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Strategic Human Resource Management and the HR Scorecard
Prof. Abhipsa Mishra
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
Session objectives
1. Outline the steps in the strategic management process.
2. Explain and give examples of each type of companywide and competitive strategy.
3. Explain what a strategy-oriented human resource management system is and why it is important.
4. Illustrate and explain the HR Scorecard approach to creating human resource management systems
5. Discuss HR Metrics
6. Elaborate High Performance Work Systems
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
Strategic Human Resource Management
It is the linking of HRM with strategic goals and objectives in order to improve business performance and develop organizational cultures that foster innovation and flexibility.
• It involves formulating and executing HR systems—HR policies and activities—that produce the employee competencies and behaviors, that the company needs to achieve its strategic aims.
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
The Strategic Management Process
• Strategic Management– The process of identifying and executing the organization’s
mission by matching its capabilities with the demands of its environment.
• Strategy– A chosen course of action.
• Strategic Plan– How an organization intends to balance its internal strengths
and weaknesses with its external opportunities and threats to maintain a competitive advantage over the long-term.
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
Business Vision and Mission
• Vision
– A general statement of an organization’s intended direction that evokes emotional feelings in organization members.
• Mission
– Spells out who the company is, what it does, and where it’s headed.
SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra
Types of Strategies
Diversification Strategy
Geographic Expansion Strategy
Vertical Integration
Strategy
Corporate-Level Strategies
ConsolidationStrategy
SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra
Types of Strategies (cont’d)
Cost Leadership Focus/Niche
Business-Level/Competitive Strategies
Differentiation
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
Porter’s generic strategies
1. Overall cost leadership (McDonalds, Wal-Mart)
• Low-cost-position relative to a firm’s peers
• Manage relationships throughout the entire value chain
2. Differentiation (Harley Davison, Apple)
• Create products and/or services that are unique and valued
• Non-price attributes for which customers will pay a premium
3. Focus strategy (Rolex, Lamborghini)
• Narrow product lines, buyer segments, or targeted geographic markets
• Attain advantages either through differentiation or cost leadership
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
Value Chain
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
Porter’s generic strategies
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
Achieving Strategic Fit
• The “Fit” Point of View (Porter)
– All of the firm’s activities must be tailored to or fit the chosen strategy such that the firm’s functional strategies support its corporate and competitive strategies.
• Leveraging (Hamel and Prahalad)
– “Stretch” in leveraging resources—supplementing what you have and doing more with what you have—can be more important than just fitting the strategic plan to current resources.
SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra
Strategic Human Resource Challenges
Corporate productivity & performance improvement
efforts
Increased HR team’s
involvement in design of
strategic plans
Basic Strategic Challenges
Expanded role of employees in the
organization’s performance
efforts
SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra
Human Resource Management’s Strategic Roles
Strategy Execution Role
Strategic Planning Roles
Strategy Formulation Role
SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra
Creating the Strategic Human ResourceManagement System
Human Resource Professionals
Employee Behaviors and Competencies
Components of a Strategic HRM System
Human Resource Policies and Practices
HR Metrics
HR’s role as an Information Analyst
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
What are HR Metrics?
• Relating to measures
• Involving or proceeding by measurements
• Method of tracking the effectiveness of HR
• What you value about HR programs and the equivalent monetary value
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
HR Excuses Against Metrics
• “You can’t measure what we do…”
• Lack of clear purpose for measuring
• Lack of cooperation between departments
• Difficulty extracting data from multiple systems
• Difficulty understanding and analyzing metrics
• Numbers used to draw inaccurate conclusions
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
Why Measure?
If you can’t measure it, you can’t understand it. If you can’t understand it, you can’t control it.If you can’t control it, you can’t improve it.
The Improvement Process
Understand
Measure
Control
Improve
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
Importance of HR Metrics
• Quantify the value of HR
• Guide workforce strategies
• Maximize HR’s return on investments
• Provide measurement standards
• Show what HR contributes to business results
• Make the business case for HR’s objectives
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
Metrics helps to…
• Communicate performance expectations
• Discover gaps in strategies
• Make better decisions
• Address the trend towards value reporting
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
What to Measure?
Measure outcomes not activity
Begin with efficiency measures
Develop metrics geared towards your organization’s goals and strategies
Establish metrics to monitor key HR practices proven to grow human capital
Use metrics that will encourage change and help us make better decisions about human capital
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
• Creating a measurement team is recommended
• Communicate importance of metrics to team
• Team should select metrics together
• Determine how metrics will be defined
• Obtain leadership buy-in
• Disseminate the tasks
Collecting Data
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
Strategic Relationships
• Process must be owned by Executives, Managers, HR, Finance, and IT
• Takes time and will power
• May require an investment in information technology support services to support human capital measurement and reporting opportunities
• Requires the fostering of key strategic relationships to ensure favorable outcomes
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
Getting Started
Assess your data
Build your metrics
Create meaningful measures
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
• What do you already track?
• Where should you focus?
• What metrics would be useful?
Assessing Your Data
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
• Determine your measures
• Select benchmarks for comparison Similar services Same size Similar organizational structure Similar budget
• Compare your results
Building Your Measures
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
Data Integrity
• Quality of data is critical
• Garbage in….garbage out
• So…..
Check the math
Watch out for zeros
Compare results to each other
Conduct a sanity test
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
Data Sources
• HRIS (PeopleSoft, SAP, CostPoint, etc.)
• Surveys
• Interviews
• SHRM
• Watson-Wyatt
• WorldatWork
• Mercer
• Saratoga Institute
• IPMA
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
What Can Be Measured?
Staffing and Hiring Work Processes Competent Employees
Turnover RatesReduced Time-to-Fill for
VacanciesTraining Costs
Number of Employees Trained
Cost per Hire Voluntary Separations
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
Formula: Total Voluntary Separations / Regular Headcount
Purpose:• Voluntary Separation Rate looks at the percentage of regular
headcount that voluntarily left the organization.
• This metric is an excellent indicator of problems within the organization, including but not limited to inadequate compensation and/or benefits, lack of opportunities for promotion, low employee morale, inadequate training, and/or improper assessment of employee's qualifications (over or under qualified).
Voluntary Separation Rate
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
Voluntary Separation Rate
Calculation:
13,894 / 141,277 = 9.8%
Total Voluntary Separations / Regular Headcount
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
Formula: The number of business days to fill a vacant position. This is counted from the day the position becomes vacant to the date a new employee starts in the job.
Date of Hire - Date of Vacancy
Purpose:• Time to Hire shows length of time it takes to fill vacant
positions.
• This metric is an indicator of organization's ability to recruit and hire new employees.
Time to Hire - Definition
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
Time to Hire - Calculation
1/6/2006 - 5/10/2006Date of Hire - Date of Vacancy
=
44 business days
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
Formula: Total Training Cost / Regular Headcount Trained
Purpose:• Training Cost Factor - average rupees spent on
training for each regular employee receiving training• This metric is an indicator of the organization's investment in
training and can also be used to monitor training costs and the organization's return on investment.
Training Cost Factor - Definition
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
Training Cost Factor - Calculation
Rs. 31,131,631 / 249,700Total Training Cost / Regular Headcount Trained
=
Rs. 124.68
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
Analyzing Data
Microsoft Excel• Formulas
Sum
Average & Median
Time Calculations
• Charts & Graphs
Pie
Bar
Scatter
Reporting Data
Microsoft Word• Reports
Tables
Graphs
Charts
Microsoft Access• Database
Tables
Queries
Reports
Powerpoint
Inserting graphs
Exit Salaries vs. Years Exp.
$20,000.00
$25,000.00
$30,000.00
$35,000.00
$40,000.00
$45,000.00
$50,000.00
$55,000.00
$60,000.00
$65,000.00
$70,000.00
0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 18.00 20.00
Years Experience
Exit
Sala
ry
Strategic Human Resource Management and HR Scorecard
SHRM, HR Metrics and HR Audit; Prof. Abhipsa MishraShining the Light on the Real Value of HR
via the Human Resources Scorecard
SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra
Creating an HR Scorecard
1
2
3
4
5
Outline value chain activities
Define the business strategy
Outline a strategy map
Identify strategically required outcomes
Identify required workforce competencies and behaviors
6
7
8
9
10
Create HR Scorecard
Identify required HR policies and activities
Choose HR Scorecard measures
Summarize Scorecard measures on digital dashboard
Monitor, predict, evaluate
The 10-Step HR Scorecard Process
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
What is (balanced) scorecard?
• A set of measures/indicators (usually 16 – 36 max) that directly reflect or represent the strategy/strategic objectives
• Their prime purpose is to measure that the desired change or development defined by the strategic objectives actually takes place
• In short, strategic indicators allow you to measure and manage strategy execution and achievement progress
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
What is it all about…
Scorecard Objectives
Enable a focus on the “vital few”
Achieve alignment and focus on strategy and achievement of our mission
Balance short-term, operational decisions with long-term strategic decisions more effectively
Unlock organizational capacity by enabling employees to clearly see where their actions fit into the bigger picture
An organizational alignment & performance management tool/process
A communication tool
A tool for ongoing learning and refinement of strategy
The scorecard is not just a set of indicators …
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
A true balanced scorecard…
• Demonstrates alignment with corporate strategy/objectives (departments & BU’s),
• Contains a limited set of strategic objectives and indicators,
• Is focused on indicator quality rather than quantity (focused on measuring what matters strategically)
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
The HR Scorecard Development Process
3. Create Existing
Indicator List
11. Define HR
BSC
Implementation
Plan
6. Detail HR BSC
Indicators
9. HR BSC
Indicator
Review Workshop
10. HR BSC
Indicators
FINALIZED
8. Define HR BSC
Governance
Model
7. Document HR
BSC
Hierarchy
1. Cascade
Corporate Strategy
2. Create HR
Strategy Map
5. HR BSC
Development
Workshop
4. Define HR BSC
Philosophy
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
You CANNOT have an HR BSC indicator set without an HR Strategy Map!
MISSIONMISSION
Strategy Map
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
What is a Strategy Map?
It uses the same framework as the balanced scorecard
It’s a one page document that describes how your organization “creates value” and contributes at an actionable/operational level to the achievement of the overall strategy
It provides a “picture” of your strategy
It provides a uniform & consistent way of describing your strategy
A visual representation of the cause & effect relationships between the components of your strategy (your “theory” of how everything/everyone works together to achieve results – the story of your strategy)
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
The Strategy Map – Key Elements
Mis s io n : Vis io n :Private Se c to r
Strate g y Map
Fo rm at
CORE VALUES:
Fin a ncia l
Cus to m er
In te r na l
Pr ocess
Or g a n iz a t io na l
Ca p a b ilit ie s
Strategy Focused Business Solutions [email protected] (416) 722-1367
Mission:
Bringing Protection to Life.
Vision 2015:Be a world class financial services provider, delivering exceptional customer value
through the excellence and integrity of our people.
Group Life &
Health Insurer
CORE
VALUES
Financial
Customer
Internal Process
Organizational
Capabilities
Partnership Entrepreneurship Continuous
Learning
A Factual Approach to
Decision Making
Community
Citizenship
Develop Competencies
in Key Strategic Roles
Foster a Constructive
Culture
Implement One System,
One Overall Process
Focus on Process
Improvement
Become a Long-Term Disability
Industry Leader
Develop Non-Advisor
Distribution Channels
Be Easy to Do Business
With
Focus on Drivers of Customer
Satisfaction
Optimize Advisor
Distribution Channels
Achieve Sustained
Profitable Growth
Improve Cost
Structures
Maintain Existing Profitable Group
Insurance Business
Acquire New Profitable
Group Insurance Business
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
The Strategy Map
Mis s io n : Vis io n :Private Se c to r
Strate g y Map
Fo rm at
CORE VALUES:
Fin a ncia l
Cus to m er
In te r na l
Pr ocess
Or g a n iz a t io na l
Ca p a b ilit ie s
To deliver the results our shareholders demand and achieve our mission and vision, how must we perform financially?
To achieve the financial returns we desire, what must we deliver to our customers so they will reward us with their business & loyalty?
To give our customers what they expect, what business processes must we focus on and excel at?
To execute our businesses processes at the required level, what skills and capabilities, culture, and tools and technologies must we have in place?
SHRM, HR Metrics and HR Audit; Prof. Abhipsa MishraHigh-Performance Work Systems
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
High-Performance Work System (HPWS)
It is a specific combination of HR practices, work structures and processes that maximizes employee knowledge, skill, commitment and flexibility.
Is composed of many interrelated parts that complement one another to reach the goals of an organization, large or small.
Developing High-Performance Work Systems
Underlying Principles of HPWS
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
Principles of HPWS
• Egalitarianism and Engagement
Egalitarian work environments eliminates status and power differences and, in the process, increase collaboration and teamwork.
When this happens, productivity can improve if people who once worked in isolation from (or opposition to) one another begin to work together.
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
• Shared Information
A shift away from the mentality of command and control towards more focused on employee commitment.
Creating a culture of information sharing where employees are more willing (and able) to work towards the goals of the organization.
Principles of HPWS
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
• Knowledge Development
Employees in high-performance work systems need to learn in “real time,” on-the-job, using innovative new approaches to solve novel problems
Learning organizations
Technology Enhanced Learning Environments
Principles of HPWS
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
• Performance-Reward Linkage
It is important to align employee and organizational goals.
When rewards are connected to performance, employees will naturally pursue outcomes that are mutually beneficial to themselves and the organization.
Principles of HPWS
Anatomy of High-Performance Work Systems
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
Complementary Human Resources Policies and Practices
Staffing Practices
Training and Development
Compensation
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
Implementing the System
Ensure that change is owned by senior and line managers
Allocate sufficient resources and support for the change effort
Ensure early and broad communication
Ensure that teams are implemented in a systemic context
Establish methods for measuring the results of change
Ensure continuity of leadership and champions of the initiative
Necessary Actions for a Successful HPWS:
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
Benefits of HPWS
• Employee Benefits Have more involvement in the organization
Experience growth and satisfaction, and become more valuable as contributors
• Organizational Benefits High productivity
Quality
Flexibility
Customer satisfaction
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
Evaluating the Success of the System
Are employees actually working together, or is the term “team” just a label?
Are employees getting the information they need to make empowered decisions?
Are training programs developing the knowledge and skills employees need?
Are employees being rewarded for good performance and useful suggestions?
Are employees treated fairly so that power differences are minimal?
Determining whether a high-performance work system has been implemented as designed:
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
Outcomes of High-Performance Work Systems
• Employee Outcomes and Quality of Work Life
More involved in work
More satisfied and find that needs for growth are more fully met
More informed and empowered, feel that they have a fuller role to play in the organization and that their opinions and expertise are valued more
Have a greater commitment that comes from higher skills and greater potential for contribution
SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra
Outcomes of High-Performance Work Systems cont’d..
• Organizational Outcomes and Competitive Advantages
– Higher productivity
– Lower costs
– Better responsiveness to customers
– Greater flexibility
– Higher profitability
SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra
HR Audit
SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra
SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra
SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra
SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra
SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra
SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra
SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra
SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra
SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra
SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra
SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra
SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra
SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra
SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra
SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra
SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra
SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra
SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra
SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra
SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra
SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra
SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra
SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra
SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra
SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra
SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra
SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra
SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra
SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra
SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra
SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra
SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra
THANK YOU
This leads to a High Performance Work System