Canadian HR Reporter

STRATEGIC CAPABILITY NETWORK'S PANEL of thought leaders brings decades of experience from the senior ranks of Canada's business community. eir commentary puts HR management issues into context and looks at the practical implications of proposals and policies. CANADIAN HR REPORTER November 14, 2016 EXECUTIVE SERIES 19 www.scnetwork.ca Join our professional community of Canadian HR & Organizational Leaders: • Connecting @ monthly events • Collaborating with peers • Challenging conventional thinking The Power of Human Capital CULTIVATING LEADERSHIP FOR 35 YEARS Great Leaders GROW www.scnetwork.ca PANELLISTS: • Ian Hendry, president of the Strategic Capability Network and vice-president of HR and administration at Interac in Toronto • Jan van der Hoop, president of Fit First Technologies in Toronto • Christine Discola, director and country HR offi cer at Citigroup in Toronto • Paul Pittman, founder and president of the Human Well in Toronto Ian Hendry Paul Pittman Jan van der Hoop Christine Discola New understandings, new assessments Four SCNetwork members engage in a back-and-forth on Julian House's presentation Ian Hendry: e emergence of behavioural economics reminds us of how our new understanding of neuroscience should be forcing us to re-assess the eff ectiveness of our human resources programs. Since our old mental models are our natural recall mechanism, the event featuring Julian House (research scientist at the Ontario government's Behav- ioural Insights Unit and research fellow at the University of Toronto's Behavioural Economics in Action Research Hub) awakened us to the fact that our ability, and willingness, to test their relevancy in a fast- changing world is too often overlooked. Why is that? Jan van der Hoop: I think it's because most of us are lazy (not critical) thinkers by nature. As Julian said, we are most often reacting to the world around us passively, seeing what we see, and believing what we believe through the fi lters of our reptilian brain — as if we are on autopilot. System two thinking, where we disengage the autopilot so we can see and think clearly, is exhaust- ing, and can be disruptive and hugely inconvenient. I would say the same is true when it comes to organizations, where systems and structures — say compensation, for example — remain virtually unchanged from their industrial age roots, in spite of plenty of evidence to indicate they are not only inef- fective at incentivizing the right behaviour, they are actually counterproductive. But, then again, nobody ever got taken out back and shot for not challenging convention. Christine Discola: Much of our tightly held human re- sources programs are based on extrinsic value and the expecta- tion that employees will buy in if they believe there is some kind of short-term or long-term fi nancial reward — whether it is a high-po- tential program or a performance rating, or even making pension selections for retirement. ese are programs that incent people based on something that is tan- gible at the end. This assumption has always seemed rational. But as we learned, we are not rational beings and we may need diff erent moti- vations to get us engaged. Testing and validating our hu- man resources practices, then, will require an openness to change the way in which we have been doing things — how limiting is organiza- tional culture in allowing this type of exploration? Ian: So is this an opportu- nity for human resources to lead the charge and force conversa- tions that challenge traditional thinking? Paul Pittman: The implica- tions of this work are clear and profound. e application to public policy is obvious and desirable although I suspect we are seeing the tips of some complex considerations and numerous trial-and-error iterations. e results of small, relatively low-cost changes to the way choices are proff ered can have a signifi cant positive impact on out- comes. Our system one decision- making is habitual and intuitive; for example, what to have for breakfast. They are learned responses and this must also be true of de- cision-making in business when faced with choices encountered previously. A popular defi nition of insan- ity is doing the same thing over and over and expecting diff erent results. Well, maybe it is also true when you get the same results without realizing that better outcomes could be achieved with minimal change. Business decisions, however, require greater attention to risk and potential (planned and unin- tended) outcomes, along with the impact on limited shareholder resources. Christine: I wonder if the data we have on our people can be leveraged in a diff erent way to get to those diff erent business outcomes. We certainly have amassed a lot of data but we usu- ally read it as the "what" and not the "why." A lot of organizations are delv- ing into the world of predictive analytics, which is a step in the right direction — the intention is to remove our biases and base decisions on past behaviour as derived from data. Suddenly, we are scientifi c! How do we, as human resourc- es practitioners, learn to gather, standardize and interpret the data and design the right innovative outcomes? Paul: I agree Christine, this is far more powerful than the tradi- tional human resources analytics discussions which are in danger of swamping human resources departments, often without a targeted purpose — big data at its most powerful. I wanted more from this ses- sion; we have had the carrot dan- gled, now I want to discover how we can teach managers to think this way when making operational or process decisions. While the costs of subtle chang- es are miniscule, unlike public policy, the consequences of being wrong could drain those two valu- able business resources — time and cash — pretty quickly. The dynamics that have in- trigued me since our presenta- tion are the impact for rapidly evolving team-based manage- ment and non-cash incentives to motivate personal behaviour; for example, the snooze-you-lose alarm clock. Jan: ere's an interesting con- trast here that we haven't explored though: Julian's examples from a public service setting are initia- tives that are ostensibly "good for me" and, in theory, public policy/ the public purse. And the few corporate exam- ples, mostly related to incentive compensation, were interesting (the risk of a loss being a more powerful motivator than the pos- sibility of a gain). Paul, you raise a very diff erent question, though, about manage- ment techniques, where the col- lective paradigm is that gains in productivity and improvements in performance are to the benefi t of the company and at the expense of the individual. What kind of behavioural eco- nomics jujitsu will it take to over- come that, do you think? Paul: I don't think that they are mutually exclusive. Presented here, potentially, is an opportunity for "new" gains in productivity with the benefi t shared through an appropriate incentive to motivate behavioural change. In the public sector, there is less at stake: "If we get it wrong, how much worse than currently can it be?" Industry doesn't have the luxury of being able to work in that paradigm. Ian: I agree it is key to fi nd the win-wins. Otherwise, we run the risk of being accused of "spinning" information to get the desired re- sults the company wants. Given the examples within the public sector, I think the implica- tions for behavioural economics to be applied within organizations is only just emerging and that's where human resources can be the vanguard. Jan: Maybe. Either way, it does mean that HR — and leaders in general — have some new tricks to learn. Two themes are stuck in my mind: One: Each person's mental models determine what they see and hear, and the solutions they see possible, which means that in order to be eff ective, HR and leadership need to get really good at setting — and shifting — paradigms. at's not news, certainly, but it's often one of the fi rst things that is lost in the "transactions" involved in running a business, and an eff ort that requires slack in the system. And two: Most initiatives are lost in the "Last Mile" — those moments of truth where people need to care enough to do some- thing or fi nish something or ex- pend eff ort. Internet marketers are obses- sive about reducing clicks, elimi- nating decision points and reduc- ing friction in order to boost con- version stats; I believe we have a lot to learn from them. Many organizations are delving into predictive analytics with the intention of removing bias — it's a step in the right direction.

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