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Future of HR Metrics A Brave New World Jay J. Jamrog Executive Director, HRI

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Presentation on theme: "Future of HR Metrics A Brave New World Jay J. Jamrog Executive Director, HRI"— Presentation transcript:

1 Future of HR Metrics A Brave New World Jay J. Jamrog Executive Director, HRI

2 Add Value & Maximize Upside Limit Liability & Protect Downside Impact/Contribution to the Business Strategic HR Planning Organizational Design HR as Business Partner Compensation Benefits Safety & Workers’ Compensation Compliance Labor/Union Relations Staffing Training & Development Culture & Image EEO/AA Employee Relations Performance Management Survey Action Planning HR Information Systems (HRIS) A Century of Evolution in the Function Labor Employee Personnel Human Organizational Relations Relations Resources Effectiveness HR Continues to Evolve & the model defines our aspirations continue to grow Source: Rich Vosburgh

3 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

4 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

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6 Efficiency and Effectiveness

7 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

8 Effectiveness EfficiencyImpact 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

9 Internal and External Historical Benchmarks

10 The Role of HR People Processes 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

11 Administrative Expert Compensation Payroll as %--total operating costs (benchmarked); compensation targets benchmarked against peer companies; turnover rates; quality of management review and Board material. Benefits Medical 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.

12 Employee Relations Turnover rates, “Best Place to Work” rankings, legal compliance, efficiency, union activity (or lack thereof). Labor Relations Absence 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 & EEO Attitude survey measures of perceived fairness; # people trained in Diversity Awareness and Diversity Leadership programs; perceived tolerance.

13 Staffing $ to Fill; Days to Fill; # Filled; Quality of Hires; Retention of Hires. Organizational Design Benchmarking 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 Management Performance 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

14 Strategic HR Planning Quality of succession management program assessment. Quality of Bench Strength. Quality of Succession Plan Follow-up (% Actions Completed). HR as Business Partner Any business measure of effectiveness. 360-Degree Feedback on the extent to which HR is considered a partner by those they support. Culture and Image Employee Satisfaction data; quality of the description and utilization of culture & image understanding; standing on the Fortune 100 Greatest Places to Work. Strategic Partner

15 Starting with the Business Strategy

16 Basic Process for HR Strategy Scan the External Environment Identify Strategic Business Issues Develop HR Strategy Communicate the HR Strategy Identify People Issues

17 The Common HR Approach HR practices, processes, and systems Articulate how what we do adds value to The business Communicate to the business what a good job we are doing The Inside-Out Approach Source: Patrick Wright

18 The Better HR Planning Approach Identify the business model components and areas to drive value Develop an HR strategy to execute the business model with relevant metrics Use the metrics to demonstrate or prove how we are driving business performance The Outside-In Approach Source: Patrick Wright

19 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 OrganizationHRPeople Metrics Model Source: Patrick Wright

20 Do We Really Measure how HR is Driving Business Performance? Business Objectives  Driven to Win  Flexible  Embracing Risk  Creative  Global  Fast Actual HR Measures  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

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22 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

23 Impact

24 EffectivenessEfficiency 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

25 Company Business Environment HR Department Outputs Inputs Internal Feedback: Efficiency Effectiveness External Feedback: Impact

26 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 Impact Organizational Effectiveness Validity and Rigor Causation Leading Indicators

27 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

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29 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

30 Food for thought  “… it is not the lack of a strategy that causes [Senior Executives] to lose sleep, but rather their organization’s inability to execute against a strategy… ” Booz-Allen & Hamilton  “Having a great strategy is no longer enough – lots of companies can develop great strategies. To win, companies must be able to turn great strategy into great performance. In short, they must be able to execute.” Marion Associates  “Execution is a disciplined process or logical set of connected activities that enables an organization to make its strategy work. Execution can itself be a source of competitive advantage.” Hrebiniak, Making Strategy Work, Wharton

31 Execution Strategy People Processes Alignment = Successful Execution To execute strategy you need to align your strategy, process and people!

32  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

33 The Alignment Challenge Strategy PeopleProcesses 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!

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35 What is the Alignment of People?

36 Dr. Albert A. Vicere Pennsylvania State University Dr. Elena Granell Instituto De Empressa, Madrid Dr. Miles H. Overholt Human Resource Institute & Riverton Management Consulting Group Jay J. Jamrog Human Resource Institute The University of Tampa Research Team

37 Research Questions Strategy PeopleProcesses 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

38 Grounded in Management Theories from key disciplines  Strategic Thinking  Marketing  Operations  Human Resources  Organizational Culture

39 Included an analysis of four large data bases  Organizational DNA  Customer Focused Cultures  Employee Behavior  Organizational Culture

40 The Alignment of People Strategy PeopleProcesses Alignment = Successful Execution Five Key Elements Marketplace Approach Customer Focus Leadership Behavior Performance Culture Processes

41 Impact Measurement It’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”

42 Higher Values for HR Success for those who:  Provide new thinking on old topics  Balance increased strategic role with employee champion role  Closely align HR strategies to business needs  Navigate hard economic times without damaging higher order or systems mechanisms  Use systems thinking and measurement (efficiency, effectiveness and impact)  Help create systems and process for today’s realities and deleting systems that do not add value

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44 Conclusion

45 Key Attributes for the 21 st Century HR Professional INTELLIGENCE ACCOUNTABILITY CURIOSITY Source: Steve Miranda Hit it to me / My team How good: - Do I HAVE to be? - CAN I be? So much to learn So little time I wonder what will happen today Why vs How Let me show you something you don’t already know

46 Faster up the Learning Curve WHAT YOU NEED TO KNOW HIGHER PERFORMANCE PROCESS SOONER

47 Pushing The HR Curve # People Who Know the Solution Problem Complexity Success = Intelligence + Access Source: Steve Miranda

48 It’s Not HR’s Productivity We Should Be Concerned About The “Evolving” HR Professional Never Forgets …

49 Getting Computers To Do the Work Is A Waste of Time The “Evolving” HR Professional Never Forgets…

50 Because You Can Do It Doesn’t Mean You Should Do It The “Evolving” HR Professional Never Forgets…

51 “It is not the strongest of the species that survive, nor the most intelligent, but rather the one most responsive to change.” Charles Darwin, “On the Origin of the Species by Natural Selection”, 1859 Charles Darwin, “On the Origin of the Species by Natural Selection”, 1859

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