Special Report: The HR ProfessionHR At America's Most Admired Companies

By Fay Hansen Workforce Management , July 2008 The HR leaders at Americas most admired companies represent a wide mix of educational and professional paths. What they have in common is a belief in a responsive HR operation that understands the companys business objectives and engages the workforce so that everything it does is linked to company goals. The top human resources executive at Googlethe fourth-most admired company in the U.S., according to Fortunedeliberately moved into HR from a decisively non-HR background. And every day, Google reaps the rewards of Laszlo Bocks thoroughly cross-cultural approach to human resources. Bock, 35, has a Yale MBA, spent four years at McKinsey & Co. and three at General Electric, and now manages the 16,805 employees who keep Googles stock price well above the Internet industry threshold of $500 a share. In October, Google broke the $200 billion mark in market value. In the first quarter of 2008, company revenue jumped 42 percent from the first quarter a year ago. Under Bocks leadership, Google not only took fourth in Fortunes list of Americas Most Admired Companies, but also captured the top spot on its 2007 and 2008 lists of the Best Companies to Work For. That status, however, does not ensure financial success or a companywide reputation that commands the attention of investors and analysts. In fact, the overlap between Fortunes lists of most admired companies and best companies to work for is minimal. Creating a great workplace does not automatically translate into business results. Among the 2008 top 20 best companies to work for, only four also claim a spot on the most admired list, which is a better proxy for business success. Google is the only company that ranks in the top five on both lists. The key is not just a responsive HR organization, but one that feeds business objectives at every juncture. Google has gained a reputation as a place where geeks run free and employees dogs roam the halls, but Bock is entirely certain that business objectives remain at the center of the HR function and the work environment it fosters.
"If you stripped out all the dogs and cafes the culture would remain. People are curious. If you respect their intelligence and explain what you are trying to do, they will be far more engaged and aligned with your business objectives than they would at any company where you simply tell them what to do." Lazlo Bock, vice president of people operations, Google

"If you stripped out all the dogs and cafes, the culture would remain," he says. "People are curious. If you respect their intelligence and explain what you are trying to do, they will be far 1

more engaged and aligned with your business objectives than they would at any company where you simply tell them what to do." This alignment and Bocks approach are at the heart of HRs contribution to Googles status as not only a great place to work but also a deeply admired and financially compelling company. The same tools of engagement and the commitment to cross-functionality appear at other companies that are both employers of choice and leaders in their industries. Cross-functional infusion Collectively, the HR executives at the top 20 most admired companies in the U.S. manage nearly 2.5 million employees. Interestingly, none was among Workforce Managements 2007 list of most highly paid HR executives in the United States. Bock is by far the youngest, but more than half of the top 20 have not yet reached the age of 50. Seven are women, seven hold MBAs, six hold other masters degrees, and two have juris doctor degrees. Two sit on the boards of other major companies. Four, including the Romanian-born Bock, are immigrants. GE imported John Lynch from the United Kingdom. Johnson & Johnsons Kaye Foster-Cheek moved to the U.S. from Barbados when she was 22. Procter & Gambles Moheet Nagrath was born and educated in India and joined the company there in 1983, but remained in Asia until 2000. A significant number reached the top HR position from jobs in other functions. Microsofts Lisa Brummel came up through product management; Nordstroms Delena Sunday started out in sales; UPS Allen Hill was general counsel; and BMWs Ernst Baumann was a production manager. Among the five who were hired into the top HR position from outside the company, two worked for PepsiCo, the legendary HR academy company. After 15 years at Pepsi, L. Kevin Cox left in 2005 to become executive vice president for HR at American Express. Brian Schipper joined Cisco after stints at Microsoft and Pepsi. TwoGoogles Bock and Starbucks Chet Kuchinadworked at consultancies. For his part, Bock graduated in three years from Pomona College in Claremont, California, with a major in international relations, and completed his Yale MBA with a concentration in international strategy. After Yale, Bock spent four years at McKinsey as a strategy and turnaround consultant for technology and private equity companies. Working with the top-flight minds at McKinsey taught him how to grow companies and get cash out. At McKinsey, he realized that he most enjoyed the people and change management components of the business equation. "I looked at human resources as a function with great opportunities more than other functions with longer histories of high-level development, such as supply management," he says. Bock started making cold calls for HR positions at a number of companies, most of which did not bother to respond. GE did. Bock was in his second high-level HR job at GE when a headhunter for Google contacted him in 2006. He had heard about Googles high hiring bar and didnt expect to get an offer, but Google snapped him up. Bock is now part of Googles 13-member management group, which includes five Ph.D.s, five MBAs, three masters of science and one J.D. Three of the 13 have pulled stints at McKinsey. "All decisions are collaborative and made by consensus after we look at the data," Bock says.

Bock reports to the CEO and works with the same cross-functional approach that marks the rest of the organization. "Human resources is a service organization, so we work with other executives to help them achieve their objectives," he says. "Im rarely surprised by those objectives. Our internal motto in human resources is, No surprises. Everyone knows everything. " Minimalist HR Bock organizes the HR function around three principles. "First, we aspire to innovate on the people side just as much as we do on the product side," he explains. "Second, we minimize the HR infrastructure needed to keep the business running. Its best for managers and employees to work together directly. I dont ever want to hear a manager say that an employee needs to go and HR will handle it. And finally, we try to see around the corners. HR people can look ahead of the business and be ready with a plan." The HR function is organized with directors and their support staffs assigned to internal functions such as talent, analytics, compensation and benefits. Bock fills two-thirds of Googles HR positions with people from outside the field. HR generalists occupy one-third of the jobs. "They are great at pattern recognition," he says. "They know what happens when an organization hits 5,000 employees or 10,000, and they have great people skills. We love them." Bock pulls another third of the HR staff from strategic consultancies such as McKinsey and Bain. "They bring business understanding," he notes. The final third are hired specifically for their analytical skills. "They may have a Ph.D. in statistics or organizational psychology or a masters in chemistry or physics," Bock notes. "They build an underlying quality into what we are doing by constantly testing our ideas and practices. Analytics measure the ROI for everything we do." Bocks tight relationship with executives from other functions and his penchant for hiring HR staff from outside the field helps tie HR to the organization as a whole. "At the highest level we are so close to each of the functions that we understand their work," he says. "When we needed to hire an HR person for the sales and marketing function, for example, we hired someone who had worked in sales and marketing and also as a consultant." Bock works from a set of basic assumptions to run human resources at Google. "Fundamentally, I believe that people are good," he says. "If you give them freedom and respect, they will amaze you. There are so many missed opportunities at so many companies because managers over-manage and people are limited in what they are allowed to do." "At Google, we tell employees, Heres your core job, but come up with a better approach if you can. Some companies have adopted elements of this approach, but few have truly integrated it into the way they run the business." Google communicates its business objectives to employees with successive waves of information and data about the company and industry conditions. "Its a think-out-loud culture," Bock says. "There is a constant flow of information about the business on a daily basis, so employees are immersed in the flow. And there is tremendous accessibility. You can attend almost any meeting and insert yourself into almost any process." Every Friday, top executives host a question-and-answer session for employees. Google staffers also have a direct material interest in meeting business objectives because the vast majority are shareholders and many are accumulating substantial wealth as the companys stock price soars. "Employees know that decisions about the business are data-driven and expect 3

to see the numbers," Bock says. "If we make an assertion about the company or our business objectives, we have to back it up with data. We have huge amounts of transparency."
"People say, 'This stuff works at Google, but not at my company.' I disagree. The Google answer is not ... for every company, but there are elements of it that can be used anywhere." Lazlo Bock

Employees set their goals quarterly and must note the metrics by which their results will be measured. "Our goal-setting process is, I will achieve X as measured by the improvement from Y to Z, or some other metric that makes sense," Bock notes. "From the outside, people say, This stuff works at Google, but not at my company. I totally disagree. The Google answer is not the answer for every company, but there are elements of it that can be used anywhere. There is a fundamental element of understanding people that can be applied anywhere. I once heard a spokesperson from Wegmans Food Marketsa completely different kind of companytalking about doing many of the things we do," Bock says. "At the end of the day, you serve the shareholders. You must have the analytics to prove what you are doing. And you have to be responsible with costs. I really think it is a powerful, transformative idea for HR." Links to objectives The freewheeling work environment at Google stands in sharp contrast to conditions at UPS, another company on the most admired list, where drivers are trained how to hold their keys and exit from their trucks. But the two companies share a link between HR and business objectives, enforced by cross-functionality, broad equity ownership and extensive employee communications. At UPS headquarters in Atlanta, the executive offices all open out to "the plaza," an open space where executives interact daily. "Its very collaborative," says Allen Hill, senior vice president for human resources. He reports to the CEO and sits on the companys management committee. UPS wants leaders to move up in the organization with lifelong careers in multiple functions. Hill started out loading trucks and then became a delivery truck driver and delivery supervisor before he moved through several HR positions. He then joined the legal department and served as general counsel before he took the top human resources position. "The multiple-function career is part of the strength of the company," Hill says. "It feeds into the concept of lifelong learning." UPS, like all companies that depend on fuel, has been slammed with rising gasoline prices. In the first quarter of 2008, the company saw its fuel costs rise by $334 million. In April, the CFO announced that the company would be running as tightly as possible to offset higher energy costs. New financial objectives easily merge into the objectives for each function. "We are a tightly engineered company, so we are always looking for efficiencies, and we can achieve them through the quality of management," Hill says. "Promotion from within is one of the keys to our strength. We are filled with people who have proven that they know their job." 4

HR maintains its link to business objectives through Hills constant contact with executives at the highest levels of the organization and extensive programs designed to relay these objectives out to employees. "Communication is of the utmost importance," Hill says. "We use an intranet that carries information on fuel efficiency, for example. And we hold pre-work meetings every morning. This is the primary means for communicating new challenges, such as higher fuel costs, to employees." Hill believes that UPS long history as a private company, which ended only with its recordbreaking initial public offering in 1999, helps ensure strong ties between human resources and business objectives. "Because of this history, executives and managers developed a common goal, enforced by heavy ownership of company stock and stock ownership guidelines," Hill says. "This ownership stake is still true through all levels of management down to frontline supervisors, or a total of 35,000 people in the organization." The human resources function at UPS is organized with a senior HR manager for operations outside the U.S. and additional managers assigned by region. Another senior HR manager handles U.S. operations, which are also broken down by regions and districts. The senior managers report to Hill, who has ultimate responsibility for the companys 425,300 employees. At both Google and UPS, high levels of stock ownership and constant communications with employees align the workforce with business objectives. The HR function remains steeped in those objectives through close relations with other functions and the cross-functional training of their top HR executives. Both companies translate their employer-of-choice designations into business results. DISCUSS QUESTION 1. What are the key competencies of the HR managers in the America's Most Admired Companies? Do you think they are also necessary competencies to be successful in HR professional? 2. What are the common characteristics of the HRM models in the America's Most Admired Companies?