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May 2, 2012 Presented by:
Jenna Weidner, Senior Consultant
How Human Resource Management
Can Impact Your Bottom Line
WebEx guide
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Presenters
Jenna Weidner Agatha Gaca
Objectives of the Presentation
> Why human resource management is central to cost control
> Key cost considerations relative to legislative mandates and collective bargaining negotiations
> Identifying key steps to optimizing your human resources
− Alignment with strategic priorities
− Cross-entity considerations
− Key metrics
− Key HR Audit points
> Benefits of moving from tactical HR to strategic HR Dept.
− Improved ability to serve both staff and management
− Improved ability to review, measure, and provide insight
HR Management and Cost Control
> Personnel costs are the largest part of your budget
> People are your biggest asset and biggest liability
> Consider associated costs
− direct and indirect
− fixed, stepped and variable
− ongoing and one time
Managing Your Biggest Asset
Human Resource Management
Collective Bargaining Negotiations
> Contract language directly impacts cost
> Fiscal analysis prior to negotiations is key to setting priorities
• Consider full cost and benefit
• Examples:
−Saved $350,000/yr elimination of paid breaks and lunch
−Saved $50,000/yr categorizing service responses
> Take the broad view of impacts
•Impacts on non-reps
•Impacts on other contracts
Cost of Turnover
> Separation costs/savings
• Severance pay and leave pay out
• Administrative costs related to termination
−Processing paperwork
−Conduct exit interviews
• Increased unemployment compensation
• Wages and benefits saved due to vacancy
> Lost productivity and revenue
• Vacancy coverage (overtime or temp)
• Initial performance differential of new hire
−0% productive during training
−25% productive weeks 2-4
−50% productive weeks 5-12
−75% productive weeks 13-20
• Mentoring and coaching from coworkers and management
> Replacement costs
•Recruitment time and advertising expense
•Interviews, screening, testing
•Operational changes
> On boarding and training time and materials
Turnover cost* for a typical
employee = 150% of annual salary Turnover cost* for management or sales staff = 200% of annual salary
Example
Inputs:
100 non-management, non-sales staff, 10% turnover rate, average
salary of $50,000/yr.
Calculation:
150% X $50,000 X 10 staff =
$750,000/ yr in turnover costs
*William Bliss, “Cost of Employee Turnover”, The Advisor. Isquare.com
Poll
What is the largest component of
the typical budget?
A. Rent
B. Supplies C. Personnel
Legislative Mandates
> Understand implications
− Timeline- plan the process
− Transparency- communicate early and often
> Strategic implementation
−Gain insight into what staff really value
−Standardize HR practices across units
−Reduce labor costs
> Case study: Wisconsin Acts 10 & 32
− Various approaches
Optimizing Human Resource Management
> Alignment with organizational strategic priorities
> Cross-entity considerations
> The role of HR in auditing the use of resources
> Examples of applied metrics
Alignment with Strategic Priorities and Cross-Entity Considerations
> Determine organizational priorities
> Opportunities for alignment
− Budget process
− Position control process
− Functional analysis
Poll
Which of the following represent
opportunities to align human
resource management with
organizational goals?
A. Requests for new positions B. Budget development
C. Operational reviews D. All of the above
Auditing the Use of Human Resources
> The role of HR as auditor
> Partners in the process
− Executive leadership
− Payroll and finance departments
− Department leadership
> Approach and metrics
− Expected service level
− Resources needed to achieve this level of service
− Key metrics
−FTE per function (industry benchmarks)
−% turnover per year (organization data)
Example of Applied Metrics: Number of HR Department Staff
Organization Size Benchmarks*
Professional HR and Benefits Staff Per
100 Employees**
250-499 employees 0.94 FTE
Your Entity
(using average of metrics)
0.89 FTE 500-999 employees 0.83 FTE 4.0 FTE HR Staff 2.5 FTE Benefits Staff in 6.5 FTE HR and Benefits 541 Employees 4.8 FTE HR and Benefits Staff Benchmark Current State
Example of Applied Metrics: Role of HR Department Staff
Functional
Areas Related Tasks
HR Priorities Expected Services* Previous Effort Current Effort Employee Relations
Research and investigation, discipline documentation, grievance processing, mediation/arbitration, negotiation, policy and procedure development and revision, performance evaluation program, exit interviews, providing advice,
technical assistance, and counseling to staff, writing letters of agreement
1st 2nd (1.67) 1.40 FTE, 42% of Weighted Staff Costs 1.58 FTE, 60% of Weighted Staff Costs Classification and Workforce Analysis
Analyzing jobs by gathering input via interviews, receiving documents, observation, surveys, questionnaires, filing, creating, reviewing, and revising
job descriptions, retrieving files, position control and maintenance, copying and dispersing files, administering job classification systems, minute taking
and clerking, scheduling, organizing materials, preparation meetings, destroying files, committee meetings, clerk activities, logging and tracking
data, employment data reporting
2nd 3rd (3.00) 0.75 FTE, 18% of Weighted Staff Costs 0.40 FTE, 11% of Weighted Staff Costs Recruitment and Selection
Creating and approving job requisitions, screening and selecting candidates, creating and posting internal postings, preparing for and scheduling interviews, advertising jobs to the public, scheduling and conducting
pre-employment tests, collecting applications, conducting reference and background checks, preparing offers of employment or rejection letters
3rd 1st (1.50) 1.35 FTE, 29% of Weighted Staff Costs 0.82 FTE, 21% of Weighted Staff Costs Support and Retention
Orientation program, id and key card creation, employee recognition award program, morale boosting activities, training programs
4th 4th (3.83) 0.50 FTE, 11% of Weighted Staff Costs 0.20 FTE, 7% of Weighted Staff Costs
High Opportunity Areas: Role of the HR Department
$40,000 $60,000 $80,000 $100,000 $120,000 $140,000 $160,000 S al ar y and B enef it s of H R S taf f
Other examples of Metrics for HR Management
>Time to fill a position
> Ratio of HR managers to HR support staff
> Training dollars spent per employee
> Cost per hire
> Benefit component cost per employee
> HR expense per employee
Tactical vs. Strategic HR Management
> Defining the difference between tactical and strategic HR
> Options for structure and governance
> Options for roles and functions
> Options for review approaches
− Strategic focus
− Efficiency focus
Approaches to Human Resource Management*
>
Transactional: Administrative, order-taking. For example, updating an individualemployee’s HR records, filling a vacant position, locating a training program for an individual. Completing this work efficiently and effectively is a requirement to earn credibility to work strategically.
>
Tactical: Solutions offered. Most HR work over the past 20 years is tactical. Forexample, recruitment initiatives, training programs, restructuring of departments, succession-planning process.
>
Strategic: Work that moves the organization into a favorable position, supporting one or more courses of action developed by the organization’s leaders.*Source: “Beyond Tactical,” Frankie S. Jones, Ph.D., SHRM Presentation, 2009
Strategic
Tactical
Transactional
− Long term (two or more years).
− Linked to one or more business goals.
− Solution-neutral in early stages of partnering. When a department
manager approaches you with a tactical request, resist the urge to offer an immediate solution. Focus on the result the client is seeking to achieve and propose ideas for analyzing the root causes of the problem.
− Requires multiple solutions or tactics to be implemented.
Strategic Role of the HR Department
>
Strategic seat at table, driving overall systemic approaches (i.e.workforce planning, position prioritization, employee morale efforts)
− Companies that empower key HR professionals to take on a “strategic business partner” role create HR teams that outperform the average HR organization by 25 percent or more.*
− Such companies typically outsource HR administrative functions and realign their HR business partners to work with line executives on hiring, coaching, leadership and collaboration.*
>
Creation of tactical frameworks designed to ensure consistency, compliance and confidenceBest Practices for the HR Department
> Move beyond tactical functions to a strategic partner role*
> Focus is on organization-wide change
> Staff as a valued resource aligned with organizational priorities
> Target training: Training Magazine found that the average spend on training for the top 125 corporate companies is 6.7%.
*Source: Christensen, R. (2006). Roadmap to strategic HR: Turning a great idea into a business reality. New York: AMACOM. Position Processing Personnel Management Human Resource Management Strategic HR
Review Approaches
>
Strategy - Focused: Determines whether the efforts of the HRdepartment align with the organization’s goals or strategic plan.
>
Efficiency - Focused: Helps the organization maintain orimprove a competitive advantage by comparing its practices with those of companies identified as having exceptional HR practices.
>
Compliance - Focused: Measures how well the company isFrom High Level With More Detail
Start with Strategy
Strategic Review:
High Level Ideas
Compliance Audit:
More on Strategy Input from Department Heads Input from Elected Officials
Poll
Which of the following functions
are examples of strategic HR
management?
A. Employee recordkeeping
B. Long-term workforce planning C. Job posting
An Efficiency-Focused Process
>
Data Collection− Follow the life-cycle of an employee − Understand roles of HR staff
− Identify policies, procedures and systems − Listen to pain points
>
Analysis and BenchmarkingMore on Efficiency
>
Review documentation: Is each process adequate as described?
>
Review practice: Does each described process reflect reality?>
Find Pain Points:− Is the process timely and efficient?
− Are there any bottlenecks, shortcomings, or breakdowns in the system?
A Compliance-Focused Process
>
Common Areas Reviewed>
Common Methods Applied− Document Review − Checklists
>
Common Deliverables − ERISA − COBRA − EEOC − OSHA − ADA − FMLA − FLWA/FLSA − Title VII − Compensation − Unemployment − Workers Compensation − Age discrimination − Sexual harassment− Immigration reform and control
More on Compliance
>
Largest Areas of Legal Exposure− Hiring
− Performance Management
− Discipline
− Termination
>
Specific Risks to Consider− Misclassification of exempt and nonexempt jobs
− Inadequate personnel files
Maximizing the Benefits of Review
>
Regardless of the focus of the review, these elements are key to success− Transparency − Benchmarking − Fiscal Analysis
− Interdepartmental partnerships − Strategic leadership role of HR − Plan for implementation
Strategy to Implementation Components Necessary Elements Action Steps Improvement Initiatives Strategic Objective Goal Description and Priority Level Defined Outcome and Measures Task Details Task Details Owner Due Date Resources Defined
Task Details Owner
A high level of detail in each of
the various elements of your plan will improve
your ability to execute it effectively.
Implementation Plan Example
(Content is for Illustration Only)
Initiative Action Step Priority Timeline Activities Assigned
To Monitoring Responsibility Completion Date 1. Adopt a TCO
& ROI Model High
Short term
a. Review BT Model and determine if applicable to
other areas. b. Identify specific costs relative to other applications c. Gather relevant market data to for vendor cost
comparison Finance Director Executive Director March 2012 2. Develop a communication plan for TCO and ROI awareness
High Short term
a. Develop specific materials and venues for information distribution. b. Identify potential audiences and specific method of
information sharing (e.g. email, direct person to person). c. Determine needed resources to carry out plan.
Innovation Director Executive Director Initial information - January 2012 3. Prepare and distribute materials with value quotient High Short term
a. Assign responsibilities to carry out TCO
communication plan. b. Secure marketing or public relations assistance for
first time development of materials.
Member Care Coordinator Executive Committee Initial information - January 2012 4. Develop schedule for reviewing TCO model Medium Mid-term
a. Establish cost allocation review schedule to
coordinate with annual budget cycle. b. Access changes in costs and transactions. c. Review member input relative to costs and allocation
methodology. Finance Director Executive Director September 1 annually Articulate ROI, increase understanding and enhance member buy-in
Poll
What is the first step in developing
an implementation plan?
A. Assigning owners to tasks B. Determining deadlines
C. Identifying strategic objectives D. Defining outcomes of tasks
Tools for Strategic HR Departments
> Examples of tools for strategic HR management
− Excellent Job Classification
− Workforce Planning
− Performance Evaluation
− Competency Models
− Information Technology
> Discussion of these tools
− Why this tool
− Best practices
− Options to consider
Job Classification
>
Why Job Classification
− Core Applications: basis for pay rates, organizational structure, and compliance with legal requirements
− Other Applications: recruitment/selection criteria, workforce and succession planning, Performance Evaluation, development and training, risk management and legal defense
>
Best Practices
Job Classification
>
Options to Consider
− Recommendation: Unify Job Classification Approach
− Options for Unified Approach, listed from most to least recommended 1. Outsource Job Classification Rating Process
2. Select a single new method
• Modification of DBM to Broadband Method • Market Pricing Approach
3. Choose one of the existing methods
• More employees currently on Decision Band Method
• Focus group disliked Position Evaluation Boards with the Hay Method • Those using DBM may have been under represented in the focus group
− Recommendation: Eliminate 5 Year Review Cycle and Limit Review to New or Significantly Modified Positions (>20% of job duties changed)
− Eliminate Formal Classifications
− Recommendation: Pay for Performance/Effort Should be the End Goal
Workforce Planning
>
Why Workforce Planning
− Significant anticipated retirements from aging workforce
− Attrition due to concerns over collective bargaining changes
− Impact of lost knowledge upon ability to deliver services
>
Best Practices
− Identify and plan for staffing, training and knowledge needs
• Involve department management
• Proactive tracking of projected attrition
• Continuous competency monitoring
− Establish conditions that support workforce planning initiatives
“Engaging in the leading-edge practice of workforce planning, including enterprise forecasting and skills-gap scenario planning, is one of the greatest drivers of business results. For example, those companies that excel in workforce planning drive four times the value of those companies that focus on the
Workforce Planning
>
Options to Consider
− Collect/track data regarding employee age and years of service
− Establish a framework for assessing workload and staffing levels
− Develop a position and employee competency inventory
− Prioritize resources based on program priorities
− HR leads planning effort with a proactive and cohesive approach
• Develop strategy for recruiting qualified staff:
o Consider adoption of more flexible and appealing hiring procedures
o Expedite screening and validation of entry/examination requirements
o Develop worker-friendly personnel policies
o Explore benefits of more flexible job descriptions
• Develop strategy for developing existing staff competencies
• Develop strategy for cross training and knowledge transfer
• Communicate strategies and seek feedback from stakeholders
− Include training and workshop time related to workforce planning as part of
the upcoming supervisory training program
Performance Evaluation
>
Why Performance Evaluation
− Tool for employee performance measurement: basis for pay increases,
promotions, assignment changes and/or discipline
− Tool for employee growth: plan the training, guide job experiences, mentoring
and other activities related to employee development
>
Best Practices
− Balances performance measurement and growth in way that reflects
organizational values and culture
− Aligns with strategic objectives/priorities of the County
Performance Evaluation
>
Options to Consider
− More automation of processes (see use of technology section)
− Competency Model
• Implement in phases and organize in groupings o By category of job (supervisory, administrative, professional, etc.) o By skill area of job (finance, information technology, etc.)
o All employees (teamwork, communication, punctuality, etc.)
• Should be used for recruitment, development and placement in addition to Performance Evaluation
• Requires buy-in and support of leadership and effective communication of rationale and advantages with staff
− 360-Degree Evaluation (aka Multisource Feedback) Model
• Evaluations from peers, supervisors, direct reports, internal and external customers, suppliers, etc.
Competency Models
>
Three ways to use Competency Models
− Develop a common competency model at the organizational level and create subsets of performance standards reflecting those competencies (for example, professional jobs, administrative jobs and managerial jobs).
− Identify job families such as information technology, finance and management. Develop customized competencies and performance standards for each job family and level.
− Define a core set of performance standards and competencies—such as interpersonal effectiveness, teamwork and communication— across all jobs. Define specialized technical competencies for each individual job group.
Information Technology
>
Why Information Technology
− Improve workflow
− Empower employees with self-service options
− Improve communication
− Increase capability for analysis and planning
− Enhance decision-making relative to human resource management
>
Best Practices
− Integration between payroll and human resource systems is imperative to ensure
that processes and decision making is effective, efficient and has positive impact
− Workflows and priorities should be clearly defined before a pursuing a
technology solution
− The largest part of an organization’s budget is it’s personnel costs, so HR needs
Review
> Why human resource management is central to cost control
> Key cost considerations relative to legislative mandates and collective bargaining negotiations
> Identifying key steps to optimizing your human resources
− Alignment with strategic priorities entity-wide
− Key metrics and HR Audit points
> Benefits of moving from tactical HR to strategic HR Dept.
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