Solving The Value Equation

Core Components of Strategic HR

Executives Are Using Outsourcing to Improve Their Workforce  Performance and Effectiveness through all of the following Strategic HR programs and initiatives: 

1. Building and Maintaining Leaders >>“In the end, all business operations can be reduced to three words: people, product and profits. Unless you’ve got a good team, you can’t do much with the other two.” – Jack Welch. 
   
2. Enabling Profitability Drivers >> “Creating operating scale in the business to drive growth is the #1 driver of wealth.” –Garry Meier 
   
3. Building a ‘Perform’ Culture >> “In 2009 and beyond, wealth will be created for ‘perform businesses’ that are the most productive and cost efficient, promote and excel at change management, and focus on being REALLY good at a few things i.e. customer satisfaction.” - Garry Meier
   
4. Facilitating “Integrated Talent Management” >> “50 percent of companies are now implementing some form of “Talent Management; and the value-add is 26 percent higher revenue-per-employee than companies with no integrated processes.” –Bersin research analyst group.
   
5. Team Building >> “The team with the best players wins. Giving people self-confidence is by far the most important thing that I can do. Because then they will act.” – Jack Welch
   
6. Strategic Workforce Management (Planning, measuring, benchmarking) >> “If you pick the right people and give them the opportunity to spread their wings and put compensation as a carrier behind it you almost don't have to manage them.” – Jack Welch.

How To Effectively Implement Strategic HR

Start by asking the right questions:

1. Are you overpaying or underpaying your employees?  How do your non-monetary benefits compare to other local companies that you compete for talent with? (Benefits Philosophy)
   
2. Are you getting your monies’ worth from your employees?  i.e. Is your compensation driving the right behaviors and results? Is your compensation aligned with your financial expectations?  (Compensation Philosophy)
   
3. Do your managers deal with performance issues, good and bad, in a pragmatic and straightforward manner?  Do you make good judgments in this area?  Do you have effective decision makers? (Manager Effectiveness)
   
4. Is the work environment a ‘High Performance Workforce’? What has been done to create “People Scale” and “Management Scale” in the business? (Scalability)
   
5. Do you have more “A Players” than the competition?   Do you have all the capabilities and skills needed to succeed?   Are all of our people consistently doing the right activities and illustrate the proper behaviors to support the success of the business? Is succession planning in place for managers and leaders?   (Workforce Planning)
   
6. Does the organizational culture positively impact the business? Are all of your people consistently being productive and effective?  (Role Clarity)
   
7. Are employees doing the right job at the right time, the right way in the right quantity? Do you know what the right activities for the business are and can they be recognized when they occur?  (Qualities of Right Philosophy)
   
8. What programs are in place to DRIVE consistent performance and productivity? Are your people outperforming the competition?   (Performance Development)  
   
9. Are your employees fully motivated, engaged and aligned with the financial objectives of the business? (Constituency Alignment)
   
10. Are “Proactive Defense “ programs and process in place?  Are you in compliance with the numerous federal and state laws?   How much executive and management time is wasted on mundane or people compliance issues? Are all workforce risks effectively mitigated?  (People Costs)
    

If you cannot answer “YES” to the majority of the above ten questions then there is ample room for improvement.

The Value of Strategic HR

‘Ineffective people = ineffective businesses’; it is that simple, and that complex because every business depends on its’ people to effectively perform as a team to achieve its organizational goals and objectives.

Unfortunately, “Traditional HR” (which has historically been administratively focused) provides little value to financial goals and does not manage the people issues that keep executives up at night.  

The move to adopt human capital best practices, also commonly referred to as ‘Strategic HR Capabilities” or implement a “High Performance Workforce” has been occurring at the Fortune 500 level since the mid 90’s. 

The recent financial hardships, changes in laws and regulations, and a fundamental shift in small business economics has mandated that top performing companies invest in their workforce like never before. 

With the growing demands and challenges placed on small business executives, those that adopt best practices, utilize effective external help/support and business partners, and rethink their current approach to HR have a chance to preserve and create wealth. 

Numerous studies by “Great Places to Work Institute”, consulting firms like McKinsey and Towers Wyatt, and business thought-leaders like Jack Welch and Warren Buffet all agree: the investment and alignment of a company’s workforce directly impacts profitability and financial success. 

Need further proof of the value of Strategic HR?  Here is the Business Case for Strategic HR:

1. Time Savings and Focus for Executives: Within small businesses, organizational leaders are themselves often responsible for HR (i.e. the workforce’s engagement, productivity, and development), an area where they typically have limited training and experience.

2. Workforce Scale:

• Highly engaged employees are on average 26% more productive, have lower turnover, and greater shareholder return (see findings in Watson Wyatt’s 2008/2009 WorkUSA Report). 
• Talent Management Practices power engaged companies to achieve higher profit per employee by nearly 40% (McKinsey).
• “Imagine if your employees enjoyed coming to work. Great Places to Work have outperformed the market 2:1”  (Great Place to Work Institute)
• “Nearly 40 percent had no formal measures to gauge the impact of their HR and training efforts on the performance of their top three workforces, and nearly another 40 percent said they have only limited measures.” Accenture ‘High Performance Workforce Summary’ 2006.
• “HR equals constant upgrading.  100% transparency into performance. Take care of the best and move up the averages, much like a GM/ player personnel director in sports. The only way to win is to have a great team.” “Enormous chance [for businesses] to change and reset, but takes a culture of innovation. The one thing you have to do in a time like this is communicate like hell… so your people know every move that is going on. You don’t go in and just slash positions and they don’t know why. HR defines a company in bad times.” Jack Welch @ 2009 SHRM Conference New Orleans, LA.

3. Risk Mitigation: 1 in 4 privately held companies has been sued by an employee The average litigation and settlement costs are nearly $190.000. (Chub Insurance).

4. Cost Efficiencies: The average company saves 20% to 60% per year (HRO Association).

Did you know than only a third of companies tailor their people policies and development to align with their workforces needs?

The primary objective of Strategic HR is to align the Workforce Capabilities to the Business Objectives of the organization. This includes: creating a strong pipeline of leaders that will drive business growth, installing workplace programs that ensure engaged, motivated, and productive and employees as well as implementing scale and risk operating measures.

Evaluation and Selection Criteria for HR Technology

“For years, we were able to practice HR without needing the numbers.  Those times have changed, and data deficiency has given the HR professional an Achilles’ heel.”  (Source: Talent Management Magazine article: “All Aboard the Numbers Train”)

HR Systems Drive Efficiency & Improve Profit-per-Employee

“50 percent of companies [enteprises] are now implementing some form of ‘Talent Management’ and the value-add is 26 percent higher revenue-per-employee than companies with no integrated processes.” –Bersin research analyst group.

The equation is simple, if profit-per-employee is increased through higher productivity and employee engagement and/or by eliminating waste and administration then the overall profit of your organization will increase.

While having an HR system becomes a requirement at a certain size (based on company complexity and their people needs) how do you choose from the hundreds of quality solution providers?  

The criteria system for evaluating HR Technology Systems that we start with is as follows (a full list of features and functionality should be compared in terms of the priority/need for your organization):

A major trend that has started to spread across industries is the need for many organizations to adopt full “Integrated Talent Management.”  This holistic talent management platform is typically implemented in modules:

I. Core HR: Payroll, Benefits, ESS & MSS (Portals), Administration, Compensation, T&A, etc.

II. Employee Record

III. Training and Development: Competencies, Assessment, LMS, Performance Management, Workforce Management, etc.

IV. Talent Acquisition: ATS, Onboarding, Assessment, Selection, Screening, Workforce Planning, Job Board integration, etc.

V. Enterprise Functionality: Workflow, Document Management, Testing and Surveys, Communication, CRM, Project Management, Social Networks, Web 2.0, etc..  For some organizations, it makes a lot of sense to take the CRM or ERP plunge in tandem with an HR investment in order to have true integration with core business processes. 

For a list of vendors checkout the following resources:

• http://www.humanresourceexperts.com/
• http://hrchitect.friscowebsites.com/Partners/vendorpartners
• http://www.bersin.com/Lib/Rs/
• http://www.hrtechconference.com/expo_attendee.html
• http://www.comparehris.com/

The most important result of systems implementation is that HR becomes strategic and enables the organization to focus.  Contact Ephor for a full list of features and functions by module component listed above.

The Adoption of HR Technology by Small Businesses

What percentage of small businesses have implemented an HR system?  (i.e. an  HRIS/HRMS (Human Resources Information/Management System), Talent Acquisition (Recruiting / ATS – applicant tracking system) or Talent   Management System?)

A little online research reveals the adoption rates of HR technology at mid-market and enterprise levels as follows:

• Enterprise level adoption rates have been forecast as high as 85% (although less than half are in an “intermediate” or “advanced” stage of talent management utilization).
  • “Talent Management Software (@ the Enterprise level) purchases were flat to slightly up in Q1, and we believe the market grew slightly (3-5% in Q2)”. 
  • “Only 14% of (Enterprise) buyers use their ERP or HRMS vendor for talent management.” Bersin Blog.
• Numerous “experts” (read: online bloggers) have speculated that approximately 60% of the mid-market has partially adopted an HR system.
• Thirty-five (35%) percent of companies with 2,500 employees  have adopted a module (www.unitedBIT.com) of HR technology.

Having worked with more than two-dozen HRO, HR consulting, and HR technology firms over the last few years I can verify first hand that less than 1 in 10 small businesses have implemented a ‘holistic Talent Management’ system.  Ephor’s primary research reveals that the  majority of small businesses have outsourced payroll and benefits, a third have outsourced recruiting at least partially, and firms handle the remaining components of ‘Talent Management’ with internal resources or not at all!

Some discussion related to the topic of why there has been lackluster adoption of HR technology by small businesses recently took place at  HRmarketer Blogpost on the state of small business HR technology adoption with Steve Boese (professor of Human Resources Technology at the Rochester Institute of Technology).  Steve attributes the lack of adoption to the following:

1. the perception that technology offerings are very expensive,
2. the perception that HR technology is complex, and
3. the fact that for companies with limited resources adopting a new technology can be a daunting task (i.e. people are unaware of what is available).

But rather than debate the adoption rates of small business perhaps a more interesting question is at what inflection point, on average, do growing and high potential organizations adopt HR systems?

Depends on the industry, access to capital (i.e. if they are venture funded the implementation of a ‘holistic talent management platform’ occurs much earlier: as little as $1M in annual revenues), and growth rates, but on average the starting point occurs around 300 to 600 employees and the tipping point depends on the complexity of the business and sophistication of the management team. I would further assert that less than 5% of the small business marketplace is getting the needed value from their “payroll/benefits plus” system highlighting a tremendous gap and opportunity.

A few notable small business players that service the less than 100 employee market to watch include:

Zoho (http://people.zoho.com/jsp/iamlogin.jsp), Taleo (www.taleo.com), PCRecruiter (http://www.pcrecruiter.net/home.htm), People-Trak (http://www.people-trak.com/), and Vana Consulting (implementation firm for Zoho)(http://www.vanaconsulting.com/). 

I am sure that I am leaving someone out?

The Business Case for HR Technology

The following is a brief list of the benefits of Talent Management / HRMS (human resource management system) – i.e. the Business Case for HR Technology:

1. Reduce administration costs and resources via automation (Cost Savings)
2. Tracking, measurement, benchmarking, reporting and Business Intelligence (Make Informed Decisions)
3. Risk Management including compliance & regulatory requirements (Peace-of-Mind)
4. Hold managers, leaders, teams, employees, etc. accountable, while improving employee performance (Accountability and Performance)
5. Engage the workforce (Employee Engagement)
6. Flexible/Adaptable workforce for both responding to change and planning for future needs (Organizational Efficiencies from Strategic HR)

Garry Meier Unveils Small Business Playbook for the New Economy

At an event earlier this week at the UT Club in Austin, TX Garry Meier presented “Small Business Playbook for the New Economy” to business advisors and small business executives.

Garry’s presentation highlighted the current affect of the Stimulus Bill on small business (Garry participated in the US Senate Small Business Advisory Panel back in Feb 2009 when the Stimulus Bill was being created), and forecasted the state of the union for small business. 

Garry also shared his “required actions” that executives must take to protect and create wealth in the new economy.

Memorable Quotes:

“In 2009 and beyond, wealth will be created for ‘perform businesses’ that are the most productive, cost efficient, promote and excel at change management, and focus on being REALLY good at a few things.”

“Prosperity and economic growth has no doubt been suspended for the near future. Small businesses that are and will prosper illustrate unique business models that add significant value to the consumer... change is upon us and those that embrace it and make it an asset will enjoy opportunistic times”

Download the full presentation: Small Business Playbook for the New Economy.