1 The New Balance Sheet


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Human Capital <EVP&gt; &amp; Talent Acquisition

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  • 1 The New Balance Sheet

    1. 1. Recognizing Human Capital as a Competitive Asset The New Balance Sheet By Frank Pacheco
    2. 2. The New Balance Sheet <ul><li>Human Talent as Misunderstood Capital </li></ul><ul><li>Does Talent Make a Difference? </li></ul><ul><li>It Makes a Difference!...Act Quickly </li></ul><ul><li>Cost Analysis for Loosing Talent </li></ul><ul><li>Cost Analysis for Acquiring Talent </li></ul><ul><li>HR Strategy is Key to Business Success </li></ul>OVERVIEW Human Capital is the main competitive advantage of the 21st century………. …….Mergers - Acquisitions; Technical Advancements; Globalization - Emerging Markets; Demographics and the “War for talent” Let me walk you through it quickly….
    3. 3. Human Talent as Misunderstood Capital <ul><li>Human assets are more valuable than </li></ul><ul><li>capital assets, but not treated the </li></ul><ul><li>same, at times even casually……… </li></ul><ul><li>Many companies track assets in their balance sheet, but fail to track revenue per employee and/or analyze their bottom line impact </li></ul><ul><li>Hiring is often ad hoc, not rigorous or well designed </li></ul><ul><li>Performance metrics should be automated and ongoing </li></ul><ul><li>Development dollars could be ambiguous or inefficient </li></ul><ul><li>Little effort is spent in facilitating a smooth transition from onboarding to talent management </li></ul><ul><li>Organizations or business groups that fail to appreciate human talent as a valuable asset, will be plagued by: </li></ul><ul><li>Weak earnings </li></ul><ul><li>Loss of market share </li></ul><ul><li>Financial uncertainty </li></ul><ul><li>Unable to service growing markets </li></ul><ul><li>Unable to retain good leadership </li></ul><ul><li>Unable to service internal clients </li></ul><ul><li>Name Branding suffers and top talent will avoid such companies, causing: </li></ul><ul><li>Lowering of hiring standards </li></ul><ul><li>Retaining low performing employees </li></ul><ul><li>Promoting un-qualified personnel </li></ul><ul><li>Condoning nepotism (Bush/Brown) </li></ul>According to Gary Becker, winner of the Noble Prize in Economics, 65% of all capital in a highly evolved economy is Human Capital, therefore, workforce management has a prominent role and the investment in technology to aid its endeavor is justifiable
    4. 4. Does Talent Make A Difference? <ul><li>Bill Gates says…… </li></ul><ul><li>“ The productivity difference between my top performers (10% of his population) and the average ones is between 3x to 10x” </li></ul><ul><li>Average firm $160,000 </li></ul><ul><li>IBM $300,000 </li></ul><ul><li>HP $500,000 </li></ul><ul><li>Cisco $700,000 </li></ul><ul><li>Dell $1,000,000 </li></ul>It takes 3x the number of bodies at IBM to produce the same revenue as Dell…….IBM has lost 60% of the PC market share Revenue per Employee Total sales revenue # of employees If rev per employee is $160,000 10 x 160K = $1,600,000…Then Top talent can make an extra $1,440,000 per year (Top RPE) 10% Top Performers The rest =
    5. 5. Talent Lost and Won <ul><li>The tale of 2 cities exemplifies the consequences of talent acquisition. </li></ul><ul><li>Babe Ruth was released over the Boston Red Sox’s penny-wise and dollar foolish approach, which has earned them only one World Series in over a century, while the NY Yankees acquired Babe Ruth and continue spending on talent over the same period, winning 26 world series. </li></ul><ul><li>Paying for top talent is always the right choice! </li></ul>Babe Ruth With the Red Sox Babe Ruth With the Yankees
    6. 6. <ul><li>If Ally Mc Beal walked in…. Why would you feel the need to also interview Rosanne to check if Ally was really skinny? </li></ul>It Makes A Difference!.....Act Quickly <ul><li>He was given an offer within 24 hours </li></ul><ul><li>Michael Jordan (s) are gone in one day </li></ul><ul><li>Within 10 days…the top 10% are gone </li></ul><ul><li>Quality of hire decreases over time </li></ul><ul><li>Top candidates hate delays </li></ul>Just Do It ! Kai-Fu Lee Looses lawsuit to Over hiring their Top Talent Google’s stock is up 200% since Mr. Lee’s arrival Set fixed standards Set fixed standards Set fixed Standards Expedite your hiring practice
    7. 7. Cost Analysis for Loosing Talent <ul><li>New Hire at $60,000 </li></ul><ul><li>Benefits 30%. $18,000 </li></ul><ul><li>Space, Mgmt. Time, Soft Costs, Training $ 22,000 </li></ul><ul><li>Total Yearly Cost $100,000 </li></ul><ul><li>Recruiting & Termination Costs $60,000 </li></ul><ul><li>Sub-Total Capital Cost $160,000 </li></ul><ul><li>Top Rev P.E. $1,440,000 </li></ul><ul><li>Total Capital Cost $1,600,000 </li></ul><ul><ul><li>How many organizations allow a $1,600,000 capital asset to walk? </li></ul></ul><ul><li>We can not afford to loose talent </li></ul><ul><li>We need to change how we think about talent </li></ul><ul><li>We need to view talent as a legitimate balance sheet item </li></ul><ul><li>We need a “Rigorous Process” responsive to changing needs </li></ul><ul><li>We need to effectively acquire and manage the talent we need </li></ul>This is a shared responsibility between the hiring managers and recruiting staff Each business units needs a “Talent Acquisition and Management Strategy”
    8. 8. Cost Per Hire (CPH) Yearly average 100 Open reqs. per 5000 employees External $ 34,844 X 100 --------------------------------- $ 3,484,400 Internal $6,625 X 100 ----------------------------- $ 662,500 Executive Search CPH HR Team CPH Yearly Savings for using Your Internal Recruiters $2,821,900 Cost Analysis for Acquiring Talent Source of Hire Internet Print Advertising Job Fairs Employee Referrals Contingency Agencies College Recruiting Executive Search Exempt CPH $ 213 2,084 1,284 500 15,596 2,544 34,844 Non-Exempt CPH $ 51 726 70 70 2,076 457 7,838 Source: EMA 2000 Cost Per Hire and Staffing Metrics Survey
    9. 9. HR Strategy is Key to Business Success <ul><li>Business Strategy </li></ul><ul><li> Reliability </li></ul><ul><li> Safety </li></ul><ul><li>Asset Utilization </li></ul><ul><li>Growth in Market Share </li></ul><ul><li> Process Improvement </li></ul><ul><li>HR Strategy </li></ul><ul><li>Leadership Development </li></ul><ul><li>Succession Planning </li></ul><ul><li>Talent Acquisition </li></ul><ul><li>Teamwork & Communication </li></ul><ul><li>Performance Management </li></ul><ul><li>Competitive Advantage </li></ul><ul><li>Lower Fixed Costs </li></ul><ul><li>World Class Performance </li></ul><ul><li>Faster Decision Making </li></ul><ul><li>Improved Revenues </li></ul><ul><li>Efficient Operations </li></ul>Profits, Growth & Shareholder Value 1 2 3 Star Over Good people make companies successful and attracting Top Talent requires mastering…..
    10. 10. Client-Candidate Relations, Power Sourcing, Metrics and Reporting By Frank Pacheco The Art of War Talent Acquisition
    11. 11. The Art of Talent Acquisition <ul><li>Talent Acquisition Management Strategy </li></ul><ul><li>Phase 1 - Understand Your Organization </li></ul><ul><li>Understanding Talent Types </li></ul><ul><li>Phase 2 – Understand What You Are Seeking </li></ul><ul><li>Attracting Top Talent (Beyond $$$) </li></ul><ul><li>Phase 3 – Recruit Aggressively </li></ul><ul><li>Process Drives Talent Acquisition </li></ul>
    12. 12. Talent Acquisition and Management Strategy <ul><li>Multi-step process. </li></ul><ul><li>Forces organizations to understand themselves. </li></ul><ul><li>Basis for imbuing a “talent is an asset” culture in an organization. </li></ul><ul><li>Makes “Performance Management” an expected practice. </li></ul><ul><li>Promotes recruitment “branding” to make you an “Employer of Choice” </li></ul>(TAMS)
    13. 13. Phase One <ul><li>Strengths </li></ul><ul><li>Shortcomings </li></ul><ul><li>Culture </li></ul><ul><li>Values </li></ul><ul><li>Value proposition for employees </li></ul><ul><li>Are you able to articulate the dream? </li></ul>Understand Your Organization
    14. 14. Understanding Talent Types <ul><li>Active job seekers </li></ul><ul><li>Undesirable if they had no job in 2007 </li></ul><ul><li>May be unable of managing work relationships so they want to leave </li></ul><ul><li>May be poor communicators because no one knows they are leaving </li></ul><ul><li>Weak because no one is trying to keep them </li></ul><ul><li>Passive job seekers </li></ul><ul><li>Content/currently employed (top performer) </li></ul><ul><li>Must be convinced to look </li></ul><ul><li>Counter offers expected </li></ul><ul><li>Hired rapidly when they decide to look </li></ul>Customers, competitors, investors and other website visitors that are already coming to your website but won’t leave a resume Passive Active These are candidates with active resumes “ C” Managers don’t hire “A” Players “ A” Players won’t work for “C” Managers “ C” Recruiters can’t recruit “A” Players
    15. 15. Phase Two <ul><li>Rigorously review – “Do We Need This Role?” </li></ul><ul><li>Focus on the role’s ROI in alignment with your business plan </li></ul><ul><li>Can you justify the cost for the right talent? </li></ul><ul><li>Always aim for top performers! They produce 3x to 10x more than an average performers </li></ul>Understand What You Are Seeking <ul><li>Be prepared to answer three key questions </li></ul><ul><li>for the ideal candidates: </li></ul><ul><li>What do you want me to do? – Precisely. </li></ul><ul><li>How am I to be measured ? – Precisely. </li></ul><ul><li>How can I win? </li></ul>
    16. 16. Attracting Top Talent (Beyond $$$) <ul><ul><ul><li>Your management style </li></ul></ul></ul><ul><ul><ul><li>Open 2 way communications </li></ul></ul></ul><ul><ul><ul><li>Challenging projects & opportunities </li></ul></ul></ul><ul><ul><ul><li>Opportunities to grow and learn </li></ul></ul></ul><ul><ul><ul><li>Overcome their concerns by discussing: </li></ul></ul></ul><ul><ul><ul><li>How their work makes a difference </li></ul></ul></ul><ul><ul><ul><li>How performance is recognized </li></ul></ul></ul><ul><ul><ul><li>How performance is rewarded </li></ul></ul></ul><ul><ul><ul><li>Degree of control over their job/life </li></ul></ul></ul>Candidate Concerns 2% 17% 19% 23% 37% 0% 10% 20% 30% 40% The bureaucratic red tape and lengthy hiring process* Offering competitive compensation Benefits, pensions, vacation time Top talent unaware of available jobs* Perception of boring and bureaucratic jobs
    17. 17. Phase Three <ul><li>Apply proven innovations </li></ul><ul><li>Eliminate unnecessary criteria </li></ul><ul><li>Focus on the goal and process </li></ul><ul><li>Be ready to act quickly. “The top 10% of candidates accept jobs within 10 days.” </li></ul><ul><li>Hire experienced Recruiters </li></ul><ul><li>HR professionals should design new processes </li></ul><ul><li>Become a recruiter/salesperson </li></ul><ul><li>Treat every candidate with respect (increase your network) </li></ul>Recruit Aggressively There is an ongoing Talent Acquisition War Your competitors know your top producers by name!
    18. 18. Process Drives Talent Acquisition <ul><li>Powerful screening, filtering and scoring tools ensure that you find better candidates faster . </li></ul>Seeker Universe Filtering, Screening Scoring Client Relations Highly qualified candidates
    19. 19. Proactive & Reactive Models
    20. 20. Recruiting Roundtable Research (I)
    21. 21. Recruiting Roundtable Research (II)