EmpIndex - Measuring the Value of Human Capital (20160407)

Mark Sweeny Founder, Owner, Chief Executive

Certus Solutions

Measuring the True Value of Human Capital

The Employee Index

So What Your About To See

Origins are from My Own Research 2009!

Private & Confidential 2007-2016 © Certus Solutions All Rights Reserved


The Challenges of a Small Medium Enterprise

Cloud Professional Services Business

Survival - Cash is King!

Balancing Growth v Sustainability

Happy Customers! – Maintaining Reference-ability

Delivery Capability in a Fast Changing Space

“War On Talent”

Employee Engagement & Retention


So How Do We Rise To

the Challenge?


We Focus On Our People

and For me … HR is in the People Delivery Business

“Right People, Right Place, Right Time, Right Cost”

Management Clichés & Jargon

People are our business

People are our greatest assets

Seize the day

Talent Management Human Capital

Paradigm shift Step Change

Excellence through people

Make A Difference


Do You Feel The Same Way? A Quick Survey….Google Says…

People are our greatest asset

People are our most important asset

People are our business

People are our most valuable asset

1,590,000

2,980,000

97,600,000

229,000,000

2016 Hits

516,000

2,240,000

13,200,000

193,000,000

2009 Hits

Private & Confidential 2007-2016 © Certus Solutions. All Rights Reserved

The Challenge of HR Today

For HR To Be Relevant Today

Play it’s role in achieving sustainable competitive advantage

Show a return in delivering value to the organisation

HR Director Should Constantly Be Asking…

How effective is my “People Proposition”?

And “am I making a difference?”


“So What Do We Instinctively do? – We Try to Measure!” But… What Are We Measuring? When Are We Measuring it? and how Are We Measuring it?

Traditional Measures of

HR Effectiveness are Flawed

Flaws in Traditional HR Measures

Not linked to the overall business objectives

Identified in isolation

Focused heavily efficiency rather than effectiveness

High degree of subjectivity

Performance reviews are not ratified at corporate level

Do not financially quantify the concept of “value”


Examples of Traditional Measures of

HR Effectiveness from 2009


n = 91 organisations; 506 measures

Source: IRS

Everyone has a different opinion?

Its all about People, it always has been…

Professional Sport in America has been measuring performance since its origins Performance measures contribute to “MVP” – Most Valuable Player awards Determines a players value to the team and influences contract negotiations

Applied Learning from Professional Sport – Before MoneyBall !!!!

So Why can’t we apply the same approach to the Private or the Public Sector?


It’s a Question of Value & Contribution



Sir Alex Ferguson Former Manchester United Manager

Recruitment was centred around collecting and working with talented youths

Growing up and training together for years created a loyal team that had an incredible spirit, character and force

Combined with older players created high standards and maintained the clubs culture

Always focused on the future - building a club and not just a team- creating stability and consistency

Also concentrated on the value each player brought- only players with work ethic, energy, perseverance, comradery, who were tactically smart and a superb athlete were chosen for the club

Bill Belicheck

Head Coach of the New England Patriots


Culture beats Strategy - talent alone is not enough

Created a sophisticated screening mechanism that targets a players fit rather than talent alone

Seeks like-minded players who share core values

Team chemistry over individual talent

Accountability

Three Core Values:

Passion - players have a love of the job and not just the lifestyle (found via specific interview questions)

Intelligence - players need to be intellectually curious, committed and have a strong work ethic

Value - each position is budgeted and does not change regardless of factors such as talent. This means the patriots are never controlled by the market or a player

Billy Beane

Executive Vice President of Baseball Operations


Objective, advanced data to hire instead of the traditional “statistics and gut instincts” approach

Broke down success into a factors specific to each position

Decisions were not emotionally made

Being successful & having talented individuals can forge a better culture

Don’t disregard culture but don’t rely solely on it either

Consider objective talent, performance measurements first to widen the channel of prospective candidates and then consider culture

Lies, Dam Lies and Statistics? - Possibly

Can you really measure Human Behaviour?

Can you really measure Culture?

Can you be consistent and fair?


Business Need Defined

What do we really mean by human capital? … Its about “value” and “contribution” towards goals

… So how do we identify and quantify it in business?


So how can we measure Employee Value ?

-100 +100 0

Employees can either create value …

So Where are Your People ?

First you have to define it…

… or destroy value


Employee Value Dynamics

Identifying Who Creates Value…

Employee Value linked directly… to Organisational Objectives

Pressure on

Public

Finances

Government

Policy

Election

All Change?

Equal

Opportunity

Agenda

Trade Unions

Civil Service

Reform

European

Legislation

Global

Economy

Level of

Public Debt

UK

Legislation

Public Sector

Efficiency

Agenda

Pressure on

Public

Services

Public Value

Education

Health

Justice Security

Emergency

Services

Culture

Trade

Employee

Value

Employee

Value

-100

+100

0

Val

ue S

cale


Employee Value Dynamics

Fundamental Concepts of System Dynamics from MiT in 1950’s

Index

value increasing value reducing

+40.72

Stock or Reservoir Flow

We need to define what increases value and what reduces value


Lies, Dam Lies and Statistics? - Possibly

Creation of an “Employee Index”…

A conceptual idea in Employee and Organisation value measurement

provides alignment, clarity and focus in delivering a sustainable people proposition

minimises subjectivity around human performance

focuses upon measured contribution to determine value

commercialises HR by financially quantifying the value of human capital

Formula based upon weighted averages?


To Measure Contribution,,,,

You Need a Set of Value Factors that are Relevant to the Organisation

Technical Skills Usually based upon Competency Levels

Delivery Performance Results Related

Behavioural & Soft Skills Most difficult to Measure due to Subjectivity

Team Player – Interaction with Others?

“Would I go for a drink with this person?”


Establishing “The Bridge”

Value Factors Outcome Determined by Weighting

%

Value

Score (-100 to +100)

Weighted

Score

Attendance

Management

Average number of sick days per employee

per quarter 0.35 40 14.00

Financial Control Percentage budget variance relating to

employee costs per quarter 0.25 80 20.00

Personal Performance

Review

Score from performance appraisal per

annum 0.25 -20 -5.00

Conduct & Discipline % number of grievances raised that are

satisfactory resolved from staff per quarter 0.10 20 2.00

Training Delivery Average number of Training Days delivered

per employee per quarter 0.05 65 3.25

34.25

Example Scenario: Organisation metrics for determining the value contribution of an HR Business Partner in relation to a departmental strategic objective and local objectives

Link

Link

Link

Link

Link

INDEX SCORE OF Private & Confidential 2007-2016 © Certus Solutions. All Rights Reserved

De

pa

rtm

en

tal S

tra

teg

ic

Ob

jec

tive

“Corporate Moneyball!” – Think Stockmarket Linking to Financial Measures

Identifying Value and Quantifying Human Capital

0

10

20

30

40

50

60

70

80

90

100

1st Qtr 2nd Qtr 3rd Qtr 4th Qtr

EmpIndex

Employee 1

Employee 2

Employee 3

Employee 4

Employee 5

£££

0

10

20

30

40

50

60

70

80

90

100

1st Qtr 2nd Qtr 3rd Qtr 4th Qtr

Org EmpIndex

HR Business Partner

Senior Management

Business Unit 1

Business Unit 2

Business Unit 3

£££


Delivering Insight

Identifying “Value of Connection” across an Organisation

67

66 49 62

61 32

55 68

45 45 79 63

62 61 65 59

How Organisations truly work

67

66 49 62

61 32

55 68

45 45 79 63

62 61 65 59

Traditional Organisational Chart

EmpIndex allows you to identify where the value exists across the entire Organisation


Is this the Next Step in the Journey?

A Talent Management Index – A System that…

Allows an organisation to identify employee value (talent) across an organisation

Demonstrates an employees contribution against organisational goals

Delivers in-depth workforce analytics based upon value and contribution

Facilitates objective comparison of individual employee’s contribution

Ability to determine the performance gap between workforce and organisation

Enables an Organisation to financially quantify its Human Capital


Is this the Next Step in the Journey?

But With All Concepts, there are Questions? Would you want to measure your people to this instinct?

You need huge amounts of nearly REALTIME data to make this work?

Doesn’t it just become another system that can be manipulated?

Would it drive the right behaviour?

Is this a Step to Far and to intrusive?


Key Take Aways – Regardless of Tech!

Employee Measurement Systems need to reflect both Technical & Behavioural Skills you value

You need both elements to build a “Winning” team

You need to maintain objectively and minimise subjectivity! – but can you really measure culture?


Mark Sweeny

Owner, Founder, Chief Executive

[email protected]

@CertusCEO

www.certus-solutions.com

Thank You For Listening Questions?

Data & Analytics

EmpIndex - Measuring the Value of Human Capital (20160407)