DEBORAH L. KERR, PH.D.PARTNERAFFINTUS

DEBORAH@AFFINTUS.COM

The Sudoku of HRNINE NUMBERS TO PROVE YOUR VALUE

“Dirty” Harry Callahan Played by Clint Eastwood

The Enforcer 1976

Personnel? That's for [idiots].

Overview

Measuring HR performanceAcquiring skill in building HR performance

measurement systems

Reporting HR value to management

Three measures

9 = 3

• Cost of hiring

• Productive workforce

• HR Staff Knowledge

Key Challenges In Managing Organizational Risk

Availability of information

Timeliness of information

Organizational structure

People

Necessary level of investment

Technology

Over-regulation

Competition

Internal audit framework

Discrepancy between leadership expectation/bus

unit practices

71% of US CEOs consider people

the biggest challenge in managing organizational

risk.

What to measure• Mission achievement

Productive workforce

• Customer Satisfaction Management satisfaction with knowledge base Customer (manager) rating of HR service

• Internal Processes Time to hire Quality of hire Staff knowledge

• Knowledge and Data Systems Turnover HR Staff Knowledge

• Finance / Budget Budget status

Establish Baseline Data: Cost of Hiring

Your Company Name

a) Number of Employees 2010

b) Estimated Turnover in 2010

# of hires or placements

c) Average Turnover Rate %

= b / a

d) Average Annual Salary $

e) Average cost per placement 30%

% of salary

f) Cost of Placements 2010 $

= (.30 X d) X b

You Make the Call!Assumptions

2010 revenue 10,000,000$ 2010 budget* 9,400,000

*Selling, General and Administrative Expenses2010 HR budget (3.5% of total budget) 329,000 2010 salaries and benefits (57% of total budget) 5,358,000 2010 return on salaries and benefits 6%

Do the math...

Value of 5% reduction in HR costs: 5% x $329,000 16,450$ Value of 2% productivity gain: 2% x $5,358,000 107,160

Difference = 90,710 Productivity gain as % of HR budget 33%

WHY HR IS HARDCausal Loop Diagram of Performance Measurement and

Management

Based on J. Park’s unpublished paper Alternative Views on the Principles of Performance Management: Causal Loops Diagram Approach to the Practice of Performance Management, Texas A&M University, March 2009.

Agreed UponPerformance Target

Support for Performance Managemen

t

Quality of PerformanceInformation

Accuracy of PerformanceInformation

Cultural Support

Goal Ambiguity

Non-Regular Use

Scarce Resources

Data DrivenDecision Making

Usefulness and Use of PerformanceInformation

Number of ParticipantsEfficiency of

Performance Indicator

Competing Demands

Trust in PerformanceInformation

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You are Here

• “…talent is the most under-managed corporate asset of the past two decades.”

• “…talent driven companies of the Fortune 500 experienced nearly 82% greater profit than their competitor[s].”

http://www.htrends.com/researcharticle37148.htmlJames Houran 2009.

Andy Warhol 20th century painter and film maker

1928-1987

They say that time changes things, but you actually have to change them yourself.

How to Pick an Offensive Star, Really

•on base percentage

•slugging percentage

•avoiding outs

getting hits

Star Performance: On Base Percentage

Formula

• H = Hits • BB = Bases on Balls (walks) • HBP = Times Hit By a Pitch • AB = At bats • SF = Sacrifice Flies

OBP H + BB + HBP

AB + BB + HBP + SF

=

Ichiro Suzuki: On Base Percentage

Formula

• H = 262• BB = 49(walks) • HBP = 4• AB = 704• SF = 3

.41447 262 + 49+ 4

704+ 49+ 4+ 3

=

Not bad…

Texas Rangers– American League WestJuly 7, 2011

Wins Losses Games Behind

Payroll

Texas 47 41 - $91,885,265

LA Angels

46 42 1.0 $138,999,024

Seattle Mariners

43 44 3.5 $84,865,600

Oakland A’s

39 49 8.0 $65,275,500

http://mlb.mlb.com/mlb/standings/index.jsp?tcid=mm_mlb_standings accessed July 7, 2010

151%

92%

71%

2.13%

8.51%

17.0%

Why measure performance?

• Focus organizational attention Make sure the organization is making decisions and taking

action to support the success of the organization.

• Support effective management decision-making Performance data help get people involved.

• Validate / support operational actions Identify practices that drive success and which don’t matter.

Ed LawlerSusan Mohrman

20th century academicsCreating a Strategic Human Resources Organization

Stanford Business Books, 2003

…the HR strategic-partner role is too important to leave to someone with an HR background...

What to measure in HR

• Mission achievement Productive workforce

• Customer Satisfaction Management satisfaction with knowledge base Customer (manager) rating of HR service

• Internal Processes Time to hire Quality of hire Staff knowledge

• Knowledge and Data Systems Turnover HR Staff Knowledge

• Finance / Budget Budget status

Three measures

9 = 3

• Cost of hiring

• Productive workforce

• HR Staff Knowledge

Mission: Productive Workforce

Formula PW = HC – (%pNH)

• PW = Productive Workforce• HC = Head Count• %pNH = New Hire Productivity Estimate

Customer: Manager Satisfaction with Knowledge Base -

Attendance at Core Courses

Formula CK = [(NC)(CC) / (N)(TC)]

• CK = Core knowledge as % of courses completed• NC = Number New Employees completing

courses• CC = Completed Core Courses for the time

period• N = Number New Employees• TC = Total Core Courses

NC 6CC 2N 10TC 5

CK 24%

Customer: Manager Satisfaction with HR

Sample survey items

• HR is committed to manager success. • HR gets in the way of my efforts to be efficient and

effective. • There is open and honest communication between

managers and HR staff.• HR provides useful information and service to managers.• In the last month I have used knowledge, tools, or

strategies that I learned through HR.• Overall HR adds value to my work.

Internal Process: Time to Hire

Formulas TF = RR – OD Time to acceptance

TS = RR – SD Time to start

• TF = Time until offer acceptance• TS = Time until new hire starts work• RR = Date requisition received• OD = Date offer accepted• SD = Date new hire starts

Internal Process: Quality of Hire

• N = Number of people hired per year

• T = Average number of years that employees work in the position(s).

(in decimal values)

• rxy = Increased hiring effectiveness

• Zx = Value of high performance

• Cy = Assessment cost per use

• SR = Selection ratio (default: 5)

Formula $performance = [(N) (T) (rxy) (Zx)] – [(N)(Cy)(SR)]

Charles Handler and Steven Hunt. 2004. Estimating the Financial Value of Staffing-Assessment Tools. Workforce Online, March 2004 http://www.workforce.com/archive/article/23/40/88.php.

Assessment Method Effectiveness Cost

Random Hiring 0 0

Unstructured Interview

0.02 $50

Structured Interview 0.10 $75

Knowledge & Skills Tests

0.15 $50

Talent Measures: Work Style /Personality

0.15 $75

Talent Measures: Ability

0.25 $75

Internal Process: Quality of Hire Example

N 25 T 2.5 rxy 0.30 Zx (dollars) 19,500$ Cy (dollars) 150$ SR 5

Performance in $$ 365,625$ Cost 18,750$ Additional Perf 346,875$

Internal Process: Employee Knowledge

Knowledge Assessment Scale: 1 - 4

Team Members Employee 1 Employee 2 Employee 3 Employee 4 Avg ≥ 2

Skill 1 2 1 3 3 2.25 xSkill 2 3 3 1 1 2.00 xSkill 3 1 1 1 1 1.00Skill 4 3 2 1 2 2.00 xSkill 5 3 3 3 3 3.00 x

4 of 5 = 80%

Knowledge and Data Systems: Turnover

Formula T = (NSFY / AEFY) X 100

• T = Turnover • NSFY = Number of separations during the fiscal year• AEFY = Average number of employees during the fiscal

year

Knowledge and Data Systems: HR Staff Knowledge

1 = beginner2 = proficient (little supervision needed)3 = skilled (no supervision needed)4 = expert (teaches others, recognized specialist)

HR Knowledge Assessment Scale: 1 - 4

Team Members Employee 1 Employee 2 Employee 3 Employee 4 Avg ≥ 2

Workforce Planning and Employment 3 1 3 3 2.5 xHuman Resource Development / Training 4 3 1 1 2.25 xMeasurement and Evaluation 1 1 1 1 1.00Total Rewards 3 2 1 2 2.00 xRisk Management 4 3 3 3 3.25 xeSystems 3 3 2 4 3.00 x

5 of 6 = 83%

Finance / Budget: Salary Budget Projection Tool

“Dirty” Harry Callahan Played by Clint Eastwood

Magnum Force 1973

A man’s got to know his limitations.

What to measure?

Measure

• things people care about

• things that tell a story… the story

about how your work has

influenced organizational results

What makes a good measure?

• Goal related

• Receiver / client group needs the info

• Sensory description

• Success drivers / predictive

• Barriers

• What do you count now?

• What could you count now?

Thinking about data• Does it make sense? Does it look right?• What can I compare this to?• Do the data reported elsewhere differ from mine? • What is new or different?• What might be driving the change?• What is the result of each area measured?

If we increase the productivity of our workforce, what will that mean for the organization?

If time to hire is reduced, what will that mean for managers?

• Do the data show differences in subsets? By department By manager By season

Edgar Wilson Nye19th century American journalist

1850 – 1896

Describing Wagner’s music

It’s not as bad as it sounds.

Communicating Results

• Summarize your message in one sentence.

• Start at top (mission) or bottom (financial)

• Discuss each measure Result Cause / Driver Action plan

Sample Report: Time to Hire

• Time to hire averages 86 days – this is too expensive . A position vacant for this long costs us approximately $7600 in addition to the cost of hiring which averages about 30% of annual salary.

• Analysis – two important factors are driving this result: (1) little time for HR and hiring managers to review large numbers of résumés and (2) finding time to conduct good interviews

• HR proposes testing the incorporation of objective assessments to better screen candidates and provide scientific data to the decision making process. We have identified three options that we will pilot. Final decision to be made in 6 weeks. Four hiring managers from different departments are helping with the trial.

Developing a measurement system is a journey.

Initial

Managed

Defined

Predictable

Optimized

Inconsistent

Repeatable

Competency management

Capability management

Continuous improvement

• Inconsistency of action• Are people really important?

• Higher priority of HR practice• Can HR manage itself?

• Architecture of management practice• Do all managers have HR capability?

• Predictive capability• Measure critical capabilities quantitatively •Managers empower teams and focus on strategic issues.

• Team, unit, organization aligned with goals • Innovation: incremental and innovative•Workforce practices support a culture of performance excellence.

Mark Twain(Samuel Langhorne Clemens)

19th century American humorist, satirist, lecturer and writer1835 –1910

The man who carries a cat down the street by the tail has 10 times the experience in cat-carrying than one who watches.

dlkerrDeborah L. Kerr, Ph.D., has over 24 years experience in executive management, consulting, and teaching. She is a partner at affintus llc, a performance-predicting selection service that matches job candidates with the highest likelihood of success to open positions at companies looking to build a culture of top performers. For the past 11 years she has also served on the graduate faculty at Texas A&M University in the George Bush School of Government and Public Service where she teaches policy formation, organizational performance measurement and management, and advanced management.

From 2005 – 2007 she served as Senior Vice President of Human and Organizational Development at the American Heart Association, Texas Affiliate (AHA). As a member of the AHA’s executive team, she led the design and implementation of human capital systems, strategy execution, and performance management. Prior to her AHA work, Deborah served for 14 years on the executive team at the Texas State Auditor’s Office (SAO) where she helped implement innovative processes that have been adopted by audit organizations across the U.S. She directed the development of the SAO’s scorecard and, in 2004, the SAO was named to the Balanced Scorecard Hall of Fame, recognizing its performance management system as one of the world’s best.

Deborah’s results in implementing performance management systems has been written about in Financial World magazine and featured in both Paul Niven’s 2002 book Balanced Scorecard Step by Step and Mohan Nair’s 2004 book Essentials of the Balanced Scorecard.

Deborah is often asked to speak at national, regional, and state conferences about managing strategy and systems, measuring results, and managing people. She served on the National Advisory Panel for Human Resource Performance Measurement at the Maxwell School of Government, Syracuse University, to develop public sector performance measures for the “Grading Government” series published in Governing magazine. Her articles about organizational management have been published in Perform magazine and the Journal of Accountancy and have been published in Italy and India as well. She co-authored a chapter on consulting to public sector organizations, which is included in the textbook In Action: Building a Successful Consulting Practice published by ASTD in 2002.

Deborah holds degrees from St. Mary’s College (Notre Dame), Columbia University, and The University of Texas at Austin.

Contact

Deborah L. Kerrdeborah@affintus.com

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HR Florida Sudoku