People & ROI
    4 July 2008
    NHRD, Pune
Who are we?
People Management has become the most crucial
  function in an Organisation, taking over from all
  the others...
How did we get here?

       Personnel

               IR

                    Staff

                            HR

    ...
Does HR create Value?
Investment in HR practices

  Increased Employee Commitment

  Lead Indicator of Customer Commitment...
Other Spin offs
Intuitively and otherwise also we know that firms
  which invest in HR practices are MORE LIKELY to
  have...
How does HR impact




THE CRUCIAL QUESTION- WHAT IS THE ROI?
The Organisational Impact



    ROI – RETURN ON INTANGIBLES !!
Why Intangibles
Intangibles

  Shareholder value NOT DETERMINED BY
    FINANCIAL results ONLY

  Represent the hidden valu...
How did it come about?
Upto mid 80s the Firms value was worth about the
  book value as adjusted to Inflation

. A Fundame...
Value and Intangibles
Increasingly a large proportion of the firms value
   not tied to “present” earnings



         TIE...
HOW IMPORTANT ARE
INTANGIBLES?


  “INTANGIBLES ARE NOT NEW TO A FIRM’S
    OVERALL MARKET VALUE BUT THEY ARE
 BECOMING IN...
What leads to Intangibles
Many Leadership actions.



Often therefore focused on those that are easy to
  measure:-
  meas...
How people as Intangibles
Organisation and people become an Intangible
  Asset when they give investors confidence in
  fu...
First steps

Learn who the investors are




Who and why shareholders are interested in the
 Company?
Investor Literacy Test

 Who are the 5 major Shareholders?



 Why do they own you? Dividends/Growth
  h d h              ...
Investor Literacy Test

 Who are the Analysts and what do their reports
  say?
     ?

 How are you including key investor...
THE FRAMEWORK



HOW DO WE CREATE THE PEOPLE INTANGIBLES IN
            OUR ORGANISATIONS?
The Intangibles Framework Level 1

    Focus Area         Action Potential




                     •Build and defend
    ...
The Intangibles Framework Level 2

    Focus Area           Action Potential



                       •Define the Growth
...
The Intangibles Framework Level 3

    Focus Area                Action Potential




                 Provide Concrete su...
The Intangibles Framework Level 4


 Focus Area               Action Potential

                 Develop Capabilities of:
...
THE STEP UP APPROACH
The whole process is progressive.

  Keeping Promises      Trust   Credibility

 Trusted leaders can ...
A Sequential Process



TRUST              VISION LACKS AUTHORITY
               L
               A
CORE           C
COMPE...
On the Contrary


Kept Promises       Allows Credible Vision

Credible Vision     Informed Investments
                   ...
What are the Capabilities

Talent
Speed of Change
Shared Mindset
Accountability
             y
Collaboration
Learning
Lead...
HR Professionals




        Work on                 Communicate
       Capabilities              to Investors




       ...
To Ultimately,
Capabilities make the Intangible into Tangible

They Delight the Customers
They establish the reputation am...
What are the Steps?

Conduct an Intangible Audit to understand where
  the Leaders should focus to deliver Value

Define, ...
Align HR Practices and Investors

Takes a different focus from the traditional
   practices.

   INVESTORS AND STAFFING

 ...
INVESTORS AND STAFFING
What if the Investors can vote on Individuals hired and /or
  Promoted?

In some ways through Surro...
Investors and Training and
Development
       p
What if a representative of the largest investor sat through
  the last of...
Investors and Appraisals and
Rewards
The trend to link the Management behaviours to
 investor focused rewards

Link a larg...
Investors and Governance and
Communication
Investors in Publicly traded companies have been
  traditionally hands off.

Ho...
What is the pay off
As investors view the organisation from the HR
 filter, they gain confidence in the organisation’s
 ab...
In the Ultimate Analysis
Intangibles gives the Organization that unique
  identity and the differentiator



 APPLE      S...
Thank you !
suby@zensar.com..
suby@zensar com
On to

  Q&A
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ROI on People through a Strategic HR

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ROI on People through a Strategic HR
Mr .S. Balasubramaniam
CFO
Zensar

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ROI on People through a Strategic HR

  1. 1. People & ROI 4 July 2008 NHRD, Pune
  2. 2. Who are we? People Management has become the most crucial function in an Organisation, taking over from all the others for the success and sustainability of the others, Business. A series of factors are responsible:- Competition Liberalisation Globalisation Talent Shortage CAN WE CREATE VALUE WHILST WE DO ALL THIS?
  3. 3. How did we get here? Personnel IR Staff HR People
  4. 4. Does HR create Value? Investment in HR practices Increased Employee Commitment Lead Indicator of Customer Commitment d d Lead Indicator of Profitability But what is the Value that we create?
  5. 5. Other Spin offs Intuitively and otherwise also we know that firms which invest in HR practices are MORE LIKELY to have better fi h b tt financial returns th fi i l t than firms th t that don’t & HR Practices shape Organisation Culture Identity Reputation Brand
  6. 6. How does HR impact THE CRUCIAL QUESTION- WHAT IS THE ROI?
  7. 7. The Organisational Impact ROI – RETURN ON INTANGIBLES !!
  8. 8. Why Intangibles Intangibles Shareholder value NOT DETERMINED BY FINANCIAL results ONLY Represent the hidden value of the firm Getting Increasingly important for firms as diverse as in Technology, Manufacturing, Pharma, Retail
  9. 9. How did it come about? Upto mid 80s the Firms value was worth about the book value as adjusted to Inflation . A Fundamental Shift in the perception of the Firms Value TRADITIONALLY Shareholder value – Earnings been between 75% to 90%. Can be predicted by 90% the FIRMS earnings. CURRENTLY, it is only 50% in both up and down markets. markets Study by 2 Accounting Profs- Baruch Lev and Paul Zarowin, Stern University of Business, New York University Business
  10. 10. Value and Intangibles Increasingly a large proportion of the firms value not tied to “present” earnings TIED to INTANGIBLES INTANGIBLES represent value directly not derived from the physical assets f th h i l t
  11. 11. HOW IMPORTANT ARE INTANGIBLES? “INTANGIBLES ARE NOT NEW TO A FIRM’S OVERALL MARKET VALUE BUT THEY ARE BECOMING INCREASINGLY IMPORTANT PORTION OF A FIRM’S TOTAL CAPITALISATION” Dave Ulrich & Norm Smallwood HR’s New ROI-Return on Intangibles ROI Return
  12. 12. What leads to Intangibles Many Leadership actions. Often therefore focused on those that are easy to measure:- measure: R&D Technology Brand THAN ON INVESTMENTS in organisation and people
  13. 13. How people as Intangibles Organisation and people become an Intangible Asset when they give investors confidence in future earnings and when they can b made f t i d h th be d tangible. Value is Eroded when:- Leadership’s confidence is lost by investors e.g. Ethical violations are the most visible.
  14. 14. First steps Learn who the investors are Who and why shareholders are interested in the Company?
  15. 15. Investor Literacy Test Who are the 5 major Shareholders? Why do they own you? Dividends/Growth h d h d d h Price/Earnings for the last decade/Vis-a-vis the Industry and the gap between the Highest P/E y g p g ratio
  16. 16. Investor Literacy Test Who are the Analysts and what do their reports say? ? How are you including key investors and analysts in design and delivery of HR practices( SP/LD/R & R)? Succession Planning Leadership Development Recruitment and R t ti R it t d Retention How good is your Corporate Governance?
  17. 17. THE FRAMEWORK HOW DO WE CREATE THE PEOPLE INTANGIBLES IN OUR ORGANISATIONS?
  18. 18. The Intangibles Framework Level 1 Focus Area Action Potential •Build and defend Build Keeping your reputation. Your External and Internal Promises Stakeholders
  19. 19. The Intangibles Framework Level 2 Focus Area Action Potential •Define the Growth Strategy & the Tradeoffs T d ff •Customer Intimacy Compelling •Product Innovation Strategy gy •Geographic- •Geographic Expansion
  20. 20. The Intangibles Framework Level 3 Focus Area Action Potential Provide Concrete support for Aligned Intangibles by building core Technical Competencies in Research, Competencies p Technology, Sales/Marketing, gy g Logistics, Mfg. and the like
  21. 21. The Intangibles Framework Level 4 Focus Area Action Potential Develop Capabilities of: Shared mindset Building Value Talent T l t Through Collaboration Organisation Speed & Accountability y People Learning Leadership THROUGHOUT THE ORGANISATION !
  22. 22. THE STEP UP APPROACH The whole process is progressive. Keeping Promises Trust Credibility Trusted leaders can envision a future state that captures imagination & generates enthusiasm Compelling Strategy Builds confidence in the future
  23. 23. A Sequential Process TRUST VISION LACKS AUTHORITY L A CORE C COMPETENCIES K VISION WOULD BE UNREALISED O CAPABILITIES F CORE COMPETENCIES AND VISION LAY DORMANT
  24. 24. On the Contrary Kept Promises Allows Credible Vision Credible Vision Informed Investments that ensures Core Competencies Core Competencies Enable Capabilities to be p realised
  25. 25. What are the Capabilities Talent Speed of Change Shared Mindset Accountability y Collaboration Learning Leadership
  26. 26. HR Professionals Work on Communicate Capabilities to Investors Create C t Shareholder Value
  27. 27. To Ultimately, Capabilities make the Intangible into Tangible They Delight the Customers They establish the reputation amongst Investors Provide Long Term Sustainable Value d bl l HR Professionals should be architects and thought leaders in defining and creating capabilities
  28. 28. What are the Steps? Conduct an Intangible Audit to understand where the Leaders should focus to deliver Value Define, Assess Define Assess. Invest and Improve on each of the 4 levels of Intangibles
  29. 29. Align HR Practices and Investors Takes a different focus from the traditional practices. INVESTORS AND STAFFING INVESTORS AND TRAINING AND DEVELOPMENT INVESTORS AND APPRAISALS AND REWARDS INVESTORS AND GOVERNANCE AND COMMUNICATIONS
  30. 30. INVESTORS AND STAFFING What if the Investors can vote on Individuals hired and /or Promoted? In some ways through Surrogate voice in the Board What if Large Institutional Investors participated in the interview of senior officers? What if Institutional Investors review the competence model p used as candidates ? Brings rigor and discipline in the process A bit awkward in the beginning, but over time the investor bring insights to the HR decision making process
  31. 31. Investors and Training and Development p What if a representative of the largest investor sat through the last of the 3 day leadership program? How would he react to a decision on BUY/HOLD/SELL H ld h tt d i i decision? Get to know first hand the Leadership team in real live cases, and facing competitive issues in candid conversations and leave with a clear and specific actions of the specific actions that would be taken p Impacts-> leadership understands the strategic choices and how it would go about it.
  32. 32. Investors and Appraisals and Rewards The trend to link the Management behaviours to investor focused rewards Link a large percentage of total compensation into stock based incentives. incentives Boundaries between Managers and Investors g removed when Managers become Investors Adds a wider and deeper mindset throughout the firm, the more the managers act and think like Investors
  33. 33. Investors and Governance and Communication Investors in Publicly traded companies have been traditionally hands off. However, they explore the Intangibles. Will diagnose how well the organization makes decisions, allocates responsibilities and meets , p commitments.
  34. 34. What is the pay off As investors view the organisation from the HR filter, they gain confidence in the organisation’s ability t d li bilit to deliver f t future earnings. i HR professionals too often are not sure to make this connection, and the fear of the financials keeps them from being fully engaged. The emerging focus on intangibles opens the way for HR professionals to more readily link their work to Shareholder value.
  35. 35. In the Ultimate Analysis Intangibles gives the Organization that unique identity and the differentiator APPLE Speed in Innovative Products FEDEX Overnight Delivery Southwest Ontime Performance Zensar Innovation
  36. 36. Thank you ! suby@zensar.com.. suby@zensar com
  37. 37. On to Q&A

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