ihrim global forum 2008 san francisco, july 17-18

People, Performance, Profit

Row HensonHCM FellowOracle

Ihrim Global Forum 2008San Francisco, July 17-18

People...Performance…Profit

People as Capital: From “HR” to “HCM”People as Capital: From “HR” to “HCM” Aligning the Workforce for Increased

Performance Talent Management Implication What does the CEO expect from HR? HR Transformation Human Capital Impact On Your Bottom Line


3862

85

6238

15

0

20

40

60

80

100

1982 1992 2002

Intangible Assets Tangible Assets In 1982, intangible assets comprised 38% of a company’s market value.

By 2002, that number soared to 85%!

Source: Brookings Institute, 2005

From HR to HCM in From HR to HCM in 20 Years20 Years


• BRAND

• INTELLECT

• KNOWLEDGE

• INNOVATION

• TEAMWORK

• AMBITION

• COURAGE

• AGILITY

• SYSTEMS

• PRODUCTS

At Least 75% of S&P Assets Today Are Intangible

TALENT

• GOODWILL

• INVENTORY

• TERMINALS

• PIPELINES

• MATERIALS

• SYSTEMS

• EQUIPMENT

• MACHINERY

• BUILDINGS

• LAND

TANGIBLEASSETS

INTANGIBLES

What we mean by Intangibles?


Talent Drives the Knowledge Organization

The ability to make good decisions regarding people represents one of the last reliable sources of competitive advantage. -- Peter Drucker


People as Human Capital

AssetAsset

LiabilityLiability

LossLoss ProfitProfit

Peopleas Means

People asCapital

PeopleasProblems

PeopleasCosts

Source: Chapman Condy CompanySource: Chapman Condy Company



People as Capital: From “HR” to “HCM” Aligning the Workforce for Increased Aligning the Workforce for Increased

PerformancePerformance Talent Management Implication What does the CEO expect from HR? HR Transformation Human Capital Impact On Your Bottom Line


Strategy Execution gets a failing grade

“Less than 10% of strategies effectively formulated are effectively executed”


So how do we align our talent with our strategy?


Talent not Engaged with Objectives

Employees don’t understand their impact Employees not fully engaged with

enterprise objectives Managers don’t have line of sight into talent

Outcome:Enterprise performance suffers


Performance Not Being Managed

MBO process is unsuccessful Feedback is poorly articulated and delivered Employees not developed for success Fragmented process

Outcome:Employee not leveraged or developed


Not Creating a Performance Driven Culture

Not truly paying for performance Top performers are not rewarded or enticed

to remain Can’t identify tomorrow’s leaders

Outcome:• Rewards ineffective• Talent leaves• Jeopardizes organizational future


Global Engagement Gap

21% Engaged41% Enrolled30% Disenchanted 8% Disengaged

Source: Towers Perrin global Workforce Study – 2007-2008


How Towers Perrin defines employee engagement

EmotionalEngagement

RationalEngagement

Emotional Engagement I would recommend my

company to a friend as a good place to work

My company inspires me to do my best work

I am proud to tell others I work for my company

My job provides me with a sense of personal accomplishment

I really care about the future of my company

Rational Engagement I understand how my unit

contributes to the success of my company

I understand how my role is related to my company’s overall goals, objectives, and direction

I am willing to put in a great deal of effort beyond what is normally expected to help my company succeed

I am personally motivated to help my company be successful

Nine Core Engagement Factors

Source: 2005 Global Workforce Study. Towers Perrin


Performance Management Drives Business Success

Employee understands how to make a difference

Employee understands company goals

38% more engaged

Understand Do not

understand

84%

46%

68% more engaged

91%

23%

Understand Do not

understand


Meeting The Challenge

Drive Business ResultsClearly define and link individual performance to enterprise

objectivesProcess for Sustained Change

Iterative and collaborative communication Transfer Ownership to Users

Planning/linking objectives, defining responsibilities, training plans, and career planning

Increase Employee SuccessImprove quality & timeliness of feedbackEnable performance driven development

Support End-to-End Business ProcessesLink the right rewards directly to performanceLink feedback to development plans



People as Capital: From “HR” to “HCM” Aligning the Workforce for Increased

Performance Talent Management ImplicationTalent Management Implication What does the CEO expect from HR? HR Transformation Human Capital Impact On Your Bottom Line


Gartner’s Talent Management


Talent Life Cycle

Plan

Develop

Advance

Evaluate

Lead

Analyze

Talent Planning

Learning & Development

PerformanceManagement

Career Planning

Measure and Report

Competency Management

SuccessionPlanning

Jobs & Positions

Recruiting (internal employees and contractors/consultants)

Compensation

Teams & Projects


Translating business strategy into workforce infrastructure

Experience working in China confirms that many HR functions still have much work to do to build basic programs to drive business success. Further, the programs that are in place often are not integrated resulting in misalignment and misdirection (i.e. pay and performance, competencies and assessment, job descriptions and recruitment, assessment results and individual development plans, etc.)

Mercer March 5, 2007 report.


Workforce architecture provides tangible benefits to organizations, managers and employees

Organizations can: Managers can: Employees can:

•Translate business goals into explicit talent requirements

•Segment the workforce so that accountabilities, performance standards and competencies can be assigned to right roles

•Cascade goals and objectives from the top to the bottom of organization

•Create an infrastructure and reporting system for analyzing, managing and deploying talent

•Cut across traditional HR silos to take an integrated approach to talent management

•Give more specific guidance to employees regarding their roles, accountabilities and performance expectations

•Speak to employees in a consistent language about performance and how they can contribute to organizational success

•Obtain better information about talent resources within the organization

•Make objective decisions about how to best deploy talent to meet business needs and goals

•Gain better line of sight and understand how their role supports the business

•Know what they need to do – or do differently – to contribute day to day

•Understand what skills and competencies they will need to do their role well

•Know how their performance will be measured and rewarded

•Understand what they need to do to advance

•Gain ready access to more robust up-to-date information that empowers them to better manage their careers

Mercer – “Translating business strategy into workforce infrastructure” – Mar. 5, 2007




Performance Talent Management Implication What does the CEO expect from HR?What does the CEO expect from HR? HR Transformation Human Capital Impact On Your Bottom Line


CEO Priorities = HR’s Mandate

Top Management succession

Customer retention

Developing & retaining potential leaders

Engaging employees in the company’s visions, values, goals

Improving product innovations

Reducing costs

Talent identification and growth

9%9%

45%45%

24%24%

31%31%

25%25%

43%43%

12%12%

28%28%

33%33%

31%31%

18%18%

28%28%

18%18%

22%22%

2003 2008


What CEOs are asking from HR

What workforce segments create most value?

How will business be impacted by impending retirement and are we prepared?

Where is talent demand outpacing supply?

What skills will we need in next 5 years that we don’t have today?

Turnover? How much is it costing in customers? In productivity? In innovation? In quality?

Do we have a workforce plan to communicate financial consequences of talent decisions on our business?

Source: Deloitte Study – “It’s 2008 Do You Know Where Your Talent Is?”




Performance Talent Management Implication What does the CEO expect from HR? HR TransformationHR Transformation Human Capital Impact On Your Bottom Line


Strategic Transformation of HR to HCM

Source: IDC 2002

Decision Support

Control

Reporting

Administration and Transaction Processing

Strategic Decision Support

Outsourceto

Service Provider

Control

Reporting

Self Service

ValueAdded

ServicesCost

Structure

Cost Function Business Partner


Mercer 2007 Transformation Report


Mercer 2007 Global HR Transformation Study Asian findings

Half of HR functions around the world are undergoing a transformation, driven by changing business and organizational needs

In Asia, the number of HR roles with direct reports to CEO has doubled since 2003

Building talent as opposed to buying talent is on the up trend for HR professionals in Asia

HR leaders expect talent management to remain a top priority in two to three years.

“HR transformation is the process of recreating or reinventing the HR function with the specific intent of enhancing HR’s contribution to the business.”


Current state of HR transformation across Asia

Country Completed % In Process % Planning %

Hong Kong 39 43 4

Thailand 33 35 10

China 30 33 5

Taiwan 30 37 7

Malaysia 28 54 4

Singapore 26 37 18

Japan 18 71 5

India 17 63 3

Indonesia 15 62 10

Philippines 14 63 7

Korea 6 47 17

All 24 48 9


Top Human Capital Challenges

Acquiring key talent/lack of available talent 43 45

Retaining key talent 38 40

Building leadership capability 40 39

Driving cultural behavioral change in the organization

24 25

Succession planning 26 25

Increasing line manager capability for people management

22 22

Increasing workforce productivity 20 19

Constraints on head count (“making do with less”) 17 17

Challenges Responses In %

Global Asia


Top Human Capital Challenges

Implementing people changes due to organizational changes

18 17

Lack of consensus around organization’s strategy and direction

16 17

Encouraging organization innovation 18 16

Reducing overall human capital costs 16 16

Increasing the return on investment in remuneration 14 15

Resourcing and managing HR in new geographies 15 14

Workforce planning – merger/acquisition 14 14

Coping with an aging workforce 12 13

ChallengesResponses In %

Global Asia


Barriers to Successful HR Transformation

HR is too busy or lacks decision making power

Weak HR Information/TechnologySkills and capabilities of HR staffNegative business perception of HR Insufficient capability of line managersWeak HR and business leadership

Source – “Keeping the promise of HR transformation in Asia” - Mercer


Transforming HR

One size does not fit all Innovate or be outsourced Business partner/business

alignment Owner of corporate culture/

employee brand Competency/talent

identification & development Process flexibility and

adaptability Better analytical skills




Performance Talent Management Implication What does the CEO expect from HR? HR Transformation Human Capital Impact On Your Bottom LineHuman Capital Impact On Your Bottom Line


Why Measure?

STOP: “I think….I feel”

START: “I know…I can prove”

SHIFT: From Tangible to Intangible Asset Accounting


The Challenge of Measuring HR

Percentage of HR executives who… %

1. Believe ROI is their CEO’s most important metric: 53

2. Say better aligning HR metrics to corp strat is top priority: 60

3. Believe HR metrics spend will grow over the next 5 years: 84

4. Measure the impact of HR activities to a great extent: 5

5. Believe providing analytical tools is biggest challenge: 71

6. Reported having a fully automated HR metrics system: 2

7. Percentage whose system was not automated at all: 57

8. Cited lack of technology infrastructure as a major challenge creating HR metrics: 50


Metrics That Matter:Analytic Taxonomy

COMPLEXITY

IMPACT

Information Distribution

Metrics Delivery (Dashboards)

Contextual Embedded Analytics

Correlated Analytics

Predictive Modeling


TM Metrics that Matter: Recruitment

COMPLEXITY

IMPACT

Time to fill vacancy

Acceptance per offer ratio

Number of vacancies

Turnover forecasting

Workforce planning

Cost of filling vacancy

Recruiting Source AnalysisPercent of

internal fillsPerformance of hires

Ratio of contacted to interviewed applicants


TM Metrics that Matter: Learning

COMPLEXITY

IMPACT

% employees trained

Cost per training hour

Number of training days/programs per yr

Impact of learning on business results

Learning forecasting

Efficiency of training enrollment

Learning EffectivenessAnalysis% of ees w/

dev plansPerformance of trained vs. untrained

Trainee progress vs. dev plans

Impact of learning on dept schedules/budget


TM Metrics that Matter: Performance

COMPLEXITY

IMPACT

% employees reviewed

Perf. ratings distribution

Number of reviews completed on-time

Impact of perf mgmt on business results

Perf Mgmt / Learning linkage

Efficiency of perf mgmt process

Pay for PerformanceAlignment

% of ees unreviewed for > 2 yrs.

Effectiveness of perf mgmt

Perceived credibility of perf mgmt


Evolution of Workforce Analytics

Greater Workforce Insight

Today Where Are We Headed

Collaborative

• Correlate people metrics with operational and financial metrics

• Drive workforce engagement with relevant, contextual performance metrics

Proactive• On-demand

Dashboard

• Event-based problem identification & resolution

Reactive• Historical

Reporting on headcount and movement

Strategic

• Alignment of HR initiatives with Enterprise goals

• Predictive Analytics

• Demand planning

• Workforce cost simulation

Final Asian Research


Talent Implications

Within the next seven years, over 33 million individuals in Japan (26% of the population) are expected to be over 65 years old.

India is expected to have a shortfall of 150,000 IT engineers and 350,000 business process staff by 2010.

One-child restrictions in China have created a labor shortfall that will impact cheap labor in the region for years to come.

Current Bloomberg report states: “Globally, Singapore, Peru, India, Argentina, Australia, Japan and Hong Kong were top countries reporting strongest hiring prospects for the coming quarter.

Mercer 2006 survey states attraction and retention has been consistently highlighted as one of top three challenges facing organizations in Greater China.

Hudson survey for Q2 2007 shows employment expectations remain high for key business sectors in China, Hong Kong, Japan and Singapore

Work related stress is rising, with almost half of respondents in China, Hong Kong and Singapore saying that their company’s employees have experienced higher levels of stress over last year – China the highest. – Hudson survey


Policies to relieve and prevent work-related stress

Review job

description

Work fewer hours

Work/ life

balance

Learn add’l skills

Eliminate non

essential work

Hire more staff

No policy

other

China 14% 11% 17% 20% 10% 18% 7% 3%

Hong Kong 11% 7% 19% 10% 9% 19% 12% 13%

Japan 13% 11% 18% 13% 11% 21% 9% 4%

Sing-apore 11% 5% 19% 12% 18% 17% 10% 8%

Source: The Hudson Report – April-June 2007


What makes a Best Employer in Asia?

Effective and committed leadership. Best Employers display a more caring approach to people, and place great importance on ethics, integrity, and the creation of a working environment that nurtures learning. Leaders act as role models and are trustworthy.

Powerful leadership and talent strategy that is a key part of the company’s overall business strategy. Best Employers conduct robust performance and competency assessments leading to talent segmentation, and offer compelling development practices.

A high-performance workforce built through ensuring accountability for achieving results, valuing key staff, managing opportunity so the strongest performers are in key jobs.

Strategic HR functions that are structured in ways to deliver strong business results. Employees with Best Employers feel that HR is able to identify and implement HR strategies that are critical to meeting business needs.

Address customer needs as a way of building a sustainable business. They understand the link between engagement and customer satisfaction and use customer retention as a measure to manage the business and shareholder return.

Hewitt – Best Employers 2007

Contact Information

Row Henson

[email protected]

404/312-9221