Loss of Knowledge of Historical Precedents and Compensations Systems in Human Resources

Overview–Presenting Problem

Two Senior Vice Presidents (SVPs) in Human Resources (HR) at a multi-national company, both with over 20 years of tenure, were retiring within four weeks of one another. As can often happen, almost none of the major precedents set had been written down. In addition, the organization had a closed compensation system. This meant that little knowledge had been shared about how executives and others were compensated across the organization, nor had the rationale which led to the decisions made about the system and components. One successor was chosen for the Compensation area (with 5 years experience in the company but much less social capital than the retiring executive), and an interim successor was chosen for the other position.

The Impact

The remaining HR leadership team and the generalists did not hold the background knowledge of how and why the compensation system was designed as it was. They knew unspoken expectations existed with primary stakeholders (such as the Global Senior Leadership Team) but did not know specifically what those expectations were or the rationale behind them. Neither were they aware of precedent decisions made around executive compensation or other critical issues. Therefore, it was difficult for the new HR Leadership Team to make some of the complex decisions needed without the background of what had gone on before. Costly errors could be made due to lack of context, background, and previous actions. Also, it was extremely difficult to consistently and fully train HR generalists because very little was codified about how things were done. Having few precedents codified left the organization vulnerable to litigation. Hiring and retaining new executives was made more difficult without the experiential historical knowledge of what had been done before, expectations that had been set, and how past processes were made to happen.

Lessons Learned

Through our interview processes, we identified a list of themes and issues that were critical for the organization to retain. We then developed a cascade of knowledge transfer events to have the HR SVPs share -- either with a few key leaders or a broader group -- the precedents, rationale, experiential learning of the two retiring SVPs. The information was codified as appropriate for reuse and for training. The SVPs were pleased to be involved as the Knowledge Transfer Process gave them an organized, less time consuming method to identify critical areas of knowledge and pass those areas to the appropriate people. The SVPs also became aware of their own thought patterns and ways of addressing issues, which they could share with the larger group to ensure the group understood how they had solved challenges, not just the answers they had developed. As discussions ensued, old decisions were understood and new decisions made were solidly based. The past was used as a stepping stone to a less complex future, rather than as a barrier to moving forward.

The new HR Leadership group, after reviewing the history, context and rationale, eventually decided to create a more transparent compensation system, but knew how to do that based on past experience, how to communicate the change in a way that showed an honoring of the past, and created broader learning for the HR community around how to implement the system in a standardized way. HR Generalists had the opportunity to make better informed decisions and well-considered practices based on their knowledge of the past and of the system.

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