Presented by Dr Douglas teDuits THEHRA Winter Conference 1 245 200 PM January 30 2017 Lord Kelvin To measure is to know If you can not measure it you can not improve it ID: 712207
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Slide1
Using Data Metrics to Demonstrate HR Strategic Value
Presented by: Dr. Douglas teDuits
THEHRA
Winter Conference
1
2:45 – 2:00 PM
January 30, 2017Slide2
Lord Kelvin
To
measure is to know
.
If
you can not measure it, you can not improve it
.
When
you can measure what you are speaking about, and express it in numbers, you know something about it; but when you cannot measure it, when you cannot express it in numbers, your knowledge is of a meagre and unsatisfactory
kind…Slide3
Strategy Implementation Barriers
Only 5% of the workforce understands the strategy
Only 25% of managers have their actions linked to organizational strategy
85% of executive teams spend less than an hour/month discussing strategy
60% of the organizations don’t link budgets to strategySlide4
HR StrategySlide5
Elements of an HR Scorecard
HR Deliverables:
Connected
to the
organization’s
business strategy.
Focus on just a
few key deliverables
,
linked to several performance drivers
, that the business senior line managers understand their significances and
are willing to pay for
.
Consider HR deliverables as
organization capabilities
. Organization capabilities that offer a
competitive advantage
are tough for the business to ignore.
Focus on HR
performance drivers
and HR enablers.
HR
Efficiencies “
doables
”:
Select
key efficiency metrics carefully.
Divide the metrics into CORE and STRATEGIC
Core
metrics measure significant costs
to the organization; however do not necessarily make a significant impact to the over-all strategy.
Strategic
metrics measure the HR Deliverables
tied to the Organization’s business strategy. Slide6
High Performance Workplace Practices
The
KSA’s
of a company’s current and future employees are influenced by:
Comprehensive employee recruitment and selection systems
Extensive employee involvement and training programs
Incentive-based compensation and performance management systems
The results include:
Increased employee motivation
Reduced shirking of responsibilities
Enhanced retention of quality employees
Encouragement of low performers to leave the
company
Gruber
, D.,
Smerek
, R., Thomas-Hunt, M., & James E. (2015)Slide7
Turnover ExamplePredictive variables for employees who have the intention to leave
Perceptions of job
insecurity
Manager/departmental turnover rates
Compensation
Job satisfaction
Tenure
Demographical variables (age, sex, education, etc.)
Organizational commitment
Job expectations met
Perceptions of organizational culture
Job enrichment interventions (reduced turnover)
Realistic job previews (reduced turnover) Slide8
Calculating Turnover
For
the last
12-month
period
, add up the number of voluntary resignations.
Next
divide by the total number of employees at the end of the same 12 month period
.
Multiple
by 100 to get %
Resignations
=
555
Number
of employees =
5000
555
÷
5000
= .11 x 100 = 11%Slide9
Cost of Employee Turnover
Turnover cost indicates how much turnover is costing and its impact on the operations of the agency.
Number
of
employees = 5000
Annual
turnover = 11
%
Number of employee turning
over = 555
Average
turnover cost per
employee =$1,694
Total annual
cost = $940,170
Savings from reducing turnover by
10% = $ 42,350 (555
x .
05 = 56) 56 fewer employees turning over 56 x $1694 = $94,864)Turnover costs also take into account indirect costs. Research indicates that the indirect costs of turnover can be 2 to 5 times higher than direct costs. These costs are more difficult to quantify and assign a dollar figure to, but they are very real.
Gruber, D.,
Smerek
, R., Thomas-Hunt, M., & James E. (2015)Slide10
Direct Costs of Turnover
Recruiting Costs
Advertising costs
Interviewing Costs (time spent x wage of the interviewer(s)
Referencing Costs (time spent x wage of the interviewer(s)
Administrative Costs (time spent x wage of administrator(s)
Processing of paper work for newly hired employee
Processing of paper work for exiting employee
Supervision Costs (time spent x the wages of the supervisor/manager
Training Costs (Time spent training (xx
hrs
) x wage of employee); (Time spent training (xx
hrs
) x wage of trainer(s); (Materials, equipment, job aides)
Separation Costs (Average cost of unemployment, separations pay, etc. ); (Overtime costs to do work of exiting employee )
Gruber, D.,
Smerek
, R. (2015)Slide11
HR Can Make a Difference Provide direct and economically significant contributions to the company
But you must have
effective
HRM
practices that are
linked to the strategic mission
Basic Requirement include
Must
add value
to the firm’s production processes
Skills the firm seeks must be
rare
Human capital investments are not easily replicated
(imitated)
Gruber
, D.,
Smerek
, R., Thomas-Hunt, M., & James E. (2015)Slide12
Proactive HRM Practices
Influence employee skills through
acquiring and developing human capital
Use
solid recruiting techniques
with
reliable and valid selection procedures
to assist with the
identification and development of the right employee
Provide
formal and informal training
that can further influence employee development
Skill development
OJT
Coaching/mentoring/
sponsering
Management developme
ntImportant to remember that even highly-skilled employees need to be motivated and encouraged to work harder and smarterHighly structured jobs, micromanagement, and not allowing employees to use their highly-honed talents will disempower employee successSlide13
Organizational Financial Performance
Financial returns associated with
people investments in progressive
HRM
systems are generally sustainable
HRM
practices
can produce considerable increases
Extensiveness
of recruiting, selection validity, use of formal selection procedures directed and positively related to firm profits
Adoption of employee
training programs and increased financial performance
Linking appraisals to compensation connected to firm profitability Slide14
The HR Scorecard
Who are HR’s customers?
How do we measure our customer satisfaction?
What are HR financial measures?
Example
Slide15
Creating An HR Scorecard: Four Elements
The HR Scorecard should contain the following four elements:
High-Performance Work System-
the elements specifically selected to assist HR
to
implement the strategy through the HR deliverables.
HR alignment with external systems-
matching the HR system to the requirements of the organization’s business strategy.
Key
HR deliverables-
are key human capital contributors to implementing the organization’s business strategy.
HR efficiency-
measurement of costs controls and productivity of HR performance.
Creating
an HR Scorecard: The HR Scorecard: Linking People. Strategy, and Performance by Brian E Becker, Mark
Huselid
and David Ulrich. Harvard Business School Press.
Cost Control
Value Creation Slide16
Creating an HR Scorecard
The four elements balance
Cost Control
and
Value Creation
Cost
control comes from measuring HR efficiency.
Value
Creation comes through measuring HR deliverables, external HR system alignment, and the High-Performance Work System.
A
strategic HR measurement system is
correctly balancing
efficiency and value creation
, while being guided by a broad strategy and not a narrow HR perspective.
Creating
an HR Scorecard: The HR Scorecard: Linking People. Strategy, and Performance by Brian E Becker, Mark
Huselid
and David Ulrich. Harvard Business School Press. Slide17
Lagging Indicators
Performance measures that
represent the consequences of actions already taken
Output measures,
easy to measure
but
difficult to influence or change
(already happened)
Financial Measures
Weight loss example – what is the lagging measure?
HR Examples? Slide18
Leading Indicators
Input based,
difficult to measure
but
easy to influence
Business drivers of lagging indicators
Relationship between leading and lagging (if/then)
If you improve the performance of a leading indicator, then you will improve/“drive” a better performance of the lagging indicator
HR examples
– lowering employee absenteeism will improve employee satisfaction
Factors that
measure progress toward HR goals
and HR Strategy Map (business drivers)
Actions HR does for organizational success over time
Weight loss example – what are the leading indicators? Slide19
Creating An HR Scorecard: Leading & Lagging Indicators
The HR Scorecard should contain the following four elements:
Leading Indicators- Typically “input” oriented.
High-Performance Work System
HR alignment with external systems
Lagging Indicators- Typically “output” oriented.
Key HR deliverables
HR efficiencies Slide20
Creating An HR Scorecard: STRATEGIC HR Metrics
Select the
HR metric(s)
that could be considered strategic based on the Organization’s Goal.
Company A has a business goal to have
qualified successors ready for promotion within three years
for each of the top positions in each division.
Talent Acquisition of managers - Time to fill.
Percentage of managers who have completed all e-training requirements in the Learning MGT system.
Numbers of managers per division rated
ready now
for promotion by their supervisors, who have also indicated
a willingness
to
relocate and
rated over 100 points on their leadership assessment score.
Average leadership assessment scores for managers in grades 20-25 (director level and above) Slide21
Creating An HR Scorecard: The Bottom Line
Use it to reinforce the distinction between HR
doables
and HR
deliverables
.
Use it to control costs and create the HR value proposition
Use it to measure leading indicators - Key performance drivers aligned to the company’s business plan
Use it to assist HR professionals to focus on what’s important
Slide22
Drs. Robert Kaplan & David Norton
"The balanced scorecard retains traditional financial measures. But
financial measures
tell the story of past events, an adequate story for industrial age companies for which investments in long-term capabilities and customer relationships were not critical for success. These financial measures are inadequate, however, for guiding and evaluating the journey that information age companies must make to create future value through investment in
customers
, suppliers,
employees
,
processes
, technology, and innovation."Slide23
Drs. Robert Kaplan & David NortonBenefits of Balanced Scorecards
Holistic – few key things
Integrates various corporate programs
Brings strategic measures to lower levels of the organization – role with overall organizational performance Slide24
Balanced Scorecard Model
Adapted from Robert S. Kaplan and David P. Norton, “Using the Balanced Scorecard as a Strategic Management System,” Harvard Business Review (January-February 1996): 76.Slide25
Financial Measures
Revenues
Costs
Net Operating Income (
NOI
)
Return on Investments (ROI)
Earnings Before Interest, Taxes and Depreciation (
EBITD
) –
N
et Income
Risk Assessments
Cost-Benefits Analysis Slide26
Internal Business Processes
Recruiting & Selection Process
Performance Management
Recognition and Rewards
Workforce Planning
Succession Planning
Data Sharing & Integrity
HR
S
atisfaction SurveysSlide27
Employees’ Learning and Growth
Increased Need for Knowledge Workers (people are the warehouse)
Leadership & Development
Skill Gaps & Improvements Employee Goals
Technology Skills
Learning is more than training
Mentoring &
Sponsoring
Opinion surveys & Engagement surveysSlide28
Customer Perspectives
Who are they?
What are their expectations?
Communications Systems
Customers Satisfaction
Employee Relations SurveysSlide29
Strategy MappingSlide30
Dashboards
Visual representations of the
most important measures
and targets identified that need to be achieved one or more of the the organizational/departmental strategy.Slide31
Excel DashboardsSlide32
More Creative DashboardsSlide33
Good DashboardSlide34
Bad DashboardSlide35
Annual Success Plan Regional Airlines
Safety
Finance
Reliability
Service
People