Having seen more and more examples of these frameworks in HR programs, I have decided to create a quick summary of two classic consulting frameworks, and how they can be used within Human Resources. Both have come from a period when companies did not have large troves of data, sophisticated planning models or computers capable of analyzing large amounts of data. This makes these models ideal for Human Resources, where often data is limited and we rely on mostly qualitative data and experience when creating or evaluating programs. So what are these models?
- The Boston Consulting Group Growth-Share Matrix
- The McKinsey-GE 9 Box Matrix
The Boston Consulting Group Growth-Share Matrix
This model was developed in 1968 by the Boston Consulting Group to help clients analyze current product lines or business units. By identifying and categorizing these areas companies could then better allocate resources to the more valuable products/businesses. Analysts use a scatter graph to rank the products or business areas on the basis of their relative market shares and growth rates, then based on where they fit assign a rank. This rank comprises of 4 areas:
- Cash cows are units with high market share in a slow-growing industry. While boring, they can generally generate lots of money with little more investment. (High Share, Low Growth)
- Dogs are products/services with low market share in a mature or slow-growing industry. Often these are break-even or worse and should be divested from the organization. (Low Share, Low Growth)
- Question marks are growing rapidly and need large amounts of cash, but because of low market share do not generate much cash. If market share does not increase these will eventually become dogs. (Low Share, High Growth)
- Stars are areas with a high market share in a fast-growing industry. Ideally stars will become new cash cows, so while they are growing they require investment to maintain market share and eventually be cash cows. If market share is lost and it slows, these too become dogs. (High Share, High Growth)
I’ve included below how this model is ideal for use in succession planning programs. While not being a silver bullet solution to succession planning, it allows human resources and management a starting point for discussion when evaluating future leaders. The main difference is the categories, and how they are measured. See below the image for differences.
The first difference is obviously the axes. Where the original model measures market growth and market share, in succession planning we want to identify those leaders with the highest potential and strong performance.
- Leadership Potential – This should take into account the employees desire to progress (you do not want a reluctant leader who is happier in their current role). As well as their peers and superiors perceptions of their performance. These can be measured in a 360 degree feedback, or on an individual basis by interviewing their co-workers/supervisors. Lastly should be an evaluation of leadership skills that they possess, ideally against a Leadership Competency Framework, and educational and work experiences.
- Current Performance – This will take into account their current (and track record) of performance in their roles within the organization. Just because someone has leadership potential, doesn’t mean they are an ideal candidate if they are not performing within your organization. In fact, promoting an under-achiever based on potential is a great way to kill the motivation of other high-performance employees, and damaging your culture.
Now for the differences in categories:
- Cash Cows become your long-term ideal employees. They are happy in their jobs, and performing well. They are what keep your organization running smoothly.
- Stars remain stars. They are your future leaders, and hopefully a source of competitive advantage.
- Question marks are still question marks. They need coaching and performance management. Determine why they are under performing and try to correct it. If lucky they may become more ideal employees or even stars. Worst case scenario they become problem employees.
- Dogs become problem employees. These are employees who need to be on a performance improvement plan, or terminated to protect the organization and to avoid continuing to invest resources into them when there is no benefit to the organization.
The McKinsey – GE 9 Box Matrix
The McKinsey-GE 9 Box Matric was developed early 1970s following the success of BCG’s growth share matrix. McKinsey alumnus Kevin Coyne described the GE–McKinsey nine-box matrix as “a framework that offers a systematic approach for the multibusiness corporation to prioritize its investments among its business units.” Or, more simply, how well can the company run the business compared with other possible owners? Units well suited to the organization are to be kept, and invested in (maybe selectively), and those the organization is poorly suited to running should be divested (sold), even if they are currently running well. The 9-box matrix works on two axes:
- Industry Attractiveness: What is the outlook for that industry as a whole
- Competitive Advantage: Does your organization have an advantage over competitors in this area?
The 9-Box matrix is ideal for Knowledge Transfer (and was the basis for the last program I designed). By sorting knowledge according to business impact and urgency (risk of loss) you have a starting point for which knowledge needs to be recorded before it is lost. It also allows business areas a quick way to see how much changing demographics and turnover can impact their results. It can be used to show how many employees are in each area on an organizational level, or on an individual level to determine which skills are most needing process documents, mentoring relationships or other ways to share the skills.
- Business Impact: How important are various skills to the organizations success. These should be closely aligned with your industry needs and competitive strategy, as well as key competencies of each role.
- Urgency: Identify which factors most predict your turnover (employee engagement factors, demographics, job type, economic environment etc.). Give each factor a rating, and map the employees or divisions summary on the chart. This helps in targeting at risk areas/employees. This also took into account frequency of usage. Skills used daily can have a large impact on productivity over time if they are lost, even if their impact is only low-medium.
In our program we also evaluated the difficulty in obtaining skills, training time and a number of other variables. One trick is not worrying as much about skills you develop well internally, instead focusing on those you often have to look externally for. Remember, you are looking for ones that impact the areas business, not just rare. Rare skills may not be an advantage, even if useful.
In our programs we had employees and supervisors match and compare skills in a table, before plotting them onto the graph. This opened the door for employees and supervisors to have open discussions about skills when they provided different ratings on the impact or frequency of usage.
An additional benefit was the ability to evaluate the squares surrounding immediate risk knowledge. It helped with identifying and sorting skills and knowledge that were more of a grey area. Most people knew their most important knowledge/skills, and their least but visualizing the knowledge/skills between was the biggest benefit. It allowed managers to look at skills they may not have noticed before until after the employee left. Particularly when an informal role outside their official job has been played by the employee while with the organization.
Have you used these tools before or others? Do you have a project that these will be useful for. If so, I would love to hear about it.
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