabinet. In fact, his cabinet consisted of his sharpest rivals in the presidential race.

At the SHRM’s 2008 Annual Conference in Chicago, Doris Kearns Goodwin, a keynote speaker and 2006 Lincoln Prize winner for her best-selling book, Team of Rivals, identified 10 characteristics that made Lincoln a great leader and recommends that organizations take a closer look when recruiting a leader in today’s environment. These characteristics are:

1.) Capacity to Listen to Different Points of View
2.) Ability to Learn on the Job
3.) Ready Willingness to Share Credit for Success
4.) Ready Willingness to Share Blame for Failure
5.) Awareness of Own Weaknesses
6.) Ability to Control Emotions
7.) Know How to Relax and Replenish
8.) Go Out into the Field and Manage Directly
9.) Strength to Adhere to Fundamental Goals
10.) Ability to Communicate Goals and Vision

If we think about this list for a moment, we can easily see a correlation between Goodwin’s identified leadership characteristics with those identified by Kouzes and Posner. Abraham Lincoln developed a capacity and was open to other people’s suggestions without having the fear of retaliation. He always tried to incorporate additional suggestions into his public speeches and developed a capacity to make the final decision with full accountability and responsibility. He was learning on the fly and quickly acknowledged errors and ensured that they didn’t happen again. Whenever concerns were expressed whether by the public, cabinet members, friends or family, Lincoln would address them in a political and professional manner. When success was achieved he would acknowledge individual contributions. However, when failure existed, he would never blame it on an individual basis but rather blame everyone as a team. Don’t you want a leader with such leadership style? I know I do!!

Lincoln also understood the significance of relaxation, entertainment, and humor in order to have a work-life balance due to internal and external environmental factors. He took his job very seriously but he loved to joke around with his cabinet members and shared his appreciation of their hard work and dedication. And because of this deep understanding of what it takes to be a front line employee, Lincoln enjoyed going out into the field to visit soldiers and manage them directly. He had a great appreciation for them and always tried to thank them in person for causes they stood up for and believed in. Because of this personal connection to the soldiers, their morale had increased significantly.

Unfortunately, today’s organizational leaders don’t have the time to follow Lincoln’s leadership style. It seems to me that they care more about the bottom line profits than their workforce, which contributes over 75% of the bottom line profits. Or maybe they simply don’t care about becoming engaged with the workforce as much as they care about their $10 + million paychecks despite the red numbers in the third or fourth quarter…

However, Lincoln cared down deep about his cabinet members, the public, and their opinions. Shouldn’t every organizational leader do the same? Even though he was pushing to abolish slavery, he never disregarded public opinion just as organizational leaders should disregard their employees’ opinions, or should they?? Think about talent retention…