The ONE Change You Can Make to Better Leverage Your Human Capital & Business Decisions

Happy Memorial Day!  The holiday weekend has allowed me some time to think about HR.  I’ll think about and talk about HR as long as anybody lets me and a topic I’ve been thinking about recently is the difference between an organization that has a partnership with its HR function, and organizations that have a strategic partnership with their HR functions.  What’s the difference?  Do the benefits of one outweigh the benefits of another?  Is one always better than the other?  I recently witnessed the startling difference between the two and it’s been weighing on my mind how such a change can be a pivotal transition for an organization. 

Let’s start by understanding the difference between a partnership and a strategic partnership.  A partnership exists when the business looks to HR for advice to handle its people matters.  Sometimes this is referred to as a business partnership.  The business relies on their legal knowledge and expertise with people issues to manage decisions that have been made and to keep business running smoothly.  A strategic partnership exists when HR is directly involved in the major business decisions of the organization, including the formation of strategy, the design of the organization and the implementation of the business model.

Let’s take an example to understand the difference.  Your organization decides to open a new facility in another state.  Is HR and human capital considered after the decision to open the plant is made or before the decision is made?  A strategic partner is part of the decision making process and has input into the decision rather than helping the business deal with the effects of the decision after it is made.

I’ve had the experience of being part of organizations with both types of relationships with their HR function.  Now, please keep in mind that if anything less than a partnership exists, it’s probable that some facets of the business are being overlooked.  I want to be clear.  I am an advocate of the strategic partnership, although understand and support cases where a business partnership works. 

A business partnership is necessary in most organizations today that want competitive edge.  The vast number of successful organizations have built decent business partnerships with their HR function, and see its value as an internal support system.  This is progress from what this relationship looked like 20+ years ago.  There has been a push, particularly in the last 15+ years for the business to form a strategic partnership with its HR function.  I believe it has become increasingly important as the reality sets in that human capital and how it is organized are increasingly pivotal to organizational effectiveness.  Businesses that have strategic partnerships with their human capital functions are shown to more quickly add and keep shareholder value.  The unfortunate part of this story is that a statistical analysis performed on HR from 1998 to 2007 showed no statistically significant change in HR performing business strategy activities such as identifying/designing strategy options, choosing the best strategy option, planning strategy implementation, identifying new opportunities, or assessing possible merger, acquisition or divestiture strategies.

So how do you utilize your HR function strategically?  There are several ways an HR function can become more strategic.  First, the problem may be in the organizational design of your HR/human capital department.  Organizations whose departments utilize a shared service model, information technology or cross functional training for HR staff are shown to be statistically more strategic than HR departments that are decentralized or organized for resource efficiency.

It’s also important to have strong HR information systems.  Technology can make or break your business, and it can also make or break your people processes.  HR systems are a scaled item, so if you’re smaller, a less robust system may be necessary, but make sure it still gives you the information and competitive advantage your business needs.

We live in the world of analytics today, and HR is no exception to this business trend.  For HR to be strategic, having a fundamental understanding of the metrics that make your “business” successful is crucial.  Three overarching metrics I’ll recommend you have a grasp of are the efficiency, effectiveness and impact of your HR work and initiatives.  There are certain measurements for each of these factors that are important to most businesses.

HR can also improve the decision making process around human capital to be more strategic.  There are several ways HR can do this, but I’ll give you the three shown to statistically contribute the most strategically.

• HR leaders identify unique strategy insights by connecting human capital issues to business strategy.
• HR leaders have a good understanding about where and why human capital makes the biggest difference in their business.
• HR adds value by improving talent decisions inside and outside the HR function.

It would be silly to tell you steps you can take to make HR have a strategic partnership with the business without mentioning that your HR team must have the right skills.  What the right skills are is the million dollar question.  I’m going to give you 5 HR skills shown to have the most impact on creating a strategic partnership.

• HR Technical Skills

• Interpersonal Dynamics

• Business Partner Skills

• Metrics Skills

• Managing Outsourcing

Do you or your HR team have a high level of proficiency in these skills?

Overall, the road map for HR becoming more of a strategic partner seems clear both with respect to what it needs to do to be involved in a variety of strategic activities and to become a full strategic partner.  The benefits of a strategic partnership support the argument for such a relationship with business decisions.  However, I realize that there’s a difference between knowing what needs to happen and doing it.  It’s far easier to point to what HR needs to do than to make it happen.  I sometimes see a “stubborn traditionalism” that characterizes the HR profession, which can be a hindrance.  If HR fails to advance, it seems a strategic partnership will remain a goal on most human capital professional’s career checklist.  I encourage you and your business to implement some of the tactics here to start making the transition to a strategic partnership today.

Information and statistics from the Center for Effective Organizations.

Rolling With Change – Despite “Impossible” Odds

We’re constantly reminded that the only constant is change and that ideal employees embrace and champion change.  Entrepreneurs are always thinking about what is next in an attempt to stay ahead of change.  I personally have never been in an environment where change was not a daily or weekly encounter.  In fact, change occurs so regularly in my professional life, that I am uncertain if I would be comfortable with stability, which is an ironic statement, and the topic of this post.

I grew up in an age where technology rules and still rules today.  The pace of change in technology has set the tone and pace for everything I know and is the new way of business.  I expect a certain evolution to everything.  If my favorite tablet, e-reader, Smart phone, etc does not have a new edition each year, I feel as though a part of my life is “outdated”.  I look at those products and companies as “behind the times” and surely at risk of losing the technology race. 

As our favorite products and subsequent way of life are always in a state of change, so is the way we work.  It’s expected by employees and employers alike.  However, what are the implications of this expectation?  Can it ever be a disadvantage?  I have a couple thoughts.  

There are times when I do think the pace of change I am accustomed to is not ideal.  When an initiative begins to take hold that I’ve worked to put together, I am quick to doubt it and look for flaws in anticipation of the next iteration.  I know change is inevitable, so I occasionally find my anticipation of change overshadowing my ability to embrace the present.

However, the rate of change, especially in the technology industry is not likely to slow down.  Members of the workforce that find this difficult will need to evolve or get out of the way.  I consider this to be a greater disadvantage.  Often, the difference between an average and high potential employee is the difference between someone who is proactive and reactive to change.  I recommend being proactive.  Being reactive is not only damaging to a person’s long term career goals, but also to the business they support. 

There also comes a point where someone crosses the line from reactive to resistant.  I highly recommend you not be resistant to change.  It will damage your reputation, inhibit your success, and could potentially cost you your job.

Change is ever present and evoking of opinions.  What’s your opinion on this topic?

Workforce Planning: An Awesome Opportunity to Enhance & Grow Your Business

Workforce planning is the process an organization uses to analyze its workforce and determine the steps it must take to prepare for future staffing needs.  Great and successful businesses understand the importance of proper workforce planning.  It's time to give your business that same edge.  Keep reading to understand 4 steps to conduct your own workforce planning and give your business a leg up on the competition.

There are several distinct analytical steps that need to betaken in workforce planning:

1. The supply analysis, also referred to asthe “supply model” or “staffing assessment,” involves an analysis of anorganization’s current labor supply.

2. The demand analysis, also referredto as the “demand model,” includes a review of future business plans andobjectives.

3. The gap analysis compares thedifferences in the supply and demand models and identifies skill surpluses anddeficiencies.

4. The solution analysis focuses onhow to address gaps in current staffing and future staffing needs throughrecruiting, training and development, contingent staffing, and outsourcing.

Step 1: Supply analysis

The purpose of the supply model is to analyze theorganization as it currently exists—in other words, the supply of labor andskill sets that are vital to an organization. This analysis should encompassnot only the number of employees and their skills, but also factors such asworkforce demographics, including representation of protected classes.

A supply analysis also involves making projections ofattrition (due to resignations, retirements, internal transfers, promotions andinvoluntary terminations) over the planning horizon being used, so thatattrition is taken into account in considering the future supply of labor andskill. From this information, a profile can be developed of current staff as itwould exist in the future if no action is taken in recruiting, training oroutsourcing.

Step 2: Demand analysis

The purpose of the demand model is to forecast theorganization’s future workforce composition. This forecast should take intoconsideration a range of business issues. These issues may include newproduct lines, competitive forces and expansion/constriction in globalmarketplaces, anticipated workforce availability within geographic boundaries,and a myriad of other issues.

Internal and external factors need to be considered in thedemand analysis. Analyses of internal demand influences may focus on thefollowing questions, among others:

• Will the current workforce, with minimal retraining, have the skill sets necessary to perform new duties with a new product line?
• Will current employees remain loyal to the organization that has anticipated changes in mind?

Analyses of external demand influences may consider thesequestions:

• Is labor readily available that possesses the skills and abilities needed by the evolving organization?
• What external pressures will change demand for goods and services that may ultimately affect internal business decisions and, thus, workforce planning needs?

The future composition of the workforce must also beanalyzed. This analysis will seek answers to the following questions:

• How many employees will be necessary to achieve business plan goals and objectives?
• What skills and competencies will be required for the new business?
• What is the composition of the available workforce population?
• What will the organization need to do to attract prospective employees?
• What will the organization need to do to attract and retain a diverse group of workers?

Step 3: Gap analysis

The next step in the process seeks to compare the supplymodel with the demand model to identify gaps between the composition of thecurrent workforce and future workforce needs. The workforce planningprofessional may want to categorize a variety of future scenarios and thenselect the future that is most likely to occur, with contingency planning foralternative futures. When conducting this analysis, the planner will want toidentify the additional number of employees with requisite skill sets that willbe needed, as well as the employees who will no longer be needed due to limitedskill sets.

Step 4: Solution analysis

Solution analysis involves the development ofstrategies to close the gaps identified in the previous step. Approaches formeeting future workplace demands may include recruiting, training andretraining, utilizing contingent staff, or outsourcing. The approaches selectedwill be dependent upon whether the organization will need to expand, contract,restructure or rely on contingent staff to meet new workplace demands.


Content from SHRM.ORG

How To Budget for Human Capital Initiatives with 6 Easy Points

The entrepreneur’s or HR professional’s responsibility is to align the HR budget with strategic business goals within organizational guidelines and procedures. Budgeting involves the methodical collection of information and data so that the finances needed to support a business’s objectives can be forecasted. New businesses have no prior financials to use for evaluation; therefore, forecasting and estimating will be needed for the initial HR budget. From an HR perspective, the data needed to generate a new budget includes the following forms of data:

1. Number of employees projected for the year.
2. Benefits cost projections.
3. Projected turnover rate.
4. Any actual costs already incurred in the current year.
5. New benefits/programs planned.
6. Other policies, business strategies, laws or regulations that may affect costs.

Forecasts may be simple or complex and, based on actual costs or projections, depend on the nature of the operating costs and the data available. Managers or business owners preparing an HR budget for the first time will need to collect every source of obtainable data to make knowledgeable projections.


Information taken from SHRM.ORG

5 People Metrics Every Entrepreneur MUST Understand

The HR function of a business has long been seen as a cost center.  But what happens when you begin measuring people matters and running your HR function more like a profit center?  As your business grows, there are certain people measurements that will enable you to make decisions that effectively and efficiently develop your organization.

1.  Revenue Factor:  total organization revenue/# of full time employees

This is an important factor, especially for small businesses.  As a company looks to grow, be sure to have a firm grip on this number.  You’ll soon realize the benefit to adding sales people or productive staff over administrative and overhead personnel.

2.  Total labor as a percent of operating expenses:  total labor costs/total operating expenses

Understanding how much your labor is costing you is important to look at while beginning and growing your business.  Labor is most likely your largest expense, so it’s important to have a pulse on where your labor costs stand.  Be sure to pay attention to it.

3.  Quality of Hire:  average job performance scores/performance scores for all employees or # new hires promoted within period/all employees promoted within period.

When you’re a small or growing business, the quality of your hire means everything.  Being able to quantify this factor could be key for your business.  Understanding the quality of hire could also help you improve your consistency in hiring high quality candidates if you have complete, historical and detailed information on this topic.  Improving the quality you hire?  Priceless.

4.  Cost per hire:  advertising + headhunters + referral bonus + travel costs + interviewer time + relocation/number of hires

Most great entrepreneurs know that second to a million dollar idea, successful business requires rock star talent.  It’s also commonly known that acquiring this talent can be expensive.  Understanding your cost per hire may better position you to make the strategic hires necessary to move your organization forward.

5.  Turnover:  # of employees terminated/total # of full time employees

This metric is important in every organization, regardless of function, industry, size, etc.  It may be of particular benefit to separate “voluntary turnover” as well as “desirable turnover” from this factor.  This factor can help you better understand many things about your business including morale, culture, labor forecasting, etc.  If you calculate no other HR metric, be sure to know your turnover.

Having and understanding data, and making informed decisions based on data are what moves an organization forward.  Imagine if you could progress your people function above the competition?  Jackpot.  There a variety of other HR metrics an organization can follow (and should follow).  But, we’ll save these for another day and another post.  

Through HR’s Eyes: A Day in the Life

Navigating the hiring process is a tricky thing.  You have likely spent what feels like an eternity perfecting your resume and cover letter and tirelessly spent hours applying online.  You’re eager, and hopefully excited, but feel like you've been waiting a lifetime to hear something…..anything!  You may feel HR makes the process more difficult rather than better for you and wonder what they could be doing all day and why you haven’t heard anything.  Understanding what a typical day is like for an HR professional may help shed some light into the job seeking process for you.  Here’s a pretty typical day in the life of an HR professional:

8:00 – 9:00; Begin and plan the day

In today’s world, emails saturate our in-boxes (and also our time).  Typically, a significant portion of the morning is spent going through the emails that have built up and responding to internal clients.  Some matters an HR professional must respond to require deeper research or in depth decision making.  These items may require us to consult another party or take additional time to mull over issues that are less than cookie-cutter.  Most HR professionals have a variety of responsibilities and tasks they must complete.  This also requires significant planning to ensure proper time management which needs to be done early in the day.

9:00 – 10:00; Meetings

Like other business professionals, there are various stakeholders that require our regular attention and meetings are a common fact of life in most businesses.  Many of the meetings may also require substantial preparation on our part.  “People” matters are rarely black and white, and we dedicate time and resources to every decision and recommendation we make.

10:00 – 11:30; Paperwork

HR is at the core of much of the administrative work in an organization.  We spend a substantial portion of each day dedicated to our administrative and transactional responsibilities (FMLA, unemployment, worker’s compensation, employee and benefits paperwork, etc).  We’re always trying to become more efficient in this area to reduce this portion of our jobs, but it remains a necessary evil.

11:30 – 12:00; Emails

We’re back to the emails in an attempt to make the evening load easier to manage.

12:00 – 12:30; Lunch

You’ll find many HR professionals eating lunch alone at their desk.  This is for a variety of reasons.  It’s difficult for HR to regularly eat with employees in other departments.  We’re often privy to information that can inadvertently put us in uncomfortable situations with other employees.  Additionally, it is HR’s job to remain an unbiased and consistent presence in the organization. 

12:30 – 3:00; Recruiting 

We will spend a significant portion of our day dedicated to finding talent.  Despite how plentiful you think the candidate pool is for a position, I guarantee that finding qualified people for that job is not easy.  Whether the qualifications high or low, it’s always difficult to find great people.  Please keep in mind that during this time, we write job descriptions, post jobs, review resumes, conduct interviews, administer testing, run background checks, and send offer & rejection letters.  That’s a heck of a lot to do in a relatively short amount of time.

3:00 – 3:30; Vendor communication

In HR, people are regularly trying to sell you things (consultancy, benefits, technology, staffing services, etc).  Many of these conversations include HR politely declining, as most products and services are a dream and a tease on our tight budgets.  Managing vendor relationships is an important part of our jobs.

3:30 – 4:30; Manager/Employee Advising

Our advice is regularly sought from employees about personal matters as related to their job.  In the past I’ve had a “therapy chair” available in HR for these types of conversations.  Additionally, managers regularly seek our guidance relating to employment matters.  We must be available to speak with both about their respective matters.  After all, in HR, your most regular clients are internal.  

4:30 – 5:30; Wrap Up

Like other professionals, our day often requires us to wind down and wrap up.  There are often outstanding items that we must address before the end of the day.  People matters can rarely “wait until tomorrow”, and this is often the time we’re working very hard behind the scenes to keep things running smoothly for all employees.

Understanding what an HR professional’s day is like may help you gain some insight as you deal with HR through the hiring process.  I encourage you to remain positive and persistent and to aim high!

High Deductible Health Plans (with an HSA) for Beginners

A trend in group health insurance that’s gained leaping popularity in the last several years are Health Savings Account (HSA) plans or high deductible health plans (HDHP).  This article will give you a foundation for understanding HDHP’s with HSA’s and arm you with the facts to determine if this type of group health insurance plan is right for your organization.

So, how exactly does a HDHP with an HSA work?  In this type of plan, employees typically have a large deductible, often more than twice the amount in deductible of a traditional PPO plan.   In a HDHP, monthly premiums are typically less than in traditional plans where there is a co-pay (sometimes substantial).  The lower premium saves both the employee and company money on premiums.  However, an employee is required to then pay out of pocket for medical services and prescriptions in full until they reach their full deductible amount.  However, any funds paid toward medical care or prescriptions should be paid out of the Health Savings Account that is set up in accordance with the HDHP.  HSA accounts typically assign account holders a credit/debit card that employees should use for any medical related expenses.  On an HSA account, medical services can typically be purchased tax free. 

So you may ask how the account is funded and how can the purchases be tax free?  Well, an employer typically makes a contribution to the HSA account on behalf of the employee.  The amount typically ranges from 6 to 20% of the deductible, but is up to the employer’s discretion.  Employees will typically contribute to their HSA’s as well by payroll deduction.  If employees know they have an expensive medical event, they can increase their contributions to cover the costs.  Additionally, if an expensive emergency happens, an employee can reimburse themselves from their HSA account to cover the costs with the tax benefits.

A HDHP with an HSA is uncomfortable for some individuals to switch to, especially if they are used to having something like a $20 co-pay for their doctor visits.  This type of health plan requires employees to spend their health care dollars more wisely and to become educated health care consumers (if they want to avoid high costs).  You can think of a HDHP more like car insurance.  It’s there to help you in the event of an emergency, but is not meant for you to be dependent on it for things like oil changes or routine maintenance.  Some organizations who have this type of plan offer services through their HR department to help employees find the most cost effective services for certain procedures.  However, if you are willing to promote a culture of wellness and educate your employees on spending their health care dollars wisely, this type of plan could be cost saving and good fit for your business.