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EmpIndex - Measuring the Value of Human Capital (20160407)

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Conceptual presentation around how we could truly measure human capital through a performance index

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EmpIndex - Measuring the Value of Human Capital (20160407)

  1. 1. Mark Sweeny Founder, Owner, Chief Executive Certus Solutions Measuring the True Value of Human Capital The Employee Index
  2. 2. So What Your About To See Origins are from My Own Research 2009! Private & Confidential 2007-2016 © Certus Solutions All Rights Reserved
  3. 3. Private & Confidential 2007-2016 © Certus Solutions All Rights Reserved
  4. 4. The Challenges of a Small Medium Enterprise Cloud Professional Services Business  Survival - Cash is King!  Balancing Growth v Sustainability  Happy Customers! – Maintaining Reference-ability  Delivery Capability in a Fast Changing Space  “War On Talent”  Employee Engagement & Retention Private & Confidential 2007-2016 © Certus Solutions All Rights Reserved
  5. 5. So How Do We Rise To the Challenge? Private & Confidential 2007-2016 © Certus Solutions All Rights Reserved We Focus On Our People and For me … HR is in the People Delivery Business “Right People, Right Place, Right Time, Right Cost”
  6. 6. Management Clichés & Jargon People are our business People are our greatest assets Seize the day Talent Management Human Capital Paradigm shift Step Change Excellence through people Make A Difference Private & Confidential 2007-2016 © Certus Solutions All Rights Reserved
  7. 7. Do You Feel The Same Way? A Quick Survey….Google Says…  People are our greatest asset  People are our most important asset  People are our business  People are our most valuable asset 1,590,000 2,980,000 97,600,000 229,000,000 2016 Hits 516,000 2,240,000 13,200,000 193,000,000 2009 Hits Private & Confidential 2007-2016 © Certus Solutions. All Rights Reserved
  8. 8. The Challenge of HR Today  For HR To Be Relevant Today  Play it’s role in achieving sustainable competitive advantage  Show a return in delivering value to the organisation  HR Director Should Constantly Be Asking…  How effective is my “People Proposition”?  And “am I making a difference?” Private & Confidential 2007-2016 © Certus Solutions. All Rights Reserved “So What Do We Instinctively do? – We Try to Measure!” But… What Are We Measuring? When Are We Measuring it? and how Are We Measuring it?
  9. 9. Traditional Measures of HR Effectiveness are Flawed Flaws in Traditional HR Measures  Not linked to the overall business objectives  Identified in isolation  Focused heavily efficiency rather than effectiveness  High degree of subjectivity  Performance reviews are not ratified at corporate level  Do not financially quantify the concept of “value” Private & Confidential 2007-2016 © Certus Solutions. All Rights Reserved
  10. 10. Examples of Traditional Measures of HR Effectiveness from 2009 Private & Confidential 2007-2016 © Certus Solutions. All Rights Reserved n = 91 organisations; 506 measures Source: IRS Everyone has a different opinion?
  11. 11. Its all about People, it always has been…  Professional Sport in America has been measuring performance since its origins  Performance measures contribute to “MVP” – Most Valuable Player awards  Determines a players value to the team and influences contract negotiations Applied Learning from Professional Sport – Before MoneyBall !!!! So Why can’t we apply the same approach to the Private or the Public Sector? Private & Confidential 2007-2016 © Certus Solutions. All Rights Reserved
  12. 12. It’s a Question of Value & Contribution Private & Confidential 2007-2016 © Certus Solutions. All Rights Reserved
  13. 13. Private & Confidential 2007-2016 © Certus Solutions. All Rights Reserved Sir Alex Ferguson Former Manchester United Manager  Recruitment was centred around collecting and working with talented youths  Growing up and training together for years created a loyal team that had an incredible spirit, character and force  Combined with older players created high standards and maintained the clubs culture  Always focused on the future - building a club and not just a team- creating stability and consistency  Also concentrated on the value each player brought- only players with work ethic, energy, perseverance, comradery, who were tactically smart and a superb athlete were chosen for the club
  14. 14. Bill Belicheck Head Coach of the New England Patriots Private & Confidential 2007-2016 © Certus Solutions. All Rights Reserved  Culture beats Strategy - talent alone is not enough  Created a sophisticated screening mechanism that targets a players fit rather than talent alone  Seeks like-minded players who share core values  Team chemistry over individual talent  Accountability  Three Core Values:  Passion - players have a love of the job and not just the lifestyle (found via specific interview questions)  Intelligence - players need to be intellectually curious, committed and have a strong work ethic  Value - each position is budgeted and does not change regardless of factors such as talent. This means the patriots are never controlled by the market or a player
  15. 15. Billy Beane Executive Vice President of Baseball Operations Private & Confidential 2007-2016 © Certus Solutions. All Rights Reserved  Objective, advanced data to hire instead of the traditional “statistics and gut instincts” approach  Broke down success into a factors specific to each position  Decisions were not emotionally made  Being successful & having talented individuals can forge a better culture  Don’t disregard culture but don’t rely solely on it either  Consider objective talent, performance measurements first to widen the channel of prospective candidates and then consider culture
  16. 16. Lies, Dam Lies and Statistics? - Possibly Can you really measure Human Behaviour? Can you really measure Culture? Can you be consistent and fair? Private & Confidential 2007-2016 © Certus Solutions. All Rights Reserved
  17. 17. Business Need Defined What do we really mean by human capital? … Its about “value” and “contribution” towards goals … So how do we identify and quantify it in business? Private & Confidential 2007-2016 © Certus Solutions. All Rights Reserved
  18. 18. So how can we measure Employee Value ? -100 +1000 Employees can either create value … So Where are Your People ? First you have to define it… … or destroy value Private & Confidential 2007-2016 © Certus Solutions. All Rights Reserved
  19. 19. Employee Value Dynamics Identifying Who Creates Value… Employee Value linked directly… to Organisational Objectives Pressure on Public Finances Government Policy Election All Change? Equal Opportunity Agenda Trade Unions Civil Service Reform European Legislation Global Economy Level of Public Debt UK Legislation Public Sector Efficiency Agenda Pressure on Public Services Public Value Education Health Justice Security Emergency Services Culture Trade Employee Value Employee Value -100 +100 0 ValueScale Private & Confidential 2007-2016 © Certus Solutions. All Rights Reserved
  20. 20. Employee Value Dynamics Fundamental Concepts of System Dynamics from MiT in 1950’s Index value increasing value reducing +40.72 Stock or ReservoirFlow We need to define what increases value and what reduces value Private & Confidential 2007-2016 © Certus Solutions. All Rights Reserved
  21. 21. Lies, Dam Lies and Statistics? - Possibly Creation of an “Employee Index”…  A conceptual idea in Employee and Organisation value measurement  provides alignment, clarity and focus in delivering a sustainable people proposition  minimises subjectivity around human performance  focuses upon measured contribution to determine value  commercialises HR by financially quantifying the value of human capital  Formula based upon weighted averages? Private & Confidential 2007-2016 © Certus Solutions. All Rights Reserved
  22. 22. To Measure Contribution,,,, You Need a Set of Value Factors that are Relevant to the Organisation  Technical Skills  Usually based upon Competency Levels  Delivery  Performance Results Related  Behavioural & Soft Skills  Most difficult to Measure due to Subjectivity  Team Player – Interaction with Others?  “Would I go for a drink with this person?” Private & Confidential 2007-2016 © Certus Solutions. All Rights Reserved
  23. 23. Establishing “The Bridge” Value Factors Outcome Determined by Weighting % Value Score (-100 to +100) Weighted Score Attendance Management Average number of sick days per employee per quarter 0.35 40 14.00 Financial Control Percentage budget variance relating to employee costs per quarter 0.25 80 20.00 Personal Performance Review Score from performance appraisal per annum 0.25 -20 -5.00 Conduct & Discipline % number of grievances raised that are satisfactory resolved from staff per quarter 0.10 20 2.00 Training Delivery Average number of Training Days delivered per employee per quarter 0.05 65 3.25 34.25 Example Scenario: Organisation metrics for determining the value contribution of an HR Business Partner in relation to a departmental strategic objective and local objectives Link Link Link Link Link INDEX SCORE OF Private & Confidential 2007-2016 © Certus Solutions. All Rights Reserved DepartmentalStrategic Objective
  24. 24. “Corporate Moneyball!” – Think Stockmarket Linking to Financial Measures Identifying Value and Quantifying Human Capital 0 10 20 30 40 50 60 70 80 90 100 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr EmpIndex Employee 1 Employee 2 Employee 3 Employee 4 Employee 5 £££ 0 10 20 30 40 50 60 70 80 90 100 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Org EmpIndex HR Business Partner Senior Management Business Unit 1 Business Unit 2 Business Unit 3 £££ Private & Confidential 2007-2016 © Certus Solutions. All Rights Reserved
  25. 25. Delivering Insight Identifying “Value of Connection” across an Organisation 67 664962 6132 55 68 45 45 79 63 62 61 6559 How Organisations truly work 67 664962 6132 55 68 45 45 79 63 62 61 6559 Traditional Organisational Chart EmpIndex allows you to identify where the value exists across the entire Organisation Private & Confidential 2007-2016 © Certus Solutions All Rights Reserved
  26. 26. Is this the Next Step in the Journey? A Talent Management Index – A System that…  Allows an organisation to identify employee value (talent) across an organisation  Demonstrates an employees contribution against organisational goals  Delivers in-depth workforce analytics based upon value and contribution  Facilitates objective comparison of individual employee’s contribution  Ability to determine the performance gap between workforce and organisation  Enables an Organisation to financially quantify its Human Capital Private & Confidential 2007-2016 © Certus Solutions. All Rights Reserved
  27. 27. Is this the Next Step in the Journey? But With All Concepts, there are Questions?  Would you want to measure your people to this instinct?  You need huge amounts of nearly REALTIME data to make this work?  Doesn’t it just become another system that can be manipulated?  Would it drive the right behaviour?  Is this a Step to Far and to intrusive? Private & Confidential 2007-2016 © Certus Solutions. All Rights Reserved
  28. 28. Key Take Aways – Regardless of Tech!  Employee Measurement Systems need to reflect both Technical & Behavioural Skills you value  You need both elements to build a “Winning” team  You need to maintain objectively and minimise subjectivity! – but can you really measure culture? Private & Confidential 2007-2016 © Certus Solutions. All Rights Reserved
  29. 29. Mark Sweeny Owner, Founder, Chief Executive Mark.sweeny@certus-solutions.com @CertusCEO www.certus-solutions.com Thank You For Listening Questions?

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