Making HR a Profit Contributor

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SHRM Atlanta presentation by Gary Wheeler, The Virtual HR Director about how HR can contribute to your bottom line.

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Making HR a Profit Contributor

  1. 1. Making HR AProfit ContributorGary Wheeler, SPHR, GPHR, CCP, CBP
  2. 2. Objectives• Understand how HR may contribute to the growth and profitability of the company• Four areas to improve productivity• Five steps to grow business• Guideline for HR scorecard measures• Note: HR model from Dave Ulrich• Process to grow business from ActionCoach Business Coaching concepts
  3. 3. What Makes HR Strategic?• Why are we talking about it?• What does non-strategic v. strategic look like?• Why do we have to prove ourselves• What is a strategic business partner?
  4. 4. Evolution of HR• Pre-Profession • Accounting Department • People Administration • Industrial Relations • Union-Management Relations• 1948 American Society for Personnel Administrators (ASPA) • Berea, Ohio• Approximately 1968 Meeting with DOL • Professional organization • Code of Ethics • Research Arm • Body of Knowledge • Certifying Body
  5. 5. Evolution of HR cont.• 1960’s and 1970’s • The need to interpret & manage civil rights compliance • Trend – move unsuccessful operators to Personnel • Good with people• 1970’s and 1980’s • The need to interpret & manage OSHA • We become the internal corporate cop • Legal – compliance revolution• 1989 Society for Human Resource Management• 1990 Michael Losey, SPHR, CAE, President & CEO • Strategic Business Partner • Certification
  6. 6. HR Reputation• Has too many rules• Always busy• Get in the way of firing bad employees• Compliance Cop that tells CEO you screwed up• Tells us to be more sensitive• They screwed up my paycheck• They will not give me my benefits• Involved in discipline• The people that fire you• The DEPARTMENT of NO!
  7. 7. The Language of Strategic•MONEY • CEO • CFO • CMO
  8. 8. Shareholder Expectations• Reputation management• Customer loyalty• Employee retention• Shareholder returns
  9. 9. Organizational Capabilities• Productivity costs• Speed• Service• Mergers, acquisitions, alliances• Innovation• Collaboration /synergy• Branding• Quality
  10. 10. Dave Ulrich Model
  11. 11. Strategic Contribution• Culture management• Fast change• Strategic decision making• Market-driven connectivity
  12. 12. Personal Credibility• Effective relationships• Achieving results• Personal communication
  13. 13. HR Delivery• Staffing• Development• Organization structure• HR measurement• Legal compliance• Performance management
  14. 14. Business Knowledge• Value chain knowledge• Value proposition knowledge• Labor knowledge
  15. 15. HR Technology• HR technology
  16. 16. HR Strategic Contributor• Four Areas to Improve Productivity • People • Technology • Processes and systems • Accountability• Five Steps to Grow Business • Lead generation • Conversion rates • Transactions • Average dollar sale • Margins
  17. 17. Improve Productivity People Technology Processes & Accountability SystemsSkills Training Online Tracking Time Dashboard ManagementCareer Employee Integrate InventoryDevelopment Portal System Technology ControlQuality Online Training Ishikawa Weekly ReviewOrientation Process MeetingsCross Training Knowledge Project KPI’s/SMART Management Manager Goals SystemConflict Web Based Six-Sigma/Lean CertificationResolution Delivery Process
  18. 18. Investment Cost• Initiatives, programs and projects cost money Training development cost Materials cost Cost of facilitation + Loss of productivity = Total Project Cost or Investment Cost
  19. 19. Return on Investment (ROI) Gain from Investment - Cost of investmentROI = _______________________________________ Cost of Investment 78,000 - 20,000290% = ________________ 20,000
  20. 20. How To Increase Profitability Number of Leads x Conversion Rate = No. of Customers x No. of Transactions x Avg. $$$ Sale = Revenues x Margin = Profits
  21. 21. Our Business - Better Buy, Inc. Number of Leads 36,000 x x Conversion Rate 42% = = No. of Customers 15,120 x x No. of Transactions 1 x x Avg. $$$ Sale $775 = = Revenues $11,718,000 x x Margin 45% = = Profits $5,273,000
  22. 22. Leadership Team Strategy Mtg. Number of Leads 36,000 Goal 15% Increase x x x Conversion Rate 42% Goal 15% Increase = = = No. of Customers 15,120 More Customers x x xNo. of Transactions 1 w/Coupon 12% Increase x x x Ave. $$$ Sale $775 Extended Warranty Package 10% = = = Revenues 11,718,000 More Revenue x x x Margin 45% Goal 10% Increase = = = Profits $5,273,000 More Profit
  23. 23. HR Initiatives 15% - HR & Marketing Develop Training for Team x 15% - HR & Sales Develop New Sales Training Program = Customers x 12% - HR & Call Ctr. Develop Training on Customer Care x Operations Implements an Extended Warranty Product = Revenues x10% HR & Ops Enlarge and Enrich Jobs of Current Employees = Profits
  24. 24. Better Buy, Inc. Number of Leads 36,000 Tele-market Team Training x x x Conversion Rate 42% Sales Team Training Program = = = No. of Customers 15,120 More Customers x x x No. of Transactions 1 Customer Service Training x x x Ave. $$$ Sale $775 Add Extended Warranty Product = = = Revenues 11,718,000 More Revenue x x x Margin 45% Job Enlargement/Enrichment = = = Profits $5,273,000 More Profit
  25. 25. Better Buy, Inc. Number of Leads 36,000 41,400 x x x Conversion Rate 42% 48.3% = = = No. of Customers 15,120 19,996 x x x No. of Transactions 1 1.12 x x x Ave. $$$ Sale $775 $852.50 = = = Revenues $11,718,000 $19,092,180 x x x Margin 45% 50% = = = Profits $5,273,000 $9,546,090
  26. 26. Let’s See it Again Number of Leads 36,000 41,400 x x x Conversion Rate 42% 48.3% = = = No. of Customers 15,120 19,996 x x x No. of Transactions 1 1.12 x x x Ave. $$$ Sale $775 $852.50 = = = Revenues $11,718,000 $19,092,180 x x x Margin 45% 50% = = = Profits $5,273,000 $9,546,090
  27. 27. Where Does HR Strategy Begin?• Company • Organization Vision • Organization Mission • Organization Metrics • Organization Strategic Imperatives• Human Resources • HR Vision • HR Mission • HR Metrics • HR Strategic Imperatives• Critical - HR measures must drive bottom line results
  28. 28. HR Metrics• Organization metrics • HR metrics aligned to improve organization goals • HR metrics may be line management metrics • Measure outcomes not activities • Measures should equate to dollars
  29. 29. Balanced Score Card Financial Customer People Internal Business Processes
  30. 30. Balanced Score Card Examples• Financial • Cost of hires • Cost of turnover • Employee injury reserve costs • Employee injury OSHA Recordable rate • Earnings before interest tax and amortization (EBITA)• People • Company employee attitude survey results • Benefit cost per employee • Intellectual capital cost per unit produced • Employee turnover rate • Lost time days
  31. 31. Balanced Score Card Examples cont.• Customer • Customer Satisfaction Index (CSI) • Customer complaints • Employee complaints • Sales• Internal Business Processes • Training Initiative ROI • Employee development initiative • Management development initiative • Job enlargement initiative • Job enrichment initiative • Ethics & compliance initiatives
  32. 32. HR Strategy An image of the desired future / inspirational & aspirational Vision A clear and compelling goal Mission Needs/wants to Goals achieve The plan by which the goals and mission will be achieved StrategiesTactical / operational plans Initiatives to implement the strategy © Copyright Human Resource Business Partner Consultant 2005
  33. 33. Initiatives, Programs, Projects• Strategic Imperative • Initiatives • Programs • Projects
  34. 34. Example 1• Employee Health and Safety Frequency (imperative) • Employee Engagement (initiative) • New safety training program (program) • Safety awareness campaign (project) • Health and Safety Committees (program) • Safety Awareness Day (project)
  35. 35. Example 2• Employee Attitude Survey Results (imperative) • Employee communication (initiative) • Online newsletter (project – process) • Employee portal (project – process) • Management employee relations training (project) • Annual one-on-one communication (program) • Town Hall Meetings (project – process)
  36. 36. STRATEGIC HUMAN CAPITAL PROCESS Phase I Phase II Phase III Phase IV Phase V Phase VI Review Organizational OD principles, Performance Align HR vision, Human Capital Capabilities, process Management Communicate, implement mission, values, philosophy Talent, structure improvement, Plans training and evaluation strategy competencies GOALS Assess people and People needs, Conduct SWOT HR aligned Org chart, Team agreement, learning capacity to opportunities, to business Competencies Organization, measure meet organization training, strategy & goals roles and results goals performance HR metrics responsibilities plans PROCESSES-SWOT -HR vision -Education •-Org chart •Performance review Communicate,•Total Comp •HR mission •Knowledge •Career development •Job descriptions Implement, manage•Length of service •Org Values •Skills •Succession planning •Competency models track results•Turnover •HR Strategic •Abilities •Replacement •Pay structures•Evaluation process Imperatives •Experiences planning •Minimum •Design training•Leadership styles •HR Metrics •Reporting requirements•Promo philosophy relationships programs •Required training•Education philosophy•Litigation RESULTSUnderstand HR vision, mission, Understand Structure, Strategy and metrics HR development ROI, learningPeople Strategy current competency Aligned to business organization capabilities models, Job descriptions pay training Plan Copyright © 2010. The Virtual HR Director. All rights reserved. 36
  37. 37. Questions?
  38. 38. Thank You! Gary Wheeler The Virtual HR Director, LLC gary@thevirtualhrdirector.com http://www.thevirtualhrdirector.com

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