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Stratetic HRM & HR Scorecard

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Stratetic HRM & HR Scorecard

  1. 1. Strategic Human Resource Management and the HR Scorecard Prof. Abhipsa Mishra
  2. 2. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra Session objectives 1. Outline the steps in the strategic management process. 2. Explain and give examples of each type of companywide and competitive strategy. 3. Explain what a strategy-oriented human resource management system is and why it is important. 4. Illustrate and explain the HR Scorecard approach to creating human resource management systems 5. Discuss HR Metrics 6. Elaborate High Performance Work Systems
  3. 3. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra Strategic Human Resource Management  It is the linking of HRM with strategic goals and objectives in order to improve business performance and develop organizational cultures that foster innovation and flexibility. • It involves formulating and executing HR systems—HR policies and activities—that produce the employee competencies and behaviors, that the company needs to achieve its strategic aims.
  4. 4. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra The Strategic Management Process • Strategic Management – The process of identifying and executing the organization’s mission by matching its capabilities with the demands of its environment. • Strategy – A chosen course of action. • Strategic Plan – How an organization intends to balance its internal strengths and weaknesses with its external opportunities and threats to maintain a competitive advantage over the long-term.
  5. 5. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra Business Vision and Mission • Vision – A general statement of an organization’s intended direction that evokes emotional feelings in organization members. • Mission – Spells out who the company is, what it does, and where it’s headed.
  6. 6. SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra Types of Strategies Diversification Strategy Geographic Expansion Strategy Vertical Integration Strategy Corporate-Level Strategies Consolidation Strategy
  7. 7. SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra Types of Strategies (cont’d) Cost Leadership Focus/Niche Business-Level/ Competitive Strategies Differentiation
  8. 8. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra Porter’s generic strategies 1. Overall cost leadership (McDonalds, Wal-Mart) • Low-cost-position relative to a firm’s peers • Manage relationships throughout the entire value chain 2. Differentiation (Harley Davison, Apple) • Create products and/or services that are unique and valued • Non-price attributes for which customers will pay a premium 3. Focus strategy (Rolex, Lamborghini) • Narrow product lines, buyer segments, or targeted geographic markets • Attain advantages either through differentiation or cost leadership
  9. 9. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra Value Chain
  10. 10. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra Porter’s generic strategies
  11. 11. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra Achieving Strategic Fit • The “Fit” Point of View (Porter) – All of the firm’s activities must be tailored to or fit the chosen strategy such that the firm’s functional strategies support its corporate and competitive strategies. • Leveraging (Hamel and Prahalad) – “Stretch” in leveraging resources—supplementing what you have and doing more with what you have—can be more important than just fitting the strategic plan to current resources.
  12. 12. SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra Strategic Human Resource Challenges Corporate productivity & performance improvement efforts Increased HR team’s involvement in design of strategic plans Basic Strategic Challenges Expanded role of employees in the organization’s performance efforts
  13. 13. SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra Human Resource Management’s Strategic Roles Strategy Execution Role Strategic Planning Roles Strategy Formulation Role
  14. 14. SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra Creating the Strategic Human Resource Management System Human Resource Professionals Employee Behaviors and Competencies Components of a Strategic HRM System Human Resource Policies and Practices
  15. 15. HR Metrics HR’s role as an Information Analyst
  16. 16. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra What are HR Metrics? • Relating to measures • Involving or proceeding by measurements • Method of tracking the effectiveness of HR • What you value about HR programs and the equivalent monetary value
  17. 17. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra HR Excuses Against Metrics • “You can’t measure what we do…” • Lack of clear purpose for measuring • Lack of cooperation between departments • Difficulty extracting data from multiple systems • Difficulty understanding and analyzing metrics • Numbers used to draw inaccurate conclusions
  18. 18. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra Why Measure? If you can’t measure it, you can’t understand it. If you can’t understand it, you can’t control it. If you can’t control it, you can’t improve it. The Improvement Process Understand Measure Control Improve
  19. 19. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra Importance of HR Metrics • Quantify the value of HR • Guide workforce strategies • Maximize HR’s return on investments • Provide measurement standards • Show what HR contributes to business results • Make the business case for HR’s objectives
  20. 20. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra Metrics helps to… • Communicate performance expectations • Discover gaps in strategies • Make better decisions • Address the trend towards value reporting
  21. 21. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra What to Measure?  Measure outcomes not activity  Begin with efficiency measures  Develop metrics geared towards your organization’s goals and strategies  Establish metrics to monitor key HR practices proven to grow human capital  Use metrics that will encourage change and help us make better decisions about human capital
  22. 22. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra • Creating a measurement team is recommended • Communicate importance of metrics to team • Team should select metrics together • Determine how metrics will be defined • Obtain leadership buy-in • Disseminate the tasks Collecting Data
  23. 23. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra Strategic Relationships • Process must be owned by Executives, Managers, HR, Finance, and IT • Takes time and will power • May require an investment in information technology support services to support human capital measurement and reporting opportunities • Requires the fostering of key strategic relationships to ensure favorable outcomes
  24. 24. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra Getting Started Assess your data Build your metrics Create meaningful measures
  25. 25. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra • What do you already track? • Where should you focus? • What metrics would be useful? Assessing Your Data
  26. 26. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra • Determine your measures • Select benchmarks for comparison  Similar services  Same size  Similar organizational structure  Similar budget • Compare your results Building Your Measures
  27. 27. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra Data Integrity • Quality of data is critical • Garbage in….garbage out • So…..  Check the math  Watch out for zeros  Compare results to each other  Conduct a sanity test
  28. 28. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra Data Sources • HRIS (PeopleSoft, SAP, CostPoint, etc.) • Surveys • Interviews • SHRM • Watson-Wyatt • WorldatWork • Mercer • Saratoga Institute • IPMA
  29. 29. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra What Can Be Measured? Staffing and Hiring Work Processes Competent Employees Turnover Rates Reduced Time-to-Fill for Vacancies Training Costs Number of Employees Trained Cost per Hire Voluntary Separations
  30. 30. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra Formula: Total Voluntary Separations / Regular Headcount Purpose: • Voluntary Separation Rate looks at the percentage of regular headcount that voluntarily left the organization. • This metric is an excellent indicator of problems within the organization, including but not limited to inadequate compensation and/or benefits, lack of opportunities for promotion, low employee morale, inadequate training, and/or improper assessment of employee's qualifications (over or under qualified). Voluntary Separation Rate
  31. 31. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra Voluntary Separation Rate Calculation: 13,894 / 141,277 = 9.8% Total Voluntary Separations / Regular Headcount
  32. 32. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra Formula: The number of business days to fill a vacant position. This is counted from the day the position becomes vacant to the date a new employee starts in the job. Date of Hire - Date of Vacancy Purpose: • Time to Hire shows length of time it takes to fill vacant positions. • This metric is an indicator of organization's ability to recruit and hire new employees. Time to Hire - Definition
  33. 33. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra Time to Hire - Calculation 1/6/2006 - 5/10/2006 Date of Hire - Date of Vacancy = 44 business days
  34. 34. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra Formula: Total Training Cost / Regular Headcount Trained Purpose: • Training Cost Factor - average rupees spent on training for each regular employee receiving training • This metric is an indicator of the organization's investment in training and can also be used to monitor training costs and the organization's return on investment. Training Cost Factor - Definition
  35. 35. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra Training Cost Factor - Calculation Rs. 31,131,631 / 249,700 Total Training Cost / Regular Headcount Trained = Rs. 124.68
  36. 36. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra Analyzing Data Microsoft Excel • Formulas  Sum  Average & Median  Time Calculations • Charts & Graphs  Pie  Bar  Scatter Reporting Data Microsoft Word • Reports  Tables  Graphs  Charts Microsoft Access • Database  Tables  Queries  Reports
  37. 37. Powerpoint Inserting graphs Exit Salaries vs. Years Exp. $20,000.00 $25,000.00 $30,000.00 $35,000.00 $40,000.00 $45,000.00 $50,000.00 $55,000.00 $60,000.00 $65,000.00 $70,000.00 0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 18.00 20.00 Years Experience ExitSalary Strategic Human Resource Management and HR Scorecard
  38. 38. SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra Shining the Light on the Real Value of HR via the Human Resources Scorecard
  39. 39. SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra Creating an HR Scorecard 1 2 3 4 5 Outline value chain activities Define the business strategy Outline a strategy map Identify strategically required outcomes Identify required workforce competencies and behaviors 6 7 8 9 10 Create HR Scorecard Identify required HR policies and activities Choose HR Scorecard measures Summarize Scorecard measures on digital dashboard Monitor, predict, evaluate The 10-Step HR Scorecard Process
  40. 40. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra What is (balanced) scorecard? • A set of measures/indicators (usually 16 – 36 max) that directly reflect or represent the strategy/strategic objectives • Their prime purpose is to measure that the desired change or development defined by the strategic objectives actually takes place • In short, strategic indicators allow you to measure and manage strategy execution and achievement progress
  41. 41. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra What is it all about… Scorecard Objectives  Enable a focus on the “vital few”  Achieve alignment and focus on strategy and achievement of our mission  Balance short-term, operational decisions with long-term strategic decisions more effectively  Unlock organizational capacity by enabling employees to clearly see where their actions fit into the bigger picture  An organizational alignment & performance management tool/process  A communication tool  A tool for ongoing learning and refinement of strategy The scorecard is not just a set of indicators …
  42. 42. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra A true balanced scorecard… • Demonstrates alignment with corporate strategy/objectives (departments & BU’s), • Contains a limited set of strategic objectives and indicators, • Is focused on indicator quality rather than quantity (focused on measuring what matters strategically)
  43. 43. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra The HR Scorecard Development Process 3. Create Existing Indicator List 11. Define HR BSC Implementation Plan 6. Detail HR BSC Indicators 9. HR BSC Indicator Review Workshop 10. HR BSC Indicators FINALIZED 8. Define HR BSC Governance Model 7. Document HR BSC Hierarchy 1. Cascade Corporate Strategy 2. Create HR Strategy Map 5. HR BSC Development Workshop 4. Define HR BSC Philosophy
  44. 44. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra You CANNOT have an HR BSC indicator set without an HR Strategy Map! MISSIONMISSION Strategy Map
  45. 45. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra What is a Strategy Map?  It uses the same framework as the balanced scorecard  It’s a one page document that describes how your organization “creates value” and contributes at an actionable/operational level to the achievement of the overall strategy  It provides a “picture” of your strategy  It provides a uniform & consistent way of describing your strategy  A visual representation of the cause & effect relationships between the components of your strategy (your “theory” of how everything/everyone works together to achieve results – the story of your strategy)
  46. 46. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra The Strategy Map – Key Elements Mis s io n : Vis io n :Priv ate Se c to r Strate g y Map Fo rm at CORE VALUES: Fin a n cia l Cu s t o m er In t e r n a l Pr o cess Or g a n iz a t io n a l Ca p a b ilit ie s
  47. 47. Strategy Focused Business Solutions Inc. sandyrichardson_bsc@yahoo.ca (416) 722-1367 Mission: Bringing Protection to Life. Vision 2015: Be a world class financial services provider, delivering exceptional customer value through the excellence and integrity of our people. Group Life & Health Insurer CORE VALUES Financial Customer Internal Process Organizational Capabilities Partnership Entrepreneurship Continuous Learning A Factual Approach to Decision Making Community Citizenship Develop Competencies in Key Strategic Roles Foster a Constructive Culture Implement One System, One Overall Process Focus on Process Improvement Become a Long-Term Disability Industry Leader Develop Non-Advisor Distribution Channels Be Easy to Do Business With Focus on Drivers of Customer Satisfaction Optimize Advisor Distribution Channels Achieve Sustained Profitable Growth Improve Cost Structures Maintain Existing Profitable Group Insurance Business Acquire New Profitable Group Insurance Business
  48. 48. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra The Strategy Map Mis s io n : Vis io n :Priv ate Se c to r Strate g y Map Fo rm at CORE VALUES: Fin a n cia l Cu s t o m er In t e r n a l Pr o cess Or g a n iz a t io n a l Ca p a b ilit ie s To deliver the results our shareholders demand and achieve our mission and vision, how must we perform financially? To achieve the financial returns we desire, what must we deliver to our customers so they will reward us with their business & loyalty? To give our customers what they expect, what business processes must we focus on and excel at? To execute our businesses processes at the required level, what skills and capabilities, culture, and tools and technologies must we have in place?
  49. 49. SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra High-Performance Work Systems
  50. 50. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra High-Performance Work System (HPWS)  It is a specific combination of HR practices, work structures and processes that maximizes employee knowledge, skill, commitment and flexibility.  Is composed of many interrelated parts that complement one another to reach the goals of an organization, large or small.
  51. 51. Developing High-Performance Work Systems
  52. 52. Underlying Principles of HPWS
  53. 53. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra Principles of HPWS • Egalitarianism and Engagement  Egalitarian work environments eliminates status and power differences and, in the process, increase collaboration and teamwork.  When this happens, productivity can improve if people who once worked in isolation from (or opposition to) one another begin to work together.
  54. 54. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra • Shared Information  A shift away from the mentality of command and control towards more focused on employee commitment.  Creating a culture of information sharing where employees are more willing (and able) to work towards the goals of the organization. Principles of HPWS
  55. 55. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra • Knowledge Development  Employees in high-performance work systems need to learn in “real time,” on-the-job, using innovative new approaches to solve novel problems  Learning organizations  Technology Enhanced Learning Environments Principles of HPWS
  56. 56. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra • Performance-Reward Linkage  It is important to align employee and organizational goals.  When rewards are connected to performance, employees will naturally pursue outcomes that are mutually beneficial to themselves and the organization. Principles of HPWS
  57. 57. Anatomy of High-Performance Work Systems
  58. 58. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra Complementary Human Resources Policies and Practices Staffing Practices Training and Development Compensation
  59. 59. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra Implementing the System Ensure that change is owned by senior and line managers Allocate sufficient resources and support for the change effort Ensure early and broad communication Ensure that teams are implemented in a systemic context Establish methods for measuring the results of change Ensure continuity of leadership and champions of the initiative Necessary Actions for a Successful HPWS:
  60. 60. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra Benefits of HPWS • Employee Benefits  Have more involvement in the organization  Experience growth and satisfaction, and become more valuable as contributors • Organizational Benefits  High productivity  Quality  Flexibility  Customer satisfaction
  61. 61. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra Evaluating the Success of the System Are employees actually working together, or is the term “team” just a label? Are employees getting the information they need to make empowered decisions? Are training programs developing the knowledge and skills employees need? Are employees being rewarded for good performance and useful suggestions? Are employees treated fairly so that power differences are minimal? Determining whether a high-performance work system has been implemented as designed:
  62. 62. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra Outcomes of High-Performance Work Systems • Employee Outcomes and Quality of Work Life  More involved in work  More satisfied and find that needs for growth are more fully met  More informed and empowered, feel that they have a fuller role to play in the organization and that their opinions and expertise are valued more  Have a greater commitment that comes from higher skills and greater potential for contribution
  63. 63. SHRM, HR Metrics and HR Scorecard; Prof. Abhipsa Mishra Outcomes of High-Performance Work Systems cont’d.. • Organizational Outcomes and Competitive Advantages – Higher productivity – Lower costs – Better responsiveness to customers – Greater flexibility – Higher profitability
  64. 64. SHRM, HR Metrics and HR Audit; Prof. Abhipsa Mishra HR Audit
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  97. 97. THANK YOU This leads to a High Performance Work System

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