Seven HR Capabilities that Drive Performance Leadership - Hackett Group June 2015

Seven HR Capabilities that Drive Performance Leadership - Hackett Group June 2015

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  World-Class HR IThe Hackett Group I 1© 2015 The Hackett Group, Inc.; All Rights Reserved. | CR_2000183 The imperative for efficient and effective delivery of HR services has taken on a new dimension. HR must also respond with agility to changing demands and opportunities in an environment characterized by unprecedented competition, extreme volatility in the supply and cost of resources, and disruptive change from new technologies. Amid this context – and for the first time in many years – many HR organizations expect modest increases in FTEs and budgets for 2015 (Figure 3). Nevertheless, nearly one-third project staff reductions, reflecting pockets of continuing pressure on head count. The budget picture is slightly better than in the past, with 40 percent of HR groups expecting increases this year. HR Executive Insight Management Issue June, 2015 The 2015 analysis ofThe Hackett Group’s HR benchmarking database quantifies the performance advantage of world- class companies compared to typical HR organizations. Among the results: world-class HR organizations spend 37 percent less (Figure 1) – up to $17 million for the typical company1 and use 31 percent fewer FTEs (Figure 2) than peers. Analysis also revealed the hallmarks of current world-class HR organizations and the critical capabilities they leverage to achieve superior results. Achieving world-class HR performance can take five years or more. However, a company is likely to see marked improvements within two.These early wins are pivotal, establishing a foundation for more sweeping successes down the line. Key takeaways • Agility – the ability to quickly respond to changing business requirements – is a growing imperative for HR organizations, but many are challenged by flat budgets and FTE counts. • The hallmarks of this performance advantage are unrelenting focus on operational excellence, strategic talent management, close alignment to the business and insights that drive performance. • World-class HR organizations achieve outperformance by leveraging seven difference-making capabilities that span service delivery, technology, business partnership, talent management, skills, strategy workforce planning and measurement and analytics. By Nathalie Bression, Rebecca Collins andTony DiRomualdo Com plim entary Research Seven HR Capabilities that Drive Performance Leadership The world-class performance advantage: FIG. 3 Average increases expected in HR FTEs and budgets in 2015 FTEs 1.5% Budget 1.4% Source: Key Issues Study,The Hackett Group, 2015 FIG. 1 Total HR cost per employee Source: The Hackett Group, 2014 Peer group World class 37% 0 500 1000 1500 2000 2500 FIG. 2 HR FTEs per 1,000 employees Source: The Hackett Group, 2014 Peer group World class 31% 0 3 6 9 12 15 1 The cost savings calculation is based on a company with $10 billion in revenue.
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  World-Class HR IThe Hackett Group I 2© 2015 The Hackett Group, Inc.; All Rights Reserved. | CR_2000183 Hallmarks of the world-class advantage At the highest level, world-class HR organizations are distinguished by four distinct characteristics: • Operational excellence: Trust and credibility are gained with stakeholders through consistent and reliable service delivery. This also allows more resources and manage- ment attention to focus on activities that deliver higher value to the business. • Strategic talent management: Leaders with people management responsibilities are equipped with the capabilities and support they need to do the job well. • Close alignment to business needs: HR staff work side by side with the business and are able to react with agility as needs change. • Insights that drive performance: Well-developed reporting and analytics capabilities al- low HR to provide valuable insights into its own operations and business performance. Following in the footsteps of these leading organizations, HR executives can: • Align their metrics more closely with overall business imperatives • Improve their ability to leverage HR applications • Develop the right HR talent for functional excellence and business partnership • Turn their function into an engine for greater efficiency and effectiveness • Provide more value to their customers in the organization Getting started on the path to world-class performance Analysis of data from thousands of our benchmarks and hundreds of our performance studies revealed that the capabilities most strongly correlated with HR success are also the drivers of organizational high performance, such as employee engagement and workforce productivity. The capabilities can be grouped into seven categories, which we call the HR “Step Up to World-Class” Framework (Figure 4). Each capability is a gear that fits with others to deliver progressively greater levels of performance and value to the business. These are discussed below. 1. HR staff skills One of the biggest challenges facing HR organizations is “becoming fluent in the business” – that is, understanding and being able to comfortably discuss its markets, strategy, competition, operations and drivers of revenue and profits. This is the only way that staff can truly impact business performance. Significantly more staff in world-class HR organizations possess this knowledge (Figure 5). FIG. 4 “HR Step Up to World-Class” framework Source:The Hackett Group HR S T E P P U HR staff skills Strategic workforce planningppp ggg Technology/ automation strategy E People management skills of leaders Unified, streamlined processes and systems Performance measurement and analytics mployee and manager self-service
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  World-Class HR IThe Hackett Group I 3© 2015 The Hackett Group, Inc.; All Rights Reserved. | CR_2000183 Moreover, companies are constantly under pressure to change, both in incremental and transformational ways. World-class HR, bringing its advanced organizational skills to the table, have two-thirds more staff focused on leading business change. Additionally, 80 percent have staff who partner to a high extent with the business lines to enable organizational performance. Action step: Hire or train HR staff with the skills and business acumen required to meet the business needs of senior executives. Start with HR business partners who have the most opportunities for interactions with business unit executives. Recruit staff from key business units in your company to serve a stint in HR as a business partner. Have them mentor and coach other business partners that have come up through the HR ranks. To build business acumen more broadly, assign staff to cross-functional teams to provide exposure to different parts of the organization’s operations and make understanding of business fundamentals a requirement in hiring of HR staff. 2. Strategic workforce planning Strategic workforce planning (SWP) is like a GPS for managing talent, making the road ahead more visible for company managers and helping them find the most efficient route to success. SWP translates business strategy into its implications for future talent. Analyzing the dynamics of talent demand and supply (current staffing levels, growth assumptions, historical internal/external labor movement, macro-level workforce demographics) pinpoints areas of talent-related risk. This data can be used by the business to prioritize and fund improvements aimed at attraction and retention of talent to fill critical roles. When done well, SWP can improve both business and HR performance. World-class HR organizations are much more advanced in their implementation of SWP capabilities. They have automated workforce-related data and make use of tools and platforms for analysis of this information. Furthermore, they are much better at working with the business to incorporate workforce data and talent analytics into decision-making and planning processes (Figure 6). These capabilities are what allow them to be more effective strategic partners to the business on issues related to strategy execution and talent attraction, engagement, management and retention. FIG. 5 Demonstration of critical business skills Source:The Hackett Group, 2015 Percent of HR staff working extensively with line managers to enable organizational performance improvements Percent of HR staff charged with facilitating business change as a primary responsibility Percent of HR leaders engaged proactively by management to partner on strategic business opportunities 60%50% 80% Peer group World-class 67% Peer group World-class 21% 35% 72% Peer group World-class 29% 50%
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  World-Class HR IThe Hackett Group I 4© 2015 The Hackett Group, Inc.; All Rights Reserved. | CR_2000183 Action step: Develop SWP capabilities and processes, including data management. The first steps should include using benchmarking to set baselines for employee cost and staffing levels, performing a total cost of workforce (TCOW) analysis, and developing standardized data elements to enable uniform analysis and reporting of workforce data. These actions help create the foundation for the program. Then focus on core areas where skills and talent shortages are most severe or roles that are recognized as critical to organization performance. Assess risks and costs of turnover of these positions and future demand and supply trends. 3.Technology/automation strategy Technology/automation strategy provides the road map for creating an electronic platform that enables efficient and effective HR processes and service delivery. Increasingly, this becomes the platform for delivering a whole new class of services, such as information and analytics to guide decisions. Moreover, electronically enabled processes reduce errors and make information easier to access, freeing HR staff for higher-value work. Technology spend per HR FTE in world-class organizations is higher due to greater use of process automation (Figure 7). In some areas the difference between the world-class and peer groups is as high as nearly 80 percent. This investment yields real productivity advantages: world-class HR are able to service 59 percent more employees per FTE. More important, a high use of automation allows HR staff to devote more time to talent and business performance-related activities. FIG. 6 Strategic workforce planning capabilities Source:The Hackett Group, 2015 Have an explicitly articulated workforce strategy Maintain common platforms and tool sets to enable access to SWP data Facilitate senior management involvement in the SWP process 1.5x51% 78% Peer group World-class 2.6x Peer group World-class 23% 60% 3.3x Peer group World-class 18% 60% FIG. 7 HR technology cost, automation and productivity Source:The Hackett Group, 2015 Technology cost per HR FTE Percentage of transactions automated Employees served per HR FTE 34% Peer group World-class Total rewards administration Payroll administration Staffing services Time and attendance Training administration 59% Peer group World-class PEER GROUP WORLD-CLASS 53% 60% 70% 73% 79% 20% 50% 27% 50% 32%
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  World-Class HR IThe Hackett Group I 5© 2015 The Hackett Group, Inc.; All Rights Reserved. | CR_2000183 Action step: Design a technology strategy, implementation road map and data architecture for building a platform for delivery of a comprehensive set of HR services. Including performance measurement and analytical capabilities is essential. Work closely with IT leadership to create long-term HR technology strategy, architecture and implementation plans. Recruit and train HR staff to assume greater responsibility for technology management and usage. Identify specific business-related goals for the use of HR technology. Create a technology road map that defines desired strategic outcomes, KPIs, needed behaviors and human-capital initiatives. The road map should support the business case for HR technology, identifying the most logical connections between HR technology and achievement of strategic objectives. 4. Employee and manager self-service Employee and manager self-service delivers information and tools directly to users, improving their productivity while also helping HR transfer its attention to more value- adding work. Managers at more than half of world-class HR organizations make extensive use of self-service technology to perform tasks related to talent acquisition, reward and performance appraisal (Figure 8). At nearly two-thirds of world-class companies, employees use self-service over 75 percent of the time to maintain personal and benefits data and perform career-development-related tasks. Self-service should be designed to equip managers to be effective leaders, not increase their administrative burden. This requires the provision of productivity tools, information and functionality that allow them to do their jobs better. The same is true for employees, who should be able to access all the functionality they need to manage their own personal information and careers. Action step: Establish or expand manager and employee self-service functionality, focusing on a high-quality user experience that will permit HR resources to be redirected to higher-value activities. Identify key stakeholder groups and individuals, their interactions with HR and general attitude toward HR. Document the data and functionality needs and preferences of each stakeholder group. Develop services from the perspective of the customer. This applies to the way processes are designed and the touch points a customer has with the HR organization through the various interaction channels available. FIG. 8 Percentage of companies with high degree (>75%) of self-service utilization Source:The Hackett Group, 2015 Employee self-service Personal/life-event data changes Course selection and scheduling Development plan data capture Employee competency/ skill inventory PEER GROUP WORLD-CLASS Manager self-service Performance appraisal data capture Job/grade changes Incentive bonus awards Merit pay changes Employee pay status change Interview results/ data capture Job requisition submission 50% 50% 50% 50% 38% 63% 63% 41% 17% 29% 44% 33% 20% 49% 25% 63% 63% 63% 11% 29% 44% 39%
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  World-Class HR IThe Hackett Group I 6© 2015 The Hackett Group, Inc.; All Rights Reserved. | CR_2000183 5. People management skills of business leaders The Hackett Group’s research has previously documented the strong correlation between leaders’ people management skills and the strategic performance of HR and the business.2 World-class HR organizations help improve the effectiveness of their leaders’ people management skills in a variety of ways. Training is one of the most important, particularly in the basics such as giving feedback, performance coaching and building consensus. Leadership training is provided to a high extent at half of world-class organizations, which are also twice as likely to provide leadership training to new managers (Figure 9). HR organizations need to be sure they are spending enough time working with stakeholders to ensure that leaders at all levels are being developed. In the world-class group, HR business partners spend 60 percent more time than the peer group facilitating organizational and leadership development. Action step: Target training initiatives and on-the-job experiences to increase the people management skills of leaders. Provide opportunities to take on challenging assignments aimed at developing specific skills. For example, work on people development skills by serving as a mentor for a high-potential employee, training a new employee in a specific skill or partnering with a skilled people manager to lead a special project team. 6. Unified, streamlined processes and systems Processes and systems that are both unified and streamlined make it possible for HR to operate in a cohesive and productive fashion. This attribute does not happen by accident; it takes explicit design and methodical implementation. World-class HR organizations manage their processes holistically. For example, they are three times as likely to assign formal process ownership roles than peers. Their processes are designed to be more efficient, as are their processes and organization structures. The results are reflected in their significantly greater spans of control. Furthermore, they far exceed the peer group in integrated HR applications (Figure 10). FIG. 9 Leadership development practices Source:The Hackett Group, 2015 Leadership training offered to a high extent Percent of generalist time spent on facilitating organizational and leadership development Leadership training provided to new managers 61%31% 50% Peer group World-class 60% Peer group World-class 10% 16% 111% Peer group World-class 19% 40% 2 “The Performance Advantage of HR Capability Maturity Leaders,” The Hackett Group Book of NumbersTM Research Series, Vol. 17, No. 1
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  World-Class HR IThe Hackett Group I 7© 2015 The Hackett Group, Inc.; All Rights Reserved. | CR_2000183 Action step: Implement uniform processes and supporting technology to enable efficient and effective HR delivery. Start with a thorough documentation and assessment of HR processes. Then identify opportunities to standardize, simplify, eliminate and automate work. Implement technology that facilitates the sharing of data and workflows across multiple systems. 7. Performance measurement and analysis World-class HR organizations are more advanced in their development of performance measurement and analytics capabilities. Their reports on performance are thus more meaningful and their insights more applicable to decision making. Two out of three publish HR scorecards monthly or quarterly, alerting management to issues needing attention (Figure 11). Their scorecards contain more metrics of importance to the business and are more broadly distributed companywide. Most important, world-class HR organizations use key metrics to strategically align the HR and business leadership teams around the aspects of human capital that influence performance or have the potential to do so. FIG. 10 HR organization, processes and systems Source:The Hackett Group, 2015 Overall span of control Percent of groups with dedicated owner for hire-to-retire process Percent of groups with integrated HR applications 39%2.8 3.9 Peer group World-class 212% Peer group World-class 24% 75% 58% Peer group World-class 26% 41% Peer group 48% World-class 67% Percent of organizations that regularly publish HR scorecard (quarterly or monthly) Source:The Hackett Group, 2015 40% Category Metric Executive mgmt./ board BU leaders HR leaders HR process leaders HR overall High-performer turnover HR overall Revenue/FTE HR overall Workforce performance HR overall Workforce cost Performance management Performance-based pay differential Management & leadership development Successor pool growth rate Management & leadership development Manager turnover Management & leadership development Manager quality Management & leadership development Successor pool coverage Recruiting & staffing Quality of hires Recruiting & staffing Employer brand strength Source: Measuring HR Effectiveness and Impact Performance Study,The Hackett Group, 2014 Measures tracked by >50% of performance leaders but <50% of peer group FIG. 11 Measurement and communication of HR performance
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  World-Class HR IThe Hackett Group I 8© 2015 The Hackett Group, Inc.; All Rights Reserved. | CR_2000183 Action step: Strengthen performance measurement and analytics capabilities. HR must be able to report and advise on topics with concrete value to business management. Create a dedicated analytics group to fully leverage skills and tools across all areas of HR. This may range from a single person in small or mid-sized HR organizations to a center of excellence staffed by a team of people in large, multibusiness enterprises. Seek candidates who are proficient in data analysis and modeling techniques from other disciplines such as marketing, finance and operations. Train current HR staff in data analysis and interpretation techniques. Where to begin: Define your HR function’s current state Start by identifying the gaps. Which competencies does the business need from HR that you’re currently not able to provide? Rethink job descriptions, define new competency models and assess your current staff against them. Once you’ve identified the gaps, create a plan to develop your people’s skills or to recruit the necessary outside talent in order to partner more effectively the business. These may sound like heavy-duty investments, but as you’ve seen from The Hackett Group’s results of world-class HR performance, the payoff is huge. Considering all that HR organizations are up against, it’s a bet worth making. Related Hackett Research “2015 Key Issues: Enabling the Agile Enterprise,” January 2015 “The HR Agenda for 2015: Major Transformation Efforts Are Planned to Close Critical Gaps in HR Capabilities,” January 2015 “Measurement Matters: How Performance Leaders Use Metrics to Align Business and HR Strategies,” December 2014 “Operational Planning and Analysis: Factors That Improve Planning and Analysis Performance in Business Services,” December 2013 About the Advisors Nathalie Bression Senior Director, Human Resources Executive Advisory Global Practice Leader Ms. Bression has over 20 years of human resources experience with a focus on general HR management, talent management, performance management, process improvement, HR shared services, compliance and employee relations. Her experience includes analysis and utilization of HR-related data and analytics to help organizations identify strategic priorities; design and deploy efficient and effective processes, implement service delivery models, and conduct overall HR management. She also has deep expertise in integrated talent management and overall strategic HR support to business units and functional groups. Ms. Bression is certified by the Society for Human Resource Management both internationally and for North America. Rebecca Collins Senior Director, North American Practice Leader, HR Advisory Ms. Collins has over 20 years of professional experience in managing the design and delivery of large transformation projects on a global scale. She is highly proficient in strategic planning, integrated talent management, organization design, business case development, and project management. Ms. Collins also serves as global owner of The Hackett Group’s talent management program.
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  © 2015 TheHackett Group, Inc.; All Rights Reserved. | CR_2000183 This publication has been prepared for general guidance on the matters addressed herein. It does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. Tony DiRomualdo Senior Research Director, Human Resources Executive Advisory Program Mr. DiRomualdo has over 25 years of research and advisory experience in the areas of HR, IT and business strategy. His work has focused on areas including talent management, workforce planning, recruiting, learning and development, employee engagement, leadership, performance management, and HR outsourcing and technology. Mr. DiRomualdo has directed several groundbreaking global studies, producing insights and tools used by major corporations worldwide. He is the author of numerous Hackett reports and case studies and has published several articles in prominent business and academic publications including MIT’s Sloan Management Review and Chief Learning Officer magazine. Before joining The Hackett Group, Mr. DiRomualdo headed his own research firm and ran research programs at major management consulting firms. For more papers, perspectives and research, please visit: www.thehackettgroup.com Or to learn more about The Hackett Group and how we can help your company sharply reduce costs while improving business effectiveness, please contact us at 1 866 614 6901 (U.S.) or +44 20 7398 9100 (U.K.). This publication has been prepared for general guidance on the matters addressed herein. It does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. World-Class HR I The Hackett Group I 9© 2015 The Hackett Group, Inc.; All Rights Reserved. | CR_2000183 The Hackett Group (NASDAQ: HCKT) is an intellectual property-based strategic consultancy and leading enterprise benchmarking and best practices implementation firm to global companies. Services include business transformation, enterprise performance management, working capital management, and global business services.The Hackett Group also provides dedicated expertise in business strategy, operations, finance, human capital management, strategic sourcing, procurement and information technology, including its award-winning Oracle EPM and SAP practices. The Hackett Group has completed more than 11,000 benchmarking studies with major corporations and government agencies, including 93% of the Dow Jones Industrials, 86% of the Fortune 100, 87% of the DAX 30 and 51% of the FTSE 100.These studies drive its Best Practice Intelligence Center™, which includes the firm’s benchmarking metrics, best practices repository, and best practice configuration guides and process flows. It is this intellectual capital that enablesThe Hackett Group’s clients and partners to achieve world-class performance. Email: [email protected] www.thehackettgroup.com Atlanta +1 770 225 3600 London +44 20 7398 9100 Sydney +61 2 9299 8830 Atlanta | Chicago | Frankfurt | Hyderabad | London | Miami | Montevideo | New York | Paris | Philadelphia | San Francisco | Sydney | Vancouver