Shrinking Pains Cause HR To Redevelop Talents
Two years ago, Pratt & Whitney's parent company, United Technologies Corp. (UTC), announced that the entire organization would have to downsize because of sinking profits. Pratt & Whitney is the largest of United Technologies' companies, which include Otis Elevator, Carrier Air Conditioning, UT Automotive and Hamilton Standard. It's currently a $5.5 billion company. "But not so long ago, we were a company of approximately $8 billion," says John "Jack" Leary, group vice president of human resources and organization for Pratt & Whitney (P&W). "Our sales and volume, including shop load, dropped off nearly 40%."
Because of the financial avalanche, senior management decided Pratt & Whitney needed to downsize its work force by half. The downsizing included cuts in such overhead departments as HR, finance, advertising and communications. "We had set a business target of reducing the overall Pratt & Whitney population by approximately 10,000 people," says Leary. "We actually reduced [the total P&W population] by about 12,000 people from almost 42,000 to less than 30,000." That included cutting the technical employee staff by 40%, and the manufacturing and operations departments by 25%. HR, too, felt the bite of downsizing—the department's staff was also reduced by 40%. In fact, when the downsizing was done, the exempt HR population had been reduced by 47%.
However, downsizing wasn't the only business decision that sent managers to the drawing board to figure out how to recapture profitability with less people. Faced with the need to cut costs, the company's choices were to make products at a lower cost in-house, send the business out or get rid of certain businesses altogether. "We either had to make a profit or we'd have no business," explains Jeffrey M. Fleisch, manager of Pratt & Whitney's assessment organization and training operations. Senior management decided to decentralize and reorganize the entire organization. Previously, P&W had 57 large, functional business units. Now, it's organized into eight product centers responsible for making what the company calls "charter parts," which are products such as disks, hubs and air-foil cases.
In keeping with the entire company's reorganization plan, the human resources department also decentralized its operations into the new-product centers. So, human resources professionals now report to line managers in each of the company's eight new product centers, rather than reporting into a large, function-based HR organization. "In the interest of reducing the levels of management and getting them focused on businesses being formed throughout the company, we essentially decentralized the HR population and focused them on the different businesses," says Leary. Whereas Leary had 530 people reporting to him before HR reorganized, now he has eight.
That doesn't mean the old personnel department disappeared altogether. The company decided to retain a few small staff departments it calls "centers of excellence," which disperse consulting to the product centers in such specialty areas as organization and development, labor relations, benefits and compensation, and diversity and EEO compliance. The centers of excellence also are responsible for such tasks as benchmarking, strategy planning and reengineering.
The reorganization was a difficult transition for most of the personnel managers who remained. "It, of course, forced [our HR professionals] to adopt a broader role," explains Fleisch. Not only did the HR group have fewer people, it also didn't have all the necessary skills to meet the needs of the new, reorganized company. Somehow, they had to figure out how to get those skills—and get them fast. Pratt & Whitney's reengineering was completed in only three months. And the eight new business units were given only six months after that to restaff. "What experts tell us is that it was essentially a three- to five-year venture, and we did it in nine months," says Fleisch. "Otherwise, [if we hadn't] we'd be in real trouble."
HR development center reduces the shrinking pains of becoming generalists.
After the downsizing and reorganization, human resources management at Pratt & Whitney had to deal with a huge dilemma: One day, they were HR experts—the next day, most of them were expected to be generalists. "For example, labor relations people [suddenly] had to be well-versed in selection, development, training and rewards," says Fleisch. "It was a brand new role." This dilemma forced the company to ask and answer two important questions: How do you retain those HR professionals' specialist skills while teaching them how to become generalists? And, how would the company develop those who were left into human resources leaders?
The answer Pratt & Whitney came up with was to create a human resources assessment-and-development center, in which HR professionals could learn the skills they would need in the new P&W empire. But first, the company had to figure out which skills they would need. After considerable thought, the company's organizational development experts established a clear set of criteria. From the start, the HR development center's purpose has been fourfold: 1) to broaden capable HR professionals, 2) to help them become better business partners, 3) to give them a strategic focus rather than a tactical focus and 4) to help them develop their financial and business acumen.
"We're really trying to transition folks, and that was the driver," says Fleisch. "The other driver, frankly, was we needed to become better business partners with line management. We were always thought of as a central staff group. More recently, we have become members of the business, so we need to be well-versed about where the business is going in finance, in facilitating change and in all the things that go along with that."
This development concept wasn't new to UTC or to Pratt & Whitney. Since 1978, UTC had sent employees to its assessment-and-development center in Farmington, Connecticut. And Pratt & Whitney had sent supervisors and managers there since 1984 for assessment. In 1988, Pratt and Whitney changed the reason for sending professionals to the center from assessment to development. The year the company reorganized, however, was the first time it had sent any of its personnel professionals through the center. And, for that matter, it was the first time that the company had decided to send an entire functional group.
HR learns the language of the line.
Human resources' primary task in going through the development process is to learn what makes their businesses tick, learn new HR skills, then learn how to apply those skills to business problems. Of 250 individuals in HR, 50 of the company's top HR managers and leadership associates have been targeted to go through a formal, two-year development program. Most have already completed it. The rest of the organization's HR personnel are scheduled to complete various workshops on similar topics, although their interaction is limited to one to two days at a time. The objective is for each individual to maximize his or her potential for long-term success.
HR managers and leadership associates who embark on the development program first are assessed on their current competencies based on HR's competency goals, which include such skills as leadership, customer focus and communication (see "Pratt & Whitney Measures HR Managers on These Leadership Competencies,"). Human resources people who go through the assessment are coached by professionally trained assessors from Barry M. Cohen Associates in Largo, Florida. The assessors help them figure out the degree to which they'll need to develop certain competencies, depending upon the management level they're currently at or the level to which they're aspiring. They also receive development recommendations.
"The assessment center is the best predictor of future success," says Fleisch. People come up with an individual development plan based on 360-degree feedback that reflects two major management assets that they want to develop and two development needs. Managers carefully decide upon their development strategy before their supervisors ever see them. "Participants may not feel particularly good about how they're living up to the competencies [at the outset], but they can feel good that they have an actionable development plan that they can talk about with their boss," says Leary. "That's important in our system." He adds: "The benefit is that we circumvent what may be a universal weakness in management, which is getting good feedback." It's feedback in a non-threatening environment.
"Some go through the assessment piece with great trepidation and anxiety, but the process is very supportive," says Leary. "I think it's healthy for people to feel some real-life tension around development. But we try to provide a support structure for that development so it's not just pure tension."
A big plus for Pratt & Whitney's program is that it gives participants feedback when they start the development program instead of two weeks after they're done. "We design [the feedback] as adult learning experiences, and want them to try out new behaviors as they go through the center. Then, at the conclusion of the program, they get more feedback, which helps bring about closure. Then, 14 days later, they receive a written narrative that's merely a summary of all the information they've already received."
Over the next 24 months, managers work with their bosses on those development needs. Usually, this involves on-the-job projects combined with training. "It's really to round them out," adds Fleisch. The development center gives HR professionals at P&W a structured environment in which to learn and practice new human resources skills.
There are four categories on which the human resources development center is based. They are: selection, development, rewards and relationships. Individuals must tackle two case studies. For example, HR professionals who went through a recent development program had to solve two different business problems based on real problems the company recently faced. One concerned issues surrounding a joint venture between Pratt & Whitney and Blades Technology Inc., a firm based in Israel.
In the case study, individuals first were given some historical background on Pratt & Whitney and on the Israeli firm. Then they received information on the business that manufactures presser airfoils—compressors that go in airplane engines. Next, they received information about the joint-venture agreement, financials and staffing. Development-center students were then asked to solve problems that include manufacturing skills deficiencies, unempowered work forces, compensation gaps between the two countries and cross-cultural issues.
Another often used case study concerns a business startup problem. "All of the simulations revolve around business issues that would affect human resources and the business," says Fleisch. "We ask them to make some decisions and act as business advisors to line management. So it's a real-time assessment center."
The strategy behind building real-life problems into the development center is based on the need for HR managers to become business partners. "When we built the HR development center, we built in the simulation factors that would expose people to a more strategic focus because historically, we were working on [mostly] tactical things," says Fleisch. "The Center's purpose is to not only broaden folks and to force them to think as business people, but to build in both financial and business acumen and to give HR managers the opportunity to think in a more long-term, forward-thinking manner. That way, we can give them feedback on whether they have a strategic or a tactical focus."
For example, one personnel professional was strictly a labor relations person and needed to learn how to do selection and development. When an executive called upon Fleisch to design a behavioral interview to select managers (which he generally would have done himself), he gave the project to the human resources person who needed development in that area. He, in turn, came up with a structured-interview guide. In fact, he has come up with several more since then that have been highly acclaimed. "That's something that he never would have been exposed to before," explains Fleisch. "That's a minor success story. But it's a start."
In fact, in the past few years, P&W has been focusing on developing all its managers in ways it hadn't before. "When we look at the overall development of people at Pratt & Whitney, particularly management, we look at three areas that, like three circles, are interconnected," says Leary. They are: feedback (including 360-degree), action learning and assignment rotation.
In the action-learning segment, learners attend a one- to three-week course, usually delivered by a business school professor. This deals mostly with markets, marketing and market strategy. The "action" part is an assignment that learners must complete three weeks after they get out of the course. Upon completion of that task, they present their findings to the company's president, Karl Krapek. "So they get very strategic issues to work on that are part of the future, and they get to report back to the president," says Leary. "In fact, the earmark of this piece is that every single presentation that's made is acted upon." The purpose of the assignment is to pull managers through the learning process by having them focus on how they can apply what they've learned. "We ask them to put it to use on a real business issue," says Leary. That's the second step. The third step is an assignment or rotation in different areas of the business.
It's all about keeping pace with—and even ahead of—change. For human resources professionals, it can be a new role, especially when it comes to knowing fundamental business dynamics. "Business acumen is something that we need to develop more," says Fleisch. "Historically, human resources folks haven't been strong in that skill. We want them to be able to understand business plans and integrate those plans with Pratt & Whitney objectives. We really need to become business partners, and you can't do that if you don't understand what's affecting and driving the business," says Fleisch.
"This is, in a very real way, giving life to a learning organization," says Leary. "Now, how do you actually create a learning organization when you don't have the skills in the first place to do that? We're doing it with some support structures such as this development piece." The key is putting the emphasis and the responsibility for peoples' skill building in their laps.
Leary says that for many years, organizations paternalistically tried to take the responsibility for employees' development. "The employee is responsible for his or her own development. We can't take that away, although for many years we thought we could," says Leary. Employees need to be involved, personally and fundamentally, for their own development. "But we have a supporting role to play because we have an interest in their development," he says. Indeed, all Pratt & Whitney managers who are going through the development center have a mentor who is a human resources director in the company. Nobody has to feel alone in the process, even if they're driving it.
It isn't surprising that success in managing turbulent change might come down to whether personnel professionals have the right skills or not. Shrinking pains can often turn an entire business into a mass of confusion looking for answers. Making the business better one human resources manager at a time, however, doesn't seem like such a bad place to start.
Personnel Journal, August 1995, Vol. 74, No. 8, pp. 78-82.