Why your HR department needs a major reboot

May 1, 2013: 12:30 PM ET

Are companies changing as fast as the world around us? All too often, the answer is no. It's time to revamp how companies change, and it starts with HR.

By Gary Hamel

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(TheMIX) -- Most of us have no trouble coming up with examples of companies that failed to mobilize around a major new opportunity (Intel (INTC) and chips for mobile devices), or procrastinated when confronted with a wrenching discontinuity (Kodak and digital photography), or struggled to let go of a beloved but dying strategy (General Motors (GM) and its bloated brand portfolio). In most of the cases of strategic inertia I've come across, HR wasn't the primary culprit, but neither was it a powerful force for change.

We've launched a hackathon with our friends at CIPD because we believe HR can play a hugely positive role in helping companies to become adaptable at their core.

I've always loved this quote from Ralph Waldo Emerson:  "There are always two parties -- the party of the past and the party of the future, the establishment and the movement." The question is, to which party does the HR function belong? Imagine posing the following survey question to everyone in your company:

Which of these two statements most accurately describes the HR function in this organization?

1. HR is a powerful catalyst for change.

2. HR is a major impediment to change.

Ideally, more than 90% of your associates would pick statement No. 1, but I suspect this might not be the case if you ran the survey today. Let's first get clear about the sort of organizations we are trying to build.

MORE: Why companies need to change the way they change

I like to make a distinction between what consultants and business types call operational agility and strategic adaptability. Operational agility implies an ability to respond quickly to shifts in demand or customer preference within the boundaries of an existing business model. A great example of an initiative focused on agility would be Volkswagen Group's new MQB manufacturing strategy.  (Translated into English, Modularer Querbaukasten means Modular Transverse Matrix.) The MQB architecture allows a wide range of vehicles (Audis, Seats, Skodas and VWs) to be produced on a small number of platforms.

Strategic adaptability, by contrast, refers to a company's capacity to reconfigure its underlying business concept. To take an example, we've all experienced Amazon's operational agility -- it's ability to rapidly assemble our unique order from tens of thousands of SKUs and deliver it to us in day or two. But Amazon is also a case study in strategic adaptability. During it's brief history, it has morphed from a web-based bookseller, to an online retail platform, to a digital media powerhouse and, most recently, to a leader in cloud computing.

Amazon (AMZN) is rather unique in that it has changed its business model in the absence of a crisis. Usually, major strategic shifts are driven by a financial meltdown, or years of substandard returns. Deep change in big companies usually happens the same way it happens in poorly governed dictatorships -- infrequently, belated, and convulsively; and for the same reason -- a top-down authority structure frustrates bottom-up change. All too often, by the time an issue gets big enough to attract the CEO's attention, whether an opportunity or a threat, it's too late to do anything but react. By the time Google's (GOOG) top brass roused themselves to do something serious about social media, Facebook (FB) had already built a nearly insurmountable lead. The vast majority of corporate "change" programs are "catch-up" programs.

But such change shouldn't require a financial crisis, swinging lay-offs, a clean sweep of the executive suite, or a crippled share price. Change needs to happen a whole lot faster and a whole lot cheaper than it does now.

To borrow from military doctrine, we're trying to find ways of tightening the "OODA loop"-- the time it takes to observe, orient, decide, and act. On the battlefield, the army with the shortest OODA loop usually wins. The same holds true in business.

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As the pace of change accelerates, so must the pace of strategic renewal. Are companies changing as fast as the world around us? All too often, the answer is no.

Given the primary role HR plays in an organization's core processes (e.g., performance review, talent deployment, organizational development, change management, compensation), HR has the chance to be a true catalyst for positive change. So let's push ourselves to imagine how HR can get out in front and raise the banner for the party of the future.

What do you think sets adaptable organizations apart from the rest? Please share your thoughts and help us hack HR by joining the "Building an Adaptability Advantage" hackathon, a joint production of the Chartered Institute of Personnel and Development (CIPD) in the UK and the MIX.

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The Management Innovation eXchange is a site dedicated to sparking conversation and progress around the most critical challenges that managers face today: How to create organizations that are fit for the future -- and fit for human beings. The MIX seeks to enlist as many in-the-trenches innovators, progressive leaders, and adventuresome thinkers as possible in pursuit of that goal. Users can submit, rate, and build on each others' ideas -- creating an open platform for management innovation. The MIX is supported by several leading institutions, including McKinsey & Co., Dell, HCL, Red Hat, London Business School, HSM, and the Human Capital Institute.

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