Future of HR Metrics A Brave New World Jay J. Jamrog Executive Director, HRI Jamrog@HRInstitute.org HR Continues to Evolve Impact/Contribution to the Business & the model defines our aspirations Add Value & Maximize Upside continue to grow Strategic HR Planning Culture & Image Organizational Design HR as Business Partner Survey Action Planning Staffing Employee Relations Labor/Union Relations Training & Development EEO/AA Performance Management Compensation Benefits Limit Liability & Protect Downside Safety & Workers’ Compensation Labor Relations Source: Rich Vosburgh HR Information Systems (HRIS) Compliance Employee Relations Personnel Human Resources A Century of Evolution in the Function Organizational Effectiveness 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 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 Efficiency and Effectiveness Three Levels of Metrics Efficiency Impact Effectiveness Efficiency Source: Boudreau and Ramstead • 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? Three Levels of Metrics Effectiveness Impact Effectiveness Efficiency Source: Boudreau and Ramstead • 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? Internal and External Historical Benchmarks The Role of HR Future / Strategic 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 People Processes Administrative Expert Employee Relations Expert • Compensation • Benefits • HR information systems • Employee relations • Labor relations • Safety & workers’ compensation • Diversity and EEO • Compliance Day to Day Operational Focus 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. Employee Relations Expert 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 # 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. Change Agent 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. Strategic Partner 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. Starting with the Business Strategy Basic Process for HR Strategy Scan the External Environment Identify Strategic Business Issues Identify People Issues Develop HR Strategy Communicate the HR Strategy The Common HR Approach The Inside-Out Approach HR practices, processes, and systems Source: Patrick Wright Articulate how what we do adds value to The business Communicate to the business what a good job we are doing The Better HR Planning Approach The Outside-In Approach Identify the business model components and areas to drive value Source: Patrick Wright 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 Metrics Model HR People Organization Efficiency Efficiency Efficiency • Time to Hire • Direct Labor Costs • Cost per Unit • Cost per Hire • Indirect Labor Costs • Shrinkage • Headcount Ratio • Positions Unfilled • Defects/Scrap Effectiveness Effectiveness Effectiveness • Customer Survey • Employee Satisfaction • Customer Satisfaction • “At the Table” • Leadership Capability • Revenue Growth • Practice/Process Impact • Talent Retention • Market Share Source: Patrick Wright • % Black Belt Leaders • Employer Brand 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 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 Impact Three Levels of Metrics Impact Impact Effectiveness Efficiency Source: Boudreau and Ramstead • 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? Business Environment Company HR Department Outputs Inputs Internal Feedback: Efficiency Effectiveness External Feedback: Impact Scope of HR Measurement Approaches Scorecards and Drill Downs Data Systems and Portals Benchmarks Ad hoc HR Measures Source: Center for Effective Organizations, USC Strategic Impact Organizational Effectiveness Validity and Rigor Causation Leading Indicators 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 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 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 Execution Strategy Alignment = Successful Execution People Processes To execute strategy you need to align your strategy, process and people! The biggest questions facing CEOs today  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 Alignment Challenge Fast Logical ! Strategy Alignment = Successful Execution Slow . . . And follows a different logic . . . People Processes Fast Logical ! Success and speed of execution depend on people alignment, Yet this is the hardest element to align! What is the Alignment of People? Research Team Dr. Albert A. Vicere Pennsylvania State University Dr. Miles H. Overholt Human Resource Institute & Riverton Management Consulting Group Dr. Elena Granell Instituto De Empressa, Madrid Jay J. Jamrog Human Resource Institute The University of Tampa Research Questions  Can we identify disconnects between people and strategy?  Can we identify disconnects between people and process? Strategy Alignment = Successful Execution  Can we identify strategy and operational blockages? People  Can we identify tensions that create disconnects and blockages Processes Grounded in Management Theories from key disciplines  Strategic Thinking  Marketing  Operations  Human Resources  Organizational Culture Included an analysis of four large data bases  Organizational DNA  Customer Focused Cultures  Employee Behavior  Organizational Culture The Alignment of People Five Key Elements Strategy  Marketplace Approach  Customer Focus  Leadership Behavior  Performance  Culture Alignment = Successful Execution People Processes Processes 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” 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 Conclusion Key Attributes for the 21st Century HR Professional • Why vs How • Let me show you something you don’t already know INTELLIGENCE ACCOUNTABILITY • Hit it to me / My team • How good: - Do I HAVE to be? - CAN I be? Source: Steve Miranda CURIOSITY • So much to learn So little time • I wonder what will happen today Faster up the Learning Curve HIGHER PERFORMANCE SOONER WHAT YOU NEED TO KNOW PROCESS Pushing The HR Curve Success = Intelligence + Access Source: Steve Miranda The “Evolving” HR Professional Never Forgets… It’s Not HR’s Productivity We Should Be Concerned About The “Evolving” HR Professional Never Forgets… Getting Computers To Do the Work Is A Waste of Time The “Evolving” HR Professional Never Forgets… Because You Can Do It Doesn’t Mean You Should Do It “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