future of hr metrics a brave new world. add value & maximize upside limit liability &...
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Future of HR Metrics A Brave New World
Add Value&
Maximize Upside
Limit Liability
&Protect
Downside
Imp
act/
Co
ntr
ibu
tio
n t
o t
he
Bu
sin
ess
StrategicHR Planning
OrganizationalDesign
HR as BusinessPartner
CompensationBenefits
Safety &Workers’
Compensation
Compliance
Labor/Union Relations
Staffing
Training &Development
Culture& Image
EEO/AA
EmployeeRelations Performance
Management
Survey ActionPlanning
HR InformationSystems (HRIS)
A Century of Evolution in the Function
Labor Employee Personnel Human OrganizationalRelations Relations Resources Effectiveness
HR Continues to Evolve& the model defines our aspirations
continue to grow
Source: Rich Vosburgh
The Role of HR
The 2002 Human Resource Competency Study found that 43% of HR’s impact on business performance came from its strategic contribution.
Source: University of Michigan Business School
The Role of HR
In 2001, greater proportion of respondents (41.1%) said they were full partners in the development and implementation of business strategy than in 1998 (29.4%).
However, the expected increase in time devoted to this role is not reflected in the data.
Source: HRPS/Center for Effective Organizations
Efficiency and Effectiveness
Effectiveness
Efficiency
Impact
Three Levels of Metrics
Efficiency
•What range of resources (financial and non-financial) should be considered?
•What is the appropriate level of investments?
•How should investable resources be allocated to maximize results?Source: Boudreau and Ramstead
Effectiveness
Efficiency
Impact
Three Levels of Metrics
Effectiveness
•What unique combination of policies and practices would best build the necessary human capital?
•What factors link policies and practices to human capital enhancement?
•What attributes distinguish effective from ineffective policies and practices?
Source: Boudreau and Ramstead
Effectiveness
Efficiency
Three Levels of Metrics
Impact
•What is the link between sustainable strategic success and human resource management?
•Which talent pools are most critical for competitive advantage?
•How could improving human capital increase value?
Impact
Source: Boudreau and Ramstead
Internal and External Historical
Benchmarks
The Role of HR
PeopleProcesses
Future / Strategic Focus
Day to Day Operational Focus
Strategic Partner• Strategic HR Planning• HR as Business Partner• Culture and Image
Change Agent• Staffing• Organizational design• Survey action planning• Performance measurement• Training and development
Employee Relations Expert• Employee relations• Labor relations• Safety & workers’ compensation• Diversity and EEO
Administrative Expert• Compensation• Benefits• HR information systems• Compliance
Administrative ExpertCompensation Payroll as %--total operating costs (benchmarked); compensation targets benchmarked against peer companies; turnover rates; quality of management review and Board material.
BenefitsMedical cost per participant; dental cost per participant; 401K employee participation rate; $ saved in union negotiations.
HRIS Systems Support HRIS implementation on time and within budget; customer satisfaction.
Compliance# New EEO Charges; # Old EEO Charges Closed; Progress on AA Goals; Outcomes of Inspections and Audits.
Employee RelationsTurnover rates, “Best Place to Work” rankings, legal compliance, efficiency, union activity (or lack thereof).
Labor RelationsAbsence of the extreme negative (strikes, slowdowns, sit-downs, boycotts); $ outcome of new contracts, both immediate & longer term; timeliness & quality of new contracts; productivity per employee; safety & quality measures.
Safety and Workers’ Compensation
Employee Relations Expert
# Incidents & $ value of accidents; # employees trained; % required training & certifications completed; audit results.
Diversity & EEOAttitude survey measures of perceived fairness; # people trained in Diversity Awareness and Diversity Leadership programs; perceived tolerance.
Staffing$ to Fill; Days to Fill; # Filled; Quality of Hires; Retention of Hires.
Organizational DesignBenchmarking headcount; effectiveness of communications & key processes (no bottlenecks); spans and layers; management ratios.
Survey Action Planning Employee satisfaction results at the work group level; rolled up to Business Unit level; norms available for Business Unit analysis.
Performance ManagementPerformance Reviews: Timeliness and Quality; #/% Positions with written accountabilities and measures; other measures vary with the position.
Training & Development# Programs; #Days/Person Training; Impact of Training; effectiveness measures within new groups.
Change Agent
Strategic HR PlanningQuality of succession management program assessment. Quality of Bench Strength. Quality of Succession Plan Follow-up (% Actions Completed).
HR as Business PartnerAny business measure of effectiveness. 360-Degree Feedback on the extent to which HR is considered a partner by those they support.
Culture and ImageEmployee Satisfaction data; quality of the description and utilization of culture & image understanding; standing on the Fortune 100 Greatest Places to Work.
Strategic Partner
Starting with the Business Strategy
Basic Process for HR Strategy
Scan theExternal
Environment
Identify StrategicBusiness
Issues
DevelopHR
Strategy
Communicatethe
HR Strategy
IdentifyPeopleIssues
The Common HR Approach
HR practices,processes,
andsystems
Articulate howwhat we do
adds value toThe business
Communicateto the business
what a goodjob we are
doing
The Inside-Out Approach
Source: Patrick Wright
The Better HR Planning Approach
Identify the business model
componentsand areas todrive value
Develop anHR strategy
to execute thebusiness model
with relevantmetrics
Use the metricsto demonstrateor prove howwe are driving
businessperformance
The Outside-In Approach
Source: Patrick Wright
Efficiency• Time to Hire
• Cost per Hire
• Headcount Ratio
Effectiveness• Customer Survey
• “At the Table”
• Practice/Process Impact
Efficiency• Direct Labor Costs
• Indirect Labor Costs
• Positions Unfilled
Effectiveness• Employee Satisfaction
• Leadership Capability
• Talent Retention
• % Black Belt Leaders
• Employer Brand
Efficiency• Cost per Unit
• Shrinkage
• Defects/Scrap
Effectiveness• Customer Satisfaction
• Revenue Growth
• Market Share
OrganizationHR People
Metrics Model
Source: Patrick Wright
Do We Really Measure how HR is Driving Business Performance?
BusinessObjectives Driven to Win Flexible Embracing Risk Creative Global Fast
Actual HRMeasures Headcount Turnover Rates Succession Candidates Time to-fill, train, on-board Cost Reduction Training Completed Grievances Client Satisfaction Surveys Performance/Potential Ratings Sales per employee Best practices recognized
The Role of HR
When executives were asked to select which descriptor best described the view of HR held their organizations, only 34% indicated that HR was viewed as a “strategic partner.”
SHRM/Balanced Scorecard Collaborative
A major shortcoming in many companies is “a lack of measurement on the impact of HR.” Accenture High Performance Workforce Study
Impact
Effectiveness
Efficiency
Three Levels of Metrics
Impact
•What is the link between sustainable strategic success and human resource management?
•Which talent pools are most critical for competitive advantage?
•How could improving human capital increase value?
Impact
Source: Boudreau and Ramstead
Company
Business Environment
HR Department
OutputsInputs
InternalFeedback:EfficiencyEffectiveness
External Feedback:Impact
Scope of HR Measurement Approaches
Value
Time
Source: Center for Effective Organizations, USC
Ad hoc HR Measures
Benchmarks
Data Systems and Portals
Scorecards and
Drill Downs
Strategic ImpactOrganizational EffectivenessValidity and RigorCausationLeading Indicators
Building an Impact Model
Do you understand your business partner/client’s pain?• are they interested in relieving that pain?• do they see it as value added work?
Can you specify the business requirements?• lengthy boring process• critical to your success
Tough Times for Top Executives
“Over the past three years, nearly 40 percent of the top 2500 CEOs have been removed from their posts. Nearly all of them, due to a failure to execute the strategy.” Bossidy and Charan
Execution
Strategy
People Processes
Alignment=
Successful Execution
To execute strategy you need to align your strategy, process and people!
How do I know if my company is aligned?
How do I create the alignment I want?
How do I maintain the alignment I want?
The biggest questions facing CEOs today
The Alignment Challenge
Strategy
People Processes
Alignment=
Successful Execution
Fast - Logical !
Fast - Logical !
Slow . . .And follows a different logic . . .
Success and speed of execution depend on people alignment,Yet this is the hardest element to align!
What is the Alignment of
People?
Research Questions
Strategy
People Processes
Alignment=
Successful Execution
Can we identify disconnects between people and strategy?
Can we identify disconnects between people and process?
Can we identify strategy and operational blockages?
Can we identify tensions that create disconnects and blockages
Impact MeasurementIt’s all about Change
Impact measurement is not about numbers … its about change
Numbers only provide you with a common and specific language
If your clients don’t know you they won’t trust you
Fear of being “found out”