Role Of HR

“HR is a tool, not the objective”

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A strategic approach means taking a "longer" term, "big picture" approach to HR. Being strategic means operating HR programs or initiatives with the goal of making a direct contribution toward meeting major corporate long-term objectives. Rather than focusing on internal HR “issues”, a strategic focus means addressing and solving “business” problems through the effective use of people management

programs. The primary goal of strategic HR is to increase employee productivity and corporate revenue.

Definition Of HR

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Elements Of HR

HR increases employee productivity and profits An external focus assures HR efforts are aligned with business

goals and with changes in the business environment HR helps to build a performance culture HR provides a competitive advantage

There is an “external” focus HR is proactive and future focused

There is a coordinated effort There is a global approach HR builds a brand Technology permeates everything

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Competitive Analysis Measure and reward managers for good people management

Pay for performance

SWAT team

analyzing "failures" Corporate Headcount “Fat” Assessment Plan “Smoke” Detectors (Predictors) Bench Strength (Back Fill) Plan Bad Management Identification Program

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UNDERSTANDING THE ROLE OF HR WITH THE “FIVE LEVELS OF HR CONTRIBUTION“MODEL

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Level One –Information Management and Basic Transactions

Processing of new-hire documentation, payroll, separations and benefits enrollment/changes

Providing answers to

employee and manager questions pertaining to policy, benefits,

employment law

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Level Two – Providing Functional Services

This level incorporates many of the activities that create the standard functional areas within HR including:

staffing, compensation and benefits, employee relations, and training

The formation of standardized processes and policies for requesting more staff, developing staff, compensating staff, and performance management

Basic reporting on the status of talent management efforts

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Level Three – Coordination of Efforts to Improve Productivity

Improving the over-all productivity of the workforce requires that HR develop initiatives to continuously increase the dollar value of employee output while maintaining or reducing the average labor cost per unit.Productivity Defined:

The term productivity means different things to different people; In Terms of HR-

a measure of efficiency with regards to the use of human resources within a firm. In either case, productivity is simply the value of the outputs a firm produces divided by the costs of producing those outputs. The formula for productivity is simply: Productivity = Outputs / InputsTo increase productivity, outputs must increase more than costs. There are two basic ways to accomplish this, decrease costs while maintaining output, or increase output while maintaining

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How to Measure Employee Productivity?

HR must accept that it is their job to influence others within the organization to increase the productivity of our employees.

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I. Revenue per Employee as a Presumptive Measure of Productivity :-

This is the first method to calculate Employee productivity. The formula to calculate this is

Revenue per Employee = Total Revenues /

Average # of Employees

Calculating HR Productivity Measures

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1) A good starting metric, and one fairly easy to calculate is revenue per employee. The two pieces of date required to calculate this measure, total current revenues and current employee count, are often easily available

2) This metric is a very good indicator of efficiency when comparisons are made between firms of similar size in the

same industry.

Merits:

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1) It fails to include the cost of the employees in the calculation

2) This is important because firms with a large number of highly paid employees would on the surface, report the same ratio of revenue per employee as a low paying firm even though the actual cost of employees would be significantly higher.

Demerits:

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II. People Cost to Total Cost Ratio

Another simple ratio to calculate is to identify what percentage of total variable costs are people costs. Effective management strategies reduce costs while simultaneously improving employee output. The very best firms keep the ratio of labor costs constant and they use technology and productivity tools to increase output.

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III. People Cost To Output Value And Units

The last simple ratio to calculate is to identify the ration between people costs and thedollar value of the firm’s output. A similar measure calculates the labor cost per unit of production.

The ratio of people costs to the value of the firms

output = Value of Firm Output / People Costs   

Labor costs per unit of production (Units) = Number of Units Produced / Labor Hours Used

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:

More Complex Productivity Measures

1) Profit Per Employee

Similar to the revenue per employee calculation, but the major difference here is that profit is substituted for revenue. For most firms, profit is a more accurate reflection of company success than revenue.

 Profit per Employee = Gross Profit / Average # of

Employees

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2) Revenue Per People Rupee Another measure of productivity is a ratio between

revenues and total employee costs. 

Revenue per People Dollar = Total Revenues / Total People Costs

When calculating total people costs, include the cost of all wages, benefits, and HR administration.

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3)People Profit

The ultimate measure in productivity is called "people profit." It is a ratio between profit and total employee costs. Firms that generate more dollars of profit per dollar spent on employee costs are the most productive.

People Profit = Operating Income (Gross Profit

– SG&A Expense) / Total People Costs

When calculating total people costs, include the cost

of all wages, benefits, and HR administration.

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Things HR Can Do To Increase Productivity

Retention tools Referral programs Metrics (to increase accountability) and rewards that are tied to performance and productivity Identifying what motivates, challenges and frustrates employees Performance management programs that drop poor performing managers and employees Incentive systems that focus on rewarding managers for great "people management" performance On the job learning and growth opportunities (job rotations and special projects) Rewards for sharing best practices between managers Measures and rewards that Cross functional lines in order to increase cooperation Forecasting and workforce planning

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Level Four :Development of

Competitive Advantage through Talent Level four signifies a major transition point as HR work begins to provide a strategic contribution.

Increasing competitive advantage is a focused effort to ensure that each key HR program and service is best in class when compared directly to that of competing firms.

The goal in level four is to identify and exploit weaknesses found in

competing organizations.

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Typical competitive advantage building efforts include:

Competitive analysis of people programs found in competing organizations

Workforce planning and productivity forecasting

Employment branding Competitive intelligence gathering

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Level Five: Develops Solutions to Strategic Business Problems and Opportunities

Level five represents the pinnacle of work providing strategic contribution in HR

They attempt to address strategic business problems in areas such as product development, product/service quality, customer service and corporate position

Typical strategic business problem and opportunity efforts include:

HR involvement in turnaround swat teams HR consultation in product design and development efforts Analysis of workforce management impact on time-to-market

and innovation Management of performance culture HR involvement in merger and acquisition planning