Human Capital Management Why And How

Improve Your Talent DecisionsImprove Your Talent Decisions

Human Capital Human Capital ManagementManagement

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Why & How

The Economic ValueThe Processes

http://www.darinphillips.com

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Economic Benefits of Strategic Human Capital Management

Increase RevenueImprove Customer SatisfactionImprove QualityIncrease ProductivityReduce CostReduce Cycle TimeIncrease Market Capitalization


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Increase Revenue

It was initially thought that companies that make more money were associated with better talent management practices only because they could afford them (.19 correlation), but the 2001 Watson Wyatt Human Capital Index Study showed that talent management practices actually increase financial performance (.41 correlation).

- http://www.watsonwyatt.com/research/resrender.asp?id=W-488&page=1


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Customer Satisfaction

The 1998 Watson Wyatt study, Competencies and the Competitive Edge, showed that when an organization identifies and communicates the core competencies that it needs to be successful in the present and the future marketplace, it has developed a powerful tool to help meet its customer satisfaction goals.

- http://www.watsonwyatt.com/research/resrender.asp?id=W-99&page=1


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Improve Quality

Motor vehicle manufacturing firms implementing flexible production processes and associated practices for managing people enjoyed 47 percent better quality and 43 percent better productivity than firms relying on traditional mass-production approaches, according to a world-wide study by Wharton School's John Paul MacDuffie.


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Increase Productivity

Initial research on 740 companies’ HR practices found that those using systems like ours had economically and statistically significantly higher levels of company performance. One standard deviation of improvement on their bell curve of integrated talent management systems was associated with changes in market value from $15,000 to $60,000 per employee.

– Huselid, M. and Becker, B. (1995). High Performance Work Systems and Organizational Performance. Paper presented at the 1995 Academy of Management annual conference, Vancouver, B.C.


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Reduce Cost

ASTD and SHRM studied companies that are renowned for their ability to retain top talent (Linbeck, Kennedy& Rossi,Zachary,Dow Chemical, Edward Jones, Great Plains, Sears, and Southwest Airlines). One key finding was that all of these companies implemented competency-based position profiles so that employees understood the skills and abilities required to move into leadership positions.

- American Society for Training and Development and Society for Human Resource Management (1999). Recruiting and Retaining Employees: Using training and education in the war for talent. Alexandria, VA: ASTD.


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Reduce Cycle Time

Steel minimills using a high-commitment approach to management required 34 percent fewer labor hours to make a ton of steel and had a 64 percent better scrap rate than minimills using a command and control approach.

- Jeffrey Arthur of Purdue


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Market Capitalization

The five highest return to shareholders from 1972-1992 (Southwest Airlines Co. 21,775%, Wal-Mart Stores, Inc. 19,897%, Tyson Foods, Inc. 18,118%, Circuit City Stores, Inc. 16,410%, and Plenum Publishing 15,689%) differentiated themselves from their competitors and the market only through the way they managed their people during the infancy of talent management.

– Pfeffer (1994). Competitive Advantage Through People, 1994.


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Benefit to YOUR Company:Retention

What are your top 3, mission critical positions?What is the average pay and top pay for each position?What is the turnover rate at that position and how many are top performers?If the cost to replace is 2.5x salary what is the value of retaining 25% of those who were lost?


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Benefit to YOUR Company:Productivity

0-1-2 +1 +2 +3Pareto Principle: the top 20% of your employees account for 80% of your productivity.

What actions would you take if you knew what differentiated those 20% from the rest? And how would that impact your business?


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The Processes

Align the strategic objectives Ensure that you know who can execute their goals and who cannotRapidly build the capacity of those who have a gap Deploy the right people with the right skills in the right place at the right time


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Drive Performance

VisionFa

cilit

ate

d S

ess

ions

Strategic Plan

Functional Goals

Team Goals

Individual Objectives


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Appraise Talent

Technical Skill Learning Agility

Interpersonal Skill

Interest

Present Future

Capability

Commitment


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Manage Learning

Success Profile

IDP

Employee Appraisal

Training

Coaching

Experience


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Manage Succession

high-performer model

current capacity

employee appraisal

future promise

“READINESS”“FIT”

+gap analysis

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Process Overview

Cascade objectives through meetings

Assign multi-source feedback raters

Drill-down into real-time data

Identify attributes required to meet objectives

Appraise all employees

Identify gaps in required skills

Create plans to bridge the gaps ASAP

Provide learning, application and feedback

Monitor developmental progress

Identify talent required to succeed

Assign appropriate talent in key roles

Keep an eye on the future


Business

Human Capital Management Why And How