Aligning HR Goals & Corporate Objectives for Greater ROEI

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A company is only as good as its workforce. A company does not generate ideas, does not give service, and by itself is neither efficient nor productive. People make all of those things happen. In that sense, employees are the most important component in the quest to improve business results. It makes sense to treat employee-related expenses as an investment in the workforce. Like any other investment, this critical company investment must yield a healthy return. At Sage, we call that the Return On Employee Investment or ROEI.

These are not easy times for HR managers. Like other executives, they must do more with less. A viable approach to the consequences of an economic downturn is tighter “strategic alignment” of HR processes to the company’s overall competitive strategy. One way that HR managers might adapt to doing more with less is to develop initiatives that designate HR as a strategic partner to revenue-generating business units and to the executive team.

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Aligning HR Goals & Corporate Objectives for Greater ROEI

  1. 1. Sage HRMS I White PaperAligning HR Goals and Corporate Objectivesfor Greater Return on Employee Investment
  2. 2. Sage HRMSTable of ContentsIntroduction................................................................................................................... 1Strategic Alignment Defined...................................................................................... 1Recruiting and Hiring................................................................................................... 2 Planning for future workforce needs......................................................... 3 Online recruiting and social media............................................................ 3Employee Retention and Development.................................................................... 4 Employee surveys.......................................................................................... 4 Skills development........................................................................................ 5 Internal promotions and lateral transfers................................................ 5Compensation............................................................................................................... 6 Analyzing current compensation............................................................... 6 Paying for performance................................................................................ 6Technology can help with HR alignment.................................................................. 7Conclusion..................................................................................................................... 7About Sage HRMS......................................................................................................... 8
  3. 3. Introduction Sage HRMSA company is only as good as its workforce. A company does not generate ideas, does notgive service, and by itself is neither efficient nor productive. People make all of those thingshappen. In that sense, employees are the most important component in the quest to improvebusiness results. It makes sense to treat employee-related expenses as an investment in theworkforce. Like any other investment, this critical company investment must yield a healthyreturn. At Sage, we call that the Return On Employee Investment™ or ROEI™.These are not easy times for HR managers. Like other executives, they must do more with Accurate and timelyless. A viable approach to the consequences of an economic downturn is tighter “strategic employee informationalignment” of HR processes to the company’s overall competitive strategy. One way that HR is crucial to drivingmanagers might adapt to doing more with less is to develop initiatives that designate HR as a operational efficiency.strategic partner to revenue-generating business units and to the executive team.Strategic Alignment DefinedThe function of an HR system is to minimize the risks of an organization’s human capital andmaximize the organization’s ROEI. How well HR managers perform this function is not soeasy to quantify. Relative to other business units, HR departments cannot readily point tocosts and revenues as a measure of effectiveness. This is a problem for HR managers. Nodepartment in a company, even in good times, is exempt from cost/benefit scrutiny. The goalof strategic alignment is to create efficiencies and to enable HR managers to better explaintheir contribution to the company’s bottom line, using HR metrics as appropriate. Information should be actively pushed.In broad terms, HR processes should be used to align business units and individualemployees with the strategic goals identified by senior management. For example,management needs clear, direct, and constant communication with employees to implementstrategies. HR is in a unique position to communicate those strategies. This is true ina strategic sense, in an example like a compensation system that rewards significantcontributions. It can also be true on a day-to-day basis, in that employees typically useHR’s electronic interface to keep track of work hours, performance reviews, and more. Thiselectronic interface can be used to communicate, reinforce, and measure the progress towardthe company’s strategic goals.Of course, making this alignment requires an understanding of the company’s strategies. Asa first step, HR managers should study their company and its industry. They should have aworking knowledge of the company’s financials and be able to answer basic questions. Whatare the trends in our industry? What is my company’s value proposition to the marketplace?What types of employees contribute to my organization’s growth? What positions are the mostdifficult to fill? What drives employee and customer satisfaction?From this base of knowledge, HR managers can then modify traditional HR processes—recruiting and hiring, employee retention and development, and compensation—to implementthe strategies developed by senior management. In other words, if a core function of HR isto make a “rigorous and accurate assessment of talent,” strategic alignment is a means ofperforming this function more effectively. 1
  4. 4. Here are some examples of common corporate objectives and how the HR department can Sage HRMSalign its own goals to be a strategic partner to the business: Corporate Aligned HR Goals Objective Increase productivity • Increase employee engagement • Foster better teamwork • Provide training to employees • Speed up the process of onboarding Improve competitiveness • Strategic compensation • Organizational planning for internal promotions • Performance ratings • Retention of top performers Achieve better measurement of • Capture and provide access to more business performance workforce analytics Reduce costs • Increase employee retention • Hold down cost of employee benefits Improve sustainability • Reduce transactional paperwork and use electronic routing and approval processesRecruiting and HiringAccording to a recent study published in the Wall Street Journal, 52% of U.S. companiesreport having difficulty filling open positions. The cause, according to the companies polled, isthat many potential candidates lack sufficient training, experience, and/or technical skills. Also,a perception exists that the skills of long-term unemployed candidates have atrophied, or thatthe sustained inability to find work, by itself, is an indication of unsuitability.Thus, while companies are hiring from a larger pool of candidates, finding a qualified candidateis increasingly difficult. What explains this contradiction? Human resource managers canguess at the answer: Companies are less willing to pay either a market-clearing rate forcompensation or for training programs. In this environment, candidates are expected toaccept less compensation and yet capably perform from the start.Whether there is a shortage of qualified candidates, increased “belt-tightening” by companies,or a combination of both, HR managers must overcome obstacles to finding and attracting askilled workforce for their organizations.1 Conaty, “The Talent Masters: Why Smart Leaders Put People Before Numbers” (2010).2 “Why Companies Aren’t Getting the Employees They Need,” Wall Street Journal, page R1 (October 24, 2011 (reporting findings of ManpowerGroup 2011 Survey). 2
  5. 5. Planning for future workforce needs Sage HRMSTo start aligning recruiting efforts with longer term corporate objectives, you’ll need to be proactive.Before a need to fill a position arises, reach out for input from various business units to identify the bestsources of potential recruits. Business managers should be able to provide this information based ontheir experience and their industry knowledge. Past experience with current and former employeesmay provide the most useful information. Where did we obtain our best performers? Conversely, whichnew hires looked good on paper but ultimately proved unqualified?This information may indicate that the best hires learned about open positions at the company througha particular source or medium, such as a trade publication. Identifying these sources may allow yourcompany to target its talent marketing in a way that will create efficiencies.For positions that are difficult to fill, another initiative might involve developing ongoing relationshipswith the best sources of talent. If a particular trade school, for example, can readily provide talentedcandidates, HR managers should be on a first-name basis with the appropriate school officials. Thecompany might consider investing time and money, if available, to increase awareness of the companyamong the students. This might run the gamut from participating in workshops, providing “guestlecturers,” or even working with faculty on a sustained basis to ensure that the curriculum will enablestudents to become employees that meet the company’s expectations.As a part of a recruitment initiative, business managers might also identify specific individuals theywould like to hire. In making this “wish list,” HR managers should determine whether there is acorresponding interest on the part of the talent in question. This is a simple conversation (initiated byHR or by a person who knows the individual)—“if a position comes open, would you be interested?”Very often such individuals will be employed by a competitor and/or located elsewhere. Thus, potentialobstacles such as noncompetes and unease about relocation might be identified in advance. Makingthese efforts should reduce the time needed to fill a position that opens in the future. The broader pointis that HR should identify and cultivate talent in anticipation of needs.Online recruiting and social mediaAny recruitment initiative should also include an online component. Most companies advertise openpositions and collect resumes, applications, and cover letters online. Also, 80% of U.S. companiesindicate that they have increased their use social media, such as LinkedIn, for recruitment. Theseare basic tools already familiar to most HR managers, who naturally excel at networking andcommunicating with people and, as a result, have been early adopters of using social media forbusiness purposes.A stronger web initiative would also include HR working with sales, marketing, and IT to take a stakeownership of the company’s online reputation, to further the employer brand. Potential customers canuse the web to research your company’s reputation for quality, service, social responsibility, and otherfactors that may be important to growth. By the same means, potential candidates can research yourcompany’s reputation for these and other qualities, such as employee satisfaction and diversity. Howyour company presents itself on its website may determine whether qualified candidates respond toopen positions. Online recruitment efforts might include links to employee testimonials about their ownsatisfaction and their appreciation for the company’s commitment to specified values.1 Wall Street Journal Report, page R7 (citing as source “Jobsite Survey of U.S. human-resource and recruiting professionals”). 3
  6. 6. Protecting this employer brand reputation requires periodic surveys of company-related information. Sage HRMSMore precisely, what does a search of the company’s name, through Google, Yahoo, and other searchengines, recover? Negative information about the company, such as customer complaints or badpress, can be brought to the attention of marketing or the business unit involved. Negative informationregarding employment with the company—from candidates and former or current employees—iswithin HR’s responsibility to address. In addition to resolving the underlying problem, if possible, it isalso important to dilute and/or rebut negative information with positive information about the company.In this situation, social media policies can be a part of the strategic HR plan. These policies areanother example of a function that can be both managerial with respect to the day-to-day actions ofemployees but also can impact the organization at a higher level Employee Retention and DevelopmentEmployee retention and development is another area in which HR can strategically align itselfwith the company’s business objectives. The consequences of high employee turnover areclear. Most immediate is the disruption to operations and employee productivity caused bydeparting employees, particularly key talent. Employees can walk out of the door with know-how, client relationships, and the skills needed to operate the affected business unit. There arealso significant costs associated with high turnover. These include not only the costs of findinga replacement, but also the sunken costs of training and development that leave with thedeparting employee.Employee surveysThe first step to improving employee retention and development is to gather information. Employeesurveys should be conducted to determine what aspects of the job are satisfactory and which arecausing employees stress.The survey might include questions such as: • What is the most difficult part of your job? • How can the company improve its products/services or create efficiencies? • How can the company improve your work environment? • What training provided by the company have you found useful? • What training provided by the company have you found not useful? • Are you satisfied with your level of compensation? • Are you satisfied with the development and promotion opportunities provided by the company? • Are you regularly informed of development and promotion opportunities provided by the company? • What aspects of the company’s operations make you proud to be an employee? 4
  7. 7. Questions should be tailored to fit particular business units. If appropriate, a guarantee that the Sage HRMSresponses will be kept confidential may promote accuracy. The responses should yield usefulinformation that will allow HR, working with the particular business unit, to resolve problems or toidentify successes that might be duplicated in other business units. The fact that the company caresenough to regularly gather such information may, in itself, boost morale.An employee development survey initiative should yield several benefits: • Ideas for how to improve retention rates and reduce costs. • Insight into what drives retention rates. • Satisfaction statistics that be can promoted to attract new recruits.Skills developmentTraining is a critical area of talent management that helps ensure your employees have the right setof skills to do their jobs today—and in the future. Several of the survey questions are intended togather information regarding employee development as well as opportunities for promotion. Likecompensation, the opportunity to learn new skills may be an important factor in employee satisfactionand, thus, retention.To strategically align employee training programs with corporate objectives, it’s important to find outwhat types of positions will be most important to the organization in the future and what skills arerequired to fill those positions. Do these critical positions require certifications? If so, what training willbe needed to get employees certified and maintain those certifications. Finally, consider other types oftraining that may be necessary for the company to succeed—for example, training that complies withlaws about worker harassment, leadership training for managers, or training to help teams work moreeffectively together.Internal promotions and lateral transfersVery often, employees who want to expand their skill set will need the ability to switch departments.The extent to which such moves are encouraged should be discussed between HR and the affectedbusiness units. Another consideration is that some positions may require regular transitions to improveperformance. Some positions require creativity. Other positions are particularly stressful. If HR canidentify these positions, it should consider whether internal “turnover” for these positions is desirable.In addition to improving employee morale, an increased focus on employee development and internalpromotion removes many of the uncertainties described above. An employee is a known quantity. Ahistory of satisfactory performance should, with few exceptions, trump the risk taken by bringing anew employee into the company. Internal promotion should also reduce the costs associated withfilling a position. To this end, internal training programs can be used to identify talent for possiblepromotion. 5
  8. 8. Compensation Sage HRMSCompensation is typically the largest expense for any business. Not surprisingly, compensationis an inviting target for senior managers tasked with reducing costs. Often, this means thatcompensation rates are held in check, with reductions-in-force and/or attrition generatingcost savings. For HR managers engaged in recruitment and retention efforts, the inability tooffer higher compensation can be a significant limiting factor. There are two steps that that HRmanagers can take to better align compensation with the company’s competitive strategy.Analyzing current compensationTo begin, HR managers should collect and analyze market information related to compensation. Thegoal is to determine where the company falls in relation to competitors and other companies hiring forsimilar positions. Some of this information is publicly available. Alternatively, third-party firms can beretained to collect this information.An analysis of marketwide compensation can be useful for several purposes. Namely, by keepingsenior executives informed of current market rates, it will result in more informed decisions withrespect to compensation. A comparative analysis indicating salaries in the company’s recruiting areas,for example, may explain recruitment and retention rates. Such information can also enable seniorexecutives to better analyze the company’s cost structure relative to its competitors. Moreover, to theextent that the company is able to pay above-market rates, this can be communicated to employeesto improve morale by pushing back against the common misperception among employees that theyare “underpaid.”Paying for performanceA second important alignment strategy is to fix compensation to performance. Pay for performance,at some level, underscores the company’s strategic goals to employees. Communication is key. Theemployee must know, in advance, what metrics will be used to measure performance. For example,in addition to a base compensation per hour, employees might receive additional compensation forunits produced, miles driven, profits achieved, and so on. This can be done at the individual level oron a business unit basis. Pay for performance may be particularly important for the retention of topperformers. 6
  9. 9. Technology Can Help With HR Alignment Sage HRMSHR-related technology such as Human Resource Management Systems (HRMS) and talentmanagement solutions were traditionally thought of as cost reduction tools, saving time andautomating routine administration to raise productivity within the HR department itself. An HRMScertainly does deliver that result. But when viewed as part of an investment in a competitiveworkforce, it can do much more.Through employee self-service, training, development, compensation, and benefits management,HRMS and talent management solutions can provide the tools to help keep employees engagedand satisfied. These systems also deliver the analytics to help managers and executives examinetrends, support business decisions, and plan for future organizational changes.Investing in an HRMS solution, integrated with performance management, learning and training,tools for decision support, self-service portals, and more, is an investment in the most importantasset of the organization: its employees. And the return on the investment in employees can changea struggling company into a winning company.ConclusionBecause HR departments are being asked to do more with less, it’s important that HR managersidentify the best areas to focus their resources in order to make the biggest impact for theorganization. Well-aligned, strategic HR initiatives should improve important metrics such as numberof open positions, cost-per-hire, turnover rates, employee satisfaction, and so on.In today’s tough business environment, all HR initiatives should be designed to: • Support overall corporate objectives regarding both costs and results. • Yield a positive Return on Employee Investment.In addition to well-designed employee programs and benefits, HR technology such as HRMS andtalent management solutions can help organizations achieve a better ROEI and more closely alignHR processes with corporate goals. By supporting the objectives of the organization, HR will makea direct impact on the competitiveness and success of the company and become a strategicpartner to the executive team, as well as other business units. 7
  10. 10. About Sage HRMS An industry-leading, customizable HRMS solution, Sage HRMS helps companies optimize their HR business processes as well as maximize their Return On Employee Investment (ROEI)™. Developed by HR professionals for HR professionals, Sage HRMS delivers a tightly integrated set of comprehensive features and functionality that increases efficiency and improves productivity at every level in the organization. With Sage HRMS, you can successfully meet and respond to the HR management challenges you face every day in the areas of payroll, benefits, employee self-service, attendance, recruiting, training, workforce analytics, and more. By automating and streamlining your day-to-day HR business processes using Sage HRMS, you and your staff are freed up to spend more time and energy on the business asset that is most vital to your company— your employees. A global $2.2 billion software company with over 30 years of experience and over 6 million customers, Sage has provided HRMS solutions longer than any other company in North America. By choosing Sage, you not only get productivity-boosting HR and payroll software solutions, you get the support of an award-winning customer service team and access to many other business tools and resources that make your work life easier. To learn more, please call us at 800-424-9392, or visit our website at: www.SageHRMS.comSage888 Executive Center Dr. W., Suite 300 | St. Petersburg, FL 33702 | www.SageHRMS.com©2012 Sage Software, Inc. All rights reserved. Sage, the Sage logos, and the Sage product and servicenames mentioned herein are registered trademarks or trademarks of Sage Software, Inc., or its affiliatedentities. All other trademarks are the property of their respective owners. 01/12

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