Stratetic HRM & HR Scorecard

Strategic Human Resource Management and the HR Scorecard

Prof. Abhipsa Mishra

SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra

Session objectives

1. Outline the steps in the strategic management process.

2. Explain and give examples of each type of companywide and competitive strategy.

3. Explain what a strategy-oriented human resource management system is and why it is important.

4. Illustrate and explain the HR Scorecard approach to creating human resource management systems

5. Discuss HR Metrics

6. Elaborate High Performance Work Systems


Strategic Human Resource Management

It is the linking of HRM with strategic goals and objectives in order to improve business performance and develop organizational cultures that foster innovation and flexibility.

• It involves formulating and executing HR systems—HR policies and activities—that produce the employee competencies and behaviors, that the company needs to achieve its strategic aims.


The Strategic Management Process

• Strategic Management– The process of identifying and executing the organization’s

mission by matching its capabilities with the demands of its environment.

• Strategy– A chosen course of action.

• Strategic Plan– How an organization intends to balance its internal strengths

and weaknesses with its external opportunities and threats to maintain a competitive advantage over the long-term.


Business Vision and Mission

• Vision

– A general statement of an organization’s intended direction that evokes emotional feelings in organization members.

• Mission

– Spells out who the company is, what it does, and where it’s headed.

SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra

Types of Strategies

Diversification Strategy

Geographic Expansion Strategy

Vertical Integration

Strategy

Corporate-Level Strategies

ConsolidationStrategy


Types of Strategies (cont’d)

Cost Leadership Focus/Niche

Business-Level/Competitive Strategies

Differentiation


Porter’s generic strategies

1. Overall cost leadership (McDonalds, Wal-Mart)

• Low-cost-position relative to a firm’s peers

• Manage relationships throughout the entire value chain

2. Differentiation (Harley Davison, Apple)

• Create products and/or services that are unique and valued

• Non-price attributes for which customers will pay a premium

3. Focus strategy (Rolex, Lamborghini)

• Narrow product lines, buyer segments, or targeted geographic markets

• Attain advantages either through differentiation or cost leadership


Value Chain


Porter’s generic strategies


Achieving Strategic Fit

• The “Fit” Point of View (Porter)

– All of the firm’s activities must be tailored to or fit the chosen strategy such that the firm’s functional strategies support its corporate and competitive strategies.

• Leveraging (Hamel and Prahalad)

– “Stretch” in leveraging resources—supplementing what you have and doing more with what you have—can be more important than just fitting the strategic plan to current resources.


Strategic Human Resource Challenges

Corporate productivity & performance improvement

efforts

Increased HR team’s

involvement in design of

strategic plans

Basic Strategic Challenges

Expanded role of employees in the

organization’s performance

efforts


Human Resource Management’s Strategic Roles

Strategy Execution Role

Strategic Planning Roles

Strategy Formulation Role


Creating the Strategic Human ResourceManagement System

Human Resource Professionals

Employee Behaviors and Competencies

Components of a Strategic HRM System

Human Resource Policies and Practices

HR Metrics

HR’s role as an Information Analyst


What are HR Metrics?

• Relating to measures

• Involving or proceeding by measurements

• Method of tracking the effectiveness of HR

• What you value about HR programs and the equivalent monetary value


HR Excuses Against Metrics

• “You can’t measure what we do…”

• Lack of clear purpose for measuring

• Lack of cooperation between departments

• Difficulty extracting data from multiple systems

• Difficulty understanding and analyzing metrics

• Numbers used to draw inaccurate conclusions


Why Measure?

If you can’t measure it, you can’t understand it. If you can’t understand it, you can’t control it.If you can’t control it, you can’t improve it.

The Improvement Process

Understand

Measure

Control

Improve


Importance of HR Metrics

• Quantify the value of HR

• Guide workforce strategies

• Maximize HR’s return on investments

• Provide measurement standards

• Show what HR contributes to business results

• Make the business case for HR’s objectives


Metrics helps to…

• Communicate performance expectations

• Discover gaps in strategies

• Make better decisions

• Address the trend towards value reporting


What to Measure?

Measure outcomes not activity

Begin with efficiency measures

Develop metrics geared towards your organization’s goals and strategies

Establish metrics to monitor key HR practices proven to grow human capital

Use metrics that will encourage change and help us make better decisions about human capital


• Creating a measurement team is recommended

• Communicate importance of metrics to team

• Team should select metrics together

• Determine how metrics will be defined

• Obtain leadership buy-in

• Disseminate the tasks

Collecting Data


Strategic Relationships

• Process must be owned by Executives, Managers, HR, Finance, and IT

• Takes time and will power

• May require an investment in information technology support services to support human capital measurement and reporting opportunities

• Requires the fostering of key strategic relationships to ensure favorable outcomes


Getting Started

Assess your data

Build your metrics

Create meaningful measures


• What do you already track?

• Where should you focus?

• What metrics would be useful?

Assessing Your Data


• Determine your measures

• Select benchmarks for comparison Similar services Same size Similar organizational structure Similar budget

• Compare your results

Building Your Measures


Data Integrity

• Quality of data is critical

• Garbage in….garbage out

• So…..

Check the math

Watch out for zeros

Compare results to each other

Conduct a sanity test


Data Sources

• HRIS (PeopleSoft, SAP, CostPoint, etc.)

• Surveys

• Interviews

• SHRM

• Watson-Wyatt

• WorldatWork

• Mercer

• Saratoga Institute

• IPMA


What Can Be Measured?

Staffing and Hiring Work Processes Competent Employees

Turnover RatesReduced Time-to-Fill for

VacanciesTraining Costs

Number of Employees Trained

Cost per Hire Voluntary Separations


Formula: Total Voluntary Separations / Regular Headcount

Purpose:• Voluntary Separation Rate looks at the percentage of regular

headcount that voluntarily left the organization.

• This metric is an excellent indicator of problems within the organization, including but not limited to inadequate compensation and/or benefits, lack of opportunities for promotion, low employee morale, inadequate training, and/or improper assessment of employee's qualifications (over or under qualified).

Voluntary Separation Rate


Voluntary Separation Rate

Calculation:

13,894 / 141,277 = 9.8%

Total Voluntary Separations / Regular Headcount


Formula: The number of business days to fill a vacant position. This is counted from the day the position becomes vacant to the date a new employee starts in the job.

Date of Hire - Date of Vacancy

Purpose:• Time to Hire shows length of time it takes to fill vacant

positions.

• This metric is an indicator of organization's ability to recruit and hire new employees.

Time to Hire - Definition


Time to Hire - Calculation

1/6/2006 - 5/10/2006Date of Hire - Date of Vacancy

=

44 business days


Formula: Total Training Cost / Regular Headcount Trained

Purpose:• Training Cost Factor - average rupees spent on

training for each regular employee receiving training• This metric is an indicator of the organization's investment in

training and can also be used to monitor training costs and the organization's return on investment.

Training Cost Factor - Definition


Training Cost Factor - Calculation

Rs. 31,131,631 / 249,700Total Training Cost / Regular Headcount Trained

=

Rs. 124.68


Analyzing Data

Microsoft Excel• Formulas

Sum

Average & Median

Time Calculations

• Charts & Graphs

Pie

Bar

Scatter

Reporting Data

Microsoft Word• Reports

Tables

Graphs

Charts

Microsoft Access• Database

Tables

Queries

Reports

Powerpoint

Inserting graphs

Exit Salaries vs. Years Exp.

$20,000.00

$25,000.00

$30,000.00

$35,000.00

$40,000.00

$45,000.00

$50,000.00

$55,000.00

$60,000.00

$65,000.00

$70,000.00

0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 18.00 20.00

Years Experience

Exit

Sala

ry

Strategic Human Resource Management and HR Scorecard

SHRM, HR Metrics and HR Audit; Prof. Abhipsa MishraShining the Light on the Real Value of HR

via the Human Resources Scorecard


Creating an HR Scorecard

1

2

3

4

5

Outline value chain activities

Define the business strategy

Outline a strategy map

Identify strategically required outcomes

Identify required workforce competencies and behaviors

6

7

8

9

10

Create HR Scorecard

Identify required HR policies and activities

Choose HR Scorecard measures

Summarize Scorecard measures on digital dashboard

Monitor, predict, evaluate

The 10-Step HR Scorecard Process


What is (balanced) scorecard?

• A set of measures/indicators (usually 16 – 36 max) that directly reflect or represent the strategy/strategic objectives

• Their prime purpose is to measure that the desired change or development defined by the strategic objectives actually takes place

• In short, strategic indicators allow you to measure and manage strategy execution and achievement progress


What is it all about…

Scorecard Objectives

Enable a focus on the “vital few”

Achieve alignment and focus on strategy and achievement of our mission

Balance short-term, operational decisions with long-term strategic decisions more effectively

Unlock organizational capacity by enabling employees to clearly see where their actions fit into the bigger picture

An organizational alignment & performance management tool/process

A communication tool

A tool for ongoing learning and refinement of strategy

The scorecard is not just a set of indicators …


A true balanced scorecard…

• Demonstrates alignment with corporate strategy/objectives (departments & BU’s),

• Contains a limited set of strategic objectives and indicators,

• Is focused on indicator quality rather than quantity (focused on measuring what matters strategically)


The HR Scorecard Development Process

3. Create Existing

Indicator List

11. Define HR

BSC

Implementation

Plan

6. Detail HR BSC

Indicators

9. HR BSC

Indicator

Review Workshop

10. HR BSC

Indicators

FINALIZED

8. Define HR BSC

Governance

Model

7. Document HR

BSC

Hierarchy

1. Cascade

Corporate Strategy

2. Create HR

Strategy Map

5. HR BSC

Development

Workshop

4. Define HR BSC

Philosophy


You CANNOT have an HR BSC indicator set without an HR Strategy Map!

MISSIONMISSION

Strategy Map


What is a Strategy Map?

It uses the same framework as the balanced scorecard

It’s a one page document that describes how your organization “creates value” and contributes at an actionable/operational level to the achievement of the overall strategy

It provides a “picture” of your strategy

It provides a uniform & consistent way of describing your strategy

A visual representation of the cause & effect relationships between the components of your strategy (your “theory” of how everything/everyone works together to achieve results – the story of your strategy)


The Strategy Map – Key Elements

Mis s io n : Vis io n :Private Se c to r

Strate g y Map

Fo rm at

CORE VALUES:

Fin a ncia l

Cus to m er

In te r na l

Pr ocess

Or g a n iz a t io na l

Ca p a b ilit ie s

Strategy Focused Business Solutions [email protected] (416) 722-1367

Mission:

Bringing Protection to Life.

Vision 2015:Be a world class financial services provider, delivering exceptional customer value

through the excellence and integrity of our people.

Group Life &

Health Insurer

CORE

VALUES

Financial

Customer

Internal Process

Organizational

Capabilities

Partnership Entrepreneurship Continuous

Learning

A Factual Approach to

Decision Making

Community

Citizenship

Develop Competencies

in Key Strategic Roles

Foster a Constructive

Culture

Implement One System,

One Overall Process

Focus on Process

Improvement

Become a Long-Term Disability

Industry Leader

Develop Non-Advisor

Distribution Channels

Be Easy to Do Business

With

Focus on Drivers of Customer

Satisfaction

Optimize Advisor

Distribution Channels

Achieve Sustained

Profitable Growth

Improve Cost

Structures

Maintain Existing Profitable Group

Insurance Business

Acquire New Profitable

Group Insurance Business


The Strategy Map

Mis s io n : Vis io n :Private Se c to r

Strate g y Map

Fo rm at

CORE VALUES:

Fin a ncia l

Cus to m er

In te r na l

Pr ocess

Or g a n iz a t io na l

Ca p a b ilit ie s

To deliver the results our shareholders demand and achieve our mission and vision, how must we perform financially?

To achieve the financial returns we desire, what must we deliver to our customers so they will reward us with their business & loyalty?

To give our customers what they expect, what business processes must we focus on and excel at?

To execute our businesses processes at the required level, what skills and capabilities, culture, and tools and technologies must we have in place?

SHRM, HR Metrics and HR Audit; Prof. Abhipsa MishraHigh-Performance Work Systems


High-Performance Work System (HPWS)

It is a specific combination of HR practices, work structures and processes that maximizes employee knowledge, skill, commitment and flexibility.

Is composed of many interrelated parts that complement one another to reach the goals of an organization, large or small.

Football Team Shows Excellent Leadership Of High Performance Organizations (HPO)_(360p).mp4

Football Team Shows Excellent Leadership Of High Performance Organizations (HPO)_(360p).mp4

Developing High-Performance Work Systems

Underlying Principles of HPWS


Principles of HPWS

• Egalitarianism and Engagement

Egalitarian work environments eliminates status and power differences and, in the process, increase collaboration and teamwork.

When this happens, productivity can improve if people who once worked in isolation from (or opposition to) one another begin to work together.

Employee Engagement - Who's Sinking Your Boat__(360p).mp4

Employee Engagement - Who's Sinking Your Boat__(360p).mp4


• Shared Information

A shift away from the mentality of command and control towards more focused on employee commitment.

Creating a culture of information sharing where employees are more willing (and able) to work towards the goals of the organization.

Principles of HPWS


• Knowledge Development

Employees in high-performance work systems need to learn in “real time,” on-the-job, using innovative new approaches to solve novel problems

Learning organizations

Technology Enhanced Learning Environments

Principles of HPWS

Cultures AT Work - The 3 basics of High Performance cultures_(360p).mp4


• Performance-Reward Linkage

It is important to align employee and organizational goals.

When rewards are connected to performance, employees will naturally pursue outcomes that are mutually beneficial to themselves and the organization.

Principles of HPWS

Anatomy of High-Performance Work Systems


Complementary Human Resources Policies and Practices

Staffing Practices

Training and Development

Compensation


Implementing the System

Ensure that change is owned by senior and line managers

Allocate sufficient resources and support for the change effort

Ensure early and broad communication

Ensure that teams are implemented in a systemic context

Establish methods for measuring the results of change

Ensure continuity of leadership and champions of the initiative

Necessary Actions for a Successful HPWS:


Benefits of HPWS

• Employee Benefits Have more involvement in the organization

Experience growth and satisfaction, and become more valuable as contributors

• Organizational Benefits High productivity

Quality

Flexibility

Customer satisfaction

Axis_BSM_M3_Slide8.wmv

Axis_BSM_M3_Slide8.wmv


Evaluating the Success of the System

Are employees actually working together, or is the term “team” just a label?

Are employees getting the information they need to make empowered decisions?

Are training programs developing the knowledge and skills employees need?

Are employees being rewarded for good performance and useful suggestions?

Are employees treated fairly so that power differences are minimal?

Determining whether a high-performance work system has been implemented as designed:

Video links/Axis_BSM_M3_Slide8.wmv


Outcomes of High-Performance Work Systems

• Employee Outcomes and Quality of Work Life

More involved in work

More satisfied and find that needs for growth are more fully met

More informed and empowered, feel that they have a fuller role to play in the organization and that their opinions and expertise are valued more

Have a greater commitment that comes from higher skills and greater potential for contribution


Outcomes of High-Performance Work Systems cont’d..

• Organizational Outcomes and Competitive Advantages

– Higher productivity

– Lower costs

– Better responsiveness to customers

– Greater flexibility

– Higher profitability


HR Audit

THANK YOU

This leads to a High Performance Work System

Stratetic HRM & HR Scorecard

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