Chapter One

Why Read This Book?

The Good, the Great, and the Stupidus Maximus Award

In 2001 a book called Good to Great was published that profiled companies that were considered to have exemplary business practices.1 One of those companies was the electronics retail company Circuit City. Less than ten years after Good to Great was published, Circuit City was bankrupt, and its stock was delisted. How did such a high-performing company go so quickly from good to great to gone?

Many things contributed to the demise of Circuit City, but one action that stands out was the decision in 2007 to fire their most experienced employees and replace them with less-expensive newly hired staff. This move provided immediate financial benefits but created lasting and permanent damage to Circuit City’s performance. It even led to the creation of an award to recognize colossally bad management actions: the Stupidus Maximus Award. The award observed, “It doesn’t take a genius to know that getting rid of your most experienced and productive workers is not only a terribly shortsighted strategy, but incredibly dumb.”2

It would be nice if stories such as this one from Circuit City were rare. They are not. We all have stories of apparently stupid things we have seen managers do. Bad management seems to be something we simply expect and accept as something we just have to live with, much like bad weather. What leads to all these bad management decisions? Most people who get promoted to management positions have had to demonstrate that they possess at least a reasonable level of intelligence and have shown that they can be trusted at some basic level to support and help others. Very few managers are particularly unintelligent, cruel, or unethical. Circuit City’s decisions were almost certainly done by extremely bright and highly successful executives. These executives may have earned the Stupidus Maximus award, but they were not stupid people. The reality is that all of us are capable of making stupid management decisions. Many of us, although it may be painful to admit, have already done so. The challenge is that companies do not learn that their management decisions were stupid or ineffective until after they have been made.

The reason companies make bad workforce management decisions is usually the same reason people make other bad decisions: they fail to think through the consequences of their actions or overlook crucial pieces of information. Poor management decisions are often the result of not appreciating what actually drives employee performance. More often than not, this comes from looking at decisions from the perspective of the organization without thinking about these decisions from the perspective of employees. A decision that makes sense in terms of a company’s financial models may not make sense if you look beyond these numbers at the psychological factors that underlie employee actions that drive company profits. Employees do not do things because their company wants them to. They do things because they want to do them, have the capabilities to do them, and have confidence that solely they can succeed.

Successful companies are not built solely on the things leader and managers do themselves. Successful companies result from what leaders and managers are able to get their employees to do. This requires understanding work from the perspective of others and knowing how to predict and change employee behavior to align with business needs. That’s ultimately what this book is about.

This book is a guide to using strategic human resources (HR) to increase business performance. Strategic HR encompasses a variety of processes, including staffing, talent management, performance management, compensation, succession, development, and training. The term strategic HR is used to distinguish these processes from other HR processes that are more administrative in nature.

Strategic HR focuses on processes used to align the workforce to deliver business results. It is often described as getting the right people in the right jobs doing the right things and doing it in a way that supports the right development for what we want people to do tomorrow. Administrative HR focuses on administrative and legal processes associated with the employment of people: managing payroll, providing health care benefits, and handling the administrative and legal details associated with establishing and terminating employment contracts, for example.

Strategic HR is critical to achieving business objectives consistently and effectively. It has a major impact on the profit, growth, and long-term sustainability of organizations. Administrative HR is critical to organizational functioning but is not a strong source of business advantage. For example, although it is difficult to motivate employees if their paychecks don’t show up, paying people on time is not going to give a company competitive advantage. In this sense, administrative HR is similar to other crucial support services such as processing expense reports, maintaining e-mail systems, and managing building facilities. Administrative HR gets little attention from most business leaders unless it fails to work. Business leaders rarely ask administrative HR questions such as, “How do I ensure people get paid on time?” But they often ask strategic HR questions such as, “How can I get the employees I need to support this project?” or, “How do I get people aligned around the company’s strategic goals?”

There is a symbiotic relationship between strategic HR processes and administrative HR processes. Although there is a tendency to discuss these two sides of HR as though one were more important than the other, the reality is that we need both. Administrative HR is needed to employ people. Strategic HR is necessary for ensuring that people are doing what we have employed them to do. Strategic HR is where companies gain the most competitive advantage because it is about increasing workforce productivity and not just maintaining standard corporate infrastructure. If HR professionals want to increase the impact they have on their company’s strategic initiatives and business operations, then being good at strategic HR is how they will get it (see the discussion: “Strategic HR: Leadership: What It Does and Does Not Look Like”).