HR Excellence in the Real World

The latest report in BCG’s Creating People Advantage series shows how great HR functions connect with business leaders, prioritize HR areas for improvement, and measure and communicate their impact. Three case studies illustrate those principles in action.

PepsiCo Offers Its Executives a Master Class in Strategy

PepsiCo has developed a well-deserved reputation as a high-performing company that invests in leadership training and development. To build on this, the company recently implemented a strategy master class.

The program was designed around 15 PepsiCo-­specific case studies of major strategic decisions over the past 20 years, such as significant acquisitions or an expansion into developing markets. Through these case studies, the training provides a comprehensive foundation for strategy composed of several aspects. First is a uniform set of strategy fundamentals, including consistent definitions, building blocks, and guidance questions. Second is a set of tools to help executives learn how best to lead themselves, lead others, and lead the business. Third—and most important—is a set of five tactics that executives can use to successfully take on new strategic challenges:

• Frame. Clearly assess the problem, including the company’s aspiration, objectives, and scope.
• Diagnose. Look at the current situation as well as at future scenarios, including external trends and forces, the company’s competitive position and performance, and the relative attractiveness of different options.
• Design. Generate a solution that aligns with the company’s portfolio strategy, business strategy, and business model strategy and clarify where to play and how to win.
• Test. Stress-test the strategy to ensure that it is coherent, robust, and ready to execute.
• Execute. Implement the new strategy, clarifying initiatives, owners, resources, success metrics, and a mechanism for capturing lessons learned.

The training is being rolled out in two stages, starting with a two-day, in-person seminar for senior leaders, led by one of PepsiCo’s C-level executives. A broader segment of PepsiCo executives will then receive a four-hour e-learning version of the class hosted on PepsiCo’s internal education platform. Although the program is still being implemented, the benefits are already clear: PepsiCo’s senior leaders will soon gain additional insights and training that will help drive the company’s continued success in a dynamic global market.

How Lufthansa Consolidated its KPIs to Measure the Things That Really Matter

Deutsche Lufthansa AG operates one of the biggest aircraft fleets in the world and employs more than 115,000 people throughout its passenger and air-freight divisions, logistics functions, catering operations, maintenance and repair operations, and IT.

But until recently, the company’s KPIs were not centrally aligned. Because of decentralized governance, each business unit and division had its own definitions and data standards, and only a small percentage of the several hundred KPIs used could be applied across the entire organization.

The HR function realized that it needed to align its KPIs in order to assess its impact across the entire company. Therefore, ­Lufthansa conducted an audit of all potential KPIs—such as those currently in use by individual divisions, those required to align with the company’s overall people strategy and financial-reporting requirements, and those identified as external best practices. The total tally: 461 possible KPIs.

The process took several steps, but Lufthansa managed to consolidate the list and distill the number of KPIs to the 35 most strategically relevant, grouping them in four main clusters: financial HR indicators, workforce overview, HR and organizational efficiency, and HR core processes. (See the exhibit below.)

Transnet Has a Clear View of Future Employment Needs

Transnet—the largest logistics company in South Africa, with significant operations throughout Africa focusing on rail, port, and pipeline operations—launched its market demand strategy two years ago. Right from the start, Transnet realized that it needed to identify and respond proactively to skills requirements to anchor that strategy. The process was aimed at mitigating human-capital risk requirements and future employment needs so that the company would have adequate human-capital capacity to advance its goals and objectives. To mitigate the risk, Transnet decided to invest in strategic-workforce-­planning tools. The goal was to establish a standardized process that could identify workforce risks both in current operations and in future stages of the investment program.

Transnet uses a holistic and flexible methodo­logy for strategic workforce planning, structured along five key steps:

• Skill Clustering. The company developed a catalog that groups employees with similar positions and skills. This approach reduced complexity and allows Transnet to rotate employees among job families and groups.
• Supply Analysis. By linking the company’s supply analytics to its enterprise-­resource-planning system, Transnet is able to ensure consistent and reliable data and to factor in metrics such as historical attrition rates and retirement ages.
• Demand Analysis. This approach includes models, targets, objectives, and projections that incorporate the different requirements of individual business units along dimensions such as volume, changes in the company’s asset structure, productivity and efficiency measures, and specific operational skills.
• Gap Analysis. By combining the supply and demand picture with skills clustering, the company gained transparency into its HR situation at a very granular level—down to individual qualifications and inherent job requirements. With this approach, Transnet quantified both the capacity and qualification risks for both the current situation and the future outlook.
• Human Resource Measures. These efforts help HR identify and appropriately manage the gaps between available and needed resources through structured response strategies.

Through this methodology, Transnet has closed the loop. The company’s HR function can now identify and even isolate the business units and operational areas that have the most urgent needs—both currently and projected for the future—and focus its efforts accordingly.