MEASURING HR PERFORMANCEMoving from reporting to predicting

“We live in a society bloated with data but starved for wisdom.” Elizabeth Lindsey, Ethnographer and National Geographic Fellow

KEVIN HENSONkhenson@greatplains.edu580-250-5585

1st Premise

Successful organizations must achieve: • Operational Effectiveness – Is your organization

performing similar activities better than your competitors?

• Strategic Positioning – What actions can your organization take to distinguish itself from competitors? What does your organization consider to be its competitive differentiators in the marketplace?

Porter, M. (1996, November–December). What is strategy? Harvard Business Review, 74(6), 61–78.

2nd Premise

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Vision

Business Strategy

Organizational Strategy

Human Strategy: Capability

Strategic HR increases an organization’s ability to achieve its vision, mission and strategic objectives. This is done by developing (not in a vacuum) HR strategies (initiatives) that align with the organization’s direction. - SHRM

HR can and should be both operational and strategic

4Table from Boston Consulting Group/WFPMA, From Capability to Profitability: Realizing the Value of People Management (July 2012).

3rd Premise Companies that leverage human capital well outperform those that do not

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Any jerk can have short-term earnings. You squeeze, squeeze, squeeze, and the company sinks five years later. - Jack Welch

HR Initiatives compete with other initiatives and priorities in the value chain

Last one…

Porter’s Value Chain

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THINKThe Human Resource department in my organization is focused on (operational effectiveness, strategic positioning, something else)___________________?

PAIR

SHARE

How can HR …..

• Contribute to Op. Effectivness & Strategic Positioning • Make the importance of human capital visible • Compete internally for time and resources

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MEASUREMENT

• Develop new insights and understanding of business performance based on DATA and STATISTICAL METHODS .

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Measurement (Analytics) help immunize firmsagainst short-termism.

Business analytics (BA) - skills, technologies, applications and practices for continuous iterative exploration and investigation of past business performance to gain insight and drive business planning.

Business analytics focuses on developing new insights and understanding of business performance based on DATA and STATISTICAL METHODS .

Analytics Competitor: A’S, Red Sox

• Moneyball by Michael Lewis – A’s consistently make the playoffs despite a low overall

payroll– New metrics for player selection: “on-base percentage”

and “on-base plus slugging percentage”

• Boston Red Sox– Example: Martinez easier for opposing batters after 7

innings or 105 pitches (ALCS 2003)

Analytics Competitor: Harrah’s Entertainment

• Customer loyalty card data used in near-real time to optimize yield, set prices for slots and rooms, and design traffic through the casinos– Predict the “pain point” and pull you away from

the slot machine

• Which marketing initiatives to move through which channels

• HR analytics used in recruiting process

APQC Study: Process Measures and Analytics

Five participating companies: Wyeth, ING, Marriott International, General Electric, Caterpillar

• Key findings:

– Analytics are applied within processes as early warning indicators

– Value of analytics greatly enhanced when integrated into day to day processes

– Integrating process analytics with continuous improvement techniques such as Six Sigma and Lean drives action and bottom line results

Analytics Competitor: Industry

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THINKIn my organization HR is evaluated based on the following measures/metrics (i.e. turnover, UI Claims, etc.) ____________________________________________________________

PAIR

SHARE

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• 90% of Fortune 500 organizations evaluate HR operations on basis of three metrics:– Employee retention and turnover– Corporate morale– Employee satisfaction

• These metrics do not necessarily illustrate how HR impacts – Profits – Shareholder value

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Getting Beyond the wall in HR measurement…..

ReportingTraining

Participation

Number of

chemistry

degrees

Headcount

Trending/Analyzing

Average YOS for

promotion to Director

Time to Hire by function

What factors contribute to the turnover of chemists?

What critical experiences

are needed to become a

Plant Manager?

Predicting

Requires a Shift in Mindset

• From “I think…” to “I know…”

• From reporting to predicting

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PlanDesign or revise business process components to

improve results

DoImplement the plan

and measure its performance

CheckAssess the

measurements and report the results to

decision makers

ActDecide on changes needed to improve

the process

Applying PDCA

INPUT ValueAdded Tasks

OUTPUT

How does your department and your process add value to FM and

the customer?

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Adopt an analytical view of HR

Measures of...

Who Cares? HR efficiencyHR

effectiveness

Business impact of

human capital

strategies

Human capability and risk

HR ● ● ● ●

Senior executives

● ● ●

Board of directors

● ●

Investors ●

ValueAdded Tasks

How does your department and your process add value to FM and

the customer?

“Bottom-Line” HR Metrics.Value

Added Tasks

WHAT SHOULD I MEASURE? It depends… What is the value added task?

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HR Measurement

Hidden slides in the packet available to you digitallyTop Ten HR metrics list

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A short detour to “ how-to”…

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So where do I start……THE “BASIC SEVEN TOOLS OF QUALITY ” 105,000,000 results on gooogle

Cause-and-effect diagram : Identifies many possible causes for an effect or problem and sorts ideas into useful categories.

Check sheet: A structured, prepared form for collecting and analyzing data

Control charts: Graphs used to study how a process changes over time.

Histogram: Graph for showing frequency distributions

Pareto chart: Bar graph which factors are more significant.

Scatter diagram: Graphs pairs of numerical data, to look for a relationship.

Stratification: A technique that separates data gathered from a variety of sources so that patterns can be seen (some lists replace “stratification” with “flowchart” or “run chart”).

FMLA Absence last 120 days

12.613.714.114.314.514.814.915.215.315.61616.412.813.714.114.414.514.81514.8

1515.215.415.61616.513.113.814.214.414.514.81515.215.415.71616.613.314.5

16.317.613.714.114.314.514.714.915.215.315.615.916.418.61616.51313.814.214.4

13.313.914.314.414.614.915.115.215.415.716.116.913.41414.314.91515.215.415.7

14.414.614.915.115.215.515.816.116.913.51414.314.414.614.915.215.315.616.116.8

15.115.315.515.816.21713.61414.314.414.714.915.115.315.615.913.914.214.414.5

How would you interpret this data?

What can you say about the amount of variation?

What about the pattern of variation?

Example

Histogram of FMLA DAYS

12.613.714.114.314.514.814.915.215.315.61616.412.813.714.114.414.514.81514.8

1515.215.415.61616.513.113.814.214.414.514.81515.215.415.71616.613.314.5

16.317.613.714.114.314.514.714.915.215.315.615.916.418.61616.51313.814.214.4

13.313.914.314.414.614.915.115.215.415.716.116.913.41414.314.91515.215.415.7

14.414.614.915.115.215.515.816.116.913.51414.314.414.614.915.215.315.616.116.8

15.115.315.515.816.21713.61414.314.414.714.915.115.315.615.913.914.214.414.5

The histogram gives us a visual summary of the data.

DaysF

requency

Histogram of sales measurements

What does the histogram show us?

Shape of the data

Spread of the data

Center of the data

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Example – analytics drives better decisions

Staffing 6-Up ChartCustomer Satisfaction Survey Results

44 38 38 36 34 26

24 26 28 34 3144

0%10%20%30%40%50%60%70%80%90%

100%

Em

plo

yee

Orienta

tion

Contr

acto

r

Sta

ffin

g

Univ

ers

ity

Pro

gra

ms

Recru

iting

Em

plo

yees

Inte

rnal

Sta

ffin

g

Ext

ern

al

Sourc

ing

Satisfied Neutral Dissatisfied

Staffing Cycle Time(Time to Fill)

30

35

40

45

50

55

60

Jan-0

5

Feb-0

5

Mar-

05

Apr-

05

May-0

5

Jun-0

5

Jul-05

Aug-0

5

Sep-0

5

Oct-

05

Nov-0

5

Dec-0

5

Days (

Op

en

to

Accep

t)Time to Fill

External Benchmark (46 days)

Delinquencies(% of Professional Hires Exceeding Cycle

Time Goal)

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Jan-0

5

Feb-0

5

Mar-

05

Apr-

05

May-0

5

Jun-0

5

Jul-05

Aug-0

5

Sep-0

5

Oct-

05

Nov-0

5

Dec-0

5

% E

xceed

ing

Go

al

% Delinquent

2005 Goal (< 12% delinquency)

Quality of Hire -95% of Professional Hires Retained Two

Years

80%

82%

84%

86%

88%

90%

92%

94%

96%

98%

100%

Jan-0

5

Feb-0

5

Mar-

05

Apr-

05

May-0

5

Jun-0

5

Jul-05

Aug-0

5

Sep-0

5

Oct-

05

Nov-0

5

Dec-0

5

Rete

nti

on

Rate

Retention after 2 years

Retention Goal (95%)

Cost per Hire(Cumulative Average Cost per Hire

Annualized)

$1,400$1,420$1,440$1,460$1,480$1,500$1,520$1,540$1,560$1,580$1,600

Jan-0

5

Feb-0

5

Mar-

05

Apr-

05

May-0

5

Jun-0

5

Jul-05

Aug-0

5

Sep-0

5

Oct-

05

Nov-0

5

Dec-0

5Avera

ge A

nn

uali

zed

Co

st

/ H

ire

Cost / Hire

External Benchmark ($1500/hire)

Recruiter Productivity(Hires per Recruiter)

0

5

10

15

20

25

30

Jan-0

5

Feb-0

5

Mar-

05

Apr-

05

May-0

5

Jun-0

5

Jul-05

Aug-0

5

Sep-0

5

Oct-

05

Nov-0

5

Dec-0

5

Avera

ge H

ires p

er

Recru

iter

Hires / Recruiter

2005 Goal (18 hires / recruiter)

Average Cycle Times

2523

1515

13

0

5

10

15

20

25

30

Create toApproved

Approved toOpen

Open to Offer Offer toAccept

Accept toHired

Ave

rag

e D

ays

as of 5/31/05

Sample Follow-up ChartStaffing Cycle Time

(Time to Start)

30

40

50

60

70

80

90

Jun

-04

Jul-0

4

Au

g-0

4

Se

p-0

4

Oct

-04

No

v-0

4

De

c-0

4

Jan

-05

Fe

b-0

5

Ma

r-0

5

Ap

r-0

5

Ma

y-0

5

Da

ys

(O

pe

n t

o S

tart

)

Time to Start Cycle TimeExternal Benchmark (52 days)

Issue: While the Time to Fill cycle time (Offer to Accept) was a respectable 40 days, the Time to Start cycle time (Open to Start) was exceeding the external benchmark. In addition, from a customers point of view, the cycle time was unacceptable at 91 days (Create to Start). The following action steps will be taken:

Communicate to managers the need to improve the approval cycle and provide visibility to initiating manager of the status of the requisition

Investigate why the Approval (final management sign-off) to Open (assignment to recruiter) is taking so long

Be more diligent on closing the deal (shorten offer acceptance and accept to start)

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QI Macros Fill-in-the-Blank Templates and Tools for Lean Six Sigma

• Drawing flowcharts, value stream maps and Ishikawa diagrams?• Updating monthly charts and dashboards?• Advanced analysis like Gage R&R, DOE, and so on?

QI Macros SPC Software for Excel Free 30-Day Trial for PC & Mac Users

A good tool to consider…..

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• Charting – Some rules of thumb for constructing charts and

graphs– Hidden Slides in the packet available to you

digitally

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THINKIn my organization HR use the following analytical tools and software to provide a predicative capability ____________________________________________________________

PAIR

SHARE

Does this sound familiar?

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Evaluating enterprise products and services

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An Evaluation of ‘Systems’ must include:

PEOPLE PROCESS TECHNOLOGY

Start with the end in mind…

Return on Investment• Why would the CxO write the

check for technology procurement?

• Don’t automatically accept the incumbent system due to investment – those are sunk costs

Return on Expectations• What is your strategy?• What are your drivers?• Does the system align with your

needs?• At the end of the day, how do

stakeholders expect the system to add value and improve their work life?

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Items to consider for planning • Staffing

– Without an appropriately staffed HRIS group to deploy, own and continuously market the applications, the effort will die on the vine

– Hybrid skill set – high tech, high touch– If you depend on an internal IT group, what is their skill set? What type of technologies can

they support?• Define your key drivers

– Determine organizational direction– Global expansion?– Emphasis on talent management?

• Economics– Funding availability

• Timing– The world moves quickly; if process and technology rollouts don’t keep up you’ll set

yourself up to fail– Short term planning (up to 1 year) should be your target

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Caveat Emptor• The 80/20 rule applies

– In most cases 80% of the functionality will be common– What’s that 20% difference and does it matter to you?– A long list of features doesn’t matter unless they match your requirements

• Use scenario-based requirements for demos– Send to the short-list vendors ahead of time so they can prepare– Allow the requisite exec summary and system overview– Always remember what your drivers are– Make sure all scenarios are addressed– Save the glitz for last and be a healthy skeptic (demos are meant to be smooth)

• Reality checks– Search reference lists for comparable situations – software versions, services

selection, consultant roles– Bad marriages lead to ugly divorces– Best practices aren’t necessarily the ‘best’ for your company– Beware the stylish haircut – look in the mirror and make an honest self-assessment

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• Finding a consultant

How do you find a consultant?

• Selection should be as rigorous a process as system selection– Problem solver– Excellent communicator– Personally disciplined– Passion for doing what’s best for the client

• Know your ‘needs requirements’ – strategic planning, project management or group therapy?

• You must ‘click’ on– Approach– Cost– Personality/Culture

• Check references• Use websites and referrals from similar companies/projects

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The Consulting Landscape

IndependentsIndependents

Broad HR Boutique

Broad HR Boutique

The Big Boys – Multiple

practices

The Big Boys – Multiple

practices

Strategic/C-Level

Strategic/C-Level

BenchmarkingBenchmarking

Niche CentricNiche Centric

ImplementationImplementation

Research &Advisory

Research &Advisory

????????

ERP Vendors SAP OracleIT body shops CSC EDS (HP) CAP GeminiProduct boutiques – Oracle: Kbace

Recruitment mgmt – The Newman Group (Futurestep)Talent Management – Knowledge Infusion Bersin & AssociatesBPO/IT outsourcing – Equaterra TPI Everest Research Inst

The Hackett Group

Bloom & Wallace

AccentureDeloitte & TouchePWCTowers WatsonIBMBoston Consulting Grp

Executive AllianceHRchitectJeitosa Group IntlWorkStrategyWise Consulting

HR Technology SolutionsBeachside Consulting(google on personal names)

Gartner AMRForrester IDCAberdeen

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• Finding software

Objective Vendor/Product Analysis – Decision drivers and Scenario-based demos (not RFPs)

Decision Drivers Weight Vendor A Vendor B Vendor C Vendor D

Vendor Viability XX%

Usability XX%

Functionality XX%

Technology XX%

Configurability XX%

Scalability XX%

Global Capability XX%

Integration XX%

Cost/ROI XX%

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HRMS Enterprise Software Comparisons

• Comparehris.com

• Capterra.com

• http://free-report.technologyevaluation.com

– “This knowledge base on human resources management systems affords clients the opportunity to rapidly determine their criteria for management and employee personnel tasks. Its extensive criteria include benefits and payroll management, employee self service, data warehousing, and health and safety requirements.”

More reality checks…

Input is a dirty job but someone’s has to do it•There is no magic solution•Be realistic when looking at potential functionality – how is the data going to get there?•Maintain data accuracy - edit and audit continuously

Output is the true value of the system•Work backwards during the requirements phase – what do you want to get out of the system?•Reports/dashboards/metrics should be considered first, not last•Investigate retrieval tools, whether bundled or third party – getting at history in a meaningful way is still a challenge•Integration/interfacing is a key element 51

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• Back to the bigger questions

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Best Practices• Adopt a “business intelligence mindset”

• Start small and build credibility– In the early stages, focus on solving immediate problems

• Have the end in mind and build an infrastructure to support it

• Collaborate with other analytic groups within your company

• Build/buy analytics competence with HR

• Engage a leader who has an analytics understanding, passion, and interest

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Pitfalls to Avoid

• Using analytics to “prove HR’s worth”

• Assigning this mission to a lower level technician

• Don’t confuse:– Data dumps with insight– Benchmarking with analytics

• Rushing the process

• Allowing the perfect to become the enemy of the good

MEASURING HR PERFORMANCEMoving from reporting to predicting

“We live in a society bloated with data but starved for wisdom.” Elizabeth Lindsey, Ethnographer and National Geographic Fellow

KEVIN HENSONkhenson@greatplains.edu580-250-5585