Strategic H R Management:

Developing Business Acumen

Jamaican HR Association

2015 Conference

Robert J. Greene

Reward Systems, Inc.

Reality

Playing American Football

in a Soccer world

is a failed strategy

Understand That…

Your competitors have

equivalent access to

Financial & Operational

Capital

Meaning…

The only source of sustainable competitive advantage is…

A competent and

committed workforce

Implications For HR

Your greatest contribution is…

building a competent

and committed workforce

and sustaining

its viability

• Frequent, volatile economic swings; difficult to forecast

• Social/political environment is often uncertain

• Planning is difficult but necessary… reacting is inadequate and “just too late”

Our World Is Turbulent

So What Kind Of Planning Works?

• “Planning is like rain dancing; does not impact rainfall, but makes the dancers feel better” (cynical view)

• Strategic planning is challenging in today’s globalized environment

• Scenario-based planning needed so strategy is viable in a range of possible futures

Scenario-Based Planning

• Develop forecasts of three possible futures

– Optimistic

– Pessimistic

– Most likely

• Develop strategies that will work reasonably well in all three

• This decreases reaction time

So What Impact Does All Of This Have on HRM?

• Need to do environmental scanning and analyze data

• Need to do workforce planning

• Need to develop an HR strategy that works today and in future

• Need to develop HR plans and processes that support strategy

• Need to be flexible and responsive

First Step

• Know who you are and what you want to be (mission and culture)

• Know what your realities are

• Know your business strategy and organizational structure

• Formulate an HR strategy that is a good fit to your context

Deriving HR Strategy FromOrganizational Context

Vision/Mission

Culture

StrategyExternal

Realities

Internal

Realities

Structure

HR Strategy* Staffing

* Development

* Performance

Management

* Rewards

Management

Step Two

• Develop a human capital (workforce) planning model

• Install a “dashboard” of instruments for scanning

• Create sensors to monitor events and trends

• Activate the model and update continuously

Assessing Workforce Viability: Today & Vs. Future Requirements

Today’s

Workforce

Required

Workforce

Future

NeedsRecruiting

Developing

People

Career

Management

Performance

Management

Retirement TurnoverContracting/

Outsourcing

Org./

Role Design

Utilization Of

Technology

Identify sources of supply and leaks and then determine net

gain or loss and whether net human capital will be adequate

+ + +

-- +/- +/-

+ +

Legal/

Reg. Env.

+/-

SuperforecastingPrinciples

• Tirelessly collect and analyze wide variety of current data

• Assign analysis to a diverse team

• Promote openness to other views

• Constantly revise forecasts

• Try to find the why behind unexpected variations

• Do not own prior estimates

Step Three

• Develop a performance model – What constitutes “success”?

– What is required for survival?

– Who scores performance and how?

• Design a performance management system to monitor how you are doing and how you can improve

• Align rewards with performance

Performance Management Model

Vision/Mission

Culture

StrategyExternal Realities Internal Realities

Core

Capabilities

Critical Success

Factors

Key Performance

Indicators

Organization SBU/Group Individual

Individual Performance:Role Of Motivation

Motivation consists of:

Effort

Focus

Persistence

Motivation

If your people are headed in the wrong direction…

Don’t motivate them!

–Source: George Odiorne

Maximizing Motivation

KNOWLEDGE, SKILLS & ABILITIES + TIME, RESOURCES & STAFF

Able to do “it”

Wants to do it”

MOTIVATION• Effort• Direction

Know what “it” is

PERFORMANCE• Behavior• Results

Allowed to do “it”

CONSEQUENCES• Real• Perceived

CULTURE/STRUCTURE

Rewards Management Strategy

• Is it designed to fit culture, internal and external realities, organization strategy and human resource strategy?

• Is it designed to attract, retain and motivate high performers in critical roles?

• Is it realistic, given organization’s economic situation and how people intensive its cost structure is?

PERFORMANCE

REWARDS

What you measure and reward…

You most surely will get more of

Caution

“Don’t reward A

If You Are

Hoping For B”S. Kerr

Big Question:Treat Everyone The Same?

• Using the same strategies and programs for everyone sends the message of equivalent treatment

• But different workforce segments have different impacts on organizational performance

• Differentiate, don’t discriminate

Misix, Inc. © 2015 Business Confidential. All rights reserved.

Determine R.O.I. Of Performance

Str

ate

gic

Va

lue

Performance

Acceptable

Mickey Mouse

Acceptable

Sweeper

There is more value in

improving Sweepers

than Mickey Mouse.

Best

Mickey Mouse

Best

Sweeper

Source: “Beyond HR” by J Boudreau & P Ramstad

How Much Should Rewards Vary?

Str

ate

gic

Va

lue

Performance

Acceptable

Mickey Mouse

Acceptable

Sweeper

There is more value in

improving Sweepers

than Mickey Mouse.

Best

Mickey

Mouse

Best

Sweeper

Source: “Beyond HR” by J. Boudreau & P. Ramstad

Capuchin Monkeys Reject Unequal Pay

Monkeys IllustrateEquity Theory At Work

• Referent other – other monkey

• Evaluate input – both did task

• Evaluate outcomes –– OK to start

– Different outcomes followed

• Outcome/input ratios compared

• Inequitable treatment - resulted in…

We In H R Need ToGet “Scientific”

• Develop business acumen

– Financial

– Operational

– Analytical

• Understand technology and how to best utilize it

• Understand human behavior and its implications for managing

Scientific Method

• State a hypothesis (i.e., increased pay will reduce unwanted turnover)

• Specify the assumptions underlying the hypothesis (i.e., people value pay and turnover is impacted by pay)

• Support your recommendation with all valid and relevant evidence or create your own evidence by testing the hypothesis

Good Policy: “We trust in God: everyone else must present evidence”

The Practitioner’s World

What “evidence” is used in decisions?

Intuition

It worked atmy last job

Popliterature

We have always done

this Gurucounsel

“Best”practice

Research

Use Of BenchmarkingIn Decision-Making

• Benchmarking has limitations

– Contexts must be the same if “what worked there” will “work that way here”

– Emulation limits opportunity to differentiate your organization

• Decisions based on past only valid if the present and future are the same as the past

Value Of Research

• Value depends on the validity and relevance of research findings

• Internal validity is achieved by using sound method… but valid only for that specific case

• External validity = generalizability and this is what is at issue when benchmarking

The Value Of Research In Decision-Making

• Research that is sound and relevant– Suggests what will be likely to happen

when specific strategies are adopted– Can support or reject “common

knowledge”– Provides an alternative to using

instincts as the primary basis for decisions

– Provides support for recommendations to management; is “evidence”

– Can be used as the basis for reframing issues as conditions and/or objectives change

What impedes use of evidencein practitioner decision-making?

Don’t knowit exists

Don’t knowhow to apply it

Don’tunderstand

it

Don’t see itsrelevance toown issues

Where Do We Start?

• Recognize when there is a lack of knowledge on the part of practitioners (Rynes research)

• Identify the causes of the disconnect

• Address the causes

• Track the impact of more informed decision-making and actions

• Communicate the value of EBM

Let’s Test Our Knowledge:True or False?

• “Increasing employee satisfaction will increase productivity”

• “Conscientiousness is a better predictor of performance than intelligence”

• “There will be no difference between rating distributions whether or not the manager must share the rating with the employee being rated”

• “Encouraging participation in decision –making impacts performance more than setting performance goals”

Lessons To Be LearnedFrom This “Test”

• Using available and credible evidence is prudent… want your surgeon to do that?

• Practitioners have poor understanding – median score of 20; guessing would be 18 (35 T F questions)

• Research evidence does not always support what we believe, due to intuition or personal experience

• We more easily accept that which is consistent with our beliefs/what we think should be

Example Of UnderutilizedResearch Evidence

• A “realistic job preview” has a significant impact on unwanted turnover in first 18 months

• Think about impact of what a candidate/new hire is told about how performance is rewarded

• Pay secrecy has a negative impact on satisfaction (Lawler)… how much do you tell employees?

Example Of UnderutilizedResearch Evidence

• Unstructured one on one interviews shown to be the least valid selection tool

• Guess which is still the most common approach

• Biases impact perceptions:– Appearance; like me?

– Culturally mandated behaviors;• Over or under state qualifications

Practitioners Need To Understand…

The difference between correlation and causation

The difference betweencausation and reverse causation

Example

Satisfaction Performance?

Practitioners Must Understand Quantitative

Analysis Principles

Example: When comparing to market thestatistical measures used (median; mean)make a difference in validity of analysis

Example: Using multiple regression andother exploratory methods can help to determine what really causes what

Example: Developing, testing and applyinghypotheses provides a sound basis for decision-making

Hypothesis Formulation

• Develop a “If A, then B” hypothesis that identifies what needs to happen in order to close “is… should be” gaps

• Make explicit the assumptions

• Construct an experiment to determine if the hypothesis is supported

• Determine if the results are valid in other contexts (e.g., other company locations if a pilot is done in one location)

Example Of A Hypothesis

• “If salaries are raised by 10% turnover will drop by a third”

• Assumptions:– Higher pay leads to better retention– Pay is the reason people are leaving– Other factors are not causing turnover– What others do you think are implied?

• Formulate a hypothesis in the form “If A, B,…X, then turnover will decline by C” (in other words, put in all the factors you believe would impact turnover)

Example: FunctioningAs A Business Advisor

VP of Engineering reports to CEO that they are missing R&D objectives because ‘high’ turnover is causing poor performance

HR should not respond with a quick fix to the ‘problem’:

e.g., “We need to raise pay for Engineers to lower turnover”

An Appropriate Response

• “We have worked with Engineering management to identify what is causing the loss of valuable personnel, since this is causing us to miss our R&D objectives

• We conducted focus groups with Engineers• We analyzed the nature of the turnover• We evaluated the workforce skill mix and

compared it to the mix of work• We evaluated our pay structure compared

to the market

• AND OUR FINDINGS ARE…”

TotalTurnover

Voluntary Involuntary

Functional Dysfunctional

UnavoidableAvoidable

(Dysfunctional)

InternalFunctionalDysfunctional

Dysfunctional Turnover: Too High?

12%6%

6%

29%

3%14%

External 17%

4% 10%

5% 5%

Current Staff Mix In EngineeringCompared To Work Mix

Current Staff Mix

Consultant 20%

Senior 45%

Intermediate 30%

Developing 5%

Work Mix Required

Consultant 10%

Senior 25%

Intermediate 45%

Developing 20%

Conclusions: We are overstaffed at the most senior levels, resulting in work being done by people who are overqualified, too expensive and not motivated or challenged by lower level work… and “doing rookie work” has led to dissatisfaction on the part of senior people… not working at leading edge

Comparison Of Pay Structure & Pay Rates To Market Levels

Market Midpoint Avg Pay

Consultant 145 128 138

Senior 110 100 90

Inter-mediate

85 80 70

Developing 60 60 55

Making RecommendationsInformed By Evidence

• “We have identified a source of much of the dysfunctional turnover to be attributable to our pay ranges being low relative to market: we recommend adjusting them to market”

• “We recommend making equity adjustments to bring current pay rates to competitive levels”

• “We recommend hiring at the entry level and investing in training, to over time align the workforce mix to work mix”

Bottom Line:Make HR A Decision Science

• Accounting has evolved into Finance

• Sales has evolved into Marketing

• Both increasingly use science in their practice

• Being a “staff function” is fatal in today’s world

• So let’s transform HR into a decision science

You Can Impact TheQuality Of Decisions…Success Depends On:

• How you prepare yourself

• How you define issues/alternatives

• How you formulate hypotheses

• What evidence you use to decide

• How you present recommendations

• How you implement strategies

• How you evaluate outcomes

And when the answers are not clear…

Don’t hesitate to consult wizards

Robert J. GreenePhD, SHRM-SCP, SPHR, GPHR, CPHRC, CCB, CBP, GRP

• Reward $ystems, Inc.• 1917 Henley, Glenview, IL 60025-4242

• RewardSystems@sbcglobal.net

• RobertJGreene.com

• 847-477-3124

• Mission: “Helping Organizations

Succeed Through People”