Workforce Planning in the Digital Age

Digital is plunging HRDs into numerous quandaries. How can they predict what new roles will arise and which will disappear? How can they train staff accordingly, and where will they find talent to plug the gaps? These questions are putting greater emphasis on data analytics and the role of strategic workforce planning.

“As well as the impact of a contingent workforce, we’re seeing a rise in remote working – which can potentially offer 24/7 online capacity. This approach to flexible working will change the nature of the workplace,” says Mark Spelman, Member of the Executive Committee at The World Economic Forum (WEF), who has spoken at a number of Criticaleye events on global changes to the workforce.

“We’re also about to move into an era in which everything is connected, online and real time. We’ll be in a hugely different place. I’m not sure our workforce strategies are focused enough on the exponential disruption of technology,” Mark adds.

In a world where digital innovation regularly makes the unpredictable a reality, how can businesses successfully plan their workforce requirements?

Find the right person for the right role

As Executive Director for People Advisory Services and Data Analytics at EY, it’s Nathan Sasto’s job to find practical solutions for tomorrow’s talent dilemmas. One of which is how best to access the gig economy – a pool of specialist employees who can drop into a business to deliver a specific, short-term project.

“The trend towards the gig economy is certainly one of the major impetuses we’re seeing from a client perspective. We’re doing a lot of work in financial services on this, helping them to understand which roles are feasible for them to outsource,” Nathan says.

Crisis, a charity that offers temporary accommodation and support to the homeless, is one of the many organisations to regularly tap into the community of temporary workers.

Jane Furniss, Criticaleye Board Mentor and former Deputy Chair at the organisation explains: “Crisis employs around 10,000 volunteers each autumn to run their Christmas events. Choice and having control over when and where they work is a huge factor in whether they come back to volunteer again. Because they aren’t paid, they need to feel engaged and be happy with the team they work with.”

Engaging an unpaid workforce means offering roles uniquely enticing to each volunteer – and that requires a lot of data crunching. Nathan knows all too well how complicated, yet rewarding, that task can be.

When he joined EY in 2012, Nathan’s first project was to plan the volunteer workforce requirements for the London Olympics. “They needed 70,000 volunteers to run the Olympic and Paralympic games, covering 3,500 jobs ranging from medics to drivers,” he explains.

“The HR Director at the time compared it to building a Fortune 500 company in three months and then tearing it down – that was the scale of the problem.”

To address this, Nathan and his team built an artificial intelligence-based matching system, comparing over 500 million data points on languages, skills, experience and preference to reach an optimal workforce distribution. He explains: “Once we were up and running, a HR allocation task that previously took 13 people one month to carry out, took a single person just four hours.”

Analytics such as this allow organisations to map their staff requirements against a pool of talent – be that internal or external – and do it in a way that caters to different personalities, desires and skills.

Train your staff to be digitally fluent

Another critical dilemma for HRDs is the need to re-educate the workforce for tomorrow’s employment landscape.

“One of the issues we face is in retraining for digital fluency. We must work out how to move people who were trained to work in one way into a digital world,” says Mark. “Half of the people coming into the workforce today will live until they’re 100. Life-long learning will be critical going forward. I’d argue that the ability to keep your top 30 per cent of staff will depend on your long-term corporate training.”

David Grounds, who supports corporate business leaders in his role as Relationship Manager at Criticaleye, says: “Continuous learning is becoming an economic imperative, it’s no longer enough to come into an industry with a qualification and think you’re the finished article. I see that need at a senior leadership level and right through the business.”

“While constant self-improvement has always been a worthy pursuit, the rate at which technology is changing the business environment means it’s now a priority.”

According to Nathan, a common problem is predicting where best to invest your efforts. “We talk about digital skills a lot but it’s quite a challenge to take that esoteric concept into practical measures, roles and functions,” he explains.

Again, data can help. Analytics capabilities similar to those used by Crisis and the London Olympics to map talent, can be employed to determine what skills will be required for newly developing jobs.

“Imagine all the available roles were on a platter and you could see what skills and attributes were needed for each – you could tell very easily which you’re suited to and what you’d need to do to move between those roles. That’s changing the vertical succession plan and really empowering people to plan their careers effectively,” says Nathan.

Address the fear of uncertainty

This kind of insight can help protect individuals from what the WEFs predicts will be five million job losses due to automation by 2020. HRDs must play their part in supporting staff through that uncomfortable process, quelling concerns and retraining where possible.

As Mark says: “When looking at strategic workforce planning we need to recognise that it’s not just about opportunity and the upside, it’s also about managing the fears associated with the downside.”

Jane warns that if businesses fail to address these insecurities they may see their talent drain away. “Fear of uncertainty about job security can lead some of your best people to go. You can end up with people who either don’t understand the change that is happening or aren’t able to get jobs elsewhere,” she says.

“Your worst case scenario is that you lose the really good people who can obtain jobs elsewhere, while retaining the not-so-good who can’t.”

These thoughts were shared during a recent Criticaleye Global Conference Call on Making Sense of Strategic Workforce Planning.

By Mary-Anne Baldwin, Editor, Corporate

Don’t miss our next Community Update on the importance of apprenticeships.

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Questioning Digital Transformation

Forget legacy systems, many corporates are holding onto legacy revenue streams – meanwhile agile start-ups are nibbling away at their profits. The development of digital technology waits for no one, so CEOs and their teams need to instigate change.

The average life span of an S&P 500 company will decrease from 60 to less than 15 years by 2020 and, at the current churn rate, 75 per cent will be replaced by 2027. These stats echoed through the room during our recent Digital Retreat, held in association with Accenture Digital, where attendees gathered to discuss what digital means to them.

Capturing what was said at the event, here we highlight four questions that leaders should ask themselves when faced with digital transformation:

What problem are we trying to fix? 

Figure out what you want to do before you roll out new technology.
Arabel Bailey, Managing Director and Digital Lead for the UK & Ireland at Accenture, says you must start with the problem you’re trying to solve. “Traditional organisations are often organised around product lines rather than customer needs.

“Many understand the theory of digital and being more customer centric but don’t know how to execute it.”

Ashok Vaswani, CEO of Barclays UK, spoke of his company’s digital journey, which for a business established over 300 years ago has been a difficult undertaking. He believes that it’s all down to strategy and a focus on the customer: “Strategy is three questions: Where are we now? Where do we want to go? How are we going to get there?

“We set up two groups of 10 to 12 people to come up with the answers. One thing to come out of it was that every product we provide is a means to an end, rather than an end itself.”

Another key finding was that customers want speed and convenience. “We realised mobile was the way to go. We built a mobile app and launched it in July 2012,” Ashok explained. “Ninety-two per cent of all payments are now done on mobile, it’s an incredible force.”

Do we know what’s happening in other companies and sectors? 

It’s important to have antenna pointed to the outside world. This is particularly the case when agile start-ups are springing up all around you.

Narry Singh, Managing Director and Head of Digital Strategy for EALA at Accenture, who spent 20 years living and working in Silicon Valley before relocating to London in 2014, likened these start-ups to a thousand mice nibbling away at the profits of those too slow to brush them off.

Using a home improvement retailer as an example, he listed over 15 platforms − such as Pinterest, TaskRabbit and Houzz – that could disrupt its industry.

“The biggest risk to incumbents from start-ups is their speed, talent, capital and fresh brands,” Narry said. “Look at funding sources like Angelslist.com and see where the ‘smart’ money is going.”

As fintech companies rise seemingly from nothing, established businesses must place more focus on price and margin. Speaking about Barclays, Ashok explained: “For every £1 of revenue my expenses are 51p. For companies that are digitised it’s around 22p. There is a sense of urgency to move from 51p to 22p, it’s in our interest to drop prices before we are forced to.”

From 2013 to 2015, Barclays made a cost base saving of £600 million. However, Ashok said there’s still much more to do.

Are we prepared for new ways of working? 

Adapting to the challenges and opportunities new technology brings often requires major organisational change.

Bal Samra Commercial Director at the BBC and Managing Director of BBC Television, relayed his experience of leading projects such as BBC Online, the iPlayer and BBC Store. He advised leaders to challenge the traditional boundaries and skills within the organisation.

“We have combined roles at BBC Three – we’ve developed new ones by mixing up social media and content,” he said. “We set up an academy to reskill the organisation and also launched an apprentice scheme that allows us to tap into a completely new pool of people.”

Bal also endorsed the creation of incubated teams whose sole purpose is innovating with new technology. “Separate teams work for big change,” he said. “It can be hard to identify measures of success at the beginning. Support them and let people get on with it, but have a gated approach. If nothing happens in six months’ time, it needs to be looked at.”

How do we get everyone within the organisation to work together? 

Legacy systems and getting buy-in from the board were cited as two of the main obstacles. Andrew Minton, Managing Director at Criticaleye, said: “Digital transformation is a tough job for traditional organisations with long-established operating models and legacy technology infrastructures. Every organisation will be at a different stage when it comes to digital maturity, but it’s a task leaders can’t ignore.”

Whether it’s being spurred on by the chief digital officer, chief technology officer or the chief exec, they need to translate it into something the board can understand.

For Arabel, examples can bring ideas to life: “Build a prototype, get customer feedback and present it to the board. Do things in a small way and then think about how to scale it, rather than thinking about full blown digital transformation all at once.”

Yet it’s critical to stress the sense of urgency for change. “Forget legacy systems, we have legacy revenue streams and they are declining. We need to have the courage to say: ‘Let’s move ahead’,” Ashok explained. “I have to go to the board and say: ‘Let’s get rid of those legacy revenue streams.’ If I don’t, the business will disappear before our eyes.”

It’s not just about the board and leadership team, colleagues across the business need to be aligned. Ashok demonstrated the importance of this by revealing that when Barclays’ mobile app was first launched it didn’t get the pickup they’d anticipated – staff weren’t telling customers about it.

“We needed to get colleagues excited about it,” he said. “But how could we get them excited about it if they didn’t have wi-fi in branches? So, we put wi-fi and 10,000 iPads into branches. The board asked how this would make money; it wouldn’t but it was something we had to do.”

Getting the organisational mindset to shift is a difficult task, but it has to be done. Ashok concluded: “It’s always a heavier challenge at the beginning. It’s about saying: ‘Trust me’.

“Now, it’s about saying: ‘Look what we’ve done,’ and to continue beating that drum.”
By Dawn Murden, Editor, Advisory

What are your thoughts on digital transformation? If you have an opinion that you’d like to share, please email Dawn at dawn@criticaleye.com 

Read more from Bal Samra on leading breakthrough innovation

Find out more about our upcoming CEO Retreat, in association with Accenture Strategy.

 

Making Big Bets on Digital

Conversations about ‘digital business’ can be confusing. No doubt there will be reference to a burning platform, followed by the dark art of culture change. You can also almost guarantee a warning that unless a strategy is in place, digitally savvy competitors will devour you and your industry.

 
For large organisations with long-established operating models, adapting to digital is tough. In the past five years, online and mobile have transformed consumer behaviour and it’s evident that the Internet of Things – which will bring us wearable devices, smart homes and driverless cars – will continue this disruption.

 
“It’s clear how much digital technology has become a part of our everyday lives and how much it has changed them,” says Andrew Minton, Executive Director at Criticaleye.

 
“Reflecting on the technological advances we’ve already witnessed should quash any fears we might have about change and help us visualise the positive impact current digital innovations could have on the future,” he adds. “Digital is no longer a choice. It’s a necessity that no company can afford to ignore.”

 
At a recent Criticaleye Discussion Group, Competing to Win in the Digital Age, held in association with Accenture Strategy, attendees fought through the fog around digitisation by sharing practical experiences of what it means to them and their businesses.

 
Here are three key themes that emerged:

 
1) Digitisation improves efficiency 

 
If there’s logic behind technology improving service delivery, don’t be afraid to embrace it. At Network Rail, there’s a multimillion pound project underway to digitise information systems that date back to the 1830s. “Data and understanding are vital as they will help improve efficiency,” says Jane Simpson, Chief Engineer at Network Rail.

 
This includes a wide variety of changes, from the introduction of apps for staff to report faults, to the adoption of track recognition technology that compares one data run to another. The latter saves an individual from having to walk miles upon miles of track, trying to spot if anything is awry.

 
But often, such changes won’t occur unless everyone sees the logic. “Never underestimate the buy-in you need from the end-user and the leaders in an organisation,” Jane warns.

 
2) There is a skills shortage…

 
…well, sort of.

 
It seems almost anyone born with an iPod in their mouth has star quality.

 
Martin Hess, Vice President of Enterprise Services Sales for UK&I at IT concern Hewlett-Packard, states there is a notable generation gap when it comes to digital.

 
“Organisations are trying to find ways to exploit technology but the leaders don’t necessarily get it,” he says. “They may know how to use social media but they think about it in a very different way. On the flipside, younger people don’t yet have the business acumen and, as a consequence, the hierarchy of digital knowledge in organisations is upside down.”

 
While fast-tracking millennials to the boardroom may be a step too far, the demand for a digital environment is making other companies revisit the traditional model for career progression. At the very least, the onus is on directors to boost their digital brainpower.

 
“People still think you need a NED in the boardroom to cover all of these issues,” says Samantha Barber, Non-executive Director of electricity company Iberdrola. According to her, what’s important is “the way the board interacts with external experts and sets aside strategic time to make sure they get the right analysis on trends in order to stay ahead of the game”.

 
Jonathan Hunter, Managing Director of Accenture Strategy, states that one of the biggest barriers is people being unable to conceptualise how a business can operate differently: “There is a degree of disconnect between the way people think about how work has to be done and the way that new technology can enable them.”

 
It’s too easy to attribute this to a ‘generational thing’, claims Jonathan. “It’s more about an individual’s choice and comfort around the way they engage with digital platforms and new technology,” he adds.

 
3) Only a few can moonwalk

 
Google’s Larry Page likes to talk about ‘moon shots’, whereby big bets are made on revolutionary ideas.

 
It’s fair to say that not every company can approach innovation in the same way. Talk about ‘going for the moon’ will get little airtime when the daily focus is on targets and performance.

 
The thing is, when competitors emerge seemingly from nowhere, winning customers and operating at minimal marginal cost, something has to change. “New entrants are able to have a dramatic effect on the market due to how quickly they can scale consumer use, whereas previously it took a lot longer to get traction,” says Jonathan.

 
This is where finding the balance between the old business model and the new really tests executives’ leadership abilities.

 
Claudio Righetti, Managing Director and CEO of consumer goods company Fontem Ventures, acknowledges that so-called agility in decision-making should be welcomed, but it can be difficult to execute, especially in industries that still have long lead times in production. This is when you need buy-in from the top, whereby people are encouraged to test new ideas early and take calculated risks.

 
“You can only be successful if you are willing to fail. But if you fail, you need to do this cheaply and move on quickly,” says Claudio. “If you have the right leadership you can establish this way of working and overcome the typical organisational push-back.”

 
Regardless of the sector or transformation being delivered, this is the message that keeps being told.

 
Want to find out more about digital? Read Staying Ahead of the Game

 
By Marc Barber, Editor

 
Do you have a view on this subject? If you have an opinion that you’d like to share, please email Marc at: marcb@criticaleye.net

 
https://twitter.com/criticaleyeuk

 

The Millennial Mindset

It’s not all hashtags and selfies when it comes to the millennial generation. Beyond their comfort and ease with new technology, those born between 1980 and the early 2000s think differently about the world of work. This is something boards need to understand as these digital natives inevitably replace older employees and, in the not too distant future, become the leaders of tomorrow.

It’s predicted this demographic will make up approximately 40-50 per cent of the workforce by 2020. Jo Whitfield, Vice President of Operations, eCommerce and Strategy for George at Asda, says: “Businesses are adapting but at a slower rate than customers and millennials expect… You’ve got to change your mindset and understand the world that millennials have grown up in is actually the world we are trading in.”

Being born into an environment of rapidly evolving consumer electronics – from laptops and MP3 players, to tablets and smartphones – means new technology has become second nature. “We have individuals who have grown up with technological advancement at a pace never seen before, with information at their fingertips,” comments Kris Webb, Senior Vice President of Pharma Europe and Emerging Markets, Asia Pacific & Japan at GlaxoSmithKline.

Payal Vasudeva, Managing Director for Accenture Strategy and UK & Ireland Talent & Organisation Lead, says: “The way they integrate with technology is more seamless and they expect to use the same devices at work as they do in their social lives, with the majority using two or three devices a day.

“They want greater flexibility, with better work/life integration… They are also less inclined to work within hierarchies and would rather form networks and communities to actively collaborate and problem solve.”

This point is echoed by Susan Pointer, Senior Director for Public Policy & Government Relations across Asia Pacific, Middle East, Africa & Russia at Google: “Millennials expect straight-talking openness; interesting, meaningful and impactful work and flexible work conditions – measured by quality of output, rather than by strictly managed hours of input. There is little time for unnecessary hierarchy and the expectation is that they will be empowered to contribute to the maximum of their ability regardless of level or title.”

Digital on the inside

Businesses have been busy creating a seamless multichannel experience externally for customers, but it’s time leaders turn their focus inside the organisation. Clodagh Murphy, Managing Director of technology services provider Eclipse Internet says senior executives need to “embrace technology and think: How can I use it to make our organisation a better place to work so that I can attract and retain the best talent?”

Payal agrees: “We need to challenge our thinking on the talent lifecycle in order to foster a culture of knowledge sharing, innovation and engagement, with processes and tools that truly enable this.”

This should start at recruitment and go right through to daily operations. “A number of companies use app-based recruitment which attracts those with a ‘millennial mindset’ by putting the experience in the palm of the candidate’s hand,” adds Payal. “Workplace content sharing is on the rise, catering to how employees engage with an organisation, consume information and problem solve… Gamification of learning on-the-go appeals to the consumer in all of us and is transforming how we develop skills and capabilities.”

Mike Tye, CEO at hospitality concern Spirit Pub Company, says: “Our online training is designed to deliver bite-sized, fun, interactive learning – using the principles of gamification. This is most suitable to younger generations… but hopefully older people are used to mobile devices [as well].

“We have a closed Facebook group with around 6,000 members, which is very much run by employees for recognition, questions and support. We have also recently given all staff access to the company intranet.”

It’s about empowering staff through technology. “Engagement will not be sufficient to deliver top-class results,” adds Mike. “For that to be the case there needs to be more: a true commitment from employees to the ambition of the organisation and a belief that they can make a difference.”

Susan from Google says: “Collaboration should be as wide as possible… consciously embracing the fact that the best ideas do not always emerge from the most obvious places – and that’s OK.”

Board’s eye view  

It’s imperative that the board take the issue of talent seriously in order to bring in the right mixture of skills. “One of the most important things that a company needs to drive future value is good talent,” says Iain Ferguson, Chairman of employment services company Optionis Group and information management firm EDM Group. “It is a very competitive market, and so it’s an important board level requirement to make sure that we’re competitive and attracting the best talent, no matter what age they are…

“I’m interested in who they are, what they bring to the company and how we can help them perform better.”

Susan comments: “Businesses should focus on attracting the best talent for their current and future needs, regardless of age. Build a great organisation and people will want to come – the best talent will always be attracted to exciting and impactful organisations.”

The point is that executive and non-executive directors must have a clear line of sight when it comes to the different needs and expectations of a diverse, multigenerational workforce. Payal says: “Boards needs to ensure they are building inclusive environments that all of their employees… thrive in by creating a more customised value proposition.”

Jo says: “A diverse workforce is important. We do business in a diverse world and you need to reflect the diversity of your customer base.

“Leaders need to understand… the differences that exist between generations, and use that to create value. It’s finding the knit between your current culture for all employees.”

I hope to see you soon.

Matthew

https://twitter.com/criticaleyeUK

Leading a Digital Culture

Comm update_14 JanuaryAs new technology continues to turn traditional business models upside down, the onus is on executive teams to embrace change while encouraging employees to think and act differently. It means challenging conventional approaches, testing ideas and creating a ‘digital culture’ within an organisation which is attuned to and reflective of changing customer expectations. It’s inevitable that the companies that fail to adapt will struggle to compete effectively.

For large, well-established organisations, deep-rooted changes are required. Julian Payne, Line of Business Director for Solutions at De La Rue, a supplier of identity and product authentication services to governments and multinationals, says: “If you’re a first-generation digital start-up business or technology company, you don’t have to think about digital culture, you just have it. You have an agile development team… and you are open to change.

“Whereas if you’re working in a bigger business or a business with a significant non-digital legacy… you’ve got to think about the DNA of the culture that you want to create… It means thinking about what’s happening in the wider context around everything from hosting, to the cloud and big data analytics.”

Laura Haynes, Chairman of brand consultancy Appetite, explains that digital needs to be part of the core business: “People think about digital as being something outside their regular business issues, but it is time to think differently and recognise that the first way to reap the benefits of a digital culture is to break down silos and integrate digital thinking and processes throughout the business.

“Sure, there will be parts of digital that may need new technical expertise, but there is the opportunity to explore the potential to improve processes and communications, but this means embracing digital.”

It’s about connecting the established practices with the new, and reaching a balance which allows digital to enhance or adapt the traditional offering. Bal Samra, BBC Commercial Director and Managing Director of BBC Television, who is leading major digital projects such as BBC3 Online, the iPlayer and BBC Store, comments: “Our values at the BBC are always going to be the same… but we are in a different world – it feels like everything is speeding up… You need to create a culture in your organisation to evolve from the old to the new.”

Executives on point 

Senior executives in an organisation need to take the lead on digital. Bal says: “The CEO has to set the pace of the vision… So that means constantly talking about the world around us and how it’s changing, and moving that from being scary to being an opportunity.”

Leaders need to be open-minded. Laura says: “The challenges are understandable because if you take a lot of senior leadership, they’re having to relearn a way of thinking that doesn’t come naturally… it’s not just about learning techniques; it’s about learning to think differently about processes, about truly interactive and real-time communications, about the utilisation of information and how to analyse what’s in front of us, as well as new media.”

Julian says you have to “remove fear and de-risk digital” through experimentation and education: “Get them to play at home more. Ask them to use some of the modern apps that, frankly, kids are using.

“You need an interpreter role, it might be your CTO or it might be head of R&D. Someone who can take relatively complex concepts of digital and introduce them to a board… [Crucially] you have to be really clear about where the customer value lies, the cost to achieve it and the steps to take.”

Younger employees are increasingly being turned in order to share their digital expertise, acting as reverse mentors for an older generation. Paul Brennan, Chairman of cloud infrastructure software provider OnApp, comments: “You need to utilise younger people who are going to be the consumers of your products and services in ten years’ time, to understand how they want to communicate with you.”

Allied to this, employees should be allowed to experiment and test ideas. “You fail fast and learn,” says Bal. “What you want is an innovation kind of culture which says if you fail… and if something doesn’t work, you move on. You’ve got to create a culture that allows people to challenge the conventions.”

For this ‘digital culture’ to be meaningful, it has to be joined-up with how the information generated by technology is being used to bring about collaboration, experimentation and to inform decision-making. “New technologies enable us to act in a very different way,” says Emma Cooper, Managing Director of UK Health and Public Sector, and Organisational Change Lead for the UK and Ireland, at Accenture.

“They allow us to tap into workers anytime, anywhere… Digital is changing organisations, silos and hierarchies.”

Helen Murray, Chief Customer Solutions Officer at Webhelp UK, a company that provides outsource customer services, says: “Huge insights can be gained from analysing conversations, utilising voice and text analytics, to truly understand customers’ emotions, frustrations and behaviours, and combining that with more traditional, structured data analytics… You need to ensure all customer engagements consistently reflect and represent the brand.”

In order to fully endorse digital, leaders have to understand the tangible business benefits. Paul comments: “A lack of awareness of the value proposition means you could miss opportunities, so education is important for senior executives to fully embrace digital. You need to understand the benefit to your organisation.”

At the very least, they have to be honest about where gaps in knowledge and expertise may lie. Mike Greene, Chairman of pharmaceutical and consumer healthcare company WinchPharma Group, says: “Boards need a diverse mix of experience, energy and ambition… If they haven’t got someone who’s digitally savvy and digitally confident then their board is missing something, but unfortunately they often recruit in their own image.”

Helen comments: “Digital is so critical to businesses… It’s essential that digital is in its DNA, not a separate operating unit; not an adjunct… It needs to interface seamlessly with the rest of the organisation.”

Large corporates may struggle to embrace a truly digital culture, but senior executives must rise to the challenge. Ultimately, leaders need to ensure they are open-minded and willing to learn, while utilising new technologies and data in order to empower employees to meet changing customer demand.

I hope to see you soon

Matthew

www.twitter.com/criticaleyeuk

What’s on the Mind of a CFO?

Comm update_20 August1

Collaboration is essential if chief financial officers are going to perform to the highest level. They have to be highly analytical, commercial in approach, capable of shaping strategy and possess a keen eye for detail and process at the operational level. It’s why technical expertise and good interpersonal skills are so important as the CFO will be pulled into a variety projects right across an organisation.

“The demand on the CFO is to be a bit of a silver bullet guy,” says René Matthies, Chief Financial Officer for energy company E.ON UK. “They need to be strong on different capabilities, particularly stakeholder management. It’s a balance, on the one hand supporting customers and the business and, at the same time, managing the delivery of the strategy and financial targets while safeguarding compliance and managing risk.”

It relies on possessing a diverse set of skills. “The role of the CFO is a lot broader so it’s no longer about accounting and [bookkeeping],” says Shatish Dasani, Group Finance Director at electrical systems manufacturer TT Electronics. “It’s about getting to know the business, being a commercial player and getting involved in strategy.”

The CFO will be called upon for their insights on a variety of issues, from IT, legal and HR, to the more traditional areas of financial modelling, compliance, acquisitions and speaking to analysts and investors. Steve Allen, Managing Director for Finance at TfL (Transport for London), says: “You have to be able to work collaboratively with colleagues, draw out information, challenge constructively and yet still be able to present results in a robust manner.”

David Santoro, Executive Partner for IBM Global Business Services, says: “The role of the CFO has… gone from one that’s been custodial in nature, statutory and regulatory [in its focus], to one that’s now more forward-looking and oriented towards providing strategic input into the business…

“Data and reliable information are probably the most important assets in the armament of the CFO today and that’s definitely something that has changed dramatically over the last ten to 15 years.”

The emphasis on risk management has grown significantly. Bob Emmins, Finance Director of sugar supplier Silver Spoon, comments: “Gone are the days when risk management was just what the financiers asked and the auditor thought about. It has to be embedded into the business, so that people are considering the risks whilst making their decisions.”

Deirdre Mahlan, Chief Financial Officer of alcoholic beverages company Diageo, says: “Globalisation, or the increasing tendency of businesses to act and think globally as opposed to just being present globally, has shifted the balance in terms of thinking about risk and reward.

“Certainly, when your business has less presence or less at stake in multiple cultures, multiple economies, different sets of socio-political environments, you can manage that risk-reward and resource allocation differently.”

As a business becomes more global, the dynamics around risk and resources becomes far more complex. “I think many organisations and individual professionals are still working their way through getting to reasonable levels of comfort in doing that,” adds Deirdre.

Using Intelligence

Technology’s impact on the role of the CFO is only going to increase. “It is driving both the strategic and detailed aspects of the work,” comments Barbara Moorhouse, Non-executive Director of the Lending Standards Board. “More of an organisation’s strategy may be technology led; support systems are becoming more complex and risks are increasingly technology related – and hard for non-specialists to understand.”

The speed at which information can be sliced and diced is proving to be both a blessing and a curse. Jim Wilkinson, Chief Financial Officer at African investment concern Lonrho, says: “Technology is changing the role because everything is becoming more immediate and the amount of information is increasing significantly.

“This means that time management skills and being able to identify the valuable information is extremely important. It is also making the role far more 24/7 than ever [before].”

It’s one of the reasons why finance functions are rapidly evolving, so they can provide productive insights by integrating operational and financial data to inform the decision-making process. “The operating model is changing from being transactionally focused – so producing reports, closing the books [and reconciling accounts] – to one that’s much more focused on… insight creation and driving real value back into the business,” says David.

In fact, many organisations are keen to outsource the day-to-day aspects of management accounting in order to bring in people that can enhance performance. “It’s a massive challenge facing finance [teams] globally and one that is causing a fundamental shift in how they look at… investing in the future of finance,” he adds.

What hasn’t changed is the need to talk regularly with the CEO and, in effect, act as co-pilot. Paul McKoen, Chief Financial Officer of bed and mattress manufacturer Silentnight Group, comments: “A CEO needs the support and complete loyalty of a good CFO, but they also need somebody who is prepared to stand up and criticise and tell them when they’re wrong. It can’t be an uncritical relationship.”

Jim makes a similar point. “The CEO and CFO should work extremely closely together as partners. However, they should also be challenging each other and not be afraid to speak their minds and have differing opinions. Respect for each other’s style and achievements should still overcome any fundamental disagreements,” he says.

The CFO has the widest ranging role on the board, with the emphasis firmly on forming alliances to make sure strategy and execution are aligned. As Deirdre puts it: “The biggest change in the role of the CFO, over the last decade or so, is a shift from almost a policing or reporting function, as the primary role, to one of business partnership.”

I hope to see you soon.

Matthew

www.twitter.com/criticaleyeuk

The Physical Attraction of Retail

Comm update_11 June3Traditional retailers are working hard to make customers fall in love with stores all over again. If affections are to be won back, it will entail providing a more blended, personalised experience, whereby mobile presents the opportunity to send tailored offers and discounts, while the store itself becomes a place for shoppers to evaluate products with their own eyes, consult experts and socialise.

Stephen Smith, Chief Customer Officer at supermarket chain Asda, says: “The work we are doing around reinventing our large store formats is important for long-term growth. People are making fewer visits to large stores so we’ve got to continue to invest in the physical space and give people reasons to shop in store… [which means] making that physical space work as hard as possible for us. After all, it’s still what drives the bulk of our sales and profits.”

Customers will choose to visit a physical store if it means they can have an experience, either service or product led, which is not available to them online. Gary Favell, CEO of retail concern Bathstore, comments: “In our sector, customers want support, advice and guidance. We offer a personalised, full service solution through ‘service by design’, which can only truly come to life face-to-face. Our website educates customers about [this service], then signposts customers into the store.”

Naomi Wells, Head of Future Planning and Sustainable Development at Waitrose, part of the John Lewis Partnership, says: “You’ve got to make sure you are constantly introducing new experiences for your customers. For example, in our York branch of John Lewis, we’ve partnered with Hotel Chocolat to open a cocoa bar café in the store. Then there’s our tie-up with [luxury travel operator] Kuoni, which offers concessions inside our Oxford Street department store… we’ve also introduced a dry cleaning service in our Waitrose branches and extended our click-and-collect service so that it operates between both John Lewis and Waitrose stores.

“It’s about those extra offers you can deliver that encourage the customer [to shop in a physical store]… They can get everything on the web, so when they come into a shop they are looking for an experience, rather than a transaction.”

Pushing the boundaries

It’s clearly in traditional retailers’ best interests to find new ways to drive footfall in stores as part of their multichannel offering. After all, according to research from EY, online sales still make up just 12 per cent of total retail sales in the UK.

Julie Carlyle, Partner and Head of Retail at EY, says: “The question has moved on from asking ‘is the high street dead?’ to ‘what will the high street look like in the future and what purpose will it serve?’. Whether that’s showcasing products in stores, using space to click and collect… [it’s whatever] supports the current retail model.”

Cross-sector partnerships are becoming more important as is the ability to maximise the in-store experience through digital and the use of customer intelligence. Julie continues: “If you look at the fight for the pound spend [in retail], some of that’s coming from hospitality, some from what you would call old-fashioned retail and some from media. And I think there’s a real blurring of the lines between what is actually retail and what are other subsectors, so thinking about who your competition is has become more tricky.”

As new technology becomes available, that all important customer experience can be enriched. Take Apple’s iBeacon app, which goes beyond tracking a smartphone user’s location to estimating their proximity to, for example, a display or checkout counter in a store, in order to offer personalised discounts and special offers to customers.

Peter Williams, Chairman of online-only fashion retailer boohoo.com and former CEO of department store Selfridges, says: “There is no doubt that people like a bargain. And actually, if they’re being given the opportunity to buy something that’s 10 per cent off and the store they’re in just tips them, they may well take it up. So, if you can get the technology right and persuade the consumer that [in-store smartphone tracking] is accepted behaviour, then it might just have some mileage in it.”

Other companies moving in this direction include European property developer Hammersons, which introduced the Kudos loyalty app last year to enhance the multichannel experience for the retailers it houses. Steve Muylle, Professor and Partner at Vlerick Business School, and a Criticaleye Thought Leader, explains: “[Kudos] fires discounts for a meal or a coffee at customers after they were in the store for a while, making them rest and enjoy the break, so that they can continue shopping afterwards. The app also tracks their movement.”

Of course, the use of this technology needs to be carefully judged. Julie comments: “Retailers need to strike a balance between being able to find out data about their customers and guide them in the right direction without inundating them with offers or getting to the stage where customers are actually a bit worried about… [the retailer] knowing everything about them and following them around.”

Hayley Tatum, Senior Vice-President for People at retailer Asda, comments: “Customers just want convenience, which means shopping on their terms, in their way, however it suits them. It’s vital to make sure that physical stores remain relevant to what customers are interested in… whether that’s to browse or meet friends, so it provides a hub, a meeting centre and a purpose for people to visit.”

Ultimately, this is what creates loyalty. As Steve puts it: “Retailers that support the consumer decision journey with the right offline-online combo will certainly have the competitive advantage.”

I hope to see you soon.

Matthew

www.twitter.com/criticaleyeuk

The Digital Dilemma for Banks

Comm update_11 June2Empowered customers are demanding a seamless experience across multiple channels. For traditional financial services (FS) providers, this is presenting a number of challenges as they look to create an integrated, flexible offering which caters to online services, apps and utilises data effectively. As ever, this is easier said than done given the changes required, but it’s clear that failure to move with the times is not an option.

Sandra Leonhard, MD of Digital Channels, Personal & Business Banking at Barclays UK Retail and Business Bank, says: “[A cohesive] digital strategy in FS is customer-centric as well as commercial; it will be disruptive and transformational. The digital strategy will go far beyond a distribution channel and will incorporate digital to drive product changes, transform back-end processes and technology, reinventing the customer interface and evolving the underlying core operating model of the business.”

It means making deep rooted, structural changes to an organisation. Stephen Ingledew, Managing Director for Customer and Marketing, at savings and investment business Standard Life, agrees: “It’s not something that stands alone… it’s integral to what the business is trying to achieve with customers and its commercial objectives. It’s not just about the front-end or having an exciting, engaging website or mobile way of engaging customers … it needs to be end-to-end, up front as well as operationally.”

Sandra adds: “The key is to offer channel choice but to be in line with changing customer behaviour. This means if more customers are demanding… sophisticated digital services, then banks need to evolve and rebalance their offering to remain competitive in the market.”

A similar point is made by Neil Jones, Consultancy Partner at business solutions company TCS (Tata Consultancy Services): “It’s really about understanding what your customers want in the future, and then shaping your digital strategy to deliver those needs.”

Cause for disruption
There is much talk and speculation about how digital is going to change retail finance, particularly in terms of personal interaction and customer service. Brian Stevenson, Criticaleye Board Mentor and Non-executive Director of the Agricultural Bank of China (UK), says: “The branch is going to die just like high street retail is going to die and is dying because people don’t need it anymore… there isn’t a really fundamentally important reason for branches to continue. There is still a need for people to have face-to-face interaction but it doesn’t have to be in a branch the way that people think of it today.”

By contrast, others argue that there is a compelling reason why the branch will remain a core feature of the customer experience. Steve Pateman, Head of UK Banking at Santander, says:  “I have no doubt that technology will play a massive part in the retail and corporate and commercial bank of the future. People will want to have the ability to pay-on-the-move and access information wherever they are… But this is not going to replace the relationship managers.

“It will not replace the branch. You can have the best information system, but if your delivery system with people isn’t up to scratch, then it will backfire. Too many people don’t understand that.”

While the degrees of personalisation may be open to debate, advances in the use of data and analytics have certainly made engagement more complex. Stephen comments: “Our traditional approach to financial services has been to push products out… What the data allows us to do is actually know customers better, engage them on a much more personal basis and then apply how we help them and make things easier for them, based on their experience.”

Banks are in a privileged position when it comes to data, with access to customers’ transactional patterns and often the broader financial make-up of their lives, but many are not taking advantage of this due to restrictive legacy systems. According to a report by TCS from 2013, almost 80 per cent of the 300 FS senior executives surveyed said they were losing opportunities to improve the customer journey in real time due to failings in their existing systems and processes.

Brian comments: “They are relying on core systems that don’t actually analyse the data or produce the data in any way, shape or form that’s user-friendly… financial service providers should ultimately know their customers’ needs better. That should avoid things like mis-selling.”

For traditional financial institutions, utilising information across channels can be incredibly challenging. Neil comments: “You can’t easily change your legacy system… what you’ve got to try and do is build something that sits on top. A good example is Barclays’ Pingit, which enables you to use your phone to send money to someone else’s phone.”

As well as legacy issues, the regulatory environment can be seen as another barrier to digital innovation. Neil adds: “It’s a millstone around the neck of every single financial service operator… the barrier is often: A, the quantity of regulation, and B, how many organisations and regulators interpret it. So ensure you comply, but use compliance to change the way you operate and try to innovate.”

Expect a surge in ‘pure-play’ digital financial service providers over the coming years. While they may not have the scale of established institutions, they may bring brand new ways of providing services and engaging with customers which will cause ripples in a sector that has been set in its ways for far too long. “If you are a new player… you don’t have [the] history and you don’t have to migrate old products to new platforms, or old technology to new technology,” says Brian.

There are some real strategic and operational dilemmas for financial service providers if they are to deal with the transition to digital. What is beyond doubt is that while risk, trust and security need to be managed impeccably, change is inevitable because it is all being driven by the customer.

I hope to see you soon.

Matthew

www.twitter.com/criticaleyeuk 

What Innovation Really Means

Comm update_28MayNew ideas and fresh thinking are fundamental if companies are to retain a competitive edge. To drive innovation, you need to create a culture where ideas come from both within an organisation and by working with others. Increasingly, the art of doing this successfully lies in being able to utilise various channels and by harnessing the skills at a company’s disposal to capture those moments of inspiration.

It’s crucial that, when it comes to innovation, employees don’t fear failure. Anand Gupta, Principle Innovation Evangelist for Europe at business solutions company TCS (Tata Consultancy Services), says: “We have an annual competition across the group… all companies are required to submit entries under broad categories such as, ‘Promising Innovation’, ‘ Leading Edge’ and ‘Dare to Try’.

“The ‘Dare to Try’ category is interesting because it rewards people who try to make something completely new work in the business that actually turns out to be a total disaster. But unless we encourage people to try they’ll always be scared. We want them to go beyond this fear and decide if the idea is worth it. It cannot be a wild decision, it needs to be valid within the environment… but then, if they fail, that’s perfectly OK.”

Jane Griffiths, Company Group Chairman for EMEA at Janssen, the pharmaceutical division of Johnson & Johnson, comments: “We’ve had projects going on recently where some have worked and some actually haven’t done so well; I think you have to make sure heads don’t roll as a result of attempts at innovation that don’t work out, because if you come down heavily on people who try to innovate… that stops other people from trying new things.”

There has to be consistency. Costas Markides, Criticaleye Thought Leader and Professor of Strategy and Entrepreneurship at London Business School, questions how many corporates actually get this right: “Companies ask people for certain behaviours to promote innovation, but in reality they have an environment or incentive system in place that does not encourage those things.”

If employees are to believe they have a licence to think differently, then executives have to lead by example. Costas continues: “[When] the leadership of an organisation begins questioning; going outside their industry for ideas and starts experimenting… once they start behaving in the way they want everybody else to behave, pretty soon everybody else in the organisation will follow suit. That’s how you create a culture of innovation.”

Cath Keers, Non-executive Director of Home Retail Group, says: “There has to be a brave, passionate and determined leadership to really take those risks on innovation. Encouraging cross-functional teams, who share, collaborate and adopt the ‘have-a-go’ mentality with a clear view of what success looks like, is essential.”

Once the ecosystem is right ideas will, in theory, be able to flow through an organisation far more easily. Martin Hess, Vice President of Enterprise Services at IT company Hewlett Packard, comments: “Most innovation in business comes from being close to the customer, [it] doesn’t start at head office. Try and keep an organisation as flat as possible… so the ideas don’t get diffused and diluted as they go up through the company.”

Businesses need to remain agile and if new ideas are to come through, it may be necessary to develop them in isolation to the core business. Mark Wood, SVP and Managing Director of EMEA for US-based cosmetics firm Revlon, comments: “Our normal new product development pipeline may take two-and-a-half to three years to bring an idea from concept to getting it onto the shelf, because you’ve got lots of internal processes, checks and ‘stage gates’ that you need to go through.

“We acquired a business that was run on a completely different platform. It was all about bringing the latest catwalk trends into cosmetics quickly. To maintain the ethos of that brand… we kept it outside of our normal processes.”

Going outside of the business to tap into ideas can also prove game-changing. Martin Grieve, SVP of Corporate Business Planning at FTSE 100 listed consumer goods company, Reckitt Benckiser, says: “We have many external collaborations with third parties. In today’s world, business leaders are increasingly recognising that collaborative work with third parties will deliver breakthrough innovation.”

Show your appreciation

Rewards and recognition are significant motivators. Jane comments: “We have a system of reward in the company called ‘Global Standards of Leadership Awards’, which reward good behaviour within our Credo, and innovation is one of these.

“But one of the principles I ensure happens is publicly recognising people – even if it’s only on email, or a formal memo to somebody that copies in their boss or their colleagues, that says: ‘What you’ve done is fantastic’. I think recognition is very important… the ultimate recognition of someone who is consistently innovative and contributing a lot to business is that their career advances.”

Whether it’s inhibiting corporate processes, external regulations, fear of cannibalisation or a question of talent, the barriers to innovation are high. Nonetheless, it’s vital that the senior leadership team does whatever it can to allow for progressive disruption of the status quo so the necessary breakthroughs are made.

Martin Hess explains: “I don’t think companies can succeed… without constantly looking to change and innovate. You might become a leader in one technology wave, but you won’t be able to succeed in being a leader in successive waves.

“It’s one of the few things that an organisation has to be extremely good at and to encourage if it’s to prosper.”

Martin Grieve comments: “Innovation is the lifeblood of what we do. It is what fuels the growth of the business; it’s about keeping our brands relevant to consumers, continually improving performance and consumer benefits.”

I hope to see you soon.

Matthew

www.twitter.com/criticaleyeuk 

Why Business Strategy is Changing

Comm update_2 MayA shift in strategic thinking is underway as boards come to realise that they must respond faster to the changes shaping the global marketplace. The old notion of a set five-year plan has been transformed by the use of more emergent strategies, where assumptions about the future are tested more frequently and, if a new direction is needed, the business is fluid enough to be able to adapt quickly.

“I am seeing a change taking place where the top-down, long-term view needs to be supplemented by more focus and agility in recognition of how you are going to achieve it, so the building blocks within corporate strategy are definitely becoming more dynamic,” says Ruth Cairnie, Non-executive Director of the FTSE 250 engineering firm, Keller Group, and former Executive Vice-President for Strategy & Planning at Shell.

Rebecca Lythe, Chief Compliance Officer at retailer Asda, comments: “Technology is moving so quickly and the landscape has changed in terms of how easy it is to do something quite disruptive, so mature businesses have to learn to be a lot more agile. It is still important to set a strategic direction looking some years ahead, but it’s how you get there, the time horizons within it and how you keep your strategy up-to-date which have all accelerated.”

The pace of change knows no bounds. Kevin Craven, CEO of the Services division at infrastructure provider Balfour Beatty, says: “You only have to look at what’s happened in the telecoms industry, where miles and miles of cables and wires in the ground have been replaced by mobile phones and masts. The entire economic model just shifted dramatically…

“No market is free from disruptive influences, so you clearly have to be monitoring your world and your customers and think about how you might respond to those shifts.”

Clearly, leadership teams must be better prepared when a disruptive shift does occur. “You should have at least envisaged the tough questions and how you might answer them, otherwise you’re not providing genuine value to your shareholders,” says Kevin. “One of the answers might be to say: ‘We need to close our doors.’ Another could be to sell to the innovator that’s tearing up your marketplace… [and] if you don’t want to go to those lengths then at least be prepared to be radical.

“For example, last year, because of a divergence with the group strategy, we decided to dispose of a business unit. It was one of the most profitable businesses in the group but it became clear that we were no longer the right parent for that business to achieve its potential.”

Big decisions

If CEOs delude themselves about the need to adapt, strategies will fail. Roger Martin, Criticaleye Thought Leader and Academic Director of the Martin Prosperity Institute at Rotman School of Management, comments: “The most common thing to do in the world of strategy in business these days is to complain about the V.U.C.A. world we live in – so everything is volatile, uncertain, complex and ambiguous – and then say that because of this it’s impossible to do strategy.

“But if an organisation doesn’t understand it has to make choices about where to play and how to win, it might as well not do strategy. That’s why more than eighty per cent of all strategic plans are pretty much useless.”

Peter Shore, Chairman of Arqiva, the UK’s national provider of TV and radio broadcast infrastructure, says: “Once a year we go offline for two days… to look at our individual industry segments from the bottom up. We look at where we are, assess our strengths and weaknesses, then from the top-down we try and assess where the big technical shifts or the big industry or customer shifts are going to be in our markets, and therefore where the big opportunities are for us to push our next investments.”

The board-level strategy has to be clear but the roll-out for a global business will not necessarily be homogenous, which does present some risks. Simon Dawson, Associate at leadership and organisational change consultancy Transcend, comments: “Emergent strategies are fine so long as there is connection across the organisation and rules to operate by. The danger is that people fall into a state of ‘self assembly’, whereby they go off and do their own thing believing they’re contributing to the whole strategy but, in reality, different parts of the organisation are moving in different directions.

“For example, when I worked in a telecoms business that was supposed to use emergent strategies, things were fine until the board got rid of the CEO as a result of the business underperforming. Then it quickly became clear that [the business] was just formed of little silos of people doing their own thing, none of which really connected.”

Communication must be frequent so that the vision remains relevant. Roger says: “As a business grows larger, the delusion of believing you can have uni-directional strategy set from the top just becomes more and more far-fetched.

“What you have to do is lay out a strategy direction from the top then say to the business units: ‘Here’s what we’re trying to accomplish as an organisation, please try and make something consistent with that.’ It’s then a process of going back and forth between the top and the bottom, which hones, refines, tightens and aligns your strategy.”

Ruth comments: “You need constant communication so that the view from the HQ about what the world is like, and whether the strategy can be implemented, is constantly up to date. You mustn’t be in the position where your assumptions are out of date, so it’s about constantly testing whether your assumptions are still valid and whether you are delivering on the strategy you set out; if not, an adjustment may be needed.”

For Rebecca, it’s about senior management being as candid as possible: “Strategy execution today means… having open and honest conversations within the leadership team about whether something has moved faster than you thought and, therefore, what the new implications are for the business.”

I hope to see you soon.

Matthew

www.twitter.com/criticaleyeuk