美世 - A New Approach to Human Capital Strategy

Click to edit Master title style,44,First level bullet,Second level bullet,Third level bullet,Fourth level bullet,CONFIDENTIAL,This presentation contains proprietary methodologies and tools which are only for review and remain the property of Mercer Human Resource Consulting. These methodologies and tools cannot be used or disclosed without written consent by Mercer Human Resource Consulting., 2004, Mercer Human Resource Consulting LLC,A New Approach to Human Capital Strategy:,Helping Human Resources Become a Strategic Partner,Workforce Planning and Development Conference,Agenda,Less ART, more SCIENCE,: A New Approach to Human Capital Strategy,Understanding the dynamics of your,Internal Labor Market,Case Studies,Q&A,Less,ART,more,SCIENCE,: A New Approach to Human Capital Strategy,Human Capital is one of the,largest expenses,that organizations understand the least about,As a result, even,modest gains,in the efficacy of HR management,can deliver sizeable gains to the bottom line,.,36% of revenue,The quest to find the,Holy Grail,has led to a proliferation of ideas and approaches,The question is no longer,whether,to measure but . . .,. . . which measures most directly impact,your business performance?,. . . which measures are most relevant,to your organization?,A framework for HR Transformation,HR Strategy,(Strategy, structure, processes of the,function,),Human Capital Strategy,(The “people” complement to business strategy management of the,workforce,),Value creation,Cost management,Organizations must continually balance the need for prudent cost management with the requirement to create / sustain productivity and business value,Where is your organization currently focused?,HR Strategy,(Strategy, structure, processes of the,function,),Human Capital Strategy,(The “people” complement to business strategy management of the,workforce,),Value creation,Cost management,Workforce impact of HC,programs / policies,Co-Sourcing and,Outsourcing of HR functions,Improved HR service delivery,Streamline HR processes,Measuring business impact of HC programs / policies,Overall labor cost,management strategy,Outsourcing / Off-shoring,HR Talent Management,Rewards,linkage to Strategic Objectives,Cultural Transformation,Strategy dependent vs. strategy neutral costs,Demand Management,Leveraging technology investments,Leverage workforce data,A framework for examining Human Capital Strategy,Components of Blueprint,Capabilities,Workforce capabilities reflected in experience, attained skills, and competencies, etc.,Behaviors,Workforce behaviors reflected in work intensity, individual / group performance, teamwork / cooperation, etc.,Attitudes,Workforce beliefs and values about risk-taking, innovation, commitment, flexibility, etc.,Talent acquisition and development, performance management, and rewards,Specific practices,Determined through:,Qualitative analysis of senior management perspectives,External benchmarking of selected companies,Academic research,Statistical modeling of links between workforce attributes / people practices and business outcomes,“Desired State”,Human capital strategy is a,blueprint,that helps an organization secure, motivate, and manage its workforce to accomplish business goals,Determined through:,Inventory of existing practices,Qualitative analysis of senior management perspectives and workforce attitudes,Quantitative analysis of dynamic patterns of talent movement and rewards,Quantitative analysis of performance risk,“Current State”,The key resides in being able to causally link human capital tactics and practices to workforce,and,business outcomes,Balanced Scorecards people,component,MONITORING & ACCOUNTABILITY,Customer valueFinancial performance,Productivity,Quality,BUSINESSOUTCOMES,HUMAN CAPITALMANAGEMENTPRACTICES,Capabilities,Behaviors,Attitudes,Engagement,Satisfaction,WORKFORCEOUTCOMES,Anecdotes,Reactivechecks,Simulationsand fore-casting,Correlations,Benchmarks,On-goingreports,Causation,Most powerful,Data,Information,Insights,Predictions,Stories,The “Art of HR” is slowly being replaced by the Science of Human Capital Management,Advances in,information technology,and,analytic methods,are making it,possible,for organizations to,manage investments in human capital,in a way that canhave a,measurable impact,on,business performance,.,The most powerful approaches move beyond benchmarking & correlation to,cause and effect,1.,Correlation,HC factor and business,performance must be related,Change,in,Spans,Productivity per FTE,The key is to analyze multiple variables, then,isolate,only those that,directly impact,the bottom line.,2.,Time (directionality),HC factor should precede,business performance,Time 1,Time 2,Change,in,Spans,Productivity per FTE,1.,Correlation,HC factor and business,performance must be related,Change,in,Spans,Productivity per FTE,Economic,conditions,3.,Isolation,Other factors that could,have influenced productivity are,identified and ruled out,Prior period,productivity,Change,in,Spans,Productivity per FTE,Capital,Spending,Source: 330 HR interventions that impacted productivity 1975-1985, Richard A. Guzzo et al, University of Maryland (updated 1996 by Mercer).,Types of interventions,Impact on productivity,HIGH,LOW,MEDIUM,Training,Goal,setting,Teams,etc.,Financial,incentives,Work,redesign,Feedback,Work,resched.,An example of why context is so important:,The impact of certain HR interventions on business performance can vary,significantly,across environments such variability dispels the sole reliance on benchmarks.,Why benchmarking human capital practices often,misses the mark,Research has shown wide differences in the average effects of specific HR interventions.,Average effects are not a sufficient basis to guide the development of a Human Capital Strategy for a particular organization due to the overriding importance of business context.,Context reveals the dynamics unique to each organization.,It varies even among direct competitors and across business / functional units within the same organization.,Human Capital Tracking Metrics,HC Scorecard,External Market Database,HRISand Payroll,Other Internal Sources,(e.g. Applicant Files;Training Inventory),EmployeeSensing,HC Management Database,Labor Market Data,Market and Industry data,Performance Database,Company or business unit financials,Data on quality and operational performance,Customer Data,COMMONDATAPLATFORM,A Human Capital Data Warehouse can be constructed by integrating multiple sources,Statistical,Modeling &,Forecasting,Size,Employee heterogeneity,Risk,Pay,Employment Variability,Prior Turnover,Branch/team,Pay structure,Incentive Payouts,Total Dispersion,Supervision,Structure/complexity,Spans,Chain,Stability,Workload,Organization profile,Experience,Tenure,Education,NE/E Mix,FT/PT Mix,Recruiting source,Performance (level & volatility),Turnover rate,Age,Gender,Ethnic background,Education,Training,Experience,Number and Duration of Jobs,Prior Industry,Prior job type,Job / occupation,Exempt / non-exempt status,Full time / part time status,Tenure,Current job,OrganizationWage,Level,Growth,Level,Salary grade,Incentive earnings,Promotion history,Performance ratings,Transfer history,Location (work/home),Unemployment rates,Market share,Competition (location and number),Labor pool,Demographics,Income,Education,Occupation,Employment cost,Employee attributes,Organizational practices,External influences,Strategy,Line of business,Growth,Profitability,External,Environment,Hundreds of variables internal and external to the organization can be analyzed,A new way of thinking about human capital strategy is emerging,Stop copying,Look inside,Leverage the data youve been collecting,Measure the ROI on your various workforce practices,Differentiate between high-yield tactics . . . and marginal investments,Match human capital strategy to your business model,Three underlying principles drive this new approach,Business models and human capital strategies must match,INSIST ON “SYSTEMS THINKING”,GET THE RIGHT FACTS,FOCUS ON VALUE CREATION,Tap into the running record of your company for specific insights,Know and focus on whats important to drive value,TechCo,unwittingly drove people with key institutional knowledge out the door.,Insist on,systems,thinking,By stabilizing supervisor turnover and giving people a sense of career opportunity, overall turnover was reduced by over 20%,Get the,right,facts,Case Examples,Hire 20% more from employee referrals,Turnover drivers,Percentage point reduction in turnover,0%,2,%,5%,7,%,10%,1-point rise in unemployment,10% reduction in layoffs,Increase jobs performed (from 1 to 2),1-year decrease in current position,10% base pay growth,10% market pay adjustment,If promoted within last year,If incentives received,Supervisor did not leave,10%,20%,30%,40%,50%,60%,70%,80%,Full-time Employees,-80%,-60%,-40%,-20%,Avg,.,+20%,+40%,+60%,Productivity,Higher productivity,Lower productivity,3% of revenue,Average,Optimum,Focus on,value,creation,Saved $5 million,Destroyed $30 million,Understanding the dynamics of your “Internal Labor Market”,11,72,125,190,312,116,Hires,17,49,123,184,227,86,Exits,Promotions,7,517,6,640,4,963,Level 8,168,5,830,Career,level,3,383,Lateral moves,234,45,341,186,81,38,16,81,85,134,129,An organizations current workforce is the result of three “labor flows”,The power lies in understanding the specific practices, tactics, policies, etc., that are the source of those talent flows,The flows can be segmented by business unit, job family, demographics, and . . .,ANNUAL CAREER PROGRESSION,VOL EXITS,TOTAL EXITS,793,1,542,70,134,128,233,102,233,African American: 1,200,Asian: 1,087,Hispanic: 678,White: 9,901,ANNUAL HIRES,630,37,116,44,2,28,52,5,9,4,6,12,23,37,4,8,7,13,5,6,0,0,1,1,1,1,1,0,0,0,12,20,34,1,2,1,3,4,5,4,1,1,0,11,46,95,1,2,10,18,3,6,28,2,4,0,10,154,343,11,28,17,41,16,45,55,2,10,2,9,28,58,3,4,14,30,2,4,21,1,11,1,8,85,155,4,10,13,21,4,11,91,2,11,2,7,70,147,7,13,11,25,10,20,59,4,13,4,6,80,155,5,12,18,29,6,19,55,2,15,1,5,94,171,6,14,15,25,12,27,75,4,11,4,4,71,128,9,15,10,14,8,21,84,3,15,5,3,112,198,18,25,14,20,24,51,120,12,17,18,30,15,15,150,17,21,15,187,19,19,16,183,31,23,25,232,2,12,3,47,9,11,6,103,12,14,8,142,1,5,1,10,0,0,1,2,3,9,2,62,1,0,0,2,Level,ACTIVE EMPLOYEES,High performance ratings,Unit revenue growth,Amount of training,Highly-rated manager,Recent promotion,Occupation,Number of jobs held within firm,Tenure,Unit size,Managers span of control,Education,Technical expertise,Outside experience,Pay growth,High,Low,Promotion likelihood,Lower,Higher,. . . through modeling, can reveal what talent youre building (and losing) over time,This same type of analysis forms the basis for workforce forecasting . . .,The number of employees for 2006 are the “expected numbers” given the current workforce and existing hiring, promotion, retention and transfer practices.,losses,gains,2002,2006,Level,1,2,3,4,5,6,7,8,9,10,563,975,1,659,1,171,1,876,2,601,2,774,801,686,312,477,658,945,1,420,1,541,2,369,3,273,944,1,935,1,491,10,9,8,6,5,4,7,51%,49%,43%,57%,33%,67%,0%,100%,66%,34%,72%,55%,45%,12%,25,2,Level,49%,41%,48%,52%,0%,100%,34%,66%,54%,46%,60%,40%,0%,9%,95,18,4%,3%,273,114,8%,9%,349,306,5%,12%,331,886,12%,14%,221,1,788,16%,15%,244,1,382,New Hires,% of Total,Female,Male,Average active employees,Total Exits,% of Total,Promotions,% of Available,28%,51%,59%,. . . and analyzing the equity of rewards and the resulting impact on workforce initiatives such as diversity,In this company, women face a glass ceiling at level 6,Not surprisingly, turnover rates are significantly higher,Promotion probability from . . .,Managers,Staff,Denotes the promotion rate holding constant,legitimate,factors.,. . . but the managerial promotion gap reflects differences in qualifications,Accounting for legitimate factors,Raw statistics show that minorities are less likely to be promoted from two of three staff levels . . .,Do I have the right workforce?,How do I change the composition of my workforce?,What are the fastest, most cost effective ways of ensuring adequate staffing at critical levels or in critical jobs within the organization?,Is the reward system effective? Am I paying and promoting the right people?,Are our pay practices putting us at risk? Are we on track to meet our diversity goals?,What is the value of internal job movement? Can profitable career transitions be managed more aggressively?,How can I use HR tools compensation, benefits, selection, career development programs, etc. to build and motivate the workforce I need?,And, when combined with financial performance data,:, How can I manage my workforce to maximize business,performance?,By focusing on these internal dynamics, we can answer questions such as:,Case Studies,Solution,Premier global brand is threatened by product design issues, flawed launches, and manufacturing quality problems.,CEO pegs financial impact at,$1+ billion,.,Company thinks leadership development program is at heart of problem.,Fast-track managers move from function to function without mastering their jobs creating too many generalists,Company cant see how to keep cross-functional experiences without having the system “gamed”.,Clients Perceptions/Actions,Business Challenge,Analysis shows how elements of the talent system selection, performance management, pay and career incentives “conspire” to create too frequent lateral movements.,Business Results:,Global initiatives are launched to calibrate effects of interactive human capital practices: Pay and incentives talent development career development hiring assuring the right mix of generalists and specialists.,Identifying business risks using human capital strategy,Case Examples for New Era-View,Because of mounting quality problems, this company felt a pressing need to strengthen its technical career path . . .,Disguised case example,Lateral moves opened doors for promotions,Time in position (years),0.8,0.9,1.0,1.1,1,2,3,4,5,6,Relative promotion likelihood,drop in promotion likelihood led to frequent job changes,Analysis showed that career rewards discouraged technical specialization,Talent Acquisition,Reduce insularity of your internal labor market:,Increase emphasis on outside experience (or lessen dependence on internal “feeds” to job openings),Be more open to hiring from the outside at middle and senior levels,Address myths concerning superior productivity of home-grown talent,Accept higher rates of turnover among entrenched “lifers” in selected business units and job categories,Focus hiring on those with depth of technical skills,Give managers more autonomy and ownership for hiring,Talent Development,Define and value multiple career development paths:,Define career paths, nature of movement and developmental actions for Corporate Leader, Functional Leader and Technical Specialist,Enhance training investments focused on building technical depth, culminating in “Master” status,Establish new process for talent identification and integrate talent development planning with business and compensation planning,Consider introducing accounting “charges” to business units that precipitate premature lateral movement,Performance Management,Align and integrate performance management with other talent management processes:,Clarify role and methods of determining performance, performance trend, growth and mastery potential,At beginning of job assignments, establish agreements between employee and manager on development goals, expected employee contributions and knowledge transfer expectations,Enhance processes to align business, team and individual objectives,Improve accuracy of forced ranking,Rewards,Shift from a “tournament” to a pay-for-performance reward structure:,Lessen impact of hierarchical level on total reward opportunity,Address extreme career choke point at lowest level of leadership hierarchy,Expand use of variable pay, increasing reward opportunity for meeting quality goals and successfully completing projects,Expand access to equity for those in technical track,Address existing incentives for lateral movement,Human capital priorities were then be set based on impact,Solution,Global brand faces declining market for traditional business lines, but is unable to build new products demanded by consumers due to workforce capability limitations.,Companys,market value drops by over 90%,.,Company has used RIFs (reductions-in-force) to “retool” workforce.,Company cant see how to “buy” the needed skills without another RIF.,With precipitous declines in stock price, there are minimal funds available to pay for another workforce transition.,Clients Perceptions/Actions,Business Challenge,Analysis reveals how excess cash is spent on compensation programs significantly subsidizing sub-par performance of individual contributors.,Annual price-tag of incentive,subsidies,exceed $50 million,.,Business Results:,Instead of having another RIF, company applies individual performance gates to reduce waste in spending opening up funds to hire people with critical competencies and encouraging turnover of sub-par workers.,Quantifying the ROI of your pay practices can be very revealing,But the variable pay system impedes timely adjustment of workforce to new business requirements.,A changing technological platform and business design require different workforce capabilities,Balancing employment costs with productivity gains,Solution,Large US distributor concerned with high workers compensation claims costs.,Company service was believed to enhance customer relationships but the physical demands of the job increased risk of injury over time.,The company didnt have a clear sense if initiatives under consideration would ultimately improve claims experience,and,retain the value associated with customer relationships.,Clients Perceptions/Actions,Business Challenge,Finds that productivity outpaces employment costs until productivity peaks, at around 10 years of service.,Changes are designed to encourage people to stay for the “optimal” length of time ,creating over $20 million in value,per year.,Business Results:,Company initiated programs to: reduce quick turnover of new hires through step-rate pay increases during the first year of employment and encourage retirement and/or job changes for longer-service workers to improve organizational productivity and lower workers compensation claims.,This company was experiencing rising employment costs among certain key job groups . . . with uncertain gains,Employee costs,Productivity,Years of service,Productivity and employee costs($ per hour),Employment costs exceed productivity gains,Here, significant improvement opportunities were found at both ends of the tenure spectrum.,Statistically modeling business impact revealed the business outcomes of specific workforce practices,Disguised example,Decreases,productivity,Increases,productivity,Drivers of business results can be examined at the unit level o,r at the employee level, if such measures of productivity are available,Solution,Business design heavily relied on selling additional business to existing customers.,This company had devoted significant resources to understanding customer needs and expectations.,Little research had been done on the employee side of the equation effectively, this organization didnt know what motivated its employees.,Clients Perceptions/Actions,Business Challenge,Shows the company rewarding newcomers who did not have strong relationships with existing customers over incumbents.,This practice was costing the firm,$40 million in potential revenue gains,per year.,BUSINESS RESULTS,The co