Transcript India, Market and Britannia

Sreekanth K Arimanithaya
CHRO
Measuring
Human Capital
Impact to
Business
Does HR add Value
to Business?
2
Does HR add value to business?
•For decades, human resource managers have believed that their function enhances
performance. This contention has been met with scepticism on the part of
executives, who wonder whether funds allocated to the human resource function
are good investments.
•Does human resource management matter for organizational performance? –
we take stock of the available evidence. Based on data from over 19,000
organizations, reserchers conclude that human resource management adds
significant value to organizations.
•In addition, the value added is strongest when human resource systems are
emphasized rather than individual practices, when human resource management
decisions are tied to strategy.
Indeed, in many industries (such as those with low margins), the decisions and
actions of skilled HR managers can represent the difference between making
profit and losing money.
Does HR add value to business?
•For 10 of the 13 practices investigated, there is compelling evidence
that each significantly affects performance. Three specific factors that
impact the effectiveness of the practices discussed in the previous section:
(1) vertical alignment between HRM and firm strategy;
(2) horizontal alignment among the HRM practices; and
(3) the work context.
•Data from over 19,000 organizations makes it clear that HRM adds value. In
particular, we believe that managers will see the most gains from HRM by
developing a comprehensive and internally cohesive HRM system that
is embedded in the organization’s history, culture, and
structure. Doing so not only enhances performance, but also leads the
firm’s system to be more difficult for competitors to imitate.
Relevance….
5
Look at the facts…..
6
Ram Charan
If organizations managed money the way they managed
people, they would be bankrupt!
Source: Talent Masters
Providing ROI on HR Programs & Impact of
Talent on Business
Importance of Measurements
“If we can’t express what we know in the
form of numbers, we really don’t know
much about it. If we don’t know much
about it, we can’t control it. If we can’t
control it, we are at the mercy of
chance”
Mike J. Harry
Six Sigma Academy
9
Human Capital is increasingly critical
Value of typical 500 company
70%
20%
1980
Today
Intangible
Assets
Yet we don’t study
how to measure HC
Imapct !!!
Building Blocks
Business Intelligence
Reports
Analytics
Employee Data linkage to
Business Metrics
(KPIs and Dashboards)
Analyzer (Semantic
searches & Algorithm)
Data (Value, Contextual)
Soseeo Collaborator
Decision Enabled Talent Management
Strategy
Identifying Talent
• Where, what and
how much?
Organization Capability
Operation Plan
Attracting Talent
Developing Talent
Retaining Talent
Leveraging Talent
• Who, when, how
soon, what quality
•How much developed,
productive, engaged
•How long staying, Who
is staying, Are they
discretionary efforts.
•Do we move internally,
Are we optimized and
orchestrated
MANAGE
GOVERN
(Ensure right talent is
available at the right
place and managers have
the ability to manage the
life cycle)
SECURE
(Ability to understand
return on investment
on Talent
management
programs and
initiatives)
(Ability to ensure employee
knowledge is retained and IP
of the organization is
safeguarded. Also understand
risk against execution of
strategy with respect to
Talent Management)
Linking HR Analytics to Business
So What
What
Now What
Showing HR Measurements implication & Correlation to business
such as revenue, profit, Market Share, TSR etc
•Measure HR variables which are critical to HR function and
business
•Measure the HR- Business ‘Value Creation Process’
•Measure HR ‘Strategic Asset’
•Measure HR practices which are creating ‘Investor Intangibles’
•Measure those elements that contribute to Strategy
Implementation
Showing what organization should do to improve performance of
HR variables to improve business performance.
Linking HR Analytics to Business
What
(What to Measure in
Human Capital)
So What
(What is the Implication of
these HR measures to
Business Measures)
Now What (Once I
understand HR – Business
measurement relationship,
how can I improve HR
performance so that
business impact increases.
Manage ( Set of HR
Functional Analytics to
understand efficiency and
effectiveness of HR
Function)
HCM Efficiency and
Effectiveness across
Employee Life Cycle
Management
(ys)
Revenue, Operating
Income, Market Share, TSR
impact caused by HCM
impact
(Ys)
Causes of HR process
variance , poor
performance/ variables
impacting efficiency &
effectiveness of HR
functions (Xs)
Govern ( Set of Analytics to
understand ROI of HR
programs and Investment
in Talent )
Human-Capital Facts
What are the key indicators
of my organization’s overall
health?
Human-Capital Investment
Analysis Which actions
have the greatest impact
on my business?
Analytical HR
Which units, departments,
or individuals
need attention?
Secure ( Set of Analytics to
understand risk profiling of
talent and knowledge in
execution of strategy)
Understand HCM risk
profile of organization in
execution of strategy
Predict the impact of HCM
risk profile in execution of
strategy
Control the critical HCM
risk variables so that
strategy is seamlessly
executed.
HR Functional Score Card
Revenue per FTE, Employee Satisfaction, Retention
of Key Talents, Attrition Analysis, Labor Productivity,
Time to Proficiency,
HR Operating Cost, HR Transaction Cycle Time, HR/FTE ratio, Separation
cost,
Recruitment
Employee
Development
Total Rewards
HR Consulting/
BP
- Quality of Hire
- Total Cost (to market)
- Time to Proficiency
- Employee Satisfaction
- Talent Mix Hiring
- TR cost to revenue
- Talent Up-gradation
- Retention/ Attrition
- Diversity Hiring
- ROI on TR programs
- Cross Skill Ratio
- Labor Productivity
- New Hire Attrition
-
Cycle Time
Cost
% Position Filled
Source Mix
New Hire Satisfaction
Hit Ratio
- Promotion /
Progression Ratio
-
Total Rewards (cost by
components)
Benefit cost to payroll
Budget Variance
Reward / Employee
Year to Year ratio
(Merit/ Variable)
-
Hours trained
(Employee/Course)
Training Cost
Training Satisfaction
PMS completion
Skill Gap ratio
Succession ratio
Centre Of Scale Statistics
15
- Employee Touch Points
- PIP Action identified Vs
Completed.
HR Metrics Maturity Journey- Talent
Acquisition
•Quality of hire
(Strategic HR Workforce)
Effectiveness Improvement
•New Hire Talent Retention
•Talent Mix
•Diversity Hiring
•Cycle time of hiring
•New Hire satisfaction
•Cost of Hire
•Hit Ratio
•% position filled
•Source Mix
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Efficiency Improvements
(Technology-enabled Service Delivery)
HR Metrics Maturity Journey- Managing Performance
• Demography and rating
objective analysis
•Gauge R & R of PMS
•Content
analysis and
rating correlation
(Strategic HR Workforce)
Effectiveness Improvement
•R & R analysis
•PMS rating
quality Audit
•Employee
Satisfaction on
PMS Process
•Vitality
distribution
variation
•Potential
Analysis
•% of Appraisal
completion
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Efficiency Improvements
(Technology-enabled Service Delivery)
HR Metrics Maturity Journey- Managing Performance
• Demography and rating
objective analysis
•Gauge R & R of PMS
•Content
analysis and
rating correlation
(Strategic HR Workforce)
Effectiveness Improvement
•R & R analysis
•PMS rating
quality Audit
•Employee
Satisfaction on
PMS Process
•Vitality
distribution
variation
•Potential
Analysis
•% of Appraisal
completion
18
Efficiency Improvements
(Technology-enabled Service Delivery)
HR Metrics Maturity Journey- Talent
Development
•Transfer of
learning
•ROI on Training
(Strategic HR Workforce)
Effectiveness Improvement
•Time/ cost to
proficiency
•IDP ratio
•IDP execution
Vs Completion
•Skill Inventory
•PMS rating
•Training
satisfaction
•Promotion ratio
•Ratio
•ROI on CM/ SM
programs
•Succession
plans
•Training Programs
•Hrs. Trained
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Efficiency Improvements
(Technology-enabled Service Delivery)
HR Metrics Maturity Journey- Talent
Retention
•Churn Management ratio
•Cost of TO
(Strategic HR Workforce)
Effectiveness Improvement
•Impact analysis
•ROI on RP
•AA by
Demography
•Attrition Analysis
•AA by Mgr.
•Attrition rate
•AR by category
Efficiency Improvements
20
(Technology-enabled Service Delivery)
Govern:
This
Human
Capital
Analytics provide insight to HR and
business leaders understanding on
return on investment on Talent
management programs
and
initiatives
Governing Human Capital thro’ Talent Analytics
Human-Capital Facts
What are the key indicators of my
organization’s overall health?
JetBlue analysts developed a metric—the
“crewmember net promoter score”—that monitors
employee engagement and predicts financial
performance.
Analytical HR
Which units, departments, or individuals
need attention?
Managers at Lockheed Martin use an
automated system to collect timely
performance-review data and identify
areas needing improvement.
Human-Capital Investment Analysis Which
actions have the greatest impact on my
business?
By keeping track of the satisfaction levels of
delivery associates, Sysco improved their retention
rate from 65% to 85%, saving nearly $50 million in
hiring and training costs.
Workforce Forecasts How do I know when to
staff up or cut back?
Dow Chemical has a custom modelling tool that
predicts future head count for each business unit
and can adjust its predictions for industry trends,
political or legal developments, and various “what if”
scenarios.
Talent Value Model Why do employees choose
to stay with— or leave—my company?
Google suspected that many of its low performing
employees were either misplaced
in the organization or poorly managed. Employee
performance data bore that out.
Talent Supply Chain How should my
workforce needs adapt to changes
business environment?
in the
Retail companies can use analytics to predict
incoming call-center volume and release hourly
employees early if it’s expected to drop.
Secure: This Human Capital Analytics
provide insight and ability for business
leaders to ensure employee knowledge
is retained and IP of the organization is
safeguarded. Also understand risk
against execution of strategy with
respect to Talent Management
Secure
(Ability to ensure employee
knowledge is retained and
intellectual property of the
organization is safeguarded in the
organization. Also understand risk
against execution of strategy with
respect to Talent
Dimensions of “Secure”
Talent Dimension
Potential Impact/ Risk areas to
Business
Workforce Demography
-Aged Workforce
Loss of Knowledge, Skills & Competency
Workforce Demography
-Diversity profile not aligned with customer
and vendor profile
Impact to Revenue and growth
Globalization
-Off Shoring (not optimized)
Low productivity
Outsourcing
Intellectual Property
Knowledge Management
Temp Staffing
Intellectual Property
Knowledge Management
Poor People Management
High labor Churn
Lack of Leadership Development and
Succession Planning
Low Quality Leadership Bench thus
impacting growth
Securing Firm’s Most Important
Asset- Talent.
•HR Audits
•Business Reviews
•HR Analytics
•Operational Reviews
•SLA reviews with HRO/ RPO
vendors
•Talent Reviews
Understand
Predict
•Simulations
•Modeling
•Strategic Planning
•Operational Planning
Secure
(Ability to ensure employee
knowledge is retained and
intellectual property of the
organization is safeguarded in the
organization. Also understand risk
against execution of strategy with
respect to Talent
•Business Controls
•Process Reengineering Measures
•Knowledge Management
•New Controls
•New Programs
•New Initiatives
Control
Knowing what to measure!
“Not everything that can be
counted counts and not everything
that counts can be counted”
Thank You
What? Of Talent Acquisition
Key
Measures
Operational Definitions
Number of
positions
filled
Number of employees budgeted (minus) number of employees onboard.
Source Mix
% of resumes received from different sources
Cost of Hire
Total cost of hiring which include cost such as advertising, agency and search firm fees,
referral bonuses, travel costs, relocation costs, and company recruiter costs. These costs
account for 90 percent of the cost per hire. To obtain the full cost of hire, add 10 percent to
the sum of all components to account for all other expense items such as testing, reference
checking and other minor expenses. Total hires equal add hires plus replacement hires.
Cost per Hire = Total Hiring Cost x 1.1 / (Add + Replacement Hires)
Cycle Time Of
Hiring
Shows the average number of days it takes from the date of requisition is received until an
offer is accepted. Requisition is when a replacement or add position becomes available. The
total days to fill are not an average per hire and do not include college hires. Add hires are
people hired into newly-approved positions; replacement hires are people hired into already
existing positions within the organization.
Time to Fill = Days to Fill / (Add + Replacement Hires)
New Hire
Satisfaction
Is the total satisfaction of new hires on hiring process and experience of an organization
from sourcing to on boarding (throughout the candidate life cycle management.
What? Of Talent Acquisition
Key Measures Operational Definitions
Talent Mix
Mix of talent (%) join an organization in a year diversity of industrial experience, academic
excellence, domain knowledge, etc. This can be pre defined by organization.
Diversity Hiring
% of gender diversity joined an organization.
Quality of Hire
Quality of hire is dined using four parameters:
1.% of involuntary attrition happened in first 6 months due to poor performance.
2.% of voluntary attrition happened in first year due to lack of job or organization fit.
3.Data captured through survey on perceived quality or otherwise by manager after 3-6
months.
4.New Hire vitality (Number of top performer emerged in out of new hires)
New Hire
Retention
Voluntary Attrition in first 6 months.
So What
Key Measures
Business Implications
Number of positions
filled
Number of open position unfilled which have direct impact on revenue for all revenue
generating positions and will effect efficiency impact for all other support functions
Source Mix
Source mix is an important component of talent acquisition strategy and recruitment
operation plan which will have an impact on quality of candidate, cycle time of hiring,
cost of hiring and conversion rate etc. For example junior level position employee
referral is a good source of hiring wherein not only reduces cost and cycle time, but
also increase candidate joining probability.
Cost of Hire
Cost of hire is one of the component of overhead cost which have bearing on
operational cost and profit margin of the organization. In an organization wherein
employee churn is very high this cost can be substantial.
Cycle Time Of Hiring
Cycle Time of hiring is an important metric which influences candidates ability to join
and availability to business. Candidate not available to business on time can lead to
huge revenue loss and business inefficiencies.
New Hire Satisfaction
Candidate/ Employee experiences an organizations value proposition/ brand at the
very early stage during selection/ life cycle process. Perceived value proposition
impact employee engagement for newly joined employee and thus productivity.
Talent Mix
Talent mix and diversity in the workplace brings diverse talents to the organization
and provides a wider set of beliefs and experiences to draw innovative ideas. This is
very essential to drive greater business results.
Diversity Hiring
So What
Key Measures
Business Implications
Quality of Hire
Talented and quality resource many fold impact to business compared to
average resources. As per AFP software engineering productivity study,
highly talented programmer produces 12 times better results compared to
average performer and poor performer impact negative 3 times compared to
average performer.
New Hire Retention
Losing newly hired talent not only add to operational expenses on account of
rehire, but also impact revenue loss in case revenue generating position and
efficiency with respect to support function.
Now What of Talent Acquisition
Key Measures (Y) Causality {Y = f (x1,x2……Xn)
Y= Number of positions
filled
f (umber of open positions decided not to fill, start of recruitment process, , ability
of recruitment process, candidate joining the firm,….Xn)
Y= Source Mix
f (promotional scheme of organization on each channel of sourcing, recruitment
team capability, hiring manager’s belief in sourcing channel,….Xn)
Y= Cost of Hire
f (source cost, recruiter cost, relocation cost, ….Xn)
Y= Cycle Time Of Hiring
f ( time taken to clarify profile, sourcing channel, time taken to source, time taken
select, number of steps in selection processes, time taken to decide to offer, time
taken by candidate to decide and accept….Xn)
Y= New Hire
Satisfaction
f ( candidate experience with recruiter, candidate experience with hiring manager,
candidate experience with HR manager, candidate experience with other hiring
tools and methodologies used… Xn)
Y= Talent Mix
f ( sourcing channel, talent market penetration, JD, hiring manager belief, hiring
process capability…. Xn)
Y= Diversity Hiring
Y= Quality of Hire
f ( sourcing channel, talent market penetration, hiring manager belief, hiring
process capability…. Xn)
Y= New Hire Retention
f ( sourcing channel, hiring process capability, expectation matching, on boarding
processes. …. Xn)
Business Intelligence: Pulling this all together:
What , So What and Now What
Key Measures (Y)te
HR Business Intelligence
Number of positions filled
A single index derived out of lost revenue due to positions not filled in case
of revenue generating positions and efficiency loss incase of support
functions. This index also need to point out 3-4 causes for not filling these
positions.
Source Mix
Source Mix % tracking ensures appropriate quality, reduces cost of hiring
and cycle time. To get appropriate source mix target organization need to
monitor sourcing strategy, monitor recruitment process and team capability
and sourcing promotional scheme.
Cost of Hire
Cost of hire has direct impact to operating expenses thus impacting
operating margin. Maintaining optimum cost also essential for ensuring
right quality and cycle time of hiring. Cost of hiring need to be monitored
through controlling sourcing cost, advertising cost, selection cost and
recruitment team cost.
Cycle Time Of Hiring
Cycle time of hiring ensures that talent/ staff is onboard on time thus
ensuring revenue target and key business deliverables are met. Cycle Time
is impacted by inadequate sourcing, too high sourcing time, too lengthy
selection processes, managers not taking decisions on time, candidates
not taking decisions, candidates dropping etc.
Business Intelligence: Pulling this all together:
What , So What and Now What
Key Measures (Y)te
HR Business Intelligence
New Hire Satisfaction
New Hire Satisfaction is an important measurement to understand the
satisfaction level of new hire on selection processes and experiences with
new organization. This not only ensure the employee join the organization,
but also determine organization future ability to attract talent thus impacting
business performance. The factors impacting New Hire satisfactions
includes candidates experience with hiring managers, recruiters, HR,
recruitment tools and methodologies and time taken to decide.
Talent Mix
Diversity of Talent joining an Organization. Diversity of Talent include
gender, experience, age, nationality, experience, culture etc. These
diversity drives greater workplace innovation and greater efficiency
including revenue and operating income. Diversity can be impacted by
sourcing channel, selection process, HR programs etc.
Diversity Hiring
Quality of Hire
Better quality drives greater results. As research shows quality personnel
can deliver 5 to 12 times productive jobs than average resource. Quality of
candidate is depend upon sourcing channel, managers selection capability,
selection tools used etc.
New Hire Retention
New Hire Retention impact both top line and bottom-line of organization.
New Hire Retention depends on candidate job fit, organization fit, candidate
quality etc.
Data from ERP/
XL
Putting this all together
Number of Positions Filled
Functions
Sales
Professional Support
Support
Marketting
HR
Finance
Administration
Enginnering
Total
Revenuew per Employee
Professional Support Reve per employee
Value per employee
Top Drivers for Not Filling
Recruitment Freez
Hiring Inefficiency
Talent Market
Budgetted Positions
Revenue Generating Support
200
30
50
Open Positions
Total
Revenue Support
200
20
30
5
50
2
12
12
5
5
5
5
2
2
400
400
704
Logic
Entered in
Simply Ask
Total
1
2
1
1
Gap
Revenue Support Total
20
180
180
5
25
25
2
48
48
1
11
11
2
3
3
1
4
4
1
1
1
32
368
64
640
Business Impact
•Lost Business Value
•Key Actions to be taken