Future of HR Metrics A Brave New World. Add Value & Maximize Upside Limit Liability &...

Future of HR Metrics A Brave New World

Add Value&

Maximize Upside

Limit Liability

&Protect

Downside

Imp

act/

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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”