Creating Business Value Through HR Function


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Transforming HR Function to Value Adding Activities that Focus on Business Goals Instead of Administrative Bureaucracy Aligned to Sentimentality.

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Creating Business Value Through HR Function

  1. 1. Creating Business Value Through HR Function Dr. Elijah Ezendu FIMC, FCCM, FIIAN, FBDI, FAAFM, FSSM, MIMIS, MIAP, MITD, ACIArb, ACIPM, PhD, DocM, MBA, CWM, CBDA, CMA, MPM, PME, CSOL, CCIP, CMC, CMgr
  2. 2. Business Value Business value refers to a collective set of results generated in sync with goals of an organisation. Organisational activities usually yield some outputs that may be acceptable by certain groups of workers as equitable value due to justification by perception. On the contrary, competitive activity value analysis demonstrates existence and extent of connectivity between activity output and an organisation’s goals.
  3. 3. Competitive Activity Value Analysis This 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
  4. 4. Activity Value Analysis Yes No
  5. 5. 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?
  6. 6. Questions About Quality • Does defect occur? • What is the rate of deviation? • What are causes of deviation? • What are consequences of deviation?
  7. 7. 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?
  8. 8. Value-Added Analysis Value-added analysis concentrates on identification of a relationship between activity output and product or service of a firm. A value- adding activity is one that contributes to organisational pool of output earmarked for generating product or service.
  9. 9. Non-Value Adding Activity A non-value adding activity is one which does not contribute to organisational pool of output earmarked for generating product or service, and is not for executing compliance to Government requirements. This should be eliminated for purpose of trimming the work to match requirements of organisational goals.
  10. 10. Provision of Value This is the essence of presence in the value chain of an organisation. Inability to provide minimal value is tantamount to muda and unjustified existence.
  11. 11. Value Chain The 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.
  12. 12. Value Chain Concept Source: M.E. Porter, Competitive Advantage, Creating and Sustaining Superior Performance
  13. 13. Value Chain Snapshot In a scenario where the value chain snapshot of an organisation highlights some key activities in HR function as part of the value chain, whereas they are non-value adding activities; they would crystallize as invalid links in the value chain, and indicate quandary, dissonance, nonconforming focus, miscarriage of resources, in addition to systemic blunder.
  14. 14. Where Business Value Shows Up Fortunately, there are only five places in a business where we can see the value of our work. These are the same for any type of organization, whether it’s a commercial enterprise, a government entity, or a non-profit group (similar to how accounting practices are essentially the same across each type). We can identify business value by asking the following questions about the 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 affect any of these value areas. It could increase revenues or decrease expenses. In fact, sometimes a project could affect two or three simultaneously, such as increase revenues, bring in more new customers, and increase revenue from existing customers. Source: Jared Spool, Identifying Business Value of What We Do
  15. 15. Business Alignment Business Alignment is occasioned by placement of key activities with content and direction that are geared for achievement of organisational goals. Effective Business Alignment of HR Function shall occur when every activity output from each section of HR contributes fittingly to organisational pool of output earmarked for generating product or service.
  16. 16. HR Value vs. Business Goal Contemporary HR Value had been self-centred and somewhat disconnected from business goal orientated perspective. That’s why such output is not identified as ‘value adding result’ in corporate strategic outlay.
  17. 17. HR Thrust Effective Business Alignment of HR Function implies every component of HR system, structure, policy, procedures, initiatives, objectives and strategy must be focused on provisioning of excellent enablement for achievement of organisational goals. This should be the HR Thrust.
  18. 18. 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
  19. 19. The Top 10 Best Practices of High Impact HR Organisations 1. Structured governance and business case development 2. Developing advanced workforce planning capabilities 3. Implementing the “right” HR philosophies 4. Reducing administrative work for HR Business Partners 5. Implementing flexible HR organisation design 6. Improving employee-facing HR systems 7. Measuring both HR operational and business metrics 8. Developing internal HR skills 9. Improving line manager capabilities 10. Outsourcing HR services strategically Source: John Hollon, TLNT- The Business of HR
  20. 20. “The business value HR professionals contribute to their organizations is growing as more CEOs recognize the power of effective people management” - Susan Meisinger, SPHR
  21. 21. 2011 HR Executive’s Agenda Analysis of 450 organisations in various parts of the world shows on a scale of 1 to 5 where 5 is very strategic and 1 is very reactive, business leaders scored HR an average of 2.71 for strategic importance and the level of connectivity between HR and business objectives. This confirms a demanding gap in global firms. Source: Aberdeen Group
  22. 22. Which is Important? Results or What Produces Results
  23. 23. According to James and Mona Fitzsimmons, the value equation should be as stated below. Value = (Results Produced) + (Process Quality) (Price) + (Cost of Acquiring the Service)
  24. 24. Prodding Factuality of Value Equation If value as a function is relevant Then ‘results produced’ and ‘manned processes for producing results’ are both relevant. Therefore, the strategic stance of outstandingly competitive organisations focus on results and what produces results, for the purpose of achieving effective value mapping from Chicken to Egg.
  25. 25. Identity of Results Produced Results Produced should be within the context of the receiver’s stance and not the perception of producer. HR must identify its service value in terms of relative worth to the receiver. The right sets of results that are unique, influential and conspicuous constitute competitive advantage.
  26. 26. Dr Elijah Ezendu is Award-Winning Business Expert & Certified Management Consultant with expertise in Interim Management, Strategy, Competitive Intelligence, Transformation, Restructuring, Turnaround Management, Business Development, Marketing, Project & Cost Management, Leadership, HR, CSR, e- Business & Software Architecture. He had functioned as Founder, Initiative for Sustainable Business Equity; Chairman of Board, Charisma Broadcast Film Academy; Group Chief Operating Officer, Idova Group; CEO, Rubiini (UAE); Special Advisor, RTEAN; Director, MMNA Investments; Chair, Int’l Board of GCC Business Council (UAE); Senior Partner, Shevach Consulting; Chairman (Certification & Training), Coordinator (Board of Fellows), Lead Assessor & Governing Council Member, Institute of Management Consultants, Nigeria; Lead Resource, Centre for Competitive Intelligence Development; Lead Consultant/ Partner, JK Michaels; Turnaround Project Director, Consolidated Business Holdings Limited; Technical Director, Gestalt; Chief Operating Officer, Rohan Group; Executive Director (Various Roles), Fortuna, Gambia & Malta; Chief Advisor/ Partner, D & E; Vice Chairman of Board, Refined Shipping; Director of Programmes & Governing Council Member, Institute of Business Development, Nigeria; Member of TDD Committee, International Association of Software Architects, USA; Member of Strategic Planning and Implementation Committee, Chartered Institute of Personnel Management of Nigeria; Country Manager (Nigeria) & Adjunct Faculty (MBA Programme), Regent Business School, South Africa; Adjunct Faculty (MBA Programme), Ladoke Akintola University of Technology; Editor-in-Chief, Cost Management Journal; Council Member, Institute of Internal Auditors of Nigeria; Member, Board of Directors (Several Organizations). He holds Doctoral Degree in Management, Master of Business Administration and Fellow of Professional Institutes in North America, UK & Nigeria. He is Innovator of Corporate Investment Structure Based on Financials and Intangibles, for valuation highlighting intangible contributions of host communities and ecological environment: A model celebrated globally as remedy for unmitigated depreciation of ecological capital and developmental deprivation of host communities. He had served as Examiner to Professional Institutes and Universities. He had been a member of Guild of Soundtrack Producers of Nigeria. He's an author and extensively featured speaker.
  27. 27. Thank You