Maximizing ROI in HR By Rajiv Kapoor


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Maximizing ROI in HR By Rajiv Kapoor

  1. 1. National HRD Network Rajiv Kapoor JCB India Ltd.
  2. 2. 18 plants, 670+ Dealers, 1500+ Outlets, Presence in 150+ countries
  3. 3. India s Largest manufacturer of Construction Equipment India’s Location: Ballabgarh & Pune World class facilities in India 2 out of every 3 machines sold is a JCB 2000 employees i I di l in India Self- Self-Employment generation Skill enhancement through CSR h h h
  4. 4. ROI is derived from Finance. None of the HR expense is booked as investment. HR expenses are Costs “Where is ROI in HR?” Are we trying to prove a hypothesis null ab‐initio? h h ll b ? Difficult to determine returns for HR contributions which affect many  f f h b i facets of the business View of HR as a “cost center”
  5. 5. last 6-7 years 6- ◦ War on Talent ◦ Leadership ◦ Retention ◦ And the Best Employer is…….
  6. 6. ◦ Strategic HR initiatives linked to Organizational goals Planned Measured Evaluated Synergized Integrated ◦ Sporadic Knee- Knee-jerk Fad based Nice sounding Sponge like – money, resources & time Need for speed > Strategic importance Intuition / Luck based
  7. 7. Successful Organizations: ◦ Think long Term Do the Mission, Vision, ◦ Align initiatives with Business needs Values touch the heart & minds of employees? ◦ Focused ◦ Intermesh - Link ◦ Distraction free How does HR drive strategy? ◦ Not just Benchmarking h k ◦ Sit on the Bench Introspect How does HR create synergy? Analyze ……However, no bench warming
  8. 8. H R Stra H R Stra tegy R R Analytical Methodical Linked Measured Synergized Long Term a ategyy y
  9. 9. ROI Methodology ability HR Profit Center Balanced Scorecard HR Macro Studies Human Capital Measurement HR Accounta Competitive HR Benchmarking HR Satisfaction Surveys HR Cost Monitoring HR Key Indicators HR Auditing HR Case Studies Feedback Surveys MBO in Personnel 1960s 1970s 1980s 1990s 2000+
  10. 10. Activity Based Results Based ◦ No business need for the initiative ◦ Initiative linked to specific business need ◦ No assessment of performance issues ◦ Assessment of performance effectiveness ◦ No spec c measurable object es o specific easu ab e objectives ◦ Specific objectives for application & ◦ No focus on achievement of results business impact ◦ No effort to provide supportive ◦ Target expectations communicated environment ◦ Supportive environment prepared ◦ No effort to build partnerships p p between stakeholders ◦ Partnerships established between key stakeholders ◦ No measurement of results or ROI analysis ◦ Measurement of results & ROI analysis ◦ Planning / reporting are input focused ◦ Pl Planning / reporting are outcome i ti t focused
  11. 11. Input Measures inputs such as volume & efficiencies Action Measures participant’s reaction to the initiative & captures planned actions Learning L i Measures changes in knowledge, skills, attitudes Application A li i Measures changes in on-the-job behavior / actions on-the- Business I B i Impact Captures changes in business impact measures ROI Compares initiative b C i i i i benefits to the costs / i fi h inputs Intangible Benefits • Recruiting Success, Job Satisfaction, Operational Commitment, Career Enhancement & Technology Upgrade
  12. 12. HR budgets continue to increase in most of the companies A stronger link exists between HR and the strategic goals of the organization The effort in developing an “HR profit center” intensified p g p More HR functions are being outsourced – focus only on core There is increased interest in monitoring and managing human capital There is increased interest in monitoring and managing human capital More HR Managers have a business or operations background HR evaluation is more systematic methodical and proactive HR evaluation is more systematic, methodical, and proactive ROI is growing in use as an HR evaluation tool
  13. 13. • Provides a balanced set of measures • Offers a step-by-step process • Bridges business evaluation and initiative evaluation • Balances research/statistical methods with practical application • Flexible for all types of initiatives • Credible with Managers and administrators
  14. 14. 18.2% 18 2% Intuition and perception by senior 21.8% executives Observations by management and reactions from participants and users Improvements in productivity, cost savings, quality, etc. 60.0% Th t The true measure of investment in HR, particularly training interventions, should be gained through  fi t t i HR ti l l t i i i t ti h ld b i d th h improvements in productivity, cost savings, quality etc.   Over 80% of respondents in a survey conducted world wide by Deloitte use intuition, perception  and observations.  
  15. 15. • Having a strategic focus: - communicating clearly, fairly and unambiguously the Board’s current understanding of the links between the HCM policies and practices, its business strategy and its performance; and - including information on: the size and composition of the workforce; retention and motivation of employees; the skills and competences necessary for success, and training to achieve these; remuneration and fair employment practices; leadership and succession planning; • Be balanced and objective following a process instead of taking metrics off the shelf objective, shelf. • Provide information in a form that enables comparisons over time and uses commonly accepted definitions where available and appropriate.
  16. 16. Committed and Engaged Employees Learning Organization Sense of Belonging World Class Organization Best Place to Work lding Competency Building ding ing tems Build Culture Buildi itment Buil TEAM JCB Syst Commi Faith & Trust
  17. 17. E=MC² E=MC² E= Energy to infuse “Sense of Urgency” Urgency” M= Motivate to win C= Challenge C= Care & Commitment Our Core Values •Hard Work •S Sense of Urgency fU •Ethical Work Practices •Innovation JCB in India “A World Class organization”
  18. 18. HR CHALLENGES HR STRATEGY & POLICIES 1. Attracting and retaining skilled professional workers Recruitment JCB Business 2. Developing Managerial capability Career Development Strategy Succession Plan 3. Retaining high performers Competency Framework 4. Developing succession pool depth p g p p Promotions & Transfers 5. Addressing shortages of management T&D or leadership talent PMS People Processes Employee Participation Communication matrix Effectiveness of CFTs Reward & Recognition Participation in Suggestion Performance schemes DIMENSIONS OF ESS Measures % Job rotation done Role Kaizen per employee Work Processes Absenteeism rates Relationship Accident rates Compensation C ti Medical data Training & Development Perception Grievance rates Career Growth Indicators Recruitment cost and Hit rates Image Attrition levels Customer Focus Productivity P d i i Leadership Value Added per employee ESS Communication. Exit Analysis
  19. 19. Not consistently evaluated at all 16.4% 20.0% 20 0% 4.5% By evaluation forms submitted by participants at the end of the programme Testing during the programme Post-course assessment of business 59.1% impact •Nearly 60% of respondents in a survey conducted by Deloitte use assessment of reactions (happy sheets) to evaluate their initiatives But what about application back in the workplace? initiatives. •At JCB we are at 2nd level of Testing during the programme. •We have implemented the 3rd level of Post assessment in few programs
  20. 20. T&D Evaluation Levels Level Measurement Focus KP Model 1. Reaction & Planned Measures participant satisfaction with Action the HC project  p p p j and captures planned actions, if appropriate 2. g Learning Measures changes in knowledge, skills, and attitudes related  g g , , to the HC project 3. Application Measures changes in on the job behavior or actions as the HC Measures changes in on‐the‐job behavior or actions as the HC  initiative is applied, implemented or utilized 4. Business Impact Business Impact Measures changes in business impact variables Measures changes in business impact variables 5. Return on Investment Compares project benefits to the costs
  21. 21. Minimizes hard costs Minimizes hard costs Minimizes missed opportunity costs –unfilled position  Improves productivity and longevity Drives organizational improvements, productivity and results
  22. 22. Issue Best practices to improve recruiting process ROI Time-to-hire • Determine items critical to business success. Quality-of-hire • Measure pre-process and post process or technology Cost-per-hire implementation. • Have vendors work to provide models and tools for collecting and Longevity-of-hires L it f hi evaluating data data. Recruitment source • Report performance regularly as part of standard management effectiveness reporting package. • Develop programs to address process deficiencies in individual benchmark areas.
  23. 23. Diversity is about ‘otherness’ or those human qualities that are different than our own and outside the group to which we belong, yet are present in other groups. There are two dimensions to diversity – ◦ Primary Dimension – Disability, Age, Race, National Origin, Sex (gender), Color and Religion, Sexual Orientation ◦ Secondary Dimension – More about creed, beliefs and norms that are nurtured, cultural nuances and tendencies Einstein – “We can't solve problems by using the same kind of thinking we used when we created them."
  24. 24. Marketplace impact Marketplace impact Stockholders/Investors ◦ Products/services, brand  ◦ Increased revenue and ROIs differentiation ◦ Decreased litigation and negative  ◦ Customer  public relations acquisition/retention/satisfaction Community Employees ◦ More community investments ◦ Competition for talent Competition for talent ◦ M More employment opportunities l ii ◦ Employee satisfaction score increases ◦ Societal corporate responsibilities  ◦ Organizational effectiveness due to  upheld increased productivity ◦ Better communications ◦ Retention
  25. 25. Companies provide anecdotal evidence only and have no real data available to support their ROI arguments. The data is available; however, HR doesn’t know where to find it. The ROI models are theoretical. Models are too complex and take too long to complete. Models do not use real client data. Models fail to address the critical business issues in the organizations. organizations.
  26. 26. Human Resource: Compensation: ◦ Training / employee ratio ◦ Payroll to Revenue ratio ◦ Training expense ◦ Percentile benchmark ◦ Training spread Separation: p Talent / capability: ◦ Attrition rate ◦ Percentage of critical roles filled  ◦ Natural / involuntary internally ◦ Competency analysis / gaps ◦ Fast access to right talent Defined Measurable
  27. 27. Access to business information to facilitate Distribution of performance appraisal ratings decision making Competency development expenses per Adherence by the workforce to core values employee Average change to performance appraisal Firm salary/competitor salary ratio rating over time Incentive compensation differential Climate survey Number and quality of cross functional teams Customer satisfaction with hiring process Number and type of special projects to develop Effectiveness of performance appraisal high potential employees processes for dealing with poor performers Number of suggestion generated and or Employee competency growth E l t th implemented Employee satisfaction Percentage of employee whose pay is performance contingent Employee turnover Percentage of employee with development plan f l hd l l Extent f E t t of cross functional teamwork f ti lt k Quality of employee feedback systems Extent to which employees have ready access to the information and knowledge that Back up talent ratio they need Range in merit increase granted b classification d by l f Percentage of employee making suggestion
  28. 28. Absenteeism rate by job category Number of training days and programs per Accident costs year Average employee tenure Percentage of and number of employees involved in training l d Average time for dispute resolution Percentage of correct data in HR information Compliance with Govt. regulation bodies system Compliance with technical requirements of Percentage of performance appraisals affirmative action completed on time Cost of HR related litigation Response time per information request Cost of injuries Time to fill an open position Cost per grievance Turnover cost HR department budget as a percentage of Cost per hire sales Turnover rate by job category HR expenses per employee Speed of salary action processing Interview per offer ratio Number of applicants per recruiting source Number of safety training and awareness activities
  29. 29. 2009 OBJECTIVES : HR & IR Green On Target Amber Behind but recoverable INDIA HOD : RAJIV KAPOOR Red Behind & not recoverable Status S No BSR Business Unit Key Measures Comments/Remarks Q1 Q2 Q3 Q4 Availability in 1 Clear & Fair HR policies Updation Net Grade G d 2 Fairness in Compensation Salary Survey Structure Competency Mentoring & 3 Competence & Career Development Framework Coaching 4 Effective PMS Improvement Not Planned in Q1 Service Family Value 5 Belongingness of Employees Anniversary Involvement actualization New 6 Employee Engagement Sports Review R&R ESS Initiatives Common Common 7 Facilitating Pune Integration Forum Structure 8 EHS 9 Risk Management Ongoing Productioniza Manpower Productivity 10 World Class Culture DWM tion Utilization Benchmark 11 Better Cash Management Ongoing 12 CSR Ongoing O i Inauguration Visits to 13 PR Management of new facility Institutes 14 Facility Management New Canteen 15 Visits Ongoing 16 Expat Management Ongoing 17 Best Employer Start Start in Q2
  30. 30. Deliverable Measures Status Remarks Career & Succession Identification of: Identified Plan for HIPO being Plan • Successors implemented • HIPOs Developmental Training & •Quarterly Target •75% Coverage Inputs p Development, p , achieved 5 Mandays •Development Centre scheduled in Q3 Mentoring & Establishment of •Start by Q2 end Start •New Process New Coaching process Developing internal Numbers of •17 Internal •Starting week faculty y • Internal Trainers Trainers identified Beginning 11th May g g y • Sessions • 22 Sessions 2009 Conducted planned
  31. 31. “An organization's success is the product of its people competence. That link between people and performance should be made visible, visible and available to all stakeholders ” stakeholders. -John Sunderland, Executive Chairman, Cadbury Schweppes This is effective ROI