The pressure on HR for the creation of (more) value to an organization increases. As mentioned in my previous blog ´HR Business Model Canvas´, an HR business model describes the value proposition for the HR domain. However, the market is changing rapidly and organizations must respond faster. There is little time for thoughtful tactics to cope with the challenges of the market. The market is very complex and requires more than ever an approach that can move with the changing circumstances. By using the HR Business Model effectual, the challenges of the market can be confronted with five principles. But what is Corporate Effectuation and how can the principles be used in relation to the HR Business Model? This blog will apply Corporate Effectuation to the (HR) Business Model Canvas.
Corporate Effectuation has the following decision-making principles:
Bird in hand – Start with who you are, what you know and who you know and not necessarily with a specific objective. Start by looking at the “bird” you already have in your hands in terms of values, beliefs, skills, experience and network. Start from available resources, because then you start the next morning.
Affordable loss – Expert entrepreneurs limit risk by understanding what they can afford to lose at each step, instead of seeking large all-or- nothing opportunities. They choose goals and actions where there is upside even if the downside ends up happening. Decide on what you are willing to lose.
Crazy Quilt – Expert entrepreneurs build partnerships with self-selecting stakeholders. By obtaining pre-commitments from these key partners early on in the venture, experts reduce uncertainty and co-create the new market with its interested participants. Devise strategic partnerships.
Lemonade – Expert entrepreneurs invite the surprise factor. Instead of making “what-if” scenarios to deal with worst-case scenarios, experts interpret “bad” news and surprises as potential clues to create new markets. Leverage challenges into opportunities. Be open to surprises and use them to your advantage.
Pilot in the plane – By focusing on activities within their control, expert entrepreneurs know their actions will result in the desired outcomes. An effectual worldview is rooted in the belief that the future is neither found nor predicted, but rather made. Focus on what you yourself can control.
Corporate Effectuation and (HR) Business Model
Vision & Context – HR will have to ask who she is, what she does and in what context. (also read ‘Vision of SWOT analysis HR Business Model‘). This will give insight into basic assumptions and limiting conditions (bird in hand). The starting point for the (HR) Business Model.
Involved – HR has to work with other departments to co-create a canvas. What HR knows as value proposition, when relating to the canvas (delivering right people in the right place), is seen by the organisation as a key resource. Therefore common direction and belief will be generated (crazy quilt).
Do it yourself or outsource – Perhaps HR has to find for partners to optimize its own process and also for recruitment, promotion and outflow of human capital (crazy quilt). HR will have to make a choice to outsource activities, like Business Process Outsourcing, or to do activities themselves. By this there has to be made a consideration of costs/revenues (affordable loss).
Agile and flexible – By periodically repeatíng the process of validating the HR Business Model, HR remains alert and can respond to changes in the market permanently (lemonade). For example, this validation process takes place through benchmarks, HR metrics, analytics and HR Scorecard (read ‘Vision HR Scorecard‘).
Co-creation – Employees who normally sit down in ‘the plane’ as a passenger, now take place in the cockpit. They are actively involved in HR and can therefore intercept signals for change. By working together when creating the HR Business Model, (HR) employees manage themselves and this makes them involved (pilot in the plane).
Business Modeling enables HR to master her own business activities. Corporate Effectuation supports in the proces of making decisions that determine new directions (in infinity). By this HR can work with other disciplines to understand strategic issues and sees the consequences of actions within the organization and HR department. Therefore HR will act like an entrepreneur.
The above resulted in the paper ‘A business administration approach to HRM‘.
Don’t hesitate to comment and give me your feedback, suggestions and ideas are welcome too!