It is a good sign that compensation for star HR performers is reaching astronomical levels and the better CHROs take home no less than any other CXO. The worry arises because a substantial part of the variable and long term remuneration that stellar HR performers enjoy is linked primarily to the financial and share performance of the company and this dangerously contaminates the goals HR should be pursuing for people. By making these financial goals excessively incentivized, we are burdening our HR leaders with an Andvaranaut ring1, which does not promise a happy end to its owners. Rewards that can be earned without serving the purpose for which HR should exist are likely to cause a Buridanian paralysis at best and a virtual neglect of non-financial goals at worst. Frequent and demoralizing downsizings, diminishment of durable employment and neglect of the long-term development of internal people can all be traced to the curse of the Andvaranaut. However well paid the HR leaders who take these calls, they cannot be considered to have made the profession proud or, more importantly, made a difference to a lot of the people in their organizations. As Issac Watts put it:
…, forbear to call him blest
That only boasts a large estate,
Should all the treasures of the west
Meet, and conspire to make him great …
Let a broad stream, with golden sands,
Through all his meadows roll,
He's but a wretch, with all his lands,
That wears a narrow soul.2
There is a simple but radical way to avoid such dilemmas and that is by making HR responsible primarily, if not solely, for the preservation and increase of aggregate happiness in the organization. It is important to note that the measure must be of the absolute quantum of happiness enjoyed by all the people employed (permanently or contingently) by the company and not some derived average. Another clarification that is worth providing at this stage is that by happiness we mean not just "what makes experiences and life pleasant and unpleasant"3 in a Hedonistic sense but also the Aristotelian view of true happiness consisting in doing what is worth doing and "striving for perfection that represents the realization of one’s true potential."4 While there are academics who would have preferred a focus simply on the latter category (which they term Eudaimonic well-being5) I will stick to using the more familiar word 'happiness' in its wider sense covering both the Hedonistic and the Eudaimonic senses.
A fellow of infinite jest
Isn’t HR already involved with raising employee happiness? There is a lot of wishful thinking about CHROs becoming Chief Happiness Officers6 but, in reality, there are very few ways in which most HR departments today hook up with happiness and none of them even begin to approach the transformational fashion in which this column proposes people happiness be made central to HR’s raison d'être.
There are several highly tense management environments where HR plays the role of the pressure relieving valve. At very senior levels this is done personally. Unkind people call this the role of the court jester but there is a general expectation that a CHRO will calm ruffled prima donna feathers, mediate conflicts and restore fraught tempers. Whether this relief from tension can be equated to happiness is a moot point.
There is a lot of wishful thinking about CHROs becoming Chief Happiness Officers but, in reality, there are very few ways in which most HR departments today hook up with happiness
Far more visible is the role which HR plays as event manager (or as liaison to one) for arranging picnics, sports and social gatherings of limitless varieties. These are considered important for giving employees – especially millennials – fun at work and supposed to absolve the organization from any effort to make the actual work fun. Of course, 'Bread and circuses' (from the Latin: 'panem et circenses'7) have been used to distract people from their day-to-day woes and powerlessness at least from the time of the Roman Empire. They didn’t work too well then and, if the attrition rates and discontent in our software majors are anything to go by, they don’t work any better now.
Some HR leaders place great store by their ability to put the executive team in touch with their inner selves or to contract various spiritual advisors to achieve the same blissful objective. My views on the advisability of mixing business with the infinite or the divine deserve a column of their own. Suffice it to say that the broadest smiles (presumably reflecting the greatest happiness) arising from such transactions are on the faces of the godmen on their way to the bank.
There is one HR intervention, though, that does add genuinely to the stock of happiness in a corporation, provided it is conducted seriously, comprehensively and in the right spirit. I am referring to the studies of organization commitment or engagement and the detailed action plans some organizations adopt to raise commitment thereafter. Gain in happiness is a frequent by-product. My quarrel here is with the lack of extensity and integrality in these exercises. Few organizations extend these surveys to cover their contingent workforces and fewer still take their action planning seriously below the bottom of the permanent employee pyramid. Also, it is the rare organization that makes commitment and engagement improvement central to its HR strategy and integrates it with all key policies and processes. More often than not, it is a standalone exercise, done and dusted every year or two.
If increases in happiness were to become the touchstone by which to judge HR decisions, programs, and progress, a lot of the conflicts besetting the direction of the function would be resolved. In fact, this single change would do more to prepare organizations for the future of work than all the techno-fixes doing the rounds
When happiness becomes the paramount goal
If increases in happiness were to become the touchstone by which to judge HR decisions, programs, and progress, a lot of the conflicts and confusions besetting the direction of the function would be resolved. In fact, I would go so far as to state that this single change would do more to prepare organizations for the future of work than all the techno-fixes doing the rounds. This is because the future of work poses several threats and challenges8 (most of which have been highlighted in this column at one time or another). Using happiness as a lodestar can help HR chart a safe path through many of these uncertain waters. Here are some significant changes the new paradigm would bring.
Perhaps the most telling change in mindset that should accompany the new paradigm will be in the attitude to employment of people and the type of employment they are offered. If the greatest aggregate of absolute happiness is to be maximized, the reluctance to augment the workforce by capital-intensive automation should diminish. There should also be less enthusiasm for converting durable employment into the contingent variety9, given that a certain degree of job security and a sense of belongingness are prerequisites for feeling content, leave aside happy. I do not believe this change of goals for HR would lead to heedless addition of people without concern for their costs or efficiencies. After all, once an enterprise becomes uncompetitive it is not in a position to generate any happiness at all, much less increase it! Instead, what HR should be doing at the top table is to demand that a fair share of the company’s growth should be supported by durable jobs in return for which HR would take on the responsibility of delivering people with the requisite productivity, skill and consequential cost-effectiveness. In other words, HR should have a joint interest in harvesting sufficient profits for the organization’s survival and growth needs but should not sacrifice its happiness goals to satisfy anyone’s greed.
Another set of seemingly intractable issues that the happiness maximizing formula would make more manageable are those arising from the large and increasingly difficult to justify differentials between levels. This applies both when unhappiness inducing and happiness causing measures have to be doled out. For instance, when organizations downsize (hopefully only as a last resort), instead of terminating all contingent staff and then wreaking havoc at the bottom of the pyramid, the pain should be evenly distributed, as an earlier column has already argued10. Our new happiness calculus would back up this essentially fair recommendation.
Gains too should be more equitably distributed if our objective function is aggregate happiness. This is certainly not an argument for parity in payments. After all expertise, innovation, additional effort, and market value must all have a role in determining compensation if we don’t want to be left without the managerial and expert talent essential for success. But there is general agreement that the mantra of market comparison, in its present form, is an unchecked license for taking top-level compensation to unsustainable levels11. Until CXOs can run organizations with the help of just robots and drones, fairness and the need for building team spirit and a sense of belongingness demand more justifiable patterns of gain distribution across levels. In this context, I can do no better than re-quote the message Peter Drucker left us: 'I have often advised managers that a 20 to 1 salary ratio is the limit beyond which they cannot go if they don’t want resentment and falling morale to hit their companies.'12
Many of us bemoan the fact that HR pays such little attention to job design and enrichment. Under the new evaluation schema that would be a worry of the past. After all, what better way to multiply happiness than to provide it as an outcome of the very activities people are engaged in day in and day out? When jobs are intrinsically interesting, the process of acquiring even difficult skills to carry them out and the pains and repetitions involved in striving for perfect output (and not just one that will pass muster) becomes pleasurable. This indeed is at the heart of craftsmanship, a near-sacred flame that eludes us all too often in the modern corporation.13
I could keep multiplying instances but I think I have provided enough to show the Alexandrine slice with which our new evaluation metric would cut through the Gordian knots of conflicting priorities and doubtful fairness in which HR is tied up today.
Hold-ups in happiness
Nobody said such a major transformation in mind-sets and goal focus was going to be easy. Apart from the general reluctance to step into the relatively unknown, there can be three, increasingly serious, objections to these ideas.
One obvious concern can be that if our prime criterion for judgment is the greatest quantum of aggregate happiness, we may ride roughshod over a few individuals and cause them unhappiness in the process. The obvious but essential guard against this would have to be a strong Code of Fairness that prevents discrimination, ad-hocism or any other form of unfairness to the individual. Incidentally, the same dangers lurk and similar preventive measures are demanded with the adoption of any super-ordinate goals, be they financial, market-based or people-focused.
A more serious objection relates to measuring happiness, particularly in comparison to the rule-bound and repeatedly audited figures for profits and sales. While there is considerable research and much progress has been made in quantifying group happiness14, I will readily admit these measures come nowhere close to the precision with which, say, a Profit & Loss Account is toted up. But is that degree of precision really needed for our purposes? Is it really so difficult to figure out what the balance of happiness will be if we start running a substantial part of our operations using contract labor? Or if we have level-wise segregation in our cafeterias? For that matter, are we really able to trace HR’s contribution to stock price or even profits (based on which so much variable compensation depends today) with any more certainty than we would be able to do for happiness? As William Bruce Cameron pointed out: "… not everything that can be counted counts, and not everything that counts can be counted."15
Perhaps the most worrisome concern is the feared lack of alignment between the people happiness goal we want HR to follow and the profit targets pursued by the rest of the organization
Perhaps the most worrisome concern is the feared lack of alignment between the people happiness goal we want HR to follow and the profit targets pursued by the rest of the organization. There can be three ways to assuage this concern. In the first place, it can reasonably be argued that the best way HR can contribute to financial performance is through the agency of employees acting on customers.16 In other words, delighted employees are a prerequisite to delighted customers who in turn generate returns that delight shareholders. Under this logic, there is no essential contradiction between employee happiness and shareholder returns – the former is essential for and leads ultimately to the latter. Secondly, even if we accept, for the sake of argument, that there is a degree of misalignment between the happiness constellation for which HR aims and the financial returns on which shareholders are focused, is that necessarily a bad thing? Isn’t a degree of tension between functional priorities necessary for all-round excellence? Take, for instance the major emphasis on customer centricity in recent years with its implicit premise that, if there is to be a trade-off between the interests of customers and of others, the customer champion will espouse the former cause. And this is not just a recent phenomenon. In the time of the 'license-permit raj' when companies could sell pretty much anything they made without too much concern for quality or cost, I was fortunate to work under a Chairman who chose to be the missing voice of the customer within the company and insisted on service complaints being systemically resolved regardless of the cost and fought every Rupee increase in product price with a fierceness that turned pleaders for price increases to putty. That was the kind of constructive tension that drove Telco (now Tata Motors) under Sumant Moolgaokar to be India’s largest private sector corporation and the undisputed leader of its automobile industry. Conversely, when all voices are silenced in the pursuit of quick returns you have alignment, no doubt, but then run the risk of a situation like Boeing’s, where a century’s reputation is tarred because, in its desperate desire to beat the competition, the company broke "the one unbreakable law of project management: that a development cycle can’t be fast, cheap, and good."17
Just as countries have progressed to focusing on the welfare and needs of their citizens, corporations too will one day have to make the happiness and well-being of customers and the people within the organization, their prime purpose
Happiness as a corporate purpose
There is, of course, a third way to align the happiness focus of HR with organizational priorities and that is to make the entire organization happiness focused, whether in its dealings with customers, vendors, investors or, of course, employees. We already do this, in a fragmented, piecemeal fashion, when we measure customer or supplier satisfaction. The question is whether it can be done as an all-encompassing goal for the company as a whole. To me it is no more fanciful and potentially more wholesome that the financial metrics we singularly follow presently. After all, corporations were created for serving the needs of society and not the other way around. Providing plentiful and satisfying jobs as well as supplying valued products and services at prices that leave customers feeling they have gained, are at least as important as yielding returns to investors. As Malcolm Salter of the Harvard Business School argues: "… narrowing the compatibility gap between capitalism and justice and reversing declining public trust in contemporary capitalism requires a very different conception of corporate purpose – one reflecting established moral and economic principles that challenge those underlying the shareholder value maximization doctrine."18 Corporations are stuck at the stage nations were several centuries ago when everyone was expected to strive for the glory and prosperity of the monarch (promoter/shareholder in today’s terms). Just as countries have progressed to focusing on the welfare and needs of their citizens, corporations too will one day have to make the happiness and well-being of customers and the people within the organization, their prime purpose.
One cannot but admire the pioneering effort made by Bhutan to measure its Gross National Happiness (GNH) Index. A closer look at the robust methodology they have used19 should lay to rest some of the concerns about happiness measurement for corporates. Will the happiness metrics be as precise as Rupee figures of sales and profits? Clearly not. But, year after year, there is growing precision in quantifying country-wise happiness.20 Measurements at the company level should be infinitely simpler. Incidentally, by showing the kind of factors that are conducive to generating societal happiness both the GNH and the World Happiness Report referenced earlier go a long way to convincing us that happiness is not purely an internal search for bliss, unaffected by outside factors (try telling someone who can’t pay his child’s school fees, because his contingent employment is suddenly terminated, to rely on inner peace!).
Which company will take the kind of lead Bhutan took as a country? I hope it is one from India.