Human Capital.ppt

Human Resource Management
Module - 1

Recruitment
 The process by which a job vacancy
is identified and potential employees are notified.
 The nature of the recruitment process
is regulated and subject
to employment law.
 Main forms of recruitment through advertising in
newspapers, magazines, trade papers and internal
vacancy lists.

Recruitment
 Job description – outline of the role
of the job holder
 Person specification – outline
of the skills and qualities required
of the post holder
 Applicants may demonstrate their suitability
through application form, letter or curriculum vitae
(CV)

Selection
 The process of assessing candidates and
appointing a post holder
 Applicants short listed –
most suitable candidates selected
 Selection process –
varies according to organisation:

Selection
 Interview – most common method
 Psychometric testing – assessing the personality of the
applicants – will they fit in?
 Aptitude testing – assessing the skills
of applicants
 In-tray exercise – activity based around what the applicant
will be doing, e.g. writing a letter to a disgruntled customer
 Presentation – looking for different skills
as well as the ideas of the candidate

Employment Legislation
 Increasingly important
aspect of the HRM role
 Wide range
of areas for attention
 Adds to the cost of the
business
Even in a small business, the legislation
relating to employees is important –
chemicals used in a hairdressing salon for
example have to be carefully stored and
handled to protect employees.

Discrimination
 Crucial aspects
of employment legislation:
 Race
 Gender
 Disability
Disability is no longer an issue for employers
to ignore, they must take reasonable steps
to accommodate and recruit disabled workers.
Copyright: Mela, http://www.sxc.hu

Discipline
 Firms cannot just ‘sack’ workers
 Wide range of procedures and steps
in dealing with workplace conflict
 Informal meetings
 Formal meetings
 Verbal warnings
 Written warnings
 Grievance procedures
 Working with external agencies

Development
 Developing the employee
can be regarded as investing
in a valuable asset
 A source of motivation
 A source of helping the employee fulfil potential

Training
 Similar to development:
 Provides new skills for the employee
 Keeps the employee up to date
with changes in the field
 Aims to improve efficiency
 Can be external or ‘in-house’

Rewards Systems
 The system of pay and benefits used by the
firm to reward workers
 Money not the only method
 Fringe benefits
 Flexibility at work
 Holidays, etc.

Trade Unions
 Importance of building relationships with employee
representatives
 Role of Trade Unions has changed
 Importance of consultation
and negotiation and working
with trade unions
 Contributes to smooth change management and
leadership

Productivity
 Measuring performance:
 How to value the workers contribution
 Difficulty in measuring some types of output – especially in
the service industry
 Appraisal
 Meant to be non-judgmental
 Involves the worker and a nominated appraiser
 Agreeing strengths, weaknesses and ways forward
to help both employee and organisation

HR Management Challenges
 Workforce Availability and Quality Concerns
 Inadequate supply of workers with needed skills for
“knowledge jobs”
 Education of workers in basic skills
 Growth in Contingent Workforce
 Increases in temporary workers, independent contractors,
leased employees, and part-timers caused by:
 Need for flexibility in staffing levels
 Increased difficulty in firing regular employees.
 Reduced legal liability from contract employees

 Workforce Demographics and Diversity
 Increasing Racial/Ethnic Diversity
 More Women in the Workforce
 Single-parent households
 Dual-career couples
 Domestic partners
 Working mothers and family/childcare
 Significantly Aging Workforce
 Age discrimination

 Organizational Cost Pressures and Restructuring
 Mergers and Acquisitions
 “Right-sizing”—eliminating of layers of management,
closing facilities, merging with other organizations, and
outplacing workers
 Intended results are flatter organizations, increases in
productivity, quality, service and lower costs.
 Costs are “survivor mentality”, loss of employee loyalty, and
turnover of valuable employees.
 HR managers must work toward ensuring cultural
compatibility in mergers.

Module - 2
Human Capital Planning and Employee
Hiring

 The term Human Capital has now become common in HR language to
describe people and their collective skills, abilities, experience and potential.
 Human Capital is one of three elements to make up intellectual capital.
 Intellectual capital describes the knowledge assets available to the
organizations and is a large part of intangible value. It can be described as:
 Human capital – the knowledge, skills, abilities and capacity to develop and
innovate possessed by people in an organization
 Social capital – the structures, networks and procedures that enable those
people to acquire and develop intellectual capital represented by the stocks and
flows of knowledge derived from relationships within and outside the
organization
 Organizational capital –the institutionalized knowledge possessed by an
organization which is stored in databases, manuals etc. This would also include
HR policies and processes used to manage people.
Human Capital Definition

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 There are many definitions of human capital, some of which unfortunately
refer just to the efficiency of the HR function - such as the average number
of training days per employee.
 ‘A strategic approach to people management that focuses on the
issues that are critical to an organization's success
 A form of asset management: a plan for securing, managing and
motivating the workforce capable of achieving business goals
 Human capital extends well beyond the HR function to encompass the total
people strategy of the organization and the management practices needed to
optimize performance and drive value creation.
 Human capital owned by all of the business leaders and resides in
everyone within the organization.
Defining Human Capital

 Human Capital Management can be defined as
“an approach to people management that treats it as a high-level strategic issue and
seeks systematically to analyze, measure and evaluate how people policies and
practices create value”
 Defining the link between HR and business strategy is an important issue to
understand the HCM
 A human capital approach implies that a realistic business strategy must be
informed by human capital data.
 how can a business pursue a strategy that doesn’t take account of the capacity
of all the resources available, including the human ones?
Human capital can be seen as a bridging concept between HR and business
strategy.
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Human Capital Management (HCM) Definition

 Andrew Mayo, Professor of, argues that what distinguishes human capital and
HCM from HRM is the emphasis on the value of people and what they produce,
rather than a focus on the HR function itself.
 HCM, unlike HRM, is about assessing the impact of people management
practices and the contribution of people to bottom-line performance.
 The development of human capital might develop as follows:
 assessing the effectiveness of HR
 evaluating the impact and effectiveness of people management processes
 using human capital data
 developing measures to calculate the return on investment in people
 HCM, which includes strategically-focused areas HCM reporting.
As organizations evolve their human capital evaluation and reporting,
they increasingly adopt a more sophisticated approach to their
measurement techniques. 31
The Difference Between HCM and Strategic HRM

 4 Principles
 Human capital should be viewed as a bridging concept linking business strategy and
HR practices.
 It is a precarious asset – the potential mobility of individual employees could and can
undermine an organization's ability to deliver.
 It is a paradoxical asset – the qualities that individuals bring, notably flexibility,
mobility and personal commitment, the very same factors that create competitive
value, are some of the most difficult to measure.
 Human capital measurement is context-dependent.
 The specific set of measures are less important than the process of measuring and the uses
for the information gathered.
 Focus on internal rather than external reporting, as the latter is impossible without solid
internal information.
 There are three core principles behind effective HCM:
insist on systems thinking get the 'right' facts focus on value.
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HC Measurement and Reporting

The purpose of this Guide is to help organizations move forward with their internal HC
measurement and reporting, by providing practical information and setting out a
clear process to follow. This process has five key stages, and each section of the
Guide will cover each of these stages in turn.
 Step 1 – Setting human capital management in context
 This section defines what HC is and its links to the business strategy, and
provides an overview of the frameworks and models necessary HCM and
measurement.
 Step 2 – Getting started: gathering and collating the data
 This section provide guidance on the nature and sources of relevant
information for HC reporting, what measures and categories might be reported
on, and how this information can be collated to build a HC measurement
platform.
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Guide for HC Measurement and Reporting

 Step 3 – Measuring human capital: tools and methodologies
 This section presents the spectrum of measurement techniques for
HC, introduces statistical methodologies which can be deployed to
leverage the measurement platform, shows how to communicate
results internally and select key metrics to guide human capital
decisions.
 Step 4 – Reporting the data: from internal to external reporting
 We address the links to the related issues of external reporting
requirements, what kind of information investors are expecting,
and propose a framework for external reporting.
 Step 5 – Developing a route map to human capital reporting
 This final step covers developing your own route map, identifying
who in your organization should be involved, determining
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Guide for HC Measurement and Reporting

35
Internal HC Measurement and Reporting

36
Step 1 – Setting HCM in Context

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Defining human capital
A recent research study, estimated that the value of human capital represented
over 36 per cent of total revenue in a typical organization - It's not
surprising, then, that there's a growing demand to define and measure its
contribution and the return on investment in it.
 Defining human capital as an Intangible Asset:
 A plan for securing, managing and motivating the workforce
capable of achieving business goals
 With the growing realization of the importance of intangibles, financial
analysts and investors are calling for more transparency in methods to
measure their value.

 From compensation to talent management, learning and development to
organization design, have sometimes been built up in isolation and from
'best' professional practice rather than being developed as an integrated
support for business needs.
 Human Capital strategy seeks to address this by placing the investment and
development of the workforce as a key component of business strategy.
 This implies that People Management should be clearly set out in a
framework that allows for a strategic 'fit' and for flexibility in matching
changing business requirements.
 It's well worth producing a human capital business plan with a summary of
the organisation's human capital strategy.
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Linking to the business strategy

 HCM reporting should demonstrate the link between people management and
business performance.
 The key is to develop and/or adapt an approach that best suits the thinking and
management style of the organization in order to create a framework to link how
people are managed with the delivery of business strategy.
 The most commonly used models and frameworks for HCM are:
1. The human resource benchmarking model
2. The balanced scorecard
3. The Human Capital Monitor
4. The Human Capital Index
5. The engagement model
6. The organizational performance model.
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HC Measurement Frameworks and Models

 Benchmarking is an organized method for collecting data that can be used to improve
organizational performance, rather than simply gathering a mass of statistics that add
little or no value.
 What are the issues we need to address to survive and succeed?
 it's critical to transform this benchmarking data into useful, value-adding
information
 The following methodology can be used to transform benchmarking data into impact
o Decide where improvement is essential.
o Establish the parameters you're seeking.
o Establish your benchmarking team.
o Specify the data.
o Undertake collection of data.
o Locate suitable benchmarking partners.
o Analyze the results.
o Implement
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1- The HR benchmarking model

 This is one of the best-known methodologies. It aligns the evaluation of the people
dimension to a company's strategic aims through a balanced scorecard.
 The scorecard originally had four elements:
 Financial,
 Customer,
 Internal business process,
 Learning and growth.
 One of the main benefits of the scorecard approach is that it provides a simple
communication tool for internal and external stakeholders.
 The need to create clear alignment between HR's own functional organization, the
supporting HR systems and employee behaviors – This suggests a strong link between HR
activity and the development of a firm's human capital.
 The idea of an HR scorecard has reinforced the need for business measurement of HR
activities, and it is also a relatively popular tool which many HR functions use to assess
their own effectiveness.
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2- Balanced scorecard

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The Balanced Scorecard Framework

 Andrew Mayo, a member of the CIPD's steering group, has sought to identify the human
value of the enterprise or 'human asset worth’. He emphasizes that people should be viewed
as an asset rather than a cost.
 The main challenges are:
 How an organization should recognize the intrinsic diversity in the worth of its people and value it
 How to create a framework of people-related metrics as part of an organization's overall performance
 How to quantify both the financial and non-financial value to stakeholders.
 The human asset worth is defined as being equal to 'employment cost x individual asset
multiplier (IAM)/1,000'. This is a weighted average assessment of capability, potential to
grow, personal performance and alignment to the organization's values set in the context of
the workforce environment (how leadership, culture, motivation and learning are driving
success).
 The process of measurement leads you to consider whether human capital is sufficient,
increasing or decreasing and highlights issues to address.
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3- The Human Capital Monitor

 Watson Wyatt have constructed a survey of companies linking their key management
practices to their market value concluded that four major categories of HR practice could be
linked to a 30 per cent increase in shareholder value,
 The methodology focuses more on a 'best practice' concept of value-adding HR policies than
the 'best fit' approach applied in the models presented thereafter.
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4- The Human Capital Index
Practice Impact on market value
Total rewards and accountability
that differentiate between high and poor performers
16.5%
Collegial, flexible workplace
environment encouraging teamwork and co-operation
9.0%
Recruiting and retention excellence
development of recruitment to support strategic aims
7.9%
Communication integrity
where goals are clearly stated
7.1%

 The application of the engagement model looked at the employee–
customer–profit chain - if you keep your employees satisfied, they will help
ensure that your customers remain satisfied, and your customers in turn will ensure
and improve your corporate profits.
 The result of this, in Measuring and Managing Employee Performance
is that the pursuit of employee satisfaction has become interlinked
with the concept of HR strategy and business alignment
 Measuring and improving employee satisfaction has become an
important basis of organizational improvement.
 Employee attitude or climate surveys have become a key measure of
human capital.
 Surveys have shown links between employee morale and business
metrics, particularly at the business unit performance level
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5- The Engagement Model

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The Employee–Customer–Profit Chain

 Mercer HR Consulting developed a model that links
HCM to organizational performance and, ultimately,
shareholder value
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6- The Organizational Performance Model

Human Capital Strategy consists of six interconnected factors (MERCER):
 People - who is in the organization; their skills and competencies on hiring; what skills and
competences they develop through training and experience; their level of qualification.
 Work Processes – how work gets done; the degree of teamwork and interdependence
among organizational units; and the role of technology
 Managerial Structure – the degree of employee discretion, management direction and
control; spans of control, performance management and work procedures
 Information and Knowledge – how information is shared and exchanged among
employees and with suppliers and customers through formal or informal means
 Decision Making – how important decisions are made and who makes them; the degree of
decentralization, participation and timeliness of decisions
 Rewards – how monetary and non-monetary incentives are used; how much pay is at risk;
individual versus group rewards; current versus longer-term 'career rewards'.
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The Organizational Performance Model

 Define human capital management in the
organization.
 Articulate a human capital strategy to
support your business objectives.
 Produce a human capital plan.
 Select a human capital management and
measurement work to demonstrate the
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Step 1: Checklist Setting HCM in Context

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Step 2 – Getting Started: Gathering and Collating the Data

 Gathering and collating human capital data requires an understanding of
type, analysis and use. Once the relevant data have been identified, you
can build a measurement platform and start to interpret the information,
then you'll be ready to demonstrate the connection between human
capital management practices and business objectives and performance.
This step Includes:
1. Gather the right facts
2. Assess the data sources and information systems
3. Identify and collect the relevant data
4. Build the human capital measurement database
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Step 2 – Getting Started: Gathering and Collating the Data

 High-quality and high-impact decisions need to be based on reliable and relevant
facts, the 'right facts' -
 Gathering the right facts entails looking beyond what people 'say', and considering what
they actually 'do'.
 It's essential to look at the actual behaviours of employees over time to inform your
human capital decisions.
 There are two basic types of employee data:
 Perceptual – attitudinal or qualitative information, typically collected via interviews or
surveys
 Archival – based on historical records; this includes employee history, financial or
operational data, customer records.
 Time is another critical element. Data can be captured as snapshots at a particular
point in time - Only by looking at data over time you can collect relevant dat.
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1- Gather the Right Facts

 In the process of gathering and reviewing information, you'll need to work
closely with your human resource information system (HRIS) experts. You
need to start by asking basic questions:
 What are the software packages currently used?
 Over what period of time have existing systems been in place?
 Do they differ by geography, by business unit, by division?
 What amount and type of historical employee data is available?
 Have there been any major organizational changes?
 What are the key employee segments, line of business, function, geography?
 The amount of historical data is also critical.
 It's important in this phase to define the scope of the study.
 Once you've clarified the feasibility, scope and focus of your analysis, you
can identify and collect the relevant data.
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2- Assess the Data Sources and Information Systems

 First, depending on the scope and the issue you're trying to
address, you'll need to select which data is relevant for your
organization.
 Second, you'll need to focus on collecting relevant and reliable
data today and identify those areas you will need to capture or
harmonize in the future.
 Three broad categories of data can be used for HCM:
1. HR practices and workforce data
2. performance data
3. external data.
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3- Identify and Collect the Relevant Data

 HR and workforce data is the 'must have' for human capital reporting.
Compiling and analyzing this data will enable the organization to understand the
characteristics of its workforce, measure the effectiveness of its people policies and
assess the value of its human capital assets.
 Data sources:
 HRIS payroll systems,
 Ancillary systems,
 Employee surveys.
 Data elements:
 HRIS and payroll data on the work force: demographics; status; job history;
availability; compensation; mobility; organization and management
 Complementary workforce data: performance management; training and
development; skills and competencies; education; pre-employment; succession
planning
 Perceptual data: employee survey; exit interviews; executive interviews.
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1- HR Practices and Workforce Data

 Performance data: a mixture of financial, operational and customer information.
 By connecting workforce information to performance outcomes, you'll be able to assess
the impact of your HCM practices on the business and provide a basis for making HC
investment decisions.
 Data elements: there are three categories of performance outcomes to consider:
 Financial data: revenues, net income, economic profit, profit margins
 Operational data: calls abandoned (call centers), customer waiting times (retail),
new accounts opened (financial services), patient care (healthcare)
 customer data: customer satisfaction, customer retention, customer service ratings.
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2- Performance Data

 External data can provide valuable insights to help determine how successful
your policies and practices are likely to be in the face of competitive market
conditions.
 Labor market data, such as local unemployment rates and/or industry salaries, will
influence both the availability of skills and the ability to buy necessary talent.
 Industry or market data, such as market share or industry volatility, will allow you to
control for external influences that might mask the impact of human capital
management practices.
 External data encompass national statistics, labor force surveys, industry reports
or compensation data.
 Its important to distinguish between the use of external data as inputs to the
analysis and benchmarking the outcomes of the analysis across organizations.
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3- External data

 The building process involves the data acquisition, data 'cleaning' and the transformation of
data.
 Cleaning of data will ensure that the format of the data you've received is: consistent,
reliable, and complete
 Transforming means converting the various used formats (numeric, text, data base … to a
similar format to enable the integration to a single data platform, such as SPSS® or SAS®.
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4- Build the HC Measurement Database

 Gather the right facts.
 Assess data sources and information
systems.
 Identify and colorant data.
 Build the human capital database.
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Step 2: Checklist Getting Started: Gathering and Collating
Data

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Step 3 – Measuring HC: Tools and
Methodologies

 There's a broad spectrum of assessment and measurement techniques and sources
of information available to organizations today.
 The technique used will influence the value and business impact of HC reporting
in the organization and its reliability for making essential people and business
decisions.
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The HC Measurement Spectrum

 Corridor anecdotes: The weakest sources of information; highly subjective. for example;
'She's really good!' or 'That initiative worked well in XYZ division.'
 Reactive checks: Immediate reactions to potential or real issues. If the average female pay
is 20% below average male pay.
 Ongoing reports: provide internal benchmarks and some basis for human capital
measurement; such as on performance and absence monitoring,
 Benchmarking: External benchmarking : is typically used to compare HR and
management practices across companies, either within industries or against recognized ‘high
performance companies. Internal benchmarking: can provide insights into how effectively
the workforce is managed and deployed
 Correlation: Show statistical links between two or more given variables, for example,
employee morale and customer service and satisfaction. The difficulty with correlations is
that they reflect association rather than causation
 The most powerful reporting methodologies look to determine causality in order to identify
the key human capital drivers of performance and predict and forecast the impact of people
strategy interventions. This then allows modeling of potential changes and their likely results.
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Levels of HC Measurement Techniques

 At the heart of this process is the need to test hypotheses to establish causal
relationships; for example, how do you know that your reward system will
drive better business performance ? three conditions must be met:
 A simple correlation must first be found, - two or more variables are linked. This might
be, for example, that higher business unit results are linked to staff bonus payouts.
 Any change must precede the outcome. Time matters, this means that the increase (or
decrease) in bonus payments must precede the increase (or decrease) in business results. This
is why historical data is more valuable than snapshot surveys.
 This concerns statistical controls. Multiple factors may be influencing the variable of
interest, it's important to account for their effects.
 Analyzing the data, both qualitative and quantitative, will allow you to review
scenarios and test hypotheses.
 The following example illustrates the three fundamental steps in establishing
causality
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Establishing Causality and Testing Hypotheses

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Hypothesis Testing: Do Bonus Payments Drive Business
Results

 No decision should be made on the analysis of results alone.
 Consultation and involvement, ie of line managers and employees, in scoping, gathering
and using data is critical to ensure it reflects the reality of day-to-day operations and value-
creation in your organization.
 Presenting the results of your human capital analysis is an important aspect of gaining the
support of your business managers.
 Once you have a record of data and areas for improvement have been identified, quantify
your key targets wherever possible.
 Quantitative results, measurable targets and 'high-impact' recommendations are most likely
to convince your line managers, finance director or chief executive, win their buy-in and
encourage them to take action or unlock the necessary budgets.
 Tracking and reporting progress against objectives on a regular basis, monthly or quarterly,
is essential to ensure that you keep your internal stakeholders engaged and to show that you
deliver on your promises.
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Interpreting and Communicating the Results
Internally

 Research proves, and case studies illustrate, that there is no 'best-
practice' set of measures that are relevant for all organizations'
internal reporting.
 Depending on its strategy or the issues an organization seeks to
address, the corresponding metrics and targets for success will
differ.
 Internal reporting should present the few most appropriate metrics
to drive human capital management.
 The metrics you report to external shareholders might differ.
 Shareholders want to see evidence of how well you're managing
your workforce to support your business strategic objectives and
what value is delivered to the business.
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Selecting, Monitoring and Reporting the Key Metrics

 Identify the measurement technique to apply to the
human capital analysis.
 Formulate and test hypotheses by establishing
causality
 Interpret the analysis and communicate the results
 Monitor and report the key metrics
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Step 3: Checklist Measuring human capital

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Step 4 – Reporting the Data: From Internal to External Reporting

 The CIPD Accounting for people (AfP) task force, was set up to look at human capital
management and external reporting.
 According to AfP, HCM has a direct impact on performance and should therefore be
included within this main reporting vehicle.
 Operating and Financial Review (OFR) should provide shareholders with details of the
company's objectives, strategy, past performance and future prospects, including:
 its policy towards employees, customers and suppliers
 its impact on the environment
 its social impact
 its impact on the wider community.
 The OFRs will have to consider information about employment policies and practices
and should be evaluated using the AfP task force's report on measuring human capital
management.
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The Rise of External Reporting Requirements

 The AfP recommended a broad framework that companies should use in drawing up their
reports (individual organizations determine which measures are appropriate for them):
 Present a strategic focus,
 Provide information on workforce practices in five areas:
 size and composition of the workforce ;
 the retention and motivation of employees ;
 skills and competencies necessary for success, and training to achieve these ;
 remuneration and fair employment practices ;
 leadership and succession planning
 HCM should be balanced and objective, following a process that is susceptible to
review by auditors
 Reporting should provide information that enables comparison over time.
 Directors of companies producing OFRs should include information on human
capital management or should explain why it is not material.
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The AfP Recommendations

 The profile of the workforce and its diversity
 Senior executive remuneration
 The quality of leadership and management strength
 How well labor costs have been managed over time
 Evidence of a coherent, robust people strategy which is mapped to
the stated business strategy for the next three years
 Evidence that current people management practices are affecting
organizational and business performance
 Current and forecasted returns on people investments
 The valuation of current human capital assets and future investments
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What kind of Information are Investors
Expecting?

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The CIPD External Reporting Framework

 The CIPD stresses the importance for external reporting to provide a
holistic, future-oriented account of HCM.
 Organizations report on the following components:
 Human capital strategy
 Sections on acquisition and retention, learning and development, and
human capital management
 Information on human capital performance
 Comparability and flexibility of external reporting
 Most recognize that the more comparable human capital management
information becomes, the greater the utility for shareholders in assessing
trends over time and across organizations.
 measures that are relevant for one sector and organization may be much
less useful in another.
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The CIPD External Reporting Framework

 Be prepared to report on HCM
 Refer to the recommendations of HCM reporting from
Accounting for People Task Force (AfP)
 Take investors' expectations into consideration.
 Establish data-gathering systems to populate this framework
linked your internal human capital information.
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Step 4: Checklist Reporting the Data: From
Internal to External Reporting

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Step 5: Developing a Route Map to Human Capital Reporting

 Human capital and the people strategy encompass the whole organization –
the chief executive, the senior management team, line managers, staff and all
the various functions.
 The HR function may be the likely catalyst in human capital reporting and
most certainly needs to take up the challenge
 ultimately the chief executive should be held to account as investors and
stakeholders seek the assurance that their organization's human capital is
being effectively deployed and nurtured for the future. This is why board-
level commitment and involvement is so important.
 Virtuous circle is generated by organizations committed to effective
measurement. The measures are in some ways less important than the
activity of measuring and of continuously developing and refining the
understanding of human capital and its links to business performance.
77
Who should be involved?

 By Linking management to measures, measures to reporting, reporting to
management, companies are beginning to build the credibility, information
flows and knowledge necessary to embed a human capital perspective in
management and measurement practices both at HR and top management
level.
78
The Virtuous Human Capital Circle

79
The Human Capital Measurement Journey

 Identify who should be involved in the human capital team.
 Review your current position in the capital management
Journey and plan what is required for you to move to the
next stage.
 Review the Guide, take each step, and tick off all the
checklist's items.
 Embark on the journey to HC measurement and reporting
80
Step 5: Checklist Developing a Route Map to HC
Reporting

What We Need to Know About Training and Development
for
the 21st Century
 Training and development play a significant role in achieving a
company’s strategic goals.
 Training is crucial to bring about change and the operation of a
world-class organization.
 Recognition of cultural differences and different work practices
and approaches is important.
 Training and development programs must be monitored to
respond to changing needs.
 Training and development must be differentiated.

Factors Contributing to the Growth of
HRD
 The role of HRD in improving organizational
competitiveness
 The recognition of employees as a valued resource
 Technological change
 A shift in the demographic composition of the
Canadian work force

Human Resource Development:
Relation to Other HRM Functions
Work/Job
Analysis
Human Resource
Development
Activities
Staffing
Process
Organizational
Change
Organizational
Design
Performance
Management
Systems

HRD Responsibilities Within an
Organization
Employee
Responsibilities
HRD
Responsibilities
Supervisor
Responsibilities

Steps to Identifying and Implementing
Appropriate Skill Development Activities
 Analyzing performance needs
 Distinguishing instructional needs
 Applying relevant learning principle(s)
 Recognizing ability levels of participants
 Selecting appropriate instructional formats
 Identifying program delivery options
 Evaluating the effectiveness of the HRD
program(s)

Reasons for Performance Needs
 Lower than desired performance levels
 The introduction of new technology
 An inability to hire qualified applicants
 A desire to prepare employees for the
future work demands
 Implementation of new organizational
structures

Types of Instructional Needs
 Information acquisition
 Motor skills
 Interpersonal skills and attitude change
 Decision-making and problem-solving
skills

Key Learning Principles
 Learning requires feedback
 Learning occurs more quickly with
reinforcement
 Skill development requires practice
 More learning occurs when individuals are
intrinsically motivated
 The application of new skills is facilitated
through transfer of learning

Factors Necessary for Transfer of
Learning to New Situations
 Maximize the similarity between the learning and
performance situation
 Practise the new task extensively (overlearning)
 Provide a range of learning experiences
 Identify key elements of the material or behaviour so
that the learner is able to determine the appropriateness
of transfer
 Emphasize knowledge of general principles
 Provide feedback on job performance and otherwise
reinforce proper transfer of new materials and
behaviour to the job

Types of Instructional Interventions
Classroom Training
- Lectures
- Role-plays
- Case methods
- Vestibule training
Learning Technologies
- Programmed instruction
- In-basket exercises
- Business games
- Intranet
- IVI
Learning on the Job
- Structured OJT
-Apprenticeship
-Job Rotation

Advantages of Developing Intranet Training
Programs
 Consistency can be created, since the same training materials can
be viewed by an employee at different times and locations
 Interactivity can be created through discussion groups,
comprehension tests, and two-way communication tools
 Training materials can be kept current at a central location
where updating of publications and training materials is done
 User-friendly interfaces, with point-and-click navigation, can be
developed

Recommendations to Increase the
Effectiveness of Job Rotation
 Proactively manage job rotation as a component of the overall HRD
system
 Outline the specific skills that are expected to be developed in a job-
rotation system
 Link rotation with the career development planning process so that
employees know the developmental needs addressed by each job
assignment
 Ensure breadth of job rotation by opening opportunities to all
groups of employees, not just managerial and professional groups

Sources of Data to Evaluate
HRD Programs
 Measures of knowledge or skill, obtained through
tests or other standardized measures
 On-the-job behaviour and performance measures,
such as individual production rates, error rates,
customer complaints
 Organizational measures, such as profitability,
production costs, and scrap rates

Performance Management System
Module - 4

Definition of PM
1. Continuous Process of
 Identifying
 Measuring
 Developing
The performance of individuals and
team

Definition of PM (continued)
and
2. Aligning performance
with
Strategic Goals of the organization

Performance Management
is NOT
performance appraisal

PM is NOT performance appraisal
Performance Management
 Strategic business considerations
 Driven by line manager
 Ongoing feedback
 So employee can improve performance

PM is NOT performance appraisal
Performance Appraisal
 Driven by HR
 Assesses employee
 Strengths &
 Weaknesses
 Once a year
 Lacks ongoing feedback

Contributions of
Performance Management

Contributions of Performance Management
For Employees
Clarify definitions of
 job
 success criteria
Increase motivation to perform
Increase self-esteem
Enhance self-insight and development

For Managers
Communicate supervisors’ views of
performance more clearly
Managers gain insight about subordinates
Better and more timely differentiation
between good and poor performers
Employees become more competent

For Organization/HR Function
Clarify organizational goals
Facilitate organizational change
Fairer, more appropriate administrative
actions
Better protection from lawsuits

Disadvantages/Dangers of
Poorly-implemented
PM Systems

Disadvantages/Dangers of Poorly-implemented
PM Systems
For Employees
 Lowered self-esteem
 Employee burnout and job dissatisfaction
 Damaged relationships
 Use of false or misleading information

PM Systems
For Managers
 Increased turnover
 Decreased motivation to perform
 Unjustified demands on managers’ resources
 Varying and unfair standards and ratings

PM Systems
For Organization
 Wasted time and money
 Unclear ratings system
 Emerging biases
 Increased risk of litigation

Reward Systems
Definition
Set of mechanisms for distributing
 Tangible returns
and
 Intangible or relational returns
As part of an employment relationship

Reward Systems
Tangible returns
Cash compensation
 Base pay
 Cost-of-Living & Contingent Pay
 Incentives (short- and long-term)

Reward Systems
Tangible returns (continued)
Benefits, such as
 Income Protection
 Allowances
 Work/life focus

Reward Systems
Intangible returns
Relational returns, such as
 Recognition and status
 Employment security
 Challenging work
 Learning opportunities

Returns and
Their Degrees of Dependency
on the

Returns with Low Dependency
on the
 Cost of Living Adjustment
 Income Protection

Returns with Moderate Dependency
on the
 Work/Life Focus
 Allowances
 Relational Returns
 Base Pay

Returns with High Dependency
on the
 Contingent Pay
 Short-term Incentives
 Long-term Incentives

Purposes of PM Systems:
Overview
Strategic
Administrative
Informational
Developmental
Organizational maintenance
Documentational

Strategic Purpose
Link individual goals with organization’s
goals
Communicate most crucial business
strategic initiatives

Administrative Purpose
Provide information for making decisions
re:
 Salary adjustments
 Promotions
 Retention or termination
 Recognition of individual performance
 Layoffs

Informational Purpose
Communicate to Employees:
Expectations
What is important
How they are doing
How to improve

Developmental Purpose
Performance feedback/coaching
Identification of individual strengths and
weaknesses
Causes of performance deficiencies
Tailor development of individual career
path

Organizational Maintenance
Purpose
Plan effective workforce
Assess future training needs
Evaluate performance at organizational
level
Evaluate effectiveness of HR
interventions

Documentational Purpose
Validate selection instruments
Document administrative decisions
Help meet legal requirements

An Ideal PM System:
14 Characteristics
1. Congruent with organizational strategy
2. Thorough
3. Practical
4. Meaningful
5. Specific
6. Identifies effective/ ineffective
performance
7. Reliable

An Ideal PM System:
14 Characteristics (continued)
8. Valid
9. Acceptable and Fair
10. Inclusive
11. Open (No Secrets)
12. Correctable
13. Standardized
14. Ethical

Congruent with organizational
strategy
 Consistent with organization’s strategy
 Aligned with unit and organizational
goals

Thorough
 All employees are evaluated
 All major job responsibilities are
evaluated
 Evaluations cover performance for entire
review period
 Feedback is given on both positive and
negative performance

Practical
 Available
 Easy to use
 Acceptable to decision makers
 Benefits outweigh costs

Meaningful
 Standards are important and relevant
 System measures ONLY what employee can
control
 Results have consequences
 Evaluations occur regularly and at appropriate
times
 System provides for continuing skill
development of evaluators

Specific
Concrete and detailed guidance to
employees
• What’s expected
• How to meet the expectations

Identifies
effective and ineffective performance
 Distinguish between effective and
ineffective
 Behaviors
 Results
 Provide ability to identify employees with
various levels of performance

Reliable
 Consistent
 Free of error
 Inter-rater reliability

Valid
 Relevant (measures what is important)
 Not deficient (doesn’t measure
unimportant facets of job)
 Not contaminated (only measures what the
employee can control)

Acceptable and Fair
 Perception of Distributive Justice
 Work performed  Evaluation received 
Reward
 Perception of Procedural Justice
 Fairness of procedures used to:
 Determine ratings
 Link ratings to rewards

Inclusive
 Represents concerns of all involved
 When system is created, employees should
help with deciding
 What should be measured
 How it should be measured
 Employee should provide input on
performance prior to evaluation meeting

Open (No Secrets)
 Frequent, ongoing evaluations and
feedback
 2-way communications in appraisal
meeting
 Clear standards, ongoing communication
 Communications are factual, open, honest

Correctable
 Recognizes that human judgment is
fallible
 Appeals process provided

Standardized
 Ongoing training of managers to provide
 Consistent evaluations across
 People
 Time

Ethical
 Supervisor suppresses self-interest
 Supervisor rates only where she has
sufficient information about the
performance dimension
 Supervisor respects employee privacy

Integration with other
Human Resources
and Development Activities

 PM provides information for:
 Development of training to meet
organizational needs
 Workforce planning
 Recruitment and hiring decisions
 Development of compensation systems

Compensation Management and
Employee Relations
Module - 5

Total Rewards and Compensation
 Total Rewards
 Monetary and non-monetary rewards used to
attract, motivate, and retain employees
 Rewards System Strategic Objectives
 Legal compliance
 Cost effectiveness
 Internal and external equity for employees
 Recognizing contribution to maximize performance
and manage talent

Compensation Approaches
Traditional Approach Total Rewards Approach
• Compensation primarily base
pay
• Bonuses for executives only
• Fixed benefits tied to seniority
• Pay grade progression based on
organizational promotions
• One organization-wide pay plan
for all employees
• Variable pay used with base pay
• Annual/long-term incentives
provided to all employees
• Flexible and portable benefits
offered
• Knowledge-based broadbands
determine pay grades
• Multiple pay plans consider job
family, location, and business
units

Typical Division of HR Responsibilities: Compensation

Compensation System Design
Issues
 Fairness
 Internal Equity
 Procedural
 Distributive
 Interactional
 External Equity
 Privacy
 Transparency

Market Competitiveness
and Compensation
Lead the market
Meet the market
Lag the market

Compensation Quartile Strategies

More Compensation System Design Issues
Identification of the required
competencies
Progression and
compensation of employees
Limitations on who can
acquire more competencies
Training in the appropriate
competencies
Certification and maintenance
of competencies
Competency-
Based Pay
Systems

More Compensation System Design Issues
Team
How to develop
compensation programs
that build on the team
concept.
Individual
How to compensate the
individuals whose
performance may also
be evaluated on team
achievements.
Individual vs. Team Rewards

Possible
Components
of Global
Employee
Compensation

Legal Constraints on Pay Systems
 Minimum wage
 Child labor
 Exempt vs. nonexempt status
 Overtime

Compensation for Overtime Work
Common
Overtime
Issues
Compensatory
Time Off
Incentives for
Non-exempts
Training
Time
Travel
Time

Legislation Affecting Compensation
Compensation
and the Law
Davis-Bacon Act
Walsh-Healy Act
McNamara-O’Hara
Act
Equal Pay Act
of 1963 and
Pay Equity
State and
Local Laws
Garnishment
Laws

Compensation
Administration
Process
Pay Structure
 Pay grades
 Pay ranges

Valuing Jobs with Job Evaluation
Methods
 Job Evaluation
Means used to identify the relative worth of jobs
within an organization.
 Compensable Factor
 Job value common among a group of jobs.
 Something for which an organization chooses
to compensate an employee.

Examples of Compensable Factors for Different Job Families

Job Evaluation Methods
Job Evaluation
Methods
Point
Method
Ranking
Method
Classification
Method
Factor-
Comparison
Method

Job Evaluation Methods
Point method
Ranking method
Classification method
Factor-comparison method

Valuing Jobs Using Market Pricing
 Market Pricing
 Using market data to identify the relative value of jobs
based on what other firms pay for similar jobs.
Advantages Disadvantages
• Ties organizational pay levels
to the external job market,
without “internal” job
evaluation distortion.
• Communicates to employees
that the compensation system
is “market linked.”
• It relies on market survey data.
• A specific job may differ from a
“matching” job in the survey.
• The market data’s scope (range
of sources) is a concern.
• Tying pay levels to market data
can lead to wide fluctuations.

Pay Surveys
 Collection of data on compensation
rates for workers performing similar
jobs in other organizations.
 Benchmark Jobs
 Jobs found in many organizations.
 Internet-Based Pay Surveys

Pay Structures
 Job Family
 Group of jobs with common organizational characteristics.
 Common Pay Structures
 Hourly and salaried
 Office, plant, technical, professional, managerial
 Clerical, information technology, professional, supervisory,
management, and executive
 Pay Grades
 Groupings of individual jobs having approximately the same
job worth.

Compensation
Administration
Process

More on Pay Structures
 Market Banding
 Grouping jobs into pay grades based on similar market survey
amounts.
 Market Line
 Shows relationship between job value as determined by job
evaluation points and job value based on pay survey rates.
 Shows distribution of pay for surveyed jobs
 Linear trend line to be developed by the least-squares regression
method.

Market-Banded Pay Grades Example (Bank)

Example of Pay Grades and Pay Ranges

Pay Ranges
 Broadbanding
 Using fewer pay grades having broader pay ranges that in
traditional systems.
 Benefits
 Encourages horizontal movement of employees
 Is consistent with trend towards flatter organizations
 Creates a more flexible organization
 Encourages competency development
 Emphasizes career development

Individual Pay
 Rates Out of Range
 Red-Circled Employee
 An incumbent (current jobholder) who is paid above the range set for the
job.
 Green-Circled Employee
 An incumbent who is paid below the range set for the job.
 Pay Compression
 Pay differences among individuals with different levels of experience and
performance in the organization are reduced.

Pay
Adjustment
Matrix
Compa-ratio
 The pay level divided
by the midpoint of the
pay range.
ratio)
-
(Compa
89
100
(midpoint)
15.00
pay)
(current
13.35
$
Employee 


J
89

Standardized Pay Adjustments
Standardized
Pay Increases
Seniority
Cost-of-Living
Adjustments
(COLA)
Across-the-
Board
Increases
Lump-Sum
Increases
(LSI)

STRATEGIC HUMAN
RESOURCE MANAGEMENT
Module - 6

HUMAN RESOURCE
MANAGEMENT
“… human resource management (alternatively, ‘employee
relations’ or ‘labor management’) includes the firm’s work
systems and its models of employment. It embraces both
individual and collective aspects of people management. It is not
restricted to any one style or ideology. It engages the energies of
both line and specialist managers… and typically entails a blend
of messages for a variety of workforce groups.”
Purcell & Boxall (2003) P. 24

STRATEGY
“The determination of the basic long-term goals and
objectives of an enterprise and the adoption of courses
of action and the allocation of resources necessary for
carrying out these goals.”
Alfred Chandler, Strategy and Structure, (MIT Press, 1962), P. 13

STRATEGY
 At the core, its is the debate between best fit and best
practice
 Used for gaining a competitive advantage
 Innovation
 Offer something new; different from competitors
 Quality Enhancement
 Products and services
 Cost Reduction
 Attempt to be the lowest cost provider
 Optimal strategy depends on the wants and nature of
competitors

TYPES OF STRATEGY
 Business
 Examines correspondence between each firm’s
competitive strategy and its system of high performance
work practices
 Operations
 An internal approach; connected to the work organization
inside a firm
 Resource View
 Views human resources as sources of sustained
competitive advantage

STRATEGIC HRM
 “(S)trategic HRM is about how the
employment relationships for all employees
can be managed in such a way as to
contribute optimally to the organization’s
goal achievement.” Legge (2005) P. 223

HR PRACTICES LINKED WITH
COMPETITIVE STRATEGY
 Recruitment
 Training
 Career Path
 Promotions
 Socialization
 Openness

HIGH PERFORMANCE
PRACTICES
 Features
 Comprehensive selection/recruitment procedures
 Incentive compensation
 Extensive employee involvement/training
 Expected Results
 Improve knowledge, skills, and abilities of employees
 Increase motivation
 Reduce shirking
 Enhance retention of quality employees (reduce tenure of
non-performers)
Huselid (1995) P. 635

HIGH COMMITMENT
PRACTICES
 Unique to the High-Performance Paradigm
 Sophisticated selection and training
 Emphasis on values, human relations skills, and knowledge skills
 Behavior-based appraisal
 Single status policies
 Contingent pay systems
 Traditional Personnel Practices
 Job security
 Above market pay and benefits
 Grievance systems
Godard (2004) P. 351

CONCLUSION
Model of the Basic Strategic HRM Components
HUMAN CAPITAL POOL:
Knowledge, Skill, Ability
EMPLOYEE RELATIONSHIP BEHAVIORS:
Psychological Contracts, Citizenship, Discretion
Wright, P. Dunford, B. and Snell, S. (2001) Human Resources and the Resource Based View of the Firm, Journal of Management, 27:6
PEOPLE MANAGING PRACTICES:
Staffing, Training, Rewards, Appraisal,
Work Design, Participation, Recognition, Communication

CONCLUSION
 Effectiveness can be increased by
systematically melding human resource
practices with the selected competitive
strategy
 The success or failure of a firm is not likely
to turn entirely on its strategic human
resource management practices, but these
practices are likely to be critical

Human Capital.ppt

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