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The return on_people_e_book

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ROP Maturity is a both a process and a philosophy. In order to achieve higher Return On People, your organization must be willing to fundamentally change the way it measures its workforce and view its people as a financial asset, not a liability. It must thrive on rapid change, and recognize that agility is now a basic survival skill. The Return on People eBook will open your eyes to steps you can begin to take today in order to get there.

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The return on_people_e_book

  1. 1. Seven C-Suite actions to increase strategic alignment, agility, and performance with maximum return on Human Capital Investment Chris Frederick Willis
  2. 2. The Return On People eBook was written by Chris Frederick Willis Chris is the visionary entrepreneur behind Media 1, driving measurable performance improvement for some of the world’s most enviable brands since 1993. Chris played an instrumental role in the development of the Return On People organizational performance methodology. A recognized authority on the future of work, Chris is passionate about breaking down the barriers that trap organizations in outdated models, and unnecessarily hinder workers from giving their greatest contribution. She is a regular industry conference presenter, has authored articles for the eLearning Guild and Training Magazine, and been published in Dr. Michael Allen's eLearning Annual. A special acknowledgement goes to L. Michael Wykes, CPT for leading research and process development for the Media 1 Return On People assessment and performance improvement methodology. With contributions from the Media 1 ROP consulting team: Harrison Withers William F. Jones Ben Froese Cover and information design by James Barnes Please share this eBook freely with leaders, innovators, and champions. Thank you! Media 1 are experts in Return On People, a powerful organizational performance methodology grounded in Human Capital Analytics. We apply ROP to increase long-term profit and fuel an empowered, agile, and sustainable work environment for all contributors. Our clients include senior executives from companies who have grown through merger and acquisition and emerging organizations seeking to implement leading people practices. Return On People will help you create an accountable measurement culture for a greater return on your investment in people. This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License. To view a copy of this license, visit http://creativecommons.org/licenses/by-nc-nd/3.0/ or send a letter to Creative Commons, 444 Castro Street, Suite 900, Mountain View, California, 94041, USA.
  3. 3. Contents STOP! ....................................................................... 4 Consider yourself warned ….................................. 4 Why ROP matters: A cautionary tale ..................... 6 Measurement counts.............................................. 7 Reality check.......................................................... 8 Help, how did we get here? .................................... 9 We segregate our people data ............................... 9 We measure the wrong things................................ 9 We treat people as a liability ................................ 10 So what? .............................................................. 10 Return On People (ROP) ....................................... 11 What can ROP do for you? .................................. 13 ROP and benchmarking....................................... 13 Benefits of ROP.................................................... 14 Take a holistic view .............................................. 14 ROP and the C-Suite............................................ 15 What the research says ........................................ 16 It’s harder than you think...................................... 17 The truth is in the middle ......................................19 Level 1: Operational Provider ...............................19 Level 2: Strategic Service Partner.........................20 Level 3: Integrated Enabler...................................21 Level 4: Predictive Driver......................................22 Level 5: Empowered Driver...................................23 Beyond measurement............................................24 Three organizational performance factors ............24 Three individual performance factors....................25 Performance Factor Grid ......................................25 7 C-Suite actions to improve ROP Maturity .........26 1. Align at the top..................................................26 2. Chip away at information silos ..........................26 3. Ask better questions .........................................27 4. Make a bold declaration....................................27 5. Identify Enablers and Barriers...........................28 6. Create new roles...............................................28 7. Master change ..................................................28 Learn more .............................................................29 References..............................................................30
  4. 4. The Return On People eBook 4 STOP! Return On People (ROP) is not an HR strategy. This eBook is written for the leadership team. The ROP information you’ll find here—the cautionary tales, the best practices, and practical steps to start piloting now—are aimed at the C-Suite. Effective ROP strategy must be a leadership mandate. It requires looking at the organization holistically. It requires challenging the structure and role of HR, and breaking down silos, physical and artificial, that are barriers to business agility in a global economy. ROP Maturity is a both a process and a philosophy. In order to achieve higher Return On People, an organization must be willing to fundamentally change the way it measures its workforce and view its people as a financial asset, not a liability. It must thrive on rapid change, and recognize that agility is now a basic survival skill. The ROP Maturity model will open your eyes to what you need to do to get there. Consider yourself warned … Non-executives, read on with caution. The ROP model may leave you feeling frustrated, wanting to do more to help your organization achieve higher return on its investment in people. You are not alone. Most large organizations still operate under Industrial Age command and control models. Unless you are in the command part of the equation or are lucky enough to have the ear of someone who is, your control over organizational performance improvement is, sadly, limited. Sorry.
  5. 5. The Return On People eBook 5 If you work in an outdated command and control organization, please do us both a favor and share this book with someone in your organization whose title begins with “C.” Maybe start with the Chief HR Officer (CHRO), who not only understands the value of your people, but who, along with the Chief Information Officer (CIO), owns much of the people data that feeds Workforce Analytics. Your Chief Financial Officer (CFO) will be interested in how the analytics side of ROP provides visibility to Key Performance Indicators and takes some of the voodoo out of the softer side of Human Capital Investment. Your Chief Executive Officer (CEO), as lead executive, will appreciate the clarity and actionable strategy that the ROP Maturity model offers for improving business performance in the short term and guiding better long term decisions in a volatile market. Meanwhile, whatever your role, if you happen to be one of those people who aren’t satisfied with the status quo, go ahead. Take a risk. Catch a ride on a rising wave and become an ROP evangelist. Spread the word. Someday you can remind everyone that you knew about ROP first. Except, maybe let the CEO take credit. CEOs like that. Chris F. Willis, CEO Media 1: The Return On People People www.roipeople.com • solutions@media1.us • @media1der
  6. 6. The Return On People eBook 6 Why ROP matters: A cautionary tale CTBY (Could This Be You?) are, by every public indicator a model company, a Fortune 1000 international conglomerate, grown through multiple high profile acquisitions. CTBY Flagship and each of its lesser Satellites regularly appear on the “Best of” awards lists: Best Places to Work, Excellence in Learning, Global Leadership Award … you name it. The acquired brands are no less impressive, each highly respected in their own category. CTBY had attempted HR Transformation by moving select transactions to Shared Services, and the Flagship business units had enhanced HR automation through their enterprise ERP software. They assigned HR Business Partners and designated Centers of Excellence to place greater focus on business strategy. But for some reason, expected efficiencies had not materialized. We were engaged to lead an HR process improvement and consolidation initiative across all CTBY business units, on the premise of eliminating inefficiencies in order to cut cost. Because employee engagement and satisfaction are valued so highly in CTBY’s high touch culture, they had previously shied away from offshoring their HR transactions as so many other Fortune companies had done. Top management at CTBY determined they were still spending far too much on processing non-strategic HR transactions. Management estimated that through consolidation and process re-engineering they could cut $2M USD annually from their combined HR budget. It was our task, in essence, to analyze their current state and ferret out the best ways to capture those reductions. Is this true? Yes, CTBY (Could This Be You?) is a pseudonym for a real company, and this story is true. Of course, our Performance Consulting Code of Ethics prevents us from sharing details about their business, our findings, and specific strategic recommendations for improving their investment in their people. However, our research and experience show that the examples in this eBook portray a surprisingly accurate picture of the Return On People Maturity of most Fortune 1000 organizations, especially those who have grown through a merger or acquisition.
  7. 7. The Return On People eBook 7 Measurement counts It was only a short time into the project before we surfaced strategic flaws in the cost-cutting focus and serious disconnects across the business units. Once we interviewed key process managers from each division individually, multiple discrepancies and issues came to light: • There were no enterprise standard methodologies for calculating HR spend. Each business unit had estimated spend, deciding, on their own, which factors to include in their calculations. • Transactional volume was also difficult to pin down: o Business units used disparate systems (some home-grown) and reporting methodologies; they weren’t measuring the right things. o Management cited employee dissatisfaction with their self-serve portal, and it was widely believed to be common for HR Business Partners (HRBPs) to perform transactions when called upon in order to keep managers happy. • Priorities were conflicted by a strong cultural bias toward keeping employees happy at all costs versus a C-Suite focus on increased efficiency and cutting cost. • There were no standards for capturing or reporting total spend for outsourced labor. • People metrics had never been required by management, so few business units had strong analytical or reporting competencies. • There was poor cooperation and a deep lack of respect between the business unit leaders. Units that had been acquired had never been fully integrated and openly shared their disdain for the “soft” culture of their new parent enterprise. Additionally, each held a deep seated belief that their core business was so unique that consolidation was impossible. A funny thing happened on the way to HR Transformation Over the past decade, following the influence of David Ulrich and colleagues, most large organizations attempted HR Transformation.1 The goal of HRT was to move from a rigid, command and control personnel department to modern Human Resources as a strategic business partner with a coveted seat at the boardroom table. In reality, early efficiencies were gained in automating or outsourcing HR transactions. Some moves to Shared Services or Employee Self-Service also bore early gains. But the other side of the equation—the HR Business Partnership—has not fully come to fruition. Anointing HR Generalists with the title, HR Business Partner, did not automatically provide all with either the savvy or authority to take on a truly strategic leadership role. Our research shows that most HR organizations today are stalled in varied states of business maturity. Like CTBY, they attempted HRT as a process improvement initiative, cutting costs and redundancies by doing what they were currently doing faster and more efficiently. However, true transformation seldom comes from doing more of the same thing better.
  8. 8. The Return On People eBook 8 Reality check Once we established clear Human Capital measurement baselines using the same methodology across all business units, the picture changed dramatically. After meeting with CTBY Finance and bringing all business unit leaders to the table to agree on standard metrics, we were only able to calculate less than half the reported apples-to-apples spend on HR transactions. CTBY would have to slice current HR transactional spend by a whopping 25% in order to achieve the desired $2M in savings. Additionally, we found little tangible evidence to back top management’s belief that HR Business Partners were actually spending a substantial amount of time performing low level transactional work. In reality, while hands-on service remained a priority, HRBPs were also well aware of leadership expectations. Most of the business units had worked hard over the prior 18 months to automate or outsource the lowest level, repetitive transactional tasks. In fact, a bigger issue was that individual efforts by business units without enterprise governance had led to a proliferation of new or expanded disparate systems and processes, a problem of which leadership was largely unaware. Without accurate data, C-Suite perceptions had been clouded by a few high profile stories that had become ingrained as corporate mythology. Likewise, CTBY Flagship, by far the greatest enterprise consumer of HR transactions, had already completed an extensive business unit initiative to optimize their transactional processes. When it came to optimizing HR transactions, the low hanging fruit had already been plucked. The entire project premise had been flawed from the start. The returns CTBY were seeking simply could not be achieved by optimizing or outsourcing their HR transactions. Where is CTBY, now? After sending out a fact finding missive to validate that our Return On People recommendations were sound (they were), CTBY took a step back from their HR Transaction Process Improvement project. As of the time of this writing, they had assembled a new project leadership team and were prioritizing goals and developing strategies for moving forward. Armed with the truth – an accurate picture of their current state and baseline data – their next steps will be strategically aligned around greater ROP maturity and a mandate for providing measurable outcomes.
  9. 9. The Return On People eBook 9 Help, how did we get here? How could it be possible for such a highly regarded, Fortune 1000 company to be so completely out of touch with the people side of their business? Research shows that they are not alone and are perhaps even the norm. The problem stems from how we think about, and measure, our people. We segregate our people data Most large organizations capture and report data about their people through HR and Talent Management systems that operate and report separately from business financial systems. Bersin by Deloitte reported that the average large company has more than 10 different HR applications,2 and most of these are not even integrated within HR. People data in organizations that have grown through merger/acquisition is likely even more segregated, with no visibility across business units. We measure the wrong things Although we collect people data in HR, measurement and reporting that comes through HR does not directly tie to business strategy. We measure the number of transactions performed and the number of individuals who attended training sessions. We perform satisfaction surveys. We track the time to hire and average turnover. HR Analytics measure how well HR itself is performing in its traditional role of administering the employee lifecycle. This data is largely used as a scorecard to show management how efficient HR is operating—and to justify its importance to the business. However, HR performance data is only loosely tied to the overall corporate strategy and is seldom properly framed in terms of meeting specific strategic business goals. The average large company has more than 10 different HR applications, and their core HR system is over 6 years old. So it takes effort and energy to bring this data together and make sense of it.2 Josh Bersin
  10. 10. The Return On People eBook 10 We treat people as a liability Back in 1999, Peter Drucker predicted, “The most valuable assets of a 20th-century company were its production equipment. The most valuable asset of a 21st-century institution, whether business or non-business, will be its knowledge workers and their productivity.” 3 Fast forward to 2010, and Ocean Tomo estimated that approximately 80% of the S&P 500 market value was attributed to intangible assets, including specialized talent.4 It appears that Drucker’s prediction has become reality— at least by calculations that take intellectual property into account. But not in the C-Suite. Even in today’s knowledge economy, people, and the resources that support them, appear as an ever-growing liability on the corporate profit and loss statement. In boardroom sessions to increase business profitability, there are two opposing strategies at play—reducing liabilities or enhancing assets.5 When faced with business downturn or disruption, an organization’s people are presented to top business leaders as its greatest liability. So what? In today’s competitive global economy, the companies that win will be category leaders with the ability to predict changes in the marketplace and react to opportunities with people-focused solutions that increase competitive advantage before anybody else. It’s a game of agility and focus. Those who win will have the best systems to gain maximum value from their people resources, their Human Capital, to earn the highest returns. Data Story Despite all of the information and data, an effective argument is not enough. You need to have the ability to fashion a compelling narrative to convince and communicate. Daniel Pink
  11. 11. The Return On People eBook 11 Return On People (ROP) Return On People is the art and science of maximizing investment in Human Capital to drive successful business strategy. Economist Theodore Schultz invented the term "Human Capital" in the 1960s to describe the economic value that people provide6 . He believed that investing in people leads to an improvement in the quality and level of productivity. Human Capital Analytics have shown that investment in people provides a positive impact on profitability and stock value7 . Organizations continually seek ways to receive maximum benefit from their investments, including those in their workforce. We all know these investments are comprised of salary, wages, cash, benefits, perks, and rewards… But we also make investments in people in terms of what it costs our organization to maintain culture, leadership, recruiting, development, retirement, learning, tools, resources, and even HR support. However, as we’ve seen, it’s very difficult for organizations to report and utilize meaningful data about their people. Even if we have the data that we need, very few organizations actually use it to measure how these investments in people increase value. We call this your Return on Investment in People, or Return On People, for short. Which analytic is which? Analytics are all the rage. An increase of available data has converged with the need of the business to be more competitive in a global market and the desire by HR to better support business strategy. In the emerging practice of people analytics, the terminology can be confusing. Here’s how these terms are used in this eBook: Human Capital Analytics measures the economic value that people provide; can be used interchangeably in economic theory as well as business measurement. Talent Analytics or Workforce Analytics measures past employee activities to predict future outcomes; a business-specific application of Human Capital Analytics. HR Analytics measures the performance of the Human Resources organization for enterprise HR improvement. Return On People describes our unique process and methodology for creating strategic alignment and eliminating barriers so you can make use of your people data, however you refer to it, in order to improve business performance.
  12. 12. The Return On People eBook 12
  13. 13. The Return On People eBook 13 What can ROP do for you? We all know why we make investments in people; we want our companies to be more efficient, more agile, and more engaged. We want them to be more innovative and productive. But we don’t necessarily know how our people investments help us get there. The truth is: earning the best Return On People is a significant business driver. Each dollar we invest in people results in specific improvements that yield financial returns for our organization. Those financial returns include an increase in net operating profit, plus fueling competitive advantage and better stock health. But it’s not about having more data or spending less: it’s about getting better data that helps us make choices that lead to earning more. It’s about aligning the C-Suite around a united strategy. It’s starting a two- way conversation that broadcasts a shared vision across the organization then rolls back up as data to check hypotheses and illuminate what is working, so you can build on that momentum. Once you measure your Return On People, you can determine which investments earn your best returns and make better decisions. People data matters less than the picture we paint when interpreting the data story and sharing that story throughout the organization. ROP and benchmarking Benchmarking shows how you are performing, high or low, relative to an established baseline measurement. A baseline is simply a “line in the sand” performance metric that you and your team establish as a meaningful point of reference. The baseline itself is neither good nor bad; that interpretation is determined only by measuring your movement in relation to it. The current state information that is uncovered in a comprehensive Return On People Audit can, and should, be used for establishing baselines for measuring your future progress toward increasing ROP Maturity.
  14. 14. The Return On People eBook 14 Benefits of ROP What kinds of returns are we talking about, specifically? Organizations that make an investment in putting Workforce Analytics to work benefit across the board: • Greater visibility into ROP means that limited budget dollars can be allocated to the right employee initiatives: o Continuing or expanding solutions that have already proven to impact critical business performance metrics and outcomes. o Funding small pilot projects to test innovations that can be expanded based on promising returns. • Supporting higher performance investments builds a stronger organization through returns that benefit shareholders, customers, and employees. • It is much easier to align strong personalities around a single vision when armed with quantifiable information; a unified vision is easier to roll down consistently through the enterprise. • The HR organization can be held accountable for bottom-line impact in the same way as any other business unit, building desired credibility and trust with the greater business. • HR executives add value to C-Suite conversations when they: o Quantify their current impact on business outcomes. o Explain the current state of the workforce and projected future needs. o Make a business case for future initiatives. Take a holistic view Return On People is not an HR or Talent Management initiative. In a comprehensive ROP Maturity Audit, we examine six aspects of your organization. • Workforce Strategy and Organizational Design: The ability to match employee capabilities with business-driven current and future workforce needs combined with the ability to organize people for maximum productivity toward business goals. • HR Operations: Includes operational and transactional aspects of basic HR services as well as compliance and employee focused legal issues. • Human Capital Development (HCD): Includes training and development for top business performance. • Talent Management: Ensuring the best possible environment for all employees to maximize their value as a strategic competitive advantage. • Human Capital Analytics: The ability to derive the highest Return On People. • Cultural Readiness: An organizational culture of measurement and agility in response to rapid change.
  15. 15. The Return On People eBook 15 ROP and the C-Suite With Return On People data and resources scattered across pillars, an ROP performance improvement initiative requires a big picture approach and must start at the top level of the organization. Success will require alignment and input from multiple business leaders and will offer benefits to all involved. Chief Information Officer (CIO) A recent Gartner report listed increasing enterprise growth as the top CIO business focus and analytics and business intelligence as the top priority for technology.8 These two top concerns intersect at the corner of ROP and Workforce Analytics. Chief Financial Officer (CFO) In a volatile global marketplace, the CFO is facing increasing pressure to get a handle on true Total Cost of the Workforce (TCOW) and other Human Capital metrics that are emerging market performance indicators. An ROP initiative forces the organization to come to a mutual agreement on which strategic metrics matter most and how they will be measured and reported consistently across all business units. Chief Executive Officer (CEO) According to the 15th Annual Global CEO Survey by PWC, only 15% of CEOs reported that they are getting comprehensive information on their Return on Investment in Human Capital, with the majority indicating that they wanted more information.9 Chief Human Resources Officer (CHRO) The CHRO holds the key to the organization’s Human Capital data, and has likely been investing in a stronger talent management strategy. A C-Suite ROP performance improvement initiative would provide the aligned focus, authority, and accountability required to revitalize a stalled strategic HR Transformation. Without the appropriate level of analysis and tools, there can be a continuing wake of destructive activity as organizations move from one extreme in over-hiring to the other of recurring layoffs and reductions, much like a binge and purge bulimic cycle, destroying company health over time.11 Human Capital Management Institute
  16. 16. The Return On People eBook 16 What the research says
  17. 17. The Return On People eBook 17 It’s harder than you think Our work with companies like CTBY, whose story we shared at the beginning of this eBook, highlights how Return On People transcends HR and how complex people measurements can be. Because people data crosses systems and pillars, it requires a unified vision and cooperation from the top levels of the organization—the C-Suite—in order to remove the barriers that are keeping you in the dark. Our research shows that it’s common for a single complex organization to have a wide range of sophistication in measuring and using people data. Disparate departments collect and report data differently, and that adds to the confusion and misunderstanding around Workforce Analytics, the measurements required for calculating Return On People. We recognized the need for an instrument that systematically and consistently educates organizations on how well they are currently using ROP data and what they can do to improve. Based on existing theory about Human Capital Analytics in the workforce, and our own extensive research, we know there are five levels of maturity that every business leader will need to move his or her organization through, in the process of transforming human resources information into an empowered driver of business strategy. The Return On People Maturity continuum spans from an operational provider transitioning into a strategic enabler, all the way through an enabled, predictive, and empowered driver using Return On People analytics. The goal is becoming a proactive, fully integrated, continually improving organization that maximizes its ROI in people, and creates value for the business. How ROP Maturity fuels agility Working together toward a higher ROP Maturity level is actually an enterprise performance improvement initiative. The process, when done right, uncovers barriers to peak performance and guides business leaders to agreement around actions and measures that matter most to your organization. Alignment and visibility to key performance indicators and predictive analytics are all prerequisites to true business agility. The illustration on the next page summarizes the “Five Levels of ROP Maturity,” followed by a detailed description of each level.
  18. 18. The Return On People eBook 18
  19. 19. The Return On People eBook 19 The truth is in the middle In large, complex organizations, information and best practices are often trapped in silos, especially for those who failed to fully integrate following a merger or acquisition. Because of this, it’s common for one function, department, or business unit to be more sophisticated in using predictive people analytics, while other areas are almost solely focused on tactical activities. As you learn more about the Five Levels of ROP Maturity, you will likely find that you have advanced visibility to your people data in certain areas and are flying blind in others. Additionally, you likely have data available to you that you are not fully utilizing, for reasons we’ll explore later. Assessing different business units and functions around these Five Levels of Return On People Maturity will help uncover these situational discrepancies so that you can work on aligning and raising up the entire organization. Level 1: Operational Provider Employee focus At the Operational Provider level, your company is delivering traditional HR services to your employees such as payroll, benefits, and training and development. Your company is also likely delivering administrative support to front line leaders for transacting employee services. HR helps enforce company policies and monitors legal human resource issues. Because data sources are not standardized across the organization, HR cannot consolidate measures, information, and metrics to provide strategic business insights to leaders.
  20. 20. The Return On People eBook 20 Level 2: Strategic Service Partner Business unit focus Strategic Service Partners are in the process of moving from an HR-centric to a business unit focus and have likely embarked on one or more strategic “HR Transformation” initiatives over the past decade. This has left various areas of the organization working at a more advanced ROP level than others, especially in Recruiting and Talent Management. Level 2 organizations may report decreasing people costs and increasing revenue and productivity. You may be using dashboards and scorecards to track and measure business performance. However, you may experience limitations in providing the most useful business information to the entire organization due to a lack of standard data and measurement systems for finance, IT, and Human Capital assets across business units. As part of HR Transformation, you have assigned skilled internal consultants, HRBPs. These consultants work with business leaders to drive talent strategies and solutions to maximize returns on financial, Human Capital, and other organizational assets. HR has moved toward a Shared Services model that operates across multiple business units. These services may be expanded to include increased levels of employee and manager self-service. In addition, Centers of Expertise likely work in concert with your Shared Services functions to deliver best practice consulting and services in specific areas of the business, such as workforce management and management development. Your organization’s level of analytical capability is poised to evolve into key measures that help the organization adapt business strategies.
  21. 21. The Return On People eBook 21 Level 3: Integrated Enabler Enterprise focus As an Integrated Enabler, your organization efficiently gathers and analyzes critical Human Capital data. Your people incorporate data into meaningful measures, and proactively provide business insights to help the enterprise succeed. In other words, an Integrated Enabler provides a single integrated view of Human Capital measures and information to enable better business decisions and deliver a higher Return On People. The organization has likely adopted an enterprise approach to Shared Services that manages multiple competencies, either in-house or outsourced, such as HR, IT, Purchasing, Finance, CRM, facilities management, travel, or other enterprise-wide functions. Additionally, enterprise-wide measures from numerous functional areas are aggregated into standard metrics. Information and metrics are provided to the business that allows root cause analysis of specific problems. The organization can then ask critical “what if” questions and determine what factors of the problems affect the workforce. At this level, efficient data gathering, measurement, and analytics capabilities are used to determine factors driving good or poor performance. Also, a mix of Human Capital, finance, operational and marketing initiatives drive the best overall performance for the entire enterprise. These insights are translated into specific financial terms that align with business goals.
  22. 22. The Return On People eBook 22 Level 4: Predictive Driver Market focus An organization at the Predictive Driver level weighs internal Human Capital metrics against external market forces, enabling comparisons between current Human Capital needs with future enterprise business needs. At this level, the entire enterprise measures itself on the return it receives from combined investments in people, financial, and other capital assets. The organization monitors metrics related to market conditions and continually assesses projected workforce capital demands against current availability. As a Predictive Driver, key insights related to Human Capital trends are developed, which help the company design strategies and tactics to maximize investments. Additionally, the organization predicts changes and supplies enough skilled, engaged, and motivated employees to meet changing business needs and drive future business decisions. Analysts are beginning to statistically link predictive analytics to business outcomes to drive business direction. This, in turn, drives business agility in the ability to act quickly on strategic decisions in an ever-changing market.
  23. 23. The Return On People eBook 23 Level 5: Empowered Driver Future Focus The Empowered Driver has honed the highest level of sophistication in predictive Human Capital Analytics for agility and continuous improvement. Your organization holds a finger on the pulse of external market and internal Human Capital metrics for the enterprise, enabling comparisons between current Human Capital needs with future business needs. An Empowered Driver organization is based on a culture that values the truth, as proven through measurement. At this level, the entire organization scores itself against the return it receives from combined investments in people, financial, and other capital assets. The company monitors metrics related to market conditions and continually assesses workforce capital needs against the current supply. At this level, the HR organization as we know it today is no longer separate from the business but is comprised of Human Capital Consultants who are deployed strategically through the Global Shared Services Organization. Their input is charged back to the business unit which utilizes their services, and their effectiveness is measured against the return on investment they bring the engagement. HR transactions, whether in-house or outsourced, are managed efficiently and painlessly and are measurable contributions to total employee compensation, engagement, and productivity. Human Capital Analytics are sought for insight into future scenarios and are key component of any strategic business decision made through the C-Suite.
  24. 24. The Return On People eBook 24 Beyond measurement While measurement is an important component of the Return On People methodology, the ROP Maturity model involves so much more than analytics. The model views the current state of an organization through the lens of Human Performance Technology.10 HPT tells us that, for each ROP Level, there are six factors that must be in place to perform optimally and to successfully advance to the next level. Get these six factors right to develop and empower an aligned, high performing organization with maximum ROP potential. Three organizational performance factors Organizational performance factors are controlled by the organization, either directly from the C-Suite or through management, to support a wider organizational strategy. Note that in this context, “workers” describes all levels of employees, from executives to individual contributors. 1. Clear expectations, information, and feedback: The ROP strategy and vision have been clearly communicated, and everyone knows their role in helping bring it to fruition. 2. Good tools, processes, and resources: Workers have what they need to act with optimum efficiency, and barriers to performance have been eliminated. 3. Effective incentives and consequences: Workers understand what’s in it for them when goals are met and what’s at stake if they are not. Breaking down barriers At each of the Five Levels of ROP Maturity, we have identified a number of typical Enablers that support optimal performance and Barriers that get in the way. An ROP Performance Audit reviews your current state of ROP Maturity using the six performance factors outlined here. It identifies your current Enablers, so you can take full advantage of what is working for you. The ROP Analysis also calls out current Barriers, with recommended steps to remediate them so you can move toward the next level of ROP Maturity.
  25. 25. The Return On People eBook 25 Three individual performance factors Individual performance factors are what each employee must bring to the table. 4. Skills and knowledge: Workers know what to do and how to do it, either through prior experience or on-the-job learning and development. 5. Capability: Workers have the mental and physical ability to perform assigned roles. 6. Motivation: Workers are engaged with the ROP vision, ideally because it matters to them personally, or because they are externally driven by incentives and/or consequences. Performance Factor Grid This Performance Factor Grid illustrates the interplay between the three organizational and three individual performance factors: Organizational Clear expectations, information, and feedback Good tools, processes, and resources Effective incentives and consequences Individual Skills and knowledge Capability Motivation Grid based on work of Tom Gilbert 1978, 1996; Geary Rummler 1995; Peter Dean 1997; L. Michael Wykes 2000
  26. 26. The Return On People eBook 26 7 C-Suite actions to improve ROP Maturity Now that you’ve been introduced to the Five Levels of ROP Maturity and the Return On People performance improvement methodology, here are seven things that you can start doing right now to begin getting your highest return on your investment in your people. 1. Align at the top A successful ROP performance improvement initiative starts with a holistic, asset-based view toward Human Capital improvement. Unlocking people data and applying it usefully crosses pillars. It is an organizational initiative that cannot be accomplished by HR, IT, or Finance alone. ROP requires an aligned, strategic vision, and a commitment from the C-Suite. Consider holding an ROP Leadership Workshop to establish common ROP goals. 2. Chip away at information silos Integrated Workforce Analytics will be a requirement for the agile organization of the future, and there is no easy, overnight solution for breaking down the information silos that are standing in your way. Disparate information systems and specialized roles have cultivated a myopic focus, with both physical and cultural barriers that hinder big- picture thinking about your workforce. This is an especially difficult problem for established organizations rooted in traditional command and control organizational models and those who have grown through merger or acquisition. Begin pursuing an integrated approach to information management, aligning vision and process as well as systems and data. How do you measure up? Take our free ROP assessment. Our free assessment returns a single ROP Maturity score, which provides a quick snapshot into your organization's readiness to make strategic use of Human Capital information for your highest Return On People. The report you receive with your score also offers high level advice for taking your next steps toward using predictive analytics to drive better business strategy.
  27. 27. The Return On People eBook 27 3. Ask better questions The real purpose of Workforce Analytics is to answer questions and test hypotheses about people costs, staffing, outsourcing, and productivity. For example, what is your Total Cost of Workforce? TCOW, as defined by HCMI, is a measurement comprised of all direct and indirect cash and equity compensation, benefits, and development costs for employees and contingent workers.11 Few companies have a good handle on this metric, but the savvy ones are using it in advanced productivity measures shown to be highly predictive of future stock performance. Calculating TCOW is a complex exercise that requires multiple divisions and functions to cooperate and uncovers unexpected barriers along the way. Removing those barriers now sets the stage for increased ROP Maturity across the entire organization. 4. Make a bold declaration As we saw with the CTBY story at the beginning of this eBook, it matters less which reports your leadership team relies on, than that the metrics driving the information and resulting interpretations are consistent across the organization. Establish solid baselines; then declare data sources, formulas, and how the data story will be shared with those who need to act on the information. Most importantly, hold all employees accountable for achieving the “critical numbers” you establish for your organization. This process of clarity and accountability is the first step in establishing a measurement culture, with a solid foundation that will grow in sophistication over time as the right analytics yield positive results. Each step you take toward increasing your ROP Maturity yields greater visibility and predictability. You become armed to make better business decisions and achieve a consistently higher Return On People. Causes come in threes. Solutions come in fours. Dr. Judith Hale
  28. 28. The Return On People eBook 28 5. Identify Enablers and Barriers Begin with a comprehensive assessment of your current ROP Maturity. Seek out analytics pilot projects and internal success stories that you can co-opt and build on, including business intelligence or dashboarding efforts for marketing or other areas. Ask for creative input from those who were involved. Inventory the systems that currently house your people data and consider consolidation or replacement of those that are holding you back. Begin developing greater analytical competencies and institute basic business finance training for all employees. Share wins to reward and strengthen your emerging data-driven culture. 6. Create new roles Many roles and personalities that served us well in a command and control organizational structure can work as barriers to growth and agility. If your organization is one of the many suffering from a stalled HR Transformation initiative, it’s time to dig in and find out why. Your HR Business Partners should be the internal consultants poised to help raise your ROP Maturity. What is holding them back? Is your Shared Services Organization living up to its promise of greater efficiency and process standardization? HR Shared Services should be the ideal place to pilot small Workforce Analytics projects. Appoint a Chief Analytics Officer to help make sure that you have visionary leadership in place in roles that can facilitate ROP success. 7. Master change Change is a now a permanent condition, not a one-time event. Cultivate a culture that is comfortable with using data to support the timely, educated decisions and continuous improvement that are the hallmarks of an agile organization. ROP and Big Data Don’t try to boil the ocean. The path to realizing the full potential of Big Data is best walked in many small steps. A modest Workforce Analytics pilot project can yield big results that pave the way for more ambitious future initiatives.
  29. 29. The Return On People eBook 29 Learn more Our current favorite Return On People reading list … The New HR Analytics: Predicting the Economic Value of Your Company's Human Capital Investments Jac Fitz-enz Go deep into Human Capital Analytics with “Dr. Jac,” widely acknowledged as the father of Human Capital strategic analysis and measurement. HR Analytics Handbook Laurie Bassi An indispensable pocket reference to advanced HR Analytics by expert Laurie Bassi. Human Capital Analytics: How to Harness the Potential of Your Organization's Greatest Asset Gene Pease, Boyce Byerly, Jac Fitz-enz Practical examples from case studies of companies applying analytics to their people decisions and providing a framework for using predictive analytics to optimize Human Capital investments Metrics: How to Improve Key Business Results Martin Klubeck A simple guide for non-analysts on how to collect, analyze, report, and use measurements to improve your organization Optimize Human Capital Investments: Make the "Hard" Business Case Frank J. DiBernardino Human Capital Analytics and strategy expert, Frank DiBernardino, links Human Capital Investment performance with shareholder value. Keeping Up with the Quants: Your Guide to Understanding and Using Analytics Thomas H. Davenport, Jinho Kim A general “quantitative literacy" guide to help non-analysts develop the skills to summarize data, find the meaning in it, and extract its value.
  30. 30. References 1 "Dave Ulrich co-author of HR Transformation," Web, http://youtu.be/V6y-9glrhqI. 2 Bersin, Josh. Forbes, "Big Data in Human Resources: Talent Analytics Comes of Age." Last modified February 17, 2013. Accessed June 29, 2013. http://onforb.es/12czO3P. 3 Drucker P.F. (1999 p135) Management Challenges for the 21st Century, Butterworth-Heinemann, Oxford. 4 Ocean Tomo, "Ocean Tomo's Annual Study of Intangible Asset Market Value - 2010." Last modified April 04, 2011. Accessed June 29, 2013. http://bit.ly/13hsrxc. 5 Stybel, Larry, and Maryanne Peabody. MIT Sloan Management Review, "Enhance Assets or Reduce Liabilities?" Last modified June 26, 2010. Accessed June 29, 2013. http://bit.ly/1cBHBgy. 6 Questia, "Human Capital." Accessed June 29, 2013. http://bit.ly/1cBJ1HS. 7 McCann, David. CFO.com, "A Powerful Stock-Price Predictor." Last modified May 15, 2013. Accessed June 29, 2013. http://bit.ly/13hu7a3. 8 Gartner, Inc., "Gartner Executive Program Survey of More Than 2,000 CIOs Shows Digital Technologies Are Top Priorities in 2013." Last modified January 16, 2013. Accessed June 29, 2013. http://gtnr.it/1575yeM. 9 PWC, (p23) "15th Annual Global CEO Survey 2012." Accessed June 29, 2013. http://pwc.to/1576oZd. 10 International Society for Performance Improvement, "What is HPT?" Accessed June 29, 2013. http://bit.ly/12vjf6p. 11 Higgins, Jeff, and Grant Cooperstein. Human Capital Management Institute, "Managing an Organization’s Biggest Cost: The Workforce." Accessed June 29, 2013. http://bit.ly/13hz1nh.
  31. 31. R Media 1 are experts in Return On People, a powerful organizational performance methodology grounded in Human Capital Analytics. We apply ROP to increase long-term profit and fuel an empowered, agile, and sustainable work environment for all contributors. Our clients include senior executives from companies who have grown through merger and acquisition and emerging organizations seeking to implement leading people practices. Return On People will help you create an accountable measurement culture for a greater return on your investment in people. Learn more at ROIPeople.com. ROP Maturity Audit  C-Suite ROP Alignment Engagement Team ROP Workshops  Free ROP Assessment
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