Creating Business Value Through HR Function

Creating Business Value Through HR Function Dr. Elijah EzenduFIMC, FCCM, FIIAN, FBDI, FAAFM, FSSM, MIMIS, MIAP, MITD, ACIArb, ACIPM, PhD, DocM, MBA, CWM, CBDA, CMA, MPM, PME, CSOL, CCIP, CMC, CMgr

Business ValueBusiness value refers to a collective set ofresults generated in sync with goals of anorganisation. Organisational activities usuallyyield some outputs that may be acceptable bycertain groups of workers as equitable value dueto justification by perception. On the contrary,competitive activity value analysis demonstratesexistence and extent of connectivity betweenactivity output and an organisation’s goals.

Competitive Activity Value AnalysisThis involves the following steps:•Choose a Function to be analysed•Identify business processes in the function•Delineate every activity in each process•Identify activity output and measures•Identify primary user of activity output (internal or external customer)•Value-Added Analysis•Fixed & Variable Activity Assessment•Work Flows and Detail Procedure Analysis•Performance Measurements Analysis•Operational Implications Assessment•Financial Implications Assessment•Evaluation of aggregate competitiveness of activity Source: Elijah Ezendu, Competitive Activity Value Analysis

Activity Value Analysis Yes No

Questions About Value• What is the purpose of that activity?• Does it aid achievement of organisational goal?• Is it only a tool of bureaucracy?• Is it only a departmental norm?• What is the impact of non-performance?• Is there a genuine alternative to the activity?

Questions About Quality• Does defect occur?• What is the rate of deviation?• What are causes of deviation?• What are consequences of deviation?

Questions About Cycle Time• What is the standard time required for performing activity according to international benchmark?• What is the actual time used for performing activity in that organisation?• Is there appropriate provision of required resources for activity?• Is there a fitting workload balance?• Is there a clear activity ownership?

Value-Added AnalysisValue-added analysis concentrates onidentification of a relationship between activityoutput and product or service of a firm. A value-adding activity is one that contributes toorganisational pool of output earmarked forgenerating product or service.

Non-Value Adding ActivityA non-value adding activity is one which doesnot contribute to organisational pool of outputearmarked for generating product or service,and is not for executing compliance toGovernment requirements. This should beeliminated for purpose of trimming the work tomatch requirements of organisational goals.

Provision of ValueThis is the essence of presence in the valuechain of an organisation. Inability to provideminimal value is tantamount to muda andunjustified existence.

Value ChainThe value chain concept was developed by Prof. Michael Porter for describing activities that occur within and around an organisation and relating them to its competitive strength.• It differentiates primary activities from non- core that are regarded as support activities.• It provides for identification of key activities in every functional silo as part of the value chain of an organisation.

Value Chain ConceptSource: M.E. Porter, Competitive Advantage, Creating and Sustaining Superior Performance

Value Chain SnapshotIn a scenario where the value chain snapshot ofan organisation highlights some key activities inHR function as part of the value chain, whereasthey are non-value adding activities; they wouldcrystallize as invalid links in the value chain, andindicate quandary, dissonance, nonconformingfocus, miscarriage of resources, in addition tosystemic blunder.

Where Business Value Shows UpFortunately, there are only five places in a business where we can seethe value of our work. These are the same for any type oforganization, whether it’s a commercial enterprise, a governmententity, or a non-profit group (similar to how accounting practices areessentially the same across each type).We can identify business value by asking the following questions aboutthe end results of our project:•Will it increase revenue?•Will it decrease expenses?•Will it bring in new customers?•Will it bring in more money from existing customers?•Will it increase shareholder/taxpayer value?Depending on the nature of our business, a given project could affectany of these value areas. It could increase revenues or decreaseexpenses. In fact, sometimes a project could affect two or threesimultaneously, such as increase revenues, bring in more newcustomers, and increase revenue from existing customers. Source: Jared Spool, Identifying Business Value of What We Do

Business AlignmentBusiness Alignment is occasioned by placementof key activities with content and direction thatare geared for achievement of organisationalgoals.Effective Business Alignment of HR Functionshall occur when every activity output fromeach section of HR contributes fittingly toorganisational pool of output earmarked forgenerating product or service.

HR Value vs. Business GoalContemporary HR Value had been self-centredand somewhat disconnected from business goalorientated perspective. That’s why such outputis not identified as ‘value adding result’ incorporate strategic outlay.

HR ThrustEffective Business Alignment of HR Functionimplies every component of HR system,structure, policy, procedures, initiatives,objectives and strategy must be focused onprovisioning of excellent enablement forachievement of organisational goals. This shouldbe the HR Thrust.

Best Practices – How to Bridge the Business Divide•Evaluate current opportunity with the business# Bringing insight to investment decisions# Building future value through today’s forums# Bridging the people visibility gap# Removing barriers and optimize performance•Develop platforms for strategic conversation•Transform HR Business Partners into strategic advisors•Report Links Source: Amy Wilson, Wilson Insight

The Top 10 Best Practices of High Impact HR Organisations1. Structured governance and business case development2. Developing advanced workforce planning capabilities3. Implementing the “right” HR philosophies4. Reducing administrative work for HR Business Partners5. Implementing flexible HR organisation design6. Improving employee-facing HR systems7. Measuring both HR operational and business metrics8. Developing internal HR skills9. Improving line manager capabilities10. Outsourcing HR services strategically Source: John Hollon, TLNT- The Business of HR

“The business value HR professionalscontribute to their organizations is growingas more CEOs recognize the power ofeffective people management” - Susan Meisinger, SPHR

2011 HR Executive’s AgendaAnalysis of 450 organisations in various parts ofthe world shows on a scale of 1 to 5 where 5 isvery strategic and 1 is very reactive, businessleaders scored HR an average of 2.71 forstrategic importance and the level ofconnectivity between HR and businessobjectives. This confirms a demanding gap inglobal firms. Source: Aberdeen Group

Which is Important?Results or What Produces Results

According to James and Mona Fitzsimmons, thevalue equation should be as stated below.Value = (Results Produced) + (Process Quality) (Price) + (Cost of Acquiring the Service)

Prodding Factuality of Value EquationIf value as a function is relevantThen ‘results produced’ and ‘manned processesfor producing results’ are both relevant.Therefore, the strategic stance of outstandinglycompetitive organisations focus on results andwhat produces results, for the purpose ofachieving effective value mapping from Chickento Egg.

Identity of Results ProducedResults Produced should be within the contextof the receiver’s stance and not the perceptionof producer. HR must identify its service value interms of relative worth to the receiver.The right sets of results that are unique,influential and conspicuous constitutecompetitive advantage.

Dr Elijah Ezendu is award-winning business expert and certified management consultantwith expertise in HR, OD, Competitive Intelligence, Strategy, Restructuring, BusinessDevelopment, Sales & Marketing, Business Turnaround & Interim Management, Leadership,ADR, Project & Programmes Management, Cost Management, Outsourcing, Franchising,Internal Control, Intellectual Capital, Online Business, Social Media, Software Architecture,Cloud Computing, eLearning, Business & Tech Integration, Social Impact Analysis, andInternational Business. He holds proprietary rights of schematic methods in HR, Strategy,Competitive Intelligence, Business Model, Business Development, Negotiation, CSR, SocialHR, and Social Media. He is currently Chief Executive Officer, Rubiini, UAE. He functioned asSenior Partner, Shevach Consulting, Nigeria; Lead Assessor and Member of GoverningCouncil, Institute of Management Consultants, Nigeria; Lead Resource, Center forCompetitive Intelligence Development; Lead Consultant, JK Michaels; Technical Director,Gestalt; Chief Operating Officer, Rohan Group; Director, Fortuna, Gambia; Director ofProgrammes, Institute of Business Development, Nigeria; Member of TDD Committee,International Association of Software Architects, USA; Member of Strategic Planning andImplementation Committee, Chartered Institute of Personnel Management of Nigeria;Adjunct Faculty, Regent Business School, South Africa; Adjunct Faculty, Ladoke AkintolaUniversity of Technology, Nigeria. He holds Doctoral Degree in Management, Master ofBusiness Administration and stands as Fellow of several professional institutes in NorthAmerica, UK & Nigeria. He is an author and world-class speaker who has featured in manyworkshops & conferences. His ancillary services included council member of professionalinstitutes, editor-in-chief of journals, and Board Member of some Foundations. He serves asAdjunct Faculty of Business Schools in addition to Director of Firms.

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Creating Business Value Through HR Function

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