HR Controlling

HR Controlling

Dr. A. Jungmeister

HR Meeting 2005

Krebs & Partner AG, [email protected], [email protected]

2

4. Actual Trends

3. HR Key Ratio System, HR Key Ratios

2. HR Controlling & HR Development

1. Introduction HR Controlling

5. Best practice


3

Future/Strategic Focus

Day-to-day/ Operational Focus

Processes/ Strategy People

Management of Strategic Human Resources “Strategic Partner”

Management of Transformation and Change “Change Agent”

Management of Firm Infrastructure “Administrative Expert”

Management of Employee Contribution “Employee Champion”

The Changing Role of HR


4

Your Company – Team Work

•  In which quadrant of this scheme do you think your company is in?

•  Please give your vote.


5

Time Spent of an Average HR Resource Now and in Future

Source: Marc Fiedrichsen IBM BCS, http://www.ehlite.ch/april03/12eprint.htm

NOW FUTURE


6

Strategic and Operational HR Controlling

Strategic HR Controlling Criteria Operation Oriented HR Controlling

Success potentials, Strategic Recruiting

Targets Efficiency, Productivity

Strengths, Weaknesses, Chances, Risks

Dimensions Cost, Expenses, Return

Extensive External Factors Considered

Hardly

Very Often Proactive Rarely

Long Term Time Orientation Short to Mid Term

Holistic, network of causes and effects

Mindset Analytical, simple chain of effects

Low Formal (Numbers, Reports)

Yes

Top Managers Hierachy, Functions Involved

Employees, Middle Managers


7

Strategic HR Controlling: HR Portfolio A HR portfolio allows positioning of the Human Capital against corporate strategy and defines priorities

HIGH

LOW

HIGH LOW

A B

C

Qua

lity

of p

erso

nnel

w

ithin

Bus

ines

s U

nits

Strategic Importance of the Business Units


8

Strategic HR Portfolio Valuation

HIGH

LOW

HIGH LOW

Workhorses Stars

Trainees „Dead wood“

Perf

orm

ance

A HR portfolio evaluates the demand for action in terms of actual alignment of the personnel

Potential


9

What is Controlling?

Controlling Means Economic Support of Top Management to

Enable Their Performance: - Planning - Steering

- Delivery of Information - GAP Analysis


10

Tasks of HR Controlling - The Cycle

Setting Targets

Collect Current Data

Determine Gaps

Define Actions

Make Actions Operational

Perform Actions

Determine Deviations

Reports & Actions

PLAN

CHECK

ACT

DO


11

Quantitative Methods

Qualitative Methods

Methods of HR Controlling


12

Quantitative Methods - HR Key ratio systems, Score Cards

- HR cost reduction initiatives

Quantitative Indicators of HR Controlling

- Cost of personnel (recruiting, selection, work in, training,

fringe benefits etc. )

- Productivity measures (hours per cycle, product etc.)

- Personnel budget (Job count, head count, total HR expenses,

BU HR cost etc.)

Quantitative Methods


13

Qualitative Methods - Qualitative methods are employee evaluation assessments, surveys, personnel portfolios, scenarios or SWOT analyses

Qualitative Indicators of HR Controlling –  Qualitative demand of personnel (number and form of skills)

–  Employee evaluation results

–  Measurements of work and employee satisfaction

Qualitative Methods


14

Ratio Comparison: •  Time line comparison •  Between companies or units - Benchmarking •  Budget vs. current situation comparison System of Ratios : Ratios should be aggregated in a useful manner – f.e. in a Balanced Scorecard

Why ratios?


15

- Early Warning System

-  Planning/ Forecast

-  Control

-  Reduction of Uncertainty

-  Clear Reporting

- Transparence in HR

-  Leverage of HR potential

-  Basis for Reorganization - Head Count Adjustments

-  Activation of Unused Resources

Benefit of ratios


16

Overview of Ratios in HR

HR Deve- lopment

Young Talent

Develop- ment

Career Planning

Leadership Developmen

t

Continuous Education

& Training

Strategy Alignment

Cost/ Performance

Ratios


17

Typical Ratios for Efficiency Analysis in HR

Ratio Steering/ Target Actual vs. Target

Personnel cost per unit produced Personnel cost per unit sold Cost of personnel per product developped Turnover per employee

Turnover per employee work hour Contribution margin per employee Cash flow per employee


18

Definition and Priorization of HR Goals & Targets

Definition of Ratios for HR Controlling

Definition of Survey Time and Areas

Definition of Report Structures, Distribution Processes and Confidentiality Schemes

Definition of Data Sources and Benchmarking Data

Definition of HR Ratio Users and Their Needs

Selection of Operation Procedures for Ratio Production

Steps to Your HR Scorecard/ Key Ratio System


19

Checklist For Key Ratio System

•  Is it available to the users?

•  Cost/benefit

•  Validity of data

•  Purpose - goals

•  Organization aspects (maintenance, users)


20

HR Key Ratio System - Sample

Personal Development

Training quota

Absorption quota

Structure of test results

Annual time of education spent

Training costs per day and employee

Return on Intellectual Capital ROIC

HR Key Ratio System (excerpts)

Outplacement

Costs per social plan per employee

Exit compensation costs (range, average)

Number of outplacements per period,

Number of outplacements per Business Unit

HR Controlling

Cost of personnel per employee

Cost of personnel per hour per category

Percentage of cost of personnel from contribution margin

Net demand on personnel

Average age of personnel

Quota of female employees


21

HR Controlling with BSC

Goal Measure Target InitiativeFinancial



Goal Measure Target InitiativeCustomer

Goal Measure Target InitiativeCustomer

Goal Measure Target InitiativeCustomer Vision

and Strategy

Goal Measure Target InitiativeInternal Business Process



Goal Measure Target InitiativeLearning and Growth



Recruiting efforts quota

Total training expenses per employee

Training quota


22

1.  Line Managers Take Over HR Responsibilities (Article)

2.  Beyond Budgeting Model – Empowerment 3.  HR Becomes Performance Manager instead

of HR Administration Manager 4.  HR Outsourcing

Actual Trends, Best Practice


23

1. Line Managers Take Over HR

•  Line Managers Take Over HR Responsibilities (Article & Discussion)


24

2. Trend: Beyond Budgeting

Environment of Enterprise

Success Factors

Framework

Processes & Measures

Investors are demanding more

War for talent

Globalization – Price Pressure

Quicker Innovation

Customers choose freely

Quicker response time

Skilles Employees

Continuous Improvement

Operational Excellence

Customer Focus

Governance

Challenges & Values

Accountability / Transparency

Empowerment

Optimized Organization

Targets

Compensation Models

HR Strategy

Ressources & Coordination

Measurements

Source: CAM-BRT Framework, SAP HR Congress 2002


25

3. HR Becomes Performance Manager

•  HR Unit Becomes Enabler of Strategy Execution •  HR Becomes Performance Manager instead of HR

Administration Manager with formula: CVA = (VAP – ACP) x P VAP = Average return of personnel ACP = Average cost of personnel P = Number of employees CVA = positive, if VAP > cost of personnel


26

4: Outsourcing - Either Eliminate the Complexity Yourself or Set Targets With The Outsourcer

$62

$40$26

$13

$9

$4

$11

$25

$18

$5$5

HR Admin Today HR AdminReengineered

HR Admin Outsourced

People Costs Overhead CostsInfrastructure Costs Vendor MarginResidual & Vendor Mngt Costs

HR Admin Outsourcing Evaluation (Cost / Employee)

US EXAMPLE

$86

$74

$58

$12 $28

Lower labor costs Lower overhead costs

Greater infrastructure scale

Cost-Benefit Impact Of Various HR Admin Outsourcing Scenarios

2001 2002 2003 2004 2005 2006

$MM

Baseline Costs (HR Admin Today)

HR Admin Reengineered Costs

HR Admin Outsourced Costs

Outsourcing Transaction

Costs

Internal Reengineering

Transition Costs

Source: Booz Allen Hamilton Analysis 2004


27

4: … Yet Outsourcing is Not Realizing Always the Full Potential

68%

60%

57%

39%

23%

42%

36%

44%

22%

17%

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

Access to VendorExpertise AndSophistication

Improved QualityOf Delivery

Increased FocusOn Core

Competencies

Cost Reduction

Balance SheetImprovement

Expected

Actual

Percentage Of Respondents Rating The Benefits As Significant

Sources: GartnerGroup; Booz Allen BPO Survey of 100 U.S. Companies 2004

Expected And Actual Benefits Of Outsourcing

32%

31%

28%

24%

22%

19%

14%

12%

10%

9%

7%

0% 5% 10% 15% 20% 25% 30% 35%

Weak Control Of Cost / PerformanceData

Excessive Standardization

Outsourcers Unresponsive to ChangingBusiness Needs

Poorly Managed Migration

Inflexible Contracts

Performance And Cost Worsened

High Turnover In Account ManagementStaff

Lingering Shadow Staff

Excessive Effort in Contract Mgmt

JV Unable To Commercialize

Key Staff Attrition

Percent Of Respondents

Main Challenges With Outsourcing


28

•  Model Telco

Best Practice: Telco


29

Controlling Model Business Units TELCO S

trate

gic

Ope

ratii

ons

Supporting Units

Operating Units ABSD

Production IT& Infra- structure

Sec. & Fraud Mgmt

Plattform Mgmt

BSC Mandates

Process and Product Engineering

Prod.- Strategy and Management

Strategy Definition Strategic

Controlling

Oper. Controlling

Unit ABSD Management Unit TCTZ

Unit HR HDF

II

IV

I II III IV

•  Strategy Definition •  Review Hypotheses •  Strategic Initiatives •  Scenario analysis •  Challenging •  Reporting

Central

•  Cost Models •  Target Costing •  Support,

Audits

•  Key Indicators •  Target Parameters

and Targets for Processes and Plattforms

•  Strategic Input •  Tasks for BPR

Projects

I

HR Controlling

Tech. Contr.

III

III


30

Ressource Requirements ABSD Operations 2004 - 2006


31

Ressource Requirements ABSD Initatives 2004 - 2006


32

Balance Sheet HR Controlling Telco

Productivity KL employees (actual) 70 % Gross capacity (equals personnel of unit KL)

yx FTE

Net capacity (equals employee productivity x gross cap.

yx FTE

Full cost calculation Gross personnel ABSD (gross capacity) yx FTE Overhead • Back office, Assistances - yx FTE • Management

( Head of AB, Dep. & Head of AB-XXX = 1 FTE -yx FTE

• AB-AWN unproductive employees (incl. staff) - yx FTE Net capacity Full Cost

Full cost minus net capacity = 5.08% yx FTE


33

Telco HR Action Plan & Issues

HR Reporting •  Net capacity : yx FTE •  Gross capacity out of forecast : yx FTE

•  Actual net capacity : yx FTE

•  Delta net capacity : yx FTE •  Delta gross capacity : yx FTE

Conclusion / actions: •  To cover the actual demand, we would have to recruit additional XX

employees FTE (Full Time Equivalents). •  This is possible within the existing management structure. •  Actions to be taken:

provide new locations and work centers for the new crew


34

Best Practice: Model Die Post

•  Model: Die Post


35

Value Chain View Cost Optimization Quantitative HR Measures

Strat. Targets/ Programmes Culture Development Management Dev. Knowledge Management

Growth perspective Operational View

stra

tegi

c op

erat

iona

l

Personnel Key Data Time and Expense Reporting Salary data Fluctuation Absences

Employee Satisfaction Exit statistics Employee Valuation /MBO Education & Training data

qualitative quantitative

The HR Controlling Model of the Post distinguishes between operational / strategic

dimensions and quantitative and qualititave data

Source: Lecture Hans Gurtner, NDS HRM NDK1, 22. Oktober 2004 at BFH


36

HR Controlling Post – Tasks& Challenges

•  Definition and Implementation of a single vision in HR strategy

•  HR Controlling means a holistic view on all important aspects in planning, steering, controlling and information supply of HR Management

•  HR Controlling defines, surveys and analyzes data periodically to improve efficiency on resource management

•  HR Controlling defines all relevant aspects for Leadership and monitors them tightly with a monthly reporting

•  HR Controlling delivers all relevant HR data for the employee MBO process

•  HR Controlling empowers line managers with qualified suggestions and consulting especially for increasing efficiency and effectivity of the workforce


37

•  Model CS Real Estate

Best Practice: CS Real Estate


38

CS Real Estate: From Mission Statement To A Balanced Scorecard (BSC)

Value for Our Owners

Value for Users/ Customers

Structured Planning And Operation Processes

w.Innovative Evaluation Criteria and Procedures

Within industry sector employer of choice with attractive

working conditions

Processes

Customers

Finances

Employees

Cost

Performance

Growth

User / Customer

Process

Employees

High Archi- tectural Quality

Personal Care and Optimal

Decision Support Documents

Target Categories of BSC Mission Statement


39

The Process Map As A Basis For The BSC

PLANNING CORPORATE REAL ESTATE

OPERATIONS CORPORATE REAL ESTATE

PROCESS CONSULTING

PROPERTY MGMT / PORTFOLIO-MGMT

PROCESS CONSTRUCTION

MANAGEMENT

FUNCTIONAL SUPPORT

FINANCE AND CONTROLLING

Cor

e Pr

oces

ses

Man

agem

ent &

Su

ppor

t Pro

cess

es


40

Performance Indicators Are Measured within the Process – Targets Are Defined Via SLAs (Service Level Agreements)

Eigentümer Anlageobjekte

(Entscheidungsgremien oder Vertreter gemäss

Kompetenzregl.)

Macro-Process „PROPERTY MGMT / PORTFOLIO-MGMT" Micro-Process "Acquisition"

XFPI Akquisition **) Anlagekriterien und Investitionsabsichten gezielt platzieren

Unternehmen für Gebäude Mgmt. Immobilien-

unterhaltsfirmen Planer, Berater,

Immo-Fachstellen und -Treuhänder

Eigentümervertreter BU 15 / 17 18 /

37 / 67 Externe

Hauseigentümer

Angebot grob prüfen / auswählen

Projekt-Angebot Bauland-Angebot

Kommunikation mit Marktpartnern

Grundsatzantrag mit Rahmenbed. Genehmigung /

Entscheid Genehmigung /

Entscheid externe Prüfung / Analyse - je nach Branche/Angebot

***) - Wirtschaftlichkeit - rechtliche Kriterien - technische / funktionale Prüfung - Bauland:Projekt entwickeln - Projekt: ev. überarbeiten

Detail-Prüfung*** Investitions-/ Kaufantrag

Genehmigung / Entscheid

Genehmigung / Entscheid

Verhandlungen**** ****) Vertragsverhandlungen - Kaufvertrag - GU / TU Vertrag

Vertragsabschluss und Übernahme /

Beurkundung

Kommunikation** Kommunikation**

Liegenschaft-Angebot

Finanz- und Allokations-

plan aus Mikro-Prozess Portfolio-Mgmt

Prozesse Optimierung, Bauprozess,

Betrieb


41

Alignment Of Structure to Processes – Link To Responsibility

Head Real Estate

R. Malakow

PLANNING OPERATIONS FACHFÜHRUNG / SUPPORT

Corporate Real Estate CH

U. Konzalla

Portfoliomana-gement Investmts

D. Keller

Construction Projects

J. Burkhard

Accounting / Controlling / MIS

J. Kellerhans

Strategy and Development

M. Egger

Support

D. Frey

PROPERTY MGMT POERTFOLIO MGMT CONSTRUCTION FINANCE AND ACC.

Special Tasks

H. Suter

CONSULTING MANAGEMENT • Bus. Development

MANAGEMENT • Strategy • Budgeting, 3Y Planning • Implementation HR • Strat. Partner Management

Process Responsibility


42

Implementation Of Perfomance Measurement With BSC Into Employees MBO‘s

n  Business Unit heads are responsible for the integration of departemental BSCs into employees MBOs (Management By Objective) and employees targets

n  Some key ratios out of the processes were directly taken form process indicators, others had to be adapted

n  Departmental BSC are not the only criteria for employee evalution within the MBO process – other process related measures are included

BSC Process Operations

Name: X

MBO Targets for Employee X

BSC Process Construction BSC

Process Property Mgmt

Other Specific Objectives


43

Literature/ References

The ROI of Human Capital by Jac Fitz-Enz, Frankfurt 2003

The HR Scorecard: Linking People, Strategy, and Performance by Brian E. Becker, Mark A. Huselid, Dave Ulrich, 2005

How to Measure Human Resource Management by Jac Fitz-enz, 2004

HR Metrics The World Class Way, by Sullivan, John, 2005


44

Contact

Krebs & Partner AG Organization Development -Team Development - Coaching Erlenauweg 17 CH-3110 Münsingen Tel.: +41 (0)31 721 84 14 Fax : +41 (0)31 721 85 89 Member of ICF Switzerland-International Coach - Federation www.tbka.ch [email protected], Mobile: +41 79 292 75 19 [email protected], Mobile +41 79 404 18 94