the case against splitting hr: how to become a true strategic advisor

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The Case Against Splitting HR: How to Become a True Strategic Advisor

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Speaker: David Weisbeck Chief Strategy Officer Visier

Moderator: Ladan Nikravan

Senior Editor Workforce magazine


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Ladan Nikravan Senior Editor Workforce magazine

The Case Against Spli<ng HR: How to Become a True Strategic Advisor

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David Weisbeck Chief Strategy Officer Visier

The Case Against Spli<ng HR: How to Become a True Strategic Advisor

© 2014 Visier™


Dave Weisbeck, CSO, Visier January 21, 2015

WORKFORCE INTELLIGENCE SOLUTIONS. SMART. INTUITIVE. COMPLETE.

2 0 1 4 H o t 1 0 0 Best Privately Held Software Companies

SOME OF OUR AMAZING CUSTOMERS

TOPIC’S TODAY

1.  The case for and against splitting HR

2.  Factors driving the demand for HR to play a more strategic role in the business

3.  How HR can re-skill and overcome the barriers

to adopting a data-driven culture

The case for and against splitting HR

15

I talk with CEOs across the globe who are disappointed in their HR people. They would like to be able to use their chief human resource officers (CHROs) the way they use their CFOs—as sounding boards and trusted partners—and rely on their skills in linking people and numbers to diagnose weaknesses and strengths in the organization, find the right fit between employees and jobs, and advise on the talent implications of the company’s strategy. But it’s a rare CHRO who can serve in such an active role. Most of them are process-oriented generalists who have expertise in personnel benefits, compensation, and labor relations. They are focused on internal matters such as engagement, empowerment, and managing cultural issues. What they can’t do very well is relate HR to real-world business needs. They don’t know how key decisions are made, and they have great difficulty analyzing why people—or whole parts of the organization—aren’t meeting the business’s performance goals.

Ram Charan

" 55% of CEOs consider the CHRO a key player in strategic planning

" 56% of CEOs agreed insufficient talent within their org is a key challenge with serious near term financial implications

" Yet 37% of CEOs said their CHRO doesn’t know the business well enough

16

LACK OF BUSINESS SAVVY

Source: Economic Intelligence Unit – CEO Perspectives

" Most CHROs (and HR practitioners) are process-oriented generalists §  Have expertise in personnel benefits, compensation, and labor

relations §  Have difficulty relating HR to real-world business needs §  Have difficulty analyzing why people—or whole parts of the

organization—are not meeting the business’s performance goals.

" Split HR into two: §  HR-A (for administration):

-  Primarily manage compensation and benefits -  Report to the CFO

§  HR-LO (for leadership and organization) -  Focus on improving the people capabilities of the business -  Report to the CEO

18

WHY SPLIT HR?

BECAUSE IT WORKS.. when it works.

19

WHY NOT SPLIT?

“Eight years of research into Watson Wyatt's Human Capital Index® (HCI) has consistently found a strong correlation between effective HR program design and financial performance. Indeed, the link goes beyond correlation: Effective HR programs are a leading indicator of financial performance.”

Towers Watson

We found that companies that are stronger in people management have a correspondingly higher financial performance. … In contrast, companies with the worst financial per-formance show a greater need for action across virtually all 27 HR subtopics… This has been a consistent finding… it is clear that the most successful people companies consistently outperformed the market, by nearly 100 percent.

Boston Consulting Group

20

In HR (or finance or IT), 20% of the professionals are exceptional, adding value that helps organizations move forward, 20% of HR folks are locked into a fixed mindset and lack either competence or commitment to deliver real value, and 60% are in the middle. … I advocate teaching the 60% what they can do to deliver value.

" HR professionals fall into three categories:

1.  Reactors: Ensure compliance with policies and respond to business needs when asked

2.  Partners: Collaboratively work with business units toward mutual goals

3.  Anticipators: Use data to predict talent gaps in advance and provide insights into how talent relates to business goals

21

1.  Reactors: Ensure compliance with policies and

respond to business needs when asked 2.  Partners: Collaboratively work with business

units toward mutual goals 3.  Anticipators: Use data to predict talent gaps in

advance and provide insights into how talent relates to business goals

POLL: INTO WHICH CATEGORY DO YOU FIND YOURSELF MOST OFTEN?

22

23

Report Global Leadership Forecast 2014/2015, by Development Dimensions International, found:

•  22% are Reactors: Ensure compliance with policies and respond to business needs when asked

•  60% are Partners: Collaboratively work with business units toward mutual goals

•  18% are Anticipators: Use data to predict talent gaps in advance and provide insights into how talent relates to business goals

Factors driving HR to be more strategic

25

Fragile Economic Recovery

•  Downward pressure on prices •  Uncertain economic future •  But, CEOs are starting to shift from survival to

growth mode

“76% of CEOs have cut costs in the last 12

months.”1

Adjusted for inflation, the cost of labor has increased 42% in the

last 13 years2

Need for more

responsive, proactive, and agile planning

1. PWC 2014 CEO Survey 2. Bureau of Labor Statistics

26

Globalization

•  Global markets are increasingly important •  By 2025 China will have 45% of global F500 •  Increasing proportion of global GDP

is coming from emerging markets

36% of the world's GDP

comes from global business - and

knowledge work is growing 30% faster than labor-intensive

work2

Need to compete,

analyze and compare global options for growth, as part of

planning

“50% of CEOs want to increase headcount next

year.”1

1. PWC 2014 CEO Survey 2. McKinsey Global Institute

27

6% of high-performing

employees in US organizations voluntarily changed jobs in 2013, the highest rate in 10 years.

93% of CEOs recognize the need to change, or are changing, their strategies for attracting and retaining talent.

Hiring, new jobs, and voluntary turnover are all at the highest levels

in 4 years

Bureau of Labor Statistics

PWC, 2014 CEO Survey

Demographic Shift & Skills Shortages

•  The working-age population is undergoing a major geographic shift •  Experienced Baby Boomers are retiring •  Power is shifting from employers to employees as the labor market

becomes a seller’s market

28

Need to ensure have the skills needed to achieve corporate

objectives.

Need to manage rising labor costs in emerging

economies.

2014 HARVARD BUSINESS REVIEW: TOP WORKFORCE CONCERNS

*HR Joins the Analytics Revolution, HBR Analytic Services

EXTERNAL FORCES DRIVING HR TRANSFORMATION

Hire Right

Demographic Shift

Retain Top

Talent Skills

Shortages

Ensure Planning

Agility Economic Flux

Optimize Spending

Competitive Pressures

more than ever before HR can play a critical role in driving business performance.

31

HR leaders who are proactive users of data may have a better chance of winning the CEO’s confidence.

HR Executive, Gaining their Trust, Sept 2014

Another key finding is that HR leaders will have a seat at the table for strategic discussions only if they can demonstrate the business impact of HR. …Our experience has found that data-driven, analytical HR departments are more likely to play a strategic role in their organizations, and the survey data supports this.

Boston Consulting Group, Creating People Advantage, 2014-15

How HR can re-skill and overcome the barriers to

adopting a data-driven culture?

1.  Know the Goal §  Always act with the end in mind. Purposeful. With intent.

2.  Big Picture View §  Mental model of the end-to-end system. Past, present, future.

3.  Think Divergently §  Consider the alternative path. Look outside current boundaries.

Be open. Ask “What if?”

4.  Think Critically §  Break things down to root causes. Analyze. Inspect.

5.  Align §  Seek convergence, not consensus.

33

WHAT DOES IT MEAN TO BE STRATEGIC?

STRATEGIC BUSINESS PARTNER

Default to Action §  Communicate clear goals §  Monitor, measure and report on

progress to goals §  Review and adjust plan on a

regular basis §  Create accountability

Alignment §  Coaching §  Consulting – 2-way

conversation §  Be willing to challenge – have

a point of view §  How do I build relationships

and collaborate?

Impl

emen

tatio

n

Human Resource Expertise §  Talent Management

§  Recruiting §  Compensation

§  What processes and technology improve efficiency?

§  What are the people goals and measures of success?

Business Expertise §  Who is the customer? What

problem do you solve for them?

§  Who is the competition? How do you compare?

§  What are the business goals and measures of success?

Exp

ertis

e

BECOMING A MORE STRATEGIC BUSINESS PARTNER

1.  Analyze: Apply critical and divergent thinking

2.  Align: Understand the Big Picture of the business, and seek convergence

3.  Act: Create the goal. Make plans and decisions based on data and fact

35

RECRUITING CONCERNS

" How can we recruit more cost effectively?

" How can we ensure we hire more top performers?

" How can we fill positions faster, without sacrificing quality?

" How do we ensure we are competitive in the hiring market?

36 36

The competition for talent is

global

The hiring market is

increasingly competitive, as demographic shifts occur

OLD SCHOOL

§  React: Request, approve, fill position

§  Look at metrics like: §  Time to Hire §  Cost to Hire §  Speed to Hire

NEW SCHOOL

Analyze Align Act

§  What are the bottlenecks in the hiring process?

§  What recruiting sources are the best?

§  What candidates

succeed?

§  What roles are critical to business success?

§  What roles should we backfill?

§  What roles do we need to support new initiatives?

§  What if we hire in a different location?

§  How are we tracking against our hiring plan and total costs?

§  Should we adjust our plans?

ANALYZE: RECRUITING IS A PROCESS

ALIGN & ACT: WHO, WHERE, CRITICAL?

RETENTION CONCERNS

" How can we ensure we are retaining critical roles and top performers?

" How can we optimize our compensation and ensure we are paying for performance?

" Who is at risk of leaving? " Why are people leaving? " Where should we welcome

departures?

41 41

93% of CEOs recognize the

need to change, or are changing, their strategies for attracting and retaining

talent.

6% of high-performing

employees in US organizations voluntarily

changed jobs in 2013, the highest rate in 10 years.

OLD SCHOOL

§  React: §  Deliver a Turnover dashboard §  Perform Exit Interviews

§  Look at metrics like: §  Turnover by roles, location, and department

NEW SCHOOL

Analyze Align Act

§  Where can we expect resignations?

§  Why are people leaving?

§  Who will leave next?

§  What roles are critical to business success?

§  What roles should we backfill?

§  What roles do we need to support new initiatives?

§  What is our backfill plan?

§  How are we tracking

against our hiring plan and total costs?


ANALYZE: MOVE FROM WHAT HAPPENED TO WHAT WILL HAPPEN

MICRO VIEW: Who are we likely to lose?

ANALYZE: MOVE FROM WHAT HAPPENED TO WHAT WILL HAPPEN

MACRO VIEW: How many, and where will we lose people?

ALIGN & ACT: RETENTION

46

Think of retention in terms of: " CAPACITY:

§  Will we have the staffing levels required to sell, produce, serve,… §  How will retention impact our productivity?

" CAPABILITIES §  Do we have the right mix of skills and talent across the organization.

How will retention impact this? Think of retention as part of your plan. Measure attrition against your plan.

WORKFORCE COST CONCERNS

" How much does our workforce really cost?

" How can we optimize our workforce costs?

" How are our costs changing over time?

" Are we on track with our plan and budget?

" How can be better map to Finance?

Most HR departments lack

a complete view of workforce costs

76% of CEOs have cut

costs in the last 12 months.

People are 70% of a

company’s cost – and are the “final frontier” of savings

in competitive markets

OLD SCHOOL

§  React: §  Run a comp review process §  Print a binder of headcount and comp costs and see if it

matches Finance’s §  Freeze hiring

§  Look at metrics like: §  Base comp §  Bonus comp §  Benefits

NEW SCHOOL

Analyze Align Act

§  What do our total costs look like?

§  What is contributing to our cost increases?

§  Where can we

optimize costs?

§  What is the budget? What should it be?

§  Where do we want to invest or reduce costs?

§  What are the talent implications?

§  What should our workforce plan be?

§  How are we tracking against our plan and total costs?


ANALYZE : WHERE ARE COSTS GOING?

51

ALIGN : MEASURE ALL OF THIS (AT LEAST WORK TOWARDS THIS)

ALIGN : WHAT SHOULD WE BE SPENDING?

52

ALIGN : OUR SPENDING PLAN IS…

53

ALIGN : WHERE WILL WE INVEST SPENDING?

54

ACT : FORECAST MONTHLY

55

RECOMMENDATIONS:

§  Most compensation analysis by HR is annualized – dig into actuals, it isn’t just for finance

§  Forecast – take actuals plus intended hires & costs and project to where you will end the year – then evaluate if you are on target

§  Review this monthly with leadership

RESOURCES AT WWW.VISIER.COM

56

DISCUSSION

" Dave Weisbeck " [email protected]

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