Strategic HRM & Business Partnering

STRATEGIC HUMAN RESOURCES MANAGEMENT (SHRM) AND -BUSINESS

PARTNERING (HRBP)CHARLES COTTER

22-23 AUGUST 2016AFRICAN REGENT HOTEL, ACCRA, GHANA

www.slideshare.net/CharlesCotter

TRAINING PROGRAMME OVERVIEW

• Fundamental strategic HRM concepts

• Applying strategic management principles across the HRM value chain

• Applying the strategic HRM process

• HRM Risk Management

• Strategic HRM Business Partnering (SHRBP) Best Practice Principles

• Transforming to a SHRBP

• HRM Metrics and Analytics

INTRODUCTORY ACTIVITY• Individual activity:

• Complete the following statement by inserting one word only. As a HR Manager, in order to be regarded as a strategic business partner, I need to/to be………………………………………………

• Jot this word down and find other learners who have written down the same word. Write this word down on the flip-chart.

• Each learner will have the opportunity to explain their choice of word.

STRATEGIC HUMAN RESOURCES MANAGEMENT (SHRM)

• SHRM is defined as an approach to managing people that deals with how the organization’s goals will be achieved through its human resources by means of integrated HR strategies, policies and practices.

• SHRM propositions:

The HR of an organization play a strategic role in it’s success

Human capital is a major source of competitive advantage

It is people who implement business strategy

A systematic approach should be adopted to planning and implementing HR strategies

HR strategies and plans should be integrated with business strategies and plans

BALANCED SCORECARD

EXAMPLE: STRATEGY MAP

EXAMPLE: STRATEGY MAP

CURRENT: HRM-BASED ARCHITECTURE

REQUIRED: BUSINESS-BASED ARCHITECTURE

MODERN: STRATEGIC HRM VALUE CHAIN

LEARNING ACTIVITY 1• Group Discussion:

• By referring to Ulrich’s Strategic HRM model; HRM processes and systems; the HRM architecture and compliance with strategic management principles e.g. Balanced Scorecard and Strategy Mapping etc. evaluate whether your organization’s HRM function is currently strategic.

• Identify areas of improvement (gaps) and recommend improvement strategies i.e. Identify how the HR function can enhance performance (efficiency) and value add (effectiveness).

THE NATURE OF THE BUSINESS ENVIRONMENT – V-U-C-A

LEARNING ACTIVITY 2• Group Discussion:

• Conduct an environmental scan – both internal and external – by means of a SWOT Analysis of your organizational HRM department/function. Identify at least x5 Strengths; x5 Weaknesses; x5 Opportunities and x5 Threats.

• Develop alternative and integrated HRM strategies in which you demonstrate:

How to capitalize on strengths How to minimize and eliminate weaknesses How to exploit opportunities How to counteract/negate threats

HR RISK MANAGEMENT

DEFINING HR RISK MANAGEMENT• HR risk is thus any people, culture or governance factor causing

uncertainty in the business environment that could adversely impact on the company’s operations.

What are the HR risks that could jeopardize management in achieving its business objectives?

How serious are these risks, i.e. what are the impact of these HR risks?

What can we do about it, i.e. how can we mitigate the HR risks?

• HR Risk Management is a systematic approach of identifying and addressing people factors (uncertainties and opportunities) that can either have a positive or negative effect on the realization of the objectives of an organization. (SABPP)

HUMAN CAPITAL INSTITUTE RESEARCH

SABPP RESEARCH

AON HEWITT EXPERIENCE

DISCUSSION QUESTIONS

• Indicate whether you believe that people risk is a serious/priority risk and a strategic imperative in your organization. Substantiate your answer. If not a priority/strategic imperative, describe how HRM can transform this process.

• By referring to the guidelines to HR Risk Management, critically review and evaluate current HRM Risk Management practices. Identify gaps and recommend improvement strategies.

STEP 1: IDENTIFY HR RISKS• The identified risks must be recorded and documented in a HR risk management

register.

• This process will be guided and defined by the organizational Risk Management procedure.

Identify the HR risks that you'll either need to manage or accept List all of the likely HR risks that your organization faces

• Every activity of an organization poses a risk so brainstorm and document the risks.

Consider both the general risks and the risks specific to your organization.

• Refer to list of typical risks

• Tip: Involving staff, volunteers and board members in the risk identification process will give you a comprehensive picture of the risks based on different people's involvement in different areas of the organization.

STEP 2: ANALYZE HR RISKS• The chart allows HR Managers to rate potential risks on these two

dimensions.

The probability that a risk will occur is represented on one axis of the chart The impact of the risk, if it occurs, on the other.

• HR Managers can use these two measures to plot the risk on the chart.

• HR Managers can then decide what resources they will allocate to managing that particular risk.

• Risk Impact/Probability Chart.

STEP 3: PRIORITIZE HR RISKS

STEP 4: RISK RESPONSE AND IMPLEMENTATION

RISK RESPONSE IMPLEMENTATION• When you have decided which risk management

strategies will be the most effective & affordable for your organization, practically outline the steps and who is responsible for each step in the risk management plan.

• Provide training for all organizational staff and volunteers so they understand the rationale of the risk management plan as well as the expectations, procedures, forms etc.

• Communicate the plan and ensure that there is buy-in from all who are involved in the organization.

STEP 5: RISK EVALUATION • Risk Monitoring

Is your plan working? Have your risks changed? Have you expanded or reduced your programs and services? Are changes or updates required? Are staff and volunteers following the risk management plan? Do they need re-training on the details? Do we need to better communicate the plan?

• Tip: Risk management is an evolving field. Therefore, it is a good practice to keep current and re-evaluate your organization's risk management system on an annual basis.

• Risk Control

HR RISK CONTROL PROCESS

LEARNING ACTIVITY 3

• Group Discussion:

• Apply steps 1-5 of the HR Risk Management process to a selected organization.

DEFINING HR BUSINESS PARTNERING

• Partnership: A relationship between individuals or groups characterized by mutual co-operation and responsibility, for the achievement of a specified shared goal.

• HR business partners are HR professionals who work closely with an organization’s senior leaders in order to develop an HR agenda that closely supports the overall aims of the organization. The process of alignment is known as HR business partnering.

• Strategic business partners: A long-term relationship (alliance) to achieve defined objectives common to all partners.

• In the context of strategic human resource management, the HR function and activities are intended to ensure the organization's financial success and prosperity (business continuity).

DIAGNOSIS: 10 BEST PRACTICE GUIDELINES FOR HRBP

• #1 Embedding HRM strategy in business strategy and able to translate that strategy into deliverable actions

• #2 Well-defined, implemented and reported HRM performance and ROI metrics (creating credibility and accountability)

• #3 Generating business intelligence e.g. predictive and strategic analytics (that shapes, informs, guides and ultimately, influences strategic business decisions)

• #4 Offering a professional, value-adding business proposition sensitive to and supportive of business needs, interests and strategic priorities

• #5 Ongoing line management consultation, engagement, coaching and building trusting, collegial and mutually beneficial business relationships

DIAGNOSIS: 10 BEST PRACTICE GUIDELINES FOR HRBP

• #6 HR Management and practitioners possess business and industry knowledge, acumen and insight

• #7 HRM collaborates with line management to broker meaningful and impactful business solutions

• #8 HRM processes, systems and practices are horizontally integrated (bundled), agile, responsive and stream-lined (that enhance productivity and efficiency)

• #9 HRM is a transformational initiator, driver and implementer of business change

• #10 HRM is technology-savvy innovator, enabling and leveraging best practices (e.g. CoE; Shared Services and e-HRM)

LEARNING ACTIVITY 4

• Individual Diagnostic Activity:

Critically review and evaluate your current HR processes and function against the ten (10) best practice criteria.

• Group Discussion:

Identify gaps. Recommend improvement strategies.

RESEARCH-BASED HRBP MATURITY (HAY GROUP)

• Only 34% believe HR is making a significant strategic contribution to their organization; the majority (60%) positioned themselves somewhere in the middle

• Only 36% say talent management and organizational effectiveness are closely aligned

• Slightly more than 39% say they have moved away from traditional silos, but this leaves 61% that haven’t – or worse still, are unsure.

RESEARCH-BASED HRBP MATURITY (OTHER)

• Research shows that HR business partners have a presence in 43% of high-performing organizations (i4cp)

• The 2013 Global Assessment Trends Report (GATR) - SHL.com found that 41% of firms surveyed are confident that their human capital strategy is properly embedded in their organizational strategy.

HRBP CRITICAL SUCCESS FACTORS• Strategic focus and thrust (on issues that contribute to business growth and

competitiveness)

• Adopting a “big picture” perspective (regarding the organization’s priorities and goals)

• Having personal impact and credibility (to influence key decision-makers)

• Adopting an Key Account Management, (internal) client-centric approach • Possessing a set of value-adding skills and knowledge (customers and

business)

• Being a diplomat and negotiator (in harmonizing the HRM agenda with business needs)

BEST PRACTICE HRBP (COMPETENCE)

HRM CONTENT

BUSINESS CONTEXT

HRBP PROCESS

EXPECTATIONS AND PRIORITIES OF BUSINESS EXECUTIVES

• CEO’s expect the Human Resources function to play a much more active and participatory role in enabling business strategies.

• Senior business leaders consider talent to be perhaps the critical factor in the push for sustainable growth and the need to manage new opportunities and risks in a more complex and interdependent world.

• According to The Conference Board CEO Challenge (2013), Human Capital is rated 10% higher than operational excellence as a major challenge for businesses.

WHAT BUSINESS EXECUTIVES ARE LOOKING FOR IN HRBP?

• Catalytic Driver of Change

• Pro-active Business Thinker

• Collaborative Consultant

• Purpose-directed Coach

• Delivery (results-oriented HR practices)

• (Credible and Accountable) Performance Advisor

• Strategic Facilitator

ENABLERS OF TRANSFORMATION/RE-POSITIONING TO HRBP – “RIGHTING THE SHIP”

“HR needs to follow the right process, applying the right skills, in the right manner/method,

fulfilling the right roles, for the right reasons, to achieve the right results.” (Cotter, 2014)

ULRICH’S SIX COMPETENCIES FOR HR TRANSFORMATION (2009)

(CONTEMPORARY) PENTAGONAL STRATEGIC VALUE-ADDING ROLES

• Self Mastery

• Relationship Management

• HR Expertise

• Business Acumen

• Execution

HRBP TRENDS • Optimization of systems, processes and structures (architecture)

• Re-organizing HR service delivery and operating models e.g. Shared Services

• Sourcing “Stars” from outside HRM

• Implementation of HR Academies and Business Partner training programmes

• There is a particular focus on developing consulting, project and change management skills as well as general business and commercial acumen

• Establishing HR Centres of Excellence/Expertise (CoE’s)

HR CENTRES OF EXCELLENCE

FUTURE-FOCUSED ROLES

ACTION STEPS/PLAN TO TRANSFORM HR INTO HRBP

• Step 1: Strategic Review and Analysis

• Step 2: Strategic Role Clarification and Contracting

• Step 3: Formulation and Development of Transformational Strategies

• Step 4: Implementation of Transformational Strategies

• Step 5: Measure and evaluate business impact and results

STEP 1: STRATEGIC REVIEW AND ANALYSIS

• Objective: The focus of the analysis should be on understanding the needs of the business as a sustainable entity, its strategic direction and identifying initiatives that will help your business grow.

• Review of current HRM and business strategies

• Identification of resources and capabilities

• Tools:

Environmental scan (PESTEL)

Gap Analysis

S-W-O-T Analysis

STEP 2: STRATEGIC ROLE CLARIFICATION AND CONTRACTING

• Objective: The concluding of Service Delivery Agreements with line/operational and senior/executive management

• Consultation, engagement and communication with operational management

• Clarification of expectations, needs and value-adding roles of HRBP

• Contracting agreements

STEP 3: FORMULATION AND DEVELOPMENT OF TRANSFORMATIONAL STRATEGIES

• Objective: Development of HRBP transformation strategic plan

• Formulation of goals and objectives

• Development of alternative transformational strategies

• Choice of most appropriate strategies

Viability Feasibility Sustainability

STEP 4: IMPLEMENTATION OF TRANSFORMATIONAL STRATEGIES

• Project-based, cross-functional team approach

• Organizing, assigning and deploying resources

• Leading and directing (the implementation process)

• Monitoring and Controlling

STEP 5: MEASURE AND EVALUATE BUSINESS IMPACT AND RESULTS

• Measure and calculate the ROI

• Amend and review strategies (remediation action)

• Report back to business partners (to demonstrate transparency and accountability)

• Aspire to continuous improvement processes

LEARNING ACTIVITY 5

• Group Discussion:

• Apply steps 1-5 of the action steps/plan of transforming HR to a strategic HR business partner.

• What type of HRM Metrics does your organization currently utilize?

• Describe the organizational impact, level of maturity and credibility of these HRM Metrics

• What does your organizational HRM Metrics architecture look like?

• What is the current degree of HRM practitioner competency of HRM metrics/analytics?

• Review the benefits of HR Metrics. Is there a business case for applying HR Metrics?

• Metrics are simply measurements. Metrics track activity, but don’t necessarily show a causal relationship.

• HRM Metrics - Measurements used to determine the value and effectiveness of HR strategies.

• Differentiation between People and HR Measures

• Human capital analytics examine the effect of HRM metrics on organizational performance. In more general terms, analytics look for patterns of similarity between metrics. By using analytics over time, HRM can become predictive.

• Measures - #1 HRM measure?

DEFINING THE FUNDAMENTAL CONCEPTS

ENGAGEMENT’S EFFECT ON 9 KEY PERFORMANCE INDICATORS

CASCADING OF BUSINESS STRATEGIES/METRICS

HRM ANALYTICS MATURITY MODEL (BERSIN BY DELOITTE)

Source: The State of Workforce Analytics and Planning 2014 Survey Report

HRM ANALYTICS PROCESS

5-STEP HRM ANALYTICS PROCESS• Step 1: Identify where HRM can make a strategic impact in

the organization

• Step 2: Develop appropriate metrics around these areas

• Step 3: Obtain data relating to relevant metrics

• Step 4: Draw out insight from the data

• Step 5: Project and take action to communicate metrics and related insights information to provide a robust basis for strategic change and improvement

THE 5 E’s OF HRM ANALYTICS

• Exploration

• Examination

• Extraction

• Evaluation

• Extrapolation

STEP 1: IDENTIFYING WHERE HRM CAN MAKE A STRATEGIC IMPACT (EXPLORATION)

• This process step focuses on determining the areas where HRM can make a strategic impact within the organizational context.

• It enables HRM management team to identify priority areas for measurement which are aligned with organizational goals and strategies.

• Identify capability opportunities or problem areas from a business partner perspective.

• Sources for information collection, retrieval and analysis.

SOURCES FOR INFORMATION COLLECTION, RETRIEVAL AND ANALYSIS

• Employee and management surveys and interviews (for employee contentment, communications, rewards system)

• Performance appraisals (to measure productivity, attendance)

• HR records (to track communications, turnover, recruiting efficiency, retention, promotions, and succession planning)

• Employee files (to research productivity, attendance, training)

STEP 1: EXPLORATION • A critical first step is to ensure that HRM is measuring the right things.

• The design and development of relevant HR metrics requires reflection and discussion in order to determine what it takes for the organization to succeed and to understand how HR can add value.

• Identify organizational burning issues

• Three issues underpin effective measurement (CIPD, 2011):

Aligning measurement with goals

Take a business partner perspective

Adding value by focusing on building capability

STEP 2: SELECTING APPROPRIATE METRICS FROM WHICH ORGANIZATIONAL INSIGHTS CAN BE DRAWN

(EXAMINATION)• HRM Measures:

Efficiency (10%) Effectiveness (20%) Impact (70%)

• Categories of HRM Metrics:

First Tier (most valued) Second Tier (lesser valued)

• Commonly used HRM Metrics

STEP 2: EXAMINATION - HRM MEASURES

BROAD CATEGORIES OF HRM METRICS

Workforce Demographics

HR Efficiency

Remuneration

Skills Development, Training & Education

Productivity

Provisioning and Recruitment

Risk Analysis

Staff Retention

FREQUENTLY USED HRM METRICS (PWC)

10TYPICAL STATISTICS OBTAINED IN COMPILING HRM METRICS

Revenue factor, which is company total revenue divided by the amount of full time employees

Human capital value added (revenue minus operating expense and cost of compensation/benefit divided by the total amount of full time employees)

Human capital return on investment: Revenue minus operating expenses and cost of compensation benefit divided by cost of compensation/benefit

Total compensation revenue ratio which is cost of compensation/benefit divided by revenue

Labour cost revenue ratio, which is cost of compensation/benefit plus other employee costs (bonuses, mileage paid, incentives) divided by revenue

10TYPICAL STATISTICS OBTAINED IN COMPILING HR METRICS

• Training investment factor equals the total cost of training divided by total amount of training attendees

• Cost per hire, which includes advertising, agency fees, relocation, and others divided by operating expenses

• Health care costs per employee (total health care cost divided by total amount of employees)

• Turnover costs, which is equal to hiring costs plus training costs plus other costs (turnover rate during first year of employment is key)

• Voluntary separation rate is the total number of people who quit or retired divided by the total amount of employees

STEP 3: OBTAIN DATA RELATING TO RELEVANT METRICS (EXTRACTION)

• The top performing companies were using a variety of drilled-down metrics, having the people to analyze them, and communicating them effectively.

• This process step focuses on how HRM can most effectively communicate the insights drawn from metrics to inform action and hence enable HRM to deliver maximum strategic impact.

• Effective decision-making, based on robust measures and metrics, therefore, requires HR professionals to think carefully about the relationships that need to be established to enable appropriate information-sharing of these insights.

STEP 3: EXTRACTION – PROCESS STEPS

• #1: There is the initial “harvesting” or gathering of unstructured data from the web.

• #2: The normalization stage—preparing harvested data for analysis. Normally, a relational database such as MySQL is used, but NoSQL can also be used.

• #3: The data is given additional structure with metadata, or tagging. Analytics can then be presented through a dashboard.

• The process of collecting and updating the data from the myriad of internet sources has to be automated. Advanced Programming Interfaces (APIs) can enable different digital platforms to share dynamic data and feed it into other applications, such as a company’s own database.

STEP 3: EXTRACTION – CHALLENGES CONFRONTED

• Struggling to use unstructured data

• Difficulty tying talent acquisition data to business results

• Problems with storing, retrieving and integrating data

• There is rarely a systematic approach to integrating disparate systems. Legacy data systems often don’t talk to each other. There are missing links between ATS and HRIS systems.

• The data exchange is often clumsy at best, requiring rekeying of data and man ual interventions.

• The successful transfer of data from multiple sources, such as an ATS, a recruiting site or a social network with an HRIS System is the most problem atic part.

• Failure to get the most of ATS

Source: The State of Workforce Analytics and Planning 2014 Survey Report

Source: The State of Workforce Analytics and Planning 2014 Survey Report

STEP 4: DRAWING OUT INSIGHTS FROM DATA (EVALUATION)

• The HRM function and measurement capability

• HR professionals have long been data collectors, amassing and keeping track of employees’ personal information, salary rates and the annual number of retirements. But to grasp the potential of HR analytics, HR managers need to become data interpreters.

• Top performing companies invest in personnel who have analytic and process-oriented capabilities, those people who can install the necessary methodological disciplines necessary to use the information effectively.

• Identify root causes and cause-effect linkages and -relationships

• Action planning – interventions and solutions

HRM ACTION PLAN (INTERVENTION) TEMPLATE

STEP 5: PROJECT AND TAKE ACTION TO COMMUNICATE METRICS AND RELATED INSIGHTS INFORMATION TO PROVIDE A ROBUST BASIS FOR

STRATEGIC CHANGE AND IMPROVEMENT (EXTRAPOLATION)

• Projection of data – forecasting (PREDICTIVE ANALYTICS)

• To communicate HRM Analytics, tell a story (NARRATIVE)

• “Data is abundant, but if you don’t give it context, it’s just a bunch of numbers.”

• Internal benchmarks (to com pare their business units to others in the organization)

• Support comes after results are delivered, not before. “It really comes back to how credible you are. You get buy-in when you show up repeatedly with accurate numbers and you can relate the story to how the company’s performing.”

STEP 5: EXTRAPOLATION - REPORTING

• HR analytics reporting

• How the information is communicated to the organization, particularly the C-suite, is critically important.

• Companies simply produce spreadsheets that offer no easy and timely way to present what is happening in the business.

• Like any good research report, it is vital to present meaningful information and identify actionable insight that can be used to make positive change.

• Tactically, the best practice organizations, distribute multiple reports to multiple levels. Tailored reporting to address the specific needs, and ideally focuses on very specific busi ness impacts.

• If the metrics being shown convey business impact, quarterly reporting of 5-10 of the most critical, agreed-to KPIs is warranted.

DIFFERENT OBJECTIVES, DIFFERENT METHODOLOGIES

http://www.inostix.com

(Reporting)

LEARNING ACTIVITY 6

• Group discussion:

• Apply steps 1-5 of the HRM Analytics process to a defined organization.

CONCLUSION

• Key points

• Summary

• Questions

CONTACT DETAILS

• Charles Cotter

• (+27) 84 562 9446

• charlescot@polka.co.za

• LinkedIn

• Twitter: Charles_Cotter

• http://www.slideshare.net/CharlesCotter