• Linking HR initiatives with organisational goals

Do you know what the organisational goals are?

1. • Is the long term strategy published anywhere?
   • What is the vision and mission of the organisation?
   • What do the shareholders; the Board; the CEO and Exec Team think they are – how do they interpret them?
   • Are there differences and, if so, what are they?

You need this knowledge not just to form the links with your HR strategy but also to know how to “pitch” your ideas!

1. What does this mean to the “People” asset? Think in terms of:

• Where we are today and where do we need to be?
• What skills will we need as an organisation?
• Where will skills be needed and when?
• How many people will need these skills?
• How will we get these skills (acquisition, development, recruitment, “in-sourcing”, out-sourcing, etc)?

 

1. What sort of culture will we need to be successful in this journey and when we get there? Think in terms of:

• Creativity / innovation, responsiveness, leadership, quality, customer focused, competitive, team, etc.
• What type of internal culture do we want and is this the same as the externally perceived culture?

 

1. What sort of HR systems do we need to enable us to make this change? Think in terms of:

• Recruitment profiling
• Career development systems
• Training focus
• Communication systems including surveys
• Remuneration policy and systems
• Performance management systems
• Values initiatives to make them come to life
• Employee relations and HR policy
• Succession planning

• Achieving the desired workplace – types of people and strategies needed?

My experience tells me that there are a limited number of stages in a business life cycle. At a high level, these could be named as:

Grow – Consolidate – Retrench

Each stage will require different skills, systems and attitudes.

Growth can be achieved through increasing revenue which is typically either increasing market share or entering new markets (product diversification). Mergers and acquisitions normally fit into the latter category but some businesses may look to increasing margin to increase profitability which may mean reducing costs or increasing economy of scale.

Typical in these types of organisations are the need for:

 

Skills	Attitudes / Culture	Systems
Innovation (product or service or process)	Creativity, Risk Appetite	Suggestion schemes, Performance systems, Collaborative processes and cross-functional teams
Responsiveness, Speed to market	Process Improvement, Entrepreneurial Thinking, Can do – Will do!	Clear delegations and accountabilities, problem solving systems (such as Appreciative Inquiry)

So what are the HR implications?

Skills	Attitudes / Culture	Systems
L& D initiatives?	Employee Surveys Values alignment to systems Values Programmes HR Policy (alignment)	Performance Management Remuneration Recruitment Succession Planning

So let’s look at an organisation in a retrenchment stage.

What do you think would be likely skills, attitudes and systems required? Work in a group to fill in the table below:

 

Skills	Attitudes / Culture	Systems

Now come up with some examples of HR initiatives to achieve the above. What could you do in the following areas?

Recruitment
L&D
Employee Relations and HR Policy
Career Development and Succession Plans
Performance Management
Remuneration Policy
Internal Communications

• Identifying the desired workplace – behaviours, culture, environment

Values reflect attitudes which lead to behaviour which creates the culture. Simply put – it is the way we do things around here or what is important to us.

There are two applications for culture:

1. Reinforces the desired attitudes. For example:
   • responsiveness
   • customer service
   • innovation
   • team work or competitiveness
   • risk appetite

 

These are often reflected by what people or customers say about the organisation externally.

1. The way in which we behave to achieve our objectives. For example:
   • respect for our people or environment
   • performance focused
   • hierarchical or egalitarian
   • team work or competitiveness
   • growth and development

These are often reflected by what our employees say about the organisation.

Our internal culture is especially critical to engage our employees.

Engaged employees (versus ambivalent or disengaged employees) have the highest productivity and are often talked about as our “stars” or “high potential’s”. This group is our “talent” as they will lead the charge on our journey.

We need to survey our staff and get them to tell us what they think is “valued” in our organisation and for suggestions on how to make the organisation a better place to work.

Think about these organisations and list what you think some of their values are (positive or negative)?

 

Organisation	(Externally) Observed Values
3M
Vodafone
TradeMe
Saatchi & Saatchi
PWC

Think of organisations that you have worked for. What do you think are some of the attributes that help drive people’s engagement?

 

Managing your Drivers of Engagement 

The 9 drivers of employee engagement: (taken from the entire population of the JRA Best Places to Work survey)

1. A job that provides a sense of personal achievement (35%) 
2. Fun working environment (11%) 
3. A sense of having a future with the organisation (10%) 
4. A sense of belonging (9%) 
5. Pay and benefits considered fair for the work performed (9%) 
6. Confidence in the organisation’s leadership (5%) 
7. An organisation perceived as caring (4%) 
8. Working for a ‘successful organisation’ (3%) 
9. Believing in what the organisation is trying to achieve (2%) 

 

 

My experience shows me that building and sustaining a culture of engagement involves: 

¡     Creating a constructive / positive environment

¡     Listening and acting

¡     Providing energy

¡     Having a performance focus

¡     Celebrating success

¡     Honest and real time communication

• What KPIs are required – financial and non-financial?

Let’s look at the following KPIs and discuss why we use them and what they tell us about our business:

• Voluntary Staff Turnover
• Unplanned Absences
• Leave Liability
• Tenure
• Bench Strength
• See slides for other examples

 

¡     Instead of just counting the training-spend-per-employee as the input, compare the results being achieved by the work group concerned before versus after the training programme;

¡     Instead of only measuring recruitment speed and recruitment cost as the input, measure quality of new recruits as the outcome;

¡     For an organisation with a high concentration of knowledge workers, consider productivity lost through voluntary staff turnover;

¡     For a customer service business, look at customer satisfaction correlated with employee satisfaction.

• Calculating the financial value of an engaged employee or high performing culture

• Learn how your organisation does its “Return on Investment” (ROI) calculations.
• Every ROI is based on assumptions, particularly around benefits! Validate these with finance and senior management. Be pessimistic.
• What is an acceptable ROI time frame?

ROI and Metrics

 

¡     Use KPIs that mean something to the bottom line!

¡     Connect the dots! Keep asking – so what?

¡     Benchmark – appropriately! Do you want a Rolls Royce or a Toyota (What is your Cost / Service model)?

¡     Look at the outcome not the inputs!

Examples could be:

¡     Productivity = more for less = costs = profits

¡     Quality = cost and customer satisfaction

¡     Speed (to market, to adapt to changed conditions, etc)= profit

¡     Reputation = market share = profit

¡     Engagement = productivity

Case Study

So let’s use this knowledge to create a business case for running a series of Appreciative Inquiry Workshops.

The total investment (note this terminology – not cost!), say for 30 people, is $30,000.

As a result of running this initiative, I expect a productivity gain of 5% in our customer service area, due to the creative solutions we have identified and implemented.

This improvement may be measured by the amount of work performed in a certain time period, the number of errors or re-work required; reduced absenteeism; quicker turnaround, etc.

I also believe that the 30 people who are trained will receive more motivation from attending the training with the positive mind set this encourages and the empowerment this creates. I will assume therefore that in this unit, our normal attrition rate of 15% will reduce to 5%.

So my assumptions are:

ü       A gain of 5% productivity in our customer service area

ü       Within this unit our normal attrition rate of 15% will reduce to 5%.

So, if we employ 40 customer services staff and the average salary cost is $45,000, then we can work out the  total employment cost (Note: I always make costs conservative for the sake of credibility and buy in):

Staffing Costs:

Salary:                                      $45,000 (average)

Sick Leave:                               $1,730

Annual Leave:                           $3,461

Benefits:                                   $1,100

Payroll/ACC/Admin Costs:         $1,800

Office Space & Systems:          $6,500

TOTAL COST                           $59,591

 

A 5% reduction in staff (from improved productivity) results in a saving of 2 headcount (assuming full time equivalents) for the same volume of work. Savings generated are (gross) $59,591 x 2 = $119,182.

A reduction in turnover has a different set of costs associated with it, as we also have recruitment costs, training costs and loss of efficiency costs:

Turnover Costs (assumed salary $45,000): 

Recruitment costs (15%):                                                           $6,750

Training time required to get to 100% efficiency

(approx: 1 week of supervisor’s time @ $60,000 p.a.):                 $1,150

Loss of efficiency (25%) from outgoing person

(for 2 weeks – approx):                                                              $   500

Loss of efficiency (25%) from incoming person

(for 4 weeks approx):                                                                 $1,000

TOTAL COST                                                                           $9,400

So the difference between the historical and the anticipated turnover is 3 people less leaving per year or Total saving $9,400 x 3 = $28,200.

Total Savings (turnover and productivity gains):          $147,382

Our ROI is therefore $147,382 / $30,000 = 491% or $117,382

With a gross margin of 30% every $1 saved from costs equals the equivalent of earning an extra $3 in sales.

So bottom line impact is equivalent to earning additional revenue of $300,000! 

 Every year – ongoing!

 

¡     Instead of just counting the training-spend-per-employee as the input, compare the results being achieved by the work group concerned before versus after the training programme;

¡     Instead of only measuring recruitment speed and recruitment cost as the input, measure quality of new recruits as the outcome;

¡     For an organisation with a high concentration of knowledge workers, consider productivity lost through voluntary staff turnover;

¡     For a customer service business, look at customer satisfaction correlated with employee satisfaction.

ROI Exercise.

In your groups take an assigned real life project and come up with a ROI calculation.

 

Be prepared to share you answers to the following questions:

 

 

What is the desired outcome of your project?

 

 

 

 

 

What is the link to your organisations short or long term goals?

 

 

 

 

 

How will you measure your impact?

 

 

 

 

 

What assumptions do you need to make?

 

 

 

 

 

What is your bottom line impact?

• Calculating returns from training and development – is this merely wasted when people leave the organisation?

Why do we train people?

• Increase skills
• Learn new skills
• Motivate
• Reward
• Succession planning
• Create engagement.

 

What happens to an asset if we don’t look after it (routine maintenance)? So how do we insure assets?

 

Throw a stone into a pond. When you remove the stone does the ripple stop?

 

Morale, engagement and ideas are contagious!

It is a good idea to capture learning by getting the attendee (if an external course) to provide a briefing to the team on the main learning’s they got from the training. This helps the ROI and consolidates the learning.

Finally, the more value an asset has the more you need to look after it. Value your IP and create the culture that will retain it. This may be your biggest contribution to the bottom line!

 

¡           compare the results being achieved by the work group concerned before versus after the training programme;

 

 

 

Better to risk losing a trained employee than keeping an untrained one!

• Workforce productivity – measuring your current levels, increasing productivity and benchmarking against others

Think about the productivity measure we could use for the following work groups:

 

• A Customer Services Team responsible for handling customer enquiries?

 

• A Sales Support team responsible for processing orders?

 

• An Accounts Payable or Receivable team?

 

• A Management Accountant?

 

• A HR Advisor?

 

• An IT team?

 

Typically in an organisation we find the expected performance measures in:

 

• Job Descriptions
• Individual, Team and Department KPIs
• Customer Contracts
• Legal Statutes
• Service Level Agreements (SLAs)
• Annual Reports and Shareholder Statements (SOIs)

Where will you find performance or productivity data in your organisation?

 

 

 

 

 

Measure Business Outcomes

¡     Increasing skills raises productivity. Productivity results in cost reduction.

¡     Retention results in cost reduction.

¡     Creativity and innovation result in revenue increase.

¡     Quality systems / culture result in cost reduction and / or revenue growth.

¡     Engagement results in productivity.

 

BENCHMARKS

 

Select your benchmark carefully.

 

• Do you want to be best in class or average (there is a cost implication)?
• What is your organisation’s USP(s)? 
• What is your value equation (cost versus service)? 

 

The best benchmarks are your own (historical improvement) or your competitive market place.

 

Do tertiary institutes have any data or research?

 

Remember to always measure and evaluate your effectiveness (individually and as a function) and lead by example.

 

Only work on those things that can be measured and evaluated so you can learn, gain credibility and show accountability. By the way, most things can be measured and evaluated – be creative!

 

 

• Packaging information and data which is set to align with organisational goals

 

 

Align to strategy. Specifically, what is acceptable ROI (timeframe)?

Where is the hurt (or the Golden Fleece)? This may be different for different parts of the business.

 

Prioritising:

 

Where is the biggest bang for the buck? Think ratio of investment over benefit and up front costs. Better to do three small inexpensive things than put all the eggs in one basket. Build credibility. What has emotional engagement or momentum?

 

Look at all aspects of HR as being interdependent. Recruit, develop, retain. HR Policy mimics culture.

 

To increase particular skills or behaviours, the training and recruitment must be aligned. Either hire the right people or train what you have. If we want to bring focus to a skill or behaviour then ensure we are specific about it (Communicate) and we measure it (KPIs and Performance Management).

 

¡     Engage! You and the Senior Team and Board share a common goal!

¡     Long Term Strategy – link to your HR plan and then to your programme.

¡     Risk – quantify and mitigate.

¡     Governance

• report Company and HR performance
• benchmark.

¡     Where is the hurt (or the Golden Fleece)?

¡     Where is the biggest bang for the buck?

¡     Think ratio of investment over benefit and up front costs.

¡     What has emotional engagement or momentum (with the Senior Team, the Board and the customers)?

¡     Look at all HR aspects as being interdependent.

 

 

 

 

 

 

Performance indicators have a critical role in ensuring a business is achieving the strategy that will realise the vision for the business. KPIs may be financial, such as profit and revenue growth, but these are very backward looking – if a business fails to achieve the intended growth, you can try harder for the future for new opportunities, but the income lost is gone for good.

 

Useful KPIs are predictive, helping management to identify early where the strategy is going off track or where it is not being operationalised.

 

This allows adaption of the plan at an early stage – whether a new strategy, tactics or team members - to ensure the vision is achieved.

 

• Communicating the impact of HR initiatives on the bottom line effectively

 

Understand the business – no, really understand it!

 

¡     What are the commercial strengths and weaknesses of your business?

¡     What are your competitor’s strengths and weaknesses?

¡     What’s happening in and to your industry?

¡     Who are your customers and why do they use your business as opposed to your competitors?

¡     Study your organisation’s business plan.

¡     Spend time with your key managers and their staff – “on the road” or “on the floor”.

 

Speak the language

 

¡     Understand the financial language of your business, ask your CFO to take you through the Balance Sheet and explain to you what the relationships are between the various items and what the pressure points for your business are.

¡     Ask your Management Accountant to help you prepare a Cost Benefit Analysis for your next project.

¡     Use financial terms:

• Risk and Mitigation
• Investment payback period
• ROI
• Opex / Capex
• Productivity – CBM, Fixed, Variable.

 

Be a solution provider – solve real problems!

 

Form allies – Marketing for Brand IP, Sales for selling, Finance for validation and assumptions, IT for systems.

 

Do the math.

 

Validate the math and assumptions.

 

Ask someone else to check your work – your credibility is on the line.

 

Don’t guess. If you don’t know say you’ll come back with a detailed answer.

 

• Communicating metrics to both the Board and other parts of the organisation

 

 

So what does the Board do?

 

¡     Long Term Strategy

¡     Risk (legal compliance, continuity)

¡     Governance (performance, public accountability (reporting), shareholder relations).

 

What else?

 

 

So how do we influence the Board?

 

¡     Engage! You share a common goal!

¡     Long Term Strategy – link to your HR plan and then to your programme.

¡     Risk – quantify and mitigate.

¡     Governance

• report Company and HR performance against benchmarks.

¡     Speak the language of commerce!

¡     Adapt to target your audience:

• Where is the hurt or flavour of the month?
• What is topical?
• What do you need or are you just sharing information?
• Relate your data to previously accepted data.
• What can they (the audience) control or do with the information?
• Use case studies and other credible supporting material (such as published Best Practice standards or Industry Standards).