Future of HR Metrics A Brave New World

1. Future of HR MetricsA Brave New World Jay J. JamrogExecutive Director, HRIJamrog@HRInstitute.org

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

6. Efficiency and Effectiveness

7. Impact Effectiveness 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? Efficiency Source: Boudreau and Ramstead

8. Impact Efficiency 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? Effectiveness Source: Boudreau and Ramstead

9. Internal and External Historical Benchmarks

10. Future / Strategic Focus The Role of HR • Change Agent • Staffing • Organizational design • Survey action planning • Performance measurement • Training and development • Strategic Partner • Strategic HR Planning • HR as Business Partner • Culture and Image People Processes • Administrative Expert • Compensation • Benefits • HR information systems • Compliance • Employee Relations Expert • Employee relations • Labor relations • Safety & workers’ compensation • Diversity and EEO Day to Day Operational Focus

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 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.

13. 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.

14. 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.

15. Starting with the Business Strategy

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

17. The Common HR Approach The Inside-Out 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 Source: Patrick Wright

18. The Better HR Planning Approach The Outside-In 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 Source: Patrick Wright

19. Metrics Model HR People Organization • Efficiency • Time to Hire • Cost per Hire • Headcount Ratio • Effectiveness • Customer Survey • “At the Table” • Practice/Process Impact • Efficiency • Cost per Unit • Shrinkage • Defects/Scrap • Effectiveness • Customer Satisfaction • Revenue Growth • Market Share • Efficiency • Direct Labor Costs • Indirect Labor Costs • Positions Unfilled • Effectiveness • Employee Satisfaction • Leadership Capability • Talent Retention • % Black Belt Leaders • Employer Brand Source: Patrick Wright

20. 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 Do We Really Measure how HR is Driving Business Performance?

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 HighPerformanceWorkforceStudy

23. Impact

24. Effectiveness Efficiency 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. Business Environment Company HR Department Outputs Inputs InternalFeedback:EfficiencyEffectiveness External Feedback:Impact

26. Scope of HR Measurement Approaches Value Scorecards and Drill Downs Strategic ImpactOrganizational EffectivenessValidity and RigorCausationLeading Indicators Data Systems and Portals Benchmarks Ad hoc HR Measures Time Source: Center for Effective Organizations, USC

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

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

32. 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?

33. The Alignment Challenge Fast - Logical ! Strategy Alignment = Successful Execution Slow . . . And follows a different logic . . . Fast - Logical ! People Processes Success and speed of execution depend on people alignment, Yet this is the hardest element to align!

35. What is the Alignment of People?

36. Research Team 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

37. Research Questions • 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 Strategy Alignment = Successful Execution People Processes

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 Five Key Elements Strategy • Marketplace Approach Alignment = Successful Execution • Customer Focus • Leadership Behavior • Performance Processes People Processes • Culture

41. Impact MeasurementIt’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

44. Conclusion

45. Key Attributes for the 21st Century HR Professional • Why vs How • Let me show you something • you don’t already know INTELLIGENCE CURIOSITY ACCOUNTABILITY • 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 Source: Steve Miranda

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

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

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

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

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