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HR Performance Dossier made for L'Oréal Human Resources, June 2007 P3 HR, Creators of Business Performance P10 Can HR Performance Be Measured? P19 What Process for What Performance? P27 Go Further

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Page 1: HR Performance - Equinox-Cognizant · The role of HR as business contributors today consists in aligning human resources processes with the company’s strategic interests, ... HR

HR PerformanceDossier made for L'Oréal Human Resources, June 2007

P3HR, Creators of BusinessPerformance

P10Can HR PerformanceBe Measured?

P19What Process for WhatPerformance?

P27Go Further

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CONTENTS PERFORMANCE

HR, CREATORS OF BUSINESS PERFORMANCEp.4 The HR Value Proposition

Based on the book by Dave Ulrich and Wayne Brockbank, HBSP, 2005

p.7 More Confident and Credible HR, at the Heart of BusinessInterview with Alastair Imrie, Group Human Resources Directorat BAE SYSTEMS (UK)

p.9 Perception of the Value of the HR FunctionBased on the article by Dirk Buyens and Ans de Vos,Human Resource Management Journal, 2001

CAN HR PERFORMANCE BE MEASURED?p.11 Why Human Resources Need to Evaluate Their Performance

– And to What EndInterview with Jean-Louis Dufloux, associate with Equinox Consulting

p.13 L’Oréal Managers Talk About HR PerformanceInterview with Valérie Chapoulaud, managing director Europe 5, L’OréalLuxury Products Division, Alvin Hew, president and managing director, L’Oréal Taiwan, and David Greenberg, senior vice president of Human Resources, L’Oréal USA

WHAT PROCESS FOR WHAT PERFORMANCE?p.20 The HR Scorecard

Based on the book by Brian Becker, Mark Huselid, Dave Ulrich, HBSP, 2001

p.24 The Eight Essential Phases of ROI in HRBased on The ROI FieldBook, Patricia Pulliam Phillips, Jack J. Phillips, Ron Drew Stone, and Holly Burkett, Butterworth-Heinemann, 2006

Human Resources is currently finding itself at the core of an increasing number of serious problems. Just to name a few, there isthe war for talent, employer image management, constant reorganization, people’s need for close support and individualattention… In such circumstances, the notion of “HR Performance” seems to have little to do with the job.For some managers, HR performance can be summed up as the ability to attract and hire the best people. Others primarily expectHR to provide “transactional” services, i.e. recruitment, administrative management, etc. Still others would like HR to be atransversal actor in change and to contribute largely to organizing such initiatives. Then, when it comes to workers, many wonderexactly what role HR plays and how much “power” it has. People also worry about HR’s ability to protect or influence their destinyin the company…It is true that the job of human resources involves a delicate balance between initiatives that are measurable in the short term(i.e. recruitment, job transfer, employee turnover, training budgets, staff supply, etc.) and others that are expected to pay off in themedium term (i.e. effectiveness of succession plans). And one mustn’t forget factors that are hard to quantify, especially issueslike proximity and time spent listening to company members. This last point brings to mind Jean-Paul Agon’s message to the HRcommunity at the beginning of the year: “You are the only ones who have the word “human” on your business card, and above all,I would like you to get close to people and to make up for the friction generated by our way of working.”Between “calculating everything” and “purely qualitative” assessment, how can HR performance be measured? This is thequestion that we wish to explore in this dossier. Group leaders have been questioned about their expectations, and human resourcepractices have been closely examined. Generally speaking, L’Oréal has never explored this subject extensively. But it is time to think about these issues, because that iswhat it is most likely to take to not only improve HR performance, but also to earn recognition for all of HR’s contributions. Enjoy!

Rémi LugagneHuman Resources Development Director

Editorial

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HR, Creators of BusinessPerformance

Key Ideas

The role of HR as business contributors today consists in aligning human resources processes with the company’s strategic interests,and doing their utmost to facilitate the work of teams in the field. HR professionals may have acquired the status of business partners,but they have yet to gain in stature by becoming involved in strategy and by bringing in value. David Ulrich has already contributedgreatly to the transformation of HR with his reference work, Human Resource Champions. He now co-authors The HR Value Propositionwith Wayne Brockbank and explores the ways of transforming HR professionals into business contributors, more involved in thebusiness environment and present at the core of the business.

This is a change with impetus, especially for BAE SYSTEMS, as HR Director Alastair Imrie explains. Alastair Imrie called upon WayneBrockbank, co-author of The HR Value Proposition, to present a HR function of a new caliber. Based on both HR fundamentals and onthe company’s core business and external environment, and implemented throughout the company, the new HR model finally has allthe weapons necessary to be a credible contributor to the company strategy.

Based on The HR Value Proposition, Dave Ulrich and Wayne Brockbank (Harvard Business School Press, 2005), the interview withAlastair Imrie, Group Human Resources Director, BAE Systems (UK), and the article “Perception of the Value of the HR Function”, byDirk Buyens and Ans de Vos (Human Resource Management Journal, 2001).

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indeed able to better assess thecreated value than its producer. In a land where the customeris king, Human Resources had better stay on its toes!

THE PREREQUISITESTO CREATING VALUE

Until recently, HR professionals have been cooped up in theirivory towers. Now, however, they are increasingly dealing withthe demands of parties outside the company. Ulrich andBrockbank predict that HR personnel must, first and fore-most, be open to others’ demands and raise the right ques-tions: which of the players involved deserve their attention?What do they expect of the company and the HR departmentin particular?

Proving their legitimacyEach sector has its key people in the creation of value: thefinancial analyst in an investment bank, the geologist in theoil industry. These people do not wonder if they are truly busi-ness partners because they are a business in themselves. ForHR professionals, things are not as clear. They must provethat they are contributing true added value to the company’soperations and that their service provides a competitiveadvantage. Why would a CEO invest in human resource poli-cies if he or she does not see their benefits and how theyimprove the company’s productivity? To prove their legitimacy,HR professionals must thus show evidence of their usefulnessand have a perfect knowledge of the market in which theircompany operates, the prerequisite for answering the follo-wing questions. What are the skills the company needs toadapt to demand fluctuations? How should HR departmentsbe set up for more global results?

Considering external parametersThere are many external parameters that influence a compa-ny’s activities: new technologies, market regulation by thestate, or demographic changes. To maintain their credibility,HR professionals must not only be on top of all of thesetrends, but also assess their impact on the company. Newtechnologies, for example, have revolutionized HR practicesby automating some tasks, but HR must also know their

Business partners: that is how HR professionals nowlike to define themselves. Indeed, their role todayconsists in aligning human resources processes with

the company’s strategic interests, and doing their utmost tofacilitate the work of teams in the field. According to DaveUlrich and Wayne Brockbank, co-authors of The HR ValueProposition, HR does not yet have everything it takes tobecome true strategic players. More than just guiding mana-gers and employees internally, to be a strategic player meansknowing what clients and investors need. Clients, the compa-ny’s target audience, are in the best position to judge the realvalue of the product or service provided. The final user is

The HR Value Proposition

HR Directors have begun to gain stature as strategic partners. The next step is tobecome not just partners, but major players in strategy and creators of value. Thisposition implies a change in practices as well as attitudes.

VIEWPOINT

#

#The AuthorsDave ULRICH is a professor at the

University of Michigan. His

research focuses on companies’

capacity to build value-creating

HR policies that are consistent

with the global corporate strategy.

He has written many works on the

subject, most notably Why the

Bottom Line Isn’t!, published by

John Wiley, April 2003.

Wayne BROCKBANK, a professor

at the University of Michigan, is

the director of the Michigan

Executive Programs in Hong

Kong, Singapore and India, and

Visiting Professor at the Instituto

de Altos Estudios Empresariales

in Argentina and at Mt. Eliza

University in Australia. He is a consultant for

international groups (GE, Motorola, Cisco and Goldman

Sachs).

•••

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impact on production. The fact that BMW’s customers, forexample, can now choose a car model on an Internet portaland order directly from the factory has definite implicationson human resources management. 80% of BMW’s sales inEurope now go through this channel. HR professionals are thefirst to be affected and must rethink the organization andtask distribution.

Similarly, HR professionals must be aware of labor marketchanges in the countries where the company is established.Today, the decline in industrial jobs, which are being replacedby services and high-added-value positions, has become wides-pread in all western countries and calls for a very differenthuman resources management policy from that of the 1990s.

Heeding the client’s opinionOften, marketing departments call upon consumer groups toguide future product innovations. Could HR also apply thismethod? When hiring a head cook for a restaurant, why notask patrons to come and taste dishes prepared by the diffe-rent candidates in order to select the best one? Using clients’opinions in recruitment would improve decision-making andminimize the risk of error. Similarly, some companies no lon-ger hesitate to invite their clients to participate in trainingsessions that are usually “for members only.” That is the caseof General Electric, which includes its customers in trainingpools, thus hoping to better determine their expectations andneeds. For a negligible cost (a few extra participants at aseminar), the company creates a very instructive bond with itsclients, the very people who ensure its survival. This helpsshed light on what drives them to purchase options and pro-ducts. A US electronic component company even thought ofinviting customers who had recently preferred a competitor’soffer in order to understand the reasons for their choice andto try to win them back.

Other companies involve their clients by having them parti-cipate in employee evaluation and rewards. One US airlinedistributes $50 coupons to its passengers, who can then passthem on to the crew members on their flight if they are happywith their service! No matter how innovative, however, thisnew focus on clients is insufficient if it is not accompaniedby a true reform of HR practices.

TOWARDS A REFORMOF HR PRACTICES

In order to create value, human resources must rethink theirentire process, beginning with their recruitment policy. In thisera of the battle of the brains, sure to intensify over the nextfew years, HR would do well to build lasting relations withany institutions where talent can be found, notably collegecampuses and university research centers.

Polishing the employer’s imageIn order to deal with shortages in certain fields of work, com-panies do not hesitate to encourage recruitment by recom-mendation, naturally including a reward for the employee whomanages to bring a valuable player into the company. Ofcourse, an appealing website is also needed in order to attractfuture employees, as well as the ability to respond to theirquestions and applications as quickly as possible. Younggenerations are receptive to the major media, so commercialscan be very helpful. The company must market its image asan employer with the same diligence as it applies to prepa-ring its product advertising campaigns. It must emphasize theadvantages offered to employees, the group’s values, and itscapacity to adapt to employees’ needs, allowing them tobalance their family and work life.

Last, but not least, new recruits must be integrated withgreat care. Once the administrative details are settled, thenew employee will expect quick feedback on his or her work,showing how he or she is contributing to the company’s globalstrategy.

Rethinking training programsAlthough employees often dread training, if it is well-prepa-red, it is one of the best ways to develop the teams’ employa-bility and skills. However, training deserves better than thestandard approach that is common today. Depending on thegoal, it may be advisable to seek outside consultants or to askmanagers themselves to provide training. Depending on theobjective and training program content, the method can varyas well: e-learning, role-playing, practical case studies, on thepremises or outside the company. It is also important to •••

#•••

Knowing external business realities(technology, economics, globalization,

demographics)

Ensuring HR professionalism(HR roles, competencies, and development)

Building HR resources(HR strategy and organization)

Crafting HR pratices(people, performance, information, and work)

Serving external and internal stakeholders(customers, investors, managers, and

employees)

Sou

rce:

The

HR

Val

ue P

ropo

siti

on,

p.1

0.

� �

��

HR valueproposition

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ensure that knowledge is effectively transmitted from thetraining into actual work in the field, and to be able to mea-sure its impact. All of these aspects are sometimes neglected.

Rethinking performance evaluationManagers in the field are most involved in their company’sperformance, but without good HR tools to measure it, theirefforts can be in vain. Setting performance standards is thusone of HR’s responsibilities. Choosing the right indicators isimportant, and not always the easiest to quantify. For sales-people, the task is relatively easy as the measure of perfor-mance is linked to the sales curve, but for an R&D team,behavior-related skills, which are intangible by definition, arealso of considerable importance. In this case, the best way toset coherent objectives and attainable performance targets isto consult the involved teams directly, in order to create arelevant benchmark together. This is also a way to ensure thatthe goals are better-accepted, since they will have been setby the employees themselves.

Encouraging performancePerformance leads to rewards. Indeed, rewards, whetherfinancial or not, are at the heart of motivation. Thus, depen-ding on the field, it is crucial to determine what proportion ofpay can be variable or set. The career ladder is also a strong

incentive. But many managers seem to have forgotten thatsimply congratulating one’s teams is a reward in itself.. Theleast costly methods are sometimes the most effective interms of incentive: knowing how to share information withone’s employees is a valued sign of trust; asking for their opi-nion on a problem or giving each person the freedom to orga-nize his or her work as he or she sees fit (as long as there areresults, of course) are also effective ways of ensuring a highlevel of employee commitment.

Human Resources often receive negative attention fromline managers, and Human Resources will increasingly needto defend its own position in the company. Seen as cost gene-rators, they must now provide evidence that they can also,and predominantly, generate profits for the group. In sum,although HR professionals’ main task is to handle in-houseissues, they can no longer stop at just dealing withemployees. Markets rise and fall in the outside world, and itis externally that value is created. Human resources, too,must seek their new-found legitimacy outside its traditionalrole. ■

Based on The HR Value Proposition by Dave Ulrich andWayne Brockbank, Harvard Business School Press, June2005.

•••

� THE FUTURE OF HUMANRESOURCE MANAGEMENT

Mike Losey, Sue Meisinger,Dave Ulrich, John Wiley & Sons,April 2005The only way to ensure the future ofHuman Resources is by making sure itevolves. Since HR’s early beginnings, ithas proven to be more and more of atrue asset for any organization. It isthere where employees are hired, wherethey are trained, where their rewards and bonuses are designedand adjusted, in other words, the strength of a company’scompetitive edge and growth. This book breaks down theworries taking over the future of HR even today, such asfinding adequate personnel, and describes the criterianecessary for HR to survive and succeed in the future, likecreating or adapting corporate culture according to thechanging conditions of the company. The authors have giventhe floor to 64 international experts from the business world,research or consulting firms, and have come out with ninethematic chapters compiled with articles that address presentand future challenges in the HR world. The authors look at the

future of HR through a scientific perspective, and by this, areable to identify the rules to abide by for its endurance andevolution in true business contribution.

� HRM AND PERFORMANCEJaap Paauwe, Oxford University Press,August 2004HR has a fundamental double role,which in no simple task: provide thecompany with the best profiles to reachset performance objectives, and thenearly moral obligation to offer itsemployees a working environment thatis fair and centered on personaldevelopment. Many researchers leanmore on the link between sophisticated human resourcesmanagement techniques and company and individualproductivity. But what about the social dimension of HR? JaapPaauwe's work answers this question by establishing a new HRtheory based on multiple concrete cases; a theory that can beapplied not only organizationally, but also nationally andinternationally.

Zoom

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More Confident and Credible HR,at the Heart of BusinessInterview with Alastair IMRIE, Group Human Resources Director at BAE SYSTEMS (UK), Business Digest, October 2005

Alastair Imrie, Human Resources Director of BAE Systems, called upon Wayne Brockbank, co-author of The HRValue Proposition, to present a HR function of a new caliber. Based on both HR fundamentals and on thecompany’s core business and external environment, and implemented throughout the company, the new HRmodel finally has all the weapons necessary to be a credible contributor to the company strategy.

According to the authors, HR must learn to pay extra attention to external businesswhile keeping in mind both external and internal stakeholders. Would you say theseare the two most important and challenging objectives you are confronted withtoday? The first main challenge I see is delivering first class service to the business so thatbusiness leaders can make their contribution without having to worry about back-office operations. This is our ticket to operate, and gives us our base credibility.Secondly, we have to contribute on the strategic level. This means understandingthe business, asking challenging questions and providing innovative solutions tobusiness problems. We must be very aware of the external environment. More thanjust the employment market, I’m referring to our customers and other key stakehol-ders. BAE Systems’ primary customers are the defense departments in the countriesin which we operate. Recent world events, changes in defense spending and in therole of the military, will all impact the way in which our business operates. We needto understand how these changes affect our customer so that we are able to respondand support them. Customers increasingly look to us for help in developing theircapabilities rather than simply to supply them with products. Unless HR can unders-tand these changes and help to address them inside the business, even if theymight seem like little to do with HR to some, we will not achieve our goals.

How do you ensure HR’s professionalism within your company? Are there any speci-fic types of training and / or performance measure systems within BAE aimed atimproving HR’s strategic role?We started a project around three years ago to understand the changing role of theHR professional specifically in our company. We developed a new role profile and setof competencies, which we then tested with our line management, putting into placean assessment and development process. We chose to work with Wayne Brockbankand the Michigan Business School because they had the right mix of academicexcellence and pragmatic business approach. We also benchmarked ourselves usingthe Michigan HR competency study (360°). Wayne has now worked with all of oursenior HR people worldwide, and we have created a common language and toolsetfor HR with an organization-development focus. The learning methodology, withmuch re-enforcement via project work, learning opportunities and consulting sup-port, has proved highly effective. Even if the HR team was already strong, they arenow more confident having the tools and techniques to help solve problems at theirfingertips. Measuring the effect of this intervention through our HR CustomerSatisfaction Survey, we have seen a huge increase in our business leaders’ per-

Alastair IMRIE, Group Human

Resources Director at BAE

SYSTEMS since 2002, is also

Group Managing Director of

Shared Services, in charge of

managing resources and

operations. Formerly, he was

notably Managing Director of

Merger Integration, responsible

for delivering synergies

generated following the merger

between British Aerospace and

Marconi.

•••

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ception of the strategic role of HR. Of course, we do not claim a direct relation-ship, but the work we did with Michigan undoubtedly made a significantcontribution.

More recently, we have put into place development electives to cover all areas ofHR competency, including organization design and development, employee rela-tions, business and financial awareness, service provision and personal credibility. We also provide personal development plans for our newer, early career HR teammembers specific to their needs and the functional model at BAE Systems. We haverethought some of the elements of graduate development, as HR people have toclimb up the learning curve fast.

In addition to these development activities, we run HR conferences to communi-cate key messages and feature keynote speakers including senior company mana-gers, customer representatives and HR academics. We also hold a best practice sha-ring and recognition event and an annual strategy workshop. We have a HR websitewith best practice areas, company news and relevant information from externalsources. All of this helps to increase cohesion within the function, and to shareexpertise and knowledge. We also hold regular business meetings with our HeadOffice HR directors at which we discuss company issues and agree joint plans wherenecessary. Once this group ratifies decisions or plans, I take them to the executivecommittee of the company in the knowledge that they are well aligned with the busi-nesses’ priorities.

What are the most advanced and original HR practices (in terms of people,information, management of work flow processes) implemented at BAE and valuecreating?We have an innovative HR model that we apply in the UK, a joint venture withXchanging HR Services (XHRS), which provides HR services to business, supportingand developing e-HR. XHRS provides the day-to-day services so that the rest of HRcan focus on its more strategic role. We chose to form a partnership to jointly deliverthis with Xchanging rather than completely outsource. This accommodates our situa-tion and values, as we need HR to operate in the most integrated way to best servethe business. The range of e-HR tools delivered through our ‘people portal’ includingself-services for employees and managers and e-appraisals are now starting to have areal impact on efficiency and accessibility – the nature of our partnership withXHRS means that tools can be developed specifically for us rather than having touse standard industry packages.

We have invested significantly in our strong team of HR professionals’ develop-ment, particularly in organizational development. We are now seeing some greatexamples of HR working closely with the business and providing innovative solu-tions. For example, our HR teams in North America have played a vital role in sup-porting our acquisition strategy. In our UK customer solutions and support, we areseeing our HR people really working at the sharp end with our Air Force customer totruly integrate civilian and military personnel teams and improve military operationssupport.

What is the main challenge for BAE HR in the next few years?We need to respond speedily and effectively to the changing business scenario. Asour footprint has grown in North America, the HR team has had to facilitate anincreasing level of transatlantic working. For example, The Land & ArmamentsOperating Group has its head office in North America but has several thousandemployees in the UK, Sweden and South Africa. In Europe we continue expand ourbusiness in Solutions and Systems Integration, which require different HR responsesin terms of culture, organization design, resourcing and rewards. I am confident thatthe development work thus far is enabling the HR team to respond effectively to theever-changing environment. ■

“...we have

to contribute on the

strategic level.

This means

understanding the

business,

asking challenging

questions and

providing innovative

solutions to business

problems.”

•••

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Perception of the Valueof the HR Function

W hat do top managers, HR managers and line mana-gers perceive to be the value of the HR function?In academic literature HR management (HRM) is

seen almost exclusively as a strategic partner. But it is oftenacknowledged that it has other qualities within the company.For ten years organizations have had to face ever increasingpressure from the market. They have had to reduce their costsdrastically and focus on the added value of their personnel,their processes and their structures. In this new context com-panies have had to acquire new skills. HRM is then seen asone of the key activities in developing strategic market-orient-ted solutions. In order to check this hypothesis Dirk Buyensand Ans de Vos carried out a survey of 38 top managers,97 HR managers and 178 line managers.

The human resources department: multiple rolesMost of the literature relating to HRM stresses the importanceof its strategic partner function but takes no account of thecentral activities of this function. Thus the HRD would beparticularly involved when strategic decisions are made andimplemented.

However, according to research carried out by DaveUlrich*, the contribution that this department makes withinthe company is much greater than that. His research enabledhim to highlight four special areas where HR was a vehicle foradded value. According to him the HRD should have a role instrategic human resources management, in transformationand change management in the company, in employee mana-gement and in administration. In companies HR does notnecessarily have to deal with these four activities. They couldbe entrusted to senior executives, external consultants, parti-cular employees etc.

Different perceptions depending on one’s jobThe study carried out with top managers, HR managers andline managers showed that everybody recognized HR’s essen-tial role as a strategic partner. But, HR’s influence is not res-tricted to this area. The perception of the function variedgreatly from person to person. Thus line managers thoughtthat the HRD’s most important role was that of managinginfrastructure - recruitment, training etc.

They therefore showed that they had a traditional view ofthe function. They did not consider that they themselves wereresponsible for recruitment and training. For their part top

Based on the article by Dirk BUYENS and Ans DE VOS, Human Resource Management Journal, 2001

managers saw the HRD’s role as mainly managing transforma-tion and change within the company. This is undoubtedly dueto the increasing importance of this type of management incompanies today. As for HR managers, they considered theirmain function to be managing people and stressed the impor-tance of employee motivation and skills within the company.

Involment in decison makingThe research also found that the HRD’s value depends on itsbeing involved in each stage of the decision making process –defining problems, introducing and monitoring solutions. If itis involved as early as possible in decision making its role isnot reduced merely to passing on decisions and managingconflicts but it becomes a central activity. Thus the value pro-vided by the HRD will depend on the way the various mana-gers of the company perceive this function.

Finally, by studying the degree to which HRD is involved indecision making and in its four favoured areas, it is possibleto put a value on the work of the HRD. Research could there-fore be carried out into the variables that determine theposition of this department within the company. From thatappropriate reforms could be implemented to change theposition of HR within the company and thus optimize itsadded value. ■

* Ulrich, D. (1997). “Measuring Human Resources: An Overview

of Practice and Prescriptions for Results”, Human Resource

Management.

The research also found that the HRD’s

value depends on its being involved

in each stage of the decision making

process – defining problems, introducing

and monitoring solutions.

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Can HR PerformanceBe Measured?

Key Ideas

That which is immeasurable does not exist—truth or tale? Why should HR’s contribution to business performance be evaluatedand what should be done with such information? Many HR leaders still think that the profession’s impact on organizationalperformance is far too qualitative to be measured. However, for many reasons, this defensive position can no longer hold.According to Jean-Louis Dufloux, it is HR’s ability to measure its performance that will make investment in human resources(which is far more difficult to marshal than financial investment) more effective, and thus more “profitable”.

As far as Valérie Chapoulaud is concerned, the two essential components of HR performance are proximity and solid businessunderstanding, and Alvin Hew shares this viewpoint. As for David Greenberg, he believes that an objective performancemeasurement tool would be to evaluate HR’s ability to influence its business partners.

Based on the interviews with Jean-Louis Dufloux, Associate with Equinox Consulting, Valérie Chapoulaud, managing director Europe 5,L’Oréal Luxury Products Division, Alvin Hew, President and Managing Director, L’Oréal Taiwan, and David Greenberg, senior vicepresident of Human Resources, L’Oréal USA.

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Why Human Resources Need toEvaluate Their Performance– And to What EndInterview with Jean-Louis DUFLOUX, Associate with Equinoxe consulting, Business Digest, April 2007

Whilst human resources performance evaluation isbecoming increasingly important for listed compa-nies – with social rating is gradually becoming as

important as financial rating – many HR leaders believe thatbecause its impact on organization performance is qualitative,it is difficult to measure. But for many reasons (such as theclarity of HR policy regarding employees and management, theimportance of projecting the right image to customers andend-user, etc.) this defensive position is no longer viable.

Today, there are different ways of assessing the effective-ness of HR policy, even if they are less standardized than thosethat measure, for instance, financial performance.

How would you define high-performance in HR? High performance in HR can be evaluated in terms of its capa-city for aligning the following three requirements:1. A company-wide drive for success (implementing a strategyand achieving results),2. The importance of individual employee motivation (tasks andresponsibilities allocated, workplace ambiance, evolution andenrichment and balance between personal and professional life), 3. The projection of a social image that has a positiveinfluence on external parties (candidates, customers, analysts,and so forth). These factors work in harmony with one another.

While these measures seem straightforward, putting theminto practice is another story. There are two main reasons forthis, the first being the natural reluctance to calibrate theintangible “human” element, and second being the multitudeof factors (culture, area of expertise, country, and so on) withinthe major groups, meaning that great care should be takenwhen making comparisons.

What would a group like L’Oréal have to gain from anevaluation of its HR performance?1. The first thing might be that a management that takes theinitiative and guarantees a personalized evaluation process(employee performance assessment) becomes more legitimateif it practises what it preaches.

2. The second relates to image and efficiency:• Vis-à-vis its customers, performance evaluation is aboutassessing the quality of services and their exploitation – in

short, about the good it brings to the Group's operations. •Vis-à-vis the company itself, it is about ensuring its ownmeans to manage its long-term evolution and activity by objec-tively regarding what has been accomplished and whatremains to be.

How can the measure be implemented?The measure can be implemented by focusing on the threerequirements mentioned below:1. The strategic partner• Of the groupAligning HR policy in conjunction with the company’s strate-gic plan (for example: the capacity for rapidly arranging theinternationalization of the organization in case of an importantglobalization of activities). • Of the group's areas of expertiseSupporting line managers in projects the lend to the transfor-mation of the organization (for example: the detection andretention of key resources in the event of an acquisition, thecapacity to provide the necessary management and marketingstaff for a new development project, legal and social supportin the event of restructuring, and so on).

Jean-Louis DUFLOUX spent ten

years at the Paris branch of

Deloitte (1986 -1996) providing

consulting services to Financial

Institutions and in 1996 helped

create a management

consultancy, which was bought

up by a large European

computer services company at

the beginning of 2000. In

2004, in collaboration with a

number of associates, he founded Equinox Consulting, a firm

employing over one hundred consultants and specializing in job

strategy, general organization and accompaniment for companies

undergoing change. Their projects always combine technical

elements (areas of expertise or industry) with human factors.

BIOGRAPHY

•••

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2. Championing employees• As individualsImprove employee commitment and workforce skills (for ins-tance, the ability to detect requests for mobility and match themto the group’s needs, the capacity for helping people climb thecareer ladder through additional on-the-job, developing themanagerial skills of employees who were initially recruited fortheir sales, innovative or production skills, and so on). • As a groupGuarantee (or improving) the effectiveness of HR processes(pay, staff administration, payroll management and proces-sing, performance evaluation, and so on) by applying thesesame processes across the board – efficiently and equitably.

3. Supporting the HR imageEnsure that the image projected to the outside world rein-forces a reputation and pull that is in keeping with the group’sself-image (for example: a high reputation rating within targe-ted higher education establishments and on the labour mar-ket, a strong identity when it comes to social subjects likediversity, gender equality, child labour, integration into thelocal economy, sustainable development, and so on).

What are/would be the best indicatorsof successful HR?In this context, simplicity is the best means of achieving suc-cess. Good indicators are simple ones – purposely strict, butfirm, and reliable.

A 3-year post-recruitment retention period, the averagerecruitment period for novice applicants, (the cost of a payslip) in terms of founding a reputation rating for an employerreflect only loosely on the integration policy, the quality of therecruitment process, the effectiveness of a pay scheme or aHR brand policy, but are necessary for objective discussion. When selecting indicators, the HR department should adoptthe same approach as the financial department would, onlyseeing a group's performance in terms of turnover, the growthrate, IFO, ROE, and the price-earnings ratio, and so on.A HR management chart of fifteen or so known indicators thatare regularly monitored by the department, the head office andits customer management offices would already be a tremen-dous step in the right direction on a number of fronts.

It then becomes entirely possible to create advanced indi-cators, adapted for use in the corporate context or a specificsituation. But this is not where the problem lies. The real dif-ficulty lies in an HR department's capacity to collect objectiveand homogenous data on various professions in different orga-nizations and a multitude of countries -- and then to analyze,transmit and develop it.

How can the quality of HR services – vis-à-vis opera-tional managers and employees – be evaluated andthen transmitted? In some groups, the situation is so complicated that itbecomes extremely difficult to produce a simple analysis of itsworkforce by population or skill category. This is not an exag-

geration; it shows how definitions vary from one country to thenext. “Executive,” “engineer” and “fast tracker” are not objec-tive notions; companies must find benchmarks and stick tothem – both geographically and historically.

Experience has shown that, when questioned, operationalmanagers request few indicators. Again, it is important to deve-lop common indicators that both HR departments and opera-tional managers can can agree on. They then need to be used,monitored, and interpreted (for example: the time from when arequest for resources is made to when the first response fromthe human resources department is received, the number oftransfers granted versus those requested, the number of trai-ning places provided versus those required, and so on).

In any case, indicators are selected according to the situa-tional context. For example, during a period of full-scale deve-lopment, the operational manager will be particularly interes-ted in the human resources’ reactivity when filling vacancies(recruitment and/or mobility), and employees will be concer-ned about the HR’s capacity to provide them with training thatwill enable them to learn new skills.

And lastly, is it possible to measure the economiceffectiveness of a human resources department? Yes, it is possible to measure its effectiveness in certain tran-sactional areas (for example, in administrative management,payroll, and human resources information systems, or HRIS)just as it is in any other operational sector. However, evalua-tion is much more complicated in other, less tangible areaslike social climate, skills improvement, and mobility andenhancement of individual potential. All of these things dohave an unquantifiable economic impact.

In some cases, the exercize needs to be conducted the otherway round. An average retention period of 4 to 5 years in a com-pany with a high recruitment rate represents possible savings of25% throughout the entire recruitment and integration sector.

An enhanced HR, one that increases the candidate accep-tance rate or limits salary expectations, also representssavings,and more specifically, benefits from this long-terminvestment.

One thing is certain – in groups whose management isbecoming increasingly international and whose need for stra-tegic support from HR requires increasingly high levels ofreactivity and flexibility, it is essential to set up:• Not only a structure of organization and processes thatclearly guarantee the quality of the HR department's contribu-tion to fulfilling the needs of the Group, employees, and out-side world, • but also indicators that are accepted and understood byeveryone, and which ensure that these processes are appliedand produce results in every countries (obviously, at varyingdegrees).

Only by using such indicators will HR investment (which ismuch more difficult to mobilize than financial investment)prove efficient, productive and, to put it in economic terms,profitable. ■

•••

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L’Oréal Managers TalkAbout HR Performance

Reconciling Strategic Vision with HR AmbitionsInterview with Valérie CHAPOULAUD, managing director Europe 5, L’Oréal Luxury Products Division, Business Digest, June 2007

Europe 5 is the most lucrative Zone in the Luxury Products Division, producing30% of the Group's turnover and 25% of its profit. It has a 3300-strong work-force in Great Britain, France, Germany, Austria, Portugal, Spain, and Italy,

and is responsible for producing around ten different brands. The LPD is number onein Europe 5, with a market share of more than 17%.

So, how does Chapoulaud see her division developing in the future? She would likethe division to maintain its undisputed position as market leader, while achieving pro-jected growth – of between 7 and 8% in 2007, and 8 to 9% in 2008. A comprehen-sive action plan involving all the division's activities is under way. This includes: conso-lidating Lancôme as the best-selling brand in Europe, moving Armani from 7th to 5thposition, putting Biotherm in the top 10 within the next 3 years, and successfully intro-ducing new brands (Diesel, Armani, Khiel’s, and so on). The brand portfolio strategy isaggressive, vigorous, and dynamic, and has two key objectives – consolidating the suc-cess of the division's beauty business, and becoming a leader in the perfume market.Europe 5 is therefore a Zone with a high degree of growth potential – in terms of brandsand jobs. The HR department must therefore identify strategic requirements and pro-vide the human resources to fulfil them. The HR department, whose main role is to bea real business partner, manages the Zone's workforce with a team of fifteen staff.

What would you expect from a successful HR department?The HR department is the Zone's linchpin. It works in close partnership with the divi-sion, and its function is to reconcile business and personnel ambitions. I have twomain expectations of HR – a strong employee and team presence in the field, alongwith a solid grasp of the business. Indeed, it is impossible for HR to achieve thesegoals and results without understanding what is required, both in terms of the stra-tegic vision and the organization. Presence and business acumen are my two watch-words for successful HR performance.

HR's performance would be compromised by an HR department that is unable toreconcile the Zone's strategic vision with its HR strategy. This would occur if thedepartment's approach is too theoretical, and lacks pragmatism and operational effi-ciency. The reality on the ground involves managing ten or so brands with very diffe-rent requirements that need to be matched by the appropriate HR provisions. So, Iwould expect the Zone's HR department to be capable of applying the Zone strategy,while adopting a flexible, open, imaginative, and creative approach.

How do you see HRM's role developing in terms of future strategic ambitions?It is essential to reconcile business requirements with HR strategy in the short term.But, it is equally important in the medium and long term for the HR department toanticipate its role with regard to future strategic ambitions, the target company,

Valérie CHAPOULAUD has been

European Zone director of the L'Oréal

Luxury Products Division (LPD) since

July 2005. She joined the Group soon

after graduating from EM Lyon (Lyon

Management School). Having held a

variety of posts, she sees herself as a

pure "product" of L'Oréal. She has been

national brand manager twice (Cacharel

& G. Laroche, and Biotherm),

international manager, and has been

Zone director twice – she was managing

director of the L'Oréal Asia Zone

between 2002 and 2005 before taking

up her current post.

•••

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profile requirements, and career management. Effective management of the HRnetwork is also important, if only to import or export the right skills.

Are you currently monitoring the results of your HR initiatives? How do you see themdeveloping in the future? We monitor the Zone using four performance indicators: the Zone's overall turnover (ofcourse), and that of individual countries; mobility (for instance, are we actively encou-raging international skills mobility?); anticipatory management of the succession plan;and crisis management (reactivity to and results of dealing with unexpected crises).

Note that the Zone HR department does not handle certain issues, such as payand brand image assessment, which are managed by the national HR departments(transversally with the divisions). We cross-check the division with the countriesthroughout the Zone, and we have a say in decisions, but operational decision-makingis the prerogative of the individual countries.

In the future, we will focus more on qualitative criteria. It is, in fact, difficult tomeasure everything, because day-to-day performance depends heavily on factors thatare difficult to quantify. For example, a major re-examination of our organization isunder way, and the HR department's role in this cannot be measured in purely quan-titative terms. The Group's long-term vision of this is unclear, but it is certainly anapproach that is worth pursuing.

I would conclude that we need to focus on the alignment of the HR departmentwith the strategic vision. This will accelerate the development of HR's activities andits ability to identify organizational requirements in terms of skill profiles andrecruitment. ■

•••

L’Oréal Taiwan: A Winning Combination of SoftSkills & Business Savvy Interview with Alvin HEW, president and managing director, L’Oréal Taiwan, Business Digest, June 2007

What is L’Oréal’s current situation in Taiwan, and what are your strategic goals?L’Oréal Taiwan officially came into existence in 1995 and now employs 1000 people(80% of whom are Taiwanese). The Taiwan subsidiary presents three distinctive fea-tures:• Contrary to the other Asian subsidiaries, L’Oréal Taiwan has a large Luxury ProductDivision. It accounts for 55% of total sales, versus 25% globally.• All four divisions of the corporation are established here, which makes Taiwan a par-ticularly representative miniature of the entire L’Oréal universe, with all of its divi-sions and brands.• Taiwan is Asia’s most competitive market. European, Japanese, American, Korean,Taiwanese as well as mainland Chinese competitors are all vying for market share.

It has taken a lot of effort over the years and many managers to turn this subsi-diary into what it is today: a leader! We have been the market leader since the end of2006, when we moved ahead of Procter & Gamble, dethroning it for the first time

“We monitor the Zone

using four performance

indicators: the Zone's

overall turnover;

mobility; anticipatory

management of

the succession plan;

and crisis

management”.

•••

Alvin Hew is managing director of L’Oréal Taiwan, a subsidiary that includes all L’Oréal divisions andbrands. In 2006, L’Oréal Taiwan dethroned Procter & Gamble and thus became the leader on its market.This achievement was made possible in part by the high quality work done by HR. Still, remaining marketleader over time will require the company and HR to join together even more closely as they carry outbusiness strategy.

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in Taiwan. We reached this peak slowly but surely, market share by market share.Right now, the Taiwanese beauty market is not particularly dynamic, despite its consi-derable size (50 billion Taiwanese dollars or slightly over a billion euros). L’Oréalholds 10.5% of the market and is striving to maintain and grow all of the brands ina lasting way. There are still opportunities for growth even if the future is going to bequite challenging because each of our brands can still be stronger individually.

How has HR contributed to the company’s success in Taiwan?We have become market leader thanks to a combination of factors, including ourhuman capital. When I arrived in 2005, the company was plagued by a serious pro-blem—the average employee turnover rate was 30%. The reason for this is that theTaiwanese job market is quite healthy, with unemployment at approximately 3.8%.The entire country is looking for managers… and there was and continues to be amass exodus of talent toward opportunities in China.

While solid business foundations had already been laid when I took over, it wastime to consolidate them and to develop our human resources. We moved quickly asfar as the latter is concerned. By late 2006, turnover among managers—our primetarget—had come down to 16%, and the non-management turnover rate had droppedto 25%. This resulted in more experienced staff and an organization where we couldcapitalize on continuous learnings which help to build business.

What other major challenges does HR need to respond to, to keep lowering turnoverrates?L’Oréal has a good reputation and helps us to entice people to join us. It is often saidthat “people join good companies but leave bad managers”. In Asia, people have veryhigh expectations of interactions and relationships with others. Hence it is importantfor HR to offer managers training to develop their leadership and communicationskills to improve the quality of our managers. Improving the quality of managementis a major priority for HR, because it is a way to produce a top-down effect that willhelp reduce the employee turnover rate. It has been two years since we started focu-sing on enhancing management quality, and this year’s employee satisfaction surveyrevealed a huge increase in employees’ respect for their managers.

What do you expect from a high performance HR team?That it plays a key role in developing people, so that managers learn to inspire themembers of their teams and thus contribute to creating a motivating atmosphere. Ahigh performance HR team should exercize three levers to drive company perfor-mance:• Boost management quality;• Improve the quality of recruitment to ensure that the right people are hired;• Enhance the quality of the workplace environment.

We make a point of ensuring that people have reasonable workloads, that they feelcomfortable here and have a sense of belonging to a team, and that they understandthe company’s mission as well as their own. To this end, we hold large company-widemeetings twice a year. First, there is an annual business review where we focus onthe company’s business situation. We review the previous year, celebrate achieve-ments, and initiate forward reflection on the year ahead, etc. Secondly, we hold amid-year business review to check on progress and eventually make any necessaryadjustments. These meetings provide opportunities to remind everyone what the com-pany is about as well as what each department and division’s role is when it comesto fulfilling strategic objectives.

Are you satisfied with how your HR team has pursued these goals?I am very lucky, because the HR team is extremely strong, despite its limited size—it includes just seven people. Their force comes from their leader, who has worked forL’Oréal Taiwan longer than anyone else and who also has a background in

Alvin HEW joined L’Oréal Paris in

1997 and initially worked with Jean-

Paul Agon, who was the director of the

corporation’s Asia zone at that time. At

the end of 1997, Hew was sent to his

native Malaysia to take charge of the

Consumer Products Division. He held

this position until early 2000, at

which time Jean-Paul Agon appointed

him Managing Director of L’Oréal’s

Malaysian subsidiary. He fulfilled this

job until January 2005, and in

February, he became President and

Managing Director of L’Oréal Taiwan.

Earlier in his career, Hew was a

manager at Procter & Gamble’s

international office in Geneva (1992-

1997), and he worked in banking in

Canada (1986-1990). He received his

MBA from Insead (Fontainebleau,

France) in 1991.

•••

•••

© M

r. K

eye

CH

AN

G

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finance. She is extremely meticulous and very good at setting up our many pro-grams. An example of the team’s potency is that it was the first one in the entiregroup to establish a mid-year review. The team is also excellent when it comes to gar-nering best HR practices from the international scene while still developing customi-zed courses that meet local needs.

How can such a team progress even further?At L’Oréal, we want HR people to also develop a strong business sense. I thereforeurge them to deepen their understanding of our strategy, because such insight makesit possible to truly comprehend the fact that the key to everything is the people invol-ved. Right now, the HR team could get even more involved in business and takecharge of developing appropriate organizational structures. For example, if a businessconcern required us to boost innovation, this would raise questions of how teamsshould be supported in their work in order to reach this goal, and what types of peopleneed to be hired, etc.

The current team excels at recruitment and integration programs, but it needs tobecome more strategy-oriented. It should start asking things like, what are our busi-ness concerns? Why are they important? How are we currently organized to respondto them, and why are we having trouble attending to them effectively? Should we reor-ganize our structure? The HR team should also develop its overall perception of thecompany and become more structured.

What is currently limiting the team’s performance?Team size and members’ skills. As far as the latter is concerned, I am working directlywith the HR director to help her gain a better understanding of business issues andto give her a central role in developing the understanding of our organizational struc-ture. There is no need to enlarge the HR team if it includes the right people. Thatmeans people who grasp how the company works as well as company strategy. Sucha team may be nurtured through HR training courses or by having a few business-oriented people join the team.

Based on your strategic goals, what performance measurement criteria do you applyto HR?I urge the HR team to take a quantitative approach to their jobs.

We are particularly attentive measuring the employee turnover rate in the company.Every month, it is analyzed according to division, position, and level of seniority. Whenwe are not losing anyone, it means we are retaining people! The turnover rate is thushighly representative of the quality of the HR team’s work in the following areas:• Recruitment and integration: To recruit effectively, HR must check to see if it is pro-ducing accurate descriptions of jobs and background requirements. The team mustalso figure out which people are performing the best.• Training: There are two leadership programs that focus on soft skills in view ofimproving management quality. One of them concentrates on improving managers’awareness of our sector of activity, our company, and its professions. The second pro-gram is run by an Australian trainer who teaches people how to manage a team effec-tively and generate adhesion.

We measure program cost and volume (number of people trained, hours of trainingper person, etc.) and establish benchmarks (which are very useful for measuring HRperformance) with other Taiwanese companies as well as with the group average.

The HR team has now reached a point where it can start focusing on businessissues while still attending to human concerns. So this is a very exciting time. Webecame number one on the market just a short time ago, so we must consolidate ourachievements, and it is also time for HR to become a strategic player. Today’s stag-nant market presents a continuous challenge, but with the HR team that I havebehind me, I am confident that we will be able to both maintain and enhance com-pany growth. ■

“A high performance HR

team should exercize

three levers to drive

company performance:

boost management

quality; improve the

quality of recruitment

ensure that the right

people are hired;

enhance the quality

of the workplace

environment”.

•••

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L’Oréal USA: HR as a Business Partner Interview with David GREENBERG, senior vice president of Human Resources, L’Oréal USA, Business Digest, June 2007

What is your definition of a “high performance” HR team?1. First of all, it is a team that is thoroughly familiar with and fully aligned with the goalsof the business. Our team is organized around our business. As a result, we have gainedconsiderable insight about brand strategy, and what drives our business, especially fromthe people perspective.2. Second of all, a high performance team is objective and independent. These prin-ciples must be upheld if we intend to be a resource for both managers and the work-force as a whole. All HR professionals have a duty to provide objective guidance, andthis sometimes means distancing oneself from senior management. HR has to developits own viewpoint and defend its convictions. Without this type of courage and initia-tive, it is likely to lose employees’ confidence and trust. HR would then appear to beineffective, and people would stop confiding in its members… In such circumstances,HR would also be of little value to senior management, because it would no longer pro-vide the necessary link between employees and corporate leaders. Preserving an objec-tive position in no way hinders HR’s ability to remain perfectly aligned with corporatestrategy. Independence refers to a way of thinking and dealing with people and organi-zation. What is the best way to organize teams to reach objectives? Who are the rightpeople for key positions?3. In addition, a high performance HR team maintains close relationships. The teamshould know and be available to all members of the business units. Given our 7000employees, there is generally one HR person for 80 people, a figure that is quite reaso-nable. Relationships tend to develop informally, when HR people visit business offices,go to factories and distribution centers, and take interest in people’s career advancement.They keep in constant touch with what is going on and are interested in all feedback,both positive and negative.4. Finally—and this point is particularly important to us, since innovation is the funda-mental principle of our company—HR people should be skilled at detecting raw talent,great minds, and creative thinkers. They should give such people opportunities to fullyexploit their potential. For example, we generally avoid strict job descriptions in order toavoid locking people into set categories.

How could your team be rendered even more effective and better aligned with thegroup’s strategic goals?All of the previous criteria should be further developed and reinforced. Communication,idea sharing, and good practices are all essential to do so. It is important to me to createa feeling of community among the members of HR. Every year, we hold a three-day confe-rence that brings all of the group’s HR leaders together to examine a specific issue.External experts are brought in to provide support, and we also review HR priorities. Lastyear, the subject was change and HR’s role in enabling the company to carry it through.What skills do we need to demonstrate in order to provide key support for the change pro-cess? In addition, every quarter, I take part in a leadership meeting with the group’s top30 managers. And every month, I meet with the HR team leaders from all our divisionsand activities. I also visit business units on a regular basis, and I try to spend time

David GREENBERG joined L’Oréal in

1993 in the L’Oréal Paris division of

the American subsidiary where he

worked in the marketing department

for six years. In 1999, he was

appointed General Manager of L’Oréal

Mexico’s Consumer Products Division,

and he held that position until 2003.

He then returned to the American

subsidiary as general manager for

Matrix Global. In 2005, he was

appointed senior vice president of

Human Resources at L’Oréal USA.

Greenberg’s HR team includes

140 people and is responsible for over

7000 employees divided among all

the L’Oréal divisions. The team is not

only in charge of matters like

compensation, strategic recruitment,

and development, but it is also a

business partner to the four divisions

of the company.

David Greenberg is Human Resources manager at L’Oréal USA. He explains that HR performance is depen-dent on clearly defining HR’s role in overall performance as well as the added value that it can offer. Giventoday’s ever-changing circumstances, an objective measurement tool for assessing HR’s contribution wouldevaluate HR’s capacity to influence its business partners.

•••

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with employees, either formally (for example, by being at the management develop-ment center during training programs) or informally (through impromptu conversations).It is also critical to have clear objectives for our organization. These are: 1. Contribute to the group’s culture of innovation. HR has a fundamental role to play herein terms of hiring, development, and training.2. Play an active role in modernizing our structure and organization. This especially refersto providing leadership support, communicating effectively, ensuring optimal team com-position, and measuring organizational capacity.3. Commit to preparing the future. Hire people with high potential, develop career pathsfor them, and keep investing in training and development.

This is what HR must do in order to maintain and develop long-term performance. Itis also what we must keep in mind when we are asked to assess ourselves.

How do you or would you like to measure the performance of your initiatives? And do youthink that there should be limits to measuring HR performance?We still have a fair amount of progress to make in this area. We currently have measure-ment instruments that enable us to diagnose business units’ general health, meaninglevels of diversity, staff retention rates, employee commitment, etc. But in my opinion,HR performance cannot be measured solely according to such criteria. These compo-nents make it possible to translate the organization’s overall health into numbers, butalthough HR certainly contributes to this, we are not the only ones responsible. At thispoint, we are unable to clearly measure HR performance, and the challenge is to comeup with a wholly objective measurement tool. In the future, we would like to be able tomeasure HR performance based on our ability to influence our business partners. Weshould help to drive scheduled corporate change. Hence the importance of our being atrusted counsellor that can influence top management due to a deep understanding ofthe people that make up the company.

On the other hand, we have become more skilled at clarifying and communicating ourvision of HR and its organizational value. People are now aware that HR has a specificstrategic role to fulfil, and we are now expected to be fully involved in organizationalchange—something that did not use to be the case. We are working directly with seniormanagement to help them reach (but not define!) their organizational goals.I do not think it is worth setting any limits on measuring HR performance. HR shouldaccept the responsibility to produce significant results for the company, just like all theother departments. Its obligations should be defined as formally as possible, so that HR’sdirect, unambiguous responsibilities are apparent to all.

What are the changes that you have referred to, and what exactly is HR’s role in change?As a company that is guided by the principle of innovation, we have always been awarethat people are our greatest asset. But at the same time, people’s effectiveness is deeplyimpacted by the company’s culture and environment. HR fits in as a sort of cultural guar-dian. Its jobs includes figuring out how to communicate, how to get organized, how tomake decisions, how big teams should be, and which hierarchic structure to adopt, etc.Right now, our culture is no longer what it should be, so a year and a half ago, a three-to five-year change initiative was launched. HR has an important role to play, because wemust ensure that people understand the existing culture, and we must relay employeefeedback and opinions from the field. As for the changes that we are carrying out pre-sently, HR is directly contributing to efficiency by ensuring that employees focus on core,result-producing activities. For example, we help people to focus more on customers andless on unproductive administrative tasks.

I am quite optimistic about the future, because people are very motivated, and thecompany is ready for change. Still, we are under a lot of pressure, because we mustprovide top management with the resources it needs to attain its goals. Nevertheless,we have all the reasons in the world to believe that we will successfully live up to thischallenge. ■

•••“We would like to be

able to measure HR

performance based

on our ability

to influence our

business partners.

We should help to drive

scheduled corporate

change”.

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What Process for WhatPerformance?

Key Ideas

It is now essential for HR managers and operational leaders alike, to be able to demonstrate HR's concrete impact on thecompany's overall performance and on strategy, but choosing the right methodology to do so is not a random choice. A key tool formeasuring this impact is the HR balance scorecard, and, as evaluation tools, the Jack Philips’ ROI MethodologyTM, and the4 levels model by Donald Kirkpatrick. It is absolutely essential to start by identifying the company's own particular value creationprocess. Thereafter, everything relies on the preparation of an appropriate measurement system, which has to update HR's keycontributions, then identify and measure their effects. The success of a HR balance scorecard is not based on sophisticatedtechnical design alone. The conditions of its application and human factors are critical too. If it is to be successful, the HRbalance scorecard requires the engagement and involvement of everyone, not just the HR function. Its implementation has to bemanaged as a major process of internal change.

Based on the book by Brian Becker, Mark Huselid & Dave Ulrich, The HR Scorecard, Linking People, Strategy, and Performance,(Harvard Business School Press, 2001), The ROI FieldBook, by Patricia Pulliam Phillips, Jack J. Phillips, Ron Drew Stone &Holly Burkett, (Butterworth-Heinemann, 2006) and Transferring Learning To Behavior: Using The Four Levels To ImprovePerformance, by Donald L. Kirkpatrick & James D. Kirkpatrick (Berrett-Koehler Publishers, 2005).

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Companies usually look upon their employees as theirmost valuable asset. Yet few of them can evaluate pre-cisely the contribution made by HR to overall perfor-

mance. Why is this so? Probably because the influence of HR,in the broad sense, is difficult to assess, since its concrete,measurable contributions do not appear to be critical for thedeployment of strategy. This question of HR's contribution isof fundamental importance at a time when HR are looking toevolve towards a more strategic role. HR managers must the-refore conceive a measurement system that can demonstratetheir concrete impact on profitability and value creation.

THE STRATEGIC ROLE PLAYEDBY HR

Demonstrating the strategic contribution they make is a majorchallenge for HR, calling for appropriate architecture and amethodical process. The strategic role played by HR derivesfrom the growing importance of immaterial capital in today'seconomy. To lay claim to their role, HR need:

A strategy-orientated HR architectureThe three elements comprising this must have a strategicdimension:• HR function: this corresponds to the human infrastructureand must be made up of professionals who are sensitive to thestrategic issues involved.

The HR performance chart is a key tool for measuring the real impact of HR on thecompany's overall performance and strategy. The successful implementation of thischart requires the engagement and involvement of everyone in the necessary processof internal change.

VIEWPOINT

• HR system: this allows employee performance to be optimi-zed. If it is strategy-oriented, we speak of a High-PerformanceWork System (HPWS).• Individual behaviour: it is essential for HR staff to partici-pate in strategy.

One company that has integrated this strategic dimensionof HR particularly well is the retailer Sears, Roebuck & Co.After losing billions of dollars in the early 90s, the companyrealised that its welfare depended primarily on the attitude itsemployees showed towards customers. Training and incentiveprograms in the HR field have since translated into spectacu-lar results.

An appropriate measurement systemTo determine what types of performance are to be measured,the main thing you need to know is how value creation workswithin the company. This is a necessary first stage, to ensurethat HR and the strategy are in proper "alignment".An appropriate measurement system has to be balanced andincorporate "action" indicators (R&D, customer satisfaction,strategic guidance for employees) and "report" indicators (e.g.financial data).

Taking account of HR's contribution to company perfor-mance also means identifying the function's strategic finishedproducts ("deliverables"), which consist of:• performance activators: these are a series of human charac-teristics or competences specific to every company (e.g.employee productivity, employee satisfaction).• levers: these reinforce performance activators. Typically, theymay be a remuneration system.

In concrete terms, the process of turning HR into a strate-gic advantage for the company can be illustrated via a HR per-formance chart.

THE HR PERFORMANCE CHARTThe creation of a performance chart specific to HRis the central tool allowing HR's key contributing

factors to be identified, and their impact on results to be mea-sured.

Creation of the HR performance chartA HR performance chart serves two purposes: allowing HR

The HR Scorecard

#

Brian BECKER is Professor of Human Resources and President

of the Organization and Human Resources Department of the

Management School at New York State University, Buffalo.

Mark HUSELID is Associate Professor of Human Relations

Strategy at the Management and Employment School at

Rutgers University.

Dave ULRICH is Professor of Management at Michigan

University.

The Authors

#

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to be managed as a strategic advantage and demonstratingthe contribution made by HR to the company's financial per-formance.

A HR performance chart consists of four elements:• HR deliverables: these are HR actions that convert humancapital into a strategic advantage (link with value creationwithin the company).• High-Performance Work System (HPWS): this is made up ofall HR practices aimed at maximising employee performance.• Alignment: HR's "external" alignment with corporate strategyserves to optimize HR's strategic deliverables.• Efficiency: this is measured not only in terms of cost reduc-tion, but also in terms of strategic effectiveness, reflectinggenuine value creation. This distinction will make it easier toevaluate the strategic benefits and resource allocation.

A good example of HR's impact on strategy is illustrated bythe way in which competences are managed within the R&Ddepartment of the high-tech company HiTech. It has beendemonstrated and indeed proven, that HR makes a concretecontribution, both to developing the company's turnover andimproving its productivity. How? Firstly, a sustained policy ofproduct innovation and meeting delivery dates helps to main-tain sales, and secondly, good recruitment planning helps thecompany to cope with its maintenance and production impe-ratives.

HPWS and alignment are "action" indicators, whereas HR'sefficiency and deliverables are "report" indicators. The HR per-formance chart incorporates these four elements in order to

reach a balance between the notion of cost control (resultingfrom efficiency) and that of value creation (resulting from HRdeliverables, alignment and HPWS).

A HR performance chart offers several benefits:• A clearer distinction between straightforward HR activitiesand strategic deliverables• Controlling costs and creating value• Measuring the main indicators• Validating HR's contribution to strategy implementation andto results• Managing strategically• Encouraging flexibility and change

Another key function of the HR performance chart is toassess how a company's current HR architecture differs fromthe ideal architecture. Cost-benefit analysis techniques can beused here. These analyses complement the data derived fromperformance charts: whereas the latter are used to assess whatchanges are necessary, the analyses are used to determine thebest ways of bringing these changes about.

Principles for ensuring accurate measurementA proper performance-measurement system should help us tofocus on what creates value and make it possible to justifydecisions concerning resource allocation. Thus it goes furtherthan a straightforward benchmarking system of companies inthe same sector: it clarifies the value-creation mechanismsspecific to a company, by taking us inside the "black box" lin-king HR with the company's performance. Keeping rigidly

Clearly define the company strategyPrepare a business case for HR as

a strategic advantage

Create a strategic map

Identify the concrete results delivered by HR, using the strategic map

Align the HR architecture with the HR results

Implement a system of management by measurement

Design the strategic measurement system

Check the effectivenessof the strategic map at

regular intervals

The 7 stages that transform HR architecture into a strategic advantage

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to values without clarifying the links of cause and effectwould undermine HR's credibility.

The starting point is choosing how to measure the criteria.The measurements made must be meaningful, because thefigures in themselves do not mean anything.

Conceptualising the HR elements that create value allowsthem to be evaluated within the scope of a strategic vision, butit is also important to measure them. The abstract concept ofvalue creation thus becomes an observable and concrete one.

Measuring HR alignmentThe need for alignment between HR architecture and strategicprocess also concerns the performance measurement system.Alignment is assessed from two points of view: one based onstrategy implementation / HR system and one involving HR'sstrategic role / competences.

These two types of alignment enable employees to be madeaware of strategy and to contribute to it.Nevertheless, the internal alignment is largely dependent onthe external alignment. This means that strategic aspectsdetermine the configuration of the HR system.Alignment proceeds in two successive phases:• alignment of HR results• alignment of the HR system with the resultsThis can be simply represented in the form of a matrix: theexternal alignment matrix.

PRACTICAL ASPECTS OF THE IMPLEMENTATIONOF A HR PERFORMANCE CHARTThe successful implementation of a HR performan-

ce chart necessitates recourse to appropriate HR compe-tences, and above all, requires a commitment on the part ofeveryone.

Competences required for HRAccording to several studies, the competences required for astrategic HR approach have now moved on. As well as routinecompetences (a knowledge of the company, expertise in theHR field, change management), there are now a further threerequirements: management of corporate culture and corporateidentity, a high degree of personal credibility and effectivemanagement of HR strategic performance. The latter compe-tence requires the manager to be able to:• think in terms of causal theories, in order to determine howHR really influence strategy• understand how to measure these impacts• discern links of causality• effectively communicate the results of HR's strategic perfor-mance to the main operational-level managers.

To develop these competences, it is essential to act in seve-ral directions at once: cultivating the performance of HR pro-fessionals, rewarding them properly and designing appropriatetraining programs.

HiTech's performance chart

High-Performance Work System- Competence model suited to employee recruitment, development, management

and remuneration- Percentage of employees participating in formal performance evaluation sessions

System of HR alignment in R&D- Percentage of selection decisions based on competence model- Percentage of recruitment carried out at "elite" level- Level of development and implementation of policies for generating employee loyalty- HR alignment index over 80%

In manufacturing-Time taken by recruitment cycle, 14 days or less- HR alignment index over 80%

HR Services- Percentage of employees with the technical skills required- Percentage of staff turnover among top scientists in R&D- Percentage of positions to be filled in manufacturing

Efficiency in HR- Cost per recruitment

Impact- Reduction in HR cycle time

Source: The HR Scorecard

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Guide to implementationWhile a HR performance chart makes use of technical infor-mation, its main requirement is commitment on the part ofemployees. Based on experience of its implementation, andparticularly that of General Electric, seven key factors have tobe considered in order to gain this commitment.

1. Recommendations are offered for each of these:Having a "change manager" to be responsible One person responsible for measurement and two "promoters"may be designated to guide and supervise work.

2. Sharing the need for change internallyCreating an educational case study to measure HR and sharingthis case with operational-level management allows the rea-sons for change to be properly explained.

3. Forging a vision: what results do you expect to achieve?Defining the desired objectives for the HR performance chartand creating a system for gathering data are pre-requisites forsuccess.

4. Mobilising efforts: who should be involved?Every project has its own key players. Knowing how to identi-fy these and obtain their support is a decisive factor.

5. Working out facilitation processes.To support and accompany change, you have to appoint the rightpeople to run the project and ensure that proper motivationmethods are in place. Finally, project managers will have tocheck the relevance of the communication plan for HR measu-rement purposes and make the necessary financial investments.

6. Driving through and reporting change.A plan for measuring HR may prove to be very useful forbenchmarking purposes.

7. Initiating and sustaining change: how should the processbe implemented?To ensure that the changes made have a lasting effect, themain thing is to make the measurements visible and easy toapply, even if they subsequently have to be revised.

A HR performance chart will not remedy a poorly-managedHuman Resources department. However, by gathering rigorousdata that can be updated, you can focus on the main elements ofHR architecture. This offers HR managers the opportunity to laytheir personal stone in the foundations of their company's strate-gy and lets them become strategic partners in their company. ■

Baesd on HR Scorecard, Brian Becker, Mark Huselid and DaveUlrich, Harvard Business School Press, March 2001

Testing the alignment of the HR system with HR results,using the Stilwell Manufacturing model

Please note from what stage the HR system elements presented above can facilitate the work of the HR department.The value scale extends from -100 to +100.-100: counter-productive for the HR Dept0: little or no effect on the Dept+100: makes an effective contribution to the smooth functioning of the Dept.DNK: don't know

Levelof recruitmentof top managers

Performancevis-à-visstrategy

Teamworkperformance

Job stability

HR DeptHR

PlanningRecruitment& Selection

Training &Development

ManagementEvaluation

Compensation& Benefits

WorkOrganization

CommunicationSystem

0

0

0

0

0

0

0

-50

0

-30

0

0

0

-20

0

-50

-50

-40

+40

0

-20

0

0

0

0

0

0

0

Source: The HR Scorecard

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the right kinds of questions in view of ensuring high qualityfinal analysis. What is ROI? Why utilize this method? How?For whom? When? Planning the assessment process is a wayfor the evaluator to save time and money, to improve thequality of data collected, and to ensure that stakeholders’needs are fulfilled. To plan effectively:• Define the purpose of the evaluation;• Identify the principal stakeholders;• Connect program objectives to the evaluation method;• Fix standards that will make it possible to see whether goalshave been met.

The Eight EssentialPhases of ROI in HR

Anyone in charge of developing human resources is now obliged to provide convincing data about how HRcontributes to global company performance. Evaluation techniques are therefore becoming a central issuein HR departments. One such technique is the finance-inspired return on investment (ROI) method. ROIevaluation is becoming increasingly popular, because it is based on rational analysis of results in relation tolevels of investment.

Summary based on The ROI FieldBook by Patricia PULLIAM PHILLIPS, Jack J. PHILLIPS, RonDREW STONE, and Holly BURKETT, Butterworth-Heinemann, November 2006.

I n The ROI FieldBook, Patricia Pulliam Phillips, Jack J.Phillips, Ron Drew Stone, and Holly Burkett go throughthe steps involved in effectively implementing ROI into a

HR performance evaluation process.

1Evaluation Planning

Planning is an essential step in developing an ROI study, yetit is often neglected. This preliminary step is the time to ask

8 Misconceptions about ROI

8 biases against ROI as a performance evaluation method for HR programs that should be banished.

■ Measuring and evaluating such performance is too costly and time-consuming.

■ Evaluation of HR programs by ROI is a passing fad.

■ Evaluation is subjective and cannot be standardized.

■ Evaluation is impossible when it comes to tacit skills.

■ Evaluation only concerns certain types of organizations.

■ If management does not request that programs be evaluated, it is not worth doing so.

■ It is not always possible to isolate the effects of a training program.

■ Implementing an ROI evaluation system requires special statistical know-how.

Spotlight

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2Data Collection

When it comes to ROI, the data collection phase is probablythe most crucial stage in the process, because if informationis merely approximative, it will be impossible to produce acredible interpretation of it. Hence the reason why you haveto ask the people you are evaluating the right questions. Thatimplies that the evaluator too must ask him or herself theright questions. For instance, what am I asking people? Howam I asking it? Who am I asking? And when? In other words,the evaluator must:• Devise questions whose answers can be evaluated;• Identify the most appropriate tool for collecting data;• Pinpoint sources of worthwhile data • Determine the best time to collect information

3 Isolating the effects of learning and development

The only way to find out how training programs impactorganizational performance is to isolate their effects.One must therefore ensure that only performanceimprovement that stems from the program whose influence isbeing measured be considered in the analysis process. Thereare three systems that may be used to pinpoint thisinformation:• Control groups: Compare a group of people that are involvedin a skill evaluation program to a similar group that is notinvolved in such a program.• Trend analysis: Compare the performance of a group rightbefore and just after a training program. • Deduction: Find out how program participants feel about aprogram and how they interpret its usefulness. This method isnot very objective and is only used if and when neither of theother two methods produce satisfactory results.

4 Converting Data into Monetary Values

Once you have collected a significant amount of information,how can it be rendered meaningful with regard to operations?A particularly effective way of endowing data with suchmeaning is to convert it into monetary values. There is a fivestep process that makes it possible to distinguish betweendata that can be converted and that which cannot (intangibledata):• Define a unit of measurement; • Determine the value of the unit of measurement; • Determine the performance variation that corresponds tothe measurement; • Calculate annual variation; • Calculate the total annual value of improvement.

5 Tabulating Program Costs

By definition, ROI implies also taking program costs intoaccount. Cost analysis is based upon three principles:• Identification: You have to consider all costs, not just directcosts. For example, salaries that are paid while people are intraining represents opportunity costs. • Categorization: When program costs are well-organized, it ispossible to assess them more accurately, and they can also becompared with other areas of spending. • Presentation: The importance of costs in organizationsmakes it wholly worth presenting them as well as possible.Not presenting estimated costs clearly is tantamount todiscrediting the entire ROI evaluation process.

6 Calculating the Return on Investment (ROI)

Gains (evaluated in financial terms) are compared toidentified costs in order to calculate the return oninvestment. To facilitate the interpretation of the ROIcalculated, you must:• Apply the right formula: ROI = (profits – costs) / costs x100• Understand what you are calculating: the effectiveness (notthe efficiency) of an investment in human capital.• Relativize the significance of ROI. Alone, it is not enough toproduce valid conclusions. It should be associated with otherdata and considered in view of the initial objective. • Double check the components of the ROI. It is onlymeaningful if all costs are included and if the conversion ofgains into monetary terms is accurate. • Use all of the data. ROI is often a starting point for programevaluation. Other measurements should be utilized in order torefine analysis.

Patricia PULLIAM PHILLIPS, Jack J. PHILLIPS and Ron DREW

STONE are all leaders of the ROI Institute, Inc., a benchmark

and consulting firm that uses a performance evaluation method

called the ROI Methodolgy™. Patricia Pulliam Phillips is

president and CEO of the company; Jack J. Phillips is chairman

and the creator of the ROI Methodology™; Ron Drew Stone is

senior vice president. Holly BURKETT is a consultant and an

expert in evaluating organizational and work performance.

http://www.roiinstitute.net

BIOGRAPHY

•••

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7 Reporting results

When data has been collected and analyzed and conclusionshave been drawn, this information must sti l l becommunicated objectively. You must define what is actuallyworth reporting and to whom you should communicate. Thefollowing notions should be kept in mind:• Different targets need to be communicated to incorrespondingly suitable ways; • Results should be presented at the right time (generally assoon as they are known, although it is sometimes worthwaiting); • Specific reporting methods should be used for each type ofaudience (the choice of media is particularly important); • You should present results objectively and modestly;• Personal testimony is useful, provided that those who haveprovided it enjoy enterprise-wide recognition;• The audience’s view of the training department shouldinfluence the way in which results are presented.

8 Management support

The ROI evaluation process only reveals its full value andpotential when management is closely involved and ensuresits implementation. Be it only because managers have to bewilling to devote time and resources to each phase of the ROIevaluation process! That is why it is also important to focuson managers’ needs and expectations. The goal is to generatecollective momentum for carrying out the ROI evaluationprocess. The following should be done:• Repeatedly stress the importance of managers’ role in learning.• Show how the projects carried out will contribute to solvingmajor organizational problems. • Publicize positive results and report on the advancement ofanalysis. • Put faces on data. People respond more strongly to a personwho shares his or her experience than to a number.• Manage risks proactively, because an unfortunate mistakemight compromise the credibility of the ROI evaluationmethod.

Although the authors generally view this evaluationtechnique as applicable to training and development initiatives,it can also be easily extended to other HR initiatives. ■

TRANSFERRING LEARNING TO BEHAVIORUSING THE FOUR LEVELS TO IMPROVE PERFORMANCE

Donald L. Kirkpatrick and James D. Kirkpatrick, Berrett-Koehler Publishers, May 2005

…Or how to successfully implement level 3 evaluation as per the famous Kirkpatrickmodel. Ever since its creation in 1959, the 4-level Kirkpatrick model (reaction / learning/ behavior / results) has been a reference for all training initiative assessment. It is a highlyastute model, where each stage of evaluation takes the previous one to a higher, morerefined level.

When it comes to performance evaluation, the people in charge of training are underincreasing pressure to demonstrate that their training initiatives are producing the desiredresults. That might mean greater efficiency, lower production costs, an increase in sales,or ROI. The results of training—level 4 in the model—can only be evaluated after the trai-nee’s acquisition of the new behaviors required to improve these results has been asses-sed. For many HR professionals, this forth level of evaluation provides the most accuratereflection of the effectiveness of their programs. However, it is quite difficult to reach,

because it requires observation of behavior use in real life situations.

This book is co-authored by Donald Kirkpatrick and his son James, and it is inspired by the historic challenge of evaluatingchanges in a person’s behavior subsequent to training. It first focuses on the foundation that needs to be laid to ensure thatevaluation of training programs is effective. Examples from case studies of companies like Toyota, Nextel, and a dozen othersthen supply ideas of ways to implement this concept efficiently and appropriately. A comment: this model can and shouldinspire HR in the broadest sense of the term.

Zoom

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Read Further

� RH LES LEVIERS DE LA PERFORMANCEPatrice Galambert, Eyrolles Éditions d’Organisation,June 2007Patrice Galambert, founder of the French consultancy firmEcomotiv and a specialist on the links between HR andfinance, has produced his analysis of the various HR

performance levers. He points outthat it is a mistake to think of HRperformance measurement onlyin terms of reducingorganizational costs, and insiststhat it is also important toacknowledge the role ofinvestment in corporate valuecreation. His book goes beyondmere argumentation – it is acomprehensive guide that tacklesthe question of HR performancefrom an operational perspective.He employs a simple and

practical methodology to explain: 1) What HR performance is,2) how to develop it by optimizing costs and using the rightvalue creation levers, and 3) how to set up a managementsystem to monitor costs and results. Galambert's book willinterest anyone who wishes to understand all thecontemporary HR issues.

� ROI ON A SHOE-STRING: STRATEGIESFOR RESOURCE-CONSTRAINED ENVIRONMENTSBy Holly BURKETT, Industrial and Commercial Training2005, Part 1 in Vol. 37, Issue 1; Part 2 in Vol. 37, Issue 2Holly Burkett is co-author the The ROI FieldBook, and shehas also written a report on the relevance of ROI in trainingprograms that is based on examination of 10 case studiesfrom companies throughout the world. Her initial premise isthe following: Despite heightened interest in return on investment (ROI) andin having training professionals prove their bottom-lineorganizational value, many practitioners resist comprehensivemeasurement and ROI evaluation processes. Indeed, they areconcerned about the cost, time, and human resourcesrequired to fully implement the process. The purpose of thistwo-part series is to present ten best practice, cost-savingapproaches for developing a credible, economical ROIstrategy. A systemic approach to measuring training's impactbegins with an evaluation framework. For the purposes of thisarticle, Jack Phillips' five-level framework for capturing the

financial impact of training programs has been referenced. Many organizations around the globe are using cost-savingapproaches so that they can begin conducting ROI evaluationwithin their current budget. Others use cost-savingapproaches in order to increase the number of ROI studiesthey conduct. The ten cost-saving approaches to ROImeasurement programs have been proven to significantlydecrease resource requirements while still providing sound,credible data. Nevertheless, establishing an evaluationculture is no easy task. In many ways, implementing asystem-wide R0I effort is similar to implementing a large-scale change initiative. Practical application of these cost-saving approaches allows resource-constrained training unitsto present their work in terms of financial benefits thatleaders understand and have come to expect. It is a vital steptoward establishing business partnerships that enhancecommitment to training programs, products, and [email protected]

� SHOW ME THE MONEYJack J. Phillips, Patricia Pulliam Phillips, Berrett-KoehlerPublishers, April 2007

In Show Me the Money, Jack J.Phillips and Patricia PulliamPhillips present a simple methodfor determining the value of anyproject at any stage of itsdevelopment. Their ROIevaluation methodology enablesmanagers, analysts, andconsultants to objectively andprecisely assess the value of theprograms that they offer. Byfocusing on evaluation in adynamic way, the authors not only

provide the keys to measuring the resources required for aproject as well as project results, but they also show readershow to hone their projects as they develop. In addition, theydiscuss how to communicate to stakeholders. Phillips andPhillips have enriched their book with a large number of casestudies, practical hints, and specific techniques thatfacilitate reading. Show Me the Money is an effective guidefor people who are well aware that the financialrationalization of projects has become a decisive businessissue. See: http://www.roiinstitute.net/

ZOOM PERFORMANCE