HR’s Paradox:

Adding Value …

Without Adding Costs

American Public Power Association Business & Financial Conference

September 20, 2004

Why do companies,or their strategies, fail?

Our Findings

Lack of shared understanding and expectations

Lack of clear ownership and accountability

Unrealistic or overly ambitious expectations

Out of touch with the market and/or the business

Inadequate attention to process and execution

F.O.C.U.S.

F – FAD FIGHTING

O - OWNERSHIP

C - CORE CAPABILITIES

U - UNDERSTANDING BUSINESS

S - STREAMLINE PROCESSES

FIGHT FADS

&

PRIORITIZE

F

Fight Fads & Prioritize

• Fight the temptations of fad surfing

• Too many or none at all

• Focus on multiple stakeholders

• Add clarity and rigor

• Measure the right things

Fad Surfing

New package – old goods

Quick-fix eventsInitiative du’jour

Fight Fads & Prioritize

• Fight the temptations of fad surfing

• Too many or none at all

• Focus on multiple stakeholders

• Add clarity and rigor

• Measure the right things

Finding The Priority Zone

Bu

sin

es

s H

ea

lth

Business Priorities

Does Your Company Have …

Yes No Sort of

A Mission/Vision statement?

Strategic Initiatives?

Core Values?

Balanced Scorecard?

Core Capabilities?

Critical Success Factors?

Compensable Factors?

Noble Values

• Agility

• Empowerment

• Fun

• Integrity

• Learning

• Teamwork

Value-less

F - FUN

A - AGILITY

T – TEAMWORK

L - LEARNING

I - INTEGRITY

E - EMPOWERMENT

Could These Be Yours?

Core Values Keys to Success Growth Strategies

Integrity Deliver Value Build on the competitive strengths of our technology

Teamwork Be Cost Efficient Centralize all planning, technology and capital allocation

Performance Resource Effectively Focus on best-of-breed product and service lines

Learning Engage Customers Leverage synergies and resources across business units

Respect Build a High Performance Culture

Institutionalize our core values in all regions and businesses

Fight Fads & Prioritize

• Fight the temptations of fad surfing

• Too many or none at all

• Focus on multiple stakeholders

• Add clarity and rigor

• Measure the right things

Possible

Solutions

Value to

HR (a)

Value to the

Business (b)

Value to

Employees (c)

Priorities

Low

Value

High

Value

Low

Value

High

Value

Low

Value

High

Value

Total

Score

(a) X (b) X (c)

1 2 3 4 5 1 2 3 4 5 1 2 3 4 5

A. Innovation•Ideas for saving costs•Ideas for improving processes

CREATING VALUE FOR MULTIPLE STAKEHOLDERS

Fight Fads & Prioritize

• Fight the temptations of fad surfing

• Too many or none at all

• Focus on multiple stakeholders

• Add clarity and rigor

• Measure the right things

Add Clarity and Rigor

• Know the essence of your business strategy

• Identify the top 3 business imperatives

• Continually ask the key questions –

• Is this really a priority and is it achievable?

• How will we do it?

• How will we know we’ve succeeded?

• How does it map to the strategy?

Fight Fads & Prioritize

• Fight the temptations of fad surfing

• Too many or none at all

• Focus on multiple stakeholders

• Add clarity and rigor

• Measure the right things

Metrics

Measure not what we can, but measure what matters!

HR Metrics

TRADITIONAL VALUE – ADD

Economic Process Performance Value Drivers

Payroll as a % of revenue

Acceptance rates PBT per employee Quality of hires

Benefit costs as % of payroll costs

Time to fill Hiring source diversity

Revenue per sales-maker

Cost per hire Promotion & transfer activity

Number of employee referrals

More ready-replacements

Legal costs Formal complaints Exit reasons Call Center metrics

HR to total hdct Turnover Employee survey Customer Loyalty

Per capita training Absenteeism Completed PR’s Process cycle time

Compa ratios Productivity Completed IDP’s New products launched

ALIGN

OWNERSHIP

FOR HR

O

HR Owners

• The HR Team – redefine “HR’s Job”

• Line Managers – complete people management

• Employees – increasing self-service

• Service Providers – increasing outsourcing

HR Activity Continue Eliminate Share Transfer Outsource Others…

Exit Interviews

Making Job Offers

Scheduling Training

Etc. …

The HR Team

HR Owners

• The HR Team – redefine “HR’s Job”

• Line Managers – complete people management

• Employees – increasing self-service

• Service Providers – increasing outsourcing

Line Ownership

“If a manager can’t be trained to handle every

kind of employee situation,

then we have the wrong person in the job.”

James Despain, Division VP and GM –

Caterpillar Tractor Division

CORE

CAPABILITIESC

Why Bother?

Creates intangiblesfor shareholder value

Helps align company &employee growth goals

Can enable or impair execution

Key linkage for HR &Business strategies

VISION –

TO BE OUR INDUSTRY’S

CORE

CAPABILITIES

INDIVIDUAL

COMPETENCIES

TYPES OF

MEASURES

Investment of Choice

Managing Relationships Effectively

Relationship Building

Political Savvy

Influence Skills

Business

Supplier of Choice Providing Seamless Global Service

Initiative

Pattern Recognition

Customer Focus

Customers

Employer of Choice

Integrating Products and Services

Consultative Selling

Strategic Thinking

Collaboration

People

CAPABILITIES THAT DRIVE RESULTS

UNDERSTANDING

THE BUSINESSU

Understanding the Business

• Relevant business/industry trends

• Key differentiators/market levers

• Knowing your firm’s value propositions

• Understanding financial statements

Business Trends Is This Trend Considered a … Explanation

Strength Weak-

ness

Oppor-

tunity

Threat

Industry Consolidation

Supply Chain Convergence

Commoditization of our Products and/or Services

BUSINESS TRENDS ANALYSIS

Understanding the Business

• Relevant business/industry trends

• Key differentiators/market levers

• Knowing your firm’s value propositions

• Understanding financial statements

Connected to the Business

What keeps the CEO up at night?

How would they handle a 10% budget cut?

What would they say about HR?

STREAMLINE

PROCESSESS

Three Main Areas

Perceptions about HR (ETDBW)

HR Effectiveness and Efficiency

B.U. Effectiveness and Efficiency

Work Processes

• load• flow

Work Protocol• procedures• structures

GETTING THE WORK OUT – Adapted from The GE Workout

LIST ALL ACTIVITIES IN

EACH CATEGORY

(Employee, Team, Dept, Company)

ELIMINATE TWO

ACTIVITIES FROM

EACH CATEGORY

ELIMINATE 20%

OF THE ACTIVITIES

IN EACH CATEGORY

REPORTS

REVIEWS

APPROVALS

R.R.A.M.M.P.O.

F.O.C.U.S.

FOCUS – on the top 2-3 things that impact the business and HR

OWNERSHIP – realign responsibility and management for HR processes

CORE CAPABILITIES – define HR’s role around strategy execution

UNDERSTAND THE BUSINESS – drive and measure business results

STREAMLINE PROCESSES – help improve overall efficiency and effectiveness

Bill Thomas, SPHRManaging Principal

866-302-9099bill@centricperformance.com

www.centricperformance.com