21st Century High-Performance Metrics - CUNA … Century High-Performance Metrics ... • Human...

HOPS International LLC World Class Leadership & Organizational Development

21st Century High-Performance Metrics – Measuring the Right Things

Charles T. Walsh President - HOPS International LLC

The Center for Organizational & Leadership Excellence 11 Sleepy Hollow Cove Longwood, Florida 32750

www.hopsintl.com [email protected]

21st Century Metrics Mindset for HR Professionals

http://www.hopsintl.com/

mailto:[email protected]


Today….You need key HR measurements for:

– Every major Human Resources policy, program, practices,

and goal… and for every needed improvement area;

– Every financial, market, or management funding decision;

– Every Human Capital decision that impacts value and sustainability!

The Times They Are A Changing…..


HR Paradigm Shifts

Traditional Approach Results-Based Approach

New Programs initiated as requested

New programs initiated after legitimate need established

Multitude of programs in all areas

Fewer programs – greater impact

Existing programs status quo Existing programs reviewed/ changed/eliminated if needed

Count of activities Measure impact

Limited management involved Extensive involvement and collaboration

Viewed as cost center Employee investment

Unfamiliar with operations issues

Knowledgeable about operation issues

Lack finance and business concept knowledge

Well versed in basic finance and business concepts


2 Levels of HR Metrics:

Tactical Level: 1. Efficiency/ diagnostic

metrics (Cost metrics) 2. Recruiting results

metrics (Number of hires)

3. “Cause” identification metrics (Why they accepted)

4. Satisfaction level metrics (Manager /applicant satisfaction)

Strategic Level: 1. Predictive Metrics –

Goals/Targets/Opportunities/Problems

2. “Connectivity” Metrics – (unintended “linked” consequences)

3. Value Proven Metrics 4. Revenue/ Profit/Market Share

Impact Metrics

4


Human Resource Strategic Alignment

Financial & Business Success

High Performance

Culture

Leading People Operational

Excellence

Managerial

Effectiveness

Leadership

Influence

& Impact HR PROFESSIONAL

HR’s Opportunity to Influence Results



Operational

Excellence

Ensuring Value for the Customers Building Equity for Stakeholders Providing Clarity & Execution of Business Objectives Accountability for Business Performance

Understanding Managerial Effectiveness

Allocating & Managing Human Capital Identifying & Managing Costs & Risks Managing Policy, Process & Procedure Measuring the Right Things

Results & Impact


High Performance

Culture

Leading People

Understanding Leadership Influence

Creating & Enabling Value for the Employee Building Employee Alignment & Commitment Creating A One-Team Focus : Vision to Results

Building A High-Performance Culture Measuring A High-Performance Culture

Managing A High-Performance Culture Leading & Developing People (Intentionally) Fostering & Valuing Diversity Building Loyalty, Commitment, & Engagement

Leader & Employee Behaviors


12 “Sample” Strategic Impact Metrics:

1. New Hire Performance Index

2. New Hire Failure Rate

3. Volume Turnover of New Hires w/ Why

4. Engagement Metrics

5. Human Capital ROI

6. Cultural Performance

7. Give Away/ Take Away Ratio

8. Manager & New Hire Satisfaction Metrics (Value)

9. Leadership Capapcity

10. Quality Talent Sources

11. Non-Hire Quality Index

12. Total $$ Impact of HR

8


HR Strategic Metrics - State of Readiness

Conference Board Research Findings (2012)

• Fully 78% of firms routinely track and report people measures (i.e., turnover, absenteeism, compensation, etc.).

• Only 31% of HR departments have anyone on the HR staff who understands the

company’s strategic Key Performance Indicators (KPIs). • Only 25% of HR departments have anyone on staff who can both understand the

company’s KPIs and link them to people measures.

• Only 19% of HR departments deliver people measurement reports to all levels of the management team (business partners).

• Only 12% of firms use human capital measures to help the company meet its strategic targets of Key Performance Indicators (KPIs).

Source: “Measuring More than Efficiency.” Report # R-1356-04-RR, New York, NY: The Conference Board, Inc.


The Optimization of Human Capital "As the global economy continues to flatten, organizations will need to

have an increased focus on talent management, succession planning, retention, capacity to execute strategy, and finding new ways to increase productivity in order to outperform their competition.

HR departments that align themselves with corporate strategy and goals, and ensure they have access to the necessary expertise, information, and systems to optimize workforce investments will be at a distinct advantage in helping their organizations maximize corporate value".

(Human Capital Effectiveness 2011 Revised Report of the Saratoga Institute )


The Optimization of Human Capital People As Strategic Assets

Knowledge

Communication Information

People Learn

People Communicate

People Know



Human Capital Effectiveness Metrics

• Revenue Factor:

Is a basic measure of human capital effectiveness and is the aggregate

result of all of the drivers of human capital management that influence employee behavior.

It conceptually links the time and effort associated with the firm’s human capital to its revenue output by indicating employee productivity. It simply measures the revenue generated for each employee.

The formula for this metric is:

Revenue / Headcount



• Expense Factor:

It conceptually links the time and effort associated with the firm’s human capital to its operating expense output.

The formula is:

Operating Expense / Headcount



• Income Factor:

Is calculated by taking the operating income and dividing it by the total headcount of the organization.

It conceptually links the time and effort associated with the firm’s human capital to its operating income output.

The formula is:

Operating Income / Headcount



• EBITDA Factor:

Is calculated by taking the EBITDA and dividing it by the total headcount of the organization.

It conceptually links the time and effort associated with the firm’s human capital to its operations’ profitability without the potentially distorting effects of changes in depreciation, amortization, interest and tax.

The formula is:

EBITDA / Headcount



• Human Capital Value Added (HCVA):

Is an adjusted operating profitability figure calculated by subtracting all expenses except for labor expenses from Revenue and dividing the adjusted profit figure by the total headcount.

The formula for HCVA is;

Revenue – (Operating Expense - (Compensation + Benefits Cost))

Headcount



• Human Capital Return on Investment (HCROI):

It calculates the return on investment on a company's employees. This is

equivalent to calculating the value added of investing in the organization's human assets.

HCROI looks at the ROI in terms of profit for investments made on total labor cost by using the same adjusted profit figure of HCVA. HCROI is calculated by dividing the adjusted profit figure to human capital costs (except for training). It directly shows the amount of profit derived for every dollar invested in labor cost – in effect the leverage on labor cost.

The formula is:

(Revenue - (Operating Expense - (Compensation + Benefits Cost) / (Compensation + Benefits Cost)



• Human Economic Value Added (HEVA):

It shows wealth created per average headcount in an organization. It shows how much EVA can be ascribed to the average amount of employee contracted for.

The rate is calculated by subtracting the 10% of shareholder’s equity from the net profit/loss and dividing the difference by the average headcount of the organization which can be formulated as;

(Net Profit - 10% shareholder's equity) / Headcount


Self-Assessment Tool Supplemental Handout

Assess current status of measurement and evaluation efforts and measure progress in the future;

Instrument examines 20 issues related to a results-based philosophy;

Help organizations assess the success of HR programs;

Provides a means for comparison;

Instrument appropriate for all HR staff members, but target audience is the individual responsible for the function.


Human Resource Strategic Alignment


High Performance

Culture

Leading People Operational

Excellence

Managerial

Effectiveness

Leadership

Influence

& Impact HR PROFESSIONAL

HR’s Opportunity to Influence Results


Charles T. Walsh President - HOPS International LLC

The Center for Organizational & Leadership Excellence 11 Sleepy Hollow Cove Longwood, Florida 32750

www.hopsintl.com [email protected]

http://www.hopsintl.com/

mailto:[email protected]

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