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The Case Against Splitting HR: How to Become a True Strategic Advisor
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Speaker: David Weisbeck Chief Strategy Officer Visier
Moderator: Ladan Nikravan
Senior Editor Workforce magazine
The Case Against Splitting HR: How to Become a True Strategic Advisor
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Ladan Nikravan Senior Editor Workforce magazine
The Case Against Spli<ng HR: How to Become a True Strategic Advisor
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David Weisbeck Chief Strategy Officer Visier
The Case Against Spli<ng HR: How to Become a True Strategic Advisor
© 2014 Visier™
The Case Against Splitting HR: How to Become a True Strategic Advisor
Dave Weisbeck, CSO, Visier January 21, 2015
Page 11
WORKFORCE INTELLIGENCE SOLUTIONS. SMART. INTUITIVE. COMPLETE.
2 0 1 4 H o t 1 0 0 Best Privately Held Software Companies
Page 12
SOME OF OUR AMAZING CUSTOMERS
Page 13
TOPIC’S TODAY
1. The case for and against splitting HR
2. Factors driving the demand for HR to play a more strategic role in the business
3. How HR can re-skill and overcome the barriers
to adopting a data-driven culture
Page 14
The case for and against splitting HR
Page 15 15
I talk with CEOs across the globe who are disappointed in their HR people. They would like to be able to use their chief human resource officers (CHROs) the way they use their CFOs—as sounding boards and trusted partners—and rely on their skills in linking people and numbers to diagnose weaknesses and strengths in the organization, find the right fit between employees and jobs, and advise on the talent implications of the company’s strategy. But it’s a rare CHRO who can serve in such an active role. Most of them are process-oriented generalists who have expertise in personnel benefits, compensation, and labor relations. They are focused on internal matters such as engagement, empowerment, and managing cultural issues. What they can’t do very well is relate HR to real-world business needs. They don’t know how key decisions are made, and they have great difficulty analyzing why people—or whole parts of the organization—aren’t meeting the business’s performance goals.
Ram Charan
Page 16
" 55% of CEOs consider the CHRO a key player in strategic planning
" 56% of CEOs agreed insufficient talent within their org is a key challenge with serious near term financial implications
" Yet 37% of CEOs said their CHRO doesn’t know the business well enough
16
LACK OF BUSINESS SAVVY
Source: Economic Intelligence Unit – CEO Perspectives
Page 17 17
Page 18
" Most CHROs (and HR practitioners) are process-oriented generalists § Have expertise in personnel benefits, compensation, and labor
relations § Have difficulty relating HR to real-world business needs § Have difficulty analyzing why people—or whole parts of the
organization—are not meeting the business’s performance goals.
" Split HR into two: § HR-A (for administration):
- Primarily manage compensation and benefits - Report to the CFO
§ HR-LO (for leadership and organization) - Focus on improving the people capabilities of the business - Report to the CEO
18
WHY SPLIT HR?
Page 19
BECAUSE IT WORKS.. when it works.
19
WHY NOT SPLIT?
“Eight years of research into Watson Wyatt's Human Capital Index® (HCI) has consistently found a strong correlation between effective HR program design and financial performance. Indeed, the link goes beyond correlation: Effective HR programs are a leading indicator of financial performance.”
Towers Watson
We found that companies that are stronger in people management have a correspondingly higher financial performance. … In contrast, companies with the worst financial per-formance show a greater need for action across virtually all 27 HR subtopics… This has been a consistent finding… it is clear that the most successful people companies consistently outperformed the market, by nearly 100 percent.
Boston Consulting Group
Page 20 20
In HR (or finance or IT), 20% of the professionals are exceptional, adding value that helps organizations move forward, 20% of HR folks are locked into a fixed mindset and lack either competence or commitment to deliver real value, and 60% are in the middle. … I advocate teaching the 60% what they can do to deliver value.
Page 21
" HR professionals fall into three categories:
1. Reactors: Ensure compliance with policies and respond to business needs when asked
2. Partners: Collaboratively work with business units toward mutual goals
3. Anticipators: Use data to predict talent gaps in advance and provide insights into how talent relates to business goals
21
Page 22
1. Reactors: Ensure compliance with policies and
respond to business needs when asked 2. Partners: Collaboratively work with business
units toward mutual goals 3. Anticipators: Use data to predict talent gaps in
advance and provide insights into how talent relates to business goals
POLL: INTO WHICH CATEGORY DO YOU FIND YOURSELF MOST OFTEN?
22
23
Report Global Leadership Forecast 2014/2015, by Development Dimensions International, found:
• 22% are Reactors: Ensure compliance with policies and respond to business needs when asked
• 60% are Partners: Collaboratively work with business units toward mutual goals
• 18% are Anticipators: Use data to predict talent gaps in advance and provide insights into how talent relates to business goals
Page 24
Factors driving HR to be more strategic
Page 25 25
Fragile Economic Recovery
• Downward pressure on prices • Uncertain economic future • But, CEOs are starting to shift from survival to
growth mode
“76% of CEOs have cut costs in the last 12
months.”1
Adjusted for inflation, the cost of labor has increased 42% in the
last 13 years2
Need for more
responsive, proactive, and agile planning
1. PWC 2014 CEO Survey 2. Bureau of Labor Statistics
Page 26 26
Globalization
• Global markets are increasingly important • By 2025 China will have 45% of global F500 • Increasing proportion of global GDP
is coming from emerging markets
36% of the world's GDP
comes from global business - and
knowledge work is growing 30% faster than labor-intensive
work2
Need to compete,
analyze and compare global options for growth, as part of
planning
“50% of CEOs want to increase headcount next
year.”1
1. PWC 2014 CEO Survey 2. McKinsey Global Institute
Page 27 27
6% of high-performing
employees in US organizations voluntarily changed jobs in 2013, the highest rate in 10 years.
93% of CEOs recognize the need to change, or are changing, their strategies for attracting and retaining talent.
Hiring, new jobs, and voluntary turnover are all at the highest levels
in 4 years
Bureau of Labor Statistics
PWC, 2014 CEO Survey
Page 28
Demographic Shift & Skills Shortages
• The working-age population is undergoing a major geographic shift • Experienced Baby Boomers are retiring • Power is shifting from employers to employees as the labor market
becomes a seller’s market
28
Need to ensure have the skills needed to achieve corporate
objectives.
Need to manage rising labor costs in emerging
economies.
Page 29
2014 HARVARD BUSINESS REVIEW: TOP WORKFORCE CONCERNS
*HR Joins the Analytics Revolution, HBR Analytic Services
Page 30
EXTERNAL FORCES DRIVING HR TRANSFORMATION
Hire Right
Demographic Shift
Retain Top
Talent Skills
Shortages
Ensure Planning
Agility Economic Flux
Optimize Spending
Competitive Pressures
more than ever before HR can play a critical role in driving business performance.
Page 31 31
HR leaders who are proactive users of data may have a better chance of winning the CEO’s confidence.
HR Executive, Gaining their Trust, Sept 2014
Another key finding is that HR leaders will have a seat at the table for strategic discussions only if they can demonstrate the business impact of HR. …Our experience has found that data-driven, analytical HR departments are more likely to play a strategic role in their organizations, and the survey data supports this.
Boston Consulting Group, Creating People Advantage, 2014-15
Page 32
How HR can re-skill and overcome the barriers to
adopting a data-driven culture?
Page 33
1. Know the Goal § Always act with the end in mind. Purposeful. With intent.
2. Big Picture View § Mental model of the end-to-end system. Past, present, future.
3. Think Divergently § Consider the alternative path. Look outside current boundaries.
Be open. Ask “What if?”
4. Think Critically § Break things down to root causes. Analyze. Inspect.
5. Align § Seek convergence, not consensus.
33
WHAT DOES IT MEAN TO BE STRATEGIC?
Page 34
STRATEGIC BUSINESS PARTNER
Default to Action § Communicate clear goals § Monitor, measure and report on
progress to goals § Review and adjust plan on a
regular basis § Create accountability
Alignment § Coaching § Consulting – 2-way
conversation § Be willing to challenge – have
a point of view § How do I build relationships
and collaborate?
Impl
emen
tatio
n
Human Resource Expertise § Talent Management
§ Recruiting § Compensation
§ What processes and technology improve efficiency?
§ What are the people goals and measures of success?
Business Expertise § Who is the customer? What
problem do you solve for them?
§ Who is the competition? How do you compare?
§ What are the business goals and measures of success?
Exp
ertis
e
Page 35
BECOMING A MORE STRATEGIC BUSINESS PARTNER
1. Analyze: Apply critical and divergent thinking
2. Align: Understand the Big Picture of the business, and seek convergence
3. Act: Create the goal. Make plans and decisions based on data and fact
35
Page 36
RECRUITING CONCERNS
" How can we recruit more cost effectively?
" How can we ensure we hire more top performers?
" How can we fill positions faster, without sacrificing quality?
" How do we ensure we are competitive in the hiring market?
36 36
The competition for talent is
global
The hiring market is
increasingly competitive, as demographic shifts occur
Page 37
OLD SCHOOL
§ React: Request, approve, fill position
§ Look at metrics like: § Time to Hire § Cost to Hire § Speed to Hire
Page 38
NEW SCHOOL
Analyze Align Act
§ What are the bottlenecks in the hiring process?
§ What recruiting sources are the best?
§ What candidates
succeed?
§ What roles are critical to business success?
§ What roles should we backfill?
§ What roles do we need to support new initiatives?
§ What if we hire in a different location?
§ How are we tracking against our hiring plan and total costs?
§ Should we adjust our plans?
Page 39
ANALYZE: RECRUITING IS A PROCESS
Page 40
ALIGN & ACT: WHO, WHERE, CRITICAL?
Page 41
RETENTION CONCERNS
" How can we ensure we are retaining critical roles and top performers?
" How can we optimize our compensation and ensure we are paying for performance?
" Who is at risk of leaving? " Why are people leaving? " Where should we welcome
departures?
41 41
93% of CEOs recognize the
need to change, or are changing, their strategies for attracting and retaining
talent.
6% of high-performing
employees in US organizations voluntarily
changed jobs in 2013, the highest rate in 10 years.
Page 42
OLD SCHOOL
§ React: § Deliver a Turnover dashboard § Perform Exit Interviews
§ Look at metrics like: § Turnover by roles, location, and department
Page 43
NEW SCHOOL
Analyze Align Act
§ Where can we expect resignations?
§ Why are people leaving?
§ Who will leave next?
§ What roles are critical to business success?
§ What roles should we backfill?
§ What roles do we need to support new initiatives?
§ What is our backfill plan?
§ How are we tracking
against our hiring plan and total costs?
§ Should we adjust our plans?
Page 44
ANALYZE: MOVE FROM WHAT HAPPENED TO WHAT WILL HAPPEN
MICRO VIEW: Who are we likely to lose?
Page 45
ANALYZE: MOVE FROM WHAT HAPPENED TO WHAT WILL HAPPEN
MACRO VIEW: How many, and where will we lose people?
Page 46
ALIGN & ACT: RETENTION
46
Think of retention in terms of: " CAPACITY:
§ Will we have the staffing levels required to sell, produce, serve,… § How will retention impact our productivity?
" CAPABILITIES § Do we have the right mix of skills and talent across the organization.
How will retention impact this? Think of retention as part of your plan. Measure attrition against your plan.
Page 47
WORKFORCE COST CONCERNS
" How much does our workforce really cost?
" How can we optimize our workforce costs?
" How are our costs changing over time?
" Are we on track with our plan and budget?
" How can be better map to Finance?
Most HR departments lack
a complete view of workforce costs
76% of CEOs have cut
costs in the last 12 months.
People are 70% of a
company’s cost – and are the “final frontier” of savings
in competitive markets
Page 48
OLD SCHOOL
§ React: § Run a comp review process § Print a binder of headcount and comp costs and see if it
matches Finance’s § Freeze hiring
§ Look at metrics like: § Base comp § Bonus comp § Benefits
Page 49
NEW SCHOOL
Analyze Align Act
§ What do our total costs look like?
§ What is contributing to our cost increases?
§ Where can we
optimize costs?
§ What is the budget? What should it be?
§ Where do we want to invest or reduce costs?
§ What are the talent implications?
§ What should our workforce plan be?
§ How are we tracking against our plan and total costs?
§ Should we adjust our plans?
Page 50
ANALYZE : WHERE ARE COSTS GOING?
Page 51 51
ALIGN : MEASURE ALL OF THIS (AT LEAST WORK TOWARDS THIS)
Page 52
ALIGN : WHAT SHOULD WE BE SPENDING?
52
Page 53
ALIGN : OUR SPENDING PLAN IS…
53
Page 54
ALIGN : WHERE WILL WE INVEST SPENDING?
54
Page 55
ACT : FORECAST MONTHLY
55
RECOMMENDATIONS:
§ Most compensation analysis by HR is annualized – dig into actuals, it isn’t just for finance
§ Forecast – take actuals plus intended hires & costs and project to where you will end the year – then evaluate if you are on target
§ Review this monthly with leadership
Page 56
RESOURCES AT WWW.VISIER.COM
56
Page 57
DISCUSSION
" Dave Weisbeck " dave.weisbeck@visier.com
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