Get Ready for Your Next Business Transformation…Before It Begins

Jason Barkham, Partner at WellOrg Partners, penned this week’s post for the Straight Dope for the CHROPE (a CHRO in a Private Equity portfolio company).

WellOrg Partners is a team of seasoned business transformation experts that believes in the power of collaboration between HR and Finance leadership to unlock value in the business. They combine cutting-edge organizational planning and analysis technology with proven transformation methodologies and extensive real-world experience to help organizations to drive sustainable improvements in business performance through better operating models and organization designs.

Their website is linked here: WellOrgPartners.com. And be sure to subscribe to their Substack, “Demystifying Transformation” - it is a great resource, details below.

For the CHROPE, the question is not whether a transformation will happen, but when. With exacting timelines, transformation efforts spare little time for preparation and planning once they begin. This puts a premium on getting ready for that next transformation now. Here are five key things that CHROPEs can do to avoid being caught on their heels.

Transformation projects rely on available data. Too often, this means that organizational redesigns rely on org charts and anecdotal employee performance data. In a transformation initiative – whether driven by M&A or cost containment – better benchmarks are essential. Leaders must understand the efficiency and effectiveness of their organizations and how they add value to the company (whether in terms of revenue, compliance, or risk mitigation). The CHROPE can support this by having ready-built systems and processes to gather data including:

·        Organization shape (e.g., org size, shape, spans of control)

·        Process efficiency, especially for SG&A (e.g., Finance, HR FTEs per billion in revenue)

·        Service placement (e.g., average cost per FTE, percent of FTEs insourced vs. outsourced in selected areas)

·        Job architecture (e.g., number of grades, job families, pay bands, succession plans)

The CHROPE looking to prepare the organization for transformation and immunize it from negative shocks should be looking to build a versatile employee team. Key employees who are repositories of institutional knowledge about poorly documented processes create two interrelated problems. First, if they are considered irreplaceable because of their legacy knowledge but lack the relevant capabilities needed to expand their role, they will be hard to promote or replace. Their lack of versatility will hamstring redesign initiatives – the CHROPE must design the organization around people in these critical roles, rather than finding the best model for the company at large. Second, resources who know they are thought to be irreplaceable can use that leverage to extract outsized compensation. For both reasons, proactively looking at key people and processes can be an enabler to org redesign, bring process improvement opportunities by highlighting those substantial risk management benefits by uncovering functions that are out of compliance with best practices / internal risk management parameters. Some key steps to beginning this process include:

·        Inventorying critical processes to identify and remediate documentation gaps

·        Identifying employees with critical (undocumented) institutional knowledge, and developing a plan to document or share that knowledge

·        Building succession plans for key positions and cross-training potential replacements

The CHROPE always plans for M&A activity, so building a draft integration checklist is a worthwhile investment. The checklist helps the CHROPE anticipate and prioritize issues by unearthing and defusing potential landmines, speeding value realization and avoiding unnecessary employee impacts. Some key items to consider in building such a checklist include:

·        What policies, systems, and processes are critical to maintaining continuity of compensation and benefits for the acquired entity on day 1?

·        What are the functions or activities that are required to align to the broader operating model (e.g., enterprise technology, accounting)?

·        How are new people and functions onboarded into your HCM and Organizational Planning systems?

·        How will data and information sharing be managed between entities on day 1?

·        How will we quickly identify and “tuck in” key talent?

·        What are key cultural and communication beats in the first 100 days?

·        Who are the key people to manage these post-merger integration processes?

The CHROPE can be forgiven for thinking that LLMs and Generative AI (and Robotic Process Automation before it) were overhyped. “Bots” have not yet come for everyone’s jobs. However, the slowing hype cycle creates space for thoughtful evaluation of these technologies. A measured approach to investing in these technologies can gradually improve productivity and create efficiencies. The time between transformations provides an opportunity to explore automation, beginning with questions such as:

·        What time-consuming processes burden the organization? Are they repeatable, or learnable by Gen AI or similar capabilities?

·        Do people spend substantial time querying the same data sources? What does the data look like? Is it structured, or at least consistent? Are the standard corrective measures the teams perform?

·        Where can an AI co-pilot measurably improve employee productivity?

Leveraging findings from the first four categories, companies can begin to develop a training agenda. Defining training objectives grounded in helping the company prepare for transformation can help CHROPEs prioritize limited training resources. In setting training priorities, companies can consider:

·        Which activities don’t involve out of pocket expenses (e.g., job shadowing)?

·        Can activities be scheduled to take advantage of natural work cycles, where people might have spare capacity?

·        Who are the highest potential employees, for whom the training would have the most impact?

The CHROPE is mindful of how these activities will impact a workforce suffering from change fatigue and worried about its future. Framing these efforts around the importance of building organizational resilience can mitigate these concerns. By starting small, keeping the overall effort manageable, and refining the approach to find the most effective ways to build these capabilities, the CHROPE and their team can limit the strain on their organizations while meaningfully improving readiness for the next transformation.